Archive for July, 2014
As many of you know the Ultimate Sustainable dividend portfolio was built over a year ago as an attempt to slowly become financially free. By that I mean having enough passive income to not “need” to work any longer. I track my progress every month and I’m looking at many different wyas to get that done which include real estate, my own business, etc. That being said, the core of my strategy relies on income generated from my portfolios.
The USDP, along with my ETF portfolio generate the bulk of my passive income and I decided to track this with a monthly post in order to keep myself accountable and also because I’ve heard from many of you that this would be helpful.
As is always the case, you can get extra information in my newsletter, it’s free to sign up for here:
Without further wait, let’s get started. Here are the portfolio holdings as of last night:
|Ticker||Name||Shares||July 28 2014 Price||July 28 2014 Values|
|OMC||Omnicom Group Inc||32||$72.96||$2,334.72|
|JCI||Johnson Controls Inc||42||$48.65||$2,043.30|
|ITW||Illinois Tool Works Inc||30||$84.75||$2,542.50|
|SJM||JM Smucker Co/The||21||$104.08||$2,185.68|
|TROW||T Rowe Price Group Inc||31||$80.25||$2,487.75|
|OXY||Occidental Petroleum Corp||24||$99.82||$2,395.68|
|XOM||Exxon Mobil Corp||21||$104.37||$2,191.77|
|ADI||Analog Devices Inc||46||$50.55||$2,325.30|
|TXN||Texas Instruments Inc||32||$47.35||$1,515.20|
|VWO||Vanguard FTSE Emerging Markets||81||$45.14||$3,656.34|
|BND||Vanguard Total Bond Market||46||$82.15||$3,778.90|
The month of July is one of the slower months in the year in terms of dividends but the $35 generated this month are still 27% more than July 2013 so we are making progress!
Ultimate Sustainable Dividend Portfolio News
Not much to report here. I can’t say I’d blame these companies for not announcing dividend increases in the middle of the summer!
So the USDP now trails the S&P500 total return and will hopefully make up for it!
Many more interesting earnings will be released this week. The one I’m most looking forward to at this point is Twitter’s (TWTR). I could be making my first “long term speculative pick” of the year in the 1-2 coming weeks and both TripAdvisor (TRIP) and Twitter (TWTR) remain the most likely options. It all depends on how things play out I guess:) Otherwise, it was a great week for my picks again, mostly thanks to Facebook which shot up as I wrote about on Thursday.The long & short portfolio now stands at +33,28% so far this year.
You can also see my long & short trades here:
Today’s trade features two of the bigger internet travel plays and while one trades at a much higher P/E, I’m convinced that buying it remains the no-brainer pick here. Part of the story here can be told by simple chart that features revenue growth. First let’s look at the numbers for both stocks:
|Ticker||Name||Price||PE Ratio||PE Next Year||Return YTD||Sales Growth||Analyst rating||Book Value||Beta||Earnings||Revenue/Share||Sales 5Y Avg Growth||Sales 5Y Avg Growth||EPS 5Y Avg Growth|
TripAdvisor is one of my top picks in this market when I look at the upside vs. downside. I had been waiting for an opportunity to buy TRIP for a while and its decline following a disappointing earnings release last week might be just what I’m looking for to buy a more significant stake in the company as discussed here just recently. My biggest argument for supporting TRIP is that it has such a unique community and becomes extremely difficult to compete with. Most other plays (Priceline, Hotwire, Expedia, etc) compete mostly on ease of use, overall offering and prices. TRIP has millions of comments that make it possible to give its users a unique perspective. I think that will continue to be extremely valuable and I don’t see anyone close to competing there. I do expect that just like Facebook, TRIP will eventually move far beyond advertising and build strong relationships with the tens of thousands of businesses that run hotels, restaurants or other travel-related businesses. Thus, I personally think TRIP is an amazing (especially in the long term) buying opportunity here.
Next earnings release: October 23rd 2014
Overall, I’ve been a fairly negative investor when it comes to Travelzoo. They do have an interesting business model but it’s fairly easy to compete with and as is the case with Groupon (GRPN), is losing steam fairly quickly. While they do have other interesting properties, their core remains that huge mailing list that they target with specific travel deals on a weekly basis. It has resulted in a significant slowdown in most of its metrics and won’t get any easier in the future in my opinion. So while it is trading at a much lower P/E than it was a couple of years ago, I still think it’s overvalued and will continue to suffer.
Next earnings release: October 17th 2014
I’ve obviously been writing about Facebook for quite some time on this blog and while I’ve been very fortunate in how things have played out, I do still think it’s a fascinating story no matter how you look at it. At the time of the IPO, I strongly believed Facebook was a great value at those levels but I was obviously in the minority and since I tend to stay away from newly turned public companies for the first few months (I hate the initial volatility), I did end up buying a few months later. As you can imagine, if I thought $38/share was a value, getting in under $20 was a steal. There was risk involved (there always is), but in terms of upside vs downside risk, it was a no-brainer.
Much of the criticism of Facebook’s valuation was based on:
–Doubts about Facebook’s ability to remain the dominant social network (FB = MySpace)
–Revenues: If mobile was going to mean less of those big flashy banner ads, then was Facebook doomed when internet moved to mobile?
I personally discounted the last 2 arguments and believed the first one was possible, especially if Facebook made some big mistakes, but unlikely. Over time, more concerns have been added:
-Younger generation moving away from Facebook
-Users splitting their attention between an increasingly large number of social services
That being said, by all accounts Facebook has been delivering in an incredible way in the past few quarters. Just look at growth in users, revenues and earnings:
credit: FB earnings slides
When I look at Facebook’s stock near the $75 level (point it reached yesterday in after hours trading), I do continue to see tremendous upside. Why? In my opinion, there are 5 clear steps for Facebook and while all of these will be on-going, I’d say Facebook is barely into step #2:
–Step #1: Building and Never Stop Improving and Building: Clearly, Facebook already has the top social network around but has continued to build on it both through its own efforts (improving core Facebook, messenger app, etc) but also through acquisitions such as Instagram, WhatsApp, etc.
–Step #2: Build an advertising based business: Facebook started off with those flashy banners but has moved beyond those to news within the newsfeed, app installs, etc. They mentioned on yesterday’s call that in many countries the ads are being perceived as nearly the same quality as the other content. Clearly, there is still a long way ahead but Facebook is making great progress as we can see in their impressive growth. I believe that will continue but perhaps even more important is Facebook’s ability to sell ads outside its walls thanks to its growing relationship with other app developers, its integration of Liverail, etc. Facebook is only getting started here.
–Step #3: Other revenue efforts: As of right now, efforts such as payments, ecommerce and subscriptions are minimal as they should be. But I strongly believe that these will represent a huge stepping stone in the coming decade. There are much bigger gains in advertising right now but as the internet continues to mature, as smartphones spread and as Facebook’s ecosystem and the outside world adapts, revenue opportunities will emerge and I think this will be a focus in a few years.
–Step #4: Full integration: I’m clearly not a believer in Facebook integrating Instagram, WhatsApp or other “products” into Facebook but if Facebook does make progress on elements such as payments, advertising, etc, it will clearly be able to slowly integrate some of those features into those products. There is no reason to rush this. Those products are not as mature and the focus is on step #1 but I do think they will reach that point in the future.
–Step #5: Future Platforms: Mark Zuckerberg discussed this a bit in yesterday’s call. Clearly, while Facebook has what I consider to be an ecosystem, it does not control things the same way that Apple and Google do because those 2 players own the dominant mobile O/S. One day, as we have started moving away from desktop computers, smartphones will start losing market share to newer mediums and Facebook believes the Oculus Rift purchase will help Facebook be in a better position in the next “platform” than it is on desktop or mobile platforms.
So yes, Facebook is just getting started and the upside remains very significant in a market where most see Facebook’s end game as advertising.
Disclaimer: Long Facebook (FB)
Ahh the earnings have started coming in. These days, I’m spending (too much) time reading at night trying to draw conclusions from both the earnings numbers but also the earnings calls. I’ll try to write more about it this week, I obviously can’t wait to see what Facebook (FB) and Apple (AAPL), my two biggest long term positions come out with. I also am closing out 1 trade as I mentioned this morning. After another good week, the long & short portfolio has returned 29,51% so far this year. The past 3 years have been good but this is obviously the top one since writing this blog. Hopefully things do keep up.
I discuss earnings, trading and give my thoughts on the tech stocks in my free email newsletter, feel free to join here:
You can also see my live trades here:
Today I didn’t have as many options as I usually do despite only having a few live trades. Earnings season gave me less confidence in many of these stocks so after doing some filtering, I ended up with 7 names. I was tempted to do a trade with Twitter (TWTR) and LinkedIn (LNKD) but will wait for both to report earnings before drawing more conclusions. So I’m going with 2 stocks that I’ve traded frequently:
|Ticker||Name||Price||PE Ratio||PE Next Year||Return YTD||Sales Growth||Analyst rating||Book Value||Beta||Revenue/Share||Sales 5Y Avg Growth||EPS 5Y Avg Growth||Sales 5Y Avg Growth||EPS 5Y Avg Growth|
|NILE||Blue Nile Inc||27.4||31.08||21.23||-43.24||12.49||3.67||2.18||0.95||35.89||10.85||109.9||0.65||N/A|
Google has been on a good run and while it remains more than anything else, a company that dominates search and makes most of its money by showing ads on those pages, there are more and more “potential seeds”. Things like its Android presence, its Youtube channel, its different Google X projects, etc. Some of those will end up generating solid growth and for that reason, I think Google does deserve a valuation premium. Costs are rising a bit faster than I’d like to see but I am becoming a believer in the “Page doctrine” and do think some of those initiatives will end up paying off.
Next earnings release: October 17th 2014
Over the years, I’ve been a Blue Nile doubter and have probably shorted it more than any other stock. I’ve pulled back on that quite a bit this year. Part of is the decline in the stock making it less “overvalued” but the earnings growth has also been strong making it a riskier short. That being said, when I compare the valuation of a stock like Blue Nile to Google, it does still look expensive and this week seemed like a good option to go for. Earnings growth is important but I’m a strong believer in the revenues growth being a critical metric and from that perspective, it’s been disappointing.
Next earnings release: August 1st 2014
Over time, I’ve grown more and more sceptical of businesses that have little to no barriers to entry. Travelzoo (TZOO) feels like one of those businesses and the most recent earnings release was very bad. I don’t see any of that changing in the near future. This morning, I’ll still be closing out this trade on Expedia (EXPE) and Travelzoo (TZOO), taking profits off of the table on this one.
As always, you can see our 2014 long & short stock picks here:
–How Russian hackers stole the Nasdaq @ BusinessWeek
Tech Stock Readings
–Kara Swisher, a tech journalist legend @ NYMag
–Amazon a friendly giant as long as its getting fed @ NYT
–Uber, Lyft and reinventing the ride @ NYT
–Box, Uber and 29 cent tacos @ joshhannah.com
Last week I was able to close out 3 different stock picks, all winning ones which I was obviously thrilled with. The year-to-date performance (before fees) of this portfolio is now +23,81% which is very solid. I do intend on keeping the streak going but the next few weeks will be very interesting as most of the stocks I follow will report earnings. Google, Yahoo and eBay are among those reporting next week!!
I discuss these type of things as well as give my thoughts on the tech stocks in my free email newsletter, feel free to join here:
You can also see my live trades here:
Today is a bit of a different type of trade as I match up one of the lower P/E stocks that I follow with one of the highest ones. That means they have very different levels of growth of course which has to be taken into consideration but also look carefully at these numbers and how much more you’re getting out of Apple (revenues and earnings per share) compared to Yelp. At this rate of growth, it will take a very very long time for Yelp to play catch up….
|Ticker||Name||Price||PE Ratio||PE Next Year||Return YTD||Sales Growth||Analyst rating||Book Value||Beta||Revenue/Share||Sales 5Y Avg Growth||EPS 5Y Avg Growth|
Today I was asked by a friend what my top stock pick was these days. A few months ago he had suggested I look at Gazprom which has done extremely well since the start of the Russian crisis. I still think it’s a solid pick but it was even better then. I liked the pick, it was original, controversial and it worked. That being said, as much as I would have liked to pull one of those off, I went with Apple. Despite its very solid performance this year, Apple remains a great upside vs downside play and I can’t think of many better plays at the moment. Apple trades at a discount to the S&P500 in terms of P/E ratio which I can’t justify.
Next earnings release: July 24th 2014
Over the years, I’ve been at best neutral about Yelp. There were the rumours of shady tactics towards advertisers, a reliance on players like Google for traffic. Of course, with many big players such as Google (GOOG), Facebook (FB), TripAdvisor (TRIP) and Priceline (PCLN) (through its OpenTable acquisition) making very strong moves to better compete with Yelp, it’ll be a big challenge for the company to justify its sky-high valuation. Depending on Google’s search engine for much of its traffic is not surprisingly a big challenge given how they now compete. Just look at this Techcrunch article about leaked documents and you’ll get an idea. The same is likely happening on other platforms. Yelp has little to no control in those platforms.
When you think about the fact that Apple’s price/share is 35% higher than Yelp’s but its revenues/share are almost 650% higher, you can see why I think Yelp will have an extremely tough time justifying its 80 forward P/E.
Next earnings release: July 31st 2014
–Betting on the Ponies @ ReactionWheel
–Are you the best trader ever? @ IrrelevantInvestor
–The 40 year evolution of the American stock market @ Quartz
–What is Espirito Santo? @ MoneyBeat
Tech Stock Readings
This morning I will be closing out 3 more trades from my long & short tech stock picks and it’s always more enjoyable to do so when the 3 are winning trades as is the case this morning. In all 3 cases, I have a decent level of confidence but prefer to open new trades as the earnings season gets started and there will be more opportunities to go after. Returns indicated here are as of yesterday’s close but trades will be closed on today’s opening:
Feb 24: Long Priceline (PCLN) & Short Blue Nile (NILE) +20,52%
May 19: Long Apple (AAPL) & Short Oracle (ORCL) +20,79%
May 19: Long Netflix (NFLX) & Short Pandora (P) +25,13%
As is always the case, you can see all the 2014 long & short tech stock trades here:
The portfolio return is now over 23% and I’ll have a few more trades to go so hopefully things keep up:)