Archive for December, 2012

Weekend Readings

By: ispeculatornew | Date posted: 12.14.2012 (4:00 am)

For those of you with iPhones, you might have heard that Google had released a new “maps app” which seems to be up to expectations, thus much better than the current Apple maps.. It’s fascinating to see all of the relationships, good (bidding together for patents, etc), the lawsuits, competition in mobile, etc.. We’re lucky to be consumers stuck in the middle of this don’t you think? Anyway, that might seem like a random rant:) Wishing you all a Happy Friday, here are a few readings that I recommend:

General Readings

Questions to ask before hiring a financial advisor @ FinancialSamurai
Proof that most stock prediction medthods don’t work @ Monevator
How I got my kids excited about saving and investing @ DrawinsMoney

Dividend Readings

Dividend stock death? @ TheDividendGuyBlog
Railroad stocks analysis @ DividendMonk

Tech Stock Readings

Things are moving Fast at Yahoo @ AllThingsD
Jeff Bezos business person of the year? @ MarketShadows

Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn’t pays it” – Albert Einstein

I Love What I’m Seeing Out Of Yahoo ($YHOO)

By: ispeculatornew | Date posted: 12.13.2012 (4:00 am)

For the longest time, I was a very public Yahoo (YHOO) hater. There was nothing to be excited about apart from its holdings which were not managed by the company. We had this streak of bad CEO’s from Jerry Semel to Carol Bartz and Scott Thompson. It was a running joke. What wasn’t a joke was how Yahoo had refused a $44.6 billion offer from Microsoft (MSFT) in 2008. Years later, it was worth a fraction of that. I’m very much a believer in doing a few things exceptionally well rather than trying, as Yahoo has done, to be good at everything.

Then It All Changed

On July 16th 2012, Yahoo finally gave in to Daniel Loeb and made a big change putting former Google star Marissa Mayer in as CEO of the company. Mayer, was going to change the culture in big ways. There were perks like the free food for employees, getting an iPhone, seeing Yahoo’s profile instantly upgraded. It also became clear that status quo would no longer be acceptable as quarterly goals were initiated for all employees, including Marissa.

The company promised to move faster than ever and focus on its key areas. That was a MAJOR change. Just read the latest earnings transcript and you can see that Marissa Mayer is more than happy to talk about areas where she does not want to compete but especially places where she does feel Yahoo must act fast. Basically, Yahoo wants to be a bigger part of our daily lives.

Just in the past few days, Yahoo unveiled a major Yahoo mail upgrade, a new Flickr iOs app, etc. These are small things that will probably have little financial impact in the short term. What they do though is change Yahoo’s perception. The company is no longer static, is willing to take risks, launch new products, move fast and fail at times. That is something that Google and Facebook have been very good at. Yahoo? Not so much. The next big change is a major overhaul of the front page, Yahoo’s most valuable property.

Will These Work? Who Knows..

The fact though is that Yahoo has very little to lose. The company was slowly becoming irrelevant, had lost its mojo, had more trouble attracting top talent, and had a core business that was basically worth $0… yes, you had read that right. The barely breakeven business was basically valued at $0 and most of Yahoo’s value came from its cash, holdings in Alibaba and others. That is quickly changing as you can see:

I am late in joining the party (I had said I would likely be going long Yahoo but I’m now enough of a believer to get in. The timing is unclear but I do think I will end up buying. I do believe the upside is greater than the downside and while Mayer’s moves are somewhat expensive (big hires, costly initiatives, etc), the upside is significant.

This Might Take A While

Having a CEO that employees believe in and products that are actually solid is a critical first part but turning around Yahoo will take some time so I don’t expect this to take a few months. But I do think that over a few years, Mayer will lead Yahoo to greener grounds.

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Am I the only Yahoo believer here?

Disclaimer: No position on Yahoo yet, likely to go long as a long term speculative position in the next few weeks

IntelligentSpeculator Holiday Wish List

By: ispeculatornew | Date posted: 12.12.2012 (4:00 am)

No surprise in the fact that my top pick is the Dividend ebook, published through Amazon! It is now available in both paperback ($14.99) and Kindle editions ($9.99) for both the Canadian and US versions!:) I know I’m not exactly objective since my partner wrote it but I highly recommend that you take a look!! Thanks in advance for your support, we are closing in on 400 book sales:)

Order It now at Amazon

Other books that I recommend are:

The Intelligent Investor: The Classic Text on Value Investing

Hedge Fund Market Wizards

Bailout Nation, with New Post-Crisis Update: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy

Other Things I’m Looking To Get:

-A nice looking watch (I’m shopping on TheWatchery.com)

Apple material (never have enough.. iPad, iPhone, etc)

-Subscription to Audible.com (audiobooks)

-Gift card at Mandarin Oriental (have you ever stayed there? It’s at the very top in my opinion)

Not investment related but still very very cool:

The 4-Hour Chef: The Simple Path to Cooking Like a Pro, Learning Anything, and Living the Good Life

What are you hoping to get? Or buying investors around you?

Adding Real Estate To My Passive Income Flows – Commercial Or Residential?

By: ispeculatornew | Date posted: 12.11.2012 (4:00 am)

As I continue towards my goal to be financially independent within a few years (see my progress here), one direction that I intend to take is buying some real estate. I’ve explained some of the reasons why as well as a few of the benefits involved. This week, I took time to look into one critical decision I will be faced with when I do finally end up buying some real estate.:

Residential Or Commercial?

There are a lot of different benefits and downsides involved. The main ones that I was able to find:

Commercial:

-dealing with businesses can involve complex lease contracts that can be intimidating and require legal help
-higher down payments are generally required to get a mortgage/loan
-a lot more can be involved depending on the type of activity performed by the company
-can turn out to be more difficult to rent (while good residential ones will generally rent easily at the “right” price

Residential:

-more difficult to deal with tenants as the landlord must work with many different laws
-process is much more straight forward. Why? I have rented before, know what’s involved, etc
-legislation often limits how prices can be increased every year making more difficult to run profits
-finding key tenants is critical: not only will it determine how reliable they will be in paying but also will take care of the property, hopefully live there for a few years, etc.

I will probably end up buying a condo to start things off. It will provide me with an easier way to become familiar with all of the different aspects of being a landlord. It will also require a smaller investment which is certainly significant. One reason is that I don’t want to invest a million dollars on one building to be lent out to 1 business. It would make me too dependent  I’d much prefer to start off with something smaller and increase my investment by adding new units in different locations. This would provide me with a lot more diversification.

I know that some of you have generate income from real estate holdings, I’d love to hear what types you hold, and what kind of experiences you’ve had. I do know that I’d much prefer renting out at a slightly lower price to a very reliable person than trying to rent at the very top. It will certainly make for very interesting research…

Perils Of Intraday Trading

By: ispeculatornew | Date posted: 12.10.2012 (4:00 am)
These days, it’s a lot easier to get a stock moving in a given direction. A simple blog post or rumor can move a stock significantly. I heard about some funds that buy a position, start a rumor that the stock will end up being acquired, then sell it when the stock price increases. This has always been done but it can be done faster and more efficiently these days. You no longer have to call everyone to spread the rumor, you can just post it and hope for the best… Take a look at 2 examples from Friday’s trading:
Nexen (NXY) which got crushed when rumors started coming out that the Canadian government would reject its acquisition by CNOOC.
Hours later, the news came out and the acquisition will actually be approved by Canadian regulators.. the stock is now back up trading at $27 after hours. Imagine someone who shorted the stock only to get it back for 15-20% cheaper a few minutes later?
Groupon (GRPN) increased by nearly 25% on rumors that it might be acquired by Google .. who knows if it will actually happen but the stock certainly had a good day… it’s tough to know if someone planted this news or if there’s something true behind it

Have You Done Or Do You Know “Day Traders”? If so, how are they doing? With the HFT firms and these huge swings, it’s become very difficult for day traders to remain profitable.  I personally stay far away.. I try to avoid using intraday stops for example to avoid being impacted by such moves.

Weekend Readings

By: ispeculatornew | Date posted: 12.07.2012 (4:00 am)

Good Friday morning:) I hope all of you are doing well! It’s going to be a very busy weekend, but I can’t wait:) Did you guys hear about Netflix getting into trouble because of the CEO posting on his Facebook account? Insane..! Anyway, here are some good readings:)

General Readings

Rich brits left Britain following tax hike @ Telegraph
Proof that falling prices can be good for you @  Monevator
US fiscal cliff – better than past behavior @ CuriousCat

Dividend/Passive Income Readings

CSX Corporation looks cheap @ DividendMonk
TransCanada Corp (TRP) Dividend analysis @ TheDividendGuyBlog
How much to save for retirement? Are you on track? @ MoneyCrashers

Tech Stock Readings

Facebook to be added to Nasdaq index @ TechCrunch
Major deal for Netflix (NFLX) @ TechCrunch
Rogue Apple trader arrested @ ZeroHedge

-“Price is what you pay. Value is what you get” – Warren Buffett

Amazon ($AMZN) vs Apple (AAPL), Which Is More Sustainable?

By: ispeculatornew | Date posted: 12.06.2012 (5:00 am)

Today I started reflecting on Amazon and Apple. I’ve been shopping on both of their websites as Christmas inches closer and I started thinking about how difficult Amazon is to value. Much like LinkedIn (LNKD), it’s a company and a business model that I love but that I find very difficult to put in context. They both seem very expensive on the surface but have incredible growth potential.

Back to Amazon and Apple. One company has sky-high margins, is piling money like there’s no tomorrow and focused on a few key products. The other one is doing almost exactly the opposite. It’s fascinating and I thought I’d take a deeper look.. I’d love to get your thoughts:

Apple Model

The Apple model is much more similar to what we’re used to. After turning the company around, Steve Jobs gave a clear vision by working on a handful of key products that were significantly superior to alternatives in every possible way (design, ease of use, experience, etc). That helped Apple build an incredible brand, an army of fans that continues to be impressed by the latest releases. Apple could virtually launch any type of product and have a huge success no matter how it is priced, etc.

The big downside though is that it could change over time, especially if Apple ends up releasing a product that lacks its usual quality. The recent Apple maps fiasco in the latest iOs was one such example. Get a few more like those and you could see a major shift.

I do think that the Apple model is fairly easy to evaluate. You have a company that generates $X, growing at X%. You can then compare the P/E ratio to other competitors which has personally led me to become a major believer in the stock in recent months.

Amazon model

Amazon is a very different model by comparison. It started off in the physical book business and gradually became dominant. At that point it started moving to other industries selling different products through its main brand but also sub-brands such as Zappos.com, Diapers.com, etc. All of those have given Amazon a dominant position in much of the ecommerce business.

What Happened Next?

After taking a strong position in the physical book market, Amazon was able to slowly but surely take down most national bookstores such as Barnes & Nobles. It then moved to ebooks, a market that Amazon completely dominates. The company continues to face off and win in many different spaces for cloths, books (now even getting into book publishing), video, cloud computing, it now also competes with Netflix, is getting into local shopping, etc.

How Amazon Destroys Competition

There are numerous examples where Amazon is more than willing to sell at no profit or even at a loss. Why?

-To establish itself as a low cost leader
-To destroy competitors such as Barnes and Nobles, Best Buy, etc
-Because it can..

One such example is the Kindle which Jeff Bezos has admitted not even trying to make a profit on. Then Netflix has accused Amazon of losing $1B/year on its video streaming service. Amazon also ships a lot of its merchandise at a loss. Who knows what else Amazon is losing money on. What does seem clear is that it is driving many competitors out of business which could mean higher margins in the future.

In The Meantime

I struggle valuing Amazon because its EPS is basically meaningless. As long as Amazon keeps pumping money into losing businesses to destroy competition and increase its capabilities, market share, etc. EPS will remain somewhat irrelevant. What is important is:

-Will Amazon start focusing on earnings per share at some point and what would happen if that was the case?

I guess no one has the answer to that question but clearly many including myself think it will happen at some point. If we didn’t, Amazon (AMZN) would be an obvious short at its current valuation…

Which is most sustainable, Apple or Amazon? How do you personally value Amazon?

I Don’t Care About Special Dividends And Neither Should You

By: ispeculatornew | Date posted: 12.05.2012 (4:00 am)
As a dividend investor, I’m obviously very concerned about the fiscal cliff and the impact it might have on taxes, especially taxes on dividends and capital gains. It could end up giving companies less incentives to pay back their shareholders through dividends. Some of them are trying to act before that happens and announcing special one time dividends. Giant retailer Costco for example was quick to announce a special $7 dividend. To give you an idea, Costco (COST) has recently been paying $0.275 per share every quarter. To say that there was a major jump would be an understatement.
Of course, it’s a special dividend. Why? The end of the year is generally when such payouts occur because companies want to pay out extra cash. Even by those standards though, this year is seeing a lot of activity. It’s hard to think that Obama is not part of the reason why.
When Costco announced its dividend, the stock jumped with investors showing how they approved the move.

Time For Me To Buy Costco?

I personally have exactly the same opinion about Costco as I did. Why? My USDP portfolio is built on long term, sustainable dividend growth. While getting a $7 payout would be nice, the stock’s value will decline by that much (all else being equal). I don’t think that Costco paying this much makes it any more likely to pay out more in the future. In fact, it might be the opposite.

Here Is When I WOULD Care About Special Dividends

I would not buy a stock simply because it has announced a special dividend. That being said, if a company that I currently hold (especially in the USDP), then that is obviously good news as it will make it possible for me to increase my positions by reinvesting that dividend. That being said, I would still want to make sure that it does not change their longer term dividend policy.

Research Might Differ With Me

Credit Suisse research seems to indicate that while such stocks gain 1% on average when they announce the dividend, they also tend to outperform in the following month (by 1.2% on average). That certainly makes me curious. One explanation could be that companies would not go for this if they didn’t believe their underlying business was very strong.

Who Has Announced A Special Dividend?

There are already several including some names held in the USDP:
-Murphy Oil Corp (MUR) $2.50
-Carnival Corp (CCL) $0.50
-Franklin Resources (BEN) $3.00

Many Others Could Potentially Join That Group

Those include
-Wallgreen (WAG)
-Microsoft (MSFT)
-Yahoo (YHOO)
-Dell Inc (DELL)

Do you care about special dividends? Hold any stocks that are paying some or looking to acquire stocks that will?

Passive Income Brainstorming: Retiring in remote location

By: ispeculatornew | Date posted: 12.04.2012 (4:00 am)

Every month, I update my progress on becoming financially independent through my passive income updates. I’m still very far off from my goals, but do have many more years to go so I’m confident that I will be able to reach them at some point in the near future What happens when you either are not convinced you will make it? That’s one of the reasons why more and more people end up moving abroad to spend much of their retirement. Financial reasons are part of the reasons but there is also the desire for warmer weather, a better standard of live, to travel more easily, etc.

Is The Difference Significant?

The answer here is very easy. Yes! Depending on where you end up going, life can be 2 or 3 times cheaper, sometimes even less. That could mean that instead of eating in and avoiding trips, you could end up having a maid, a part-time chef and be able to travel around. It’s significant. And I’m not talking about going to a remote part of Africa.

Countries in central America such as Costa Rica or Ecuador offer incredible standards of living at a fraction of the cost. Ideally you can stick to places where English or any other language that you speak is well understood. You might also want to go to Europe where it might be a bit more expensive (similar to whatever you pay in the US or Canada) but where you are always one train or cheap plane ride away from discovering a new country.

Logistically

It’s actually much easier to do this move than you might think. In most cases, if you’re not looking to work, getting residency or a right to live in the country will mostly depend on you proving that you have the financial means to support yourself which should not be a problem. Once that is done, you are set to go. I don’t know if I’ll ever end up doing this but it’s certainly a very attractive possibility.

Benefits

Personally, the two main benefits that I see are:

being able to discover a new country, continent
being able to afford luxuries such as an amazing house, staff to help with cleaning or cooking, the ability to eat out at amazing restaurants for a fraction of the price, etc.

Downsides

There are some disadvantages of course:

being further away from friends and family: this would probably be #1 on my list, especially if I have young kids or close family
missing western elements: Costa Rica or Ecuador probably have everything that you need to go by. However, if you’re looking for some special American cereals, a chocolate bar or that American brand, you might not be able to get it.

Part time

I’m not sure if I’ll ever end up moving full time but one very interesting alternative would be to go for a few months every year to such a country. Buying a place or renting a few months at a time, especially in the first few years would help me determine if I could see myself moving there.

In The End, It’s Just One More Choice..

I do know that if at some point I feel like I want or need to retire but don’t have the financial means to do so, having the option to retire in a remote location is certainly a very attractive possibility! What are your thoughts on it? Would you ever consider retiring abroad?

Top 100 Dividend Stocks – Dec 2012 – Pitney Bowes (PBI) Looking Strong???

By: ispeculatornew | Date posted: 12.03.2012 (4:00 am)

Dividend investing is a huge part of my investment strategy. As I’ve mentioned in my now monthly passive income updates, receiving dividend income from my both my Ultimate Sustainable Dividend portfolio and my ETF portfolio is a primary driver of how my retirement will be like a few decades from now:)

Today, I am back with our list of the top 100 dividend stocks from the S&P500 and we have a familiar name back on top.

Pitney Bowes (PBI)

Pitney Bowes is dominating the list but if you look at its stock chart just below, you will see that the rising dividend is caused not by raising payouts but because the stock price keeps declining. That is NOT a good sign. The fact is that numbers don’t look great when you look at the year over year comparisons and I’d be very reluctant to buy PBI, especially in a long term portfolio such as the USDP.

Over the weekend, I will do further research on these 100 names and will send it over to newsletter subscribers next week, be free to join if you haven’t already, it’s free!:)



 

In the meantime, here is the list!

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