Archive for January, 2013

Ultimate Sustainable Dividend Portfolio – January 2013 Update – Taking The Next Step

By: ispeculatornew | Date posted: 01.16.2013 (3:00 am)

In September 2011, I did some in-depth research to find long term sustainable dividend stocks and have been doing updates on this Ultimate Sustainable dividend portfolio since then in the attempt to show how well such a portfolio can perform over the long term but also show how I would manage such a portfolio. I have said it before, I do not believe in stocks that you can hold “forever”. Thus, even in a long term portfolio such as this one, I will end up making some trades from time to time.

The USDP is obviously a critical part of my now very public quest to replace my job income with passive income. you can see my most recent update here 

The USDP continues to do very well!! Very exciting stuff and I’m thrilled with how things have gone so far. I have done a couple of trades and continue to work on optimizing it, if ever you would like to receive those types of updates, please join, it’s free:


Keep in mind that this portfolio was built by selecting 20 stocks out of thousands. The goal is not to pick the 20 best dividend stocks but rather to pick a diversified, high quality portfolio that will keep dividends increasing over time.

Here are the holdings as of last night to start off:

[table “481” not found /]

Dividends Received

This year, I have no income in January but I expect February to be a very good one. The income is likely to increase much more quickly going forward as I will be adding more money into the fund and thanks to my use of the DRIP.  Take a look at the progress:

Ultimate Sustainable Dividend Portfolio News

Not much to report this time around. No dividends were paid so no dividend increases obviously:)

Returns

I’m fairly happy with the USDP return in the past year. Why? Because both are more or less equal which in a fairly fast rising market is a good performance for a dividend/income focused portfolio.

 

Trades

I have started reinvesting $1000 into the portfolio every month which I will hopefully be able to keep up! This week, my biggest was increasing my position in Microsoft (MSFT) to bring it back in-line with the target weight of the portfolio

Passive Income Targets – January 2013

By: ispeculatornew | Date posted: 01.15.2013 (3:00 am)

After starting this new series earlier this year, I received a lot of positive feedback. Going forward, on a monthly basis. I talk a lot about the need accumulate different passive income flows. As time goes by, my objective is to be able to live entirely off of these new income streams but also be able be diversified enough to be ok no matter what happens. In many ways, that is what’s behind my interest in dividend income. For now, I prefer to avoid using actual numbers (might change later on) so what I will do is express all of this data in %. The objective of course is for all of these flows to end up generating 100% of my current income. I also want to gradually make sure that my income producing assets are not all locked away in accounts that will only be available upon retirement. In terms of income, I will be using my gross household income. Counting the bonus would only make things more difficult to track and would not represent how I currently live on my finances.

For example, if my base salary is currently 100K, my objective is to make 100K of passive income on an annual basis. This could be done through a variety of methods which I will be exploring of course. A few people tried to figure out how much capital I have by looking at the USDP size. The main issue is that the USDP is only part of my dividend income. I also get income from my ETF holdings, etc.

Over the past few months, I’ve became much more accountable in terms of my passive income objectives. It’s critical for me to become as financially independent as possible very quickly so I’ve been working on my existing sources of income (dividend investments and my online company) but also looking into new potential sources such as P2P lending.

My primary objective remains to generate 100K in passive income on an annual basis, ideally from a few different sources

January Updates

-In terms of the USDP, this is the first month that I will start reinvesting $1000

My online company is making a few changes that will mean less interest payments to make… better cash flow situation might end up helping me withdraw more later this year

You can see that my annual income jumped this month thanks to party of my bonus being deployed towards dividend paying stocks

Also, I met with a financial planner a few weeks ago which I will certainly be discussing in a few different ways, it gave me several ideas, a few recommendations, etc.

Finally, I’ve decided to create more precise objectives which will help me determine if my progress is good enough

My Long Term Passive Income Objectives

January 2014: $12,000/year
January 2018: $25,000/year
January 2023: $50,000/year
January 2030: $100,000/year

How Much Do I Really Need?

I am aiming for an income of 100K or so, before taxes. To be clear, I feel like I need significantly less than that. Why? I’ve described how I am living off of significantly less right now (I’m paying taxes, paying my house, saving, etc). I also have the option, as discussed of retiring in a foreign location.

Overall, I feel like aiming for the same level of income as I am currently making is very very reasonable and I could easily live with less but why aim lower if I’m confident I can reach that 100K?:)

 

Why Am I Doing This?

I’m a strong believer in working with clear objectives but also holding myself accountable so writing about these objectives will without any doubt help me reach financial independence more quickly.

Current Passive Income Flows:

5.13% – Dividend/Investing Portfolio: I am currently generating a dividend yield of about 3.50%. This portfolio will be increasing over time. I use a bucket system which I will be writing more about but the main retirement components are a long term dividend portfolio (see the Ultimate Sustainable Dividend Portfolio) and an ETF portfolio (see BuildYourETFPortfolio for more details on how I build mine). I saw a slight increase here thanks to markets rising and a similar yield.

5.04% – Private Investment In My Online Company: I have discussed how my web company has been the best investment of my life so far. Currently, the company is paying back very little as it is focused on repaying debts and we are still very much focused on growth. This certainly has the potential to increase over the next few years but probably not until 2013. We have seen a lot of volatility lately in income sources as you might have read on TheFinancialBlogger but the debt repayment continues.

Total: 10.17%

It’s not spectacular by any means yet. That being said, I am 31 years and do have a decent base (I could live with less easily).. I will continue to work on getting that total as close as I can do 100%:) I do expect a significant jump in January after the bonus payments.

 

Passive Income Ideas

0% – Real Estate: I have started writing about adding real estate to my income flows. One aspect that I love about Real Estate Investing is how much of an inflation hedge it will represent for my portfolio. So I started looking into some aspects such as investing into residential or commercial real estate.

0% – P2P Lending – I started exploring the idea and wrote my first post about it here🙂

0% – Annuity – No intention of buying an annuity for the time being

0% – Other ideas – I could end up starting other businesses or projects will I’ll certainly keep you posted about.

What I Am Not/Will Not Include

Pensions: I do know that the government will be paying me a sum of money once I retire. However, given how poor government finances look like these days, I personally think it’s crazy to count on the government actually fulfilling its promises. It won’t happen. Yes, there will be money, but not anywhere what is currently being promised. Whatever I do end up getting will be a nice surprise.

I feel like I am being extremely conservative here. By not including my government pension and also not including the fact that lower revenues will mean less taxes to be paid, I’m overestimating the amount of passive income that is truly needed. That is more than fine by me. I’d also like to think that my house will be paid by then making my level of spending lower all things being equal.

Do you have any questions or comments? I’d love to hear any ideas or how you’ve been managing on your end as well!

New Trade: Long eBay (EBAY) & Short Demand Media (DMD)

By: ispeculatornew | Date posted: 01.14.2013 (3:00 am)

Last week, I was able to publish my 2013 Tech Stock rankings which certainly generated a lot of comments and feedback! I also opened my first trade, going long Apple (AAPL) against Blue Nile (NILE) which is currently up 7%, not bad! But I’m obviously not going to get carried away with a few trades, it’s a long year that’s just getting started! Today, I am opening a new trade, one that I hesitated doing. Why? Because one of the stocks is reporting earnings this week, a period where I ideally stay away (too much volatility and it feels like I’m playing roulette). That being said, I believe it’s a great opportunity, the best one I could find right now so here we go. Let’s start off with the numbers for both stocks:

[table “480” not found /]

Long eBay (EBAY)

In general, I’ve been a believer in eBay over the years, thanks mainly to its Paypal unit which has done extremely well. I think it’s fair to say that eBay is now doing another thing extremely well; moving to mobile. In a new world where mobile is king, it’s safe to say that eBay has adapted extremely well. I’m very curious to see what numbers will look like for the holiday season where more shoppers than ever before turned online to do their shopping. I do expect the company to continue showing strong growth and seeing its P/E ratio so close to Demand Media (DMD) screams opportunity to me.

Short Demand Media (DMD)

Clearly, I’ve been wrong on Demand Media in the past. That being said, the stock is far from out of the woods and will require significant top and bottom line growth if it wants to justify its high P/E ratio. The fact is that Demand Media is a fairly easy to understand company .It creates web content for which it sells advertising. I just don’t see how it will be able to keep growing its business steadily when it depends so much on Google and others to bring traffic. I’m not saying it’s impossible but from all of the data that I’m using, it seems unlikely making the potential upside of this trade significant. Traffic estimations are always difficult to rely on but if I add up everything, in a difficult ad context, it’s not easy for me to see how they could end up having much upside surprise.

Disclaimer: No positions on EBAY or DMD

 

Weekend Readings

By: ispeculatornew | Date posted: 01.11.2013 (3:00 am)

Well the Colts are out which is certainly sad but I’m still very much excited about my favorite sports weekend of the whole year.. 4 games, the 8 best teams, battling it out. It’ll be amazing! Go Broncos, Texans, 49ers and Seahawks.. I hope at least 3 of you can pull this off:)

General Readings

Health care costs still rising @ CuriousCat
Health care costs exploding..nice chart @ TheBigPicture
CFA jobs – what to expect @ SmartFinancialAnalyst

Dividends and Passive Income Readings

What can we expect from dividend stocks in 2013? @ TheDividendGuyBlog
Real estate as dividend income @ DividendNinja
Why are US dividends so much lower than the rest of the world? @ TheBigPicture
Lending club and prosper updates @ InvestorJunkie
Are bonds as safe as they seem? @ ThePassiveIncomeEarner

Tech Stock Readings

What  a new cheaper iPhone means @ TheAtlantic
Major challenges for Marissa Mayer at Yahoo @ AllThingsD
Apple increasingly focused on China @ Bloomberg
The future according to Larry Page @ Fortune

IntelligentSpeculator’s 2013 Tech Stock Power Rankings

By: ispeculatornew | Date posted: 01.10.2013 (3:00 am)

I’m a bit exhausted but happy. This is by far the longest and most difficult post I write but after much research, I’m ready to hit the publish button:) I start off by looking at the stocks that I follow and try to rank them as much as possible!

Let me start off by saying, I will be making mistakes here, obviously. The goal is not for all of my top picks to do well or all of my bad picks to do poorly. Rather, I hope that my top 10 picks can end up doing better than the bottom 10. Does that make sense? Hopefully by a fair margin but I’m not even asking for that much to be happy.

How I Rank Them?

Two main things I looked at are:

-How undervalued/overvalued are these stocks in my opinion?
-How confident am I in that prediction?
-What are the upsides and downsides to each stock? 

Some Companies Were Excluded

I decided to exclude the same companies as last year mostly so: Chinese stocks (SNDA, SOHU, NTES, CTRP, YOKU), Yandex (YNDX) and MakeMyTrip (MMYT) for the same reason and Orbitz Worldwide (OWW) because the stocks trades under $5. I also removed 2 stocks that I now struggle to value:

Research in Motion (RIMM) and Groupon (GRPN)

I did add 2 new stocks: Facebook (FB) and Trulia (TRLA)

I don’t expect a single person to agree with the entire list, the chances of that happening would be nearly 0. I would still love to get your comments.

Without further wait:

2013 IntelligentSpeculator Technology Stock Power Rankings

Rank
Stock/Company
Stock/Company Comments
1 Apple (AAPL) Once again, Apple sits at the very top of my rankings. I know
that there has been a lot of negativity about the company formerly led by Steve
Jobs but I continue to think that the upside is significant while the downside
isn’t. That screams opportunity to me. The P/E ratio remains low for a company
that continues to grow at a decent speed.
Would I still say you’d be crazy not
to own Apple? Absolutely
.Key Numbers: P/E: 11.9, Forward P/E: 9.13, 1Y Sales Growth: 44.58
2 Baidu (BIDU) Baidu was near the top of my rankings last year and it did not
do as well as I would have hoped but it remains solid. Yes, growth in China has
slowed down significantly but BIDU remains the dominant player in the exploding Chinese market
and I just don’t think it’s valuation reflects that.Key Numbers: P/E: 22.74, Forward P/E: 16.86, 1Y Sales Growth: 83.2
3 Google (GOOG) Google is certainly formidable and
I like what I see out of the
Larry Page led search engine
. There are certainly many challenges but I do think
that it is clearly more than a one trick company and seeing Android take over
the mobile space is clearly a long term positive.Key Numbers: P/E: 22.26, Forward P/E: 15.74, 1Y Sales Growth: 29.28
4 Facebook (FB) I’m obviously a huge believer in Facebook, in its future (not
because of display ads) as you can see in my
recent post about the social web
stocks
. The stock is up over 50% since my purchase but I do believe it can
go much higher.Key Numbers: P/E: 63.18, Forward P/E: 44.3, 1Y Sales Growth: 87.99
5 Amazon (AMZN) Amazon is incredibly challenging to value because its margins
are so low. Using a P/E ratio is nearly impossible. That being said,
Amazon
continues to expand its business, its customer base, etc. I’m a big believer
over the long term
although it’s always difficult to know what could happen over
1 year. The upside is too important though for me to not have Amazon near the
very top of my listKey Numbers: P/E: 502.6, Forward P/E: 75.46, 1Y Sales Growth: 40.56
.
6 LinkedIn Corp (LNKD) LinkedIn continues to be priced beyond what most of us would say
is reasonable but its business is terrific, is experiencing high growth and I
still think it can expand to many other areas as I wrote about.Key Numbers: P/E: 741.13, Forward P/E: 86.85, 1Y Sales Growth: 114.81
7 eBay Inc (EBAY) I continue to believe that eBay’s Paypal business is terrific,
and while there is a lot of competition, nothing seems to threaten Paypal’s
dominance at this point.Key Numbers: P/E: 25.82, Forward P/E: 19.09, 1Y Sales Growth: 27.25
8 TripAdvisor (TRIP) In terms of building long term businesses,

TripAdvisor is on the right path
and I still think its priority will be
around building the community and its brand rather than profitability. There are
many different directions where the company can go next beyond simple display
and lead advertising and I expect a lot more from TRIP in the coming years.Key Numbers: P/E: 34.13, Forward P/E: 24.46, 1Y Sales Growth: 31.45
9 Priceline (PCLN) What a terrific company. Priceline has delivered and surprised
for years now and remains a very solid play on internet travel. Its brand is
very strong and I do think that while growth is capped, the market still
underestimates the numbers that Priceline can come up with.Key Numbers: P/E: 24.82, Forward P/E: 17.46, 1Y Sales Growth: 41.19
10 Yahoo (YHOO) Quite simply: Marissa Mayer.

She is transforming the company culture rather quickly and this is also about
the downside being fairly limited on Yahoo
given all of its assets. I’m
curious to see if she can keep expenses under control given all of the changes
but I do think she has a chance of turning things around.Key Numbers: P/E: 17.87, Forward P/E: 17.08, 1Y Sales Growth: -21.19
11 OpenTable Inc (OPEN) Open Table continues to be a bit of a challenge for me to value
but my pain point is that even though growth has slowed, it remains fairly high
and I do think there is still a lot of potential for OPEN to do well.Key Numbers: P/E: 51.36, Forward P/E: 26.71, 1Y Sales Growth: 40.94
12 Dice Holdings (DHX) For a long time, I’ve thought Dice Holdings was massively
undervalued compared to Monster Worldwide (MWW) and I did several trades between
the two. I don’t think it’s as clear now but DHX remains a good value.Key Numbers: P/E: 15.8, Forward P/E: 14.82, 1Y Sales Growth: 38.86
13 Rackspace Hosting Inc
(RAX)
Rack Space has a terrific business, in an exploding space (cloud
computing). The bigger problem is that margins remain low but I would think
those could increase over time.Key Numbers: P/E: 106.19, Forward P/E: 70.03, 1Y Sales Growth: 31.33
14 ValueClick Inc (VCLK) I’ve been surprised by how strong Valueclick’s business has been
, especially in terms of revenues. Earnings have not increased as much though.Key Numbers: P/E: 17.05, Forward P/E: 10.78, 1Y Sales Growth: 30.03
15 Microsoft Corp (MSFT) Microsoft continues to face competition in its O/S and Office
businesses from cloud based alternatives but it remains a solid player and is
moving as quickly as it can to adapt. Will it be quick enough? Remains to be
seen.Key Numbers: P/E: 10.25, Forward P/E: 8.28, 1Y Sales Growth: 5.4
16 Zynga (ZNGA)
Zynga is probably the most argued point from
my social web stock article on SeekingAlpha
. The fact is that while it has a lot of cash (and probably not much
downside), I still think that the fact that its games are losing players and its
been forced to shut down a lot of activities is a major factor in my decision to
have Zynga in the lower half of my listKey Numbers: P/E: N/A, Forward P/E: 208.19, 1Y Sales Growth: 90.82
17 Demand Media (DMD) Demand Media seems to have recovered to some extent but I still
fail to see how it will be able to display strong growth in the coming years.Key Numbers: P/E: N/A, Forward P/E: 19.6, 1Y Sales Growth: 28.44
18 Expedia Inc (EXPE) Expedia had very strong numbers last year and continues to do
well despite spinning out a very valuable property and partner (TripAdvisor), I
do expect growth to remain fairly strong in 2013.Key Numbers: P/E: 25, Forward P/E: 17.85, 1Y Sales Growth: 13.69
19 IAC InteractiveCorp
(IACI)
IAC Interactive has certainly been performing much better than I
expected, I will be very impressed if they can keep up this level of growth.Key Numbers: P/E: 22.84, Forward P/E: 12.75, 1Y Sales Growth: 25.82
20 Rosetta Stone Inc (RST) Rosetta Stone is another company that I like as a consumer but
could not imagine myself investing in. It had nice gains last year but continues
to show flat growth in revenues despite huge marketing expenses. It does expect
2013 to be its first profitable year but that remains to be seen. The P/E ratio
looks very expensive to me.Key Numbers: P/E: N/A, Forward P/E: 54.24, 1Y Sales Growth: 3.7
21 Monster Worldwide
(MWW)
Monster Worldwide is one stock that I’ve believer to be
overvalued for a long time. It is now about 40% down from its 52 week high now
though and I’m starting to feel like shorting MWW is not as great of an idea.
That being said, I certainly wouldn’t own it either.Key Numbers: P/E: 20.75, Forward P/E: 12.74, 1Y Sales Growth: 13.78
22 XO Group Inc (XOXO) The company formerly known as The KNOT continues to evolve but
it does not expect to make much more this year than it did the last. I still
don’t see much to get excited about here.Key Numbers: P/E: 27.32, Forward P/E: 17.36, 1Y Sales Growth: 10.08
23 Netflix (NFLX) Huge gamble and I’d be scared to short the stock but it’s P/E
ratio remains very high. Its recent deal with Disney is very encouraging but I
still expect the competition that Netflix faces to make it difficult to become
much more profitable.Key Numbers: P/E: 109.16, Forward P/E: 98.84, 1Y Sales Growth: 48.18
24 Adobe Systems Inc
(ADBE)
The fact is that Adobe’s core business has not been strong in
some time and both revenues and profits are expected to decline this year. It’s
still a stok I’m staying far away from.Key Numbers: P/E: 23.27, Forward P/E: 21.41, 1Y Sales Growth: 4.45
25 Travelzoo (TZOO) Travelzoo was truly disappointing last year and a big part of
that was the quickly shrinking margins in its deals business, as competition
continues to grow.Key Numbers: P/E: 15.14, Forward P/E: 16.07, 1Y Sales Growth: 31.53
26 AOL Inc (AOL) AOL was a big part of my failures last year, thanks largely to
its patent sale. I obviously don’t expect another such event to occur this year
and with revenues to remain flat, I’m ready to take my chances on AOL, once
again!Key Numbers: P/E: 6.67, Forward P/E: 16.28, 1Y Sales Growth: -8.88
27 WebMD Health (WBMD) WebMD does not have very good fundamentals if we’re being
honest. Nothing justifies that P/E except for the constant takeover rumors. I’m
betting that it won’t happen and the company will continue to suffer from a slow
advertising market.Key Numbers: P/E: N/A, Forward P/E: 148.02, 1Y Sales Growth: 4.54
28 Quin Street Inc (QNST) Quinstreet spent a lot of money acquiring businesses and setting
up a business. A big problem though is that it has a lot less to spend so
getting much growth out of its portfolio will be a challenge.Key Numbers: P/E: 37.06, Forward P/E: 8.42, 1Y Sales Growth: -8.08
29 Zillow Inc (Z) I have some serious doubts about how both Zillow and Trulia will
end up making money, in what is still a slow housing market. The valuations are
out of whack in my opinion.Key Numbers: P/E: 152.95, Forward P/E: 69.52, 1Y Sales Growth: 116.8
30 Trulia (TRLA) Same opinion as I have about Zillow, only worse!Key Numbers: P/E: N/A, Forward P/E: 113.69, 1Y Sales Growth: 94.68
31 Pandora Media Inc (P) I’m not a big believer in making money through music, I’ve said
it before and the rumors/announcement that Apple would launch a competing
service in the next few months should be enough to scare any existing Pandora
shareholder. That and competition from Spotify, Amazon and others will continue
to delay profitability.Key Numbers: P/E: N/A, Forward P/E: N/A, 1Y Sales Growth: 99.14
32 Blue Nile Inc (NILE) No surprise and many of you probably think I am a Blue Nile
hater. I’m not, I’ve used the company in the past and loved my experience.
However, it remains overvalued time after time.Key Numbers: P/E: 66.36, Forward P/E: 33.39, 1Y Sales Growth: 4.54

Disclaimer: Long Facebook (FB), Long Apple (AAPL), Short Blue Nile (NILE)

Passive Income: P2P Lending

By: ispeculatornew | Date posted: 01.09.2013 (3:00 am)

In my continued quest to add to my passive income flows, I’m looking into different alternatives that could both increase and diversify my revenues. As a person that is truly interested in investing as well as new technologies/services, you probably won’t be surprised to learn that I’ve started looking into P2P lending.

What Is P2P Lending/Borrowing?

If you take a step back and think about the business of banks. Most of us hold some money in the bank and get paid some (very very small) interest every month. The bank then turns around and loans out that money to borrowers that are looking to buy a house, a car or start a new project for example. They might make 5% and even 10% spread on that business. As you can imagine, there is an opportunity for disruption there and P2P lending/borrowing sites are now making that possible. They serve as a middle man between borrowers and lenders charging a fraction of what a bank might do.

The business is really picking up too. Lending Club, one of the big names recently surpassed $1B in loans.

Comparables?

As you can see from this chart:

The easiest comparison is to high yield bonds. You are generally getting high returns but have more risk than if you were lending to a government (through govt bonds for example).

Maximizing Risk vs Reward

The key obviously is to maximize the risk-reward ratio. How?

-Diversifying risk (spreading an investment through 10-20 or more borrowers)
-Doing proper research (in this case you’d look at the profile of the borrowers, their credit rating, employment history,previous loans, etc)
-Analyzing your portfolio (through tools such as this one) and optimizing it

I do know of a few people who’ve been using it with success getting returns of over 10%. I think you’d probably expect to have a few non-payers but iit should not be a significant portion if you’ve done your homework. From their site, depending on the quality of the borrower:

Grade A: 5.66%
Grade B: 8.89%
Grace C: 10.27%

How I Will Likely Try This

I’m still looking for information about the different websites, how it works, how to optimize returns, etc. I do hope to be able to open an account, probably later this year to test it out. I’d probably start off very small ($2K perhaps?) just to test things out but I do think this could provide another well diversified income stream at some point in the future.

Have Any Of You Tried This? Either From The Perspective Of Borrower Or Lender? I’d love to hear more about it if you have

 

New Trade: Long Apple ($AAPL) & Short Blue Nile ($NILE)

By: ispeculatornew | Date posted: 01.08.2013 (3:00 am)

While I’m still working on my tech stock power rankings, I am very happy to go ahead with my first long & short trade of the year today, especially with a classic one for me. I am going long Apple (AAPL) and short Blue Nile (NILE). In the short term, it might not go my way but I continue to think that these stocks are massively misvalued. On an equal basis, Apple is making over 4 times what Blue Nile makes in earnings per share. Before I get into that, a couple of news:

-if you are interested in my opinion of the main social web plays (Facebook, LinkedIn, Zynga, TripAdvisor and Yelp), I wrote a post on SeekingAlpha this weekend!

Trading Rules Change

Over the years, I’ve received a lot of feedback regarding these trades and one that I continue to struggle to form an opinion on was again discussed last month, this time by Robert Zaleski who said:

“I’ve thought this numerous times, but I’m finally going to be bold enough to ask it. What’s the most a trade has gone against you and still succeeded? I ask this because it seems to me you should be cutting trades that are losers if they are at 5-10% down.

And when a trade is going well, I don’t think you should necessarily liquidate at 20%. Maybe you do once it hits 15+% or some other number. Or maybe you reset your 5-10% drawdown target.

Just curious how you came up with a 20/20 target.”

It’s certainly a fair point and one that I’ve been thinking about a decent amount and I do get the impression that this might improve my trading. It’s difficult to quantify it so I will change things a bit this time around. I will continue to use a 20%$ stop loss on these trades but will now give myself the liberty of closing trades higher than 20%. In such cases, I will reconsider if:

-trade reaches +30% or +40%
-earnings for one of the stocks comes up

Another change I’m considering is changing how I calculate my entry point (currently trade on the open)..I’ll continue to reflect on this. VWap is another option as is the close (a bit less wild than the opening price).

In any case, I will let you know that goes but once again, I truly appreciate the feedback, I’m very fortunate to have such great readers:) So let’s go ahead and dig into this trade, we’ll start off by looking at the numbers for both names:

[table “479” not found /]

Long Apple (AAPL)

I’m not sure where Apple will be in my 2013 rankings but one thing is for sure, the stock continues to look undervalued. It trades at a forward P/E of 9 or so which for a stock that continues to grow, seems awfully low. Sales and earnings did disappoint lately and there have been rumors that iPhone5 sales have been much lower than expected. That being said, Apple is not about to experience flat growth, still has some products lined up and a terrific cycle setup to keep up its momentum. Apple is now paying out dividends and has decided to resume some production in the US, making it more clear than ever that the Steve Jobs era was over. That is fine, Apple seems to be doing just fine.

Next earnings announcement: Jan 23

Short Blue Nile (NILE)

Once again, the stock that I continue to short over and over (generally with a lot of success I might add is Blue Nile) which is trading at a forward P/E of over 35. That could work if it was Facebook,, Kayak or TripAdvisor which all trade near that ratio).. the difference though is that Blue Nile continues to see little growth. I just don’t see anything that can explain Blue Nile’s high valuation in a sector where it faces a lot of competition. For some, Blue Nile is an expensive borrow so you can certainly look into alternatives such as getting short exposure through options or shorting another similar name.

I would agree that momentum is on Blue Nile’s side. Just take a look at recent growth rates for both companies:

That being said, it is nowhere near enough to justify the difference in valuations.

And the earnings per share growth is not nearly as impressive…negative growth in most quarters does that scream high P/E? Not to me..

Next earnings announcement: Feb 15

Disclaimer: No position on Apple (AAPL) or Blue Nile (NILE)

Thoughts On A Crazy Year For Tech Stocks

By: ispeculatornew | Date posted: 01.07.2013 (3:00 am)

Wow, 2012 flew by and as I start to ready my 2013 power rankings, I took some time to look at the past year for the stocks that I follow, trying to figure out what I got right and what I didn’t as well as a few other random thoughts..hopefully I can learn from this. After 3 solid years of tech stock (long and short) trading, 2012 was not my best one…

My Worst Call: Zynga (ZNGA)

Clearly my worst call of 2012. I get a few things wrong but I should have known better when dealing with Zynga. I got stuck on the fact that depending on Facebook (FB) was not a big issue. I still believe that. However, I failed to grasp how much competition Zynga would face and how many of its hit titles are not the types of games that you’ll play for long periods of time (compared to a game such as World of Warcraft from Activision (ATVI).

Runner Up: Not seeing AOL (AOL) incredible rise coming is unfortunate but I don’t think there was a way for me to see that one coming. The rise came almost entirely from the patent sale which had not been anticipated. Call me a strong skeptic that it can pull this off again…

My Best Call: Apple (AAPL)

You could absolutely say that this call does not look as great as it did a few months ago. That being said, I think that as much as I had been bullish on Apple (saying you’d be crazy not to own it, having it at #1 in my power rankings, among my 4 picks for 2012, etc), getting a 33% return is pretty decent!

Runner Up: Despite it not being in my power rankings (IPO happened in May), my timing on buying Facebook (FB) just below $20 turned out to be very good as I’m currently up over 40% after a few months…

You can see my tech stock rankings as well as their return between the date I published them (Jan 17th) and the year end:

[table “477” not found /]

In terms of my long and short tech stocks, a few numbers:

Returns per year:

2010: 14.61%
2011: 82.89%
2012: -6.29%

#Trades In 2012: 32

#Winning Trades: 16
#Losing Trades: 16

I also took a look at how many times I traded stocks and my average return while trading them:

[table “478” not found /]

AOL certainly looks like a major part of the reason why I did poorly.. 5 trades with an average return of -23.70%.. wow! I did rather well on a few others, including MonsterWorldwide (MWW) and LinkedIn (LNKD).

I will also be making some changes in my trading this year, to be discussed when I’ll do my first pick tomorrow..! You can also stay tuned for my 2013 Power Rankings, to be published in the next few days (it actually takes a ton of time to write up) despite being a fairly short post for you to read.

In conclusion, I certainly hope that you had a good year trading in 2012, I had a very good one overall although not as great for tech stocks! Hopefully that part can revert in 2013:)

Thanks again for your continued support and comments, they are always very appreciated,

 

Weekend Readings

By: ispeculatornew | Date posted: 01.04.2013 (3:00 am)

Think raising taxes on the rich is the easy answer? Even Gerard Depardieu, the famous French actor is moving abroad it seems, as he just received Russian citizenship.. it’ll be interesting to see how that goes:)

General Readings

The imprecise science of past returns @ LongTermReturns
Have you created your financial goals yet? @ InvestorJunkie
The Ninja’s year in review 2012 @ DividendNinja
Studying the CFA in a digital era @ SmartFinancialAnalyst

Dividend Readings

Best US Dividend stocks for 2013 @ TheDividendGuyBlog
Kinder Morgan Energy Partners @ DividendMonk
Thomson Reuters dividend analysis @ ThePassiveIncomeEarner

Tech Stock Related Readings

Apps I used most in 2012 @ TechCrunch
Facebook analysts stick to script @ WSJ
A world without Google, Amazon, Apple, etc? @ MarketingPilgrim

Top 100 Dividend Stocks For 2013 – The 7-7-7 Dividend Selection Rule

By: ispeculatornew | Date posted: 01.03.2013 (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 still 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.

Sick Companies Getting To The Top

I’ve said over and over how using the top dividend yield as a point of reference could be dangerous and I guess I shouldn’t be surprised to see Best Buy (BBY) climb up there… as investors continue to jump off of the Best Buy ship (rightfully so!!), the dividend remains the same (for now) and thus the yield increases. Of course, no one expects that dividend to remain the same so the yield is not actually useful in such a case right?

The 7-7-7 Dividend Section Rule

One of my favorite ways to screen through dividend stocks is to use the 7-7-7 rule. Basically, I look for stocks that have average a 7% growth (or better) over 5 years for the:

-dividend growth
-earnings per share growth
-sales growth

Companies that fit here generally have strong profitable businesses and are dedicated to increasing dividends..! I actually did that screening for the 100 stocks that you can see here and got 2 results!!

[table “476” not found /]

Surprised to see so few? Those are the types of stocks that I look to add to the USDP. If you are interested in finding out more, I will do further analysis for the free mailing list, you can subscribe here, it’s free!:)
>
 

In the meantime, here is the list!

[table “475” not found /]