Archive for May, 2013

Wealth Management Options

By: ispeculatornew | Date posted: 05.21.2013 (1:00 am)

One of the aspects of personal finance that I rarely discuss because many readers are more interested in finding their stocks themselves are companies that do wealth management. They generally will have your money transferred to them and will charge an annual fee (generally % of your assets) and then they will reinvest it as best as they can. The major benefit is that it’s relatively hands-off, which may become the best option for all of us at some point.  The downside of course is that the fees would generally be higher for such options. I do have a few relatives using such services and they seem to be very happy with the results. I sometimes get tempted to offer my services against those fees but such arrangements can often not work out as planned.

How To Find Such Brokers

I’d say that in general, if they’re able to find out that you have some money to invest, they will be able to get to you. In other cases though, it can be good to look online for information. In the US, Merrill Lynch has a fairly solid reputation and can be a very decent option. While Merrill is present in most major countries, there are often more local players that have significant presence such as Investors Group in Canada and Suncorp (view the Suncorp Super Website). These brokers can typically offer all kinds of solutions that will include annuities but also custom products such as the Suncorp Superannuation.

I would not go as far as saying that this type of product is for everyone but it certainly can be useful for a certain part of the population that are looking for easy and convenient ways to have their finances taken care of.

Have You Worked With Wealth Management Shops? If so, I’d love to hear your thoughts

New Trade: Long Priceline (PCLN) & Short AOL Inc. (AOL)

By: ispeculatornew | Date posted: 05.20.2013 (3:00 am)

It’s been a little while and I’ve certainly missed it. Today, I’m starting off by closing 2 trades done earlier in the year. First off,

Long Google (GOOG) & Short Valueclick (VCLK): +24,79%

GOOG

 

VCLK

 

Long AOL (AOL) & Short Demand Media (DMD) -26,66%

AOL

DMD

Today, I am opening a new trade that involves 2 stocks trading at comparable forward P/E ratios. Yes, AOL has been a difficult name for me to trade and it has done incredibly well in the past 18 months or so. But if you look at fundamentals, I don’t think you could possibly compare these 2 stocks. Just take a look at their recent growth profiles:

AOL Revenue Quarterly YoY Growth Chart

AOL Revenue Quarterly YoY Growth data by YCharts

You can also take a look at the numbers for both stocks:

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Long Priceline (PCLN)

Priceline has been one of my favorite stocks for years. It seems to always be underestimated. Why? Perhaps because it’s a fairly big name but makes little noise. It’s also evolving in a fairly competitive industry. It has remained a solid player though and I do think the recent acquisition of Kayak will turn out to be key for Priceline’s long term future. If growth keeps up as most analysts expect, I don’t think its current price is exaggerated.

PCLN

Short AOL (AOL)

AOL was a star last year and continues to do fairly well in 2013. Part of it is due to solid execution by the Tim Armstrong team but it’s also due to some one time moves such as the patents sale. In the end, it’s difficult for earnings to increase quickly when sales are no, especially in the ultra competitive content business where AOL competes with the likes of Demand Media (DMD), Yahoo (YHOO), IAC Interactive (IACI), etc

AOL

Weekend Readings – Obama In Trouble?

By: ispeculatornew | Date posted: 05.17.2013 (3:00 am)

Barack-Obama-EU-January-2012Wow, the Republicans had been on the offensive for a while, and with this whole IRS scandal coming out, I can’t imagine President Obama is sleeping too well. It does look incredibly bad…!!

General Readings

What does Japan mean for the rest of the world? @ Tim Duy’s Fed watch
Meet Dylan the day trader @ WashingtonPost
Advice for Dylan the daytrader @ ReformedBroker
Are hedge funds bullet proof? @ NYT

Dividend/Passive Income Readings

Let’s play with Mattel @ TheDividendGuyBlog
Reality income (O) REIT analysis @ DividendMonk

Tech Stock Readings

Facebook flop @ Stratchery
Apple, Google, Facebook and Amazon are all trying to become the same company @ QZ
Google’s multi-front war @ Digitopoly

Rackspace (RAX)… Buy, Sell or Hold?

By: ispeculatornew | Date posted: 05.16.2013 (3:00 am)

Rackspace is one of those stocks that I’ve had on my radar for a long time but have struggled to get a solid opinion on. I have made comments during my Tech Stock Power Rankings (2012 and 2013) but have not been able to get enough of a sense to trade it. There are many things to like and dislike about the company:

Pros:

-Operates in the high growth cloud computing business
Revenues and earnings per share have climbed steadily for years

Cons:

Competes with the likes of Amazon (AMZN) and Google (GOOG)
Being unable to compete on prices, it’s stuck trying to find other ways to generate value
Trades at a high P/E

In the end, it does seem overvalued. Yes, I understand that companies such as Amazon trade at even higher P/E’s but there is the hope that they will be able to raise prices on some of its segments and become highly profitable. I don’t see how that could happen with RackSpace. It is already priced higher than most of its competitors and I simply don’t see where that growth would come from.

RAX Revenue Quarterly YoY Growth Chart

RAX Revenue Quarterly YoY Growth data by YCharts

Is It Too Late Though?

The biggest problem of course is that it seems late to short RackSpace, just look at how poorly the stock has done in the few months:

RAX

So would it be too late sell/short RAX? Here are the current numbers:

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I personally continue to think the upside is limited but I would struggle to take a decisive view so would likely “hold” for now. Do any of you hold a position on RAX?

Ultimate Sustainable Dividend Portfolio – May 2013 Update – Crushing the S&P500

By: ispeculatornew | Date posted: 05.15.2013 (3:00 am)

retirementIn 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. I would personally say that things have been going very well and will certainly continue to evolve. I do have a few more things planned which I will discuss in the near future.

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 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:

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Dividends Received

May 2013 is the best month to this day for the USDP in terms of income with nearly $125 of dividends. It’s not enough to live off just yet but it’s a start right?:)  Take a look at the progress:

usdp2

Ultimate Sustainable Dividend Portfolio News

Very nice to see 3 of my 20 existing holdings increase their dividend payouts! See the details over here:

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Returns

It’s far if you tell me that I’m not exactly “crushing” the S&P500. But I did outperform decently and it’s better to celebrate when that does happen as the next month could be very different:)

usdp3

Trades

Yesterday, I reinvested nearly all of the money reinvesting the dividends but also adding a 21st stock to the mix, as I had hinted last week, I went with Invesco (IVZ) which is a nice addition to my current portfolio. I have said I preferred staying away from banks but a company such as Invesco is quite different. It manages money and earns a cut..it’s a fairly stable business.

Passive Income Targets – May 2013

By: ispeculatornew | Date posted: 05.14.2013 (3:00 am)

retirementThis was a very slow month on all fronts, not much change in terms of income, projects or even updates. I do have several ideas that I’m working on and will hopefully be able to share more on in the near future.

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.

My primary objective remains to generate 100K in passive income on an annual basis as soon as possible, ideally from a few different sources. My partner just wrote about how he hopes to retire at age 35 which you can check out.

May Updates

-I will be posting the latest update of the USDP in a few days:)

How Much Do I Really Need?

I am aiming for an income of 100K or so, before taxes as a first goal. 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?:)

passiveincome

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:

5.39% – Dividend/Investing Portfolio: I am currently generating a dividend yield of about 3.43%. 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.

7.48% – Private Investment In My Online Company: I have discussed how my web company has been the best investment of my life so far. I’m happy to say that I was able to slightly increase my monthly income from the company even though it wasn’t expected. I certainly hope that will keep happening.

Total: 12.86%

It’s not spectacular by any means yet. That being said, I am 32 years old 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%:)

passiveincome2

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 as well as the question of becoming (or not) a landlord.

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% – Farming – I know it sounds crazy but I’ve started looking into it as you can see from my post a couple of weeks ago

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.

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

I love seeing that little blue line above the red one, it’s a very nice thing to see:) So far so good in terms of reaching my next objective of $12,000 per year by January next month. In fact, I’ve already surpassed that amount and will work hard to get closer to my $25,000 goal.

passiveincome3

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!

 

It’s All About Perspective… Japan (EWJ)

By: ispeculatornew | Date posted: 05.13.2013 (3:00 am)

A couple of months ago, I wrote about Japan, and how many investors are starting to believe that something big is happening over there. You can read my post here. There was always the chance that I was late to the trade but I had bet on the fact that no matter what you call this (comeback, bubble, etc), it might end up going for much longer than we could reasonably expect. Just take a look at EWJ (iShares Japan) over the past few months:

EWJ

Incredible right? Unsurprisingly, the Nikkei (Japan’s main equity index) has a similar chart:

nky2

Of course, if you take a look at a longer period of time (say 30 years), you will see that it’s either:

-not that impressive after all
-has a whole lot more distance to go

I personally continue to believe in this trade, with a stop if things start to go the other way….

Any thoughts?

Weekend Readings – Survivor Fans Out There?

By: ispeculatornew | Date posted: 05.10.2013 (3:00 am)

survivorGood morning and happy Friday:) I’m not sure if I’m the only Survivor fan among the thousand or so daily visitors here but I’m hooked and have been since he very start. The last few episodes have been epic:) Anyway, all for me for today, enjoy these readings:)

General Readings

So you want to trade for a living… @ Bclund
What if markets are undervalued? @ HowardLindzon
Wall St is back @ The Economist

Dividend and Passive Income Readings

Tomorrow’s dividend stars? @ StreetAuthority
Sell in May and go away? Stupid or smart? @ TheDividendGuyBlog

Tech Stock Readings

Instagram, the story @ VanityFair
Groupon reports earnings @ TechCrunch

Have You Put Your Chips On The Web Ecosystems Yet? (GOOG, AAPL, AMZN, FB)

By: ispeculatornew | Date posted: 05.09.2013 (3:00 am)

I’ve discussed this trade in the past and I don’t want to repeat myself but here I’ll go again. Just look at some of the bigger web/internet companies these days and you’ll see a clear pattern. Companies such as AOL (AOL), Yahoo (YHOO) and Valueclick (VCLK) that all reported disappointing earnings are struggling. Why? For one, because the web is becoming more “mobile” and while an operating system such as Android is in fact an “open” O/S, it does remain much more of a challenge for companies other than Google to interact with users. The same is true on Apple devices with Google being the one big exception. Why? Because it has built exceptional apps/web services such as Gmail, Google maps, etc.

Yahoo said it was hoping to get its apps into the hands of a billion more users in the coming years. I’m the first to admit that the recent “Weather app” is a great start. It still seems like an uphill battle though. For that to succeed, Yahoo will need to build many more apps that are significantly better than what those ecosystems offer.

Who Are Those Ecosystem Plays?

I’d argue that Google and Apple are the two dominant ecosystems that need to be owned if you believe in this play. They dominate the smartphone space and I don’t think that’s likely to change anytime soon.

The two other plays are less clear but I still think they need to be made:

-Amazon
-Facebook

I’ve argued for both and own some Facebook shares. Amazon is also a clear long term hold even though it’s difficult to nail down the right timing to buy.

AAPL Chart

AAPL data by YCharts

Why Are These Ecosystems So Critical?

Think about how we used to use the web. We’d have these 10 or 20 pages, would start searching around on Google, using our Yahoo mail or Hotmail, would go from link to link to news sites, shopping, dating, using services such as Mapquest, etc.

Now that most of us access the web through mobile (and even in the case of those that don’t), we generally have an operating system and either:

-look for apps that we access
-use “native or embedded apps” such as search

In both cases, users generally go through the ecosystem. For example, when users buy apps or content through iTunes or Google Play, Apple and Google end up making a cut. In similar ways:

Amazon is able to make margins through selling products on its own but also by letting merchants use its infrastructure/ecosystem
Facebook has built the most used social network that other major players such as Zynga, TripAdvisor and even Netflix have built on

Disclaimer: Long Facebook (FB)

Looking For That Next Dividend Sustainable Stock

By: ispeculatornew | Date posted: 05.08.2013 (3:00 am)

One week from now, I will be posting a new update to the Ultimate Sustainable dividend portfolio and I will likely be adding a new name to the current list. Today, I spent a few hours in order to find a new candidate that could be added to the current list. The goal remains to find stocks that have high growth in sales, earnings and dividends that can be sustainable over 10 or 20 years at a minimum. Obviously, as times goes by, circumstances can change but having a good starting point is certainly a key. I can then adjust things as needed. I will also try to find names that have an international component and that ideally brings diversification to the 20 names I already own.

When I looked for stocks listed on the NYSE and on Nasdaq that would fit all of this, I was left with 11 names after doing some analysis:

Yanzhou Coal Mining Co Ltd (YZC)
Ensco PLC (ESV)
RPC Inc (RES)
Invesco Ltd (IVZ)
Teva Pharmaceutical Industries Ltd (TEVA)
Herbalife Ltd (HLF)
Textainer Group Holdings Ltd (TGH)
Sunoco Logistics Partners LP (SXL)
WPP PLC (WPPGY)
Intel Corp (INTC)
Occidental Petroleum Corp (OXY)

Off the bat, I decided to remove several of them:

YZC – I prefer staying away from Chinese names for now
HLF – too much controversy and risk associated with Herbalife
WPPGY – no pink stocks

INTC & OXY – already part of the USDP

As I’ve also disclosed in the past, I do feel like I have sufficient exposure to the energy sector for now so will remove ESV and RES. SXL, which operates pipelines is a bit limit but I will leave it for now. Here are the 4 names that I’m looking at. I will thus look at these 4 names using the top 20 things I look at when judging dividend stockshere are the highlights:

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I guess it then becomes a matter of opinion but given my current portfolio, my top pick would be either Invesco Ltd (IVZ) or Sunoco Logistics Partners LP (SXL). Why? They simply don’t have much in terms of weaknesses.

Which of these names would you prefer to own? I’ll likely add one of these names next week in my USDP update so stay tuned!