Archive for August, 2013

Weekend Readings

By: ispeculatornew | Date posted: 08.16.2013 (3:00 am)

062712-NEXUS-TABLET-004editDo any of you own a brand new Nexus 7 tablet? I ordered mine which will be an interesting experience for me given the fact that I’ve been all-Apple (ipod, iphone, ipad, etc) in terms of mobile devices so I’m curious to see how that will go!:) I’ll certainly keep you posted! In the meantime, here are some readings for the weekend!

General Readings

A healthy side to HFT trading? @ Noahpinions

Dividend & Passive Income Readings

Why investors should look beyond typical streams @ DividendGrowthInvestor
Walmart dividend stock analysis @ TheDividendGuyBlog

Tech Stock Readings

Big Apple product refresh coming? @ Bloomberg
Facebook (FB) to take on eBay’s Paypal @ AllThingsD
Tech stocks..everyone was right until they were gone @ iBankCoin
Defending Apple’s cheap phones strategy @ Ben-Evans

If I Were Carl Icahn…

By: ispeculatornew | Date posted: 08.15.2013 (3:00 am)

Carl-IcahnI’m sure that most of you would agree that Twitter is a very important product and company. I’m anxiously awaiting its stock going public even though there doesn’t seem to be anywhere near the level of hype that we saw in the months before the Facebook (FB) IPO. Why? I’m not exactly sure. Twitter is a major force and is increasingly mainstream. It has now proved its ability not only to provide news but also to make money.

A few months ago, when the Associated Press twitter account was hacked and a false message about a fire at the White House appeared, the market quickly tanked only to get right back once it was rebuffed. That is certainly one (illegal) way to use Twitter for financial gain. This week, we saw a much more legitimate way to use Twitter. Carl Icahn (@Carl_C_Icahn), one of the most powerful investors in the world announced he had a big stake in Apple (AAPL) with over $1.5B in stock. The stock shot up instantly.

AAPL

Some investors bought right away to profit from the quick jump. Many others though believe in Icahn’s ability to see value and even though they are likely paying more than he did for AAPL stock, the potential gain remains significant. Icahn said he believes the stock is worth well over $600 which as you know, I’m also a big believer in. I really do think guys like Icahn. Bill Ackman, Warren Buffett should all be taking a more public role on Twitter and abroad. It’s good for their name, brands but also their portfolios. Obviously, they need to be careful about trying to manipulate stocks for short term gains  but in the case of Apple for example, it seems very legitimate for him to express his opinion which will help in many different ways.

I’m active on Twitter (@intelligentspec) but certainly don’t have anywhere near Icahn’s reach but hopefully if I make enough good calls, that influence will grow over time. Enough to move a stock? Likely not. But if it’s enough to generate some feedback, comments and discussions, then it is more than worth my time.

Of course, it’s important to know what you’re getting yourself into. When Bill Ackman went public with his Herbalife (HLF) short, he ended up generating a lot of attention and a short term drop but later on, some big players ended up taking the other side making his life more difficult.

Are you a believer in the power of Twitter? Do you think guys like Icahn should be able to disclose their opinions about stocks in such a way?

Ultimate Sustainable Dividend Portfolio – August 2013 Update – Still Looking Good

By: ispeculatornew | Date posted: 08.14.2013 (3:00 am)

passiveIn 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. I recently came back from vacations and I can tell you that it’s one incredible motivation.. Not that I needed it but wow:)

Things continue to go very well for the USDP which I’m thrilled to see. 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:

[table “534” not found /]

Dividends Received

August will see a nice chunk of income as the $117 of dividends is 20% more than last year.  Take a look at the progress:

usdp2

Ultimate Sustainable Dividend Portfolio News

[table “533” not found /]

Returns

Nothing spectacular here but the USDP continues to outperform the S&P500 so I’m certainly fine with how things are going, especially given it’s more difficult for dividend portfolios to outperform in faster rising markets.

usdp1

Trades

I am getting very close to dumping Intel Corp (INTC) as I explained. I would say it’s likely at this point but I will continue to look for a good candidate to add in its place. If you have any ideas, please go ahead and let me know:)

Passive Income Update – August 2013

By: ispeculatornew | Date posted: 08.13.2013 (3:00 am)

retirement2August… not much exciting is going on right? Actually, I’ve been working on a couple of important posts to be posted in the next few weeks, I continue to make progress. I’m still working on improving the USDP which might require dumping off Intel Corp (INTC)…time will tell.

The reason I post this monthly update is both to keep myself accountable but also have a more public discussion about my plans and how I can become financially independent as quickly as possible.

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.

August Updates

-I posted the latest USDP update, with another one coming later this week
-I also looked into 2 major mistakes that investors do in my opinion… trying to time the market and overlooking the importance of fees.

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?:)

Why Am I Doing This?

passive-aug3

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:

5.54% – Dividend/Investing Portfolio: I am currently generating a dividend yield of about 3.37%. 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: 13.02%

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%:)

passive-aug2

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:) The trend isn’t as convincing but I do expect jumps to occur on year-ends as I receive a bonus from my day job. Hopefully that will happen in a few months:)

passive-aug1

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 TripAdvisor ($TRIP) & Short Pandora Media ($P)

By: ispeculatornew | Date posted: 08.12.2013 (3:00 am)

Overall, things have been going well so far in terms of trading in 2013. The one weaker aspect had been my long & short tech stock picks but that is coming back as my average trade has returned 2.40% so far this year which is above my objectives. Of course, that could change but so far it’s been good. I will be making a few more picks hopefully but as has been the case in the past years, I will not open new long & short after the end of August.

You might have seen that I currently have my maximum of 7 live trades so to open a new one, I will be closing one. I will close the trade on Long TripAdvisor (TRIP) and short OpenTable (OPEN) which currently stands at +35.28%. I did like this trade obviously but I don’t love being short OPEN so I’m more than happy taking today’s gain off the table.

Today I’m back with a new long & short trade with two fairly familiar names.Let’s start off by looking at the numbers:

[table “532” not found /]

And the quarterly Y/y revenues growth:

TRIP Revenue Quarterly YoY Growth Chart

TRIP Revenue Quarterly YoY Growth data by YCharts

Long TripAdvisor (TRIP)

I’m closing a trade on TRIP today as you know but I remain a major believer in the company’s longer term prospects, even at its current valuation. A big part of that is being a leading social stock but there is much more.

TRIP

Next earnings release: November 1 2013

Short Pandora Media (P)

Most of you know that I usually like to compare P/E ratios with the growth in revenues and earnings and find opportunities or discrepancies. This time, I’m shorting the fast growing Pandora. Why? Because as I’ve said many times, I’m a skeptic in its ability to make a lot of money out of such a competitive industry. So can Pandora make it? Perhaps. But I strongly believe that the competition will be a major issue for Pandora, especially once Apple jumps in the mix.

P

Next earnings release: August 22nd 2013

Disclaimer: Long TRIP (which will be closed) and no position on P

Weekend Readings

By: ispeculatornew | Date posted: 08.09.2013 (3:00 am)

arodAhhh ARod… what a show this is becoming.. can’t believe we’ll be talking about this for many more months but that’s exactly what’s going to happen.. oh well! Here are a few good readings for this weekend:)

General Readings

Bond wars @ Pimco
Treasuries safer than ever? @ Bloomberg
Inverse correlation between risk and return @ Falkenblog

Passive Income/Dividend Investing

Top 5 dividend investing rules to dominate @ TheDividendGuyBlog
The bucket system, a route to financial freedom? @ TheFinancialBlogger

Tech Stock Readings

AOL sees increasing revenues @ TechCrunch
Jeff Bezos buys Washington Post @ ZeroHedge

Is Content As Critical As The Ecosystem? ($AMZN, $GOOG, $AAPL, $NFLX, $FB)

By: ispeculatornew | Date posted: 08.08.2013 (3:00 am)

house-of-cards-final-posterRegulars know that I have a strong opinion on ecosystems. The whole theory if you have not read it before is that in this world of technology, controlling the “platform” or ecosystem is critical. Having a good service such as Flickr, maps, or others is important but it’s difficult to keep users if you do not control the entire ecosystem. Google (through Android, Chrome, etc), Apple (iphone, itunes, etc), Facebook and Amazon have been able to build incredibly complex systems that make it very difficult to compete with them. Yes, thousands of developers build mobile apps and entire businesses but they do usually end up depending on the platforms to some extent. Just think of how Zynga (ZNGA) was forced to modify its entire business to meet Facebook’s demands. Having an existing ecosystem also makes it much easier for these companies to launch new businesses.

Is Content The Next Phase?

You could argue that one of the companies that has been able to do well despite not “owning” an ecosystem is Netflix (NFLX). I’d guess that the main reason is the big entry barriers that exist in trying to negotiate deals with the Disney (DIS), and other media giants. Increasingly, it feels like the content producers have more and more power as different players compete to buy the rights to their content. Just think about all of the players that could compete for content from the NFL for example. You could have network TV (CBD, Fox, ABC), specialty chains (NFL network, etc), online and streaming players (Google’s Youtube, Amazon, Netflix, Microsoft’s xBox), etc. The content producers know that they have a lot of power and are increasingly able to charge huge amounts.

The Only Viable Solution?

If Netflix and others see that content prices are rising more quickly than what makes sense from a business perspective, the logical next step is trying to produce its own. It’s a huge challenge and there’s no doubt that some will fail but these players are putting a lot of money and energy into this:

Netflix: producing its own tv series such as Emmy nominated (and one of the best shows I’ve seen this year) House of Cards

Google: Pumping millions of dollars into building legit Youtube channels with exclusive, high quality content

Amazon: Not only is Amazon also producing its own video content but CEO Jeff Bezos made the headlines a few days ago by purchasing the Washington Post. With newspapers now at all-time low valuations, is now the perfect time to snatch these companies that are able to produce high quality content. When Warren Buffett and Jeff Bezos are both buying up newspapers, there has to be something more than meets the eye. What if these newspapers are able to successfully transform the content they produce to be multimedia and available in various platforms?

Apple: Nothing yet out of the company led by Tim Cooks but there has been speculation for some time that the company could start producing its own content to sell on iTunes, the largest digital marketplace in the world.

Who Is “Winning”?

It’s very early to tell how this will play out and if technology companies trying to produce entertainment content will even succeed but I think that Amazon and Netflix are the early leaders while Google.has been making progress and others such as Apple and Facebook have barely started. In the end, I think it’s critical for these companies to start working on the content part once they have a solid infrastructure. Having one without the other will likely not be enough. All of this isn’t enough to make me buy or sell a security but I will certainly keep it in mind when doing analysis of tech stocks that I follow.

Time To Dump Intel Corp ($INTC) From The USDP?

By: ispeculatornew | Date posted: 08.07.2013 (3:00 am)

$INTCOne if not the most important project that I write about on this blog is my passive income journey where I try to build passive income streams that can then help me become financially independent. As most of you know, the Ultimate Sustainable dividend portfolio (USDP) is a core part of that strategy and it is build mostly around strong long term growth. So far, none of the holdings have ever decreased their dividend and while I know it will happen at some point, I’m hoping to get rid of those names BEFORE that happens.

Naturally, I try to stay informed as best as possible and I’m currently very concerned about one of my holdings; Intel Corp. Why?

If you remember, I try to hold names that respect the 7-7-7 rule; 7% of average growth in the past 5 years for sales, earnings and dividends. Intel is doing very poorly in each of these metrics. I bought Intel for a variety of reasons but being a tech stock, I expected growth to remain strong which has not been the case. Let’s take a look at a few key charts:

INTC Dividend Chart

INTC Dividend data by YCharts

INTC Revenue Quarterly Chart

INTC Revenue Quarterly data by YCharts

INTC EPS Diluted Quarterly Chart

INTC EPS Diluted Quarterly data by YCharts

You can also see the numbers. Things have not been going very well. Why? A variety of reasons such as competition, tougher economic times, etc. The bigger worry though is the fact that Intel is on the bad side of a very strong trend. Intel builds chips that power many things but mainly pc’s. The strong growth in Mac and the surge of mobile devices and tablets where Intel is much weaker is a very worrying sign and unsurprisingly, it has struggled to keep up.

Let’s look at the main numbers:

[table “531” not found /]

INTC

Intel did end up not raising its dividend and its unclear when the next raise will come. To be clear, I don’t expect that dividend to decrease anytime soon. The company has little debt, is still making much more than its paying, etc. But I want to get out before such questions start becoming a serious concern. I remain undecided but I’ll try to get to some decision before the next USDP update. One issue that I would encounter if I do remove INTC is that there are very few other tech stocks that would be a good fit to replace it. There is also a bit of downside risk in terms of overall yield. INTC pays almost 4% dividend, mostly because the stock has performed so badly and at the growth levels I’m looking for, it’s almost impossible that I’d find a name that offers a 4% yield. A small drop would be worth it over the longer term of course though.

Do any of you hold Intel? If so, what are your thoughts?

Trying To Time The Market Can Be Very Costly

By: ispeculatornew | Date posted: 08.06.2013 (3:00 am)

timingIt’s an email that I get over and over. I have trouble answering it every time. As many of you know, I’m very much a believer in the risk of a financial collapse, I’m very skeptical about many things such as Western governments ability to fulfill their promises and I do think very difficult times will come. Could markets drop by 20-30% or even more? Absolutely. Every time I buy the market in my longer term retirement accounts that thought crosses my mind. I do however keep buying and have done that since I opened the account.

I did not stop right before the credit crisis hit when we hit market peaks. I didn’t stop either when Bear Sterns and Lehman collapsed and many started wondering what would happen to our economy. It’s not a great feeling to buy when you feel like it’s possibly the start of a new depression era.

But you know what’s even worse?

Trying to time the market for years, waiting for that big drop to buy only to see the market do this:

SPX

 

Two years ago, when the S&P500 was getting ready to test the 1000 level, I was thinking it could go much lower. I did keep buying though and when I look at this chart, I’m SO relieved. Yesterday I got an email from a reader who’s been waiting for a pullback for 2 years and now has a lot of cash. Ouchhh. Timing the market is an extremely risky trading strategy for a long term retirement account and I just see much more downside than upside in doing it.

Focus On What You Control

We control many aspects of our retirement income. We control:

-how much we invest
-asset allocation
-which stocks to buy
-etc

We don’t control the overall market. In general, companies are making more money every year except so the main driver of the overall market is the market’s P/E ratio which you can try guessing, I’m not against the idea of timing the market in more speculative accounts but I’d never consider it with my retirement portfolio.

If you are one of those who does try to buy at that right moment, I’d love to hear from you. What do you wait for? Does it ever feel or seem like the “ideal” moment?

Long eBay ($EBAY) & Short Demand Media ($DMD)

By: ispeculatornew | Date posted: 08.05.2013 (3:00 am)

Last week was a good one and while I’m not closing any trades today, a couple of them currently stand over the +20% return (TRIP vs OPEN and PCLN vs AOL). I will let those stand a bit longer though so we’ll see how things go. In case you missed it, LinkedIn (LNKD) once again announced strong earnings last Thursday. I’m so annoyed. I keep waiting for Amazon (AMZN) and LinkedIn to show some weakness… looks like I’m missing the boat on both. Oh well.

Today I’m back with a new long & short trade with two fairly familiar names. Let’s start off by looking at the numbers:

[table “530” not found /]

And the quarterly Y/y revenues growth:

EBAY Revenue Quarterly YoY Growth Chart

EBAY Revenue Quarterly YoY Growth data by YCharts

Long eBay (EBAY)

Ebay continues to dominate the payments scene with Paypal and I expect that to remain the case in the near future which will make it a good buy at these levels. I do expect the company to be able to display more growth in revenues and profits than other companies that rely heavily on advertising.

EBAY

Next earnings release: October 17 2013

Short Demand Media (DMD)

It has not been easy for Demand Media to do well as it fights to get traffic and advertisers with the Google (GOOG), Facebook (FB) and other giants. I’m a big believer in the fact that eBay can more easily justify its current valuation and has less downside risk than a company a like DMD.

DMD

Next earnings release: August 7th 2013

Disclaimer: No positions on EBAY or DMD