Archive for April, 2014

Weekend Readings

By: ispeculatornew | Date posted: 04.11.2014 (3:00 am)

everythingstoreI continue to listen to the audiobook about Amazon the everything store and find it truly fascinating…! What a company and what a story. Hopefully I can keep listening a bit more this weekend. If you are looking for some interesting readings to end your week, here are a few that I enjoyed:

General Readings

The future for real interest rates @ FT
Retirement Advice, Without the Sugarcoating @ NYT

Passive Income & Dividend Readings

The Rock Solid Ranking is live @ TheDividendGuyBlog

Tech Stock Readings

Black box strategy @ Stratchery
Google (GOOG) prepares to launch TV @ TechCrunch
The resurging Microsoft @ TechCrunch
Amazon’s annual shareholder letter @ SEC

Should Yahoo (YHOO) Go Down The Netflix (NFLX) Road?

By: ispeculatornew | Date posted: 04.10.2014 (3:00 am)

$YHOOIt’s fascinating to see how quickly the ecosystem plays are evolving. They are rolling out new products, acquiring others in order to extend their reach and increase the lock-in effect. At this point, there are 6 clear contenders which in a way already look like winners:

-Apple (AAPL)
-Google (GOOG)
-Amazon (AMZN)
-Microsoft (MSFT)
-Facebook (FB)

Some would argue that Amazon has little to do with the others but I’d argue that over time, they will increasingly compete. Facebook offers a different kind of ecosystem/platform but looks strong and established enough to warrant its spot.

The Difficult But Not Impossible Task

It is also possible for players that do not own their “ecosystem” to do extremely well. It’s a major challenge because the product must be so unique and such a strong brand in order to make it very difficult for those players to launch a competing product or to put significant pressure on pricing, etc. I’ve argued for example that players such as Spotify and Pandora (P) in the music sphere will continue to struggle.

There Is Hope

TripAdvisor (TRIP) and Netflix (NFLX) are two brands that have clearly done very well and are unlikely to disappear anytime soon. Netflix is by far the best example. Why? It has a strong brand, strong content agreements and has started (with great success) to produce its own content. Yes, most if not all of the platforms I mentionned are involved in video and competing to an extent with Netflix. But the video company is strong enough to force its hands:

-Apple features Netflix in its App store and as one of the main apps on the AppleTV
-Google features Netflix in its Android app store
-Amazon just launched its new FireTV which will include Netflix
-Microsoft’s xBox also offers a platform to connect
-Facebook has a partnership to get Netflix users to use “Facebook connect”

Thus, I’d argue, Netflix is in a an ideal position to not only avoid being threatened by those players but instead to profit from the expansion of those players.

Back To Yahoo

There has been talk about Yahoo’s transformation and while building a few apps has been nice, it’s not enough to compete. For all of the discussion about apps such as Yahoo! Weather, they have lost a lot of momentum because it was so easy to replicate. In fact, Apple did exactly that by “improving” its weather app in its latest iOS version. Yes, Yahoo has Flickr but it needs more.

yhooYahoo’s Strengths

I’d argue that Yahoo’s content and core portal is its best product but the problem is that there’s no way the portals will “promote” it. As per “TheInformation”, Yahoo has been trying to buy its way onto handsets in order to get more active users but it’s proving extremely difficult.

The alternative is building something unique that will give enough incentive to users to download that Yahoo can then link all of its apps/content together as Facebook has gradually started to do. It would be a very long term process but honestly, I don’t really see an alternative. In an increasingly mobile world, getting eyeballs is a much more difficult proposition.

Being able to create a video platform that would include exclusive content but also its own shows seems like a bit of a long shot but I do think that if it did work out well, it could become a game-changer.

chart source: WSJ

McDonald’s (MCD), As Good Of A Dividend Stock As It Gets?

By: ispeculatornew | Date posted: 04.09.2014 (4:03 am)
mcdLast week I send a newsletter out about Disney (DIS), one of the blue chip stocks that I’ve been tempted to buy these days. One reader asked me to take a new look at McDonald’s which I did and thought it would be very relevant to post here. Not only does MCD offer a much higher dividend yield but it’s also proved to incredibly reliable from all perspectives. I decided to take a deeper look using the top 20 things I look at when judging dividend stocks.

Dividend Metrics

MCD-SPY
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Clearly, McDonald’s has an extremmely strong profile. Its dividend yield is a very reasonable 3%, it has increased payouts at a strong pace for the past few years and is actually a dividend aristocrat after increasing payouts for the past 38 years. I did add the comparison with a S&P500 ETF to give you a better context. There are many strong blue chip dividend payers but you could argue that MCD is one of the top ones which carries some weight.

Company Metrics

MCD2
This is where it matters when I personally look at MCD. In order for that dividend yield to be sustainable, I’m looking for:

Strong sales growth

ycharts_chart (3)
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McDonald’s has managed to grow sales by 19.5% (total, not annual) between 2008 and 2013 (S&P500 had 11,3%) and is expected to grow sales by 8% over the next 2 years, almost identical to the S&P500.

Earnings growth

ycharts_chart (5)
Reasonable payout ratio
ycharts_chart (6)

Decent valuation

S&P500 – 17.06 P/E
ycharts_chart (7)
Overall, I think these numbers are extremely strong. MCD has a very strong business that is growing. I would like to see a bit more bottom line growth and that is the one metric I would pay more attention to but in terms of valuation, I think MCD is trading at a fairly attractive price. It’s not a dirt-cheap bargain but you’d probably never see MCD trading at such a discount either.

Stock Price

While I generally rely a lot more on fundamentals than anything else, I do agree with Benjamin Graham when he says that “In the short run, the market is a voting machine but in the long run, it is a weighing machine”. That is one more reason to make sure it’s an ok entry point:
MCD

mcdonalds-Quarter-Pounder-with-Cheese-Extra-Value-MealsIndustry And Overall Thoughts

McDonald’s is one of those stocks that should be part of any diversified dividend portfolio. It has been around for almost 75 years, has expanded into 119 countries and is one the safer brands that would be expected to do well no matter what happens to the overall economy. That also comes with slower expected growth (burger sales will not double overnight will they?) It has been able to expand by opening new store locations but also expanding its menu in a smart way. It has also managed the move to “healthier” food as well as you could expect and while the burger remains the core of its menu, there are a lot more options these days. Like Coca-Cola (KO) and Pepsi (PEP), MCD is an iconic brand that has little in terms of global competition and certainly nothing that would threaten its long term growth.  I would personally be a buyer at these levels. Would it fit in the USDP? I generally tend to go for a bit higher growth stocks in that portfolio but I could see it happening at some point though because MCD has a lot to compensate for that slower earnings growth.

Do you own MCD? Any thoughts on the stock?

A Quick Take On Amazon ($AMZN)

By: ispeculatornew | Date posted: 04.07.2014 (3:00 am)

$AMZNNo new long & short trades today so I wanted to write a quick take on one of the more fascinating stories….

I’ve always been interested in Amazon as a customer, an investor and just an overall fan. I’ve never been able for that to translate into buying the stock because it has felt so expensive the past few years. I’m currently listening to the audiobook: Amazon: The Everything Store. It’s truly a fascinating story, a must-read for anyone interested in the company, in Jeff Bezos, etc.

The Standard Way To Look At Amazon

You have this giant company that despite being over 10 years old, has been unable to ever generate meaningful profits, trades at a P/E of over 500 despite seeing solid but not spectacular growth. There is nothing to indicate that Amazon will ever put much of its focus on profits which is a very worrying trend for any shareholder. The next time the market goes into “crash” mode, stocks that seem overvalued will obviously be the ones paying the most and Amazon seems like the perfect candidate.

A Better Way To Look At Amazon?

If 10-15 years ago, someone had envisioned how important ecommerce would become and that it would mean a complete change in how shopping would be done, I think we’d all agree that there would be a HUGE opportunity. The problem of course is that the only way to become a dominant player in this sector would require:

-building a major brand
-building a distribution network that enables it to sell & ship all around the world
-the logistics involved would require warehouses all around the US and the world
-setting up agreements with sellers all around the world in a hyper competitive world
-building customer loyalty to avoid having to fight for those same clients day after day in a world where the next shop is one click away
-being able to become the dominant digital store where customers and businesses would download digital documents, cloud space, etc

All of that is a major challenge. I can’t imagine an existing giant such as Walmart being nimble enough to pull this off. But it would have seemed nearly impossible to imagine a new company being able to pull this off. Why?

-You’d need an extremely long term view
-You’d need to invest tens of billions in infrastructure
-Because of that, you’d likely be earnings no profits for over a decade
-You’d need to rely on your future competitors in order to initially start selling their stuff

Impossible… yet Amazon has pulled it off. Not only is it one of 4 major ecosystem players but it’s by far the best positioned for the continued growth in ecommerce. I can’t think of one single player that can successfully compete with AMZN. Maybe 5-10 years ago EBAY could have made its case but it feels so long ago.

What if at some point, Amazon has built enough of its infrastructure and can finally start slowing down the spending in those areas? What if it starts generating margins that the Walmart (WMT, Costco (COS) and others manage to generate? Yes, it has a lot of shipping costs, but it saves a lot on retail space, employees, etc.

Does this seem that impossible? It wouldn’t happen in the next few years but what if it did happen at some point?

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Am I Crazy? Or do you agree that while not certain, this certainly could happen?

General Readings – Game Of Thrones

By: ispeculatornew | Date posted: 04.04.2014 (3:00 am)

game-of-thrones-tv-show-poster-daenerysThere are many shows that I enjoy watching but in the past few years, Game of Thrones has been of my favorite ones so I’m thrilled that the 4th season starts this Sunday, can’t wait:))) Until then, here are a few good readings:)

General Readings

The idiots guide to HFT trading @ BlogMaverick
Obama vs Putin: the rematch @ WashingtonPost
Kid gets accepted to all 8 IVY league schools @ Uproxx
HFT delays IPO because of Michael Lewis book @ ZeroHedge
Caterpillar (CAT) escaped $2.4B in taxes with Swiss tactic @ Bloomberg

Tech Stock Readings

The original social network @ Eugenewei
Why Alibaba is buying shopping malls while Facebook is buying virtual-reality companies @ Quartz
Amazon (AMZN) launches its much anticipated tv set box @ TechCrunch
Steve Jobs promised ‘holy war’ on Google, court hears @ FT

I Love What Tesla ($TSLA) Is Trying To Accomplish

By: ispeculatornew | Date posted: 04.03.2014 (3:00 am)

teslaTechnology is a beautiful thing isn’t it? It’s changed our lives in so many ways and it feels like things are just getting started in this new “connected” world. There are however major challenges when new technologies have to disrupt existing industries, especially when a powerful industry is involved.

One big example of course is Uber which has been growing incredibly quickly and continues to face all kinds of challenges as it competes not only with other startups (Lyft and others) but more importantly Taxis which are seeing their entire industry be challenged. Unfortunately, they are often succeeding in making life difficult even though that is not what the end consumers want. There are plenty of examples but this Washington Post story about the battle in Seattle gives you a good idea.

Another company that is causing a lot of drama is Tesla. They are doing many disruptive things including of course going for electric cars. Another thing that they’re trying to do is make it possible for consumers to buy directly from the company. In this era of the internet, it doesn’t seem crazy right? Yes, a lot of consumers want to try out a car before buying but many others know exactly what they want and they’d like to buy online in the same they would buy a book, an ipod/iphone or even an engagement ring. Somehow, that’s causing an issue.

In New Jersey, it’s been ruled illegal to buy a car without going through a dealer. Why? A big reason of course is that the dealers are grouping together putting money and resources to force the change. It’s highly disappointing because there is no “good” reason in my opinion. Dealers have value and should stay in business as should taxis. Consumers should also have the option of getting other types of transportation or buying their car on the internet. I don’t see any logical reason to block these.

Do you see a reason? I will personally continue to cheer on those who try to cause disruption that would result in more/better options for consumers.

Top 100 Dividend Stocks – April 2014 Edition

By: ispeculatornew | Date posted: 04.01.2014 (3:00 am)

four-seasons-boraboraDividend 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 went back to find the top dividend plays in the S&P500! The top of the top is similar to what I saw last month but as you know, there’s a lot more than yield that counts:)

Find Out More

3 of the top 5 names on this month’s list are telecoms which tend to offer very high payouts but have struggled in terms of overall return. The two others, DO and ESV are oil and gas drilling companies which certainly have high potential as well. In the top 15, only 2 names are not telecoms or energy plays. One was featured last month (HCP) while the other (MO) is a tobacco play. Ironic that one is related to health care while the other one is in a business that tends to create health issue.

In the meantime, here is the list!

TickerNamePriceDividend YieldPayout RatioEx-DVD Date
WINWindstream Holdings Inc8.2412.14250.776/26/2014
DODiamond Offshore Drilling Inc48.767.1888.694/30/2014
FTRFrontier Communications Corp5.77.02362.426/11/2014
CTLCenturyLink Inc32.846.58N/A5/30/2014
ESVEnsco PLC52.785.6836.96/12/2014
HCPHCP Inc38.795.62106.925/8/2014
RIGTransocean Ltd41.345.4263.795/28/2014
HCNHealth Care REIT Inc59.65.343110.775/8/2014
POMPepco Holdings Inc20.485.27245.456/10/2014
TAT&T Inc35.075.2553.134/8/2014
TETECO Energy Inc17.155.1396.665/12/2014
MOAltria Group Inc37.435.1381.436/13/2014
KMIKinder Morgan Inc/DE32.495.05138.484/25/2014
RAIReynolds American Inc53.425.0278.666/11/2014
ETREntergy Corp66.854.9783.115/12/2014
VTRVentas Inc60.574.79164.066/6/2014
EDConsolidated Edison Inc53.654.767.895/12/2014
SOSouthern Co/The43.944.62107.365/1/2014
PMPhilip Morris International Inc81.874.5967.716/24/2014
TEGIntegrys Energy Group Inc59.654.5661.885/28/2014
LOLorillard Inc54.084.5569.925/28/2014
PPLPPL Corp33.144.579.796/10/2014
VZVerizon Communications Inc47.574.4651.734/8/2014
DUKDuke Energy Corp71.224.3882.385/15/2014
PBCTPeople's United Financial Inc14.874.3787.674/29/2014
DRIDarden Restaurants Inc50.764.3364.094/8/2014
SPLSStaples Inc11.344.2344.266/25/2014
FEFirstEnergy Corp34.034.23245.235/5/2014
PCGPG&E Corp43.24.21100.616/30/2014
PCLPlum Creek Timber Co Inc42.044.19135.515/14/2014
PNWPinnacle West Capital Corp54.664.1560.314/29/2014
KIMKimco Realty Corp21.884.11174.484/1/2014
SCGSCANA Corp51.324.0960.36/11/2014
CNPCenterPoint Energy Inc23.694.01114.155/14/2014
GASAGL Resources Inc48.96470.935/14/2014
MACMacerich Co/The62.333.98208.325/9/2014
WMBWilliams Cos Inc/The40.583.97222.626/4/2014
AEPAmerican Electric Power Co Inc50.663.9564.465/9/2014
XELXcel Energy Inc30.363.9558.436/17/2014
COPConocoPhillips70.353.9241.665/15/2014
IRMIron Mountain Inc27.573.92213.916/18/2014
PEGPublic Service Enterprise Group Inc38.143.8858.576/6/2014
AEEAmeren Corp41.23.8875.816/9/2014
MATMattel Inc40.113.7955.25/19/2014
FCXFreeport-McMoRan Copper & Gold Inc33.073.7884.824/11/2014
KRFTKraft Foods Group Inc56.13.7445.054/9/2014
CMSCMS Energy Corp29.283.6959.695/7/2014
EXCExelon Corp33.563.6973.555/13/2014
LEGLeggett & Platt Inc32.643.6887.716/18/2014
SESpectra Energy Corp36.943.63795/7/2014
CINFCincinnati Financial Corp48.663.6252.226/16/2014
WMWaste Management Inc42.073.56696.946/10/2014
CVCCablevision Systems Corp16.873.56122.865/13/2014
DTEDTE Energy Co74.293.5368.536/19/2014
AVBAvalonBay Communities Inc131.323.53932.946/30/2014
INTCIntel Corp25.813.4946.565/5/2014
GRMNGarmin Ltd55.263.4760.316/13/2014
NUNortheast Utilities45.53.4559.455/30/2014
EQREquity Residential57.993.45#VALUE!6/19/2014
AIVApartment Investment & Management Co30.223.44335.825/14/2014
GEGeneral Electric Co25.893.453.116/26/2014
CSCOCisco Systems Inc22.413.3933.164/1/2014
DDominion Resources Inc/VA70.993.3872.885/28/2014
CVXChevron Corp118.913.3634.895/14/2014
WECWisconsin Energy Corp46.553.3556.965/14/2014
LLYEli Lilly & Co58.863.3344.895/13/2014
PSAPublic Storage168.493.32104.676/9/2014
MCDMcDonald's Corp98.033.355.55/30/2014
ABBVAbbVie Inc51.43.2776.994/11/2014
LMTLockheed Martin Corp163.243.26525/29/2014
PFEPfizer Inc32.123.2457.685/7/2014
CACA Inc30.973.2348.486/9/2014
PLDPrologis Inc40.833.23288.826/12/2014
CLXClorox Co/The88.013.2360.064/21/2014
CAGConAgra Foods Inc31.033.2252.554/30/2014
FFord Motor Co15.63.21224/28/2014
GMEGameStop Corp41.13.2136.45/22/2014
SYYSysco Corp36.133.2165.994/2/2014
KOCoca-Cola Co/The38.663.1657.856/11/2014
GISGeneral Mills Inc51.823.1646.794/8/2014
PEPPepsiCo Inc83.53.1451.25/28/2014
IGTInternational Game Technology14.063.1332.746/17/2014
MRKMerck & Co Inc56.773.1116.536/12/2014
HASHasbro Inc55.623.0972.884/29/2014
WUWestern Union Co/The16.363.0634.726/12/2014
SPGSimon Property Group Inc1643.05112.095/12/2014
IPInternational Paper Co45.883.0541.055/23/2014
KMBKimberly-Clark Corp110.253.0558.086/4/2014
DOWDow Chemical Co/The48.593.0534.446/26/2014
RSGRepublic Services Inc34.163.0460.876/27/2014
NEENextEra Energy Inc95.623.0365.236/4/2014
OXYOccidental Petroleum Corp95.293.0234.96/6/2014
DPSDr Pepper Snapple Group Inc54.463.0149.426/19/2014
WYWeyerhaeuser Co29.35384.955/7/2014
PGProcter & Gamble Co/The80.62.9956.754/23/2014
MCHPMicrochip Technology Inc47.762.97214.955/20/2014
VNOVornado Realty Trust98.562.96#VALUE!5/7/2014
CLFCliffs Natural Resources Inc20.462.9325.095/13/2014
KKellogg Co62.712.9336.165/30/2014
NUENucor Corp50.542.9396.746/30/2014