Archive for September, 2014

Increasingly Confused by Amazon ($AMZN)…the Good, The Bad And The Great

By: ispeculatornew | Date posted: 09.30.2014 (3:00 am)

$AMZNMany of you know how much I believe in my “web ecosystem theory”. I have started working on a new article about it and the impact that mobile has had on that theory but as you can guess, I’m still a big believer in placing chips on the 5 major ecosystem players ($GOOG, $AAPL, $FB, $MSFT, $AMZN). I have already taken significant longer term stakes in Apple and Facebook which have worked out well so far. I’m certainly not saying that other tech players can’t have success but it’s important to keep in mind that they will need to co-exist with these established players in order to do well. Netflix ($NFLX), Twitter ($TWTR) and TripAdvisor ($TRIP – which I recently bought – are a few of the players which I think will do well despite not “controlling their ecosystem”.

Does Amazon Belong To The Group?

The one player that I often got questions about in this group was Amazon because the nature of their activites (ecommerce) was so different but the 5 names seem to be converging rather quickly and as players like Google move towards ecommerce and shipping while Amazon starts working on mobile devices, advertising services, video websites, gaming platforms, etc, it’s increasingly clear that the collisions between these 5 players are only getting started. One area where Amazon does not fit with them however is in terms of market cap. Just take a look at the biggest US companies (in terms of market cap):


You will see that 3 of the ecosystem plays are among the top 4. Facebook is not that far behind and being the most recently founded company, is well on its way to get there. The missing company? Amazon of course is ranked #26 on that list despite its incredible growth story? Why? It’s a rather simple reason: “Lack of profits”. Today I wanted to take a new look at Amazon after reading two very thought provoking posts written by two of the top guys when it comes to tech in the recent weeks that got me thinking. I highly recommend both:

Losing my Amazon religion @ Stratechery
Why Amazon has no profits (and why it works) @ Benedict-Evans

I won’t go over every statement in those 2 posts but if you are investing or considering trading Amazon, you do need to read both.

The Good

I certainly feel like Benedict-Evans explained it extremely well and perhaps even more clearly is the tweet by legendary VC Marc Andreeson:

Clearly, the reason why Amazon’s net profit has consistently been around $0 is because that is exactly what Jeff Bezos is trying to do.

ycharts_chart (1)


Spend as much as you can. Why? Because Amazon’s mission requires an incredible amount of resources. What is that “mission”. I’ll agree that it’s not clear and even being the “everything store” seems to under-estimate what Amazon is trying to accomplish. It’s much more than a “store” that can sell you everything.  Jessica Lessin, editor of the Information (a paid but incredibly valuable website) has the best vision that I’ve heard of what Amazon is trying to do: “Amazon-as-city“. Amazon wants to sell more than physical and digital goods and is increasingly moving towards services. The good news is that it’s working as it continues to gain market share and eliminate competition:


1Amazon has also been able to make incredible progress when it comes to building these incredible warehouses. This post from Re/code gives a few maps that give you some idea of the progress that’s been made.  Clearly, no other company comes close to what Amazon has been able to build. Even companies such as Walmart that have a much broader physical presence are nowhere near as organized which is showing up in the numbers (no surprise here).

Amazon is taking over markets one at a time and if books are any indication, Amazon will be able to innovate greatly once it reaches that point. Just think of how it changed the whole ebook market, its print-as-you-go initiative, unlimited Kindle subscriptions, etc.

The Bad

I feel like Ben Thompson expressed it very well (again the link) and there are many products or ideas that Amazon is working on that make me scratch my head. Bezos is incredible and it’s a tough position to doubt Amazon’s success but it’s hard to argue that Amazon is not well positioned to compete with players such as Apple and Google when it comes to smartphones and tablets for example. Rumors that Amazon has only sold 35,000 Fire phones are a good way to think about how far the company has to go if it wants to become relevant. I understand why it would be important to dominate mobile but at what cost? How much are these products costing to develop and is it even clear that Amazon has a shot of catching up?

When Amazon spends a billion dollars to buy video gaming video community Twitch, it’s not clear how this will end up profiting Amazon. Yes, it’s a terrific property that Google was looking to buy and yes Amazon would like to have terrific video content to provide on all of its platforms. But what makes Amazon uniquely qualified to run Twitch? It seems like one more distraction.

I was very critical of eBay trying to launch an advertising network and can probably be almost as critical about Amazon’s idea to do the same. Yes, Amazon seems like its slightly better positioned but the strategy remains a mystery to me. Wouldn’t it make more sense to use that billion dollars to build more warehouses?

The Great

All of that being said, in the end I do think that Amazon remains worth the gamble. More transparency would certainly help because I’d like to make sure that most of what the company is reinvesting is being used for warehouses and other strategic purchases to feel even more at ease. But the fact remains that in its core business, Amazon is dominant, faces little to no competition (I’m not buying efforts like Google Shopping Express or ebay same-day shipping to this day) and as long as that trend continues, I do believe the “make no profits” philosophy makes sense. If this is a whole new industry that is being created and that we are still its infancy, it makes a lot of sense to reinvest as much as it possibly can to built the best infrastructure for this new world.

I have not yet found an entry point to my liking but believe me that I will be buying at some point if we see a setback.

Adding Alibaba ($BABA) To The Stocks That I Follow

By: ispeculatornew | Date posted: 09.24.2014 (4:18 am)

$BABAUnless you’ve been living on some other planet, you’ve heard about the very recent Alibaba ($BABA) IPO. I often discuss the ecosystem play where I think owning the US Players ($GOOG, $AAPL, $FB, $AMZN, $MSFT) that dominate the web ecosystem is a great way to play it. Those players dominate to some extent everywhere around the world…almost. There is one major country where they are all but shut out: China. Some of it is caused by their refusal to abide by the rules over there that would be necessary to do business but perhaps more importantly is how different of a market it truly is. They are dominated by 3 very different kind of players (so called BAT players):

-Baidu ($BIDU)
-Alibaba ($BABA)
-Tencent (listed on Hong Kong Exchange)

I could explain what each represent but there has been so much written about them that I fear I would not be adding much value here (try this collection of links). One thing that I’ve been unable to do is buy these 3 stocks to this point. Why? I think this article expresses part of my view:

Alibaba bubble

I’m personally not as concerned about who is benefiting from the IPO but trying to get a good feel for what these companies are up has been extremely challenging. I have found a few good sources of information, try to read the earnings transcripts and I’m hoping that at some point I’ll feel like I have a good enough understanding of the Chinese internet market.


What This Also Means

I have not been active on Chinese names lately but I had also been staying out of Yahoo ($YHOO) given its high volatility linked to its Alibaba stake. That will now change and hopefully I can start putting bets on Yahoo in the near term which is extremely interesting. I’m hoping that e can also now finally start getting some answers on how much taxes Yahoo will be paying on future sales of BABA stock.

Have any of you purchased stocks of Alibaba, Tencent or Baidu?

Ultimate Sustainable Dividend Portfolio – September 2014 Update – Moving Ahead

By: ispeculatornew | Date posted: 09.18.2014 (4:20 am)


Dollar treeAs many of you know the Ultimate Sustainable dividend portfolio was built over a year ago as an attempt to slowly become financially free. By that I mean having enough passive income to not “need” to work any longer. I track my progress every month and I’m looking at many different ways to get that done which include real estate, my own business, etc. That being said, the core of my strategy relies on income generated from my portfolios.

The USDP, along with my ETF portfolio generate the bulk of my passive income and I decided to track this with a monthly post in order to keep myself accountable and also because I’ve heard from many of you that this would be helpful.

As is always the case, you can get extra information in my newsletter, it’s free to sign up for here:

Without further wait, let’s get started. Here are the portfolio holdings as of last night:

TickerNameSharesSept 17 2014 PricesSept 17 2014 Values
OMCOmnicom Group Inc32$70.33$2,250.56
MSFTMicrosoft Corp74$46.52$3,489
JCIJohnson Controls Inc42$46.37$1,993.91
PEPPepsiCo Inc/NC30$92.85$2,878.35
ETNEaton Corp33$66.36$2,256.24
DOVDover Corp26$84.72$2,287.44
ITWIllinois Tool Works Inc30$88.63$2,658.90
XLNXXilinx Inc39$43.92$1,756.80
SJMJM Smucker Co/The21$99.71$2,193.62
BLKBlackRock Inc13$329.74$4,616.36
TROWT Rowe Price Group Inc31$79.30$2,537.60
OXYOccidental Petroleum Corp24$98.17$2,454.25
XOMExxon Mobil Corp21$97.08$2,135.76
ADIAnalog Devices Inc46$49.63$2,332.61
HASHasbro Inc31$53.77$1,720.64
MATMattel Inc45$34.16$1,571.36
BAXBaxter International26$72.65$1,961.55
IVZInvesco Ltd69$40.85$2,859.50
TXNTexas Instruments Inc32$48.37$1,596.21
VWOVanguard FTSE Emerging Markets81$44.20$2,696.20
BNDVanguard Total Bond Market46$81.46$2,932.56

Dividends Received

Things are going absolutely great from this perspective. You will see in the below chart a clear trend in monthly income when you compare to the same period the previous year.



Ultimate Sustainable Dividend Portfolio News

Not much to report here. I can’t say I’d blame these companies for not announcing dividend increases in the middle of the summer!


Overall returns continue to be decent but I did not yet catch up on that S&P500 uptick. The main stocks that have let me down from that perspective so far this year are:
Mattell (MAT): -26% so far this year (total return)
ETN Corp (ETN): -10,55%
Of course, it’s one more example of the importance of diversification in a portfolio like this one.




Not much going on from that perspective but you can expect a change or two before year-end.

Time To Get Out Of eBay ($EBAY)

By: ispeculatornew | Date posted: 09.15.2014 (3:00 am)

$ebayI’ve written a decent amount about eBay (EBAY) over the years and have generally been a believer. Today, as I take a new look at things, I’m not as convinced. Why? There area few reasons that I’ll get into. But the one thing that seems apparent is that the current web ecosystem plays ($AAPL, $GOOG, $FB, $AMZN, $MSFT) are now very much ready to take on eBay and I don’t think the company has been able to properly prepare itself. It’s not impossible to survive in such a context (Netflix ($NFLX) and Twitter ($TWTR) are 2 great examples but I feel like eBAY is about to run out of time on that front.

Turns Out Carl Icahn Was Right.. But Maybe Too Late

A few months ago, Carl Icahn waged a very public war with eBay’s board, arguing that they were not doing their job and among other things, should spin out Paypal. Even at the time, I had argued that he was right but I’m believing that more and more. The company is reportedly still considering the move but at some point it will be too late. The problem isn’t so much about having both an auction store and the leading internet payment site in the same company. The issue is that Paypal didn’t get the attention it deserved. I’ve personally said for years that I was valuing eBay as a payments company because that was where the growth and the future was.

So what did Paypal need to do? It needed to quickly build a customer and offline business base that were very active, to support developers (what % of apps that you use try to get you to pay through Paypal?), etc. On those fronts, Paypal has made very little progress.


What Just Changed?

For years, Google has been trying to build a payments solution, Facebook has built “Facebook credits” while Amazon’s “Payments” has slowly but surely continued to gain ground. But what changed was Apple’s recent “Apple Pay” announcement.

Not only does that confirm how serious Apple is taking “Payments” but it will force competing players to up their game VERY quickly because you can bet that Apple will become a major player in the payments space. Apple Pay will also be used for online payments in apps, websites, etc. That is very serious competition for eBay’s Paypal and you can bet that Amazon, Google and Facebook will react to this news very quickly.

The Game Is Not Lost… YET

Of course, Apple only offers payments to its customer base leaving a majority of users unsupported. It is likely that at least one more player will emerge in this space and eBay could certainly compete. I don’t think its chances are good compared to a few years ago when it was by far the dominant payment player. Paypal has around 150 million active users and Apple will almost reach of that number when its new operating system ships next month:


credit Statista


Apple has also signed up all 3 major credit card issuers as partners, will have hundreds of thousands of retail points from the start, etc. Paypal was apparently pushing to be part of Apple’s payments effort but that has clearly failed.

And again… eBay is not so focused on Paypal. Instead last week it announced:




An Ad Network?!?!? To compete with Apple, Google, Facebook, Twitter and others in an ultra-competitive business where eBay has little to no competitive advantage? I don’t think I need to argue this one. Yes eBay knows a lot about what its users like to shop for… but an ad network??? It’s even worse than the focus on same day shipping. eBay is not a technology company or an ad specialist.. so where does this make sense? Why not focus on the area where the company makes most of its money and is being targeted by the world’s leading ecosystems?

Disclosure: Long eBay (EBAY).. but not for long

Closing 1 Trade ($PCLN, $P)

By: ispeculatornew | Date posted: 09.15.2014 (2:00 am)

Overall, it’s been an outstanding year for my long & short stock picks but today is one of those days where I’m closing a trade that’s a losing one. On August 4th, I did the following:

Long Priceline (PCLN) & Short Pandora (P)

PCLN Chart

PCLN data by YCharts

As you can see, things have not quite worked out. I thought the rationale of this trade seemed right (obviously) and I usually still believe that when I close losing trades. I’m changing my mind (slightly) on Pandora which I’ll surely explain a bit later on. Not saying I’m going to buy some, I’d still likely short, but I do see a way for them to do well. More on that later I guess:)

You’ll also see a post about eBay in an hour and probably wonder why I’m not closing my long $EBAY trade. Unfortunately, there is a lot of volatility on the name, given the rumours and Apple news so for now I’ll sit tight but might close it out later this week.

Facebook ($FB) Increasingly Looking Like A Strong Ecosystem Play

By: ispeculatornew | Date posted: 09.08.2014 (3:00 am)

$FBAs I’ve stated several times over the past few years, I’m a big believer in the ecosystem play when it comes to technology stocks. I won’t get too much into why but you can certainly look at these posts for a better idea:

Ecosystems rule the world
Have you put your chips on the web ecosystems yet?

Most of us would all agree that Google (GOOG), Apple (AAPL) and Microsoft (MSFT) all qualify as ecosystems. They are at the center of mobile and desktop worlds thanks to their control through the operating systems (Windows, iOS, Android) that has extended over time. I’ve also personally had Amazon (AMZN) and Facebook (FB) into that group which I know many of you disagree with. These companies are increasingly competing in all kinds of different ways but I think it’s safe to say that Facebook is headed in the right direction as I tweeted a few days ago:

In this post, I won’t discuss the valuation or revenue expectations simply because I’ve done so in the recent past and I’m also more focused on explaining why I think Facebook is an ecosystem play.

The Current Environment

In an increasingly mobile world, it’s all about dominating the app landscape. You’d rightfully assume that players which have their own O/S have an easier path to promoting their own apps and that’s certainly true but Facebook has been able to achieve incredible numbers.

-The Core Facebook app remains the most used app by a significant portion of users. It is the only non-Google app to reach 1 billion installs on the Google Play app store.
-Facebook messenger is currently the most downloaded app on Android and iOS
-WhatsApp has confirmed it now has over 600 million users, with Zuckerberg saying it could end up reaching several billion users
-For all of the talk of “youngsters moving away from Facebook”, they have been moving towards a few apps, Instagram, owned by Facebook is arguably the top one.
-It continues to innovate with new apps such as Hyperlapse and Paper.

Yes, Facebook lacks an operating system and did try its own version with Facebook home but that was a failure. I do personally love to see Facebook being so aggressive and while they have and will continue to fail, overall the growth has been nothing short of spectacular, both in terms of users and revenues:



credits: Facebook IR

 The Coming Years

If the “desktop era” was the first big step in the “Social Web”, then I think it’s fair to say that mobile is the current era. In most of the world, that has translated into big companies such as Google, Apple, Microsoft and others unbundling their core apps into different “single purpose” ones. I’m not sure if that model will remain so or if the “China model” where a few apps make it possible to do just about anything dominate. If that ends up happening, I think Facebook has a great position through its core app, but also its messenger plays.  It is very plausible that in the next “web”, search will no longer be at the “center” but it could be other core functions such as maps or messaging.

If we’re taking an even longer term view, the recent purchase of Oculus Rift by Facebook certainly gives it a leg up in trying to compete with Google in terms of artificial intelligence.

What Are Your Thoughts On Facebook As A Dominant “Ecosystem”?

Disclosure: Long Facebook (FB)

Top 100 Dividend Stocks – September 2014 Edition – WIN Remains On Top

By: ispeculatornew | Date posted: 09.03.2014 (3:41 am)

maldivesIt’s that time of the month again. Things are always slower in the summer in terms of news, dividend increases, etc. There are still some great opportunities out there and I’m always on the lookout for ways to improve my Ultimate Sustainable Dividend portfolio. Why? Because it’s a key part of increasing my monthly passive income (see last update here). There is no “perfect” stock of course. The market is fairly efficient so it’s all about finding high quality stocks that are a good match for my portfolio and provide a good potential/downside risk ratio. Obviously, yield is just one criteria but it’s an important one and for that reason, looking at the top large cap stocks in terms of dividend payout is a great way for me to get started.

WIN Takes A (small) Step Back

WIN continues to look very solid although it did take a slight step back in the past few weeks. Take a look at this chart:

WIN Chart

WIN data by YCharts

Here is the list!

TickerNamePriceDividend YieldPayout RatioEx-DVD
WINWindstream Holdings Inc11.059.05250.779/26/2014
DODiamond Offshore Drilling Inc42.968.1588.6910/30/2014
RIGTransocean Ltd37.987.963.7911/12/2014
ESVEnsco PLC48.936.1336.99/4/2014
FTRFrontier Communications Corp6.795.89362.429/10/2014
NENoble Corp plc27.475.4625.211/6/2014
CTLCenturyLink Inc40.865.29#VALUE!12/4/2014
TAT&T Inc34.845.2853.1310/8/2014
HCPHCP Inc43.095.06106.9211/6/2014
TETECO Energy Inc17.844.9396.6611/10/2014
MOAltria Group Inc43.194.8281.439/11/2014
SOSouthern Co/The43.84.79107.3611/6/2014
HCNHealth Care REIT Inc67.264.733110.7711/6/2014
DRIDarden Restaurants Inc47.754.61157.3710/10/2014
RAIReynolds American Inc59.084.5479.19/8/2014
VTRVentas Inc65.414.43164.069/10/2014
EDConsolidated Edison Inc57.164.4167.8911/10/2014
PMPhilip Morris International Inc85.494.468.079/23/2014
MATMattel Inc34.584.455.211/24/2014
PBCTPeople's United Financial Inc15.044.3987.6710/29/2014
ETREntergy Corp76.384.3583.1111/10/2014
PPLPPL Corp34.274.3579.799/8/2014
PCLPlum Creek Timber Co Inc40.584.34135.5111/12/2014
DUKDuke Energy Corp73.454.3382.3811/12/2014
KMIKinder Morgan Inc/DE39.864.31138.4810/31/2014
FEFirstEnergy Corp33.694.27245.2311/7/2014
VZVerizon Communications Inc49.774.2651.7310/8/2014
LOLorillard Inc59.524.1369.9211/26/2014
SCGSCANA Corp51.324.0960.39/8/2014
AEEAmeren Corp39.344.0775.819/8/2014
TEGIntegrys Energy Group Inc66.974.0661.8811/28/2014
PEGPublic Service Enterprise Group Inc36.584.0558.579/3/2014
PNWPinnacle West Capital Corp56.154.0460.3110/30/2014
POMPepco Holdings Inc27.533.92245.459/8/2014
PCGPG&E Corp47.293.85100.6110/3/2014
CNPCenterPoint Energy Inc24.743.84114.1511/14/2014
KIMKimco Realty Corp23.533.82174.4810/1/2014
SPLSStaples Inc12.633.844.269/24/2014
MACMacerich Co/The65.523.79252.3511/12/2014
XELXcel Energy Inc31.693.7958.439/16/2014
AEPAmerican Electric Power Co Inc52.883.7864.4611/10/2014
EXCExelon Corp32.833.7873.5511/17/2014
WMBWilliams Cos Inc/The59.293.78222.629/10/2014
GASAGL Resources Inc53.13.6970.9311/19/2014
COHCoach Inc36.753.6747.889/5/2014
CINFCincinnati Financial Corp48.283.6552.229/15/2014
PAYXPaychex Inc41.93.6381.3710/31/2014
KRFTKraft Foods Group Inc58.553.5945.059/26/2014
CMSCMS Energy Corp30.243.5759.6911/5/2014
DTEDTE Energy Co77.423.5668.539/11/2014
GRMNGarmin Ltd53.923.5657.449/11/2014
PFEPfizer Inc29.263.5557.6811/5/2014
FCXFreeport-McMoRan Inc35.493.5284.8210/16/2014
LEGLeggett & Platt Inc35.393.5187.719/11/2014
HSTHost Hotels & Resorts Inc22.833.5169.529/26/2014
WECWisconsin Energy Corp44.73.4956.9611/12/2014
CACA Inc28.653.4950.3911/18/2014
MCDMcDonald's Corp92.83.4955.7611/28/2014
TGTTarget Corp60.193.4653.3211/14/2014
NUNortheast Utilities45.443.4659.459/11/2014
DDominion Resources Inc/VA69.473.4572.8812/3/2014
GMGeneral Motors Co34.83.4509/8/2014
WYWeyerhaeuser Co33.993.4184.9511/5/2014
GEGeneral Electric Co25.853.453.119/18/2014
CVXChevron Corp127.543.3634.8911/19/2014
CLXClorox Co/The88.663.3466.1610/20/2014
NAVINavient Corp17.983.34#VALUE!9/10/2014
OKEONEOK Inc70.233.28117.511/5/2014
HASHasbro Inc52.6653.2772.8810/30/2014
CVCCablevision Systems Corp18.523.24122.8611/13/2014
PLDPrologis Inc40.913.23288.829/11/2014
SESpectra Energy Corp41.723.2180.5611/12/2014
PSAPublic Storage175.33.19105.029/11/2014
WMWaste Management Inc47.263.17696.949/3/2014
CAGConAgra Foods Inc32.113.11140.910/29/2014
KMBKimberly-Clark Corp1083.1158.089/3/2014
PGProcter & Gamble Co/The82.983.16110/15/2014
LLYEli Lilly & Co63.683.0844.8911/14/2014
GISGeneral Mills Inc53.363.0753.4110/10/2014
SPGSimon Property Group Inc170.123.06111.9611/10/2014
LMTLockheed Martin Corp173.83.065211/27/2014
ABBVAbbVie Inc55.073.0576.9910/15/2014
CSCOCisco Systems Inc24.883.0547.999/30/2014
SYYSysco Corp38.23.0472.3110/1/2014
KKellogg Co64.793.0336.1611/28/2014
EQREquity Residential66.33.02#VALUE!9/18/2014
GMEGameStop Corp43.753.0237.2111/28/2014
AVBAvalonBay Communities Inc154.153.01932.949/30/2014
AIVApartment Investment & Management Co34.523.0131414.2711/12/2014
IRMIron Mountain Inc36.092.99213.919/24/2014
NEENextEra Energy Inc97.232.9865.1111/26/2014
MRKMerck & Co Inc59.792.94116.539/11/2014
KOCoca-Cola Co/The41.642.9357.859/11/2014
MCHPMicrochip Technology Inc48.7752.9271.1411/18/2014
ADIAnalog Devices Inc50.622.9260.329/3/2014
AVYAvery Dennison Corp48.152.9145.8512/1/2014
IPInternational Paper Co48.462.8941.0511/14/2014
DEDeere & Co83.772.8721.139/26/2014
DDEI du Pont de Nemours & Co65.832.8658.8211/14/2014

It’s Not All About Yield

Of course, as I always mention, dividend yield is one criteria but there’s a lot more involved here and finding a stock with strong overall fundamentals is key. I generally try to get stocks that respect the 7-7-7 rule. That is 7% of 5 year growth in dividends, earnings and sales.  If I remove those with a payout ratio over 80% and a dividend yield over 3%, I get very few results but these are clearly high potential stocks:

TickerNamePriceDividend YieldPayout RatioEx-DVDEPS 5Y GrowthDVD 5Y GrowthSales 5Y Growth
NENoble Corp plc27.475.4625.211/6/201424.6345.059.14
NUNortheast Utilities45.443.4659.459/11/201432.5410.448.7
CVXChevron Corp127.543.3634.8911/19/201446.259.59.6

I will be writing more about these names soon in our free mailing list, join now if you have not done so yet:

Closing 1 Trade (TWTR, DMD)

By: ispeculatornew | Date posted: 09.03.2014 (3:00 am)

Ahhh… on the one hand, this certainly feels like great news but I do feel like this stock is running away. Too late to get in? Time will tell. Back to today, I will be closing the August 11th trade: Long Twitter (TWTR) vs Short Demand Media (DMD) which is up about 37%!!

The overall return of the portfolio remains around +30% although I do have 3 losing trades that are alive and will hopefully stage a comeback:)

TWTR Chart

TWTR data by YCharts