Archive for March, 2015

Apple ($AAPL) Remains A Screaming Buy

By: ispeculatornew | Date posted: 03.23.2015 (3:00 am)

$AAPLOne of the key metrics/charts that I always look at when trying to judge Apple is the distribution of revenues for the company. Analyst Horace Dediu (a must follow @Asymco) updates several charts after each earnings update and here is the most recent one following the 2014 Q4 results:


Clearly, Apple is all about iPhones at this point and that is likely to remain the case as long as the smartphone is at the center of our digital lives. I would also argue that as the ecosystem continues to expand, the revenues coming from the periphery will expand. In terms of hardware, that will translate into more sales of accessories from simple cables and cases to Beats headphones and a lot more. The even bigger sector, though, is likely to be services which some expect to grow to 20% of Apple’s earnings in the next two years. Apple will be able to be a part of its users lives not only in terms of entertainment (movies, tv, music, etc) but also in helping them live healthier lives, have a more enjoyable experience in their cars, gyms, etc. Here is another chart from Asymco:

Valuation (P/E of AAPL vs S&P500)

I’d argue that it’s very difficult to justify Apple trading so close to the S&P500 average valuation when it’s been growing much faster. I also consider the downside risk to be very small given the strength of Apple’s ecosystem. There are many different ways to compare valuations but here is one example from Morningstar’s numbers:


That seems difficult to justify given the fact that by some estimates, Apple is among the 10 fastest growing companies in the S&P500 in terms of revenue growth.

Potential Growth

Let’s agree on the fact that the main reason Apple is not trading higher is the belief that Apple will not be able to keep growing. Yes, that argument has been around for many years but it’s still the main argument for non Apple believers. Let’s look at Apple’s core to see if growth can persist:

iPhone: I’d argue that while growth may slow down, in many ways, Apple faces less competition in the high end and that as the smartphone business continues to expand, so will Apple’s sales. Yes, they might continue to lose market share but as long as they hold on to their current users and continue adding more, they’ll be more than fine.

iPad’s+MacBooks+Watches+TV’s: There seems to be a good opportunity here for Apple and while there is a wide range in the sales estimates for products such as Apple Watches, I tend to think that in the long run, these will do well and that while the upgrade cycle might be closer to what we’re seeing with MacBooks and iPad’s, those will continue to be strong businesses.

Enterprise: An area that has been dominated mostly by Microsoft (MSFT) and Blackberry (BBRY) is now slowly but surely opening up to Apple and those big enterprise and government contracts are not only big dollars but they are also very stable revenues that will help a great deal to keep up the growth. The partnership with IBM is another clear sign of promising things to come.

Services (App Store, Apple Pay, Music, Video, HealthKit, HomeKit, CarPlay, TV): Apple has been very smart in recently increasing its release speed for these ecosystems. With more developers and hardware builders than ever ready to start building around Apple’s ecosystem, the company can now expand its lead and continue to make its ecosystem the most valuable out there not only for developers, but also for users. As cars, home, clothes, TV’s and more gain the ability to interact better with our phones, Apple is likely to have a very valuable spot right in the middle of this ecosystem, even if only by continuing to sell (an increasing numbers of) its iPhones.  There are also multiple other ways, such as a rumoured Apple web TV offering that could have a significant medium to long term impact.

Competition Is Crumbling

One main argument that I would hold for Apple is that it faces so little competition. For a company like Apple to face a decline, it would either need the entire market to mature or competitors to start eating away at its market share. I think it’s fair to say that the phone/electronics markets will continue to grow for the foreseeable future and digital services growth is likely to accelerate in the coming years. In terms of competitors, I guess it depends on how you look at each one:

Google (GOOG): The search giant is clearly Apple’s top competitor. While it does not really compete on the hardware part (yes, Google sells some Nexus devices and owns Nest), it does compete in plenty of other spaces. The top area of course would be Android, the dominant (in terms of #users) mobile O/S. I think it’s fair to say that both have very different target markets and do not threaten each other at this point. The other more problematic area in my opinion is web services where Apple has needed to make several moves to compete with Google. Some worked well, others took some time (maps being a primary area) and in many others (Youtube, Search and ISP being a few examples), Apple has no answer. I don’t consider those a threat to Apple at this point, but they’re certainly a challenge.

Samsung: When Apple CEO Tim Cook says that Apple’s focus is on making money by selling its devices, not selling ads, it obviously means that Apple needs to maintain its pricing power on those devices and for some time it looked like Samsung might create some issues. Samsung was the only company that seemed both willing and capable of competing on the very high end devices that Apple dominates. That did not last, though, and while the sales of iPhones have increased over time, Samsung’s Galaxy is under increased pressure:



Xiaomi: Clearly, Xiaomi is a force to be reckoned with. Yes, it mainly operates in China but that is a major market for Apple and Xiaomi could obviously expand well beyond China. That being said, its products are not yet up to par with Apple, it (mostly) operates in one country and Xiaomi’s brand is not very well known in major Western markets, so to say that it is a threat to Apple in the near to medium term is a stretch in my opinion.

Other Hardware Makers: A few years ago, you could say that companies such as Dell, HP, Compaq, Lenovo offered competition but they have all been losing ground.

So really, I do not see a major player that can take on and disrupt Apple at this point. That challenge is likely to become even harder over time as Apple’s rich ecosystem continues to grow both in terms of hardware and software… Overall, I continue to think that Apple remains an obvious pick in terms of upside vs. downside.

Disclosure: Long Apple (AAPL)

Ultimate Sustainable Dividend Portfolio – March 2015 Update – The Good and The Bad

By: ispeculatornew | Date posted: 03.19.2015 (4:13 am)

oil-sands2As many of you know the Ultimate Sustainable dividend portfolio was built over a year ago as an attempt to slowly become financially free. I usually do monthly updates but I got late on this latest update and one month slow became 2-3… but I’m back, and ready to get more active:) There is certainly good and bad news here:

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:

TickerNameSharesMar 18 PricesMar 18 Values
OMCOmnicom Group Inc34$78.13$2,656.42
MSFTMicrosoft Corp77$42.50$3,272.50
JCIJohnson Controls Inc45$50.28$2,262.60
PEPPepsiCo Inc/NC33$94.64$3,123.12
ETNEaton Corp36$68.52$2,466.72
DOVDover Corp29$72.10$2,090.90
ITWIllinois Tool Works Inc31$99.81$3,094.11
XLNXXilinx Inc42$41.60$1,747.20
SJMJM Smucker Co/The24$112.61$2,702.64
BLKBlackRock Inc16$377.76$6,044.16
TROWT Rowe Price Group Inc34$83.88$2,851.92
OXYOccidental Petroleum Corp27$74.01$1,998.27
CRCCalifornia Resources10$7.08$70.80
XOMExxon Mobil Corp24$86.07$2,065.68
ADIAnalog Devices Inc49$59.67$2,923.83
HASHasbro Inc34$61.43$2,088.62
MATMattel Inc48$23.96$1,150.08
BAXBaxter International29$68.55$1,987.95
IVZInvesco Ltd72$41.78$3,008.16
TXNTexas Instruments Inc35$58.30$2,040.50
VWOVanguard FTSE Emerging Markets62$40.94$2,538.28
BNDVanguard Total Bond Market39$83.35$3,250.65

Dividends Received

This is a very interesting portion as there is solid growth in the monthly income



Ultimate Sustainable Dividend Portfolio News



This is unfortunately the bad part in terms of now lagging the S&P500 total return index by a few thousand dollars, there are a few factors that would explain the lag, the main ones in my opinion:
-oil: the USDP has a lot more correlation with the price of oil than the S&P500 which certainly played a role
-bonds: we added some other types of exposure such as bonds, through ETF’s which will tend to outperform in tough markets and underperform in rising ones.
-Mattel: clearly, this has been a difficult one to hold on to and I’ll certainly review it but just look at this chart:





With almost $5000 in cash in the portfolio, it will soon be time to start trading, expect some news on that front perhaps as soon as next week.

The Ecosystem Play Update ($AAPL, $AMZN, $FB, $GOOG, $MSFT)

By: ispeculatornew | Date posted: 03.16.2015 (3:00 am)

Last night I saw a very interesting video about the main ecosystems which got me thinking. It’s a quick view if you have a few minutes:

Then this morning I decided I’d write a bit more and started looking back for my previous posts about the ecosystem play. My first post about it seems to have been posted 2 years ago to the day. In that article, and many others that followed, I argued that the ecosystem companies will dominate the tech space and that as technology enters our daily lives, they will become incredibly powerful. I’ve said multiple times that owning all of them would be a smart play. Some of you would be surprised to learn that since then I only took significant stakes in Apple Inc (AAPL) and Facebook (FB). Those have obviously been the right picks:

AAPL Chart

AAPL data by YCharts

Apple and Facebook are actually the only 2 names that have outperformed the Nasdaq Index (qqq). And to this day, I remain very hesitant about buying either Amazon (AMZN) or Google (GOOG). What am I waiting for? I’m not exactly sure. Both remain at least as dominant as they were and I have little doubt that their ecosystems will continue to gain ground. So what’s the problem?

It’s All About Focus

If I ask you what these companies are about (leaving Microsoft aside for now), I’d have an easy time describing that for 2 companies:

Apple: Building and expanding its current ecosystem that starts from the iPhone but is quickly expanding its reach both in terms of hardware and software (Apple Pay, HealthKit, HomeKit, etc). Apple is about producing the best phones, tablets, smart watches, and is increasingly moving into the luxury arena. Apple has generally been good about building a core infrastructure (think app store, Health Kit, Home Kit) and letting developers and companies build content and hardware around those.

Facebook is all about connecting people and has been doing so for over a billion people on its main Facebook platform. As the younger generation has moved towards platforms, Facebook bought the most powerful of those, Instagram and also is the dominant player in terms of messenging services with both Facebook Messenger and WhatsApp. Facebook is about connecting users with friends and family but also with brands which has been an incredible source of profit.

It becomes more difficult for the 2 others:

Google continues to be the dominant search service in the world even though its search market share has declined mostly because of its lost Mozilla deal. Google is also behind the dominant mobile O/S and while the high end users are almost exclusively with Apple, Android remains the dominant player when looking at pure user numbers. The main problem though is that it’s not exactly clear how that will work out as more mobile players such as Xiaomi and Samsung attempt to move away from the “pure” Google services powered Android. Google is also attempting to offer its own fiber service (Google Fiber), working on a wireless internet service, offers online storage, builds its own devices, cars, drones, has a shipping service, etc.  It’s unclear to me which of these activities are core, which will be 10 years from now and what type of business Google will be a decade from now.

Amazon is even more difficult for me to understand. It’s first layer of being the everything store is incredibly powerful and through building (by very far) the top online commerce and distribution chain, Amazon has set itself up to command a large part of the growing online commerce and successfully compete with the likes of Walmart (WMT), Best Buy, etc. That being said, Amazon is hardly focused on that part alone. It has also been vocal about its ambitions to move into very different industries ranging from online groceries to building tablets, phones, buying a gaming video website, producing tv shows and movies, its own streaming service, etc. For most of those efforts, you could see logical reasons behind those moves (such as the threat of a smaller presence in a mostly mobile world) but I think it’s rather clear that building a phone from scratch and spending billions of dollars into a product that ended up being a major flop is a big reason to be worried about Amazon.

Is The Ecosystem Play Still Attractive?

I’m less of a believer in the overall ecosystem play (as in owning all 5 of these names) as I was a few years ago and I think the main thing I will be tracking going forward is the company’s focus. Companies that try to do “everything” are not only much more difficult to value but I would also argue unlikely to succeed against smaller, more nimble operations that have clear focus. Apple is now moving into a product category with rumors about many others coming (such as cars) so I will certainly track the company’s focus but I think it’s safe to say that Apple and Facebook remain my top picks going forward as ecosystem plays. I’ll likely write a more complete, separate post about Microsoft in the near future as that company has been going through a very interesting transition in the past few months.

What are your thoughts on the ecosystem play? Would you agree that Apple and Facebook are the two clear picks as of right now? 

Disclosure: Long Apple (AAPL) and Facebook (FB)

Top 100 Dividend Stocks – March 2015 Edition – Net Neutrality?

By: ispeculatornew | Date posted: 03.03.2015 (3:00 am)

net-neutrality-21Today, I’m back with a look at the top dividend stocks (in terms of yield) in the S&P500. As is often the case, 4 of the top 9 names (WIN, CTL, T, FTR) are in the telecom space and will end up being impacted by the ruling regarding net neutrality. I’ll personally be very interested to read more about the impact over the entire industry and how it will impact some players more than others. Something that will be discussed more over time.

Who Rises To The Top?

I often talk about the danger of looking at the top of these rankings to find the best dividend plays and that companies often end up high on these lists because their stock price declines due to bad results. Just take a look at the performance of the top 4 names on this list over 6 months.

WIN Chart

WIN data by YCharts

Scary right? The #5 name though has a more encouraging chart:

CTL Chart

CTL data by YCharts

Here is the full list!

TickerNamePriceDividend YieldPayout RatioEx-Dvd
WINWindstream Holdings Inc7.8912.67250.773/27/2015
NENoble Corp plc16.649.0125.205/07/2015
FCXFreeport-McMoRan Inc21.635.7884.824/16/2015
MATMattel Inc26.325.78103.285/18/2015
CTLCenturyLink Inc37.865.7159.4603/04/2015
OKEONEOK Inc44.265.47139.174/29/2015
TAT&T Inc34.565.44154.7104/01/2015
HCPHCP Inc42.365.34113.3105/07/2015
FTRFrontier Communications Corp7.985.26301.6703/10/2015
IRMIron Mountain Inc36.755.17213.9103/04/2015
PMPhilip Morris International Inc82.964.8281.613/24/2015
CNPCenterPoint Energy Inc20.794.7666.85/15/2015
WMBWilliams Cos Inc/The49.044.7366.7303/11/2015
TETECO Energy Inc19.634.5995.125/14/2015
SOSouthern Co/The45.794.5994.3402/12/2015
VZVerizon Communications Inc49.454.4589.1804/08/2015
KMIKinder Morgan Inc/DE41.014.39194.914/29/2015
PPLPPL Corp34.14.3761.8603/06/2015
PBCTPeople's United Financial Inc15.134.3619.264/29/2015
HCNHealth Care REIT Inc77.114.28221.5505/07/2015
VTRVentas Inc74.474.24191.4103/04/2015
WYNNWynn Resorts Ltd142.54.2186.235/21/2015
ETREntergy Corp79.514.1863.3505/12/2015
SESpectra Energy Corp35.494.1785.2705/06/2015
GASAGL Resources Inc49.114.1641.465/13/2015
FEFirstEnergy Corp34.984.12283.9405/04/2015
EDConsolidated Edison Inc63.144.1267.595/18/2015
GRMNGarmin Ltd49.634.11101.803/12/2015
HPHelmerich & Payne Inc67.064.137.525/15/2015
PCLPlum Creek Timber Co Inc43.444.05145.325/20/2015
DUKDuke Energy Corp78.554.0590.575/20/2015
CVXChevron Corp106.684.0141.202/12/2015
POMPepco Holdings Inc27.143.98112.403/06/2015
AEEAmeren Corp42.413.8766.5403/09/2015
GMGeneral Motors Co37.313.8668.7603/09/2015
LOLorillard Inc68.423.8674.8906/03/2015
SCGSCANA Corp56.953.8355.3903/06/2015
HSTHost Hotels & Resorts Inc213.8177.43/27/2015
CCICrown Castle International Corp86.313.8179.323/18/2015
RIGTransocean Ltd16.133.7263.795/27/2015
PEGPublic Service Enterprise Group Inc42.063.7149.3303/06/2015
PNWPinnacle West Capital Corp64.083.7164.594/30/2015
OXYOccidental Petroleum Corp77.883.7#VALUE!03/06/2015
MOAltria Group Inc56.293.777.9403/12/2015
AEPAmerican Electric Power Co Inc57.583.6861.0805/08/2015
FFord Motor Co16.343.6761.254/28/2015
EXCExelon Corp33.923.6666.525/15/2015
KIMKimco Realty Corp26.283.65118.9404/01/2015
TEGIntegrys Energy Group Inc74.733.6461.845/29/2015
XELXcel Energy Inc35.283.6359.563/13/2015
DDominion Resources Inc/VA72.093.59107.085/27/2015
GMEGameStop Corp36.973.5737.2103/05/2015
RAIReynolds American Inc75.623.5499.3803/06/2015
GEGeneral Electric Co25.993.5458.266/18/2015
STXSeagate Technology PLC61.123.5335.8505/01/2015
CINFCincinnati Financial Corp52.763.4954.833/16/2015
DRIDarden Restaurants Inc643.44157.3704/10/2015
MCDMcDonald's Corp98.93.4467.65/30/2015
KRFTKraft Foods Group Inc64.063.43122.243/30/2015
DOWDow Chemical Co/The49.243.4152.193/27/2015
NOVNational Oilwell Varco Inc54.353.3928.6903/11/2015
PCGPG&E Corp53.733.3960.033/27/2015
CATCaterpillar Inc82.93.3845.14/16/2015
PLDPrologis Inc42.713.37107.43/16/2015
ABBVAbbVie Inc60.53.37157.344/13/2015
DTEDTE Energy Co82.033.3652.4903/12/2015
WECWisconsin Energy Corp50.983.3259.825/13/2015
CMSCMS Energy Corp35.133.361.3605/06/2015
WYWeyerhaeuser Co35.113.372.4305/06/2015
PFEPfizer Inc34.323.2674.0205/06/2015
LYBLyondellBasell Industries NV85.913.2633.575/19/2015
EMREmerson Electric Co57.923.2556.365/13/2015
PBIPitney Bowes Inc23.173.2450.5305/06/2015
ESEversource Energy51.753.2360.595/29/2015
KMBKimberly-Clark Corp109.663.2185.2503/04/2015
CVCCablevision Systems Corp18.783.1951.4503/12/2015
WUWestern Union Co/The19.523.1831.113/13/2015
NUENucor Corp47.033.1766.413/27/2015
XOMExxon Mobil Corp88.543.1235.5705/07/2015
MACMacerich Co/The83.653.1123.9705/06/2015
COHCoach Inc43.553.147.8803/04/2015
ETNEaton Corp PLC71.013.1003/05/2015
KLACKLA-Tencor Corp64.9553.0851.2902/12/2015
AESAES Corp/VA12.973.0843.114/29/2015
CACA Inc32.523.0850.395/26/2015
SYYSysco Corp38.993.0872.313/31/2015
MRKMerck & Co Inc58.543.0743.4803/12/2015
GISGeneral Mills Inc53.793.0553.4104/10/2015
KOCoca-Cola Co/The43.33.0576.0803/12/2015
PAYXPaychex Inc49.8353.0581.3705/08/2015
KKellogg Co64.483.04107.6303/04/2015
PGProcter & Gamble Co/The85.133.03614/22/2015
MROMarathon Oil Corp27.863.0256.145/18/2015
BAXBaxter International Inc69.153.0157.103/09/2015
LMTLockheed Martin Corp200.05348.125/28/2015
NAVINavient Corp21.42.99#VALUE!03/04/2015
NEENextEra Energy Inc103.462.9851.1106/04/2015
AIVApartment Investment & Management Co37.682.9751.425/20/2015
DNRDenbury Resources Inc8.42.9705/22/2015


Are there names on this list that you like or that you are currently considering?

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

By: ispeculatornew | Date posted: 03.02.2015 (3:00 am)

We’re 2 months in and the portfolio is up over 10% so I really cannot complain but I know that every time I open a short position, there is risk of a decent size loss so there’s certainly no reason to celebrate yet.

As is always the case you can see my long & short trades (from 2015 but also past years) here:

Let’s start off by looking at the numbers for today’s trade, two stocks that I’ve paired off against each other very often over the years:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg GrowthSales 5Y Avg GrowthEPS 5Y Avg Growth
AAPLApple Inc128.4617.313.916.766.954.3321.170.8430.0439.3248.25N/AN/A
NILEBlue Nile Inc29.9837.1225.46-

Not a surprise here and while NILE is not as great of a short as it once was (borrow remains expensive and not as overvalued) but if you look at this chart and tell me that NILE is (much) more expensive, it looks like a no-brainer. There just doesn’t seem to be that much upside in NILE.

AAPL Revenue (Quarterly YoY Growth) Chart

AAPL Revenue (Quarterly YoY Growth) data by YCharts

$AAPLLong Apple Inc (AAPL)

No shock here. I closed my long & short trade on Apple on Friday (but kept my bigger long position) mostly to take some gains but it’s not a surprise to most of you to see me jump right back in. Apple is a great stock for a few reasons but the main one is that the potential upside/downside risk remains incredibly positive to me. To have a stock that continues to dominate an exploding sector trading at such a low valuation screams buy. No, I don’t expect the stock to move by 40-50% in the next few months but I do think AAPL will continue to outperform the market thanks to its dominating iPhone, its ecosystem as well as mostly only upside from new product categories such as the Apple watch.


Next earnings release: April 23rd 2015

$NILEShort Blue Nile (NILE)

Shorting NILE is not a no-brainer because as I mentioned it’s expensive to borrow and it’s no longer trading at those crazy P/E ratios. That being said, a the company continues to be very disappointing and has not seen as much explosion as you’d hope. There are some stocks that I short but that I have real worry that they’ll explode higher because of a takeover offer or a big surprise in revenues/earnings. I don’t have that same fear with NILE (I’m probably jinxing it now) as I feel like the upside is limited. I also doubt the stock will decline much, it will be more a sideways move as has been the case for years.

ycharts_chart (1)

Next earnings release: May 1st 2015

Disclaimer: Long position on Apple and I will open this trade on today’s open