Archive for September 2013

September 30th: Ed’s Daily Portfolio Summary   2 comments

Another month comes to a close. As usual, my portfolio results include Friday, except for SYMC, which I just bought today:

GNW: -0.19 to $12.80 ( -1.46% , 36.61% overall)– bought at $9.37
IAU: 0.05 to $12.89 ( 0.39% , -1.53% overall)– bought at $13.09
NDZ: -0.03 to $8.63 ( -0.35% , -0.23% overall)– bought at $8.65
NNVC: -0.51 to $5.19 ( -8.95% , 104.33% overall)– bought at $2.54
PVCT: -0.07 to $0.77 ( -8.33% , -25.96% overall)– bought at $1.04
SYMC: 0.03 to $24.75 ( 0.12% , 0.12% overall)– bought at $24.72 today
YHOO: 0.42 to $33.17 ( 1.28% , 23.40% overall)– bought at $26.88

OVERALL: -0.43%

Posted September 30, 2013 by edmcgon in Uncategorized

Buy Symantec (SYMC)   2 comments

Ojunker asked me about security software in the comments. I did a little digging, and turned up a gem. Specifically, a tech stock with a nice dividend!

Symantec (SYMC), a security software company, has just started paying a dividend this year, and has paid it out for 2 quarters. If they continue paying it quarterly, it will eventually reach a 4.8% yield at the current price. The payout ratio is still low (14%), but that is based on what they have already paid.

On top of that, their board of directors has authorized a $1 billion stock buy back for next year.

Symantec is top dog in their industry, with a $17 billion market cap on nearly $7 billion in revenue. Their financials are clean, with almost $1 billion in levered free cash flow. Their profit margin, at 10.9%, is typical for the industry.

If they continue to pay their dividend, I may transfer the stock to my 401(k) account (where I keep my long-term holds). In the meantime, I am adding a small position to my IRA account. Any price between $24.50 and $25 is a good price for this stock. If macro conditions (read: government shutdown) drop this stock below $24.50, I would call it a “must buy”. It is a great price for a great dividend in a growing industry.

UPDATE 3:31 pm EST: I added SYMC at $24.72.

Posted September 30, 2013 by edmcgon in Portfolio Moves, Technology

Traders Corner   7 comments

Should the market decide to drop substantially today, I have bolded all of the significant levels down to the 200 day moving average. Personally, I think a market crash today over the U.S. government shutdown would be a huge overreaction. However, I will be playing it cautiously. I would also expect a lot of volatility as the markets hang on every rumor from Washington.

The S&P 500 levels to watch today:

UPSIDE: 1693-1695 (3 data points), 1697-1698 (2 data points and July’s high), 1700-1701 (2 data points), 1703-1705 (3 data points), 1707-1711 (3 data points and August’s high), 1720 (September 19th’s low), 1725 (September 20th’s high), 1729 (2 data points and the all-time high), and 1735 (top of the Bollinger Bands).
LAST CLOSE: 1691 (2 data points).
DOWNSIDE: 1687-1689 (4 data points and May’s high), 1684 (September 10th’s high and the 20 day moving average), 1681-1682 (2 data points), 1680 (50 day moving average), 1678 (September 11th’s low), 1675 (September 10th’s low), 1672 (September 9th’s high), 1664 (September 6th’s high), 1659 (September 5th’s high), 1651-1656 (4 data points and June’s high), 1640 (September 6th’s low), 1637 (September 4th’s low), 1634 (bottom of the Bollinger Bands), 1633 (September 3rd’s low), 1627 (August’s low), 1604 (July’s low), 1597 (April’s high), and 1589 (200 day moving average).

Posted September 30, 2013 by edmcgon in Daytrading, Investing, Market Analysis

Ed’s Daily Notes for September 30th   2 comments

Reuters (via Yahoo): Wall Street braces for volatility as shutdown seems likely

There is only one thing you need to know today:

As a last-minute deal to resolve spending negotiations in Washington appeared less likely, U.S. stock investors braced for what had previously seemed remote: a shutdown of the U.S. government that could spark a major equity decline.

The House of Representatives early on Sunday voted for an emergency spending bill that includes a delay of President Barack Obama’s signature healthcare reform law despite veto threats from the White House.

While a deal could be reached before the government’s fiscal year ends at midnight on Monday, the unanimous passage of a bill to continue paying U.S. soldiers in the event the government runs out of money was viewed as a sign that there would be no agreement between Republicans, who hold a majority in the House, and the Democrats, who control the White House and Senate.

Among the consequences of no deal being reached are many government employees will be furloughed, and the Labor Department will not issue its monthly employment report scheduled for next Friday.

A shutdown is expected to have a major impact on markets, injecting massive amounts of uncertainty into all asset classes. If a deal is reached quickly, that might allow markets to recover, but a prolonged shutdown could have significant implications for economic growth and consumer confidence.

However, for all the “sturm und drang” from the Media, history tells a different story:

Historically, Wall Street has managed to avoid steep downside during similar incidents. During the federal government shutdown from December 15, 1995, to January 6, 1996, the S&P 500 added 0.1 percent. During the November 13 to November 19, 1995, shutdown, the benchmark index rose 1.3 percent, according to data by Jason Goepfert, president of SentimenTrader.com.

But don’t get cocky:

Even if a last-minute deal is reached, investors face a second Washington cliffhanger as Congress must agree to increase the $16.7 trillion limit on federal borrowing by October 17. If Capitol Hill fails to act in time, the unthinkable could happen and the United States could default on its debts.

The key word there is “could”. President Obama would have to make an executive decision to default. Considering that would effectively kill the U.S. government’s borrowing ability, which would have the side effect of killing Obamacare, as well as killing Obama’s legacy, I would call the probability of a U.S. debt default as somewhere between slim and none.

Bloomberg: Apple Overtakes Coca-Cola as Most Valuable Brand, Study Finds

Apple (AAPL) has unseated Coca-Cola as the world’s No. 1 brand, as the company founded by Steve Jobs is a leader in design, performance and focuses on customers, according to a study of the Top 100 brands by Interbrand Corp.

Apple Inc.’s brand value jumped 28 percent to $98.3 billion, Google Inc. (GOOG) is now in second place at $93.3 billion, and Coca-Cola Co. has slipped from the top seat after 13 years to third place at $79.2 billion.

“Every so often, a company changes our lives — not just with its products, but with its ethos,” Jez Frampton, chief executive officer at New York-based brand consultancy Interbrand, said in a statement. Current Apple CEO “Tim Cook has assembled a solid leadership team and has kept Steve Jobs’ vision intact — a vision that has allowed Apple to deliver on its promise of innovation time and time again.”

The annual study, closely watched by the industry, determines a brand’s value by examining its financial performance, role in influencing consumer buying and ability to secure earnings. The Top 10 is rounded out in descending order by IBM, Microsoft, GE, McDonald’s, Samsung, Intel and Toyota. The 100 companies on the Interbrand list have a combined brand value of $1.5 trillion, an 8.4 percent increase from last year.

Technology names were among the biggest climbers. Google’s brand value rose 34 percent, while Samsung’s advanced 20 percent. Yahoo and BlackBerry fell off this year’s ranking. Nokia dropped to 57th place from 19th with the largest decline in brand value in the history of the 14-year study.

New names on the list include Discovery, Duracell and Chevrolet. The fastest-rising brands were Apple, Facebook, Prada, Google and Amazon.

Even though I don’t personally favor Apple products, the market does. However, note that Google is hot on Apple’s heels.

The Daily Caller: Newest UN climate report is ‘hilariously’ flawed

A top climate scientist from the Massachusetts Institute of Technology lambasted a new report by the UN’s climate bureaucracy that blamed mankind as the main cause of global warming and whitewashed the fact that there has been a hiatus in warming for the last 15 years.

“I think that the latest IPCC report has truly sunk to level of hilarious incoherence,” Dr. Richard Lindzen told Climate Depot, a global warming skeptic news site. “They are proclaiming increased confidence in their models as the discrepancies between their models and observations increase.”

The Intergovernmental Panel on Climate Change claimed it was 95 percent sure that global warming was mainly driven by human burning of fossil fuels that produce greenhouse gases. The I.P.C.C. also glossed over the fact that the Earth has not warmed in the past 15 years, arguing that the heat was absorbed by the ocean.

“Their excuse for the absence of warming over the past 17 years is that the heat is hiding in the deep ocean,” Lindzen added. “However, this is simply an admission that the models fail to simulate the exchanges of heat between the surface layers and the deeper oceans.”

“However, it is this heat transport that plays a major role in natural internal variability of climate, and the IPCC assertions that observed warming can be attributed to man depend crucially on their assertion that these models accurately simulate natural internal variability,” Lindzen continued. “Thus, they now, somewhat obscurely, admit that their crucial assumption was totally unjustified.”

…The Associated Press obtained documents that show the Obama administration and some European governments pressured UN climate scientists to downplay or even omit data that shows the world hasn’t warmed in over a decade.

“Germany called for the reference to the slowdown to be deleted, saying a time span of 10-15 years was misleading in the context of climate change, which is measured over decades and centuries,” the AP report said. “The U.S. also urged the authors to include the ‘leading hypothesis’ that the reduction in warming is linked to more heat being transferred to the deep ocean.”

This is what the world’s governments do in their spare time? Blame humans for something they don’t even fully understand? Maybe we should shut down ALL of the governments…

Posted September 30, 2013 by edmcgon in Market Analysis, News, Politics, Stocks

Weekend Open Thread   16 comments

Sorry for the delay this week, but here is the usual weekend open thread, where you folks can discuss any topic you like.

For your consideration, I offer…radio shows.

For the oldest among you, you may remember old time radio shows. When I was a kid, I remember listening to CBS Radio Mystery Theater, one of the last of the radio shows. Now, thanks to the internet, there is a website which features all of the episodes from CBS Radio Mystery Theater. I recommend it. (link here)

The reason I bring this up is because my daughter introduced me to a new website: Night Vale. It serves up episodes (or in “internet-ese”, podcasts or webisodes) of the story of a rather strange town, told by a “newscaster”/narrator. I can’t decide whether the show is funny or creepy, or a little of both. Either way, it certainly isn’t dull.

But it is nice to see a modern take on the old radio shows. Who would have thought the internet would bring back the spoken word as a medium of storytelling?

Enjoy your weekend folks! Or as E.G. Marshall used to say at the end of CBS Radio Mystery Theater, with the sound of a creaky door closing in the background, “Pleasant…dreams?”

Posted September 27, 2013 by edmcgon in Open Thread

Review: Old Guard Tech   2 comments

I was looking at the “old guard” tech companies yesterday, specifically Intel (INTC), Microsoft (MSFT), and Cisco (CSCO). All of them reached peaks during the 2000 internet bubble, which none of them have revisited since then. In fact, all of their charts look depressingly flat for the last decade. However, all of them pay decent dividends, even if their growth potential is questionable. Basically, these are stocks that are almost like bonds: a safe place to put money and collect a fixed income. Actually, “fixed income” is a misnomer with them, because all of them have raised their dividends since they started paying them. But which of these three stocks is the best?

All three have similar debt loads (debt/equity from 21% to 27%). All three have low price/earnings (12.6-12.8). All three have low PEG ratios (1.1-1.4, with 1.0 being fairly priced for expected growth over the next 5 years).

First, let’s look at Cisco:

Revenue: $48 billion
Diluted EPS: $1.86
Cash: $50 billion
Price/book: 2.17
Levered free cash flow: $8.5 billion
Profit margin: 20.5%
Dividend yield: 2.8%
Payout ratio: 33%
Dividends paid since 2011, and raised 3 times

Second, Microsoft:

Revenue: $78 billion
Diluted EPS: $2.58
Cash: $76 billion
Price/book: 3.46
Levered free cash flow: $19 billion
Profit margin: 28.1%
Dividend yield: 3.4%
Payout ratio: 34%
Dividends paid since 2003, and raised for the past 7 years, including 5 times since 2008

Microsoft clearly has the edge on Cisco in most categories. But I would expect that, since Microsoft products tend to carry lower overhead, and this flows through to the rest of the business. Over time, this makes Microsoft an even better investment.

Finally, Intel:

Revenue: $52 billion
Diluted EPS: $1.85
Cash: $17 billion
Price/book: 2.17
Levered free cash flow: $7 billion
Profit margin: 18.1%
Dividend yield: 3.8%
Payout ratio: 49%
Dividends paid since 1992, and raised for the past 9 years, including 5 times since 2008

I would have to give Intel the edge over Cisco, but only from a stockholder perspective. Intel pays their shareholders better, for very similar financial performance.

However, the winner is clearly Microsoft, with more cash, better cash flow, and a good and safe dividend. There is one caveat: Nokia. Adding Nokia’s phone unit throws Microsoft squarely into the smartphone wars, where they haven’t been overly competitive. But even with that negative, Microsoft is more than adequate financially to lose this battle and still remain rock-solid. And if Microsoft actually becomes competitive in the smartphone wars, that is just more money on this very large mountain of cash.

By the way, don’t laugh at the prospect of Microsoft becoming competitive in the smartphone wars: They have significantly more cash than the smartphone monster, Apple ($42 billion versus Microsoft’s $76 billion). To use a military metaphor, Microsoft can afford to lose a lot of battles in the smartphone wars, and then win by attrition.

I would call Microsoft a long-term “buy and hold”. Currently at $32.77, paying any price around $32 is more than reasonable. If you can get it closer to $30, even better. I am adding MSFT to my watchlist.

Posted September 27, 2013 by edmcgon in Stocks, Technology

Traders Corner   4 comments

Bill the Cat

Yesterday’s positive move certainly felt like a dead cat bounce. But keep this in mind: There are only two more trading days left in the quarter. For those of us who think markets are rigged, that is the only explanation we need…

The 20 day moving average moved above the 50 day moving average for the first time since the beginning of September. Although it isn’t a “golden cross”, it is still a positive for bulls.

The long-term P&F chart for the S&P 500 is still targeting 1970. If the Federal Reserve continues QE into next year, we could see that price. I would say 1830 by year-end is quite possible under that scenario, and 1970 by next April. If QE ends, all bets are off.

The S&P 500 levels to watch today:

UPSIDE: 1700-1701 (2 data points), 1703-1705 (3 data points), 1707-1711 (3 data points and August’s high), 1720 (September 19th’s low), 1725 (September 20th’s high), 1729 (2 data points and the all-time high), and 1736 (top of the Bollinger Bands).
LAST CLOSE: 1698, inside the 1697-1698 (2 data points and July’s high) range.
DOWNSIDE: 1693-1694 (2 data points), 1691 (2 data points), 1687-1689 (3 data points and May’s high), 1684 (September 10th’s high), 1681-1682 (2 data points and the 20 day moving average), 1680 (50 day moving average), 1678 (September 11th’s low), 1675 (September 10th’s low), 1672 (September 9th’s high), 1664 (September 6th’s high), 1659 (September 5th’s high), 1651-1656 (4 data points and June’s high), 1640 (September 6th’s low), 1637 (September 4th’s low), 1633 (September 3rd’s low), 1627 (August’s low and the bottom of the Bollinger Bands), 1604 (July’s low), 1597 (April’s high), and 1588 (200 day moving average).

Posted September 27, 2013 by edmcgon in Daytrading, Federal Reserve, Investing, Market Analysis