Sunday, June 8, 2014

Trimming and Adjusting in a Slow, Slow Economy

2014 has so far been a weird trading cycle at least for me so far. I've realized as time goes on that the growth stocks that were so successful in 2013, are not so successful in 2014. Some may have  been lucky and have avoided a rough 2014 so far, but it seems like high cap stocks have had a great run so far, and after the slight dip in the end of January, the markets have gotten to steady up pace. It may have been slow but it seems in the recent weeks its been picking up and now breaking through record highs once again to start June off. The whole "sell in May and go away" saying may not have been the best idea. But with the transition from small cap stocks to high cap stocks complete, and other adjustments taking place, did you feel like you missed out? Or can't quite get the trends?

The Trimming Technique
          One of the key decisions in investing is not only when to buy, but also when to sell. The trickiest might be the latter. Lets say you gain a huge return on an investment, but hold on to it because you are afraid its not at the top, and so you think it can keep climbing, instead it falls and you lose much more of the profit you were hoping for. Or other way around, the stock takes a turn for the worst, and so you aren't quite sure if you should sell your loses and move on or stick with the same roller coaster. Its a tricky decision that has investors in a predicament. And so the biggest tip I can give is the trimming technique. Take a look at your portfolio and if you are pleased with the returns, and truly believe the stock has had a great run and believe its in your best interest to take the earnings and run, then so do it. If the stock keeps going while you sold it, you might kick yourself, but I'd rather kick myself with a profit then with a loss. And with the trimming technique, you can just trim some of your gains and keep the stock, therefore, if the stock keeps rising you still get some gains while holding onto a percentage you already made. It works with stocks in the red too. Trimming is used when you believe your investment is at a higher risk then originally perceived; a certain percentage of your gains or losses are cut off to lower the risk of an investment.

The Advanced Reconstitution Phases
          This technique deals with funds rather than individual stocks in a portfolio, although it can still be used. Certain investment websites have a create your own "ETF" where you get to customize a portfolio based on percentages you want to invest in with certain individual stocks. Basically, in the instance of Motif Investing, you can trade 30 stocks for the same fee as one stock, the 30 stocks can be any of your liking and you can customize the percentage of your money goes to each stock. Neat right? Well this type of investing has its disadvantages and advantages and make sure you read up on these customizable "ETF's" first. Reconstituting is typically done quarterly or yearly. Reconstituting is done when a fund looks at its stocks and either add/remove its existing stocks or change the existing ranking of stocks in the fund. This is done to keep the portfolio or fund in tact with market trends. Reconstituting is critical to the success of a fund. Now, this can also be done with certain portfolios. Obviously for individual investors, trimming is an easier way adjust their portfolio, but with those customizable "ETF's"  this reconstituting technique could be possible. Invest with Care.

Monday, June 2, 2014

The Worldwide Developer's Conference: The Ecosystem of Apple

        I know I know, I have already talked about Apple last time but this time isn't about some deal. This time its about there Worldwide Developers Conference they host every year in San Francisco. Now the conference is used to showcase new software technologies and programs for developers. So the first matter we have to get out of the way is that this conference is intended for developers not consumers. So if you watched the keynote Monday and at the end said, "so what did they announce other than software updates" then you are like me. But lets try to look at the picture from Apple's perspective.

Apple's Positioning 
        The conference this year certainly didn't set off any fireworks, but from Apple's perspective they are trying to feed programmers with the tools they need to make their own fireworks. The conference was not about updating their product line, (which I desperately wish they did)  but was about connecting their products and updating their software with new features and easier ways for developers to write code. These announcements were certainly a positive for coders and developers but for consumers and investors, we were not very impressed. Early media coverage has mixed thoughts. Some media outlets focus on the positive of what they said, the new apps including a health and home app, the new finger recognition software and how it can be used through 3rd party apps, and more. Some media outlets focused on the negative what they said, what they didn't say. No new flashy watches or Apple Beat head phones has consumers disappointed. So in reality Apple addressed the glass half full instead of half empty.

My take on WWDC 2014
      I watched most of the key note speech presented by CEO Tim Cook as well as other developers and Apple assistants who presented various presentations and demos of the new software updates a preview of IOS 8 and other new apps. I am not a developer nor am I a enthusiast of coding. But I can understand the positives of the new software they released. The beginning Mr. Cook took shots at Google, then went on to explain its developing software and how it is now much easier to use as well as a new health app that can put charts of your health onto one screen. (I guess that's why they hired some renowned doctors) They also have a new home app that synchronizes all of your home security needs in one app. Tim Cook introduced updates to the Icloud, which connected their applications and devices together. They touched on how they have given more customization and speed into their developing software by using their new software which makes it more easier for developers to use. Apple also emphasized how this new update will not compromise on their well known safety features. 

What To Take From The Conference
      I might of missed a couple of points from the keynote but I got the highlights and there is some conclusions I would take from the conference that are important. Apple made strides to connect all of their devices, update their interface, add some more apps, and make it easier for developers to develop. As an investor and from the big picture, this isn't much and is why Apple fell on Monday. The small picture though has some pretty big implications. Obviously the absence of new products is a red flag for investors, but the strides it made with its developing software is a sign new developers can now be able to make big money apps easier and faster. Also its home and health apps shows how its incorporating its brand into more markets. From an investing stand point that's a good sign. Mr. Cook shared powerful data showing how they have 130 million new customers buying there first Apple product and probably switched from an Android device. (taking a shot at Google) This figure is important because it shows how Apple is still growing and it can retain these customers as well. I didn't like how Tim Cook talked up the update at the end and shared how the new coding software is the biggest thing since the app store. I still wan't to know what the wickedly smart Angela Ahrendts, the former CEO of Burberry who transformed the British company into a money machine with style is going to do at Apple as retail chief. Plus what they plan to do with Dr. Dre's beats. In the end it was a software heavy conference that might of bored consumers, excited developers, and concerned investors. 

In conclusion
       So I end by saying what I've always said about Apple, it  won't be an exciting stock like it was when Steve Jobs was at the helm. But, the anticipation and expectations for something new to come out of Apple is growing and growing. And instead of addressing it, they have made strides to get into new markets, knowing it has lost ground in other markets. "Apple put itself into a great position for the future of their products" but when will those products come out is what everyone is dying to know. Apple has been on a run for the most part because of its fundamentals. It still has a heaping amount of cash, a great dividend yield, and shows great sales from its Iphone's and Ipads, which lets face it, we'll keep buying their new Iphones for as long as they keep updating them. The stock has made a rebound on Tim Cook's reinvestments back into the company, but will not reach new heights until they come out with a new product that consumers will crawl to. Which i'm sure Apple fans will definitely crawl to whatever they have next. Invest with care. 

Wednesday, May 14, 2014

Apple Buys Dr. Dre's Beats?

Apple stirred their behemoth pot of cash Friday with the rumor that they are buying Beats by Dr. Dre for a reported $3.2 billion. Still chump change for Apples large cash flow. Apple has recently been spending their mountain of cash on expert doctors, and stock buy backs. Apple has been rediculed by many for the lack of innovation to their old product line, as well as their lack of decisions made over the heaping cash load  (look back to my article on What's The Deal With Apple for some background).

 Dr Dre, one of the last pioneers of the competitive 90s  rap ventured into the business world and along with Interscope Record's Jimmy Lovine  have managed Beats by Dr. Dre. The Santa Monica based company boasts a large profit margin on their marked up expensive headphones. They also have huge names from numerous celebrity endorsers from the sport world to the hip hop world. Long story short a lot of people wear Dr. Dre's headphones. So now the 90s rapper who smartly got into the business aspect of hip hop, the headphone. Many have theorized this makes Dr. Dre the first billionaire in hip-hop, although that is not going to be accurate, he still will make a hefty amount of money.

Why Did Apple Buy Beats?
For those of you keeping track, this was Apple's biggest acquisition ever at $3.2 billion. And they still put down a lot of cash to buy them, so why did they? Well their is some disturbing reasons why:

1. Apple's Itunes service lost $1.34 billion dollars in sales of 2013, while Spotify sales rose showing their fall in the music industry that was once dominated by Apple. Instead, Apple ventured on to new products and failed to keep their strong position in music. It took till now to realize they should probably be doing something to get back into music, so they bought the best headphones.

2. Steve Jobs had a long track record with Jimmy Lovine and so buying Beats was something Tim Cook thinks Steve Jobs would've done.

3. They like where Beats is heading (although Im not sure where that is). Dre's Beats are at the top of their game, great business advice would say never buy something at the top of what they are doing, it is hard to say they can really grow this company from where it is now. Beats has ventured into the highly competitive aspect of the music industry in music streaming. This is not such a good idea. People are accustomed to getting music for free, whether its Spotifiy, Pandora, or Youtube, music streaming is extremely competitive. And so for people to pay for your product, it better be worth every penny or else your target audience will not budge. In conclusion, Apple bought them on the thought they could grow their music streaming services.

4. Apple was scared at the number they saw in red from their Itunes service, this has not happened since they opened the Itunes store, they want to be relevant again when it comes to music. Even though Dre's beats are profitable, other headphones will and some already have, cut into Dr. Dre's market.


In Conclusion
In the end, Apple's team of coders, programmers, high valued businessmen, geeks, nerds, and whatever doctors are doing in Silcon Valley will team up with hip hop music men, partiers, and the laid back lifestyle of Santa Monica. Apple and Beats mix could work out for the company, but as an investor, this deal isn't for the short term. The message that Apple is sending through this deal isn't a bright one for the future, many media outlets have questioned their deal. Again this is only speculation, and the rumor has it the deal will go through but no word from Apple's side of things. Only Apple knows what Apple is doing. Invest with care.

Tuesday, May 6, 2014

Ford




Ford the motor company, still trying to dig its way out of the 2008 recession and can successfully say its one of the only surviving motor companies out of Detroit. General Motors mess is still in clean up mode, and the rest of the auto making industry has been shipped overseas. There were over 1,800 automobile manufacturers in the United States between 1896 and 1930. Now a few survive: Ford, Chrysler, and General Motors make up the main automakers left in the United States. Now minor car companies have been made in the United States but many have failed and others have never gained enough traction from investors.

The Exception
Now while mentioning the car industry and the U.S., it is hard to not mention this one. Tesla is one of the only successful start up car companies in the modern era and is why the story is so interesting. Elon Musk, a brilliant entrepreneur and inventor, took the gamble to start up Tesla. It paid off big time, not only is Tesla one of the hottest stocks on the market but its also revolutionizing the car industry by bringing back the electronic car.

The History of Ford
But, this is about Ford. Ford was founded in 1903 and revolutionized the auto making industry by introducing assembly lines in the process of car making. Henry Ford created the Model T, one of the first affordable cars in the United States and is widely accepted as one of the most influential inventions of the 20th century. Ford didn't go public into 1956 and tried to maintain the concept of a family ran business after Henry Ford passed. The company has been passed down from Mr. Ford and is now ran by his great-grandson Will Ford Jr. Although, the families involvement has dwindled.  The Ford family has retained 40% voting rights after going public. Even though shareholders round out the majority 60%. Chief Executive Officer Alan Mulally a critical decision maker who brought Ford out of its fall from 2008 will step down this summer and is going to be replaced by COO Mark Fields. Now Ford for most of the 20th century was consistently up their in names of the largest automakers in the world. By the late 20th century and 21st century, Ford and GM gave ground to foreign automakers. Toyota and Honda in Japan took top spots in the worlds automakers. By the 2008 recession, Ford, GM, and Chrysler were critically hit by sales and expenses that financially sunk the automakers  into laying off mass amounts of jobs contributing to the recession. Amazingly, Ford did not take as much money from the government then Chrysler and GM, so they are able to say they did not get "bailed out" and instead built there way from the bottom by themselves (for the most part). Now, Ford is steadily veering towards success again and still consistently a top automaker in the world, this year at number 5. In the U.S. Ford is 2nd behind GM.

Investment Perspective
Ford is a credible car company and has been reliable although it's stock my not suggest it. Ford has changed it's reputation from it's classic American muscle car look to a wide range of cars and trucks. The Ford F-150 is one of the most popular trucks on the road and there new Ford Raptor is gaining media and Ford fans attention. Not only should there truck line pick up, but there renewed Taurus and Focus look like they could give Ford good profit in the years to come. Recently, it's been more advantageous to buy an actually Ford than invest in the stock. It was trading around $17 for the majority of the second half of 2013 and dropped to it's $15 level in January off of a bad earnings report where they predict expenses will rise for 2014 from rolling out their new product lines. My opinion that type of a fall was on the red number from the expenses, rightfully so, investors should be worried but the pay off should be greater in the long run. It has struggled to get back to it's $17 level so far in 2014, but it's a non volatile stock for the most part, and so its $15 range should move up in the future. And like the rest of the auto industry, Ford also blamed it's bad quarter results to the bad winter storms. It's new product line should pay out not only for consumers but investors as well.

The special edition Ford F-150 SVT Raptor has media outlets buzzing
but will the expanded F-150 lineup draw in more customers?


In Conclusion 
From an outside looking in on the company I can only make my analysis from the data released by Ford and the compared stock price. Ford should be able to grow from it's new product line, unless natural disasters hit and Ford blames another bad quarter on the weather again. Keep in mind the risk reward factor, Ford could be pleased by sales from its expanding product line, or they could take a hit from it and backfire. They raised expenses and so they need some sales the next few quarters to solidify their investments. Invest with Care.

Wednesday, April 16, 2014

The Competitive Edge

A New Investing Era - High Frequency Trading 
     Investing has indeed changed from the sites and sounds of the New York Stock Exchange. Instead the mix between home traders, office traders, and high frequency computer specialists have conquered the market place and are here to stay. The average trader sits with two or three computer screens constantly marking tickers or analyzing a chart. For an investor at home, they seem to be largely out of the mix. CBS's 60 Minutes a couple weeks ago had a segment on high frequency trading that caught the attention of most media outlets. The report showed how hundreds of millions of dollars could be moved and traded milliseconds before the average investor could put a stock order in. Thus, the value of a few cents a second could add up to a large profit at the end of a year or so. Investing itself takes time and diligence and to know that after a long heavily thought out decision could get undermined by someone else's click of a button is down right upsetting. Even though the effects of high frequency trading on  the average investor  is debated, it still could be a cause for concern for the average investor. Understandably, high frequency trading accounts for a majority of volume for today's markets, and so it is here to stay.

The New Normal - Earnings vs. Hype 
       The markets have prospered on a long lasting bull run from the 2009 lows, but most analysts have expected a pullback of at least 10%. We still have not gotten that 10% yet. We had a 7% pullback in late January, but other than that this bull market has been excelling. 2014 has so far been a bumpy start especially after such success from the markets last year. The markets have either dipped a little, or just stayed relatively flat for most of 2014 so far. Now, was 2013's market run on hype or on earnings? Well it was a mix of both. But do not get ahead of yourself, the market hype was real. Many stuffed their money into Biotechs or even newer industries like 3D printing. In the great run we had last year it seemed hard to tell when these stocks were going to slow down, they were getting higher and higher and it seemed like the gains on some stocks were outrageous. Celgene, one of my stock picks in the beginning of last year was on fire. Now it seems reality has hit. Many investors realized there gains were to good to be true and sold out at the end of 2013; a smart choice. Celgene now is down 17% this year. This is where the hype ended. In realization, both Biotechs and 3D printing stocks as well as a majority of the market, were trading well above earnings. Sound investors would show you red flags immediately after looking at those companies earnings compared with their share value. This is where the debate comes in.

The Competitive Edge
       The debate of sound tactic investing and hype seems like it would be a no brain solution. When actually looking in depth, both have their advantages and disadvantages. Sound investing tactics, looking through fundamental values, companies balance sheets, and other Benjamin Graham like strategies would be a safe way to invest. But in 2013, this way would not give you certain outrageous gains like in the case of Celgene's 117% gain. In contrast, the major US indexes averaged around a 30% gain for the year. 30% in one year is quite impressive and even sound investments could beat the market, but the investing hype would've gotten you even better gains. So where's the debate? Well the sound investors would look at the certain companies and through fundamentals come to the conclusion that the stock is trading far above its earnings. While the hype of other investors would look at the momentum of the stock and buy it. The new era investor would win round 1. Well what about getting out of the market? Investors should realize that 30% gains in 2014 will not come so easily, instead allocating their money elsewhere will not only provide better gains, depending on where you move it, it will save you from a correction. This is where the growth stocks of 2014, so far, have proven to be wrong. As I said before Celgene is down 17%, as well as other Biotech companies, selling off at the years end would've been the smart choice, and if you stayed in thinking for more gains, you were proven wrong.

      In conclusion, sound investors and investors playing off of momentum both have their advantages as well as their disadvantages. Playing both earnings and momentum is the best decision possible, and fundamentals should always be factored in when making investment choices. Where sound investors win, is when they can realize to go against the public opinion and go off of fundamentals to save their profits, instead of riding the ups and lows of today's markets, they have already moved on to allocating there investments elsewhere to save their money, or gain more profit. In the end, every investor will find their niche, whether it's high frequency trading, small caps vs. large caps, momentum, or following what the experts say, everyone should play there niche to their advantage. Invest with Care.



Friday, February 21, 2014

Carl Icahn: The Count Dooku of Wall Street

At my age, many ask me who my favorite investor is or who I aspire to be. It is easy to say Warren Buffet or Milton Freedman. Although Carl Icahn may or may not be someone to aspire to be but there is no doubt that Icahn has made a huge name for himself. Icahn is just that, an icon. No mean for the pun but he is easily up there with the best investors in the game. What makes Icahn so interesting is his style of investing and even more so; his story. The book King Icahn: The Biography of a Renegade Capitalist goes into the life of Carl Icahn and how he amassed his fortune.

Carl Icahn's story is intriguing, he wasn't raised in a family with financial prestige, his dad was a frustrated opera singer that ended up switching between the cantor for his local synagogue and a substitute teacher. His mother was also a school teacher. Carl Icahn focused on his studies and majored in philosophy at Princeton. He then decided that wasn't his thing, so he wen't to med school in New York. He then dropped out after 2 years to join the army. Still hasn't picked up investing. Finally, he started investing and started his own company that is now the empire Icahn Enterprises. He then amassed a huge amount of money to try and control numerous amounts of companies in his favor to turn enormous profits. He over the years has developed a ruthless reputation. He can be considered a corporate raider, by buying certain percentages of companies to control their agenda in the stock holders favor, then ditched the company to pursuit another. He is the Count Dooku of Wall Street. It seems with age, that he actually is resembling the Star Wars antagonist Count Dooku. Count Dooku in Star Wars is the well respected master Jedi. Just like Count Dooku, Carl Icahn is regarded as a legendary investor. Icahn's reputation as a corporate raider is because of his almost hostile take overs of companies just to turn a profit. Some just say Icahn's methods are aggressive and benefit each company he comes in contact with.

His style of trading and more in depth look at his story can be found in the book King Icahn by Mark Stevens. Mr. Icahn has also spent some change on some million dollar horses. He is a diversified investor that can certainly stir up feuds with other investors, like last years feud with billionaire investor Bill Ackman. Carl Icahn can certainly be admired for his story and respected for his success in investing. But is he someone to look up to? After you  read into his business holdings, and his raids on Phillips Petroleum and TWA, you can decide whether or not to admire the Count Dooku of Wall Street.

Thursday, February 13, 2014

Comcast and Time Warner - The Merger Explained

Recently, media reports showed that Comcast proposed a $45.2 billion takeover of Time Warner Cable Inc. This takeover would be quite a hefty deal for the market and the government to grasp. Two of the largest cable providers merging just sounds like a deal that the government will sniff out. The FTC, or Federal Trade Commission along with, surprising, the IRS, and sometimes the SEC, will have some report and analyzation of the merger in due time.

My Rant on Comcast
Non business related, Comcast is the provider for my TV and I do enjoy the on demand options, (although the movies I want to watch always have a fee to them) as well as the freedom to watch without weather interference (sorry directTV) Comcast simply is frustrating. Comcast is a monopoly in the cable industry regardless of its merger with Time Warner, Comcast knows that its customers will reluctantly stay with them regardless of the premium they put on for extra channels. They know customers don't want to go through the hassle of switching cable providers and that most customers certainly won't go to satellite providers. So, Comcast has its customers right where they want them; in a struggle of paying big money for more shows or movies. I just can't get over their ridiculous fee that they charge for some of its on demand products.(other than Netflix movies are coming hard to find)All of their "Xfinity" commercials always show the classic "pay for 6 months" fee thats always lower than what you actually end up paying for it in the long run. I'll have to admit, there customer service has gotten better over the years and the monopoly that they have is only going to get grow.

The Growing Diversity of Comcast
Comcast over the years grew from the cable company, to the phone company, to the internet company, and now to the home security company. Its pretty amazing how many aspects of our lives Comcast could cover. Reading some articles that might say how the cable industry is the next to fall is an intriguing topic, but is hard to pinpoint and should be thrown away at the moment. For now, cable companies are still bringing in profit, and are diversifying themselves to reap more profits. Regardless of the fact, many Netflix or Hulu users tend to stray away from normal cable and rely more and more on Netflix. Comcast realized this and so they recently have added a home security component to its already diverse product line. The home security not only adds a different industry to go into, but also adds a mobile perspective that Comcast has been trying to unlock. And so, the growing diversity of Comcast, can only go up.

Will the Merger Happen?
With all of the diversity in Comcast, I haven't even began talking about the merger with Time Warners Cable. This would involve the two largest cable companies and give Comcast a huge boost in its already dominant industry. That just sounds like a no go from Washington. Well the government as I said before, will have some sort of report on the merger and review its eligibility soon. I wouldn't make any promises of this going through just yet. In time, we'll see. The main argument why this just might squeeze by the government regulators is how comcast and time warner do not have any overlapping markets and so customers won't see any changes to their services since they serve different area codes. Many are arguing its in the publics best interest. Still, Washington will needs to overlook the case and make an announcement soon.

All Hype?
There is an interesting book out about mergers by Thomas  Straub explaining the failures of mergers. Mergers are complicated, government interference is usual, and they are extensive and sometimes confusing. The main point to look at is how much media covers acquisitions and mergers like dogs chasing a ball, they go after mergers for the sake of a news story. Granted, this merger should be covered and is obviously major news, but there are plenty of mergers out their that have failed by either the government or just simply didn't work out. The successful merger that many point out would be the 1998 merger between Exxon and Mobile to create the giant oil company that is today Exon Mobile. Now I'm not saying that this deal will end up being the next Exxon Mobile and I'm not saying this merger will end up being another failed merger, (unless the government intervenes) I'm just saying from a long term perspective, the deal isn't going to be a gold mine of profit for investors, but watch the deal carefully. Invest with care.