Wednesday, December 18, 2013

Mega Millions Where the Sheep get Sheered!

The Mega Millions gets a ton of media coverage as many people line up to give a few dollars at a chance to win it big. The media interviews a few people as they dream of what they would do if they won and how it would change their life. Most of the people who buy a ticket are buying into this dream. They think that a few dollars doesn't matter for the chance to win. 

At this time I want to recall what I learned reading John D. Rockefeller's biography when he said 5 cents is a years interest on a dollar. So lets look at $5 is a years interest on $100. With today's rates its much more maybe interest on $300. 

Lets look at the Math 

If you read the official Mega Millions Lottery web site you will see that the odds of winning the grand prize jackpot are 1 in 258,890,850.

First is the organizations cut. Of all the money that is wagered the lottery only pays out a percentage. I'm not sure but lets say 50% goes to the businesses and organization and the other 50% goes to the winner or winners.

Second is the cash reward cut. The winner is suppose to get $636 Million if it is one person. We know 2 people won so that is already divided by 2. But the Cash payment of only $341.2 million then divide that by 2. 

Third is the Uncle Sam Federal Government cut. Then the winner has to decide to take a lump sum payment or an annuity. As of 2013 the top Tax bracket is $400,000 for single person and $450,000 for Married couple at 39.6 percent. If someone took that cash payment ($341,200,000 * 39.6) $135,115,200 in federal tax. Leaving the winner with $206,084,800 but remember 2 people won so divide by 2. 

Forth some States and Cities take cuts. Some lucky residents of the 42 states (plus the District of Columbia) participating in Mega Millions, there are five states that don't have state income tax: New Hampshire, Tennessee, Texas, South Dakota and Washington.
Lets say the unlucky winner is from New York State the highest taxing state at 8.82%. The CITY of New York will take another 3.87%. State and local taxes are deductible from federal taxable income but still it does take some off the total. A New York City resident would only get roughly $198 million divide by 2 so $99 million. 

For the last 2 sheep standing they get $99 million or possible a little higher depending on the state. This is 15% of the original $636 million being hyped. Take into account the odds of winning this amount and it doesn't make a lot of sense to put hard earned money into this kind of game or investment. I am free market believer so I don't care that people play but I am tired of hearing people complain that they don't have money when they throw it away all the time. 






Target Corporation (TGT) Analysis: One Year Later

I have previously analyzed Target Corporation (TGT) in a video: Stock and Company analysis Target Corporation (TGT) In this video I explain why I liked this company as a long term buy and hold company. In this blog today I will review this last year of 2013 and look to 2014. 

Target's 2013 performance

It has under performed the market year to date. Today is December 17th, 2013 and during this last year the (SPY) which tracks the SP500 index is up around 24% where TGT is up under 1%. My initial purchase in the project portfolio and personal account was at $58.04 on January 2nd, 2012. I sold on March 4th at $65.85. Target has had a 52 week range of $58.01 to $73.50. I was extremely lucky to buy on the day it hit its low I never try to time tops or bottoms but sometimes you can get lucky I missed the top as you can see. I also collected one dividend during this time. Some might ask why did you sell if your view is long term? I usually don't sell just to profit unless it is a large increase in a short amount of time. In this case I felt I could buy it cheaper at a later date with a lower price even with the dividends counted in. This all depends on your tax situation if you are in a IRA taking a profit today does not matter but if you have an individual account profits would be taxed at the capital gains rate. 

Why has Target underperformed and come down from its high? 

The third quarter was very tough quarter for the company. The same store growth miss expectation from .9% growth from expectations of 1.2%. Earnings will still be in the range of $4.59 to $4.70 a share. The expectations for the future were cut. The stock market is forward looking so things that are predicted to happen matter in the minds of investors. This creates opportunities because people are wrong all the time. 

The major problem now was actually suppose to be a catalyst for the company! The opportunity to grow because of the Canadian expansion. The third quarter results were dragged down .29 per share because of the Canadian division. It is estimated to be down another between .22 and .30 per share for the forth quarter. This is very troubling for something last year many investors including myself thought would be growth for the company. An estimate of .80 per share a year growth or .20 a quarter. 

Positives about Target

Target raised its dividend by 19% from $1.44 a year to $1.72 which management has promised they would do and a payout ratio is around 41%.

The bad news is priced in to the stock. If earnings rise in Canada there is a chance for huge gains. Target does have a good history of operational success. 

Target Corp (TGT) yield is 2.79% this beats competitors Wal-Mart Stores Inc. (WMT) with a 2.44% yield, Costco Wholesale Corporation (COST) with a 1.06% yield and Family Dollar Stores (FDO) with a 1.64% yield.

Takeaways

Expansion and growth is not always easy for any company and there will be setbacks that have to be overcome. Costco is looking at expanding to Europe they may have a hard time also that is yet to be seen but be careful not to over value or pay a premium for growth because everything has to go right or the stock will reflect the bad news. 

Buying today on December 17th 2013 does not mean it couldn't go down more leave yourself enough cash to add to your position if you choose to invest in this company or any company. I am long as of today at $61.55 and think the company is trading at a value if they can improve there international operations.

I will make another video and attach it to this blog entry. Let me know your thoughts on this sector or company. 



Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing.



Tuesday, November 19, 2013

Bitcoin Mania -- Just my thoughts (+playlist)




The Bitcoin mania is here. My opinions and thoughts… I compare Bitcoin to the Tulip Mania that happened in Holland in the 1600's.  What are your thoughts about Bitcoins??

Friday, November 15, 2013

The Frackers: How Hydraulic Fracturing Created a Revolution in Energy



A really great read about American entrepreneurship and capitalism!! Its always the free market who creates innovation.  Follows the wildcatters who lead a American energy revolution.

Friday, July 19, 2013

Steady the Ship or Portfolio while the Investing Waters are Rising


I must confess I am like most people when I say, “I like to see the market move higher.” It is human nature to want to see green instead of red and think we made great purchases. The truth is it is better to have market prices lower while you are in the accumulation phase to accumulate more shares. The core of my portfolio KO, MCD, GE and other blue chips are trading on the high side of valuations most hitting new 52 week highs and have been raising dividends at a historic pace. I do think this is good but not the ideal situation. I will explain: I don’t plan on selling these companies anytime soon. The reason being I have bought them for income and future dividend growth. The future is bright and I like the relatively low risk they have compared to the alternatives in the market. The problem I have is I am sitting on a lot of cash and have seen stocks on my watch list increase 10 to 20 percent and seem to be getting further and further from my purchase price target. Now for a trader who just wants capital gains this market is good! I do have a few small trades but my focus is on the long term.

This is where the discipline has to come in. If you are managing money for yourself it is a lot easier to convince yourself to wait and stick with the goals you made. I am always reminded that most professionals have to show progress yearly or even quarterly so they don't have the ability to be as patient. This is a big advantage to the individual investor who studies the markets and value investing principles. We don't have to swing on every pitch or investment. Like Warren Buffett has mentioned, we can wait for the right investment takes our time then make our move or something to that effect.

So it’s July 19, 2013 and I will just lean back continue reading books and wait for my time to invest. I am actively paying attention to the market. Every day I take in all the craziness, scrambling to the next big thing or the next tip to make a quick dollar. I then pause and look at what the market is not focusing on. The market can turn at any moment and I will be ready to put some of my cash to work in names I am watching today. I am not really in the business of predicting when I just want to be there to take advantage.

One major factor when investing in dividend paying stocks is every quarter the company pays a dividend you need at least that much drop in the share price to make sense in waiting to purchase the company. An example today is MCD if the stock is trading at $100 and it takes 6 months to trade to $98 you might be ok just buying today because you will get $1.64 in dividends and they will announce a dividend increase in the meantime. This is a decision based on your research what you feel a pullback would mean for each company on your watch list.

 What do you feel about market? I would be interested in all views

 Thanks

 DSF

Saturday, June 29, 2013

Paid to Wait

Hi everyone, sorry I haven't written a blog in a while but if you watch my YouTube channel you can keep up with my investments I like to follow.

This blog will follow my Paid to Wait and Accumulate series videos. The purpose is to follow a few companies I feel are undervalued. I want to follow the price purchased, dividend, dividend growth, yield, the future yield on cost, and target price for the shares in the future.  BP is a holding company engaged in exploration and production of natural gas and crude oil. It also has refining, marketing, supply and transportation along with manufacturing and marketing petrochemicals.

Profile
Symbol NYSE: BP
Price purchased:  $42.85
Dividend/share:   $  2.16
Dividend Yield:  5.18%
Yield On Cost:    5.04%
PE Ratio:  6.22
EPS: 6.71

First purchase was June 5, 2013, for 31 shares with $6.95 commission for a total of $1335.30. I will be able to purchase up to a hundred shares so this is the first round and I will wait to see if there is a better entry point. I would like to see the price fall to around $40 a share.

I feel BP is undervalued by the PE Ratio. It has room to grow the dividend. BP is almost finished with the government clean up and will be able to focus only on its core business.

I think fair value would be 10 to 12 times earnings like its competitors so I have a price target of $67 to $80. This will give us time to accumulate shares until we get to our price target. I will give this investment a few years but along the way a nice yield is still available.


Company Number 2 (NAT)

First off I would have to admit I have many concerns about NAT when compared to BP. So the amount used to buy Nat will be less but I am looking to buy about 330 shares total. The problem with NAT is the supply of ships available in the market. But NAT share price has reflected this problem and I think everything may be priced into the stock. As I mentioned in the first video on YouTube NAT is very shareholder friendly and the goal is to buy as many shares when the price is low and the company is struggling. The ordering of new ships is expected to slow starting in 2014 this will allow NAT who already has 20 ships take market share. This story really comes down to an improvement in the economy.


Profile
Symbol NYSE: NAT
Price purchased:  $8.80
Dividend/share:   $  .64
Dividend Yield:  8.46%
Yield On Cost:   7.02%
PE Ratio:
EPS:


On May 16, 2013 I purchased 110 shares with a $6.95 commission for a total of $974.75. The shares have come down and I want to purchase again. June 28th may have been a low but the shares rallied and if they hold I may make another 110 share purchase.

My holding period is going to be a few years with an eye on the supply and demands of the shipping business.

Thank you for reading


DSF

Tuesday, January 22, 2013

Why I Sold STX and WM Today

Today I sold both positions for the Project Portfolio. First let me start by saying if I would of had larger positions I may of done things differently. With STX I would of sold off half or more of my shares and let the remaining ride ( I did this Friday in a personal account). This gives us access if the stock keeps rising to profit more or trim at a higher price if we want to keep a few shares. If it goes down we can buy back and lower our average per share cost. With WM I don't see as much upside but the same strategy can be used.

I sold both companies because when dealing with small accounts and positions it is easy to wait and have a paper gain turn into a paper loss or as Airelon a investor and nice guy I met on YouTube put it a winner into a loser. The downside is like today the stocks continued to rise. I was going to wait until after earning but decided I was happy with the profits. That is the key to me, making a purchase of stock on a solid company and making a profit. You may not get the top of the market but you made a profit and it feels great!!

One other note every stock in the Project Portfolio I own personally.

Thanks for following
DSF


Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing.

General Motors (GM) the GOOD, BAD, AND UGLY!

I've been talking about GM on this blog because of its really big dividend yield. The company has been undervalued to the market for som...