Wednesday, March 20, 2013
The other day a guy in a suit driving nice (leather, 4x4) pick up was exiting right as I was trying to get out to the left. I'm not trying to be whiny, but I was there first. However, he pulls up just enough to where he completely blocks my view of the oncoming traffic. He had the easier turn and there was no need for him to pull that far up. I know. I've made that right turn as many times as I've made the annoying left turn. He was just being a dick.
When I got back to my office and checked bids on the names I hold in the portfolios, I was pleased with the price of Dell (NASDAQ: DELL) at around $14.28. A few months ago as talk of a leverage buyout swirled, I decided to buy Dell in the premium total return strategy. The takeout price was said to be $14. Buying the stock at $13 and some change, I wrote a May 14 call against the position figuring with the premium I was taking in plus the $14 takeout plus a dividend, I'd be able to earn my clients a reasonably safe 9% in a few months. I'd look like a genius.A few weeks later it was announced that Michael Dell and private equity backers Silverlake Partners were going to make an offer to take Dell Computer private...at $13.65 a share. I didn't look like a complete moron. Just sort of a dumbass.
As the market has digested Dell's offer, activist investor Carl Ichan is bitching that the price is too low and other interested parties are slowly joining the fray which has bid the price up. All I wanted was $14. I have it now by accident. This time, the market has performed it's function as a semi-accurate voting machine. It's also proven that Michael Dell may very well be a dick.
The price talk was $14. Mike and Silverlake offer $13.65. Seriously? 35 cents? Is Dell being a hard nosed, shrewd businessman? No. He and Silverlake are just being dicks. Mike...you're a gozillionaire. You're going to take the company you founded, know like the back of your hand and turn it around. It'll be way more profitable than it is now. Then you'll take it public again and be a gozillionaire...again.
There's not much difference between $14 and $13.65. There's a big difference in being a dick and not being a dick.
Tuesday, January 1, 2013
For fun, I went back to see how I did in 2012. yes..I'm about to brag.
For the three names I profiled, International Paper (NYSE: IP), Eli Lilly(NYSE: LLY), and Intel (NASDAQ: INTC), the total return, inclusive of dividends, came to +21.41%. The best performer of the basket was IP with a capital gain of 33.4%. The biggest disappointment was INTC giving up 15.8%. However, the trio strongly out performed the S&P 500 total return by over 800 basis points (BPS). The crucial difference were the dividends. The blended yield of my 2012 trio was around 3.8% versus around 2.2% for the S&P 500. That's nearly a 72% pay raise! So, despite the bluster from the Washington wizards (not the basketball team!) and the fear of a higher dividend tax rate, common stock dividends should still be a crucial component of an investment strategy. 2013 is no exception.
Forget the outcome of the fiscal cliff. Forget the Europeans. Forget whatever the talking heads are saying about the yen and the Bank of Japan. Buy sensibility, value, quality, and yield. So, with that mantra, let's look at three ideas:
1. Astrazeneca PLC (NYSE: AZN) - this British pharma giant cranks out the wonder drugs that will keep millions of aging baby boomers healthy so that they can continue to burden Social Security and Medicare. Recently, the company completed an acquisition of a smaller biotech firm/pipeline partner. Look for acquisitions to play a major part in AZN's growth strategy for 2013. Shares trade at 7.8 times forward earnings (cheap!) and yield 6.04%. Currently, common dividends from UK companies are NOT subject to foreign tax.
2. Cisco Systems (NASDAQ: CSCO) - Former tech bubble golden child CSCO now looks and feels like an old, stodgy blue chip. That's because it is. And regardless of the fiscal cliff outcome, capital spending by business is going to happen, CSCO provides the backbone of information technology network buildout. Trading at not quite 10 times forward earnings and yielding 2.86%, the company currently has $5.38 cash per share, very little debt, and is the 9,000 pound gorilla of the networking business. With this much cash and ability, the dividend can grow.
3. Buckeye Partners, LP (NYSE: BPL) - Energy MLPs (master limited partnerships) were a mixed bag in 2012. For the most part, a lot of names look pretty attractive from a valuation standpoint. One of my favorites is petroleum transporter BPL. The company owns one of the largest, independent pipelines in the nation. Units throw off a tempting 9.15% yield and with oil production in the country's midsection growing exponentially, there's product that needs to be moved. Whether oil is at $150 per barrel or $50, the black stuff still needs to be moved from Tulsa to Tacoma. Expanding the nation's energy infrastructure should be a major investment theme going forward.
And the value is there right now. The blended yield of these three stocks is around 6%. Not bad considering the 10 year U.S. treasury yields a miserly 1.75% before taxes. Speaking of bonds, I touched on them briefly last year. My thesis remains the same: keep an eye on quality, get some yield, and NEVER...NEVER pay a premium. Let someone else pay 110. You're smarter than that.
Let's face it. despite decent equity market gains this year, it's still weird out there. And to quote Hunter S. Thompson, "When going gets weird, the weird turn pro." Who knows what next year will bring. Regardless, you can handle it like a pro.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it . I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I do hold these names in managed, client accounts.
Wednesday, November 7, 2012
Tuesday, October 30, 2012
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Wednesday, October 10, 2012
Wednesday, October 3, 2012
So..I read this cover story about this guy who is an extremely high ranking DOD civilian lawyer. He's got estate planning issues because he's married to another guy.
My issue isn't the gay marriage thing. Like Kinky Friedman said.."I believe they have the right to be as miserable as everyone else." What chaps my ass is that a government lawyer has created enough wealth for himself over the span of his career that he's going to have estate issues.
I'm sorry. That's bullshit. He's supposed to have those problems if he has spent his working life in private practice not as a federal government employee.
That's what's wrong. I'm pissed. You should be too.