If you listen to the financial television news yappers long enough, especially around mid-day (I’ve got a big ass flat screen..not my idea..outside of my office so…unfortunately…I don’t have much of a choice), they start sounding like Ralph Macchio’s mentor, Mr. Miyagi (played by Pat Morita in his biggest role since Arnold on “Happy Days”). Only instead of the zen like “wax on…wax off” it’s “risk on…risk off”. I’ve been in this racket long enough to collect a few buzz phrases and, by far, “risk on…risk off” is one of the most moronic. Enough already.
Newsflash: all investing is “risk on”. Stocks go up and down. Bonds are subject to fluctuations in interest rates and credit ratings. Currencies are at the mercy of their sovereign issuers and the court of world confidence. And commodities? If a butterfly in Brazil bats its wings on Tuesday, a flood in Missouri on Thursday can guarantee financial ruin by Friday. Translation: you’ll lose an assload of money on your soybean trade.
Risk still ticks deep within the bowels of the perceived “no lose” bank certificate of deposit. You could get caught with a shitty, low rate if rates decide to go up. If the issuing bank fails and you’re insured up to the FDIC limit, you’ll get your money back. However, it could take a while based on how screwed up the failing institution is. Risk is everywhere. It doesn’t care what you think. Deal with it.
Honestly, Daniel San was pretty much an enormous pussy whose ass got kicked on a regular basis. Then he stepped up, got some mad skills, started doing the ass kicking himself, and won the love of Elisabeth Shue. Granted, Daniel San would’ve probably been happier if it was the nasty, “Leaving Las Vegas” Elisabeth Shue, but we’re talking about a character played by Ralph Macchio so he was lucky to get ANYTHING.
Investors should take a cue and stone up. Who knows where this whole thing is going? However, I think it’s probably one of the better times in history to buy awesome stocks cheap. Keep in mind they’re NOT going to go up 167% in a week. But, with huge names, and again, I’m beating the same drum I’ve been beating for months, like International Paper (IP), Eli Lilly (LLY), or Intel (INTC) at 20% or better discounts to the S&P 500’s P/E and beating it’s dividend yield by 120 basis points or better, why wouldn’t you make a fist and go long. You’re probably going to do OK.
You’ll also probably do OK takin’ a look at this week’s three lil’ piggies…
“Nice Assets…”
Federated Investors (FII)
Recent Price: 15.87
P/E: 10.59
Current Yield: 6.04%
The Skinny
We’ve probably oinked about this one before…so…what the hell…we’ll oink again. FII is an asset manager…mutual funds…managed accounts..pension plans…etc. It been smacked about like most financials. The difference is that this one may be worth holding. Stock’s cheap at 10x’s forward earnings. Average ROE over the last five years has been around 39%. Pretty strong. The yield is especially compelling for a financial name and a non-bank financial at that. Analyst estimates have also been relatively stable compared to FII’s peer group.
The Danger
With the market up 300 one day down 278 the next…who wants to own ANY type of investment? That’s the challenge FII and every other money manager faces: outflows by scardey investors. And, despite the fundamentals, psychology will probably keep a lid on financial stock prices for a while. Growth’s pretty anemic as well. And although it looks like the world fired the money bazooka at the Eurozone problem, it’s not going away anytime soon. Financials aren’t for the lilied of livers.
“Better homes and dividends…”
Meredith Corp (MDP)
Recent Price: 29.00
P/E: 11.09
Current Yield: 5.27%
The Skinny
Good franchise here. Company publishes 80 titles with it’s flagship brand being Better Homes and Gardens. Branded online media grabs an average 22 million visitors monthly. Stock’s cheap at 11x’s forward earnings. Low debt to capital at only 15%. Makes you feel OK with the 5+% dividend. MDP has also done a good job of licensing the brands, again mainly Better Homes and Gardens, through smart deals with the retail Leviathan Wal Mart (WMT).
The Danger
Print media has that jaundiced, walking around with an oxygen tank look. Better Homes is a great brand and will probably do OK in the post print, tablet world. But what sleepers like ”Diabetic Living” and “Quilts and More”? Don’t see those burning up the ol’ iPad, huh?
“United we log on…”
United Online (UNTD)
Recent Price: 5.28
P/E: 6.60
Current Yield: 8.2%
The Skinny
Another Yieldpig repeater here. Starting out as Juno Online, a Johnny Comelately dial up service, UNTD has evolved into an interesting amalgamation of social media sites that include classmates.com, memorylane.com, and their strongest brand, FTD.com (yes…the flower thing). Classic deep value metrics: 0.5 times sales, 96% of book value, and a $1.27 in cash per share. It’s no Groupon. Oh yeah…they’re actually making some money AND giving it to shareholders.
The Danger
While UNTD’s properties are in the “hot” social media sector, they don’t exactly possess the heft of a Facebook. Year over year revenue growth is also a little soft giving up about 5%. Long term debt is a little concerning, too: about $260 million on a market cap of $470 million. Odd in a space that typically doesn’t have a whole lot of debt. And although FTD.com is a known quantity, it’s definitely a consumer discretionary. Might be more classic value trap than classic value.
Jump on the bandwagon...follow us on Twitter @Yieldpig
Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question
Newsflash: all investing is “risk on”. Stocks go up and down. Bonds are subject to fluctuations in interest rates and credit ratings. Currencies are at the mercy of their sovereign issuers and the court of world confidence. And commodities? If a butterfly in Brazil bats its wings on Tuesday, a flood in Missouri on Thursday can guarantee financial ruin by Friday. Translation: you’ll lose an assload of money on your soybean trade.
Risk still ticks deep within the bowels of the perceived “no lose” bank certificate of deposit. You could get caught with a shitty, low rate if rates decide to go up. If the issuing bank fails and you’re insured up to the FDIC limit, you’ll get your money back. However, it could take a while based on how screwed up the failing institution is. Risk is everywhere. It doesn’t care what you think. Deal with it.
Honestly, Daniel San was pretty much an enormous pussy whose ass got kicked on a regular basis. Then he stepped up, got some mad skills, started doing the ass kicking himself, and won the love of Elisabeth Shue. Granted, Daniel San would’ve probably been happier if it was the nasty, “Leaving Las Vegas” Elisabeth Shue, but we’re talking about a character played by Ralph Macchio so he was lucky to get ANYTHING.
Investors should take a cue and stone up. Who knows where this whole thing is going? However, I think it’s probably one of the better times in history to buy awesome stocks cheap. Keep in mind they’re NOT going to go up 167% in a week. But, with huge names, and again, I’m beating the same drum I’ve been beating for months, like International Paper (IP), Eli Lilly (LLY), or Intel (INTC) at 20% or better discounts to the S&P 500’s P/E and beating it’s dividend yield by 120 basis points or better, why wouldn’t you make a fist and go long. You’re probably going to do OK.
You’ll also probably do OK takin’ a look at this week’s three lil’ piggies…
“Nice Assets…”
Federated Investors (FII)
Recent Price: 15.87
P/E: 10.59
Current Yield: 6.04%
The Skinny
We’ve probably oinked about this one before…so…what the hell…we’ll oink again. FII is an asset manager…mutual funds…managed accounts..pension plans…etc. It been smacked about like most financials. The difference is that this one may be worth holding. Stock’s cheap at 10x’s forward earnings. Average ROE over the last five years has been around 39%. Pretty strong. The yield is especially compelling for a financial name and a non-bank financial at that. Analyst estimates have also been relatively stable compared to FII’s peer group.
The Danger
With the market up 300 one day down 278 the next…who wants to own ANY type of investment? That’s the challenge FII and every other money manager faces: outflows by scardey investors. And, despite the fundamentals, psychology will probably keep a lid on financial stock prices for a while. Growth’s pretty anemic as well. And although it looks like the world fired the money bazooka at the Eurozone problem, it’s not going away anytime soon. Financials aren’t for the lilied of livers.
“Better homes and dividends…”
Meredith Corp (MDP)
Recent Price: 29.00
P/E: 11.09
Current Yield: 5.27%
The Skinny
Good franchise here. Company publishes 80 titles with it’s flagship brand being Better Homes and Gardens. Branded online media grabs an average 22 million visitors monthly. Stock’s cheap at 11x’s forward earnings. Low debt to capital at only 15%. Makes you feel OK with the 5+% dividend. MDP has also done a good job of licensing the brands, again mainly Better Homes and Gardens, through smart deals with the retail Leviathan Wal Mart (WMT).
The Danger
Print media has that jaundiced, walking around with an oxygen tank look. Better Homes is a great brand and will probably do OK in the post print, tablet world. But what sleepers like ”Diabetic Living” and “Quilts and More”? Don’t see those burning up the ol’ iPad, huh?
“United we log on…”
United Online (UNTD)
Recent Price: 5.28
P/E: 6.60
Current Yield: 8.2%
The Skinny
Another Yieldpig repeater here. Starting out as Juno Online, a Johnny Comelately dial up service, UNTD has evolved into an interesting amalgamation of social media sites that include classmates.com, memorylane.com, and their strongest brand, FTD.com (yes…the flower thing). Classic deep value metrics: 0.5 times sales, 96% of book value, and a $1.27 in cash per share. It’s no Groupon. Oh yeah…they’re actually making some money AND giving it to shareholders.
The Danger
While UNTD’s properties are in the “hot” social media sector, they don’t exactly possess the heft of a Facebook. Year over year revenue growth is also a little soft giving up about 5%. Long term debt is a little concerning, too: about $260 million on a market cap of $470 million. Odd in a space that typically doesn’t have a whole lot of debt. And although FTD.com is a known quantity, it’s definitely a consumer discretionary. Might be more classic value trap than classic value.
Jump on the bandwagon...follow us on Twitter @Yieldpig
Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question
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