Tuesday, August 15, 2017

If You Can Keep Your Head ...

... when all about you are losing theirs, and blaming it on you ...

Noted liar and exaggerator (President) Donald J. Trump was at it again today.  In an unhinged and ranting press conference at his digs in New York, he (among other oddities) compared Robert E. Lee to George Washington and Thomas Jefferson, proclaiming that we may be tearing down their statues too, someday.  Well now.  One can only assume that we will never be tearing down a statue of Trump.

If you can trust yourself when all men doubt you,

 But make allowance for their doubting too.

In other news, Dick's Sporting Goods (DKS) reported horrible earnings today.  The stock has lost half its value in a year, and is a perfect example of a great store and horrible investment.  They cited weakness in hunting and outdoor gear as a reason for the disappointing earnings.  OK, then.  If your margins are that thin, I guess that's the reason investors have suffered.  Fortunately for me, I can shop there and nothing else.  That seems like the choice.

The brilliant earnings report from Extreme Networks made its case in the price of the stock today, as it nearly returned to its $11 high.  I hope to retire soon.

If you can wait and not be tired by waiting,
 Or being lied about, don’t deal in lies

We have to wait sometimes.  It's the game.  We will get an earnings report from Cisco Systems (CSCO) after the market close on Wednesday.  The stock has been a 3.8% bond for the better part of the last 9 months, as investors wait for that home run that doesn't seem to come.  So far, it's been singles and doubles, and the company has prospects, but we wait for them to be brought up.  Perhaps tomorrow ...
If you can make a heap of all your winnings
 And risk it on one turn of pitch-and-toss,

And lose, and start again at your beginnings
 And never breathe a word about your loss;

I'll breathe a word about my loss in JC Penney.  Horribly, I listened to what I thought was an informed authority and risked it on a turn of pitch-and-toss.  Well, the pitch was a toss, and I wound up selling it two days after buying it for a loss.  What it taught me was to go with my instincts, which are substantial, and not listen to the words of someone who may have ulterior motives. Such is life.

And so hold on when there is nothing in you
 Except the Will which says to them: “Hold on!”

I'm holding on.  Pfizer and DelTaco.  In the case of Pfizer, I'm being paid a 3.9% dividend to wait.  However, the waiting is grating on me, and I wonder how long I can stay ... long.
DelTaco (TACO) is a different story. As faithful readers know, I have touted this company for a while, and have been adding to positions until I now have a significant portion of my investment tied-up in the company.
They keep executing.  Beat and raise, as they say.  They beat estimates and raise the next one, yet the market fails to reward us - and them.  My faith doesn't wain, and if you haven't yet bought in, there is still time.  The stock is mired in the $13 range, and trades at a discount to its peers in the casual dining/restaurant segment, with significant growth opportunities ahead of it.  There is nothing in their earnings reports or forecasts to make me want to sell, and I'll hold it until the market regains confidence in the sector and specifically, the company.  As for me, I have considerable confidence in both.

If neither foes nor loving friends can hurt you,
 If all men count with you, but none too much;

So, OK - don't count on me too much.  Do your homework, and remember - it's only money.

Meanwhile, you might want to look at favorite Limelight Networks (LLNW) and keep an eye on Square (SQ). Square has dropped a little from my purchase at $26, and I fear that I'll have to be patient with them until they get to the $24 range, at which point it should rebound.
Acco Brands (ACCO) is interesting, at 11 times forward earnings.  You use (and steal, probably) lots of their office products.  There's value, and you're always looking for a bargain, right?

If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,

 And — which is more — you’ll be a Man, my son!

So go - be a man, or whatever.  

Monday, August 14, 2017

It's Nice to be Right Once in a While

I'm pretty sure I've mentioned Extreme Networks (EXTR) before.  I've been holding this stock for a while, and wondering why it has been down over the past 3 months.  Sometimes, the market doesn't know what's going on, and investors have to trust their instincts a hold onto stocks that they bought because they believed in the company when they made the purchase.
In the case of EXTR, I fell in love (bad to do, I know) with the company when I figured out what they did and how if worked-into the way companies are doing business today.  It's a growth industry, and as such, one has to endure a certain amount of doubt from the so-called "investors" when something happens that they find a reason to sell.
The stock went from the $11 range down to the $9 range in the relatively short time period of three months, on almost no news - other than the fact that the company was signing-up new businesses and otherwise moving their business forward.  I had to tune-out the noise and trust my instincts - which were rewarded today. To those who sold into earning, I say, "I'll see you in 10 years."
Next up is Cisco Systems (CSCO) who reports on the 16th.  I've held that for a while, waiting for the big news.  My faith will be rewarded, I think.

Tuesday, August 8, 2017

Cord Cutters, Your Time is Nigh

It's earnings season [again] and you know that gives me a stiffy.  Aside from the financial mumbo-jumbo and forecasts of such, there is some interesting stuff going on in the media sector.

CBS reported a few days ago.  Mega-Chairman Les Moonves said that they will be forming a streaming channel for sports.  He did not have any details, but said it would be along the lines of what NBC does with their streaming content.  OK, then.

Disney reported earlier today.  Bob Iger said that their ESPN branch is going to be streaming content on the Internet, but like Iger, had little in the way of details - price, actual content, or accessibility - but suffice it to say, the idea is to form an Internet-only portal for sports similar to what ESPN does on the cable end.  Oh and, they'll be pulling their content from Netflix (NFLX) in 2019.  So, if you want to see a Disney movie, you'll have to subscribe to their channel.
In addition, he suggested that they may be forming a "Star Wars Channel" and a "Marvel Channel."  At least, when asked about it, he didn't rule it out.  Disney has plenty of content, and the idea of forming individual channels for fans isn't beyond the realm of possibility.

After all, Sirius Satellite (SIRI) radio has individual channels for Howard Stern, The Beatles, Pearl Jam, Billy Joel, and all sorts of specialized content.  Over 200 channels, and if you can't find something to listen to, the problem is with you, not them.

So, why wouldn't video media use the same tact?  Actually, it seems like it's about time.  There's money to be made, and plenty of people willing to pay - which is where the problem comes in.  Follow along:

Today, my cable/Internet bill is $208 a month.  Let's say I cut the cable (aside from local TV, which is $10 a month) and go with Internet-only service from Comcast.  That should cost me in the vicinity of $70 a month, after I have purchased my own router, at a cost of about $100.

Needing content, I'd go with Netflix ($12 a month), Hulu ($10 a month), Amazon Prime ($99 per year), and add-in the pick of your choice (HBO On Demand or Apple Music) at another $10 a month each.
If you like sports - which is the kicker [pun] - you're into the ESPN/CBS bundle for (probably) another $20 to $30 a month (?).  So, let's do the math:

With the $70 a month for Internet, plus all the extra streaming services, they are into your checking account for approximately $135.  All that for the sake of "cutting the cord" vs. the $208 you were paying before.

The point here is, big business has a lot of meetings.  My company has meetings every day.  The other point is, big business doesn't like to lose money.  You cutting the cord means they are losing money.  They don't like that, so they have meetings to figure out how to keep from losing money.  They win, because you still want HBO, sports, and well ... entertainment.  What you may or may not realize is that most entertainment is controlled by the same half-dozen corporations.  So, you cutting the cord means that one or the other of them will have to make-up for your lost income.

So, despite your best efforts, you have two choices.  (1) Go without your desired entertainment for the savings, which is noble or (b) Spend almost the same amount of money you were spending when you had cable and still get to see your precious sports and shows, and flip between a several options to find the show or sporting event you want to watch.  Inconvenience in the name of saving a few bucks.
Those are the short hairs they want to have you hang from.  Rest assured, in some way, they will find a way to get you to pay something close to the money you're paying now.  It's in their next meeting. They don't like to lose.

It's simple - and complicated.  Good luck with your decision.

Thursday, August 3, 2017

Before You Get Too Upset About Pete Rose ...

... listen to these lyrics from songs older than you.  Gain some perspective, and stop worshipping celebrities of any age.

Gary Puckett and the Union Gap - 1968. "Young Girl"

Young girl, get out of my mind

My love for you is way out of line

Better run girl

You're much too young girl
With all the charms of a woman

You've kept the secret of your youth

You led me to believe you're old enough

To give me love

And now it hurts to know the truth
Young girl, get out of my mind

My love for you is way out of line

Better run girl

You're much too young girl
Beneath your perfume and your make-up

You're just a baby in disguise

And though you know that it's wrong to be in love with me.w

OK, then.  That's one.  How about this Beatles' classic, "I Saw Her Standing There" 1964.

Well, she was just 17,
You know what I mean,

And the way she looked was way beyond compare.

So how could I dance with another (ooh)

And I saw her standin' there.
Well she looked at me, and I, I could see

That before too long I'd fall in love with her.

She wouldn't dance with another (whoa)

And I saw her standin' there.

And, this Sherman Brothers classic, first performed in 1960, and later by a 37-year-old Ringo Starr ...

You come on like a dream, peaches and cream
Lips like strawberry wineYou're sixteen, you're beautifulAnd you're mine. (mine, all mine)You're all ribbons and curls
Eyes that sparkle and shine
You're sixteen, you're beautiful and you're mine
(mine, all mine, mine, mine)

You're my baby, you're my pet
You walked out of my dreams, into my arms
Ooh, what a girl
We fell in love on the night we met

You touched my hand, my heart went pop
Ooh, when we kissed, i could not stop

Now you're my angel divine
You're sixteen, you're beautiful, and you're mine

Sixteen? That's kind of young for an old man like Ringo.

The point is, (if there is one) young girls have been the target of songwriters and movie scriptwriters for centuries.  We are crucifying Pete Rose because he claimed to have sexual relations with an underaged girl that he thought was sixteen.  OK. So then, why did you buy the songs?

Pete isn't so horrible, compared to you.

Wednesday, August 2, 2017

Our Curious Stock Market

Without going into a long song and dance, let's look at a few details:

Firstly, today the Dow Jones Industrial Average breached the 22,000 mark.  That was enough of an event for them to make up "DOW 22,000" hats and make a big deal out of it on CNBC.  Is it a big deal? Yes and no.
It's a big deal if you own shares of Apple, McDonald's, Boeing, and United Health who, combined were responsible for 867 of the move from 21,000 to 22,000.  The Dow is a weighted average, so stocks with higher share prices (like Goldman Sachs, who was responsible for the last 1,000-point surge) have a bigger influence.
Conversely, if you were a shareholder of IBM, Goldman (recently) and GE, you were negative 462 points. So, as you can see, the largest companies are responsible for the gain.  All those in the middle (the other 23) were just hanging around. That's a bigger influence than a handful of winners and losers.

It's why the S&P 500 and NASDAQ 2000 are better gauges of market progress than the storied Dow. And, for the record, the S&P has been trading sideways for all that time.  Nobody makes hats for that. What I'm telling you is to take this "Dow 22,000" talk with the proverbial grain of salt.  So, let's move on.

Pfizer (PFE) reported a nice quarter, but my patience is wearing thin.  It's pretty much a 3.9% bond, since the share price doesn't seem to move on any sort of news, and they rely on the dividend to lure investors.  CEO Ian Read said that they have several drugs and exciting prospects for 2020.  Excuse me, but it's 2017.  What can you do for me now?  I'm leaning toward getting out, and finding something more suitable for my growth + value agenda.  I'm looking at BorgWarner (BWA) and Expedia (EXPE) and leaning heavily toward Expedia.  There is a lot of value there, and while I missed out on some of it, there is still room for it to run, and that's what I'm interested in.  And, as such ...

Square (SQ) my new holding, reported a stellar quarter today, and I'm excited about being a shareholder.  It was said that Square is "The Tesla of Payments," which brings me to my next point: What's up with Tesla?

Are they a car company or a tech company?  While I greatly admire Elon Musk and his ventures into solar power, space travel, and electric vehicles, I still think that the share price is ridiculous. If I miss out on it, so be it.  My value-oriented approach doesn't lead me toward investment. Consider these comparisons with another auto-maker, Ford (F).

Ford:  Share price = $11.00. P/E 11.52 with a 5.48% dividend.  Third quarter EPS: .31 Third quarter revenue $33 billion.  2017 estimated revenue $142.3 billion.  Return on Equity: 12.0. Return on Invested Capital: 2.5 Long Term Debt to Capital: .82

Tesla:  Share price = $325. P/E -4.77 with a 0 dividend. Third quarter EPS -1.83 on revenue of $2.51 billion. 2017 estimated revenue $11.32 billion.  Return on Equity: -24.3 Return on Invested Capital: -7.5. Long Term Debt to Capital: .57

Do you see all of those negative signs (-) in front of Tesla's numbers?  One wonders how Tesla's Market Cap is $197 billion and Ford's is $43.5 billion, or roughly 22% of Tesla's.  How many Ford cars do you see on the road?  Ford produces approximately half a million vehicles in a year, while Tesla says they are in "Production Hell" and struggling to keep up with orders of about 5,000 a month.

This isn't to denounce Tesla, it's to question why one company is valued so much less than another, when the lesser company clearly has market share and production. But, that's our stock market.  It's a "futures market," and value depends on what you are supposed to do, not what you are doing.  Ford's problem (if they have one) is that they are doing what people expect.  Tesla's value is in the idea that they will do what people want. Meanwhile, buyers are placing $1,000 deposits for cars that they have neither seen nor driven.  Let's see Ford try that business model.  It makes me question the wisdom of consumers, as well as question the wisdom of investors who continue to buy TSLA and have driven the price of the stock up to $360 after earnings were reported today.

OK - just don't let the water get over your head.

Monday, July 31, 2017

That's All I Have to Say About That

We live in a world where all one has to do to be considered a woman is to add breasts and parade around in women's clothing.  That's it.  He's a she, now, and you're a horrible person if you still call him "he," because - well, she wants to be called a woman.  Inside, there are all the man parts, and none of the women parts, but we are forced to do it because "she" wants it that way.  OK then.  That's a degradation of standards.

When you lose track of standards, anything passes for ... anything.  That's how the ball starts rolling downhill, and this ball has been rolling downhill for decades.  It didn't start with confusing sexual orientation, and it won't stop there either - but it isn't helped by it, and I chose to lead with it to demonstrate a point, such as it is.

We have elected a president who, by some standards, is the "people's choice."  What Lyndon Johnson called "The Silent Majority" was heard loud and clear by our Electoral College, and we now have sitting in the White House a man who is best known for putting his name on buildings and telling people on a TV show, "You're fired."

Part of the problem is that our best and brightest don't want anything to do with the job, so people whom we would elect in a heartbeat prefer to sit on the sidelines and earn billions of dollars while they figure out ways to keep their fortunes intact while the government gives it away.  That's capitalism.

You can put a suit and tie on an idiot businessman [slash] celebrity and call him "president," but that doesn't make him a presidential.  It's a degradation of standards.  But, we still have to call him the President.

It's like that.

Sunday, July 30, 2017

The Week Ahead

As usual, during earnings season, there is something going on.  This week more than most.

On August 1, two of my companies report.  ACCO brands, which makes almost all of the office supplies that you are stealing from work reports.  We are expecting 26 cents.  In the last quarter, they beat expectations and confirmed guidance.  As a result, the stock declined into the last three months.  I am expecting another earnings beat and anticipating the stock improving on its current share price - if not for anything else - just for a sheer value standpoint.  While the world has been watching Facebook, Amazon, Google, et al., hard product companies like ACCO continue to earn money.  Let's see what Tuesday brings.

Pfizer also reports on the first. Jim Cramer refers to it as a "bond," since it regularly trades in the $32-per-share area and pays a 3.8% dividend.  That kind of makes it a bond.  Shareholders like me aren't interested in holding a bond based on drug prices.  If they do not make some comments about the next year and some acquisitions and/or new drug innovations, this shareholder is out.

Most importantly, on August 2, Square (SQ) reports.  As they say, the stock is "priced for perfection," and I anticipate perfection in their earnings release.  The mobile pay space is interesting.  Some think that PayPal should buy Square, and others think that it is an interesting acquisition target otherwise.  It's a volatile stock, and I'd like to see something positive come from management this quarter so that we can get through this trading range.

On August 3, Extreme Networks reports. They have been quietly growing market share, even as their share price declined from $11 to nearly $9 now.  I'm looking forward to a positive quarter and some upward revisions on earnings and growth, which I anticipate growing the share price back toward the $11 mark that we saw earlier. I haven't seen anything to make me think otherwise.

HERE'S THE BIG NEWS: With some cash left on the table, I purchased shares of JC Penney (JCP) on Friday.  In spite of closing stores and increased pressure from the likes of Amazon and online retailers, most feel that JCP can not only weather the storm, but profit during it.  I'm inclined to agree.  Like most things in life, if you aren't prepared to take a risk, you won't reap big rewards.  JCP is a huge risk-reward scenario, but I think that, at $5.40 most of the risk has already been priced-out, and the only thing left is reward. Their next earnings report is in a couple of weeks.  No less an expert in retail than Dana Telsey has made it her top pick.  You might not know who she is, but she has been a staple in retail analysis for two decades.
If it's good enough for Dana, it's good enough for me.  Take a look and make your own choice.

It's hard to quantify, but next week might go a long way toward whether I can retire in a year or have to wait for three or four more.  I'd just as soon go out sooner than later, which is why I work so hard at this.  You might say, "Why not just invest in mutual funds and quit worrying?"

It's the worrying that makes it worthwhile.