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  • Lorillard: The Risk And Opportunity Of Pending Regulations [View article]
    @maybenot: That's what I suspect too. But I think--and maybe hope--that the FDA will come out with regulations that 1) make headlines and 2) sound more limiting and foreboding for than they realistically are.
    May 24 11:40 PM | 2 Likes Like |Link to Comment
  • Lorillard: The Risk And Opportunity Of Pending Regulations [View article]
    LO trades at 13.5x forward earnings vs. 15x for both RAI and MO. The difference in yield is admittedly not quite as distinct--but LO has provided on average about 17bps higher yield than MO in 2013, compared with 53bps less yield than MO in 2012--a decent swing.
    May 24 09:25 PM | 3 Likes Like |Link to Comment
  • Lorillard: The Risk And Opportunity Of Pending Regulations [View article]
    Buy. Regulation is one of the reasons tobacco has been such a great long-term holding (in addition to the great economics of the business model, obviously). But regulation keeps the "perceived risk" up and price down. In this case, I think the FDA decision presents the potential for a perception shift favoring lower prices and higher future returns.

    Part of the reason the perceived risk is different than actual risk is the profits of tobacco are shared between both regulators and shareholders as you mention. They would seem to be antagonistic, but both need the other for maximum benefit.
    May 24 07:17 PM | 1 Like Like |Link to Comment
  • The Worst 'Big 4' Tobacco Company Right Now [View article]
    @ maybenot: probably should look at the div payout ratio for MO sometime. In the past three years you're looking at 78%, 96%, 82%. This year EPS should be a little higher so it won't likely be so high (although I'd love to see a hike!).

    Tim I believe the P/E ratios you mention are a bit misleading...all of the big 3 tobacco companies trade at about 15x forward earnings. RAI in particular is forecast to have a large jump in EPS ending 12/2013 which makes the 18x last year's earnings look misleading. However you are right: on a historical basis they ALL are expensive.

    The cigarette industry will be fascinating to follow in the next few years...there is something to be said for a super high dividend payout ratio in an industry which is suffering volume declines.

    You also do not mention debt...LO and MO have both leveraged to the tilt to maximize shareholder returns...LO's negative book value of equity is a good lesson in the difference between accounting and economic value. RAI is not quite as levered and has some room to maneuver here.

    I'm long MO. I like the focus on shareholder value, slight diversification, and yes the high payout ratio--cash does nothing sitting in coffers! PM is promising too but the international exposure adds an element of FX and country risk I think people underestimate.

    Thanks Tim.
    May 22 01:34 AM | 2 Likes Like |Link to Comment
  • Earning 25% In Six Weeks - A Russell 2000 Update [View article]
    Why will the shares not perform as well as the official picks? Isn't the dynamic (index funds buying the stocks) the same?
    May 21 02:31 PM | Likes Like |Link to Comment
  • Why AT&T Is An Income And No Growth Story [View article]
    A couple suggestions:

    You spend the first half of the article describing how T is facing increasing competition with "collapsing" margins, and then claim T is undervalued based on lower multiples compared with a company (VZ) who has better margin and growth profiles. I'd argue T is fairly valued because the pressures on its landline business have lowered the margin and growth profile to a greater extent than VZ's.

    May I suggest too that you not look at T's revenue, gross margin, and CAPEX profile as if it is one business with slowing revenues--this is a completely misleading picture. T is a company with two businesses: a wireline segment with declining margins & sales in which T is loath to invest in, and a wildly profitable and growing wireless business in which T can't invest enough. The future profitability and FCF profile of these businesses is vastly different. Also T does not show signs of competitive pressures in the wireless market (yet)--if anything they are, along with VZ, dominating everyone else.

    I do not think consumers will notice T's "lack" of CAPEX spending, if that's what you call nearly $80B in three years. T's LTE network gets higher marks from consumers than VZ, and they cover 150M subscribers currently and this is growing. VZ's network is larger but this is not a winner-take-all market...T will continue to make a lot of money in wireless.

    Just a few thoughts. Thanks for the article.
    May 21 02:35 AM | 1 Like Like |Link to Comment
  • Earning 25% In Six Weeks - A Russell 2000 Update [View article]
    What does the unofficial note mean, mentioning NEO, UNXL, etc? What is the difference between these names and the ones you highlighted?
    May 20 02:17 PM | Likes Like |Link to Comment
  • A Company With An Overlooked Widening Moat [View article]
    Fastenal is by any stretch of valuation expensive, and that is what is driving the underperformance this year thusfar. Earnings have grown but their multiple has shrunk as the rest of the S&P expands.

    You mention Fastenal's moat--and perhaps they do have one--but what you as an investor do not have in Fastenal is a margin of safety. They are trading above their 5 Yr averages in every metric, and any hiccup will bring them lower.

    I think Grainger actually has a much stronger moat than Fastenal. In Seattle where I live they own all the big accounts (Coca Cola bottlers, Safeway, etc.) Fastenal would love to have those accounts but Grainger is very, very sticky with Fortune 500 companies.
    May 17 03:50 AM | Likes Like |Link to Comment
  • Smart Investment In The Skies: Boeing And Lockheed Martin In A Dogfight [View article]
    What is the point of your analysis if your conclusion picks Boeing because "of the exploding demand for its planes?" Your upside shows only 4% for BA while 15% for LMT. Your analysis doesn't even touch on demand for the planes that Boeing makes. Why did I waste my time reading your analysis if even you ignore it completely?
    Apr 30 04:25 PM | 3 Likes Like |Link to Comment
  • The Real Bad Dogs Of Dividend Investment [View article]
    I want to stay polite here, but your analysis is completely misleading. There are a number of flaws but I will focus on the biggest two:

    1) A "Stray Dog," as you define it, has a high dividend yield year after year, which you seem to think offers higher returns. You assume this is better than a stock with a high yield one year but not the next. This is not true a priori (I'd believe it if you offered some data). A stock with a high yield one year and not the next usually, with a few rare exceptions, has a lower yield because of capital gains--i.e. the stock rises to make the yield lower. This is especially true of DJI components. A stock that maintains the same high yield does so partly because the stock price is not rising as much. Which is better? I suspect the stocks that rise do better long-term.

    2) Your data set is horribly limited. Taking one year returns as evidence stray dogs are a great investment? Try 5 years. 10 years. I could pick any strategy in the world that works for one year--show me something that has worked over time.

    I would guess that your strategy performs worse than the normal Dog of the Dow over the long term because you are preferring stocks that by definition are not likely to be posting large price gains. But show me some longer term results and I might change my mind.
    Apr 24 08:16 AM | 5 Likes Like |Link to Comment
  • This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
    Goldbugs buy gold, bury it in the ground and complain when someone doesn't pay them more to take it and bury it somewhere else.

    Rule #1 of Goldbugs: Gold prices should always rise. Natural market demand increases as people try to hedge against central bank printing, and because gold HAS to go up, dammit, otherwise you don't understand economic laws and the rule that shiny objects hold lots 'o value.

    Rule #2: if perchance gold prices go down, it's because of some massive conspiracy amongst central banks and short selling schemes preventing gold price to continue upward. See Rule #1.
    Apr 16 09:25 AM | 6 Likes Like |Link to Comment
  • 4 Tobacco Giants' Financials Reviewed [View article]
    Interesting...why will RAI get the reduced payments?
    Apr 9 11:22 PM | 1 Like Like |Link to Comment
  • Microsoft - Growing Strength In The Enterprise Is Where The Real Value Is [View article]
    I echo the praises for your article--its refreshing for authors to put some effort into the analysis and let the comments come as they may.

    MSFT is unfathomable to me. A company which mints cash from Windows and Office, seems to have customers who are as addicted to their products as tobacco, but (almost) none of the bad press and litigation.

    And yet, here we are, in 2013, with shareholders achieving negative real returns since 2000 despite ridiculous FCF growth. SA writers and readers furiously debate whether MSFT is more than a Windows/Office pony, whether they make their money in business or consumer, point out Lync and Skype and all these other products. MSFT continues to grow revenues and FCF, Q on Q, whatever the product is.

    And yet here we are:

    I think at some point you just have to point to this and tell Ballmer he has to go.
    Apr 9 10:10 PM | Likes Like |Link to Comment
  • 4 Tobacco Giants' Financials Reviewed [View article]
    What is the point of this article? To translate concise financial statements into wordy English paragraphs? Come on, add some value somewhere or make a statement, bold or wrong or otherwise. Some SA writers seem like they have a form document with blanks where they fill in revenues and EPS growth and think that's worth reading.
    Apr 9 09:43 PM | 4 Likes Like |Link to Comment
  • What Altria Shareholders Need To Remember About Its History [View article]
    MO yield is just above 5%. Since 1984, the closing dividend yield on MO has been under 5% for 21 of 30 years: 1984-1993, 95, 96, 97, 98, 2000, 01, 03, 04, 05, 06, 07.

    And damn that 11% yield in 2008 looks nice. Hopefully I'll be liquid enough to jump on it if we ever see anything close to that the meantime, DRIP, DRIP
    Apr 9 02:07 AM | Likes Like |Link to Comment