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Alexander J. Poulos  

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  • Detailing My Bullish Thesis On American Express [View article]

    Todays announcement caught me by surprise. I am disappointed by the news yet in hindsight I shouldn't be surprised. I spoke to a colleague that hails from Canada and is a Costco member in the US and Canada. Costco issued a new Capital One card that offers 3% back at restaurants, 2% on gas and 1% on everything else.

    Knowing Costco, I suspect they drove a hard bargain with lower transaction fees than AXP is accustomed to. We shall see over the coming quarters the impact of the Canadian Costco business on Capital ones earnings.

    As for AXP, they are clearly in transition mode, the key for them is the capital return policy. Assuming AXP is granted clearance to return a larger amount of cash than last year we could easily see the company retire 5% of all shares outstanding. For holders with a shorter term time horizon, the move would be of little value yet for longer term holders it is great news. Easily one of the best moves a company can do when their share price is stagnate is repurchase as many shares as possible. Patience should be well rewarded here.
    Feb 12, 2015. 01:03 PM | 1 Like Like |Link to Comment
  • Detailing My Bullish Thesis On American Express [View article]

    Thanks for the praise, I appreciate it. AXP has hit a proverbial "rough patch" akin to what all great business's will experience from time to time. Due to the rough patch, a bargain has appeared as I have no doubt AMEX will find a solution. The recent cost reduction measures are an attempt to streamline the business, I expect AMEX to aggressively court new business and attempt to retain client base when economically viable. With AXP trading at a sub 15 multiple not a lot has to go right for the share price to justify its current level. Subsequently, any improvement seen will have a much more profound impact. Keep an eye on forex, as AMEX results suffered due to the strong US dollar. Any sort of moderation in the forex area will allow the company to show double digit profit growth once again.

    Keep in mind, for longer term investors a stagnant share price allows the company to repurchase a greater percentage of the shares than they would have otherwise. The story here for AMEX is their capital return plan. I am optimistic the Fed will allow them to return a greater percentage of excess capital than last year. I am looking for the company to repurchase roughly 5% of all shares outstanding this year which would translate into a roughly $4.5 billion dollar share repurchase plan. To say the least the end of March will be quite interesting for the financial firms.
    Feb 12, 2015. 09:57 AM | Likes Like |Link to Comment
  • Comments On Gilead's Quarter And The Road Ahead [View article]

    An excellent well written article as always. I suspect the mild sell-off in the shares post earnings is the swapping out of GILD by the more growth oriented funds and the addition of the shares by the funds seeking income. GILD remains an undervalued capital returns play with significant embedded growth if the compounds in their lab show effectiveness in either HBV or NASh.
    Feb 11, 2015. 05:39 PM | 3 Likes Like |Link to Comment
  • Detailing My Bullish Thesis On American Express [View article]

    Due to AXP closed loop payment platform where AXP issues the cards and makes the loans to customers, there is inherent credit risk taken on my AXP. V and MA abstain from making loans, instead their partners in the "open loop" model bear the burden of the credit risk.

    Due to the fact that AXP makes consumer loans, they have fallen under the purview of the Fed which must approve their capital returns policy. I view this as an impediment that hampers some of AXP appeal. When I originally invested in the sector in Feb 2013, I choose V for this very reason. V has done extremely well fro me, morphing into my largest holding with a gain of 64%.

    I always held AXP in high regard, it was unclear to me at the time how the economy would shape up in 2013 and I didn't want to take on consumer loan risk. Now that the Fed is allowing bank holding companies to return excess cash, I am attracted to certain players in the financial area. At the time of purchase, AXP was down over 12% for the year and virtually unchanged over the past 14 months even though earnings continue to grow. I decided a bargain is at hand and hence the purchase.

    Keep in mind, 2015 is a cost cutting year with the upside depending on how much excess capital the Fed will allow AXP to return to shareholders. My hunch is it will be greater than last year which resulted in repurchase of roughly 4% of the share count. I view AXP through the lens of the next ten years and am quite content in allowing the shares to compound here. The reduction in shares outstanding will create long term value especially if AXP franchise continues to deliver superb metrics as illustrated above. Thanks for reading and commenting.
    Feb 11, 2015. 05:23 PM | 4 Likes Like |Link to Comment
  • Viacom Is Trading At A Steep Discount To Its Fair Value [View article]

    Thank you as always. If the summer movie season plays out as I suspect VIA>B will be in good shape. Paramount has some interesting fare slated for release in the summer, if they perform well the shares should close the valuation gap shown in my table above. Lets see how it plays out.
    Feb 11, 2015. 05:10 PM | Likes Like |Link to Comment
  • Viacom Is Trading At A Steep Discount To Its Fair Value [View article]

    The reason for the downward revision in estimates is due to the weak advertising rates. Nielsen the main rating agency has admitted they are having trouble accurately gauging viewership due to the "time shifting" nature of modern viewing habits. My take is they have no clue how to accurately gauge the impact of people DVRing shows to watch at a later time or to fast forward through commercials. The problem is being worked on with a shift towards 7 day viewership counts along with disabling the fast forward function in certain on demand shows.

    It is my firm belief, those who create content will always have a place whether it is through the big screen, cable, tablet etc. The industry is going through a transition phase, one I firmly believe the capable management team is able to steer them through. Nickelodeon, their crown jewel i suffering from a shift in children's attention to tablets and other hand held devices. I fully expect management to capitalize on this trend with their new subscription based model along with apps created with some of their popular characters.

    The recent release of the new Spongebob movie is an excellent example of the power of Nickelodeons core brands. The movie earned back their initial production budget and will easily top $100 million in sales worldwide while refreshing children's enthusiasm for the characters. You will see the ancillary licensing deals flow through similar to what was seen last year with the Ninja Turtles which I have no doubt there will be additional sequels.

    The management team keeps a tight lid of production costs which if left unchecked can ruin a production houses profitability. VIAB tends to use lesser know actors which keeps a lid on production costs and allows them to profit even when a movie doesn't do as well in the box office. Take the recent Transformers flick, the original cast was dumped for a cheaper crew with nary a hiccup. Fans still flocked to it because the animated robots are the stars not Megan Fox and Shia Lebouf.

    The key of course is the value, with VIAB trading at the lowest multiple of its peer group. At a 2% dividend with an aggressive share repurchase plan that will reduce at minimum 15% of the float with a pro shareholder management team you are paid to wait. at some point the market we revalue VIAB at 10x EV/EBITDA bringing the shares up to the target price shown in the model. Patience here should be well rewarded. Thanks for reading and commenting.
    Feb 11, 2015. 08:46 AM | Likes Like |Link to Comment
  • Viacom Is Trading At A Steep Discount To Its Fair Value [View article]

    MTV is attempting to offset this with original dramas, certainly not my cup of tea yet VIAB has channels geared to almost all tastes. The real key is Nickelodeon and their sister channels. On a side note, the SpongeBob movie opened with $55 million I sales far above what was projected. VIAB will easily cover their production costs, if Paramount does well in the summer box office (Mission Impossible, Terminator etc) we will see an overall revenue bounce for VIAB. Great stuff with a low multiple, 2% divvy and an aggressive repurchase plan. Thanks for reading and commenting.
    Feb 10, 2015. 06:58 PM | Likes Like |Link to Comment
  • The Dividend Growth 50... Plus 113 More [View article]

    Thanks for the positive mention. I suspect AMGN and GILD will serve us quite well going forward.
    Feb 10, 2015. 06:38 PM | 8 Likes Like |Link to Comment
  • Detailing My Bullish Thesis On American Express [View article]

    Notice how Apple Pay incorporates the open and closed loop payment systems of V,MA and AXP. Apple has repeatedly stated they have no desire to enter into the consumer loan business. Hence, I do not view Apple pay as a threat. Keep in mind, at AXP multiple I am not paying a premium for expected growth as one would pay if they purchased V currently. Paypal also incorporates them in a similar manner, so as of now I do not perceive them to be an existential threat. Thanks for reading and commenting.
    Feb 10, 2015. 05:19 PM | 1 Like Like |Link to Comment
  • Viacom Is Trading At A Steep Discount To Its Fair Value [View article]
    To all,

    The LR model is not displaying, for those interested click the following link.
    Feb 10, 2015. 04:40 PM | Likes Like |Link to Comment
  • Detailing My Bullish Thesis On American Express [View article]

    The shares at one point were down over 13% year to date, an overreaction in my estimation. Yes, the loss of the Costco business will have an impact yet in my view it is factored in. I suspect Capital One was very aggressive in their offer to court Costco, it remains to be seen how generous of a deal it is and how it will impact Capital Ones profit. It may not been the boon that everyone expects it to be. Thanks for reading and commenting.
    Feb 10, 2015. 03:41 PM | Likes Like |Link to Comment
  • Detailing Exxon Mobil's Distribution Yield Of 5.4% [View article]

    The future earnings estimates are subject to revision much in the same manner the recent earnings have been negatively impacted by the drop in crude. The way I view energy is as follows, the price of oil tends to trend higher than the rate of inflation and can be confirmed by looking at long term prices. An investment in XOM provides a built in inflation hedge along with a competitive yield via the dividend. For long term holders the share reduction plan should be factored in as well. Over time as shown in the charts above, XOM has outperformed its peer group. Thanks for reading and commenting.
    Feb 10, 2015. 09:47 AM | Likes Like |Link to Comment
  • Illustrating Why I Choose To Invest In IBM Post Earnings [View article]

    An excellent point, a portion of the 15% annualized will come from simply reinvesting the dividend.
    Feb 8, 2015. 10:15 AM | Likes Like |Link to Comment
  • Illustrating Why I Choose To Invest In IBM Post Earnings [View article]

    Welcome aboard. When asked to describe his investment in IBM, Buffet mentioned he wanted to see the share price sag to allow for a greater percentage of the shares to be purchased. Here we are three years later, with the share price lower than when he began accumulating his initial stake. The financial metrics that you have pointed out are quite attractive, as a value investor IBM metrics are tailor made. I suspect once the transformation is complete, IBM may outperform for a while leading to Buffet's 15% compounded gains goal. On a side note, he mentioned he would prefer a lumpy gain of 15% versus a smooth 12%, IBM will proven to be a lumpy ride lets see if the 15% annual gains comes to pass.
    Feb 8, 2015. 10:14 AM | 1 Like Like |Link to Comment
  • Amgen Offers Impressive Upside As A New Product Cycle Begins [View article]
    •A Phase 3 clinical trial assessing Amgen's (NASDAQ:AMGN) biosimilar to AbbVie's (NYSE:ABBV) Humira (adalimumab), ABP-501, achieved its primary and key secondary endpoints demonstrating equivalence to adalimumab in patients with moderate-to-severe rheumatoid arthritis.
    •The primary endpoint compared ACR20 values at Week 24, which was within the specified margin for clinical equivalence. In addition, safety and immunogenicity were comparable to adalimumab.
    •This is the second successful Phase 3 trial for ABP-501. Amgen has nine biosimilars in development and expects to launch five of them between 2017 and 2019.
    Feb 6, 2015. 12:23 PM | 2 Likes Like |Link to Comment