Andrew Boral

Andrew Boral
Contributor since: 2011
David I think you have a mathematical misrepresentation. Beta is the covariance with the market over the variance. I believe that they are picking the stocks based on their sharpe ratio. Thus they divide excess returns by the variance. Covariance does not enter the equation. High beta doesn't have to equal high sharpe. Do you agree? Did I misread the prospectus?
Do you have a sense of the rate of distribution growth that is expected? Is it going to be as high as PSXP's 30% forecasted rate of dividend increases?
I checked the link in your article. There was significant short volume in each on the three days following the date your article was published (2/19/2014). The numbers are:
2/24/2014 Short Vol = 338,620 Total Vol = 843,790
2/21/2014 Short Vol = 147,737 Total Vol = 494,348
2/20/2014 Short Vol = 308,591 Total Vol = 750,268
Could you elaborate about what you were thinking those numbers would tell you?
This is interesting. I took a look at the Failure to Deliver Data at the SEC website for the second half of 2014. There were failures every day. Some of the failures were significant (i.e. approximately 100,000). What does something like that mean?
EPE's performance on the opening day was unimpressive. Do you think that the other oil and gas IPOs that were issued on Thursday and Friday were the reason for the poor performance? Do you expect EPE to improve as all these issues are absorbed in the next few days?
Maybe you are a quarter or two off on the breakout prediction. The disclosure of the discontinued operation took many people by surprise last quarter. Any thoughts about the what the current quarter's earnings are going to be?
Maybe you are a quarter or two off on the breakout prediction. The disclosure of the discontinued operation took many people by surprise last quarter. Any thoughts about the what the current quarter's earnings are going to be?
Exactly. I was going to make the same point. Looking at the 2012 payout ratio doesn't make sense.
I offer a word of caution. Return on Capital can be easily gamed through the use of off-balance sheet items. And cost of capital is typically a difficult calculation to get correct. But if you are going to use this as a benchmark, I would consider the large impact of goodwill. Over 55% of DVA's assets are goodwill which are present do to the recent mergers. Goodwill has been a large factor for many years. It is a larger component of assets than for many other companies. If the company had grown organically instead of through mergers, I believe that return on capital would look much better.
What do you make of the difference in market capitalization? NVDA is only 10 billion versus QCOM at almost 110 billion. It seems like these companies have very different market penetration. There are corresponding differences in their revenue numbers. NVDA has 4 billion while QCOM has about 18 billion.
Thank you very much for your insight Dan.
I apologize for the confusion. The dividends on their statement of cash flows was to and from minority interests / joint ventures. They are not paid to the shareholders.
I am not sure why an insurance company would be correlated with a transportation and furniture index. Are you sure you took the first difference of each time series? If you didn't, that would explain your spuriously good results.
I think you have a real long-term worry. And you are asking a really deep question. Will the house of cards that the global central banks are building collapse? However, I don't that is a risk in the short term. There has been deflation or minimal inflation in Japan recently. You can find Japanese inflation statistics here:
I thought you might like to know that two of Aflac's competitors issued debt recently. The comparable offerings were by Allstate (ALL) and Unum (UNM). Both ALL and UNM issued senior notes in the last few months. Both had maturities of 30 years (i.e. due in 2042). Allstate was at 5.2% and Unum was at 5.75%. Allstate was rated BBB+ by AM Best and Unum was rated BBB by AM Best.
Hope that helps.
Thanks for the question.
Moody's came out with its rating of this issuance of subordinated debt at a rating of Baa1. This is an investment grade rating. The company's rating is higher. You are getting a higher yield for going down the capital structure.
This issuance matures in 2052. That is a 40 year maturity. Going out that long in maturity is probably longer than I would like. Rates are at abnormally low levels. It is probably a good ideas to invest in things with shorter maturities.
I also was under the impression that there are tax implications. MLP wanted to pass through losses to offset the dividend income. This would enable investors to defer taxes. And give investors a lower cost basis that they would have to pay capital gains on later in the future. Therefore the incentives for them to generate "earnings" are different than an ordinary corporation. Is that true? I understand the tax issue from an investor perspective. But not really from the management's perspective. How do the tax issues factor in for the MLP?
I want to give a little more detail on the capital expenditures you are looking for. Disclosures about capital expenditure do appear in a couple of place in the financial statements. But before I go on, the capital expenditures are not really considered material.
1) There is an accounting change in 2011. Costs associated with advertising (acquired and renewing insurance contracts) are allowed to be capitalized on a retrospective and prospective basis. You can find further information information in Note 1 of the financial statement in 2012. There accountants consider these changes to Net Income to be non-material. This usually means less than a 10% impact.
2) AFLAC has about $620 million in property plant and equipment. This didn't really grow between 2011 and 2010. However these changes would be capitalized as well. Please keep in mind that the investment portfolio is over 100 billion. The related capital expenditures seem immaterial.
I hope that gives you a clearer picture.
Hi omaha. You can look on the LSTA website. A lot of their information requires a membership. Yet they do allow you to download the index values for free. You can download an excel file with the historical index values here:
The index value as of 10/5/12 was $96.02
One of the common ways listed on some financial websites is to compute free cash flow as:
EBIT(1-Tax Rate) + Dep + Amort - Change in Net Working Capital - Cap Exp.
This is a little cumbersome. Another simple way to calculate it is to take:
Operating Cash Flow - Cap Ex - Dividends.
Capital Expenditures usually arise from purchases of long-term physical assets. If the company has significant investments in factories, properties, or equipment, they will expense these items as assets with future long term benefits. Companies such General Electric have significant capital expenditures. This past year it total over $12 billion.
AFLAC is not a manufacturing compnay. AFLAC is primarily a financial company. The majority of its assets are investments in financial assets such as fixed income securities.
If you don't have access to a financial database which already calculates it for you, for these purposes, it is safe to assume it is zero. There is an easy way to check on Google. Check Google Finance's cash flow statement. AFLAC does not break out a separate line item for cap ex. It is listed as zero.
I am not sure if there are plans to expand geographically. However, their sales growth can be mostly attributed to WAYS. It is a hybrid whole life insurance product. The product allows beneficiaries to convert into a fixed annuity, medical coverage, or nursing care at a predetermined age. Sales of this product grew by over 250% year-over-year.
There are a few issues to consider. Some that come to mind are the impact of Japan's population on insurance demand, the low yields on the investments in Japan, and the appreciating Yen / Dollar exchange rate on earnings.
1) Japan's aging population contributes positively to the earnings growth of the company. Revenue seems to be expanding quite nicely in Japan.
2) The investment portfolio tries to match Japanese assets against Japanese policies. And US assets against US assets. This minimizes currency risk when paying off policies. However, yields on the investment portfolio (net investment income vs avg investment assets) lag behind some of its competitors. AFLAC has a yield of 3.5% while MetLife has a yield of 4.0%.
3) Currencies exchange rates have recently been working in favor of AFLAC.
Thank you very much for your comments and questions. This was a commentary on the cycle more than specifically about particular ETFs. I hope to address that question more specifically in the near future.
However, the loan market fundamentals impact all of these investments in very much the same way. It is very important not to look at historical returns and expect something similar to the past few years in the future. At the bottom of last cycle loans were traded below 0.50.
At current prices, these investments can not appreciate much. As the first "comment" points out, these investments are now quite close to par. In the most optimistic environment, these investments will continue to pull closer to par. Perhaps even go above par. However never much above 102 as the term of loans is typically around 4 years.
So we are the point in the cycle, where credit spreads are compressing. They are currently approximately in the neighborhood of 700 bps depending of which assets are included. In the last cycle, these credit spreads decline all the way to approximately 200 bps. This could mean that dividends on these instruments could be cut significantly. This would depend on the credit situation and how popular loans become with investors.
As pointed out briefly above, credit conditions have worsened a little since last year. The speculative grade default rate is around 3%. In the last cycle, default rates stayed below 2% for an extended period of several years. This led to the dramatic spread compression (of around the 200 bps level). So I don't expect dividends to fall nearly as much as the last time around.
I hope that helps a little.
Thank you for that information. It really does depend on which categories you are reviewing. I quoted information in the Standard and Poors publication, "Will This Time Be Different For The U.S. Speculative-Grade Cycle?" The link is the following:
Here is the quarterly dividend history.
Mar.31 Jun.30 Sep.30 Dec.31
2008 .24 .24 .24 .24
2009 .28 .28 .28 .28
2010 .28 .28 .28 .30
2011 .30 .30 .30 .33
2012 .33 .33 .33
If the pattern holds, AFLAC is due for a dividend increase in the next quarter or two. They certainly have the ability to raise the dividend.
Are you that good at timing your stock picks that we are we really going to argue whether or not UA had better growth over the past several years when compared to NKE? My apologies.
Thanks for the warnings! I think your right there is risk here. With a current P/E multiple of 48 there is little margin for missing an earnings quarter. However as long as they are able to make the current estimated growth rate of near 30 which converges to an earnings growth rate in the 20s, I'm hoping things can continue to do well for the foreseeable future.
Given that the main problem is with the unions it is unlikely that they would be willing to loose to many jobs to increased productivity. Hopefully Hostess can make a compelling case if this is where the improvements are. However, I believe that there is also pressure on margins due to input price increases.
There is no need to be rude. We should focus on the point. Ericsson used to be a dominant handheld phone maker and just like Nokia, it has fallen by away and even declared bankruptcy.
My mistake. "market capitalization" should be replaced with "revenue". I apologize.
Thanks for the comment. There could be several reasons why they are increasing the dividend or income. But it mainly comes down to the fact that the asset manager is able to buy leveraged loans with wider asset spreads. They are finding better value in the new issue and secondary market than from the maturing or sold loans.
Thanks for the global insight.