Dividend Inc

Book Review: 100 Minds That Made The Market

Although Fisher is a marketing disaster, his books "Wall Street Waltz" and "100 Minds Made the Market" provide good starting points for stock market history, a necessary component of successful investing.

Ken is the son of Phil Fisher who was a significant contributor to stock market history in his own right. In many ways it seems that that Ken rode on the coattails of his dad.

Verifone is Gregory Pepin's Highest Conviction Holding - Here's Why

I couldn't agree more with the comments of DavidBDC...very spot on.


On Dec 24 05:51 PM davidbdc wrote:

> this is your best play for 2010 for 2 year or 3-5 years? If so you
> should at least believe they are going to trample Ingenico and hypercom
> or how they will expand beyond the high end. With payment systems/applications
> you have to have volume to grow.
>
> Sorry, but a pick at $5 would have been warranted as a real pick,
> but picking this stock at $17 to go to $25 in two years can't possibly
> be your best idea. At least for your investors I hope it isn't.....but
> maybe thats why your calling it the fear value of the stock instead
> of fair value - instead of using spell check might want to have someone
> read your article before publishing...........

Monsanto: Within Striking Distance

Greetings Manuel,

You were definitely on the mark with the Monsanto call. You might enjoy reading the sell recommendation that we offered up on December 9th (www.newlowobserver.com...). We're not willing to play chicken with such tremendous gains in a short period of time. Although, a case could be made for holding this stock long term if bought at the right price...the one you and I agreed upon back in October.

Top Dividend Stocks to Accumulate Now

Great list of companies and agree with most comments. I think that McDonald's (MCD) looks the best of the bunch. However, after a 74% run up, I find McGrawHill (MHP) hard to justify at this point. I mean, MHP has got to revert to the mean at some point, and soon. I guess that explains why the stock has traced out a top since May 2009.

A Look at Utilities: Con Edison vs. Aqua America

Corrected version below:

Greetings Jarco,

Generally I try to avoid using fundamental analysis. My hope is that if someone can be made aware of a quality company at the right time then the fundamental analysis can be done by the individual. Additionally, my view on the fundamental analysis is going to be much different than someone else so I try to take an unconventional look at the different characteristics of a particular company.

Another issue that is of concern to me is seeking the best alternatives. I did not issue a research recommendation on consolidated Edison at the March low because the alternatives were too alluring. On March 10 (dividendinc.blogspot.c...), I issued a research recommendation on Helmerich & Payne (HP). HP has increased its dividend for over 20 years in a row as a high quality oil drilling company. The upside potential presented on March 10 indicated that HP was a better alternative than Consolidated Edison. Additionally, on March 26 (dividendinc.blogspot.c...) , I issued a research recommendation on Meridian Biosciences (VIVO). VIVO has raised the dividend for 16 years in a row and has increased in price by 60% since the March recommendation. Naturally both stocks are Dividend Achievers and have performed well in the past, which is the basis for following them currently.

Again, I try to avoid expounding on fundamental analysis since everybody has their own take on the matter. However, I try to give a different view that might not be part of the consideration of "generally high quality companies." Finally, I am stuck on making my investment decisions based on what the alternatives are. Once I have determined what the best alternatives are, I then apply fundamental analysis and try to take action.

I hope this gives perspective on my investment approach.


On Nov 30 07:15 PM jarco wrote:

> The comment bashing the author is unfortunate and clearly "out of
> line'. Having said that, however, much of the article, and a few
> comments as well, are not based upon fundamentals rather stock price
> lows, behaviors, etc.
>
> ED presents a unique niche; namely, little or nor exposure to Cap
> and Trade or any other pollution/environmental issue. Pretty cut
> and dried; buy competitively (pseudo) generated power and sell the
> distribution at a guaranteed return rate. Safety and secure with
> a very nice dividend. Houston based CNP is similar but weaker financial
> metrics.
>
> Natural Gas utilities such as EGN carry risks associated with alternative
> (albeit primary) energy sources. Competition; variable demands further
> brought by weather, etc. Investors interested in safety should consider
> reliable cash flows driven by necessity. Its like a mandatory drug
> from a single source supplier.

A Look at Utilities: Con Edison vs. Aqua America

Greetings Jarco,

Generally I try to avoid using fundamental analysis. My hope is that if someone can be made aware of a quality company at the right time then the fundamental analysis can be done by the individual. Additionally my view on the fundamental analysis is going to be much different than someone else so I try to take an unconventional look at the different characteristics of a particular company.

Another issue that is of concern to me is seeking the best alternatives. I did not issue a research recommendation on consolidated Edison at the March low because the alternatives were too alluring. On March 10 (dividendinc.blogspot.c...), I issued a research recommendation on Helmerich & Payne (HP). HP has increased a student for over 20 years arose as a high quality oil drilling company. The upside potential presented on March 10 indicated that HP was a better alternative than Consolidated Edison. Additionally, on March 26 (dividendinc.blogspot.c...) , I issued a research recommendation on Meridian Biosciences (VIVO). VIVO has resisted and for 16 years in a row and has increased in price by 60% since the March low. Naturally both stocks are Dividend Achievers and have performed well in the past, which is the basis for following them currently.

Again, I try to avoid expounding on fundamental analysis since everybody has their own take on the matter. However, I try to give a different view that might not be part of the consideration of "generally high quality companies." Finally, I am stuck on making my investment decisions based on what the alternatives are. Once I have determined what the best alternatives are I then apply fundamental analysis and try to take action.

I hope this gives perspective on my investment approach.


On Nov 30 07:15 PM jarco wrote:

> The comment bashing the author is unfortunate and clearly "out of
> line'. Having said that, however, much of the article, and a few
> comments as well, are not based upon fundamentals rather stock price
> lows, behaviors, etc.
>
> ED presents a unique niche; namely, little or nor exposure to Cap
> and Trade or any other pollution/environmental issue. Pretty cut
> and dried; buy competitively (pseudo) generated power and sell the
> distribution at a guaranteed return rate. Safety and secure with
> a very nice dividend. Houston based CNP is similar but weaker financial
> metrics.
>
> Natural Gas utilities such as EGN carry risks associated with alternative
> (albeit primary) energy sources. Competition; variable demands further
> brought by weather, etc. Investors interested in safety should consider
> reliable cash flows driven by necessity. Its like a mandatory drug
> from a single source supplier.

CIBC Chief Economist: TSX Will Hit 11,000 by Year's End

I guess the numbers don't lie, Mr. Rubin was pretty close with his year end estimates.

Some might suggest that the reasons for the increase in market were due to manipulation (i.e. money injections). Additionally, some would accurately point out that the bias of most analysts is always bullish. However, with the TSX at 11,464, I believe that Mr. Rubin earned his pay.

5 Good Dividend Plays

The order I would have selected the aforementioned companies is as follows:

1-VZ at 21.19% above the low
2-T at 25.89% above the low
3-KFT at 28.02% above the low
4-LLY at 35.61% above the low
5-BMY at 47.30% above the low
6-BP at 72.43% above the low

This may be myopic on my part but the closer to the 52 week low the less (not eliminated, just diminished) risk. Unfortunately, the high yield is a less compelling element, IMO. I would rather see the payout ratios before making a final decision on these companies despite their quality.

Junior Gold Mining ETF (GDXJ) Outperforming Its Bigger Sibling

Thanks for point this out.

CIT's Pain Is Goldman's Gain

In regards to the issue of accounting fraud or manipulation of financials, several leading sources seem clear that management of financial information was present on the books of TYC. This might explain the reason why the CFO went to jail along with CEO Kozlowski. Enjoy.


Source Citation:

"WorldCom, Enron, HealthSouth, Tyco: The early years of this century have given us plenty of spectacular examples of accounting irregularities, where executives have been caught 'cooking the books.'"

Blaskowski, Laddie. "Cooking the books and how bankers can detect it." The RMA Journal (2006): 16+. General OneFile. Web. 19 Nov. 2009.


"Beginning with Enron, a number of accounting scandals hit the financial markets from late 2001 through the first half of 2002, including (with the dates the accounting irregularities became public): Homestar and Kmart (January 2002); Qwest Communications and Global Crossing (February 2002); WorldCom (March 2002); Adelphia Communications (April 2002); Tyco..."

Nogler, George E. "The changing information content of auditor going-concern opinions: it appears that the failure of Enron and surrounding events caused auditors to be more cautious." Commercial Lending Review 21.1 (2006): 43+. General OneFile. Web. 19 Nov. 2009.


"Chief Executive Dennis Kozlowski used acquisitions to turn Tyco, once a sleepy conglomerate, into a growth company. Earnings and stock price soared. Kozlowski was well rewarded, getting $77 million in restricted stock from 1999 through 2001, based in part on the growth in pretax earnings and operating cash flow he delivered. Except that those earnings were manipulated in the company's treatment of acquisitions, and Tyco's earnings and stock price collapsed in an accounting scandal during 2001. The company subsequently restated prior 2001 earnings lower by $507 million."

Roney, Maya. "It Paid to Cheat." Forbes 9 May 2005: 134. General OneFile. Web. 19 Nov. 2009.

CIT's Pain Is Goldman's Gain

You're probably right OTF, however, the convictions of Kozlowski and Swartz included securities fraud. The extent of the securities fraud was extensive which is the reason it was included in the list of convictions. In order to commit and get convicted for securities fraud you have to manipulate the stock.

Manipulation is described by the SEC as, "... intentional conduct designed to deceive investors by controlling or artificially affecting the market for a security. Manipulation can involve a number of techniques to affect the supply of, or demand for, a stock. They include: spreading false or misleading information about a company; improperly limiting the number of publicly-available shares; or rigging quotes, prices or trades to create a false or deceptive picture of the demand for a security. Those who engage in manipulation are subject to various civil and criminal sanctions." (www.sec.gov/answers/tm...)

As you imply, the trial of Tyco executives may have been done only for the purpose of show. However, it cannot be denied that manipulation was part of their conviction...unless we wish to argue semantics.

Below are the quotes and sources citations for at least two sources. There were many more articles that point out securities fraud but there is a limit I'm sure.

Enjoy and thanks for the commentary.

Sources Citation:

"Each man is serving 8 1/3 to 25 years in state prison following his 2005 convictions for grand larceny, securities fraud, conspiracy and other charges..."

Stashenko, Joel. "Court Upholds Convictions of Ex-Tyco Executives." The Legal Intelligencer (2008). General OneFile. Web. 19 Nov. 2009.


"Tyco's former chief executive, L. Dennis Kozlowski, 58, and former finance chief Mark Swartz, 44, were found guilty in June on 22 counts of grand larceny, falsifying business records, securities fraud and conspiracy - actions that prosecutors said involved both men giving themselves more than $150 million in illegal bonuses and forgiving loans to themselves, besides manipulating the company's stock price."

"Former Tyco execs sentenced to up to 25 years." Accounting Today 19.18 (2005): 4. General OneFile. Web. 19 Nov. 2009.


On Nov 19 08:22 AM onlythefacts wrote:

> I'm willing to wager that you cannot find anything in the trials
> of Kozlowski or Swartz that refers to "manipulating the financials."
> It's just NOT what the trial was about. If you read the results
> of the internal investigation into accounting done by David Boies,
> he concluded that there was no accounting fraud at Tyco. So, although
> you use this fraud as a basis for the assertions in your blog, you
> made of the underlying facts!

Seth Klarman's Baupost Group Q3 Portfolio: Two Changes of Note

Point taken. Thanks for the response Daniel.


On Nov 18 01:40 PM Daniel Eskin wrote:

> Greetings Dividend Inc,
>
> It seems odd that you're highly concerned with what e-mail address
> I'm using for personal reasons and that has any implications on my
> own integrity or that of the firm I work for. My views published
> are my own only and do not have anything to do with where I work.
> On a sidenote, your wasted time to think of words like "besmirched"
> and "unabashedly" hasn't contributed anything to this author's discussion
> either.
>
> Suffice to say, thank you for contacting me and I have deleted the
> file in question.
>
>
> Oh wait, just kidding. Unlike certain other individuals, such as
> yourself, I have a sane and practical view of the world and do not
> deny to pirating a file here or there. Please delete all copyrighted,
> trademarked and protected programs, files, videos and songs off your
> computer before making public accusations... and you might want to
> send your message to Seth himself and another few millions people
> in the United States to tell them to delete all protected songs and
> files from their systems.
>
> You're free to demand anything you want. So am I. I demand that you
> cease and desist sending comments like this, since they're frivolous
> and meaningless. Where should I send the bill for the consumed diskspace
> and bandwidth?
>
> Thanks for your entertainment.
>
> On Nov 18 12:21 PM Dividend Inc wrote:

Seth Klarman's Baupost Group Q3 Portfolio: Two Changes of Note

Greetings Daniel Eskin,

It seems odd to unabashedly market your blog through the use of your Deloitte email address offering material that is in violation of the copyright of the author. While the author doesn't receive royalties from the book anymore, I doubt that Mr. Klarman would agree that unmitigated distribution of copywritten material is an acceptable practice.

Why don't you provide us with a review or highlight of the book instead. Your analysis and thoughtfulness might inspire others to do more work on understanding Mr. Klarman's investing. That would seem to lend more credibility to your name and the blog that you're promoting.

Suffice to say, you have besmirched your team at Young and Invested and possibly the audit firm you work for. I hope Deloitte doesn't endorse such strategies when providing "consultation" for their auditing services.

Dividend Achievers: How Have They Performed?

Greetings THofler,

Your point is 100% on topic. In fact, your cursory analysis was proven in Jeremy Siegel's Nifty Fifty Revisited (www.jeremysiegel.com/i...)

Furthermore, the article echo's your analysis on MO, which for some has meant early retirement. MO has really been that good. I hope you get to benefit further from you matter of fact approach to viewing stock investing.

Regards,
Touc


On Nov 17 02:29 PM THofler wrote:

> A slightly off topic comment:
>
> My wife & I were talking about the investing that we should have
> done long ago but didn't. So we picked the date when she first had
> some available money (1984) and asked what single "obvious" stock
> should have a person have bought then?
>
> I like dividend achievers, so my list of obvious stocks was: XOM,
> KO, PEP, MCD, MO, & PG. Later I used the Yahoo "Historical"
> price tables with adjusments for dividends reinvested.
>
> The top gain factors I got were: MO at 96X; PEP at 54X; KO at 46X;
> XOM at 38X; and MCD at 36X. I'm not confident of the MO number given
> the impact of all of the acquisitions and spinoffs. But I was mightly
> impressed by Pepsi's number, even though I don't expect it to be
> hitting on all 12 cylinders going forward.
>
> PS: PEP, KO, and MCD all have had sizeable dividend increases in
> the last year. (I am long the three.)

Is This the Beginning of a New Secular Bull Market?

I don't get this guy. It is probably me but despite the facts in the article Mr. Saut, as a Dow Theorist, has consistently questioned the legitimacy of the markets rise since March, in spite of the clear indications according to Dow Theory.

In the article dated August 11, 2009 (seekingalpha.com/artic...) Mr. Saut said, "..[F]or months we have opined that if a Dow Theory 'Buy Signal' was eventually registered that so much energy would have been expended in achieving it the major market averages would likely be a 'sell' on the event." To counter Dow's Theory is to suggest that it is only useful because it has consistently been shown to be wrong. This is hardly the case. While not infallible, Dow Theory has been consistent 80% of the time.

In the same August 11th article (seekingalpha.com/artic...) Mr. Saut said, "Nevertheless, we sold some positions into last Friday’s Fling (+113 DJIA); despite the Dow Theory “Buy Signal.” Clearly, our short-term more cautious approach is at odds with current Wall Street thinking since the mantra du jour is that you should be “tactically bullish and strategically bearish.” Saut sold shares based on the Dow Theory bull market indication which is counter to the point of Dow's Theory.

In order to get a bull market indication with Dow Theory requires a confirmation of the trend by the industrials and transports. While many people challenge the relevance of the narrowly focused Dow Jones indexes, Mr. Saut seems to find them of some use. The indications have been 100% accurate since Richard Russell's November 17, 2007 Barron's article (online.barrons.com/art...) calling the market top.

Using Dow Theory, I called the market bottom on March 20, 2009 (dividendinc.blogspot.c...). Every since March 20th, the only let up in the bullish Dow Theory indication was a non-confirmation within a cyclical bull primary trend. There has been little reason to question whether we were in a bull market. Yet Mr. Saut has been pounding the table to sell at each bull market confirmation.

Now, Mr. Saut is pondering the question of whether we are in the throes of a secular bull market. Dow Theory is unequivocal about when to start considering the possibility of a new secular bull market. Such consideration can't even begin until we've passed the previous high of 14,164 back in October of 2007. However, as a Dow Theorist, Mr. Saut doesn't seem to convey this in his article(s). In fact, Mr Saut doesn't even give the necessary transition from "I think you should sell at the next bull market signal" to "the indications are much stronger than I thought and therefore I have to cede to the trend" to "Is this the beginning of a new bull market?"

It is a shame the Mr. Saut has such an authoritative role, through mass media outlets and the like, but doesn't have to answer to his errors. More alarming is the fact that Mr. Saut claims to be a Dow Theorist and yet he has incorrectly interpreted and misapplied the theory.

As a Dow Theorist, I think that Mr. Saut does a disservice by making broad claims about the theory and then doesn't correct himself when he is wrong. It is no wonder that Dow Theory is thought of as an outmoded, illegitimate means for determining the market trend. Mr. Saut only tarnishes the quality material that he puts out from time to time.

Again, I'm sure that since I don't have the fame and the fortune that I couldn't be looked upon as pillar of knowledge. But Mr. Saut's misinformation is truly a disservice.