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Marc Gerstein

 
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  • The Prudent Yield-Hog: Pushing The Envelope [View article]
    I'm going to write about more specifically a lot of these companies, but one thing I can tell you about CEL is that the payout ratio around 100% doesn't bother me because of the role of non-cash expenses. The dividend is actually about 58% of cash from operations minus capex.
    Mar 4 09:10 AM | 9 Likes Like |Link to Comment
  • Jim Cramer Master Class [View article]
    Oh my.

    How many investors (individuals or pros) construct a portflio with the sort of allocations you suggest: "18% Russell 1000 Growth, 29% Russell 1000 Value, and 53% Russell 2000 Growth."

    Look, I'm not a Cramer groupie. But come on. I think you;re straining way way too hard to bash the guy. In fact, your point comes across more like a sucker punch.
    May 21 11:59 AM | 9 Likes Like |Link to Comment
  • The Misleading Story About George Soros's Filing [View article]
    In journalism school, they teach: "If dog bites man, it's not news. If man bites dog, it's news." Notice that accuracy is not part of the adage.
    Aug 16 08:38 AM | 8 Likes Like |Link to Comment
  • There Is Nothing Rotten About This Apple [View article]
    "Once you are tied into the ecosystem, it's not very practical or necessary to change,"

    Have an iPad. Naturally, I got a bunch of apps.

    When it came to retire a junky Blackberry, I decided I couldn't bear to deal with the tiny iPhone screens so I got a Samsung. Perhaps my biggest surprise was how EASY it is to change ecosystems or in my case, have two simultaneously. Most apps are free and even the pay apps, even the more expensive pay apps, amount to chump change. apple ditched DRM on music a while back. With my most expensive app, Documents to Go, I didn't even bother to try to see if I could apply my iPad registration to the Samsung. I just paid again; no big deal.

    That's the dirty secret of wireless ecosystems. These aren't moats. they're puddles a three-year old could easily step over.

    " and many consumers prefer the walled garden of the Apple ecosystem to the open nature of Android."

    I know I heard that before . . . . oh yeah . . . AOL, circa 1999.
    Apr 23 07:33 AM | 8 Likes Like |Link to Comment
  • The Prudent Yield-Hog: Pushing The Envelope [View article]
    I'm perplexed at what you want to know that you aren't getting. You acknowledge that 27 factors are listed along with their weightings. How is that a black box? I'd say that's about as clear a box as you're likely to see on Seeking Alpha or, I suppose, any source of market commentary. Did you also check the first (March 1) article on this model? That one had more in the way of general approach. Generally speaking, though, the word safety must be interpreted in the context of this openly yield-hog strategy. Diminished probability of a near-term cut is all I seek (and since the model is meant to be re-balanced every three months, I define near-term as three months).

    "with the exception of Vector Group, none of these stocks has a dividend-increase streak as long as five years. So how safe are these yields"

    Last five years? We've had a horrendous financial/economic crisis that walloped dividends all over the place. You can certainly stand firm and demand five years of increases if you wish, but you will not be pursuing a yield-hog strategy. That's fine. There are many different kinds of income strategies and I've written about others too. But each strategy needs to be evaluated in terms of what it seeks to do.
    Mar 7 09:11 AM | 8 Likes Like |Link to Comment
  • Just One Stock: The Small Manufacturer Dominating the Rescue Hoist Market [View article]
    I'm not sure if this should be directed to Mr. Vanasek, the hedge-fund manager or Mr. Aycok, the Seeking Alpha editor, but here goes:

    Why is this stock being featured in this high-profile editorial context? What am I or any other reader supposed to do with the information?

    Is there a hope that readers will be interested in learning more about the hedge fund and, possibly, becoming investors assuming they are qualified in the context of hedge funds?

    Is there an expectation that readers will find the stock appealing and want to buy it?

    In terms of the latter, I have to frankly confess that I didn't really absorb much from the discussion of the company because I couldn't focus; I couldn't get my mind away from the horrible liquidity (Does the fund REALLY have a 35% return; is there any chance such a return could actually be realized absent a private buyout?) and the possibility that the company may go dark.

    Even if a buyout can be arranged and a nicely profitable selling opportunity surfaces, there remains the question as to whether it would be worth the risks associated with liquidity and going dark. There are plenty of other fish in the sea, even in the sub-micro segment of the market, that have produced comparable or better returns without these special risks.

    I'm completely baffled by the point of this piece.
    Jan 12 06:02 PM | 8 Likes Like |Link to Comment
  • An Undervalued Micro-Cap Dividend Stock With a 9% Dividend Yield [View article]
    I like the idea of an undervalued micro-cap with a big yield but have trouble with this one.

    For starters, the company fundamental data in the tables, while accurate, is misleading because of a huge Jun qtr. 2010 one-time tax credit that more than doubled EPS. That distorts the growth rate, the returns, and the PE.

    I'm also a bit perplexed by the dividend policy. It seems this company is quicker than most to skip payments in the occasional periods when earnings are weak. In a very strict textbook sense, that might be argued to be a sound policy, as opposed to the usual practice most companies follow wherein they try to smooth things by maintaining the dividend even in bad times if at all possible. But as theoretically sound as management's practice (letting the dividend vary more closely with earnings) is, it does detract from the 9% yield. You have to assume there will be quite a few missed payments as you hold the shares that will bring your realized yield below 9%.

    The stock may still be fine. I haven't taken the time to re-work the numbers with more realistic assumptions. But I do think a substantially revised analysis would be needed before one could make a case, whether income or otherwise, for CLCT.
    Dec 3 04:02 PM | 8 Likes Like |Link to Comment
  • Warren Buffett in His Own Words: 23 Timeless Quotes on Investing [View article]
    From the 1996 shareholder letter:

    "a friend once asked me: 'If you're so rich, why aren't you smart?" After reviewing my sorry performance with USAir, you may conclude he had a point."
    Dec 3 02:38 PM | 8 Likes Like |Link to Comment
  • Why Apple Stock Makes Me Nervous [View article]
    Typo alert?

    "But as an investor, the current valuation of Apple shares ($260.83 at market close on June 1, with a peak on April 26 of $272.46) makes me nervous."

    Surely you meant to comment on the stock's PE, rather than just the price level. Right? (wink, wink)
    Jun 2 02:06 PM | 8 Likes Like |Link to Comment
  • Wow: Judges Now Nixing Lenders’ Foreclosure Claims Entirely in Court [View article]
    Actually, anyone interested in this situation should read the complete Gretchen Morgenson article. The summary provided here is completely unsatisfactory.

    The extent of PHH's inability to establish its legal status as a creditor was quite substantial, so much so, that a ruling in its favor could easily open the door to courtroom larceny; foreclosures initiated by fake mortgagees.

    I have no idea from the facts described in the Morgenson article if PHH is legit or a fake. Apparently, the judge who studied the full evidentiary record, was not persuaded.

    It is possible that PHH is for real. If so, and if they are going to sustain an unjust loss, it looks like it would be their own fault for not properly following standard age-old procedures for documenting their legal rights. Sorry PHH, but being in a hurry to cash in on a securitization boom is no excuse for failure to follow clear procedures that are well understood even by first-year law students.

    And sorry Edward Harrison and Grechen Morgenson, this is not an aspect of a debtors revolt.It's just a matter of the legal system doing what it's supposed to be doing, applying the law. This is not just a technicality folks. This is very serious.

    Actually, in a sick way, I sort of hope PHH wins on appeal. There are a lot of really really nice homes in my area. If I can foreclose on them without having to prove I own the mortgage, wow... the heck with investment research. I'll make a heck of a lot more money through court-sanctioned larceny. Who knows, maybe this can be so big, a bunch of us seeking Alpha writers and readers can get together to form a company to do it, and even raise money in an IPO! Perhaps Trump Tower can be our first phony foreclosure.

    I like this . . . com on PHH . . . win that appeal!!!!!!!!
    Oct 25 03:09 PM | 8 Likes Like |Link to Comment
  • Commodity Index Funds: The Good, The Bad and The Ugly [View article]
    Contango refers to a situation wherein a futures contract trades above fair value, which is computed based on the spot price,interest rates, and time to expiration. At expiration, the contract's value must necessarily equal the spot price.

    Because commodities are futures contracts with expiration dates, no investor can buy and hold. The best they can do is rollover into a new contract as expiration approaches. when contango is present,they'll pay a premium to do this, and that can really cut into the returns one might expect to see based solely on examination of spot price trends. (Backwardation is the reverse, where the futures trade at a discount to fair value and rollover creates a bit of a windfall. But in rising markets, contango is more likely.)

    That said, i stilll would not necessarily describe commodity ETFs as speculative (I'm not a fan of the ETN). Whether they are or not is as we see for stocks; it all depends on what's happening in the market. Sometimes, commodities attract huge amounts of hot money investing and reach prices that are, indeed, speculative. Other times, when the hot money goes elsewhere, commodities can look quite conservative. It's just like stocks. Instead of relying on a pat formula, one must look at what's going on.

    My personal opinion is that right now, commodities look fairly reasonable. The next significant move in global demand for tangible goods is more likely than not to be upward, supply seems unlikely to keep pace, and the ot money that was all over commodities a few years ago seems to now be sitting in the spectator section. As to contango, look at how an ETF handles the last commodity rally. It'll provide a clue as to how effective their rollover strategy (how close to expiration they go before doing the rollover and how far out they go with the new contracts) has been. Chances are it won;t change since these rollover protocols are locked in via prospectus; ETFs don't have fund managers playing hunches. But that's my opinion. If I'm wrong, it will probably be because I'm too optimistic about economic prospects going forward.

    As to blanket statements that one should have 5% in commodities, I reject all statements that suggest X% in such-and-such asset class. In all case, the appropriate % depends on the risk-return inclinations of each investor, and, of course, market conditions.

    Commodities aren't magic. It's just another investment and like others, it should be subjected to basic fundamental analysis (and technical for those into that) and favored when the analysis says "yes" and avoided when the analysis uncovers too many red flags. (By the way, I think the importance,nowadays of tangible goods production is why we've seen commodities become much more correlated with stocks.)
    May 11 12:07 AM | 8 Likes Like |Link to Comment
  • Oakmark's Bill Nygren Is Looking At Amazon's Valuation Incorrectly [View article]
    Interesting situation, here as we have two experienced market-beating fund managers with divergent opinions.

    On the one hand, we have Bill Nygren, with a known track record.

    On the other, we have an anonymous writer who calls himself Slim Shady and claims to have been a fund manager with a market-beating record, but readers have no way of knowing if that's true.

    So let's assess what anonymous maybe real and maybe not fund manager Slim Shady says: "Two large expense items that have contributed to the lack of profitability over the last few years have been their spending on video content to support the Prime product, a number that is not disclosed, as well as the massive increase in subsidized shipping costs."

    While as SS notes, AMZN hasn't specifically disclosed shipping costs (yet somehow SS comes up with numbers for how shipping costs grew in excess of revenues -- come on SS, you can't have it both ways; either the number is known or it isn't), I think those of us who looked at the 10-K can make an educated guess that it's part of (but not entirely) the line item referred to as "fulfillment" expense, which has grown, but which isn't what's really swamping the operating margin. The really big item is "technology and content" which is described in the footnotes as:

    "Technology and content expenses consist principally of technology infrastructure expenses and payroll and related expenses for employees involved in application, product, and platform development, category expansion, editorial content, buying, merchandising selection, systems support, and initiatives to expand our ecosystem of digital products and services, as well as costs associated with AWS.

    Technology and content costs are expensed as incurred, except for certain costs relating to the development of internal-use software and website development, including software used to upgrade and enhance our websites and applications supporting our business, which are capitalized and amortized over two years."

    With regard, to content, AMZN continues . . .

    "We obtain digital video content through licensing agreements that have a wide range of licensing provisions and generally have terms from one to five years with fixed payment schedules. When the license fee for a specific movie or television title is determinable or reasonably estimable and available for streaming, we recognize an asset representing the fee per title and a corresponding liability for the amounts owed. We relieve the liability as payments are made and we amortize the asset as cost of sales on a straight-line basis over each title’s contractual window of availability, which typically ranges from six months to five years. If we are unable to reasonably estimate the cost per title, no asset or liability is recorded and licensing costs are expensed as incurred."

    So part of technology and content, the line item that has really soared, seems very much R&D, which is where Compustat classifies the whole item. The other part, content, isn't R&D but in terms of accounting treatment, it has one critical aspect in common: it's a large expenditure that produces revenue over the course of multiple years but is usually expensed in year one (unless a life-span is clearly and specifically known up front).

    IOW, if Amazon and Caterpillar Tractor both have equal amounts of expense with multi-year revenue generating potential, CAT will depreciate all of it while AMZN will expense most of it, meaning that the identical cash-flow characteristics will produce dramatically different reported margins due to the nature of the acconting rules.

    Seems to me like Bill Nygren, the readily identifiable fund manager with the known track record, has read and analyzed the 10-K. But there seem to be no indication that Slim Shady, the concealed former fund manger with a claimed track record that may or may not be true, has read the 10-K, or if it has, understands it.

    I haven't gone on to the P/S issue. I already lost interest in what Sim Shady has to say. I'll google Bill Nygren instead.
    Jul 21 08:53 AM | 7 Likes Like |Link to Comment
  • Linn Energy: Many Ponzi-Like MLP Blow-Ups To Follow [View article]
    Not really . . . when an article uses the word Ponzi in a headline, not to mention the phrase blow-ups, I'd expect the comment count to be much higher, as probably would have happened had it not come out on a holiday weekend. (And it may yet climb.)
    Jul 7 02:21 PM | 7 Likes Like |Link to Comment
  • Dividend Is Not A Four-Letter Word [View article]
    "How come I never see the growth people getting all defensive that people are saying bad things about capital gains? Dividend folks seem more wound-up than growth people. Why is that?"

    Many Seeking Alpha readers are experienced, sophisticated investors who do not need articles like this. But many others are still learning. When idiocy is propagated on the site by authors who, for some unknown reason, seem determined to discourage investors from pursuing what is in fact a very sensible investing strategy, it seems quite appropriate that the record be set straight.
    Jan 11 07:17 PM | 7 Likes Like |Link to Comment
  • Dividend Yield Worship Could Lead You Down The Wrong Path [View article]
    "The whole purpose of this article was to combat the idea that a high dividend yield makes it suitable for investment. To quote Jim the commentator: 'You have to own X because it now yields 4%'."

    I think I'm starting to get the idea of this article.

    Alan, don't assume people look at yield and nothing else. As to Jim C's remark -- it was a #$&*%@ SOUND BITE . . . that's all. It was not analysis. That's what talking heads are trained to do. Heck, I've still got my DVDs and booklets from the media training Reuters sent me to in the mid-2000s. You'd be amazed at how systematically on-air personalities are taught to craft quotable quotes (every bit as systematized as building a discounted cash flow model). And Cramer came out with a couple of gems relating to income investing ("instant high yield," another one he used recently), that would probably get an A+ grade from any media trainer.

    That, sadly, is the nature of television, even investment television. If you look past his blustery showmanship, it's easy to see that Cramer is actually quite strong when it comes to substantive analysis (although I'm not sure you can see it without paying for any one of a number of premium content sets; he's not giving you the good stuff unless you show your credit card). Don't believe for a single second that Cramer actually believes anyone should buy a stock based on yield and nothing else. He's way the hell too smart for that. But CNBC producers aren't, and Cramer, like everybody else on the air, knows what it takes to keep the TV money coming.

    Have you ever been on CNBC, or Fox Business or Bloomberg? If so, you know nobody can deliver a credible investment analysis once the red light goes on. Even a relatively long segment of, say, five minutes barely allows enough time to introduce an analytic viewpoint, much less deliver anything substantive. (And by the way, don't get lulled by the fact tat Cramer's on for an hour -- the show is stitched together with lots of tiny segments. Bear in min lightning round is not one segment; it's lot and lots of miniature bite-sized TV segments.) The first time I went on TV, I spent hours ahead of time preparing on companies I planned to discuss. Eventually, though, I cut preparation to about five minutes as I came to realize I wouldn't have time to actually develop any legitimate analytic points and that even if i did say something stupid, nobody would remember two minutes after the segment was over and that if i didn't know the answer to a question, I could dodge it simply by answering whatever question I wished had been asked while moving my arms boldly to distract the audience from the substance (laugh, laugh) of what I was saying. That is the context of Jim C's so-called income investing wisdom.

    Does all this suck? Hell yes! But don't blame Cramer (who, at least, has the moxy to cash in on it) and don't take it out on income seekers (who just want to do their thing as best they can in the context of an incredibly low-interest-rate environment). Blame the networks, who feel even investment audiences (a much smarter than usual demographic) have the attention span of a two-year-old Red Bull guzzler. Or better yet, blame the jackasses who sit around all day watching these networks thereby giving the producers the ratings and ad revenue they covet. The only way we're ever going to get more substance on the air is if investment audiences push the "off" buttons on their remotes and make it clear they'll stay away until the networks proved quality programming. But that, of course, is a fantasy (maybe the producers are right about their audiences).

    If you want to express frustration on Seeking Alpha, then write something bashing CNBC and broadcast media, not income investors!
    Sep 8 11:17 PM | 7 Likes Like |Link to Comment
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