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Nelson Smith

 
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  • Realty Income: Don't Reach For This Yield Play [View article]
    I don't follow U.S. REITs much, so I just typed out a comment about how there are a couple hundred REITs out there and chances are you could find one with a yield of 6-8%. And then I looked. They are few and far between, huh?

    Y'all are nuts for taking under 5% for a retail REIT. I would never do it.
    Nov 12 11:31 PM | Likes Like |Link to Comment
  • Coca-Cola Has Growth, Margin And Capital Deployment Problems [View article]
    Here's what I don't understand about the "Coke can always just use its system to grow other brands" thing.

    When it comes to water, Coke has a much smaller moat than it does with soda. Water is water. The Dasani brand is known to consumers, but it's not nearly as well known as Coke.

    I worked at a grocery store from 2001-06. I did a lot of the ordering. When it came to ordering water, price was most important. You had to stock Coke or else people would revolt. Nobody cares enough about Dasani to revolt. We'd sell Dasani, but wouldn't push it unless the Coke rep gave us a good deal on the 24 packs. I can't imagine it changing since I left the industry.

    There's value in Coke's distribution system. But as brands get further and further away from the Coca-Cola brand, they're worth less. Dasani, Vitamin Water, Minute Maid, etc. all have value, but they pale in comparison to the Coca-Cola brand. And yet, investors value the whole thing as though every brand conveys that same emotional response to customers.

    I'd consider paying 23x earnings for a company that just sold Coca-Cola. But 23x earnings for a company that sells other beverages that are only marginally as strong? Nah. And yet *those* are the beverages that are supposed to take Coke into the next promised land?
    Nov 12 12:22 AM | 3 Likes Like |Link to Comment
  • Coca-Cola Has Growth, Margin And Capital Deployment Problems [View article]
    That's okay. There's something like 8,000 publicly traded stocks in North America. I'm sure I can find enough to fill a portfolio without KO.
    Nov 12 12:11 AM | Likes Like |Link to Comment
  • Coca-Cola Has Growth, Margin And Capital Deployment Problems [View article]
    I think Tom brings up a lot of valid points with Coke. The fact is growth has slowed to practically nothing, management is paying themselves *really* well, and the stock is bid up thanks to retail investors' delusion that the next 50 years will somehow be as profitable as the last 50.

    Like I've said before, $KO would have to fall 50% before I'd look at it. There's just too many headwinds to pay 23x earnings for it.
    Nov 11 05:54 AM | 4 Likes Like |Link to Comment
  • There's No Reason To Own Johnson & Johnson - Sell It, And Buy VHT Instead [View article]
    Hey Buyandhold, we get it.
    Nov 10 09:55 AM | 4 Likes Like |Link to Comment
  • Fairfax Financial Holdings: Prem Watsa's Overrated, Underperforming Mutual Fund [View article]
    There's a whole lot wrong here, but others have already beaten me to it. Watsa has been much better than the market for too long for me to doubt him over a couple of years of underperformance (which is easily explained by reading his Chairman's letter). Josh, might I suggest cutting down your volume? 8 articles in 2 days isn't doing you or your readers any favors if you misunderstand companies as wildly as you do Fairfax.
    Nov 6 01:03 AM | 1 Like Like |Link to Comment
  • Ford Motor Not A Compelling Value Despite The Recent Correction [View article]
    I agree with Fordman here that Ford Credit certainly plays a big role in the debt calculations. I believe GM is suffering from the same sort of deal.

    But what's the solution to that? Will either company ever spin out the credit divisions? If not, you run the risk of investors everywhere liking the car company but not liking all the debt on the balance sheet from the finance arms.
    Oct 31 12:10 AM | Likes Like |Link to Comment
  • Note To Warren Buffett: Dump Coke, Pay Your Taxes, And Get On The Right Side Of History [View article]
    Nice article.

    I'd be happy to own Coca-Cola at 12x earnings. I can't get excited about it at almost double that, even if Uncle Warren is happy to hold at these levels.

    As for everyone criticizing the author about questioning Buffett, take a look at the Oracle's record over the years. He's gotten plenty of stuff wrong.

    Oct 23 11:42 AM | 2 Likes Like |Link to Comment
  • Strategy-Check: Dividend-Based Investing [View article]
    (Clicks "track new comments" button)

    (Waits for the usual suspects to show up and tell you how wrong you are)

    (Rubs hands in glee)
    Oct 20 09:04 PM | Likes Like |Link to Comment
  • Petroamerica Oil: Welcome To The Cheapest Oil Producer Worldwide (Part 2) [View article]
    I wish I was as sure of anything as much as the author is sure of Petroamerica.
    Oct 14 11:22 PM | 6 Likes Like |Link to Comment
  • Urbana: Why Mr. Market Is Assigning An Unjustifiable Large Discount To NAV Here [View article]
    Nice article Bram.

    I've looked closely at Urbana a couple times in the past, and I just can't figure out what the catalyst will be to move it closer to NAV. I look at the privately traded assets, and see just a few that are interesting -- the exposure to Bombay (obviously), and then the small investments the firm has in the Hungarian stock exchange and the investment in the new Canadian Securities Exchange. I just don't know if they will be enough to get it back into a situation where investors are willing to pay a premium for the assets.

    Saying that, I'll probably end up buying some. It's not very often $1 comes along for $0.60. I just won't feel good about it.
    Oct 6 11:59 PM | Likes Like |Link to Comment
  • Arch Coal: Cutting Supply Remains Key To Long-Term Survival [View article]
    I read about that plant in Saskatchewan. The problem with it is it cost $1.3 billion, while a similar coal plant without the carbon capture technology would cost $350-$400 million. The price of carbon capture has to come down a long way before it's viable for anybody except government.
    Oct 3 09:08 PM | 2 Likes Like |Link to Comment
  • Why Peltz's Reasons For Breaking Up Pepsi Do Not Hold Water [View article]
    No, you don't understand the business.

    There's basically zero synergies that can be captured by having it all under one roof. They're ran as separate businesses. This isn't hard to understand. Frito Lay has its own warehouses, it's own account reps for big customers, and its own sales force. Pepsi has all its own warehouse space, sales reps, and account reps. And Quaker/Tropicana/Gatorade is essentially another company still, with its own army of sales reps. It would be impossible to change this.

    A grocery customer can't even order Gatorade from their Pepsi sales rep. Each week a store gets several chip deliveries and several soda deliveries. On separate trucks. There are no benefits and no economies of scale.

    Oh, I forgot. Sometimes they work together and build soda/chip displays in stores or split ad space between the two. Like I mentioned before, there's no reason they couldn't continue to work together as separate companies. Pepsico and Yum continue to do it.

    Spend some time in emerging markets. In Asia, Frito Lay barely exists (maybe a dozen skus) and Pepsi is being dominated by Coke. They don't even manufacture any Frito Lay products, it's contracted out. Pepsi isn't doing anything special in emerging markets. The rising tide is just lifting all boats.

    I've spent 10 years in the business. But hey, keep thinking you understand it better than I do.
    Oct 2 04:14 AM | Likes Like |Link to Comment
  • Why Peltz's Reasons For Breaking Up Pepsi Do Not Hold Water [View article]
    Pepsico spun out Yum Brands (Taco Bell's owner) in 1997. The companies have retained close ties since, but the only notable business establishment the two still have is all of Yum's restaurants have a lifetime guarantee to serve Pepsi products in their restaurants. (Although that's just in North America, I've been to KFCs in South Korea that serve Coke).

    Still think that Pepsi and Frito Lay can't cooperate if they're separate companies?
    Oct 2 04:02 AM | Likes Like |Link to Comment
  • Let's Talk About The Nifty Fifty And Dividend Growth Investing [View article]
    Mike's math is way off. I took an average of the 17 companies annual returns and got 12.9%. It's obvious just by looking. 12 outperformed 11.1%, some by a lot.

    Of course, it proves nothing. So the best third of a group of stocks outperforms the index. Big deal. That's pretty much what you'd expect to happen.

    If the losers would have been punted, as he suggests, does that mean companies like McDonalds would have been shown the door between 2000 and 2003 when it lost much more than the S&P 500? How about PFE over the last decade? It's flat, while the S&P is up 77% (excluding dividends for both). It's easy to say "oh, I would have sold the losers," but it's much more complicated than that in real life.

    I'd like to echo what varan said about the sentimental language. An investor could have easily said the same things about J.C. Penney, Kodak, Sears, and all the other dogs. I'm younger than the author, and I can remember the days when the Kodak and Sears brands were strong. It's easy to say in hindsight "oh, Coke, P&G, JNJ, etc. have great brands and people will use these products forever" now that you've been proven right. But if you had of said "Kodak is a great brand. People will be using its film forever" in the 80s and early 90s, people would have agreed with that, too.

    But hey, keep thinking articles like this are "proof" that the almighty dividend will conquer all.
    Sep 26 02:58 AM | 2 Likes Like |Link to Comment
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119 Comments
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