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Ray Merola  

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  • Union Pacific: How To Trade Around A Core Position [View article]
    Glad you stopped by and commented, DAG

    Other contributors and commentators help me to think about the concepts, too. Oftentimes, I see new points of view. S.A. is a unique and powerful platform for exchanging ideas.

    All the best to you....
    May 19, 2015. 09:58 PM | 2 Likes Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    Touche, Amerlafrance

    I can only hang my hat on the ~ in the previous comment! Your math is entirely accurate.
    May 19, 2015. 09:53 PM | 1 Like Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    copper15

    In a nutshell, I suggest an investor consider selling part of his/her stake after it appreciates 25%. Harvest some of the gain. I generally think about selling ~25% of the position, since this leaves me with the same dollar amount invested as when I filled the position initially.

    If the investment thesis remains intact, then the investor may chose to buy back the shares. However, I typically will not enact a re-purchase unless I can do so for at least 5-10% less than the sale price. The pullback permits me to regain the position, but at a discount, and covers taxes (if any).
    May 19, 2015. 07:13 PM | 1 Like Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    Appreciate these remarks, GA

    We all change and adjust (hopefully) as we age; blending time and experience.
    May 19, 2015. 07:00 PM | Likes Like |Link to Comment
  • Buck The Traders: United Rentals On Sale Now [View article]
    MmMO

    I can offer a few thoughts.

    United Rentals' customer book is composed of 51% Industrial and 46% Non-Residential users. Residential customers represent only about 4% of the business. So the housing start data wasn't likely to move the needle much.

    Today, URI appears down with other Industrials and Energy stocks. This doesn't make sense to me, and is part of my investment thesis. Disconnects provide opportunities. However, in the short-term, United Rentals stock has tracked companies like Caterpillar and Marathon. Check it out on the charts. Seems silly.

    That's a lead to the last comment I have to offer: in the short-term, Mr. Market is often irrational and foolish. He over-and under-values stocks; often for the wrong reasons. However, over time, clarity usually prevails. Well-managed companies that generate increasing earnings and cash find prices follow along.

    If you like URI, and have a sound investment thesis for owning it, then I'd watch corporate fundamentals, earnings reports, management presentations, and SEC filings to ensure the thesis is intact. If so, then we just wait for Mr. Market to eventually reward good business performance.

    Hope that helps.....even a little.
    May 19, 2015. 12:58 PM | Likes Like |Link to Comment
  • Can Annaly Capital Management Sustain The Dividend? [View article]
    CWM

    Thanks for another excellent read on Annaly Capital Management. I appreciate your thorough research and analysis.

    FWIW, I contacted Vanguard Investments today. I sent an email to their Portfolio Management group with links to my recent NLY article, and yours; outlining concern over shareholder/management mis-alignment, and requesting the Vanguard shareholder provide their position.

    Given the confusion with my request, I am not sure what kind of reply I'll get. Evidently, they don't get many investors who ask questions about the portfolio composition and governance matters.
    May 18, 2015. 08:31 PM | 7 Likes Like |Link to Comment
  • Is Annaly Capital's Management The Solution Or The Problem? [View article]
    SkiDad13

    Shareholders are notoriously passive. Casting your ballot, thereby reflecting your views at the AGM is the single most constructive thing many of us can do.

    Annaly stockholders are split about 50/50 between institutions and individuals.
    May 18, 2015. 11:29 AM | Likes Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    Thank you, Piptief, for the very kind words. Much appreciated.
    May 18, 2015. 07:35 AM | Likes Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    Great color commentary on your original remarks, awayk

    Thanks for sharing with us. Certainly something to think about, as markets are ripe with "animal instincts," emotion and intuitive thinkers.

    I believe traders rely more on intuitive (clinical) thinking; while investors tend to be more analytical (actuarial). However, I suspect very few of us are black-and-white one way or the other.
    May 17, 2015. 11:17 PM | 1 Like Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    I agree. Some people just seem naturally more intuitive; others in certain areas.
    May 17, 2015. 11:13 PM | 1 Like Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    rmendpara

    It is a steal.

    These full-service $30 to $60 commissions were the only game in town. In addition, there were "odd lot differentials," and prices were in 1/8 increments, not pennies. The entire playing field seemed tilted against the small investor.

    During that period, I generally utilized mutual funds. Stocks were just too difficult to buy and sell, especially since I was young and had little capital.

    There were only a few index funds, and no ETFs.

    Times have certainly changed for the better.
    May 17, 2015. 11:12 PM | 1 Like Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    Another very good point, Augustus

    It's not required to get the distribution/accumulation exactly right. Just enough right to account for some CG taxes, and a healthy re-calibrated downward basis after taking some nice profits.

    Indeed, part of the strategy is to trade around only part of the full position. There isn't anything magic about the 50% total as used in this example. Sometimes I perform the same strategy with less. Rarely, if ever, more.
    May 17, 2015. 09:15 PM | 1 Like Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    Hi rosenose

    From reading so many of your comments, I know you are a successful, long-term investor. Indeed, developing what "works" for each of us is integral to the investment journey.

    Regarding options: I went many years and never touched options. Life was fine without them. I've found now that I can juice returns a little with them, and sometimes found these clever inventions can really help me do things that my capital limitations could not otherwise do.

    Thank you for reading, commenting, and of course your kind remarks.
    May 17, 2015. 08:13 PM | 1 Like Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    merlendale

    Very good question.

    Fortunately, Union Pacific is one of those stocks that have a consistent, long-term price v. earnings track record. A ~17x ttm P/E is pretty reliable fair value benchmark. The specific 15-year trimmed average is 17.2x.

    Currently, 2015 EPS estimates are ~$6.26. The forward 2-year EPS growth rate is 12% or so; and the preceding 15-year EPS growth rates has been comparable. Therefore I'm comfortable using CY estimates.

    This is reinforced by the fact that UP management has only missed consensus quarterly EPS once in over 3 years, while beating 3 times; meeting expectations the other times.

    A 17x P/E on 2015 estimated EPS is a little north of $106. So I place the shares at fair value when trading at that mark, and below $106 represents a discount.

    I started repurchasing a little early (at $109), but got 2 more bites at $106 and $104. Coupled with the fact that I sold at an average price of $116, I'm happy with the situation so far.

    I'd really like to fill out the position with shares purchased at $97 or so.

    Hope this helps.....

    May 17, 2015. 08:10 PM | Likes Like |Link to Comment
  • Union Pacific: How To Trade Around A Core Position [View article]
    Reasonable approach, TimmiesRegular

    As UNP shares rose from $105 to $110 to over $120, it just seemed to me that the prices were getting too far removed from earnings and multiples. So I sold down, effectively banking on "reversion to the mean."

    It took several months, but that train did "come in." I contend trading around a core position should be a most disciplined and judicious endeavor.

    We agree that Union Pacific Corp is best-of-breed, and the rails have great franchises with big moats. I have no intention of eliminating my position in UNP for a long time.
    May 17, 2015. 07:53 PM | Likes Like |Link to Comment
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