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Ray Merola

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  • Kellogg Vs. General Mills: The Future Of The Packaged Food Industry [View article]
    Nice article, Shawn

    Do you think the cereal manufacturers like GIS and K face long-term headwinds from younger U.S. consumers who may migrate away from pre-packaged food to more "healthy" alternatives?

    Cereal was a staple of my youth. Do you think breakfast foods will change for the upcoming generations?
    Jan 8, 2014. 08:25 AM | 2 Likes Like |Link to Comment
  • Intel At CES 2014: Lots To Like But No Cake Today [View article]

    What was Russ Fischer talking about re excess fab capacity? He wrote this article on December 23, 2013.

    Please clarify what I'm missing....or Russ.....or both of us.

    Russ wrote another article in November about the same thing.
    Jan 7, 2014. 07:59 PM | Likes Like |Link to Comment
  • Here's Why I'm Staying Bullish On Shares Of Consolidated Edison And Its 4.45% Yield [View article]
    On the other hand, if you owned ED shares over the past 10 years and reinvested that dividend, you'd be ahead of the S&P 500:

    ConEd 7.7%, S&P 500 7.3% per FAST graphs.
    Jan 7, 2014. 05:36 PM | 1 Like Like |Link to Comment
  • Intel At CES 2014: Lots To Like But No Cake Today [View article]
    Thanks Michael

    We will also await to earnings release telco to hear more detail about McAfee and its security solutions. I recall Intel spent around $7 billion for that outfit; not much to show for it....yet.

    In addition, I am keen to hear what's up with all the excess fab capacity.
    Jan 7, 2014. 05:25 PM | Likes Like |Link to Comment
  • 3 Strategies And Aligned Stock Picks For Your 2014 Portfolio: Part 1 [View article]

    Good question. When I refer to overweight or underweight, it has to do with the amount of funds invested as a function of all funds.

    For instance, there are 10 S&P stock sectors. If I had $100 and weighted each one sector equally, I'd invest funds in each sector totaling $10.

    Therefore, if I overweight 4 sectors and underweight 4 sectors (with two "equal weight"), I'd distribute the $100 differently: say $15 each in the overweight sectors, $5 each in the underweight, and $10 in the "equal weight" sectors.

    Some folks get fancier than me and look at the S&P 500 sector weights as a function of all 500 stocks. For instance, there's a lot more Financial stocks than Telecom. I don't try to make those fine cuts.
    Jan 7, 2014. 03:30 PM | Likes Like |Link to Comment
  • 3 Strategies And Aligned Stock Picks For Your 2014 Portfolio: Part 1 [View article]

    I am not specifically familiar with REM, but did a quick check and the concept is sound if the investor wishes to spread out risk and reward among various mREITs. There is nothing wrong with this approach, particularly in a beat-up industry. The yield is certainly stout.

    Regarding our place in the business cycle: every recovery is different, and it's not easy to tell the phase. However, there are a few historical data points worth noting:

    First, on average most phases normally last a year or two. It's clear the U.S. emerged from recession in 2009. This early-cycle phase has been sluggish, uneven, and weak. This may be a function of the kind of recession experienced in 2008-09 (financial crisis) and the current administration's policies that appear to have stressed wealth redistribution and social justice more than job growth and business recovery.

    Second, it now appears fairly clear that barring a black swan kind of event, the economy will not fall into a double-dip recession. That reinforces we have been in an early-cycle phase.

    Third, the Fed has been on cue; but not how everyone may have expected it. Historically, the Fed cuts rates in the recession and early cycle, then begins to tighten during the mid-cycle phase. This time, the Fed has maintained an extraordinarily loose policy. However, I contend that the "tapering" may be somewhat likened to what previous Fed-watchers called "tightening." The Fed raising rates (to slow an overheating economy) is the hallmark of mid-cycle.

    We are not there yet. Hence, my view that we're late in the early-cycle or just beginning a mid-cycle recovery. At the same time, I do not believe we are heading back into recession, either.

    We may find this overall cycle is slower and takes longer than most previous. That's ok, at least for me I'm not trying to fine tune anything. I just want to be roughly positioned in the right sectors at such time the economy picks up. Right now, my view is that Industrials, Materials, select Tech, and Energy will be ok. It's worth noting that Energy is the least likely sector to "behave" as is should.
    Jan 7, 2014. 02:16 PM | 1 Like Like |Link to Comment
  • 3 Strategies And Aligned Stock Picks For Your 2014 Portfolio: Part 1 [View article]
    I believe that's a very good probability.

    Eaton is well-positioned for a global rebound, with particular emphasis on the U.S. and EU regions. Management has long had the ability to execute plans well. This is why ETN remains one of my 2014 favorites.

    It may be just a little ahead of itself now, like many other stocks. Any sort of pullback could be an opportunity.
    Jan 7, 2014. 09:31 AM | Likes Like |Link to Comment
  • Why I'm Keeping Vodafone, Selling Issued Verizon Shares, And Substituting AT&T [View article]
    Hello L1329-8

    Actually I'm still in over half my original position. However, I've scaled back as the stock has moved north of $34, using OTM calls. Sold some around $35 and $38. Currently, I've got an order in for the Feb40 calls. If it fills and I get called, I'll have half a position leftover.

    I'm hanging in there since I think there's a reasonable chance that AT&T may make an offer for the remainder of the company. I will not hold Vodafone shares simply on the hope of a buyout, but the go forward prospects are pretty positive, and the dividend will remain strong.

    Let's say that T offers $115 billion for the VOD stub. VZ paid $125B net for VZW. That would come out to about $50 per ADR. If $17 is returned via cash and VZ shares, that would leave $33....after the February distribution. There's also a share consolidation coming, but I believe that general math is reasonable. We're at $39 today.
    Jan 7, 2014. 12:31 AM | Likes Like |Link to Comment
  • 3 Strategies And Aligned Stock Picks For Your 2014 Portfolio: Part 1 [View article]

    Indeed, Energy sector stocks tend to pick up steam if the economy accelerates. I prefer HAL to SLB, but both are good picks in the Energy Service industry.

    Agree that there are some financials that have room to run. Some of the names you mentioned have never really recovered since the Crash. However, in the banking industry, I still like shares of WFC for the long haul; and what I call it's kissin' cousin, USB.

    ETN may be a bit above fair value now, but the 2014 and out growth rate is very high as the Cooper Industries deal is all coming together. CEO Sandy Cutler is bankable. If I had no position, I'd wait for a pullback or sell some puts instead of jumping in with both feet. I've held Eaton shares for several years now, and really like the go-forward prospects.
    Jan 7, 2014. 12:24 AM | Likes Like |Link to Comment
  • 3 Strategies And Aligned Stock Picks For Your 2014 Portfolio: Part 1 [View article]

    I prefer CAT versus Deere (DE), Joy Global (JOY) and Cummins (CME); though there are some fine names in that group.

    Deere's management is quite capable, but sometimes I think they try to run down their stock on purpose. They always seem cautious, no matter what the situation.

    Joy is concentrated too much into heavy mining equipment. The company lacks the diversified lineup that CAT has: construction equipment, mining equipment, and industrial engines.

    Cummins is a close call. Better valuation on some measures, margins are comparable, less debt; but I like the CAT dividend (which I believe is safe), and the fact that the sentiment is so negative now. Notably, Caterpillar volume has been below average for months. However, I would not buy more shares now: I suspect the shares could find their way back down to $86 to $87. I've owned shares since 2010, periodically overweight and underweight. I'm equal weight now at about $85 apiece.
    Jan 7, 2014. 12:18 AM | 1 Like Like |Link to Comment
  • 3 Strategies And Aligned Stock Picks For Your 2014 Portfolio: Part 1 [View article]
    Thank you, pfifla1

    Our stock basis on those three names are about the same. Apparently, we both take a long view.
    Jan 7, 2014. 12:06 AM | Likes Like |Link to Comment
  • As Obamacare Rolls Out, UnitedHealth Rolls Over The Competition [View article]
    Thank you for an outstanding article in all respects, Cheryl

    It is comprehensive, obviously well-researched, and demonstrates excellent clarity of thought. I had been researching United Health Care and this article provides a great deal of insight to help me with the associated due diligence.
    Jan 3, 2014. 04:43 PM | Likes Like |Link to Comment
  • GM Is Likely To Peak In 2014 And May Become A Good Short [View article]
    Good convo on this board.

    I question how high rates will go given the Fed has all but shouted through a megaphone it plans to keep short rates near zero through 2015. I believe the market will set longer rates, but with an anchor on the short end of the curve, I suspect the 10-year will stabilize around 3.5% sometime in the next 12 to 18 months.
    Jan 3, 2014. 12:36 AM | Likes Like |Link to Comment
  • Here's Why I'm Staying Bullish On Shares Of Consolidated Edison And Its 4.45% Yield [View article]
    Thank you alexandrine. While I would expect uber-liberal AARP to whine, the link and article does provide some color on the proposed settlement. I read the 8-K, and it jibes. I noted the return-on-equity is about 9.3% versus the 10% or so requested by ConEd.

    Generally, ED staff has a good relationship with the New York PUC. This smells like a political deal during an election year.
    Jan 3, 2014. 12:31 AM | Likes Like |Link to Comment
  • A 2014 Conviction Buy: Union Pacific Stock Deserves A Spot In Your Portfolio [View article]
    This is a good question, User 19056501

    Here's some data / opinion points: I believe pipelines are more efficient and safer than rail. However, the Greens will impede pipeline transportation at every turn; getting ROW for new pipe is difficult; and short-haul movement lend itself to railroads.

    A big piece of that puzzle includes the "size of the pie." For the short to intermediate term, I do not believe hydrocarbon transportation is a zero sum game. As E&P companies expand their footprints in existing and new formations, the activity creates more demand for transportation services.

    Finally, the rails make a lot of money moving drilling sand and equipment around even if they don't haul all of the hydrocarbon production.

    My bottom line view is that expanding midstream pipelines and railroads can co-exist with adequate upside for both transportation modes. I do not see one "winning" at the expense of the other. However, assuming fields eventually wind down, midstream may ultimately get a bigger share when the pie shrinks. I see this as a normal part of a dynamic business, not a precursor to a secular decline in UNP freight.

    Hope that helps.
    Jan 2, 2014. 04:00 PM | 2 Likes Like |Link to Comment