Seeking Alpha
View as an RSS Feed

Ray Merola  

View Ray Merola's Comments BY TICKER:

Latest  |  Highest rated
  • 2014 Strategies And Stocks: Mid-Year Review, Part 1 [View article]
    Thank you, Norman Tweed, for reading.

    CAT has even surprised me a bit, and I've been bullish on the shares for awhile. I believe some investors miss that Caterpillar is a giant, diversified machinery company. Trying to pigeonhole it as a mining equipment company, or overly China-linked misses the mark.

    I agree with you on UNP. A boss-favorite of mine, but the shares are looking too rich. That's they trouble with a number of these stocks. I'd welcome a garden-variety pullback to enable some names to "come in."

    Happy 4th of July weekend.
    Jul 3, 2014. 02:06 PM | 2 Likes Like |Link to Comment
  • GM gains opportunity from recalls, customers find it a good time to buy [View news story]
    When investing, I avoid companies whereas management blames its customers for its own problems.

    Now a new permutation: an investor who blames the company's customers for improving sales.

    All in fun....enjoy the ride.
    Jul 2, 2014. 09:09 PM | 1 Like Like |Link to Comment
  • 6 Signs Of A Correction [View article]
    Good article, Tony. Thank you.

    Market pullbacks and corrections often come when least-expected. For those invested in individual stocks, making an educated determination of fair value is important. As stocks attain or move above their fair value, reducing exposure is prudent.

    Building some cash as the market rises can be the simplest, easiest approach for individual investors.
    Jun 30, 2014. 09:09 AM | 3 Likes Like |Link to Comment
  • 2014 Strategies And Stocks: Part 6, International Paper [View article]

    Thank you for sharing that positive Barron's article about International Paper.

    I come up with roughly the same 12-month forward target price: mid $60s on either 15x 2015 operating EPS or 8.5x operating cash flow. John Faraci is a premier CEO. He is driving the business in the right direction; plus is very shareholder-friendly.
    Jun 29, 2014. 10:51 AM | 1 Like Like |Link to Comment
  • Is Chubb Better Than Aflac For Your Dividend Portfolio? [View article]
    Good article highlighting 2 excellent insurance stock companies.

    I was with you completely until the punch line: apparently selecting Chubb over Aflac primarily over volatility concerns.

    Since the Great Recession, AFL stock has a better dividend growth rate; currently a higher yield; and arguably better valuation, at least as measured by P/E. Volatility has been a function of EU PIIGS investments (since mitigated or divested, not mentioned in the article) and current investment in Japanese Yen-based debt instruments (seemingly a red herring, since the company actually exchanges very few Yen for USD). The probability of Japanese default is low.

    Long AFL.

    Jun 28, 2014. 07:28 PM | 5 Likes Like |Link to Comment
  • The Intel Resurgence [View article]
    Thanks for a well-reasoned and informative article, Ed.

    The Intel thesis is plausible and explains why the stock has cracked $30 and just keeps going up.

    Why aren't you long INTC?
    Jun 27, 2014. 08:31 PM | Likes Like |Link to Comment
  • Can General Motors' Mary Barra Deliver On Her Plans? [View article]
    As part of the due diligence process, investors may consider price and volume; "Follow the Money." 4 of the past 5 weeks the stock is up on good volume, despite terrible news wires.

    Speaking of the media, the article mentioned this early-on:

    "GM ordered dealers to stop selling the 2013 and 2014 versions of its most popular car, the Chevrolet Cruze sedan, because of faulty airbags built by the Japanese supplier Takata."

    True statement. However, this "stop selling" order was lifted on Wednesday this week.

    It appeared the media shouted "Stop sell" from the rooftops, but the "Resume sell" a few days later was a whisper. Investors must beware of getting sucked in by the headlines.

    One more item: the short ratio on GM common stock is less than 3% as of June 15. It seems the shorts are not out in any force.
    Jun 27, 2014. 05:37 PM | 3 Likes Like |Link to Comment
  • This GM Bull Says 'Sell General Motors Right Now' [View article]
    Thank you, mikeRetirement

    This is an excellent example as to how investors can get ditched by the media. I was unaware of this change until you mentioned it here, though I try to keep an eye on the news wires. A quick web check validated the new data point.

    The "stop selling" news was broadcast from the hills and rooftops. The "resume selling" wires appeared to be at a considerably lower decibel level?
    Jun 27, 2014. 09:31 AM | 13 Likes Like |Link to Comment
  • Scrap These 8 Wood And Metal Companies [View article]
    Interesting screen, Douglas. Thank you for presenting it.

    However, I believe it overlooks a key valuation measure for many stock companies: price-to-cash flow.

    I am familiar with Nucor; this Dividend Aristocrat (increased the regular dividend for 30 consecutive years) is best measured by cash flow metrics versus earnings metrics. Currently, the stock is about fair value. However, the cyclical business and shares can turn quickly.

    This is the case with a number of heavy-capex, "smokestack" stocks.
    Jun 27, 2014. 09:06 AM | 1 Like Like |Link to Comment
  • AT&T: A Junk Bond In Equity Clothing [View article]
    Anthony, you have written an interesting article.

    Here are a few additional thoughts for consideration:

    AT&T is a Dividend Aristocrat. This group of about 100 companies have increased annual dividends for at least 25 consecutive years. T has improved the cash distribution for 30 years running, offering investors at least some assurance of inflation protection. This was not mentioned in the article.

    Currently the AT&T Wireline business includes U-Verse, a TV cable and satellite competitor. This business has demonstrated significant growth over the past several years, somewhat offsetting the secular decline in traditional wireline. The DirectTV merger, if enacted, would supplement this business segment.

    AT&T is winding down a major capex program now. Once completed, free cash flow will increase.

    I view junk bonds as containing a tangible level of default risk. Hence, the higher interest payments. Logically, while AT&T dividends are not "secure," nor is there any bond contract / agreement with investors. Nonetheless, the Dividend Aristocrat status, and resulting management commentary around the security of the payout appear to put the probability of a flat dividend (let alone a dividend cut or "default") to be quite low. Therefore, one could suggest the T dividend may be considered to be both safer than a junk bond, and contain a built-in adjustment factor for increasing rates. Indeed, stocks of Telcos and Utilities tend to find inflation provides ample cover for raising rates, often providing the spark for increased earnings and dividends.

    I suspect many long-term T shareholders are aware that dividend increases have been limited to ~2% a year since the Great Recession. However, prior to that, the annual payout percentage increases were consistently higher.
    Jun 26, 2014. 12:17 PM | 10 Likes Like |Link to Comment
  • Great Companies With Overpriced Stocks - Part 2 [View article]

    Currently, I have confidence in Ken Powell & Co. to make proper adjustments. This is part of what I believe makes GIS premier in their space. Any management team can look good when everything is going smooth and up. The strong teams know what to do and execute when the business needs some course changes.

    I am not suggesting that General Mills needs to go nuts here. However, I believe today's earnings announcement reinforces the need to expand to areas that promise more growth.

    Furthermore, I submit that General Mills' problem isn't loss of market share, but simply competing in some markets that are showing signs of secular decline. The idea of grain (cereals and baked goods) and dairy (yogurt) foodstuffs going away isn't going to happen. It's a function of in what form consumer want these products and moving away from heavy processing.

    To be fair, calendar counting and foreign exchange transactions didn't help GIS' quarter, either. No panic here.
    Jun 25, 2014. 01:53 PM | 2 Likes Like |Link to Comment
  • Great Companies With Overpriced Stocks - Part 2 [View article]
    Note to readers: GIS missed on top and bottom lines this morning. One-two combo of flat sales and input inflation were major issues. Margins retreated. Cost control is immediate response, but longer-term, the company will (must) generate new products aligned with changing demographics. The cereal and milk group is not a growth market.

    Shares under $50 will get my interest. This equates to a ~17x multiple on FY 2015 EPS. Dividend >3.25% is another decent marker.

    Good luck with all your 2014 investments.
    Jun 25, 2014. 11:06 AM | 2 Likes Like |Link to Comment
  • Great Companies With Overpriced Stocks - Part 2 [View article]
    Thank you for the kind words, Qniform

    Sounds like you have a reasonable and thoughtful plan on how to handle GIS shares. I wrote 55 strike calls last month and have another order for July 55s if the stock moves up enough on earnings tomorrow. While General Mills is a core holding, I am ok with over or underweighting it a bit contingent upon my assessment of fair value.
    Jun 24, 2014. 11:04 PM | 1 Like Like |Link to Comment
  • Great Companies With Overpriced Stocks - Part 2 [View article]
    Yes, Q10 investigatior

    I expect earnings to be in-line plus or minus a penny or so. A good thing when handicapping many in the Food Products industry is the fact that earnings tend to be fairly ratable. No big upside or downside surprises. In addition, CEO Ken Powell and his staff have a demonstrated track of delivering. As noted in the article, there's only been one "miss" in the past 3 years.
    Jun 24, 2014. 07:31 PM | Likes Like |Link to Comment
  • Great Companies With Overpriced Stocks - Part 2 [View article]
    Bill B.

    Quite reasonable. I struggle with selling the stock of great companies, too.

    My experience has suggested that more often than not, the market "throws the baby out with the bathwater." Banking on this characteristic has routinely provided re-entry points for stocks that started getting a little rich: even sound long-term investments like "The General."

    Once in awhile, the stock "runs away" and the re-entry point evaporates. In these cases, I have just walk away; knowing that indeed I've retained most of the original position, the DRIP is still cranking, and tomorrow is another day.
    Jun 24, 2014. 11:39 AM | Likes Like |Link to Comment