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Ray Merola

 
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  • The Pundits Are Wrong, Sell These Stocks Immediately [View article]
    Valuations do matter, and there are some valid points to be made here. The Consumer Staples sector has been overvalued for the better part of 2013, largely on the heels of yield-chasing and periodic flights to safety. I concur that much of the names are over fair value.

    However, some temperance is in order. General Mills has a normalized 15-year P/E of 17x, 10-year at 16x, and 5-year at 15x. The five-year average P/E reflects unusually low multiples during the 2008-09 crash.

    Therefore, I suggest that a reasonable P/E ratio for the stock is between 16 and 17x. Assuming FY 2014-15 EPS of about $3.00 a share, the current valuation is not outlandish. Something around $49 is in the ballpark. The earnings quality of this particular stock tends to be strong.

    Consistent dividend increases tend to provide additional yield support.

    Long GIS.
    Sep 4 10:30 PM | 7 Likes Like |Link to Comment
  • Vodafone: Buy For Income Even After Verizon Deal [View article]
    It appears that Mr. Market is valuing VOD in a post-VZW world at approximately $15 per ADR. This is figured via the current $32 share price, less $4.85 cash and about $12.20 in stock.

    The question I'm wrestling with is the real value of what's left. Based upon the most recent annual report, EBITDA was about $20 billion. No Verizon is in that figure. Some other large EU telecoms are valued at approximately 4x EBITDA. That would put the remainder on track for about $16 per ADR, somewhat justifying Mr. Market.

    However, the other EU telcos are largely limited to much smaller geography. Vodafone will remain global: including growing markets in India, Africa, etc. Could this bump up the multiple?

    What's more, VOD management paid robust dividends sans any contribution from Verizon Wireless for years. If the dividend were to remain comparable, would not investors bid up the price on yield?

    I don't have a clear handle on it. However, I'm long VOD and plan to stay that way until some dust settles. Indeed, an earlier commentator noted that the horses are not even in the barn yet. There's still some miles left to go.
    Sep 4 10:00 PM | Likes Like |Link to Comment
  • Intel Has Been, And Still Is, A Lousy Stock For Investors [View article]
    Certainly a compelling point-of-view. I've owned Intel stock for several years on a basis of $20; and keep thinking it will eventually pop. It's like the Chicago Cubs: it just keeps breaking your heart.

    I'm going to watch the Haswell release and the three indicators that I believe will either blaze a path or signal a retreat:

    1. Gross margins stabilize and begin to move up again
    2. ASPs hold or revenue ramps up to compensate for a decline
    3. The dividend is bumped up significantly, showing strong management confidence in the future
    Sep 4 09:48 PM | 1 Like Like |Link to Comment
  • Intel: So You Want Some Growth, Huh? [View article]
    Another excellent article Russ. Thank you.
    Sep 4 09:37 PM | 3 Likes Like |Link to Comment
  • Current Premises And Strategies For Managing Fixed Income Investments [View article]
    Augie91,

    We're facing a unique time for fixed income investing. It seems to some that interest rates may see a sustained move upwards in contrast to some thirty years of generally declining rates.

    If so, I believe the probability is that even the best general domestic bond funds will be lucky to break even. The increased interest income will be offset by a loss of underlying security values. Fees and expenses will erode the margin further.

    Given that backdrop, I'd prefer to simply buy selected, investment grade individual bonds with the intent of holding them to maturity. That's why I want bonds: steady income and return of principal with no surprises.

    I suspect that many bond funds will have a difficult time meeting those sidebars.
    Sep 4 09:32 PM | Likes Like |Link to Comment
  • Current Premises And Strategies For Managing Fixed Income Investments [View article]
    Thank you for the kind words, punamial
    Sep 4 04:58 PM | Likes Like |Link to Comment
  • Current Premises And Strategies For Managing Fixed Income Investments [View article]
    Indeed. It would afford a diversification mechanism as well as the ability to build a ladder. A key check would be the interest income offset by management fees versus "straight" interest from individual bonds.

    Thanks for the lead.
    Sep 4 04:47 PM | Likes Like |Link to Comment
  • Shell Oil Stubs Its Big Toe [View article]
    Thanks Sunshine123

    Seeking Alpha commentary is a strong suit of this site. Thank you for reading my article. All the best.
    Sep 4 12:24 PM | Likes Like |Link to Comment
  • Current Premises And Strategies For Managing Fixed Income Investments [View article]
    BHN,

    No, I have not gone that route. I have been willing to select individual bonds that fulfill most of my corporate, municipal and government allocations.

    Currently, I am riding corporate bonds purchased years ago.

    Of late, I've picked at a few municipal bond offerings, but they must beat three percent, be A rated, at or below par, and have no more than ten years to maturity for my consideration.

    My federal government bond holdings were also purchased previously. For this space, I like I-bonds or Treasury Direct.

    Going for fixed maturity ETFs sounds like a pretty good alternative. I'd have to review the prospectus and fees carefully.

    Thanks for reading.
    Sep 4 12:23 PM | Likes Like |Link to Comment
  • Current Premises And Strategies For Managing Fixed Income Investments [View article]
    Hi Vertical Spread

    The Pimco High Yield Administrative class (PHYAX) is part of the same fund family. The expense ratio is 0.80 versus 0.55. There are actually several other share classes of the Pimco High Yield fund, too; they involve various front or back end loads or fees.

    When choosing a fund, I always try to select no-load offerings that minimize fees.

    In addition, there are a number of ETFs that are good choices for the high yield space.

    PHK is a closed-end fund. The characteristics of a closed-end fund are a bit different than an open ended mutual fund. I recommend reading the prospectus closely.

    Sep 4 12:14 PM | 1 Like Like |Link to Comment
  • Vodafone Expects To Return $84 Billion To Shareholders [View article]
    Good points, Junius. The ADRs are about $31.50 now. The market is saying that the remaining parts of VOD (less VZW) is worth about $14.50.

    Assuming FY 2014 EBITDA is flat versus FY 2013, that's about a 3.5x P/EBITDA multiple. Seems a bit low?

    Five times 2013 EBITDA yields a $37 ADR price pre-distribution.

    I have not run the P/Book valuations versus peers.
    Sep 3 02:07 PM | Likes Like |Link to Comment
  • Vodafone Expects To Return $84 Billion To Shareholders [View article]
    Where do you believe the VOD price will "settle?" If the market is correctly valuing the shares, it means that the post-Verizon VOD shares should come in around $14.50 each.

    If my math is right, ex-Verizon Wireless, the company generated about $20 million EBITDA last fiscal year, or about $0.40 per share (or $4 per ADR).

    What EBITDA multiple suggests a reasonable go-forward valuation? Four times suggests a $16 per ADR, or about $33 before distributions. TI (Italy) and ORAN (France) telecoms also look about 4x.
    Sep 3 11:38 AM | Likes Like |Link to Comment
  • Vodafone Expects To Return $84 Billion To Shareholders [View article]
    I am puzzling a bit as to the depth of the sell-off. I see an approximate $4.85 special dividend and $12.20 in VZ stock heading towards current shareholders.

    I concur with the author what's remaining of VOD post-sale appears viable.

    So why the long faces? Perhaps the trader adage, "Buy on rumor, sell on news?"

    What if you're an investor, not a trader?
    Sep 3 10:31 AM | Likes Like |Link to Comment
  • 5 International Stocks Offering Big Value In Fearful Times [View article]
    Looking back, Chevron shares have been the best Super Major to own. Going forward, the choice isn't as clear. I like the Shell for the yield and five-year strategy. If they execute, they win.

    Exxon is always a great investment, particularly if the ttm P/E falls below 9x. Chevron is well-run but the Ecuador litigation bothers me a bit. BP is work-in-progress. Conoco Phillips is another fine company, but lacks the breadth and span of the other names.

    Total, Petrobras, Statoil, and CNOOC all appear to have flat spots that place them in the second division.
    Sep 1 01:20 PM | 1 Like Like |Link to Comment
  • Vodafone Is Extremely Undervalued [View article]
    Thanks, SP
    Aug 30 02:38 PM | Likes Like |Link to Comment
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