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Ray Merola  

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  • 2014 Strategies And Stocks, Part 8: Energy Transfer Equity [View article]
    Hi Philip

    I figured the P/CF this way:

    From the ETE 2013 10-K, page F-8, "Energy Transfer Equity and Subsidiaries Consolidated Statements of Cash Flows," I picked off net cash by operating activities $2.419 billion.

    There are about 560 million common units outstanding. This is post the 2-for-1 split.

    Dividing OCF by units outstanding equates to cash flow of $4.32 per unit.

    At the time of writing, ETE unit price was about $44 each; so doing the math I ended up with P/CF of about 10x.

    It appears the gap is that I used reported net operating cash from the 10-K versus the ETE "Distributable Cash Flow" from the earning release statement. I chose OCF since it's a standard 10-K calculation. Since most companies don't compute DCF, it's a tougher comp when trying to review apples-to-apples with other corporations.

    Excellent question.
    Mar 4, 2014. 12:02 PM | 2 Likes Like |Link to Comment
  • Intel: The Best-Case Scenario [View article]
    Nice article, Bill

    Thank you for the balanced approach.
    Mar 3, 2014. 08:47 AM | Likes Like |Link to Comment
  • Thoughts On Buffett's Annual Letter [View article]

    I have read much of your work with great respect and interest. However, I did a double-take when I see that it appears you have questioned whether or not individuals investor can generate meaningful alpha by buying stocks on the secondary market:

    "Buffett likes to say that you should focus on individual firms by viewing these purchases as though you're buying into a business and not just a stock certificate. That's great, except for the fact that the secondary markets are so saturated with people doing the same thing that you're highly unlikely to be able to uncover that value better than the army of high frequency computers and PhD mathematicians that now sit on trading desks in search of the same thing."

    There are always undervalued stocks; or shares that for whatever reason have become dislocated with respect to the underlying corporate fundamentals.

    If I'm understanding your point of view, the argument sounds like a proponent of the "efficient market theory," whereas any given stock is priced for perfection as all available information is baked into the shares. Absolutely untrue, in my book. Stocks are priced improperly all the time due to human emotions: euphoria, despair, and other animal spirits.
    It's a market of stocks, not a stock market.

    Mr. Buffett himself has mused something along the lines, "If markets were efficient, I'd be a bum on the corner with a tin cup."

    Indeed, I see a great deal of difference between "investing," and "trading." Traders of all ilks: whether swing traders, day traders, or computerized HFTs, rarely care about disconnects between a stock certificate price and the actual businesses these represent.

    Through careful screening and research, those of us who do can often uncover great businesses "on sale."

    This is not to say that individual investors cannot find success in the primary stock market. Nor that individual traders should expect to find alpha if engaging upon the same quick-turn trading game played by so many institutions, computers, and mathematicians.

    In the former case, buying new issues on the primary market can most certainly result in big money; the latter approach, IMHO, is a fool's errand.
    Mar 2, 2014. 09:31 AM | 6 Likes Like |Link to Comment
  • So What Are My Vodafone Shares Worth? [View article]

    I like AT&T here. Unless one subscribes to a fundamental shift in that company's fortune, the shares look to be at low ebb. As the yield approaches 6 percent I think buyers will step up.

    While wireline revenues are going down, U-Verse and data use is going up.

    A long-term issue for all major carriers is alternative wi-fi apps that circumvent things like international calls, texting, etc. I'm watching that closely.

    Likewise, I'm in a slow accumulation mode on T shares; primarily through cash-secured puts.
    Mar 1, 2014. 11:27 AM | Likes Like |Link to Comment
  • So What Are My Vodafone Shares Worth? [View article]

    Recommend reviewing carefully the most recent company earnings releases and shareholder communications. Vodafone management has laid out some concrete growth plans. Investors may agree or disagree with them.

    The EU has been mired in a years-old recession. It appears a trough has been reached. VOD has extensive interests in emerging markets like Turkey, India, South Africa, etc. It is expected that these countries may fuel future growth.

    You will also find that management is re-investing billions into the company via "Project Spring."

    Telcos tend to be slow growers by nature. Vodafone, primarily through EMs, has some opportunities to perhaps crack that mold.
    Feb 28, 2014. 04:14 PM | 1 Like Like |Link to Comment
  • 2014 Strategies And Stocks, Part 7: Apple Inc. [View article]
    Thank you for a comprehensive comment and analysis. I encourage readers to think about and digest everything stated. The news wires have indicated something's abuzz at Apple and perhaps we will all find out soon.

    I agree that Cook has been fidgeting about a new product(s) for several quarters now; good or bad I think he's telegraphed something new is coming.
    Feb 27, 2014. 09:37 AM | 1 Like Like |Link to Comment
  • So What Are My Vodafone Shares Worth? [View article]
    Agree, Ckent323

    I have retained a stub of VOD just to stay in the game in case T makes a move. I have been accumulating T shares slowly. If the dividend yield gets to 6%, I'll finish off a full position.

    I like VZ, but I like the T discount more. VZ paid a lot for VZW; I'm not sure it will translate into instant gains. There's a lot of debt involved and I don't see a great deal of synergies. Verizon effectively ran the operation before and they still do now.
    Feb 27, 2014. 12:52 AM | Likes Like |Link to Comment
  • So What Are My Vodafone Shares Worth? [View article]
    Thank you, Ckent
    Feb 27, 2014. 12:49 AM | Likes Like |Link to Comment
  • So What Are My Vodafone Shares Worth? [View article]
    Thank you for the clarification/reinforc... Ckent323

    Indeed, large Telecom stocks traditionally don't generate much excitement, nor build up capital gains quickly.

    Vodafone is an exception. Good for us shareholders!

    Feb 27, 2014. 12:48 AM | Likes Like |Link to Comment
  • So What Are My Vodafone Shares Worth? [View article]

    I suspect M* is using split-adjusted figures. I recommend double-checking what they are reporting to you.

    VOD ADRs have not been near $40 in years.
    Feb 27, 2014. 12:46 AM | Likes Like |Link to Comment
  • So What Are My Vodafone Shares Worth? [View article]
    Thank you for sharing your final tally.

    Check out the value of your VOD shares in August of last year versus today.

    Verizon announced the completion of a definitive agreement with Vodafone on September 2, 2013. The stock closed at $29.46 on August 28, and $32.07 the day after the announcement. The day before the transaction closed, the ADR shares finished at $39.00.

    Management did a fine job of engineering the creation of shareholder value.
    Feb 26, 2014. 01:31 PM | Likes Like |Link to Comment
  • 2014 Strategies And Stocks, Part 7: Apple Inc. [View article]
    Thank for your input, inside man 55. I hope your analysis of the situation reflects an "inside" view of what the future portends. Certainly a breakthrough product changes the calculus. My thesis is that I'm ok with AAPL as-is; and "the next big thing" would be a bonus.
    Feb 26, 2014. 10:44 AM | 1 Like Like |Link to Comment
  • Stocks For 2014: Are Dividend Paying Cyclical Stocks Acceptable Investments For Retirement Portfolios? - Part 6 [View article]
    Spot on Chuck! Thanks for another fine article.

    Investing in cyclicals can be tricky for the reasons you've cited above. However, the rewards can be likewise as great. Over the years, I've found the toughest part about investing in these companies is to "zig" when the market "zags." Listening to TV pundits and analysts often steers the retail investor in precisely the wrong direction.

    My strategy behind investing in a stock like Caterpillar is to buy when the stock is hated / undervalued, and then be patient and wait. Indeed, since the company has dramatically increased the dividend, it makes "waiting" even easier. I've written about CAT several times in this S.A. space.

    Finally, the FAST graphs help provide perspective. This is difficult to do with a pencil and paper; and it takes a lot of time. When viewing the chart, it become immediately apparent that the price line "reverts to the mean" PE line. It may take a few years, but the pattern is sound. Perhaps yet another case whereas "investing" in the form of a Buffett or Graham may provide better returns than attempting to "swing trade" stocks.

    Caterpillar is one of my core holdings. Over the years, I overweight or underweight it a bit; or hedge its volatility with options now and then, thereby picking up extra income. However, I believe CAT as with most stocks, are better owned than rented.

    Very long CAT.
    Feb 26, 2014. 10:37 AM | 3 Likes Like |Link to Comment
  • 3 Strategies And Aligned Stock Picks For Your 2014 Portfolio: Part 1 [View article]

    I have owned Nucor shares since 2008. It's one of my two favorite Materials sectors stocks. International Paper is the other.

    As a S.A. contributor, I don't "disclose" my personal stock sales. I share my views with readers, and divesting a stock or reducing a position may be part of that thinking.

    I do disclose if I own a stock or not. I am sure you noticed that I write almost exclusively about securities I own.

    Thank you for taking the time to read my work. Good luck with all your 2014 investments.
    Feb 26, 2014. 10:06 AM | Likes Like |Link to Comment
  • So What Are My Vodafone Shares Worth? [View article]

    According to the shareholder transaction publication (Section X is specifically a discussion about U.S. shareholders consequences), it appears that the cash and VZ shares are most likely to be considered similar to a qualified dividend.

    Recommend asking your broker for a copy of this document; and following web site information / updates.
    Feb 25, 2014. 09:27 PM | Likes Like |Link to Comment