Seeking Alpha
View as an RSS Feed

Tim McAleenan Jr.  

View Tim McAleenan Jr.'s Comments BY TICKER:
Latest  |  Highest rated
  • GE weighs exiting Connecticut HQ [View news story]
    I don't know enough about the Ex-Im Bank to have an opinion on that.

    But I wonder what it says about the future of Corporate America that the measuring period of "What have you done for me lately?" keeps getting shorter and shorter.

    There are these colliding pressure points in America. Large budget deficits mean that higher taxes or reduced spending will eventually be in the offing (I suppose booming growth and inflation that reduces the value of accrued debts is a third option).

    And yet, corporations like General Electric demonstrate that higher taxes will not be tolerated by the companies with the greatest power, and this could create a perpetual shift towards jumping ship anytime a better seductress flaunting tax breaks and ideological sympathy whispers in the Board's ears.

    There was a time when the growth of a local company was an immense source of regional pride. It provided continuity to communities, and even became a source of identity for some. This trend towards dating, rather than marrying, adds an ephemeral element to the relationship between working men and the largest economic engines that provide fruit from their labor.

    In a grander scale, higher federal taxation will simply accelerate the rush of American companies to leave the US. That would further reduce our influence, and despite America's problems, I'd rather have American executives be the conscience of the world than their peers in Russia or China. Perhaps we will one day see whether my preference is warranted.

    When you play musical chairs over every unfavorable development in local regulation or tax policy, you end up playing musical chairs with the lives of working men. It gives off a very "Et tu, Brute?" vibe.
    Sep 11, 2015. 02:49 PM | 6 Likes Like |Link to Comment
  • 5 Depressed Stocks To DRIP Into - For Free [View article]
    If you do that, you wreck the business model of the transfer agents that make DRIPs possible.

    "This is why we can't have nice things."
    Sep 8, 2015. 03:55 PM | Likes Like |Link to Comment
  • Halcón Resources Sets Precedent For Debt Restructurings In The U.S. Oil And Gas Sector [View article]
    Good article, fairly ridiculous disclaimer.
    Aug 31, 2015. 06:23 PM | 2 Likes Like |Link to Comment
  • Chevron Through The Lens Of Peter Lynch [View article]
    Thank you!
    Aug 31, 2015. 11:42 AM | 2 Likes Like |Link to Comment
  • Tiffany: The Only Specialty Retailer You Can Hold For Life [View article]
    Varan, part of my argument is that Tiffany is a bit on the cheap side right now.

    Last night, I was studying how different long-term results can quickly change if a stock suddenly becomes cheap. In particular, I had Exxon on my mind.

    If you bought $1000 of Exxon in 1970, and then held through the summer of 2014, you would have compounded at 14.8% and ended up with $450,000.

    If, instead, you had held through today, your returns would be down to 13.8% and a $350,000 end point. Even over a ridiculously long-term period like 45 years, you still lose a point of compounding in response to market fluctuations.

    $100,000. Gone. Solely on account of one year's fluctuation. I wonder if a similar element is at play with Tiffany?

    If Tiffany were trading at $105 per share or something like that right now, the results might be more impressive. My preference for Tiffany over the Fidelity Fund is that Tiffany seems to have the business model to deliver 10% earnings growth or better for the long term, and I expect that would eventually translate to greater end wealth at some point in time.

    When a stock becomes undervalued, its long-term performance metrics can become unimpressive compared to benchmarks that don't share the undervaluation.

    I guess I would ask you to consider how undervaluation can skew your offered comparison, if you don't think it does, then the Fidelity Fund could make sense. I still don't think anyone is going to regret owning Tiffany for the next 10+ years. But you raise a fair point.
    Aug 29, 2015. 04:15 PM | 1 Like Like |Link to Comment
  • Procter & Gamble cut CEO's bonus after missed targets [View news story]
    Lots of errors here.

    P&G should set its bonus target at 7% for core EPS, not 5%. This trend towards low hurdles for bonus money is not in the interest of shareholders.

    Secondly, no bonus should be received for failure to reach the goals. It's fine if the bonus is scaled so that bigger bonuses accompany bigger beats, but failure to meet goals should not result in any bonus whatsoever.

    What catches my attention is that the target was 5% and Lafley delivered -2%. That is a substantial earnings miss. In what world is it fair to impair the business and miss the goal by seven percentage points and still receive a $3.3 million bonus in addition to base salary? What must a P&G executive do to not receive a bonus--punch the largest shareholder in the face and then spill hot coffee on his lap?

    People are surprisingly mature when talking compensation. Everyone seems to understand that the CEO is going to make significantly more than the janitor. But resentment arises when management teams create asymmetrical reward systems. When P&G lays off employees because it needs to grow profits, it destroys employee morale to see executives receive bonuses for periods that covered this underperforming timeframe that triggered layoffs.

    My two other issues:

    Compensation shouldn't be based on one-year results as that encourages financial engineering at the expense of long-term investment with lucrative but remote payoffs. I'd rather see three, five, and ten year earnings targets tied to bonuses (although I do understand Lafley came back under unique circumstances that wouldn't make sense for ten year earnings measurements).

    And secondly, if you want to get truly nuanced and philosophical, earnings growth may not be the best basis for awarding bonuses. There are many things that matter which do not directly show up in the numbers. It is theoretically possible to deliver no growth while executing a strategy that strengthens the brand and improves the moat, just as it is theoretically possible to deliver strong earnings growth while destroying the company (many on SA argue that IBM is Exhibit A of the latter).

    P&G remains a lifelong hold. It will be fine. It will get through this. However, any thriving over the long term will be the result of customer affection for the great brands built under the P&G umbrella during the past two, three, four, and five generations. At this time, there is no indication that current management has strengthened the brands or executed a strategy that delivers on growth. Shame on the stewards of this American icon.
    Aug 29, 2015. 12:35 AM | 26 Likes Like |Link to Comment
  • Learning From The Masters: Q&A Session With Richard Berger, Part I [View article]
    I disagree with the line: "...but if you never sell it because you don't know when it has gotten far above its value and your money can find better value to invest in, then you will never win. You cannot make a profit if you never sell."

    If you buy a truly exceptional company, and hold on to it for decades, you can find yourself drowning in so much dividend income that fair valuation metrics and concerns about "not making a profit if you never sell" fall by the wayside.

    If you bought 100 shares of Coca-Cola stock forty-five years ago, you would be collecting $800 in dividend income per day. You'd be getting your initial investment back in dividend income alone every ten days.

    If you identify a company with great prospects for long-term growth, and it gives you some manifestation of that growth through dividend payments, you can "win" and "make a profit" by collecting more dividend income than your initial investment amount.

    It is winning. It is hitting grand slams. It is collecting so much dividend income that you don't even have to worry about making a quick buck through capital gains. The price of admission is patience and proper due diligence with the company you select.

    Richard adds: "The real secret to successful investing is to know when it is time to leave the party." I prefer to attend parties that never end. And collecting checks every 90 days is how the party goes on and on.
    Aug 26, 2015. 01:17 PM | 13 Likes Like |Link to Comment
  • Ten Things I Would Have Done If I Were A Seasoned Expert [View article]
    All very reasonable courses of action.

    Nothing wrong with buying Chevron in increments on the way down. You'd go nuts if you looked at the lowest price a stock reaches and then compared that to your purchase price.

    Identify fair value, and then buy in increments on the way down as circumstances allow. You still get good returns, and you also get to maintain your sanity. Win win.
    Aug 25, 2015. 02:19 PM | 6 Likes Like |Link to Comment
  • Visa weighs heavy on the Dow [View news story]
    Bought some at a little over $62, and now I'm going about my day.

    Fifteen years from now, this decision will have worked out fine.
    Aug 24, 2015. 10:44 AM | 2 Likes Like |Link to Comment
  • P&G Is Overvalued Because It's A Dividend Aristocrat [View article]
    I would argue Procter & Gamble is fairly valued in light of its ability to pump out $10+ billion in net profits during disastrous economic conditions.
    Aug 13, 2015. 03:52 PM | 10 Likes Like |Link to Comment
  • Berkshire Hathaway nears $30B deal for Precision Castparts [View news story]
    No need for name calling, Snoopy.

    Berkshire violates anti-trust regulations all the time.

    See this WSJ report:

    Perhaps it is Berkshire that doesn't understand anti-trust laws.
    Aug 9, 2015. 06:44 PM | 3 Likes Like |Link to Comment
  • Berkshire Hathaway nears $30B deal for Precision Castparts [View news story]
    My criticism is not that it is a large successful conglomerate.

    Rather, it is that Berkshire exerts too much influence in certain industries.

    It owns huge ownership positions American Express, Wells Fargo, U.S. Bancorp, Moody’s, Munich Re, GEICO, Bank of America, Goldman Sachs, and huge insurance divisions. That's too much control of the financial sector.

    It controls too much influence in the food sector, giving loans to Mars-Wrigley, owning Dairy Queen, funding Burger King and Tim Hortons, the whole Kraft-Heinz ownership position, and runs McLane which gets foodstuffs to KFC, Taco Bell, Pizza Hut, and Long John Silvers.

    And plus, it owns over 2% of Wal-Mart while selling billions of dollars of goods at Wal-Mart through the Coca-Cola investment, Duracell battery, and almost $20 billion in additional sales that occur at Wal-Mart.

    If the government did not permit AT&T to buy T-Mobile for $39 billion, why does Buffett get to control such extensive influence in the financial, retail, and food industry? It seems to me that the halo effect of his career gives him less scrutiny than other players regarding anti-trust matters, and I argue that this violates equality under the law.
    Aug 9, 2015. 05:44 PM | 8 Likes Like |Link to Comment
  • Berkshire Hathaway nears $30B deal for Precision Castparts [View news story]
    How have regulators not broken up Berkshire yet? The amount of political power being wielded from Omaha should not be allowed to exist.
    Aug 9, 2015. 03:21 PM | 6 Likes Like |Link to Comment
  • Adding CVX To My Portfolio [View article]
    It looks like you're doing some old-fashioned value investing. Well done.
    Jun 28, 2015. 01:13 PM | 7 Likes Like |Link to Comment
  • The Dividend Payout Ratio Is The Holy Grail Of Dividend Growth Investing [View article]
    Very intuitive, but Geraldine Weiss and Janet Lowe (along with myself) disagree with you.

    One of the central arguments from the book "Dividends Don't Lie" is that companies with unusually high dividend payout ratiso are likely cheap and trading in that value quintile that leads to S&P 500 beating returns.

    An example used by Jeremy Siegel recently is that people look at Philip Morris International and assume that the company is struggling because the dividend payout ratio is high. But when established companies have high payout ratios, there is often something going on that understates the numbers. In the case of Philip Morris International, the profits are understated because every piece of profit is earned overseas and is diminished upon getting translated back to U.S. dollars.

    Almost everything I am buying this year (BP, Chevron, Philip Morris International) has an unusually high dividend yield and payout ratio. This is because the profits are understated so the payout ratio doesn't really mean what people think it means. A lot of these companies seem expensive on a P/E basis but are cheap once you dig into the numbers and realize why the number spitted out may not mean what you think it does.*

    *=Other times, payout ratios indicate exactly what you suggest. The low payout ratio at Visa probably will correspond to great dividend growth and total returns, whereas the high payout ratio at Procter & Gamble does indicate some troubles within the company that may take a bit to work itself out.
    Jun 23, 2015. 02:25 PM | 9 Likes Like |Link to Comment