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John Beresford Tipton

John Beresford Tipton
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  • How Overvalued Are High Yield Stocks? We Deploy The PETTR Principle [View article]
    Sounds like your PETTR Principle is the same rule that I've been using; it's the strategy Peter Lynch recommends in "One Up on Wall Street."

    I'm surprised that you accept a PETTR ratio of 1.5, though. To me, that's the point at which a stock is overpriced. In fact, with market prices at dizzy heights (and with interest rate hikes looming in our future), I've been taking profits in everything I own with a ratio over 1.25. That includes PM and MO. (They're great companies, just overpriced, and I'll buy them back when they're cheaper.)

    But I've been buying bargains with a PETTR ratio in the 0.75-0.85 range: IBM, GILD and ARII.
    Aug 19 12:17 PM | Likes Like |Link to Comment
  • Yum, McDonald's ensnared in another China food safety scandal [View news story]
    The Chinese government *tolerates* American companies doing business in China. It does not welcome them, and these recurring scandals are just a reminder of that reality.
    Jul 21 04:53 PM | 3 Likes Like |Link to Comment
  • Update: Lorillard Shareholders May Be Disappointed By Acquisition Price, But Consideration Will Likely Be Final [View article]
    Not only is RAI losing the blu e-cigs, it's also selling off KOOL, Salem and Winston to Imperial Tobacco, and all for just $7 billion. RAI gains the Newport brand, but if the FDA bans menthol flavoring in tobacco (it's already banned every other flavor), then what's RAI really worth?

    I hope the folks at RAI know what they're doing. The market sure doesn't like what it's hearing.
    Jul 15 03:23 PM | 2 Likes Like |Link to Comment
  • The Truth About IBM No One Comes Out To Say [View article]
    Tim, I'm a fan of your work, but this article nearly convinced me to *sell* my small position in IBM.

    I own shares because I think the company is in a transitional period, and will eventually get growing again. (I like Value Line's analysis of the company, which suggests the same conclusion.) The low payout ratio was the clincher for me.

    The buyback strikes me as a gimmick to distract investors from the company's lackluster business performance. It's been a successful gimmick, sure. But that's hardly a good substitute for a strengthening enterprise.

    Perhaps we should be more concerned about what a company's earnings and revenue figures are *before* they're divided by the number of shares outstanding, and how the latest "big number" compares to those of the recent past.
    Jul 4 06:24 PM | 2 Likes Like |Link to Comment
  • Altria: What If You Bought At These Highs? [View article]
    I'm glad you pointed out that MO's profit margin is better than its competitors'. That's an important metric that doesn't get a lot of attention.

    I'm long MO, but won't buy any more at this level. Yes, the long-term yield-on-cost picture looks good and we all love dividends, but I think it's wise to look at total return. History shows that tobacco companies are typically headed for a significant fall when their PE ratios get up around 17-18, as MO's is right now.

    Imagine how much better your yield-on-cost will be, if you hold off and wait for a correction before buying.
    Jun 20 03:53 PM | 1 Like Like |Link to Comment
  • Fallen Dividend Champions: I Still Have No Fear Of A Market Crash: Part 2 [View article]
    Chuck, I admire your confidence, but I'm still a wary investor. It's not a crash that has me concerned (although one could certainly happen), it's the possibility of a sustained bear market.

    The Dow was lower when I graduated from high school (June 1982) than it had been on the day I was born (March 1964).

    Of course, June of '82 was a magnificent time to be buying stocks, but only because the market was so cheap at that point. The market today is anything but cheap, and that plus the ever-wobbly economy keeps me from buying.

    I know, I know: it's a market of stocks, not a stock market. But when the bear arrives, he tends to slash the prices of nearly everything, not just the overpriced companies. So I'm staying over here on the sidelines for now!
    Jun 19 06:53 PM | 6 Likes Like |Link to Comment
  • A Multistage Rocket Model For A Dividend Growth Stock Portfolio [View article]
    I like the way you've differentiated the different flavors of dividend stocks. A lot of SA writers make a point of saying they won't even consider something paying less than 1.5% or 2%, which always seems crazy to me. I like to calculate a projected yield-on-cost figure, looking ten years down the road, and invest accordingly.

    The Cokes and the P&Gs get a lot of love around here, but I sense a dangerous complacency: an unquestioning faith that their next thirty years will be as happily prosperous as the last thirty were. Yet earnings growth has slowed to a crawl, payouts are already over 50%, and dividend increases have been getting skimpier all the time on a percentage basis.

    Personally, for that Stage 2 portion of the portfolio, I've bought companies like Chevron, Raytheon and Mattel instead of the familiar consumer staples stocks. But a long-term investor won't go broke holding any of them.

    Jun 17 04:09 PM | 8 Likes Like |Link to Comment
  • Pepsi Could Plausibly Deliver 9% Annual Dividend Growth [View article]
    I'll never buy shares of this company as long as Indra Nooyi is running it. She shot down the logical suggestion of spinning off the snacks business, and has been squandering resources on a healthy-foods initiative that's left customers cold. The company's share price has been wheezing along since she took over, up just 35% since then while Coke is up 80%.

    Cost-cutting and stock buybacks won't create growth, which is what this sclerotic company needs badly. Someday, when it's got someone behind the wheel who can find the gas pedal, this will be a very compelling stock... but not until then.
    Jun 13 07:17 PM | 2 Likes Like |Link to Comment
  • Heard during McDonald's conference presentation [View news story]
    When you've run out of ideas for growing earnings, you announce buybacks and hope people will take it as good news.

    Have you ever looked at the vast assortment of McBurgers on MCD's crowded menu board, and realized they're basically all cheeseburgers?
    May 28 06:46 PM | 1 Like Like |Link to Comment
  • How To Invest In A Deep Value Investment Opportunity In 3 Easy Steps: Load Caza Oil & Gas, Sit, And Wait [View article]
    I'm surprised the SA editors allowed this article to go out under such a blatantly misleading title.

    If I can't trust your headline, why should I trust your analysis? Thumbs down from me.
    May 15 12:35 PM | 4 Likes Like |Link to Comment
  • Coca-Cola: It's Not All Gloom [View article]
    I'm going to get beat up for this, but here goes.

    Past results are no indication of future returns. In investing, the herd is almost always wrong, and the comments above make it clear that the herd is hopelessly in love with KO.

    KO was probably the greatest company in the world in the 1980s, when Roberto Goizueta was in charge and international markets really opened up. (That was when Buffett was buying.) Profits grew like crazy and the stock soared.

    It's a different story today. Yes, the company owns 500 brands, but the vast majority of them don't move the needle. The United States remains the company's biggest market by far, and 60% of its U.S. revenue comes from soda. Those volumes aren't growing. They're declining: last year, Coca-Cola volume was down half a percent; Diet Coke fell 6.8%. Across the industry, soda volumes have fallen in the U.S. for nine straight years and are accelerating.

    The KO bulls will say no problem, look at the international picture. But soda sales are slowing overseas too, and soda is 75% of the company's global volume.

    It's not 1985 anymore. KO's overall annual volumes are currently rising at just a 1% or 2% annual pace. Earnings growth is now down to the mid-single digits (when it grows at all; earnings dropped 3% last year).

    As usual, the company's payout ratio is over 50% of earnings. If the current (and recent) earnings picture is the new normal, the company's beloved dividend stream can't be as rock-solid as the herd believes.

    I'm not claiming that Coke will go the way of Moxie, but consumer tastes do change, and where KO is concerned, they're not changing for the better.
    Apr 6 07:21 PM | 2 Likes Like |Link to Comment
  • Weight Watchers: Excellent Business At A Fire Sale Price [View article]
    WTW is another case study in why investors should hold their applause for share buybacks.

    Here we have a company that's clearly lost its way: the meeting-fee model doesn't seem to be particularly viable in the digital age, and those revenues are plummeting. And packaged food sales are falling as well... all at a time when the public has never been more receptive to the idea of healthy eating. If the business model wasn't broken, WTW would be making money right now.

    The board ought to be looking at ways to reinvent the company. Instead, its most audacious idea has been to rescue Artal's investment by buying back millions of shares from Artal, using a king's ransom of borrowed money. How does this strengthen the business? How does this get WTW back on its feet? Easy: it doesn't.

    Who wants to invest in a company that's got a hedge fund's fangs buried in its neck? I sure don't.
    Mar 30 08:05 PM | 2 Likes Like |Link to Comment
  • The Financial Crisis Is Over For Wells Fargo Dividend Investors [View article]
    WFC is the king of banks, and the only one I own. The earnings growth is there, the dividend growth is there, and the company has Buffett's full confidence. Four stars.


    I'm a buyback skeptic. I'd rather see the company issue a special dividend than spend the money on buybacks. As the WSJ reported back on March 16:

    "Rising share prices push a higher proportion of older options 'into the money,' in which market value exceeds the strike price. This raises the chance of options being exercised, expanding the share count. Consider Wells Fargo. Over the past three years, it bought back about $11.7 billion of stock. During that time, though, its basic shares outstanding declined by only about 0.2%. And its diluted average shares outstanding increased by nearly 1%."
    Mar 29 07:30 PM | 4 Likes Like |Link to Comment
  • Big Tobacco Dividend Analysis [View article]
    As much as I love the profit power of the tobacco companies, they're all expensive now. Over the past 15 years, their normal PE range for trailing earnings has been around 12-14. With valuations this high (and a bull market looking very long in the tooth), I won't be adding to my positions any time soon.

    "Tobacco stocks don't have to invest heavily into R&D or capital expenditures as tech and oil stocks have to do." ...... That was true until cigarette volumes began declining every single year. Today, the development of new products is essential, and fortunately it's well underway.

    Some have argued that volume declines don't matter: the companies can just raise their prices every year. But that strategy will only go so far. There's a price point at which consumers will either switch from cigarettes to e-cigs, or find a black market, or simply quit smoking. I guess the companies could take a tip from Procter & Gamble and make the cigarettes slightly smaller every year, but that's not a real solution either.

    Nicotine is likely here to stay, but I think many of us will live long enough to see cigarettes go the way of record players, phone booths and Billy Beer.
    Mar 18 08:52 PM | 3 Likes Like |Link to Comment
  • Novo Nordisk - An Opportune Time To Book Profits [View article]
    Novo will face stiffer competition in the future, sure. But that's not to say that the company is bound to lose. Its own R&D is a massive ongoing investment in diabetes treatment, a field in which the company is already the world's leader.

    And even if Novo's share of the market should decline, its revenues and earnings can still grow like a weed. Diabetes is exploding worldwide, including in areas like the Middle East where Novo has yet to expand.
    Mar 14 02:20 PM | 1 Like Like |Link to Comment