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jstratt

jstratt
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  • A Few Reasons Why IBM Can Recover From A Flat Performance [View article]
    Thanks to the author!

    I agree with the conclusion but differ on the calculation. First I will ask a question Is IBM growing Revenue?

    Most will immediately answer no that its revenue is falling. I would answer that revenue per share is $93.63 vs $79.85 in 2011 for an increase of 17% over 2.5 years or about 6.8% annually.

    Now another queston. What valuation should one give to a company with large FCF that has been growing revenue per share 6.8% over the past 2 years and earnings at 11.37% over the past 5 years, and projects 8.7% earnings growth over the next 5 years?

    Last year IBM had $24.9 billion of finance company debt so the current business debt of IBM today is less than $10 billion or to put it different likely less than the annual cash flow.

    The biggest negative on IBM is the Sys and Technology (Hdwe) division. This division only drives 13.5% of the revenue or 9.2% of the Gross Profit. Yet this division is shaping the view of IBM in a very negative manner and I think IBM should deal with it rather than let it slowly disintegrate.

    My conclusions regarding IBM are

    1) I believe IBM will meet the $20 2015 non GAAP EPS goal
    2) I believe IBM is using debt wisely to raise shareholder equity
    3) IBM is an insanely profitable cash flow generator
    4) I do worry about the CEO capability

    When all is said and done IBM stock 18 months from now should be valued above $240 per share for a 17.5% annualized return and with dividend a 20%+ return.
    Aug 25 06:31 PM | Likes Like |Link to Comment
  • How Johnson & Johnson Is Helping Me With My Coca Cola Investment [View article]
    I would suggest the author is using a torturous logic to justify buying KO.

    How about acknowledging that you dont want to take much risk and you feel comfortable that KO can use its large cash flow to grow earnings by at least the 5% projection of analysts and get a 2.9% dividend as well. Perhaps you would recognize that preserving principal is more important than extra return.

    That at least would be logical.
    Aug 25 01:13 PM | 3 Likes Like |Link to Comment
  • Transocean's 8% Yield Can't Even Help A Tough Offshore Drilling Complex [View article]
    I continue to watch RIG and I am looking for an entry point. My comment is to the authors statement

    "I will admit, this may have been the worst trade I've ever made, but at this point I'm committed to it."

    That is a dangerous statement given the history of the Oil industry. I am not predicting a crash but history tells us they can be brutal and last much longer than one would expect.

    Just remember people dont drill for Oil or need rigs in an Oil glut.

    I remain hopeful that I can invest in RIG for great returns. For that to happen I need to see an end to the drop.
    Aug 25 08:16 AM | 2 Likes Like |Link to Comment
  • What If The Fed Has Created A Bubble? [View article]
    Of course the Fed has floated assets on lower rates. So has every major economy in the world. If they hadnt we would have had massive deflation like in the Great Depression.

    Will stocks and bonds go down? I would say yes but it may be in a few years or tomorrow. I have always believed that one needs to stay invested. Getting too conservative and selling out of investments may be as dangerous as over investing.

    If you keep your mental state out of a depression things will work out.
    Aug 24 10:37 PM | Likes Like |Link to Comment
  • Why Hewlett-Packard Stock Is Still A Good Investment Opportunity [View article]
    Enjoyed the excellent article!

    I will just add some thoughts on why I am holding HPQ.

    HPQ is undervalued and the huge cash flow signified best by the EV/EBITDA of 5.6 will force the stock higher. In the quarterly call HPQ indicated it will buy $2.5 bil in shares in this quarter amounting to just under 4%. In the short term the value from HPQ will come from a forward PE rising to 11, share buybacks and investor realization that HPQ is not going to collapse. On that last point HPQ has rapidly improved and cash nearly equals LT debt.

    Longer term leave some room for the thought that HPQ could transition into a company with revenue growth. I dont mean a one quarter positive during a PC refresh cycle but a consistent longer term top line growth. That is far enough away that I wouldnt invest on that basis. Still I see the seeds being planted.

    The best view of HPQ value is to convert everything to a per share basis. Revenue, Cash Flow, Earnings and even Cash and LT Debt. It will help investors understand better what is happening when encountering mixed information.
    Aug 24 11:32 AM | Likes Like |Link to Comment
  • IBM's Problems May Be Fatal [View article]
    Interesting article!

    The author is correct that IBM is throwing their balance sheet at meeting the $20 2015 non GAAP EPS goal. Even though that is another thing IBM leaders have denied. They dont often let truth get in the way of their story.

    Still IBM can buy huge quantities of shares and likely will meet that $20 on a non GAAP basis. If you look at results the biggest part of the company is what I will call non hardware. That is a very stable high cash flow business of software, service and financing.

    The hardware business is fracturing and IBM would do well to just sell it rather than let it fracture into pieces and then have to offer $2 bill cash along with the Chip business just to get someone to take it. Fracture off another piece to Lenovo etc. They appear to be driving hardware into the ground and getting nothing for it.

    The IBM investor is taking a risk betting on poor management but IBM can support the debt they have taken on and will likely meet $20 EPS and a share price above $220.

    Betting against a cash flow machine at less than 10x forward earnings is a bad bet and IBM is a cash flow machine!
    Aug 23 04:48 PM | 1 Like Like |Link to Comment
  • An Analysis Of Amgen [View article]
    DoctoRX

    I would be interested in an article on Biotech in general. I hold several with the largest position in GILD.

    On one hand it seems the quantity and quality of new medicines is phenomenal. Yet each day it seems practically every biocompany rises. It seems like biocrap.com would triple in a year.

    Currently I hold AMGN, BIIB, GILD, CELG. I am willing to buy some smaller players but havent gotten enough education to commit to those.

    Enjoy your articles!
    Aug 23 02:16 AM | Likes Like |Link to Comment
  • General Electric And Synchrony Financial After The IPO [View article]
    I will add some thoughts on GE and SYF.

    - GE is up and now is only down 4% ytd.
    - Still I think GE is finally turning a corner with revenue now rising
    - SYF should be teed up to hit a HR

    I must remind myself this is GE and they have the ability to snatch defeat from the jaws of victory.

    PS GE's recent rise has more to do with the drop in 10 year Treasury rates
    Aug 22 04:51 PM | 17 Likes Like |Link to Comment
  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    I admire Shiller but never thought the CAPE was valid. When at the lows in Mar 2009 CAPE still indicated stocks were to high as an example. My guess is the assumptions built into it have less validity over time.

    Also as a predictor CAPE would predict the company that hasnt grown earnings in 10 years and I am not interested in that.
    Aug 22 12:56 PM | 2 Likes Like |Link to Comment
  • Coca-Cola: Buy For Yield, Stay For Growth [View article]
    I am glad that KO is up in the month I also own some. I also know that most people reading this are only interested in hearing someone profess unconditional love for KO.

    According to investing.com KO is up 0.00% YTD, 7.24% 1 yr return and 19.64% 3 year return.

    KO is a good company but it should not be blasphemy to suggest that other alternatives exist.
    Aug 22 12:33 PM | 1 Like Like |Link to Comment
  • An Analysis Of Amgen [View article]
    In 1989 my father a conservative dividend investor saw AMGN drop to a reasonable PE and decided he wanted to own 1 stock that had the potential to really grow.

    He died about a year later and my Mom hated stocks. I was able to keep 50% of the position by selling all of her shares the day after a split. Sneaky I know! My Mom has since passed and those shares split up between my siblings and I. Today they stand up with a return of 15,046% for anyone who kept them.

    What I learned is that no matter what, some part of my portfolio has to have an opportunity to grow. That lesson has returned more than the AMGN.
    Aug 22 12:12 PM | 8 Likes Like |Link to Comment
  • Coca-Cola: Buy For Yield, Stay For Growth [View article]
    I just want to add that I own some KO.

    What my comment was trying to point out is that investors would benefit by looking forward when making an investment and not just backward.

    KO has guided analysts to a 5%+ expected 5 year return, add in the dividend and a conservative investor can have a good return.

    At the same time an investor should weigh alternatives and as an example DIS at a 23.25 PE and has grown EPS by 19%+ annually over the past 5 years and projects a 16%+ next 5 year growth.
    Aug 22 08:26 AM | 4 Likes Like |Link to Comment
  • Coca-Cola: Buy For Yield, Stay For Growth [View article]
    Here is my problem with investing in KO!

    KO has had a decrease in revenue and Zero growth in EPS this year. They project a 6.7% growth rate next year but why is next year going to be different? So the PE on a trailing basis is 22.13 and forward PE is 18.67.

    Now look at JNJ with a 19.93 trailing PE and 16.46 forward PE. JNJ is delivering strong revenue growth of 9% and strong earnings growth of 12.9%. Over the next 5 years perhaps a 4% revenue increase and 8-10% EPS.

    That is why JNJ in the past 2 years is up 52%, S&P is up 40% and KO is up 5%. If I were to guess KO might be up 5% in the next year and JNJ 10% in the next year. Further if a challenging market appeared I would have trouble seeing KO above an 18 PE based on flat results.

    ... and that magic historical dividend growth, doesnt that come from increasing earnings?
    Aug 21 04:11 PM | 6 Likes Like |Link to Comment
  • AT&T: Beware The Upcoming Price War [View article]
    Thanks for an interesting article!

    I would state that there are no Total Return investors left in T.

    Over the past 3 years T has paid a 3% dividend and a 2%+ return of capital.

    T is able to stiff arm TMobile and S so I am not worried about the same competition that has been there all along. The 10PE is reasonable meaning it is not overvalued but with many cross currents earnings are potentially volatile.
    Aug 21 03:15 PM | 3 Likes Like |Link to Comment
  • Verizon: How Would Higher Dividend Growth Impact Financials And Valuation? [View article]
    I am long VZ because it is at a very low PE of 11 and is actually growing and paying the 4.3% dividend out of earnings rather than T which is probably a 3% dividend and 2.2% return of capital.

    Then VZ has the best wireless network and the best fiber network to support growth. Longer term the internet of things suggests that more people will use more devices for more time helping VZ grow.

    In short VZ is a rare bargain. Now about that dividend. I would suggest that VZ grow its cash position over the next couple years to be able to service and support the $108 billion in long term debt. They do not have the cash needed at present and while I dont see an economic downturn should one occur it would be more difficult.

    So first order of business in my mind is accumulate $10 billion in additional cash/liquidity. The investment in the business never stops either with $17 billion that will be needed in the next year and possibly more for spectrum purchases.
    Aug 21 01:59 PM | Likes Like |Link to Comment
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