By:
On:
In: Around the web
Tagged:
With: 0 Comments

Amazon Inc. [stckqut]AMZN[/stckqut] announced recently that its Prime Now one and two-hour delivery service adds wine and beer to its product offerings available for superfast delivery in Cincinnati and Columbus. The company adds hundreds of alcohol-related products to its inventory from popular name brands such as Chateau Ste. Michelle, Bud Light and Veuve Clicquot as well as local favorites like Great Lakes Brewing Company, Rhinegeist and MadTree Brewing.

“We are excited to continue expanding our product offerings and we know customers will love getting wine and beer delivered right to their door in one hour or less,” said Stephenie Landry, vice president of Prime Now worldwide. “Whether you run out of wine at your dinner party or need more chilled champagne for mimosas at a family brunch, Prime Now can save customers time with superfast delivery so they can skip a trip to the store.”

Customers in Prime Now eligible neighborhoods can use the one and two-hour delivery service to order wine and beer along with tens of thousands of other daily essentials. Customers can enter their ZIP code in the Prime Now app or on primenow.com to see if the service is available or can request to be notified when the service becomes available in their area.

Through Prime Now, Prime members can get free two-hour delivery and one-hour delivery is $7.99. Prime members can download the Prime Now app, available on iOS and Android devices, or visit www.primenow.com to place orders and track the status of their delivery in real time. Learn more about Amazon Prime Now at www.primenow.com.

Source: Amazon – Press Room – Press Release

By:
On:
In: Around the web
Tagged:
With: 0 Comments

More than 3 million people decided it was worth $99 to get that last-minute present delivered from Amazon Prime last week.

Amazon [stckqut]AMZN[/stckqut] announced Sunday that a staggering 3 million people joined the membership service during the third week of December, a major record for the company. More than 200 million items were shipped for free over the holiday season this year, Amazon said in a press release Sunday.

More than 3 million people signed up for Amazon Prime in the third week of December.

Amazon doesn’t say how many Prime members exist, but some have estimated as many as 13 percent of Americans – 41 million people – subscribe to the service. That means Amazon boosted its membership by more 7 percent in just week, something that’s pretty much unheard of for a retailer.

Source: Amazon dominates the holidays: Prime adds 3 million members in a week – Puget Sound Business Journal

By:
On:
In: Commentary
With: 0 Comments

ID-10043050An ADR (American Depositary Receipts) allows US investors to diversify their portfolio with foreign securities. ADRs are bought and sold on American markets just like regular stocks.

The stocks of most foreign companies that trade in the U.S. markets are traded as ADRs. U.S. banks issue these stocks. An ADR is not perfectly aligned with the stock that is traded on a foreign exchange. Each ADR represents one or more shares of foreign stock or a fraction of a share of foreign stock. If you own an ADR, you have the right to obtain the foreign stock it represents, but U.S. investors usually find it more convenient to own the ADR. The price of an ADR corresponds to the price of the foreign stock in its home market, adjusted to the ratio of the ADRs to foreign company shares. An ADR is the actual physical certificate whereas an American Depositary Share (ADS) is the actual share. An ADR can represent any number of ADSs. The term “ADR” is often used to mean both the certificates and the securities themselves.

ADRs are quoted and traded in US dollars in the US securities markets. Also, the dividends, if any, are paid to investors in US dollars. This is an excellent way to buy shares in a foreign company while realizing any dividends and capital gains in U.S. dollars. However, ADRs do not eliminate the currency and economic risks for the underlying shares in another country. For example, dividend payments in euros would be converted to U.S. dollars, net of conversion expenses and foreign taxes and in accordance with the deposit agreement.

ADRs are good for individual investors in the US. They were introduced as a result of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values. For this reason, U.S. banks simply purchase a bulk lot of shares from the company, bundle the shares into groups, and reissues them on an exchange in the US. In return, the foreign company must provide detailed financial information to the sponsor bank.

There are four different types of ADR issues:

  1. Unsponsored
  2. Sponsored Level 1
  3. Sponsored Level 2
  4. Sponsored Level 3

While there are different types of ADRs, the individual investor really will see little difference in Level 2 and 3. Most of the stocks that you will see discussed on this site (and might make my Watch List) are Level 2 and Level 3 ADR issues.

Unsponsored ADR

Unsponsored shares trade on the over-the-counter (OTC) market. These shares are issued in accordance with market demand, and the foreign company has no formal agreement with a depositary bank. Unsponsored ADRs are often issued by more than one bank. Since these stocks are only OTC, it is rare (but not impossible) that there is enough information on them to make my Watch List.

Level 1

This is the most basic type of ADR where foreign companies either don’t qualify or don’t wish to have their ADR listed on an exchange. Level 1 ADRs are found on the over-the-counter market and are an easy and inexpensive way to gauge interest for its securities in North America. Level 1 ADRs also have the loosest requirements from the Securities and Exchange Commission (SEC). The company is not required to issue quarterly or annual reports in compliance with U.S. GAAP. However, the company must have a security listed on one or more stock exchange in a foreign jurisdiction and must publish in English on its website its annual report in the form required by the laws of the country of incorporation, organization or domicile. As with Unsponsored ADR issues, these stocks probably do not have enough information to make my Watch List.

Level 2

This type of ADR is listed on an exchange or quoted on Nasdaq. Level 2 ADRs have slightly more requirements from the SEC, but they also get higher visibility trading volume. This level is more complicated for a foreign company. The company must file a registration statement with the U.S. SEC and is under SEC regulation. In addition, the company is required to file a form that is the basic equivalent of an annual report for a U.S. company. In their filings, the company is required to follow U.S. GAAP standards. These stocks can be listed on NYSE or NASDAQ and must meet the exchanges listing requirements.

Level 3

Is when an issuer floats a public offering of an ADR on a U.S. exchange and is the highest level a foreign company can sponsor. Level 3 ADRs are able to raise capital and gain substantial visibility in the U.S. financial markets. The company is required to adhere to stricter rules that are similar to those followed by U.S. companies. Foreign companies with Level 3 programs will often issue materials that are more informative and are more accommodating to their U.S. shareholders because they rely on them for capital.

In general, you can consider an ADR to be the same as any other stock that is based in the US. Since you should always have some exposure to foreign markets, it may be wise to try to keep 2-4 ADR issues in your stock portfolio. On this site, I try to identify an ADR in parenthesis when I discuss such an offering. You should also consider an international index fund in your portfolio, it should be one of the four funds in your portfolio.

Image courtesy of Salvatore Vuono / FreeDigitalPhotos.net

By:
On:
In: Commentary, Investment tools
With: 0 Comments

johnny_automatic_money_bags

While I don’t typically invest in a company due to its dividends, others do. If you are one of those people, then you need to understand what to look for to make sure you are buying into a decent company. You need to be confident that your investment will be able to maintain or grow its dividend while not driving the company into the ground.

Dividends can (and should) flow from the cash flows derived from earnings, but there are other ways to pay out a dividend. Consider these other options. A company could pay out a dividend by:

 

  1. Draining its cash holdings.
  2. Selling off assets.
  3. Diluting your investment by issuing more shares of stock.
  4. Increasing its risk position by taking on more debt.

The problem here is that all of these options are temporary solutions. You eventually run out of cash and assets. Issuing more shares to pay shareholders can turn into a legal version of a Ponzi scheme. And increasing debt increases bankruptcy risk. Only long-term earnings power can sustainably fuel big dividends.

I have written a series of articles on how to read an annual report in 20 minutes. This is if you are choosing a stock after it has passed all of the standard metrics that I describe in my book, The Confident Investor. If you are buying the stock for another reason, such as for its dividend return, then you need to do more homework.

If you are choosing a stock based on its dividends, there are few things to check in the last 3 annual reports. Luckily, you really do not need to dig into the individual annual reports if you do not want to go through that effort. The information is in those reports, but free websites do most of the heavy lifting. You can find this information on the financial portals of Yahoo and MSN, but for my example I will use Morningstar.  Go to Morningstar.com and search for GE.  GE is the NYSE symbol for General Electric. Most people that own General Electric do so for its dividends and its exposure to the manufacturing sector and the international markets. According to Dividend.com, GE is currently offering a dividend yield of 3.27% and an annual payout of $0.76. This yield is not enough to get rich on, but it currently is beating your bank savings account.

If you go to the quotes page of Morningstar for GE, you can see a quick overview of the company. Scroll down to the Financials section and you can follow along. The first thing I want to look for is not included in the above list. I want to make sure the company is growing its top line revenue over the last 3 years and that it has been profitable for the last 3 years. Note that this would be a different check if you were buying the company as a stock growth company but in this case we are buying it for dividends. We need to make sure the dividends are coming from a solid company and those dividends are not going to be disrupted. In the case of GE, you can see that both situations are true even though Net Income is the lowest it has been in the last 3 years. That drop in income would have been very troublesome if we were evaluating the Confident Investor Rating that I describe in my book. In the case of a dividend investment, it has maintained enough profit for us to feel confident in the continued profitability.

Now let’s jump over to the Financials tab and select the Cash Flow sub tab (immediately below the tabs are sub tabs). Scroll all the way to the bottom and we see that the Operating Cash Flow and Free Cash Flow are decreasing. This is a problem.  We need this number to be increasing or at least steady to trust a dividend payout.

The next item is assets. Stay on the Financials tab, but go to the Balance Sheet sub tab. Look at the Net Property, Plant and Equipment line (it should be bold). This isn’t too bad. Over the last 5 years, it has gone up and down. The worst move was about 10%, but lately it has even increased a bit. This is a sign that the company is continuing to invest in its infrastructure and at least isn’t selling it off to satisfy its dividend needs.

To check the number of shares outstanding, we can jump to the Key Ratios tab. Halfway down the Financials section is Shares. Here, we can see that the number of shares outstanding is essentially the same YOY for the last 3 years. This is fine.

For the last check, stay on the Key Ratios tab and look at the Key Ratios section. On the sub-tab Financial Health, you will see Total Liabilities. In this case, the liabilities are decreasing slightly. This means the company isn’t taking on debt to pay your dividend.

Overall, General Electric is a fairly safe dividend investment. While I don’t typically invest in a company due to its dividends, others do. If you are one of those people, then you need to understand what to look for to make sure you are buying into a decent company. You need to be confident that your investment will be able to maintain or grow its dividend while not driving the company into the ground.

The reality is that General Electric is not likely to decrease the dividend even though it has a few warning signs. Cutting a dividend almost always results in a drop in share price. Since executives and board members are usually paid with stock or receive bonuses based on stock price, they don’t want that price to drop. They will do unnatural acts if needed to maintain the stock price. This is the problem with focusing only on dividends for an investment. That addiction to the dividend can cause companies to make really bad decisions in the hopes that investors will not run from an ailing company. However, there is no free lunch for dividend owners. If you want to trust your dividend and hope that it can grow, choose companies that are extremely well run.

Do you have any questions about this? I would spend more time on this in a book, but hopefully this article gives you a few things to consider. Let me know below in the comments or send me a tweet at @ConfidentInvest.

Image is sourced from OpenClickart.com

[stckqut]GOOGL[/stckqut]

By:
On:
In: Good company, Stock analysis
Tagged:
With: 0 Comments

 

Company name Micron Technology, Inc.
Stock ticker MU
Live stock price [stckqut]MU[/stckqut]
P/E compared to competitors Fair

 

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Fair
EPS growth Good
P/E growth Good
EBITDA growth Good
Price growth Good
R&D growth Good
Income growth Good
Assets growth Good
Return on Assets growth Good
Market Capitalization Growth Good
Income / Rev growth Good
TWCA Plus Good
Standard TWCA Good
Weighted ann. stock price increase Good

 

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $75.81
Target stock price (averages with growth) $141.77
Target stock price (averages with no growth) $82.41
Target stock price (manual assumptions) $79.33

 

The following company description is from StockRow: https://stockrow.com/MU

Micron Technology, Inc. manufactures and sells memory and storage solutions worldwide. The company operates through four segments: Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit. It offers memory and storage technologies, including DRAM, NAND, NOR Flash, and 3D XPoint memory under the Micron, Crucial, and Ballistix brands, as well as private labels. The company provides memory products for the cloud server, enterprise, client, graphics, and networking markets; memory products for smartphone and other mobile-device markets; SSDs and component-level solutions for the enterprise and cloud, client, and consumer storage markets; other discrete storage products in component and wafer forms for the removable storage markets, as well as 3D XPoint memory products; and memory and storage products for the automotive, industrial, and consumer markets. It markets its products through its internal sales force, independent sales representatives, distributors, and e-tailers; and Web-based customer direct sales channel, as well as through channel and distribution partners primarily to original equipment manufacturers and retailers. The company has strategic collaboration with BMW Group. Micron Technology, Inc. was founded in 1978 and is headquartered in Boise, Idaho.

Confident Investor comments: At this price and at this time, I think that a Confident Investor can confidently invest in Micron Technology, Inc. as long as the indicators that I describe in my book The Confident Investor are favorable.

 

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor. You can review the best companies that I have found (and I probably invest my own money in most of these companies) in my Watch List.

How was this analysis of Micron Technology, Inc. calculated?

For owners of my book, “The Confident Investor” I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.
[s2If current_user_can(access_s2member_level1)]

In order to assist you in using the techniques of this book, the values that I used when calculating the Manual pricing above were:

  • Stock price at the time of the calculation: $49.15
  • Growth: 0.188866666666667
  • Current EPS (TTM): $2.46650075
  • P/E: 21.8109982560344
  • Future EPS Calc: $5.85
  • Future Stock Price Calc: $127.76
  • Target stock price: $79.33

[/s2If]
I hope that this makes you a Confident Investor.