Saturday, April 1, 2017

Buy Facebook Inc (FB) Stock and Don’t Look Back

The world's biggest social network looks to boost ad revenue even more

Facebook Inc (NASDAQ:FB) is up nearly 25% in 2017. And the crazy thing is, that isn’t surprising. For a company with 1.86 billion monthly users that continues to log a compounded annual growth rate (CAGR) around 17% even at these levels, it’s hard to know what can slow it down.

For a long time, its one Achilles’ Heel was its ad revenue. When you see that at least 90% of FB’s revenue is derived from advertising it’s a pretty scary concept. The company with a $410 billion market cap and a price-earnings ratio of 40 only has one source of income.
But don’t worry. It’s not the first company to rely on one revenue source for its success. Clorox Co (NYSE:CLX) only sold bleach for most of the 20th Century and remains a great company today.
While these are two wildly different markets, the one commonality is the fact that both companies’ leadership knows how to adapt and grow as economic cycles come and go. A company like CLX that has been doing it for over a century and FB hasn’t logged that kind of history, but the fact is, both were the only game in town for quite a while.
Yes, there were challengers, but branding was key and the name became synonymous with quality and performance. These days, FB continues to expand that advertising base with new, innovative ideas. One of the most recent ones is testing ads in the “Related Articles” section of “Instant Articles.” It has also bumped up advertising to every 250 words from every 350 words.
These moves may seem trivial, and they should for a company with such a massive base of users. But the implications are significant for that very reason — it means billions of more ads seen every month.
It also shows that the people at 1 Hacker Way understand the advantages to its fast-growing ad revenue as well as its risks. If you go too heavy-handed with ads, users will stop using the service as regularly. This subtle move will give FB a good measure of how it can best expand ad revenue without harming its reputation or using more aggressive personalized advertising.

Bottom Line on FB Stock

The big daddy of online ad revenue remains Alphabet Inc’s (NASDAQ: GOOG) Google division. And even there, Facebook is looking to gain some ground with its recent addition of Facebook Video that is trying to get at some of GOOG’s YouTube lunch.
But the thing I like most about FB right now isn’t the fact that it’s looking ahead and staying competitive in a very dynamic and dog-eat-dog space, it’s that Mark Zuckerberg & Co. is executing, quarter after quarter.
User growth is up across its product lines. And most important, average revenue per user continues to rise. That means it’s finding new ways to get users to say “yes” to advertisers. This number gives FB pricing power with advertisers, which will help grow revenue as well as margins.

Dividend Smackdown: IBM Stock vs. MSFT Stock

We look at dividend yield, income growth and prospects for big tech juggernauts IBM and MSFT

Ring the bell because it’s that time again. We’re putting two iconic dividend payers in the ring for an old-school dividend smackdown. The fighters: Two old-school tech giants, Microsoft Corporation (NASDAQ:MSFT) and International Business Machines Corp. (NYSE:IBM).

At first this might seem like a bout between two washed up has-beens. Both of these companies are ancient by tech company standards, and neither gets the headlines they used to. Yet longevity in the tech space is something to take seriously. If you’re able to survive decades in an industry known for rapid upheaval, you’re clearly doing something right.
Yet no fighter’s streak lasts forever. Even Mike Tyson eventually got knocked out, by underdog Buster Douglas. And in our match today, one company is well into a bona fide comeback, whereas the other is at risk of getting knocked out … permanently.
So with that, let’s go ringside in this battle between IBM stock and MSFT stock starting with the current dividend yield.

Dividend Yield

In a world where the S&P 500 yields just 1.9%, both Microsoft and IBM have to be considered relatively high-yield stocks. Microsoft stock sports a dividend yield of 2.4% and IBM 3.2%. So, in a head-to-head match up, IBM is clearly the higher yielder.
Furthermore, at first glance, IBM’s dividend would appear to be more sustainable. IBM stock is only paying out 44% of current earnings per share, whereas MSFT is payout out a much higher 69%.
So, in round one of this dividend smackdown, we have a clear winner: Big Blue.
Dividend Yield Winner: IBM

Dividend Growth

For round two, let’s take a look at dividend growth. After all, the current dividend yield only gets you so far, as a dividend stock without a growing dividend is essentially just a riskier version of a bond. A good dividend stock should have both a respectable current yield and a dividend growth rate well in excess of inflation.
Well, both of our fighters qualify here. Microsoft has raised its dividend for 13 consecutive years, and IBM has raised its dividend for 17.
Over the past 10 years, both stocks have been aggressive dividend raisers, but one has clearly taken the lead. Microsoft has raised its payout by a cumulative 300%, which would crush nearly any competitor other than IBM. Big Blue has managed to raise its dividend a cumulative 400%.
Over the past five years, MSFT stock has the edge, beating out IBM stock by a cumulative 125% to 87%. But in round two, I’m going to have to give the edge to IBM.
Dividend Growth Winner: IBM

Future Prospects

Thus far, it has been a lopsided contest, with IBM taking the first two rounds. So is the match over? Or is Microsoft about to mount a comeback worthy of Rocky Balboa?
Let’s take a look.

3 Blue-Chip Technology Stocks That Will Break Through the Ceiling

Nothing will stop these technology stocks anytime soon

U.S. equities are trading mixed on Friday on light volume, with the Dow Jones Industrial Average stalling in the doldrums between its 20-day and 50-day moving averages.
Source: Shutterstock
The Federal Reserve remains in focus, with the PCE inflation rate topping 2% for the first time in almost five years, increasing the odds of an aggressive pace of rate hikes through the end of the year.
And the political headwinds remained focused on the gridlock in Washington threatening to stall any tax reform efforts.
But after a relatively subdued March, by many measures, stocks have worked off some of the speculative excess seen at the end of February. As a result, a number of stocks in key leading sector groups like industries, financials and technology are pushing higher.
Here are three big technology stocks on the move:

Thursday, May 28, 2015

Wednesday’s Hot Stocks in the News: Broadcom Corp. (NASDAQ:BRCM), Comcast Corporation (NASDAQ:CMCSA), JetBlue Airways Corporation (NASDAQ:JBLU), Gilead Sciences (NASDAQ:GILD)

On Wednesday, Shares of Broadcom Corp. (NASDAQ:BRCM), surged 21.45% to $57.15, hitting its highest level.
Today, Avago Technologies Limited (AVGO) and Broadcom Corporation (BRCM) declared that they have reached a definitive agreement under which Avago will acquire Broadcom in a cash and stock transaction that values the combined company at $77 billion in enterprise value. Upon completion of the acquisition, the combined company will have the most diversified communications platform in the semiconductor industry, with combined annual revenues of about $15 billion.
Following completion of the transaction, Mr. Tan, President and Chief Executive Officer of Avago, will continue to serve as President and Chief Executive Officer of the combined company, which will adopt the name Broadcom Limited. Dr. Samueli will join the board of the combined company as will another director from Broadcom. In addition, Dr. Samueli will be designated Chief Technology Officer of the combined company. Dr. Nicholas will serve in a planned advisory role within the combined company, reporting to Mr. Tan.
Under the terms of the definitive agreement, Avago will acquire Broadcom for $17 billion in cash consideration and the economic equivalent of about 140 million Avago ordinary shares, valued at $20 billion as of May 27, 2015, resulting in Broadcom shareholders owning about 32% of the combined company. Based on Avago’s closing share price as of May 27, 2015, the implied value of the total transaction consideration for Broadcom is $37 billion.
Broadcom Corporation provides semiconductor solutions for wired and wireless communications. Its products offer voice, video, data, and multimedia connectivity in the home, office, and mobile environments. The company operates in two segments: Broadband and Connectivity, and Infrastructure and Networking.

Shares of Comcast Corporation (NASDAQ:CMCSA), inclined 1.28% to $59.34, during its last trading session.
Comcast Chairman and CEO Brian L. Roberts issued the following statement this morning regarding the Charter/Time Warner Cable/Bright House transactions:
“This deal makes all the sense in the world. I would like to congratulate all the parties.”
Comcast Corporation operates as a media and technology company worldwide. It operates through Cable Communications, Cable Networks, Broadcast Television, Filmed Entertainment, and Theme Parks segments.

At the end of Wednesday’s trade, Shares of Gilead Sciences Inc. (NASDAQ:GILD), gained 2.45% to $112.46.
Gilead Sciences, declared that its corporate presentation will be webcast from the Bernstein 31st Annual Planned Decisions Conference in New York.
John F. Milligan, PhD, Gilead’s President and Chief Operating Officer, will provide an overview of the company at the conference on Thursday, May 28 at 8:00 a.m. Eastern Time.
Gilead Sciences, Inc., a biopharmaceutical company, discovers, develops, and commercializes medicines in areas of unmet medical nee in North America, South America, Europe, and the Asia-Pacific.

Finally, JetBlue Airways Corporation (NASDAQ:JBLU), ended its last trade with 3.20% gain, and closed at $20.18.
Today, JetBlue Airways Corporation launched service to its latest destination, Nevada’s Reno-Tahoe International Airport (RNO), with nonstop service from John F. Kennedy International Airport (JFK).
To celebrate Reno-Tahoe joining JetBlue’s network, the airline’s Reno-Tahoe partners recently launched a sweepstakes (a) for one lucky person to win a free trip for two to the city, counting flights on JetBlue, a five-night stay at the Peppermill Resort Spa Casino and Silver Legacy Resort and Casino, and a ride with Soaring Nevada Glider Rides.
In addition to new access to New York City, customers will also have connecting opportunities via JetBlue’s JFK Terminal 5 to several destinations along the East Coast in addition to America’s largest network of Caribbean destinations. Reno-Tahoe marks JetBlue’s 89th destination.
JetBlue Airways Corporation, a passenger carrier company, provides air transportation services. As of December 31, 2014, the company operated a fleet of 13 Airbus A321 aircrafts, 130 Airbus A320 aircrafts, and 60 EMBRAER 190 aircrafts. It also served 87 destinations in 27 states in the United States (the U.S.), the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and 17 countries in the Caribbean and Latin America.

Wednesday, May 27, 2015

Tuesday's Earnings Guidance

  Positive Guidance
TiVo Guides Above Estimates
Tuesday, May 26, 2015  4:04:07 PM ET  
View:   Complete Article | Historical Guidance

TiVo Inc. (TIVO) said it expects second quarter service and technology revenue of $94.0 million to $97.0 million. The current consensus revenue estimate is $93.6 million for the quarter ending July 31, 2015. Sees Revenue Above Estimates
Tuesday, May 26, 2015  4:21:19 AM ET  
View:   Complete Article | Historical Guidance Inc. (WUBA) said it expects second quarter revenue of $145.0 million to $150.0 million. The current consensus revenue estimate is $122.0 million for the quarter ending June 30, 2015.

  Inline Guidance
Anthem Reaffirms
Tuesday, May 26, 2015  4:30:00 PM ET  
View:   Complete Article | Historical Guidance

Anthem, Inc. (ANTM) said it continues to expect 2015 earnings to be greater than $9.90 per share. The current consensus earnings estimate is $10.05 per share for the year ending December 31, 2015.

Workday Guides In-line
Tuesday, May 26, 2015  4:02:12 PM ET  
View:   Complete Article | Historical Guidance

Workday, Inc. (WDAY) said it expects second quarter revenue of $270.0 million to $274.0 million. The current consensus revenue estimate is $272.4 million for the quarter ending July 31, 2015.

21Vianet Sees Second Quarter Revenue Below Estimates but Reaffirms for the Year
Tuesday, May 26, 2015  4:01:05 PM ET  
View:   Complete Article | Historical Guidance

21Vianet Group, Inc. (VNET) said it expects second quarter revenue of ¥886.0 million to ¥922.0 million. The current consensus revenue estimate is ¥959.8 million for the quarter ending June 30, 2015. The company also said it continues to expect 2015 revenue of ¥3.91 billion to ¥4.11 billion. The current consensus estimate is revenue of ¥4.00 billion for the year ending December 31, 2015.

Nimble Storage Guides In-line
Tuesday, May 26, 2015  4:01:00 PM ET  
View:   Complete Article | Historical Guidance

Nimble Storage Inc. (NMBL) said it expects a second quarter non-GAAP loss of $0.12 to $0.11 per share on revenue of $77.0 million to $79.0 million. The current consensus estimate is a loss of $0.12 per share on revenue of $77.1 million for the quarter ending July 31, 2015.

Tuniu Guides In-line
Tuesday, May 26, 2015  4:25:13 AM ET  
View:   Complete Article | Historical Guidance

Tuniu Corporation (TOUR) said it expects second quarter revenue of $220.9 million to $231.1 million. The current consensus revenue estimate is $225.1 million for the quarter ending June 30, 2015.

  Negative Guidance
Zhaopin Guides Below Estimates
Tuesday, May 26, 2015  5:55:00 PM ET  
View:   Complete Article | Historical Guidance

Zhaopin Limited (ZPIN) said it expects fourth quarter revenue of ¥320.0 million to ¥330.0 million. The current consensus revenue estimate is ¥334.6 million for the quarter ending June 30, 2015.

Tuesday, May 26, 2015

Chasing Hot Gold Stocks: IAMGOLD Corp (USA) (NYSE:IAG), Yamana Gold Inc. (USA) (NYSE:AUY), Kinross Gold Corporation (USA) (NYSE:KGC)

Gold prices fell slightly on Monday, as the dollar gained traction against major currency rivals, on signs the Federal Reserve is preparing to tighten monetary policy for the first time in six years in 2015.
Fed Chair Janet Yellen indicated on Friday that the US central bank was poised to raise rates this year, with the world’s biggest economy set to bounce back from an early-2015 slump.
Higher US interest rates increases the opportunity cost of holding non-yielding bullion. Liquidity was thin with British and US markets shut for holidays.
“The Fed raising the rates is certainly not electrifying news for the precious metal, which is on track to extend its biggest weekly decline since April,” AvaTrade chief market analyst Naeem Aslam said.
IAMGOLD Corp (USA) (NYSE:IAG) share price increased in the last trading session with a previous 52-week high of $4.27. The stock was trading on above-average volume. The stock traded at a volume of 3.42 million shares at a price decline of -1.38%. The share price is now down -10.08% for the past three months. Latest closing price was 1.12% above its 50-day moving average and -17.02% below its 200-day moving average.
While trading at volume lower than average, Yamana Gold Inc. (USA) (NYSE:AUY) plunged -1.31% at the end of recent close. Its previous 52-week high was $8.92 and moved down -57.62% over the same period, trading at a volume of 4.02 million. Shares have fallen -3.82% over the trailing 6 months. The stock is currently trading -1.88% below its SMA 50 and -22.24% below its SMA 200.
Kinross Gold Corporation (USA) (NYSE:KGC) closed at $2.41, down -1.23% from previous close and at a distance of -1.26% from 20-day simple moving average. Over the last 12 months, a return on equity of -22.00 percent was realized due to the financial situation and earnings per share reached a value of $-1.26.

Hot Stocks: The Coca-Cola Company (NYSE:KO), Infinity Pharmaceuticals, Inc. (NASDAQ:INFI), Snyder’s-Lance, Inc. (NASDAQ:LNCE), World Acceptance Corp. (NASDAQ:WRLD), Summit Hotel Properties, Inc. (NYSE:INN)

The Coca-Cola Company (NYSE:KO) belongs to Consumer Goods sector. Its net profit margin is 15.30% and weekly performance is -0.75%. On last trading day company shares ended up $41.21. The Coca-Cola Company (NYSE:KO) distance from 50-day simple moving average (SMA50) is 1.13%. Thirsty race fans rejoice! The Coca-Cola Company (NYSE:KO) has extended their long-term partnership with Speedway Motorsports, Inc. through 2020, ensuring that race fans across the country can continue to cheer on their favorite Coca-Cola Racing Family drivers at premier motorsports facilities with ice cold, delicious Coca-Cola refreshment.
Infinity Pharmaceuticals, Inc. (NASDAQ:INFI) shares moved down -0.16% in last trading session and ended the day at $12.85. INFI return on assets is -63.10%. Infinity Pharmaceuticals, Inc. (NASDAQ:INFI) quarterly performance is -16.67%. Infinity Pharmaceuticals, Inc. (NASDAQ:INFI) announced the upcoming poster presentations of new clinical, translational and preclinical data with duvelisib (IPI-145), an oral, dual inhibitor of phosphoinositide-3-kinase (PI3K)-delta and PI3K-gamma at the 2015 American Society of Clinical Oncology (ASCO) Annual Meeting, taking place May 29-June 2 in Chicago, Il. Duvelisib is the only dual inhibitor of PI3K-delta,gamma in Phase 3 clinical development and is in registration-focused studies in patients with indolent non-Hodgkin lymphoma (iNHL) and chronic lymphocytic leukemia (CLL). Infinity and AbbVie are jointly developing duvelisib in oncology.
On 22 May, Snyder’s-Lance, Inc. (NASDAQ:LNCE) shares moved down -0.96% and was closed at $29.87. LNCE EPS growth in last 5 year was -4.90%. Snyder’s-Lance, Inc. (NASDAQ:LNCE) year to date (YTD) performance is -1.19%. Snyder’s-Lance, Inc. (NASDAQ:LNCE) begin trading ex-dividend on May 19, 2015. A cash dividend payment of $0.16 per share is scheduled to be paid on May 29, 2015.
World Acceptance Corp. (NASDAQ:WRLD) ended the last trading day at $84.22. Company weekly volatility is calculated as 3.15% and price to cash ratio as 20.96. World Acceptance Corp. (NASDAQ:WRLD) showed a weekly performance of -0.92%. On May 16 World Acceptance Corporation (NASDAQ:WRLD) announced it has postponed its planned private offering of $250 million in senior notes, which it had previously announced on May 8, 2015.
Summit Hotel Properties, Inc. (NYSE:INN) shares moved down -0.59% in last trading session and ended the day at $13.55. INN Gross Margin is 35.80% and its return on assets is 0.80%. Summit Hotel Properties, Inc. (NYSE:INN) quarterly performance is 1.49%. Zacks upgraded shares of Summit Hotel Properties (NYSE:INN) from a hold rating to a buy rating in a report released on Thursday. The firm currently has $15.00 price target on the stock.

Why These Stocks Hot? Gilead Sciences Inc. (NASDAQ:GILD), Johnson & Johnson (NYSE:JNJ), Weyerhaeuser Co. (NYSE:WY), The Kroger Co. (NYSE:KR)

A U.S. group is trying to block patents in five countries for Gilead Sciences Inc’s costly hepatitis C drug Sovaldi, in a bid to give almost 60 million afflicted people access to cheaper generic versions, according to Reuters.
In Argentina, Brazil, China, Russia and Ukraine, challenges have been filed against Gilead’s patents or patent applications, the New York-based Initiative for Medicines, Access & Knowledge, or I-MAK, said on Wednesday. In all the countries except China, the group is working with local activist groups.
I-MAK said more than 59 million people in those countries have hepatitis C. Reuters Reports.
Gilead Sciences, Inc., a biopharmaceutical company, discovers, develops, and commercializes medicines in areas of unmet medical nee in North America, South America, Europe, and the Asia-Pacific. The company’s products comprise Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost, and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread, and Hepsera products for the treatment of liver disease.
Shares of Johnson & Johnson (NYSE:JNJ), declined -1.04% to $101.35, during its last trading session.
On April 29, Johnson & Johnson declared receipt of a further action from the United States Patent and Trademark Office (PTO) regarding the reexamination of U.S. Patent No. 6,284,471 (‘471) regarding REMICADE® (infliximab) in which the PTO maintained its rejection of the patent. Based on the receipt of today’s action, the company’s partner, Janssen Biotech, Inc., will have until June 12 to file a notice of appeal to the PTO’s Patent Trial and Appeal Board and plans to do so.
Presently the ‘471 patent expires in September 2018. Patent ‘471 remains a valid and enforceable patent as it undergoes reexamination at the PTO. Janssen Biotech will continue to defend its intellectual property rights, and if necessary, will pursue all accessible appeals.
Johnson & Johnson, together with its auxiliaries, researches and develops, manufactures, and sells various products in the health care field worldwide. It operates in three segments: Consumer, Pharmaceutical, and Medical Devices.
At the end of Friday’s trade, Shares of Weyerhaeuser Co. (NYSE:WY), gained 0.46% to $32.73.
Weyerhaeuser, declared that its board of directors declared a dividend of $0.29 per share on the Common Stock of the company, payable in cash on June 19, 2015, to holders of record of such common shares at the close of business on June 5, 2015. Additionally, the company’s board of directors has declared a dividend of $0.7969 per share on the company’s 6.375% Mandatory Convertible Preference Shares, Series A, which will be payable in cash on July 1, 2015, to holders of record of such mandatory convertible preference shares at the close of business on June 15, 2015.
Weyerhaeuser Co. is a real estate investment trust. It primarily invests in United States. The firm operates under four business segments, timberlands, wood products, cellulose fibers and real estate. It owns timberlands primarily in the U.S and has long-term licenses in Canada.
Finally, The Kroger Co. (NYSE:KR), ended its last trade with 0.50% gain, and closed at $74.42.
The Kroger, declared a robust program involving events and customer engagement that will honor these heroes all summer.
More than two million Americans serve on active duty or in the reserves recently, counting many Kroger family of stores associates. Kroger has partnered with the USO through “Honoring Our Heroes,” a multi-faceted program designed to show Kroger’s deep gratitude to our active duty troops and our nation’s 23 million veterans.
Kroger’s customers and associates have enthusiastically supported the endeavor: Together, Kroger’s annual campaign has raised more than $11.9 million since 2010 to support USO programs, which represents the largest cumulative gift to the USO in its nearly 75 year history.
The Kroger Co., together with its auxiliaries, operates as a retailer in the United States and internationally. It also manufactures and processes food for sale in its supermarkets. The company operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores.

Two Hot Stocks To Watch List: NetApp, Inc. (NASDAQ:NTAP), Sarepta Therapeutics, Inc. (NASDAQ:SRPT)

On Friday, Shares of NetApp, Inc. (NASDAQ:NTAP), gained 4.31% to $33.14.
NetApp, declared that Tim Russell, VP, Product Administration, will take part in a fireside chat at the D. A. Davidson Conference at 11:30 a.m. Eastern Time on May 27, 2015.
NetApp, Inc. is engaged in design, manufacture, and marketing of networked storage solutions. The company provides storage and data administration software, systems, and services. It offers Data ONTAP storage operating system that delivers integrated data protection, comprehensive data administration, and built-in efficiency software for virtualized, shared infrastructures, cloud computing, and mixed workload business applications; storage efficiency technologies.
Finally, Sarepta Therapeutics, Inc. (NASDAQ:SRPT), ended its last trade with 8.08% gain, and closed at $26.22.
On May 12, Sarepta Therapeutics, declared equity awards granted on May 11, 2015, that were formerly approved by the Compensation Committee of its Board of Directors under Sarepta’s 2014 Employment Commencement Incentive Plan, as a material inducement to the employment of two individuals hired by Sarepta in May 2015. The equity awards were approved in accordance with NASDAQ Listing Rule 5635(c)(4).
The employees received, in the aggregate, options to purchase 117,000 shares of Sarepta’s common stock. The options have an exercise price of $15.04 per share, which is equal to the closing price of Sarepta’s common stock on May 11, 2015. One-fourth of the shares underlying each employee’s option will vest on the one year anniversary of his or her date of hire and thereafter 1/48th of the shares underlying each employee’s option will vest monthly, such that the shares underlying the option granted to each employee will be fully vested on the fourth anniversary of his or her date of hire, in each case, subject to each such employee’s continued employment with Sarepta on such vesting dates.
Sarepta Therapeutics, Inc., a biopharmaceutical company, focuses on the discovery and development of RNA-based therapeutics for the treatment of rare, infectious, and other diseases. Its lead product candidate is Eteplirsen, an antisense phosphorodiamidate morpholino oligomer therapeutic, which is in Phase III clinical development stage for the treatment of individuals with Duchenne muscular dystrophy (DMD), a rare genetic muscle-wasting disease caused by the absence of dystrophin.

6 Stocks to Avoid This Grilling Season

I hope you had an enjoyable Memorial Day holiday. It’s now (unofficially) summer!
If you’re like me, you spent some time grilling with friends and family this weekend. Indeed, all across the country, people were chowing down on burgers, sausages, and chicken (maybe even a few vegetables).
And since barbecue season is now upon us, it’s worth asking: Are the companies providing our summer fare a “Buy” right now?

Purveyors of Fine Food and Drink

The food and beverage industries offer a number of dividend-paying stocks, including the six below, which are some of the biggest names in the business.
First is Tyson Foods (TSN), the world’s second-largest processor and marketer of chicken, beef, and pork. Its brands include Tyson (of course), as well as Hillshire Farm, Jimmy Dean, Ball Park, and Sara Lee.
Next is Hormel Foods (HRL), famous for introducing Spam. Hormel owns its namesake brand in addition to Black Label, Lloyd’s, Saag’s, and Wholly Guacamole. It also owns a few other popular but less barbecue-related brands like Skippy and Chi-Chi’s.
Kraft Foods Group (KRFT) – which recently merged with Heinz – is virtually inescapable at any barbecue. Among its brands, Kraft counts A1 steak sauce, Country Time Lemonade, Cracker Barrel cheese, Kraft Mayo, JET-PUFFED Marshmallows, Kool-Aid, Oscar Mayer meats, and Heinz condiments.
Now, in my opinion, a good barbecue isn’t complete without a few beers. And when it comes to beer, there’s no company quite likeAnheuser-Busch InBev (ABI.BR). This massive conglomerate owns everything from Budweiser to Stella Artois to Corona. It also owns Beck’s, Leffe, and Hoegaarden. And it even owns craft breweries like Goose Island and Elysian.
SABMiller (SAB.L) is the world’s second-largest beer company, though its $58-billion market cap is just one-third of Anheuser-Busch’s. SAB owns Miller, Coors, Blue Moon, Grolsch, Foster’s, Keystone, and Leinenkugel’s, among many, many others.
Finally, there’s Heineken (HEIA.AS), the Dutch brewery that also owns Amstel, Sol, Murphy’s, and many other brands across the globe. With a $46-billion market cap, Heineken is the world’s third-largest beer company.

Big Valuations, Small Dividends

Let’s start by looking at the current valuation of these companies compared to their median 10-year average:
Not-So-Hot Dogs
As a group, these stocks are trading at a significant premium right now. In fact, only Tyson and AB-InBev are trading at even somewhat justifiable valuations. The rest are prohibitively expensive. Thus, we’ll narrow our focus to hot dogs, sausages, and beer.
Next, let’s take a look at the dividends paid by Tyson and ABI. The latter yields a pretty respectable 2.7% and, with a dividend payout ratio of 68.5%, it’s well below our 80% threshold. Unfortunately, Tyson’s indicated yield is a meager 0.9% – better than nothing, but not what we’re looking for as income investors.
That leaves us with just one out of six companies, Anheuser-Busch. And it does have a lot going for it. Total revenue has grown for six consecutive years, including by more than 8% in 2014. It has a decent yield, and the dividend has grown substantially since 2009, when it was cut by 90%.
However, the company is still expensive relative to its 10-year median – and perhaps most importantly, the U.S. market is facing increasing pressure from craft beer sales.
Consider this: By the end of 2014, craft beer sales were responsible for 11% of the total market in the United States. That’s up from just 2.6% in 1998, an incredible rise.
The trend isn’t slowing, either. Last year, craft beer dollar sales grew 22%, faster than in any previous year. Once a niche market, craft beer is now a $20-billion-a-year industry. So, while ABI does pay a decent dividend, it’s on the wrong end of a growing market trend. Plus, the stock isn’t exactly cheap right now.
Bottom line: Go ahead and enjoy some sausages, hot dogs, and beer this summer – but don’t bother with these major food and beverage stocks.

Sunday, May 24, 2015

Correction Imminent: Buy This Classic Commodity

Gold Correction Imminent: Buy This Classic Commodity
I’ve never been known to be a gold bug. But even I can see that, in this climate, it makes sense to buy a bit of gold, or even build on your position.
You see, all signs are pointing to a market correction.
And while gold has lost some of its luster in terms of serving the role of a safe haven, it’s still an asset class that investors can turn to during market upheavals.
In fact, gold has actually been performing fairly well over the last few weeks, holding above $1,200 per ounce as concerns in the markets grow. And those worries will only get stronger in the weeks ahead…
Getting Stronger by the Day: Price of Gold Over the Last 30 Days
So, what is the nature of this unsteady market we’re all in?

Big Crowd in a Small Room

Well, for one, there are fears of an illiquid bond market.
Fixed-income markets are jittery over headlines warning investors about a looming liquidity shortage in corporate bonds and the credit markets in general.
Should a liquidity dearth materialize to any measurable degree, the stakes will be high for traditional asset managers who are buying up new issues, many of whom are jaded, as they recognize a liquidity shortage, but have yet to feel its effects.
New bond issues have also been rising at a rapid rate.
The current $7.8-trillion corporate bond market is 65% larger than it was in 2008, according to the TABB Group. At the same time, the amount of liquidity that dealers can provide to secondary market makers in U.S. investment-grade and high-yield bonds is approximately 21% lower.
The capacity to absorb investor selling has shrunk significantly, too. Dealers have reduced the number of counterparties that they transact with, and many buy-side firms are holding similar corporate bonds in a classic, crowded-trade scenario.
Sure, there are a number of new e-trading bond platforms and liquidity pools, but those platforms will likely be consolidated as it becomes more difficult to survive.
Furthermore, the U.S. bond markets continue to sell off as yields climb.
This Tuesday, the yield on the benchmark 10-year Treasury note rose to a year-to-date high of 2.303%. Meanwhile, the long, 30-year bond yield was also up five basis points at around 3.07%. Yields, however, pared some losses on Wednesday after the Fed minutes indicated no rush to raise rates.
So, will a rate hike trigger massive selling in a crowded room full of bonds exiting through a very narrow door?

Potential for Correction

Currently there’s a huge disconnect in the stock market.
You see, over the last number of weeks, U.S. equity funds have shown massive outflows, while the stock market has continued to climb to record highs.
According to Bank of America (BAC), U.S. equity funds have suffered $100 billion in outflows in 2015, tumbling to levels not seen since January 2008. More fund managers are trimming their equity holdings to be underweight as confidence in corporate profits dwindles.
It begs the question, if money is flowing out of U.S. equities, then where is it going? And furthermore, who is propping up the stock market?
The first answer is European, Shanghai, and Japanese equities. Money is pouring into these equities because the marketplace sees a greater return there due to ongoing government stimulus on both sides of the continent.
Secondly, support of U.S. equity indices appears to be coming from large asset managers – like pension funds, sovereign wealth funds, and central banks – whose portfolio managers don’t concern themselves with weekly data and other market “noise.”
It’s likely that the allocation models of these asset managers will dictate that a hefty percent of their portfolios should stay in U.S. equities because market indicators, while not great, are still okay. Plus, there’s very little yield available in fixed income.
To add fuel to this market disconnect, a sharp drop in U.S. consumer confidence in early May underscored a lackluster economic picture for the United States. This drop was highly unexpected by the markets, predicting a reading of 96.
The actual number was 88.6.
Truly, it seems the equity market disconnect, along with softening consumer confidence, looks to be a big red flag. This means our prized 18,000 Dow Jones level may break yet again on the downside.

Rate Hike Spotted Through Clouds

U.S. interest rates have remained at rock bottom, and have been exacerbated by foreign buyers who have been suppressing the yield curve.
But, by now, we all know that tightening is somewhere in Janet Yellen’s cards, even though the actual date remains a big mystery.
One thing is likely, though – when it happens, it’ll probably be only 25 basis points. Still, this will cause market volatility, despite its already being priced into the markets.
Lastly, Tuesday’s news of a surge in housing starts to a seven-year high was yet another sign of a potential tightening by the Fed.
So what should you own if bond holders run for the fire door, the stock market sees a major correction, and the Fed’s tightening finally come about?
Gold, at least for the near term, makes a lot of sense.
Published Fri, May 22, 2015  |  Commodity Strategist