Author Archives: Scalper1

Duke Energy Spearheads A Portfolio That Is Beating The Market

Summary This week I added shares of Duke, Robert Half, and Eaton Vance to the portfolio. During the week I added additional shares of Skyworks and Seagate to the portfolio. The portfolio is up 10.11% versus the S&P 500 which has dropped 0.91%. Earlier this year I decided that I wanted a portfolio which mimicked the S&P 500 without owning an index fund to do it. From the inception of the portfolio I have always maintained twelve stocks. This portfolio is up 10.11% so far compared to the 0.91% drop in the S&P 500. The portfolio is up right now because of the significant outperformance of Priceline (NASDAQ: PCLN ), Eaton Vance (NYSE: EV ), Robert Half (NYSE: RHI ), Duke (NYSE: DUK ), Altria (NYSE: MO ), and Seagate (NASDAQ: STX ). The intention of this portfolio is for long-term investments (minimum of three months), not trades. I evaluate the portfolio quarterly after earnings season and I only make changeouts if the fundamentals have changed in a company. I try to hold two stocks in each of the following categories: value, dividend growth, growth, and growth & income; and four speculative names. I also try to have at least one stock in each sector. The portfolio was yielding 1.93% prior to this week’s purchases which have now increased the yield to 2.77%. Just the other day I decided to add to my positions in Skyworks (NASDAQ: SWKS ), and Seagate while initiating my positions in Robert Half, Eaton Vance, and Duke. I’d like to give a quick synopsis each of the stocks right now and provide an update for the entire portfolio. Please keep in mind that I do individual homework on these stocks through articles here on SA and you can look up the tickers with their corresponding articles, but you should always do your own homework too. Duke Duke operates as an energy company. The Company operates in three business segments; Regulated Utilities, International Energy and Commercial Power. The stock appears to be fairly valued on next year’s earnings estimates and expensive on earnings expectations growth rates. The company pays a great dividend and has decent financial efficiency ratios for a utility company. I believe that Duke is has been slammed of late but offers a great opportunity with interest rates rising. The stock offers great value to anyone below $77. Skyworks Skyworks Solutions together with its consolidated subsidiaries is an innovator of high reliability analog and mixed signal semiconductors. The stock appears to be inexpensively valued on next year’s earnings estimates and on earnings expectations growth rates while having great earnings growth expectations for the near-and the long-term. The company pays a small dividend but has excellent returns on assets and investment. I believe the stock offers great value as long as it remains below the $90 level. Seagate Seagate Technology is a provider of electronic data storage solutions. Its products are hard disk drives, hard drives or HDDs. It also produces range of electronic data storage products including SSHD, SSD, PCIe cards and SATA controllers. The stock appears to be inexpensively valued on next year’s earnings estimates and fairly valued on earnings expectations growth rates while having great earnings growth expectations for the near-term. The company pays a huge dividend but has great returns on equity and investment. I bought the stock because I strongly believe that it continues to offer value as long as it is below $50. Robert Half Robert Half International provides specialized staffing and risk consulting services through various divisions. The Company operates in North America, South America, Europe, Asia and Australia. The stock appears to be fairly valued on next year’s earnings estimates and on earnings expectations growth rates while having great earnings growth expectations for the near-and the long-term. The company pays a small dividend and has great financial efficiency ratios. The stock has been declining for quite some time but nonetheless, I love Robert Half right now and believe it offers tremendous value as long as the shares remain below $54. Eaton Vance Eaton Vance along with its subsidiaries is engaged in managing investment funds & providing investment management and advisory services to high-net-worth individuals and institutions in the United States, Europe and other international markets. The stock appears to be inexpensively valued on next year’s earnings estimates and expensive on earnings expectations growth rates while having great earnings growth expectations for the near-term. The company pays a good dividend and has a great return on equity. I believe that Eaton Vance is depressed and offers great value to anyone below $37. Now it’s time for an update on the entire portfolio from inception. Company Ticker % Change incl. DIV % of Portfolio Eaton Vance Corp 4.68% 7.44% The Priceline Group Inc. 4.62% 7.23% Biogen Inc. (NASDAQ: BIIB ) 4.40% 13.47% Robert Half International Inc. 3.50% 7.49% Duke Energy Corporation 2.38% 6.59% Gilead Sciences Inc. (NASDAQ: GILD ) 2.17% 8.67% Altria Group Inc. 1.66% 6.39% Seagate Technology Public Limited Company 1.57% 16.05% Alphabet Inc. (NASDAQ: GOOG ) 0.90% 4.76% The Sherwin-Williams Company (NYSE: SHW ) -2.47% 5.71% Skyworks Solutions Inc. -2.60% 10.86% The Boeing Company (NYSE: BA ) -3.03% 5.32% Cash $ 0.00% This is definitely an aggressive portfolio and tends to move with quite a bit of volatility but has the potential for producing great long-term gains. So far this portfolio is beating the overall market this year but the key is to keep tabs on all your stocks regularly as well. Roughly 85% of my holdings are centered in North America because I feel the rest of the world is struggling right now. I have a heavy focus in the technology sector with zero exposure to the energy sector. This is definitely a portfolio filled with large cap names geared towards growth. The majority of the growth is geared towards aggressive growth as well. The P/E for the portfolio previously rested at 16.49 but is now 15.65 with the additional shares added this week. I anticipate this portfolio to produce high long-term returns but with quite a bit of volatility along the way. Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

ETFs: Passing Marks For Liquidity, But What About Performance?

By Alliance Bernstein Proponents of credit exchange traded funds (ETFs) claim the last week of market turmoil was a test for these instruments-and that they passed. We think this takes grading on a curve to a new level. The cheerleaders say ETFs succeeded because they traded regularly after a high-yield mutual fund failed and barred investor withdrawals. Here’s what they’re not telling you: in exchange for this liquidity, investors ended up with instruments that have woefully underperformed active mutual funds-recently and over many years. For long-term investors who are saving to pay for college or retirement, that’s an awfully steep price to pay for something they don’t really need. The numbers speak for themselves: Over the first 11 months of this year, the two largest ETFs – HYG and JNK – have sharply underperformed the average active manager, not to mention their own benchmarks. They’ve also trailed the average active manager so far in the fourth quarter ( Display ) and since the start of December, one of the year’s most volatile months so far. ETFs’ longer-term performance falls short, too. In fact, not only have active managers outpaced ETFs over the long run, they’ve done it with lower volatility, as measured by risk-adjusted returns. The Sharpe ratio, which measures return per unit of risk, was 0.45 for JNK and 0.51 for HYG between February 2008, shortly after they began trading, and November of this year. For the top 20% of active high-yield managers, it was 0.71. How Much Liquidity Is Enough? Is the ability to get in or out of an ETF at any point in the day worth the underperformance? For asset managers and traders who need to trade frequently to hedge positions, maybe. After all, they’re not investing in these instruments as long-term income generators. But a large share of the people who own high-yield ETFs aren’t traders. They’re regular folks saving for college, or to buy a new home, or for retirement. In other words, they’re investors, not traders. Most probably aren’t doing any intraday trading at all. If they’re buying ETFs for the liquidity, they’re paying-dearly-for something they don’t need. In our view, an actively managed mutual fund is likely to offer higher potential returns over the long run – and give investors a better chance of meeting their goals. In fact, the data suggest that investors who want long-term exposure to high yield would do better to pick an active manager out of a hat than invest in an ETF. With Mutual Funds, Diversification Is Key All well and good, some investors are no doubt thinking. But what happens when mutual funds fail? That’s a fair question. Liquidity is important for everyone, as the failure of Third Avenue Management’s Focused Credit Fund illustrates. But it’s important to remember that this mutual fund was not a typical high-yield fund. It focused almost exclusively on risky distressed debt issued by highly leveraged companies. These types of assets are relatively illiquid, and that became a problem when large number of investors wanted to sell their shares. In other words, investors were promised “daily liquidity”-the ability to buy or sell shares in the mutual fund at the end of each trading day-but the assets the mutual fund owned could not be bought or sold on a daily basis. These types of strategies are bound to fail eventually. Most high-yield managers follow more diversified strategies that focus on a wide array of higher-quality assets. Of course, investors should still make sure their investment managers have a dynamic, multi-sector approach and are managing their liquidity risk effectively . Those who do a good job will be in position to meet redemptions during downturns and seize opportunities as they arise . That’s something Third Avenue couldn’t do. High-yield ETFs can’t do it, either . The recent turbulence in the high-yield market probably isn’t over. But we don’t think that should concern long-term investors too much. In our view, the best approach at this point is probably to ride out the storm. The intraday liquidity ETFs offer comes at a high price-and if you’re a long-term investor in high yield, you shouldn’t be paying it. The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Disclosure: None

PPL Corporation – Ready To Go Strong Starting 2016

Summary Stock is compelling investment prospect for income-hunting investors. Strategic investments in utility infrastructure development and extension-related projects are in-line with long-term growth generating strategy. Strategy of sharing cash flow base strength with shareholders through dividend payments will continue to positively affect stock price. PPL Corporation (NYSE: PPL )’s strong business fundamentals and its important infrastructural growth-related investments cast an impressive outlook for the stock. I believe the company’s regular efforts to augment the growth capabilities of its regulated business’ infrastructure with regular infrastructural improvement and enhancement-related investments will bode well for its future EPS growth. These healthy growth prospects of PPL will ultimately better its future cash flow productivity level and this will in turn help the company maintain its practice of paying increasingly healthy dividends in the years ahead. Moreover, PPL’s current valuations are more attractive than its peers and the industry average. Nevertheless, un-foreseen adverse weather conditions, volatility in fuel prices and strict regulatory restrictions are key threats that will keep on hovering over the company’s future financial performance. Over the last few years, the U.S. utility industry has faced challenges such as a decline in energy demand by industries amid the recession. Furthermore, the regulatory uncertainties and restrictions imposed by the Environmental Protection Agency (EPA) caused industry disruptions. However, the EIA has projected that energy demand in the U.S. will increase by 2.1% in residential space in the second of 2015 and will grow by 0.7% in industrial space in 2015, which indicates that the overall utility industry’s outlook is attractive. To combat the industrial headwinds and to meet the expected rise in energy demand, the U.S. utility industry players have accelerated their growth investments in order to get a broader regulated infrastructure. Like all of the other utility industry players, PPL is also making hefty infrastructural investments; around $10 billion is projected to be spent by the company on infrastructure improvement by the end of 2017, which will help it apply for regular rate base hikes and will ultimately drive its future earnings and revenues. I continue to believe that this utility company’s attractive growth investments will help it enjoy EPS growth in future, which will support its cash flows and dividend growth. PPL, however, is confident of achieving a 6% compounded annual earnings growth rate through 2017. And for its U.K. operations, the company now expects EPS growth of 1% to 2%, in contrast to its previous expectation of flat earnings growth. I think that these strong earnings growth potentials will augur well for the stock valuation. To recover the capital investments made previously, the company has applied for a 5.1% rate case hike. Although the case is still waiting for regulatory approval, if approved, it will add around $124 million per year towards PPL’s revenues. The company has plans to use the proceeds of its rate cases in technological upgradation and improvement-related projects. In this regard, recently, PPL asked for the Pennsylvania Public Utility Commission’s approval to make an investment of $450 million in the technology upgradation process of meters in order to resolve their problems associated with old meters. This investment will not only improve the company’s image as a quality regulated utility but will also benefit its EPS growth, because the cost of investment will be recovered through a special rate rider; as per the management’s estimates, this investment will increase rate base by $330 million . Moreover, two of PPL’s subsidiaries, namely Louisiana Gas And Electric Company and Kentucky Utilities Company, have recently signed a $220 million agreement with Paringa Resources Limited for the purchase of coal from Buck Creek No.1 mine, with the completion of certain construction-related work, coal purchase under this agreement will begin in 2018. The coal purchase agreement will extend PPL’s energy generation resources, thereby improving its load capacity and will help it apply for rate case, which in turn will help it in reporting incremental EPS growth. Furthermore, the company has maintained an impressive record of sharing its cash flows with shareholders through healthy dividend payments. Owing to consistent dividend growth, currently, PPL offers an attractive yield of 4.44% . Moreover, the commitment to keep its dividends growing has been affirmed by the company’s chairman in the 3Q2015 earnings conference call; he said : “Regarding the dividend, we expect minimal dividend growth again for 2016 as we strive to get the payout ratio down into the mid-60% range, at which time we will target a 4% to 6% dividend growth rate, more in line with our earnings growth expectations. We currently expect to be in the targeted payout range by the end of 2016. So our current expectation is that we will grow the dividend more meaningfully starting in 2017, but our current expectation for 2017 is at the low end of the 4 to 6% relative to the dividend.” Due to the abovementioned strong strategic growth prospects, I think the chairman’s dividend growth expectation is realistic and achievable. Moreover, PPL’s strong balance sheet position, as reflected in the chart below, makes me believe in the company’s ability to continue sharing a decent portion of its future cash flows with shareholders in the years ahead. Source: 4-traders.com Final Words PPL is a compelling investment prospect for income-hunting investors. The company’s strategic investments in utility infrastructure development and extension-related projects and its strong balance sheet position are in-line with its long-term growth generating strategy. Moreover, PPL’s strategy of sharing its cash flow base strength with shareholders through dividend payments will continue to positively affect its stock price. Also, earnings for PPL are expected to grow at a growth rate of 4.86% , better than Southern Company (NYSE: SO )’s earnings growth expectations of 3.88% . Also, PPL has attractive stock valuations in comparison to SO and the industry average, as displayed below. Source: Yahoo Finance & NYU.edu