Author Archives: Scalper1

Facebook, Alphabet Winners In Trump-Cruz, Clinton-Sanders Battles

The election cycle in 2016 should drive a record year in political ad spending, with Facebook[ ticker symb=FB] and Alphabet ( GOOGL ) cashing in on the digital-media slice of the pie. About $1 billion will be spent on digital media platforms during the 2016 election cycle, about five times higher than in 2012, wrote Nomura analyst Anthony DiClemente in a research note. He expects Alphabet to capture 40% of that amount and Facebook 30%. The growth in political-ad spending is due to the intense battles waged between Hillary Clinton and Bernie Sanders to be the Democrat Party presidential nominee and between Donald Trump and Ted Cruz on the Republican side. Another is a greater mix of ad spending by political action committees, especially PACs seeking to deny Trump the GOP nomination. As always, TV advertising will get the bulk of political-ad spending. The reason political spending on digital media is growing in power is the unique ability to track its effectiveness. “Political campaigns have been slow to adopt digital marketing despite clear attribution benefits, competitive ROI, and significant growth in consumer time spent on digital platforms,” DiClemente wrote. “Our checks with campaign ad buyers suggest that improvement in attribution technology and the ability to link ad spend with turnout at a candidate’s rallies is proving a key driver of growth of spend on digital.”

Cisco Upgraded As JPMorgan Firms Up Q3’s 14th Week Sales Estimate

With a  14th week in its current third fiscal quarter and apparently enough momentum to hit 2016 consensus even if its switching business continues to weaken, Cisco Systems ( CSCO ) earned an upgrade from JPMorgan Wednesday. JPMorgan analyst Rod Hall used a proprietary statistical model suggesting “limited downside” for the world’s most essential computer networking gear maker, assuming 2.5% global GDP growth in 2016. The model predicts calendar 2016 revenue of $49.1 billion, in line with consensus, Hall said in a research note to investors. The prediction helped him upgrade Cisco stock to neutral from underweight, and raise its price target to 27.50 from 17. Already ahead of his target by eight cents by the time the market closed Tuesday, Cisco stock responded early by jumping 1.2% by midday to 27.91 in the stock market today , putting it within 6% of a 29.90 high hit May 18 and 7.8% below an eight-year high set March 2, 2015. Among Cisco’s most aggressive rivals, Juniper Networks ’ ( JNPR ) stock was up 1% to 25.48 by midday Wednesday. That 14th week for the quarter and 53rd week for the year happens every sixth year or so for some companies that normally count 13-week quarters, a source of confusion for some investors that is “now famous,” Hall noted. He said that Cisco “cautiously guided revenue” for the 14th week, and Wall Street analyst consensus acknowledges that midpoint scenario, but JPMorgan’s estimates “adjusts for this.” “We believe this not only sets Cisco up to beat expectations in fiscal (Q3) but to guide well for (Q4),” he said. For Cisco’s switching gear, JPMorgan is modeling “conservative campus and data center port share and ASPs (application service providers), but this is offset by better routing and security growth,” Hall said, assuming that better Chinese and Indian acceleration will offset slower U.S. growth. Analysts polled by Thomson Reuters estimate EPS of 55 cents minus items for the current Q3 ending April 30, up 2% from a year earlier, on slipping revenue to $11.976 billion, down 1.3% from $12.137 billion in the year-earlier quarter. Hall revised his adjusted Q3 EPS estimate up a penny to 58 cents, his full fiscal 2016 EPS estimate up two cents to $2.31 and his full fiscal-year revenue model up by $139 million to $49.284 billion. “We continue to see commoditization as a major challenge for Cisco’s switching business,” Hall said. “However, we believe impacts are likely to remain muted in 2016 with the potential to increase in 2017 as private and public cloud adoption accelerate.” While his upgraded neutral rating on Cisco doesn’t sound like a robust endorsement, Hall sees investors “getting paid to hold.” “Cisco’s current dividend yield of 3.8% places it among the top dividend-yielding large-cap value names in the S&P 500 after a surprise 24% dividend increase on Feb. 10,” he said. “We see this highly dependable cash return as a critical supporting factor for the stock in the midst of current market volatility and believe the company has the firepower to further increase should they wish to do so.” Image provided by Shutterstock .

The ETF Monkey Vanguard Core Portfolio: 2016 Q1 Update

This article is an update to the following articles: On July 1, 2015, I wrote an article for Seeking Alpha introducing The ETF Monkey Vanguard Core Portfolio . On January 4, 2016, I wrote the 2015 year-end update for the portfolio. On February 11, 2016, following the severe market decline during the first part of 2016, I wrote a follow-up article that detailed a rebalancing transaction that I executed to bring the portfolio back in line with my target weightings. In this article, I will report on the performance of the portfolio for the quarter ended March 31, 2016. Evaluating the Portfolio: Q1 2016 Here is the corresponding Google Finance page for the portfolio as of the market’s close on 3/31/16. Have a look, and then I will offer a few comments. Click to enlarge First, as a reference point, the S&P 500 index closed at 2,043.94 on December 31, 2015 and 2,059.74 on March 31, 2016, for a gain of .77% for the period. Second, the portfolio received dividends totaling $208.56 during this period, bringing the cash balance in the portfolio to $251.53. This came from the 3 ETFs as follows: Vanguard Total Stock Market ETF ( VTI) – $132.00 Vanguard FTSE All-World ex-US ETF ( VEU) – $45.88 Vanguard Total Bond Market ETF ( BND) – $30.68 So how did the portfolio perform? All told, not too badly. The closing value of the portfolio was $49,076.43 as of March 31 vs. $48,348.37 on December 31, for a gain of 1.51%. Therefore, the portfolio outperformed the S&P 500 by .74% over this period. Let’s break down the performance, and reasons, by asset class. Domestic Stocks – During the period, VTI grew from $27,120.60 to 28,825.50, an increase of $1,704.90. Subtracting the $1,382.85 added from the February 11 rebalancing leaves us with a net gain of $322.05. Add in the $132.00 of dividends and VTI gained $454.05 on a base of $27,120.60, a gain of 1.67%. This is a slight outperformance when compared to the S&P 500 index. Foreign Stocks – During the period, VEU grew from $12,588.90 to 13,376.50, an increase of $787.70. However. removing the $761.40 added in the rebalancing transaction leaves us with a net gain of only $26.30. Add in the $45.88 of dividends and VEU gained $72.18 on a base of $12,588.90, a gain of .57%. As compared to the U.S. market, this reflects the continued underperformance of foreign markets. Bonds – During the period, the value of BND declined from $8,076.00 to $6,623.20. However, if we add back the $1,648.20 used in the rebalancing transaction, BND actually increased in value by $195.40. Add in the $30.68 of dividends received and BND gained $226.08 on a base of $8076.00, a fairly stunning increase of 2.80%. This reflected a firming of bond prices as the signs of economic malaise during Q1 appeared to lead the market to conclude that interest rates would remain low for a longer period of time than previously anticipated, including the likelihood of the Fed having to modify it’s goal of raising rates as often in 2016. No Transactions or Rebalancing This Period Here’s how the portfolio stood in terms of its asset allocations at 3/31/16. Click to enlarge As can be seen, due to my February 11 rebalancing and the strong performance of the domestic stock market through March 31, domestic stocks are a little overweight and bonds are underweight. As noted in my rebalancing article, I did this on purpose. I am going to monitor this as time moves forward. My preference will be to increase the bond weighting by using dividends that I will receive moving forward. However, if the weightings get severely out of line, I may have to effect another rebalancing transaction. Summary and Conclusion The portfolio did very well during the quarter, outperforming the S&P 500, my chosen benchmark, by approximately 3/4 of a percentage point. Sadly, it is still down a little over 3% from its inception date of June 30, 2015. As can be seem from the graphic, weakness in foreign stocks is the main culprit, as these entered a very weak period almost immediately following the establishment of the portfolio. Still, it is my belief that a disciplined allocation to foreign stocks will prove beneficial over the long term. Disclosure: I am not a registered investment advisor or broker/dealer. Readers are cautioned that the material contained herein should be used solely for informational purposes, and are encouraged to consult with their financial and/or tax advisor respecting the applicability of this information to their personal circumstances. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.