Author Archives: Scalper1

Sony Corporation Unveils New "Future Lab" Devices

Sony recently introduced its “Future Lab” initiative, an R&D unit which presents experimental prototype devices and gathers public feedback to steer their development. The company recently showcased several of those devices at SXSW in Austin,

Ride The Wave

So much has happened and so much to talk about. We could talk about the seemingly globally coordinated easing from central banks around the globe. Central banks easing policy in the last two weeks have included Norway, Sweden, the Bank Of Japan (BOJ), the European Central Bank (ECB), the Chinese central bank and of course our own recent dovish statement from the US Federal Reserve,. We could talk about how that has led to a weaker US Dollar which in turn has helped oil, precious metal and emerging markets stage a turnaround in fortunes. Or perhaps we should discuss how Central bank maneuvers have helped US markets regain all of the ground they had lost so far in 2016. We could talk about all this but here is what we think would be most useful right now. The key to making money in these markets lies in Investor Psychology. How we understand it and our own emotions when it comes to investing our money is the key to success. Here are two charts that can help you be more successful in understanding how emotions play a role in your investing process. Courtesy of CNBC, the first chart shows two 12% rallies in the last 7 months. The second is a chart of investor psychology. After our second 12% rally in 7 months you should ask yourself, where are you on this chart? Are you relieved? Optimistic? Thrilled? Sell risk when prices are rising and buy risk when prices are falling. Understanding and keeping your emotions in check is the key to making money in markets like these. Ride the wave. Be fearful when others are greedy and greedy when others are fearful. – Warren Buffett If the Dow Jones holds its gains for the next two weeks we will have seen the biggest quarterly comeback in stock markets since 1933. We don’t have to remind you that the 1933 rally took place smack in the middle of the Great Depression. Risks are rising after our second 12% rally in months. It is going to be hard to move higher from here but don’t bet against continued central bank largess. The stock market is up 12% in 26 trading days. Not bad. But it does remind us of a blog post from back in October of 2015. October 2015 will go down as the best performing month for the S&P 500 in four years. I think that we all enjoyed the ride back up in October. The S&P 500 rallied 8.3% and followed through with more gains today to get the S&P 500 into the plus column for 2015. Those gains would be nice gains for an entire year – never mind a month! Whenever we get to thinking how much we have gained we cannot help but to contemplate the downside. We must always be on guard to temper our greed/ego just as much as we would concentrate on opportunity when fear strikes. As a reminder the S&P 500 closed October of 2015 at 2080. It would be 10% lower by January of 2016. Central bank policy in Europe and the US is having the same effect. Earnings estimates are heading lower while stocks ride higher. Not a great recipe for success. Risk is rising. We cannot predict with 100% accuracy every move in the market but what we can do is try and profit by tactically allocating and hedging our portfolio in times of market stress to take advantage of market volatility. Investing is not a game of perfection but of managing the risk inside one’s portfolio. We do not jump in and jump out of the market wholesale. By divesting ourselves of overpriced assets and availing ourselves of opportunities when prices are low allows us to take advantage of the long term benefits that the math of compounding brings.

Should I Sell My First Energy Stock?

Oddly, this isn’t the first time this thought has popped in to my mind. Last year I wrote a piece titled ” 3 Reasons I Would Sell a Stock .” The listing was created to help me identify holdings that have fallen out of favor in my portfolio or have not performed. After elaborating on the 3 reasons I would sell, I reviewed my portfolio for any stocks that met the criteria. Any takers on guessing which one of the stocks that was discussed in the article? First Energy! Shocker, right? After one heck of a run by the stock that has brought me close to break even, I now find myself asking the question again. Is it finally time to sell my stake in First Energy? First Energy (NYSE: FE ) has been a problem child for me from the beginning. Unfortunately, it sometimes works out like that. Historically, FE has been a stock that pays a high stagnant dividend yield. It is an electric utility after all. Despite the fact that the company’s recent dividend growth rate was non-existent, I was willing to overlook this fact due to the high yield (Which was above 5% at the if I recall). First big mistake right there; I was caught chasing yield and boy did I learn the hard way. Months after I purchased the stock, FE slashed their quarterly dividend from $.55/share to $.36/share. Ugh! That decrease caused a massive sell-off and my position turned red really fast. Isn’t the phrase dividend cut becoming too common on this website? Especially after what happened with KMI and then BBL over the last few months? Finally, after over two long, painful years, my position is at the breakeven point due to dividend re-investment and I have the opportunity to potentially re-coup my initial investment. To determine if I should sell the stock, I want to be able to answer one simple question. If I did not own a stake in the company and had extra capital lying around, would I purchase stock and initiate a position in First Energy? If FE does not pass our stock screener and I would not purchase shares, then why on earth am I holding on to them? Especially considering the fact that I own a small stake in another electric utility that happens to be one of our 5 foundation dividend stocks . Outside of the fact that I am being really stubborn here and don’t want to realize a loss. To answer this question, I decided to run FE through the Dividend Diplomats Dividend Stock Screener to see if FE would pass this daunting test. Let’s see how FE performed. Price to Earnings Ratio Below the S&P 500 – Using FE’s forward EPS per TheStreet.com of $2.84, FE is currently trading at a forward PE multiple of 12.6X, which is well below the PE ratio of the S&P 500. For comparison sake, ED is trading at a multiple of 18.71X. So FE is trading at both a discount to the market and one of the major players in the industry. Payout Ratio below 60% – Using the forward EPS from the line above, FE’s payout ratio is 50% while ED has a payout ratio of 66%. Again, FE passes our metric and shows a better figure than ED. Paying an Increasing Dividend – As I already mentioned earlier, FE cut their dividend to $.36/share per quarter in 2013 and has not increased their dividend since. So this point represents a big negative as my stagnant dividend stream is losing purchasing power each year. For comparison sake, ED is a Dividend Aristocrat and has a 5 year average dividend growth rate of 1.9%. This really isn’t much better; however, at least their dividend is growing at a rate near inflation. Dividend Yield – This isn’t one of the metrics on our stock screener, but it is worth pointing out. FE’s current dividend yield is about 4% while ED has a current yield of about 3.56%. Debt to Equity Ratio – Again, this metric is not a part of our initial stock screener. I began focusing on the impact of debt on a company when my KMI dividend was slashed significantly. However, I really should have begun looking at a company’s debt burden when I purchased stock in First Energy. Per finviz.com, FE has a Debt to Equity Ratio of 1.78X and ED has a Debt to Equity ratio of 1.09X. I understand that debt is not always a necessarily a bad thing, but I am a little “debt averse” after my recent experiences. So much so that I even created a Top 5 list to identify Dividend Aristocrats with low debt to equity ratios. We all have flavors of the month and mine is currently LOW DEBT! Now that I have run some numbers, let’s get back to my original question. Would I purchase shares in First Energy today based on the information above. The answer is…..no. So why am I not logging into Capital One Investing now and selling my stock? Where is my hesitation and why am I struggling to make a decision here? What has me torn is that while the stock may not have passed all metrics in our screener, it didn’t fail all of the screeners. In fact, when compared to another company in its industry, the company appears to be trading at a significant discount while sporting a higher dividend yield. The fact the company is trading at a discount makes perfect sense to me when you consider some of the negative factors I mentioned above. Is the dividend growth rate terrible? Yes. Do they have a lot of debt? Yes. However, their payout ratio is well below our 60% threshold. So the answer isn’t as clear as I was hoping it would be by the time I reached the end of this article. So all of you, I am asking you for your help here. You offered Lanny some great advice about his internet package this week and I have loved reading your responses as they have come in. So I would love to get your take on my dilemma. If you were me, would you sell your stake in First Energy? If so, what other companies would you recommend? I am thinking I would go the ultra safe route and purchase a foundation stock or one of the stocks on my “Always Buy” list with the proceeds. Are there other utilities I should consider as well? Please everyone, help me out here! -Bert