Tag Archives: internet

Sold Global Sources For 9.47% Total Return In 18 Months

Admittedly, this investment did not work out the way that we wanted (very few do, some surprise to the upside and some not so much). The investment thesis was sound and we expected to exit at around $10/share which is still a good target. The reason we sold this stock was two-fold: 1. This took up almost 10% of the portfolio and we wanted to free up cash to be ready for the November/December funk in the stocks that we are seeing now as investors reposition their portfolios in preparation for the Fed rate hikes and also make their tax loss harvesting transactions, and, 2. We expected many better-valued opportunities to come to the forefront before the end of the year Given that the small cap value stocks have performed poorly during the holding period of this stock, the 9.47% return is respectable. INITIAL PURCHASE SALE Date April 7, 2014 Oct. 27, 2015 Average Cost 7.93 (Initial tranche was bought at $8.50/share) 8.65 Final Weight in the Portfolio 11.22% There are a few facts to keep in mind for this holding. This should also give you a better insight in the way I think as a value investor: In 2014, the company issued a tender offer to purchase about 14% of the outstanding common stock at $10/share. We participated in the tender offer and had approximately 14% of our shares repurchased by the company at $10/share. The profit from this above market tender offer is included in the Total Return of 9.47% Subsequent to this, the share price had declined to almost $5/share, giving us a paper loss of almost 40% at one time. At $6/share, we bought more. In 2015, the company issued another tender offer to purchase more stock at $7.5/share. We declined to participate in this tender offer deeming the offer insufficient. The stock rose to $7.5/share level by the time the tender was complete. After the tender was complete, the stock eventually rose above the $8/share mark and we decided to sell as the timing was right. Global Sources (NASDAQ: GSOL ) is one of the competitors to Alibaba (NYSE: BABA ) although the business model is slightly different, with it focusing more on high end and vetted buyers and sellers while Alibaba’s requirements are quite lax. GSOL also hosts sourcing fairs and exhibitions to bring the buyers and sellers together so a lot of the business on its platform is conducted offline as well as on its online marketplaces. During the holding period, Alibaba came to the market via its much awaited IPO. The BABA stock rose significantly upon going public. Over time though, when we sold GSOL, Alibaba was trading below its IPO price. We often chase the sexy in the high growth companies like Alibaba, but when it comes to investments, the boring value stocks more often than not end up delivering better. It is not all straight forward though, you do need to know what price moves to ignore and what price moves to take advantage of.

Goldman Raises Yellow Flag On 2016: ETFs To Buy

While the investing world is busy celebrating expected gains coming their way in the three months from November through January – known as the most successful session of the stock market – Goldman Sachs’ latest prediction of a weak market next year, might be jarring to their ears. The sought-after investment broker expects weakness in the market next year with the S&P 500 predicted to close out 2016 at 2,100. The U.S. index presently trades at 2,088.87, meaning almost no change in gains in the coming 13 months. Considering dividends, Goldman estimates stocks to return merely 3% next year, which is a repetition of this year’s scenario. Notably, among the top ETFs, investors have seen the S&P 500-based SPY adding about 1.5%, Dow-based DIA being almost flat and Nasdaq-based QQQ advancing 10.6% so far this year (as of November 25, 2015). As per Goldman, higher interest rates post lift-off with their resultant strength in the greenback along with a soft profit outlook are behind this pessimism in the market. Plus, Goldman hints at the overvaluation of stocks at the current level. Added to this, Goldman indicated that P/E has a propensity to decline 10% in the six months after the first Fed lift-off, which is to take place in December, if macroeconomic conditions remain the same. While the tech sector has given a stellar performance lately, as per Goldman, ‘even tech sector profit margins have probably peaked at this point’. Finally, Goldman projects average EPS growth at around 10% in 2016 for the S&P 500 companies – perhaps with the help of stock buyback and not entirely through operating excellence. Still this expected increment indicates an improvement from this year. Goldman suggested investors to play the stocks of those companies which generate fewer revenues from outside of the U.S. border. This way investors can mitigate the negative currency fluctuations on a rising dollar. Goldman’s prescribed stocks are the likes of Amazon (NASDAQ: AMZN ), Chipotle Mexican Grill (NYSE: CMG ), and Wells Fargo (NYSE: WFC ). Though Goldman’s suggestions are for the worst case scenario, we also believe less exposure to the international market could be a way to win next year. We have profiled a few ETFs below to play Goldman’s stock pick in a basket manner as this is always a safer option than single stock selection. iShares U.S. Financial Services ETF (NYSEARCA: IYG ) Goldman’s favorite Wells Fargo takes the top spot of this $841-million financial ETF. After all, this is the right time to play the financial sector as this tends to outperformance in a rising rate environment. The fund charges 45 bps in fees and is up about 2.2% so far this year. It has a Zacks ETF Rank #2 (Buy). First Trust Dow Jones Internet Index (NYSEARCA: FDN ) Amazon gets the first place (11.7%) in this $4.78-billion Internet ETF. The fund charges 54 bps in fees per year. In total, the fund holds 41 stocks. The tech sector in any case is soaring now. From a sector look, Internet mobile applications account for 40% of the portfolio while Internet retail makes up for 22%. The ETF has a Zacks ETF Rank #2 and is up about 25%. The Restaurant ETF (NASDAQ: BITE ) U.S. restaurants are placed in the top 37% quartile of the Zacks Industry Rank system and are on the growth path as consumers are increasingly eating out. While the cost structure is low for these restaurateurs on falling agricultural commodity prices, many U.S. restaurants do not have much exposure to the foreign lands. This makes BITE a nice bet. No stock accounts for more than 3.09% weight in the 45-stock portfolio. Chipotle takes about 2.43% of the fund. BITE charges 75 bps in fees. Original Post