Tag Archives: nyse

Ride The Coming 4th Wave Of Wealth Creation With This ETF

Summary Rising yields generally mean the economy is improving, which should benefit companies that depend on corporate and consumer spending. Technology is at the edge of another transformative wave. The acceleration of global population aging is going to drive demand across the biotech sector. Ride the coming transformative wave with this unique ETF that targets both technology and biotech and has consistently outperformed the broader market by a wide margin. Michio Kaku is a world-renowned, American futurist and theoretical physicist. He is a Professor of Theoretical Physics at the City College of New York (CUNY). Kaku has written several books about physics and related topics and has made frequent appearances on radio, television, and film. I recently had the pleasure of listening to him speak at an event in Boston. During his talk, he described the past three waves of wealth generation and shared his vision of how technology will shape the future. The question today is: what is the fourth wave? The first wave was steam power, the second wave was electricity, the third wave was high technology – all of it unleashed by physicists. What is the fourth wave of wealth generation? It’s going to be on the molecular level: nanotech, biotech and artificial intelligence . – Michio Kaku. According to Kaku, we’re at the edge of another wave of technological transformation. The world is growing increasingly dependent on technology. Products and services based upon or enhanced by information technology have revolutionized nearly every aspect of human life. The use of IT and its new applications has been extraordinarily rapid across all industries and an IT-Biotech convergence is already well underway. The acceleration of global population aging and technological breakthroughs are going to drive demand across the biotech sector. Longer life spans and increasing rates of chronic conditions will continue to fuel demand for new products and services. Nanotech breakthroughs will spur innovations across a wide range of applications in biotech and healthcare, potentially curing human illness. Multiple platform technologies working in combination – nanotechnology, biotech/genomics, artificial intelligence, robotic and ubiquitous connectivity – are going to lead to increasing profits for the dominant players utilizing these technologies. Many ETF issuers are coming up with innovative concepts targeting these technological transformative areas. The iShares Exponential Technologies ETF (NYSEARCA: XT ), with an annual expense ratio of 0.30%, attempts to track the developed and emerging market companies which create or use exponential technologies such as big data and analytics, nanotechnology, medicine and neuroscience, networks and computer systems, energy and environmental systems, robotics, 3-D printing, bioinformatics, and financial services innovation. (click to enlarge) There are funds targeting cloud computing such as the First Trust ISE Cloud Computing Index Fund (NASDAQ: SKYY ), which has annual expense ratio of 0.60%. The Robo-Stox Global Robotics and Automation Index ETF (NASDAQ: ROBO ), with an annual expense ratio of 0.95%, targets the robotics industry or you could own the Purefunds ISE Cyber Security ETF (NYSEARCA: HACK ), for 0.75% per year, which holds a portfolio of companies in the cyber security space. SKYY and HACK both follow the technology sector solely while ROBO and XT follow multiple sectors. Although many of these ETFs hold a few well-known, large-cap companies, most are fairly expensive and have so far proven to be more volatile than the broader technology sector. Because they have a short history, and until many of the smaller Exponential Technology companies achieve consistent profit growth, I prefer to ride the coming tech-biotech transformative wave with a portfolio of large, high-quality companies – market leaders within their respective industries, with a history of delivering consistent revenue growth. These large-cap market leaders are, no doubt, aware of how emerging technologies might bring them new customers or force them to defend their existing bases or even inspire them to invent new strategic business models. Many successful small-cap companies with disruptive technologies will eventually become dominant large-cap players. In fact, the NASDAQ’s dominant players have changed drastically in the last 15 years and probably will look much different in the future. You can capture this large-cap dynamic dominance with one of our favorite, can’t miss ETFs, the tech-heavy PowerShares QQQ ETF (NASDAQ: QQQ ), a unique fund that targets both technology and biotech and has outperformed the broader market by a wide margin for more than a decade. (click to enlarge) The QQQ is an ETF based on the NASDAQ 100 Index. The Index includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization. The fund is rebalanced quarterly and reconstituted annually. Besides being a 5-Star Morningstar-rated ETF with an expense ratio of just 0.20%, QQQ has delivered consistently superior returns during most time periods over the last decade. QQQ Sector Allocation: (click to enlarge) The top 10 holdings of QQQ consist primarily of U.S. technology, and also include Gilead Sciences (NASDAQ: GILD ), a major biotechnology firm, Amazon (NASDAQ: AMZN ), an e-commerce retailer and Comcast (NASDAQ: CMCSA ), a media/entertainment giant. QQQ Top 10 Holdings: (click to enlarge) In addition to the technology names in the above graphic, the QQQ holds another 36 big-tech firms including Qualcomm (NASDAQ: QCOM ), Texas Instruments (NASDAQ: TXN ) and Baidu (NASDAQ: BIDU ) to name a few. Besides Amazon and Comcast , there are 31 additional Consumer Discretionary names including Netflix (NASDAQ: NFLX ), Tesla (NASDAQ: TSLA ) and Priceline (NASDAQ: PCLN ). And besides Gilead, the QQQ’s biotech holdings consist of 15 more companies including Celegene (NASDAQ: CELG ), Amgen (NASDAQ: AMGN ) and Biogen (NASDAQ: BIIB ). Over 55% of the QQQ is tech. Technology is a cyclical industry. When the economy gets stronger, cyclical sectors like technology have tended to generate higher revenues from increased consumer and corporate spending. So its relative performance tends to rise and fall with the strength, or lack thereof, of the economy. However, a number of technological innovations – from nanotech applications to cloud computing to mobile connectivity – are spurring migration to new technologies. This migration may continue regardless of the overall condition of the global economy. Some solid, pure technology funds include the Technology Select Sector SPDR ETF (NYSEARCA: XLK ), the iShares U.S. Technology ETF (NYSEARCA: IYW ), the Vanguard Information Technology ETF (NYSEARCA: VGT ) and the Fidelity Select IT Services Portfolio (MUTF: FBSOX ). However, the aforementioned funds are primarily all tech and not the unique mix of the QQQ. The world’s dependence on technology and the acceleration of global population aging are two megatrends that should drive performance for years to come. Seventy percent of the QQQ’s holdings focus on well-established, high-quality technology and biotech companies. The fund’s consumer discretionary stocks should also benefit from an improving economy while the fund’s consumer staples stocks add a defensive component to the mix. Let’s take a look at how the QQQ has performed over various time frames. The newer Exponential Technology ETFs don’t have a long-term performance record so they cannot be included in this comparison. As you can see in the table below, the QQQ, with its unique structure of one-half tech, one-fifth consumer discretionary and one-seventh biotech, has outperformed the S&P 500 and just about every other large-cap technology fund during most time periods over the past decade, including the iShares S&P 500 Growth ETF (NYSEARCA: IVW ), which holds the fastest growing half of the S&P 500 stocks. QQQ is a kind of quirky fund, but it works. It delivers a unique combination of tech-biotech, growth and large-cap exposure. 10-Year Performance: (click to enlarge) Conclusion Rising yields generally mean that the economy is improving, which should be good for technology and growth companies that depend on corporate and consumer spending. Big tech and biotech companies have the potential to capitalize on two mega-trends for years to come – the increasing global dependence on technology and the acceleration of global population aging. QQQ is in a strong position to benefit from these favorable trends. As Michio Kaku says, “Don’t bet against technology. Be a surfer. Ride the wave of technology, see the wave coming, get on the wave”.

8 Investing Lessons Learned From Fantasy Football

Summary The importance of analogies. Fantasy football’s lessons for lifetime profit. One last word. Everyone loves a colorful analogy. I suppose that is because a well-placed and entertaining analogy provides a more memorable imprint on the receiving brain than a simple statement does. I’m a big fan of melodrama, so it definitely appeals to me. To say “Seeing John Major govern the country is like watching Edward Scissorhands try to make balloon animals” (Simon Hoggart) is much more interesting than saying that you are very displeased with the inept manner in which John Major is running Great Britain (in the 90’s). Because, well, sometimes you just need to say something ridiculous to cut through the mundane. In general, I spend most of my down time reading articles and opinions about two things: finance and fantasy football. Musings on the interconnectivity between two very different things as I did while thinking about colorful analogies, I came to the realization that fantasy football and investing contain many common themes. I’ve been reading Matthew Berry’s Love/Hate (and everything else he writes – Thanks for all you do, TMR!) religiously for years on ESPN, so a few of these will reference some well-known nuggets of wisdom that he frequently drops. Unfortunately, 2015 fantasy football is ending for the year. Perhaps you brought home the bacon this year with a fantasy championship. Perhaps you drafted Eddie Lacy (the Kinder Morgan (NYSE: KMI ) of 2015) and never recovered. Hopefully these things will help with your drafting next year. I know they’ve been helpful to keep in mind while building my portfolio. Without further ado, here are eight lessons fantasy football teaches the investor: 1: Tune Out The Noise Perhaps the most important virtue of a stock picker is discipline. If you don’t have the conviction to stick with your analysis of a company in the face of setbacks, musings, downgrades, and Jim Cramer, you will hamstring yourself for future earnings. Similarly in fantasy football, there is always a lot of noise when it comes to matchups or weather. While these are important considerations, sometimes people will bench a stud because of a matchup (Julio Jones vs. Josh Norman last week), or other such things. You can’t let the overabundance of available information make you doubt yourself. This leads us straight to #2 … 2: Start Your Studs Everyone wants to make money fast. The allure of penny stocks is watching those big percentage gains during heady bull markets. The flip side of the coin is the important part: without concrete earnings prospects and realistic business models, penny stocks are 99.9% of the time just a roulette spin. Investing has risk involved, but long-term gains mean taking on educated risk based on strong fundamentals or viable prospects. Companies with long history of earnings growth and (as a bonus) uninterrupted dividends are your stock “studs”. Your studs are your guys that you can rely on to achieve above-average points week in and week out. When the playoffs come around, the most commonly given advice is “start your studs.” Those guys got you there, and you need to rely on them to continue to perform. Bortles, while not a high draft pick, was a stud, currently 5th among QBs in fantasy points and total yards, and behind only Cam Newton and Tom Brady in touchdowns. What’s in a name, anyway? 3: Don’t Overpay For A Name (click to enlarge) A name brand doesn’t guarantee safety by any means. I think a lot of investors learned that from Kinder Morgan this year, as the largest energy infrastructure and third-biggest outright energy company in the North America saw its stock price lose 61% in six months. Make sure you are doing your thorough due diligence and don’t get caught up in a name. I hate posting the picture above. As a Green Bay native exiled to D.C., putting Aaron Rodgers under that title wounds me to the bowels of my heart. The fact is, the Packer passing game has been a sore disappointment for awhile now, and playing Rodgers in your fantasy playoffs likely ended them prematurely for you. I know it did for my team Davante’s Inferno (on a related note I wish Davante Adams could catch footballs). 4: “Prove It” They say “Buy the rumor, sell the news”. This is the opposite of what a long-term investor ought to do. Realizing short-term gains in this manner can’t hold a candle to unlocking long-time value form a great company that grows earnings. As an added negative, if you buy the rumor and the news contradicts it, you’ll find yourself in a losing position very quickly. Buying and selling frequently is a great way to erode capital. In fantasy football, it’s good to give a player coming off an injury or big-game-out-of-nowhere a week on your bench to prove he is legit. Bishop Sankey, a popular sleeper last year who disappointed, scored 21 points in Week 1. He was likely picked up and immediately started by many. In Week 2 he scored a measly 4 points; in fact, the entire rest of the year combined he has 25 points. Alshon Jeffery (using a Bear to make up for the Rodgers above) never recovered from his injuries this year, and was a huge disappointment when he played. 5: Coaching Matters Every company has a CEO, a CFO, and a slew of other executives that guide the company according to the path they have in mind and the over the obstacles that arise. How those executives view the company and the emphasis that they place on the paths of revenue available to the company has a huge impact on future earnings. In addition, how they determine the best value to shareholders (i.e. buybacks, dividends, M&A, etc.) will impact you directly. A coaching change can have a huge impact on a franchise. With Andy Reid in town in Kansas City, you know that when Jamaal Charles goes down with an injury, he’ll plug in the next guy as a workhorse. Some coaches place more emphasis on certain positions (or the other side of the ball, even), so it is an overlooked point of vast import to know the head coach’s mindset when drafting members or claiming waivers for your fantasy football team. 6: Waivers = The “Bargain Bin” Stocks, like football players, have “floors” and “ceilings”, downside and upside. A well-balanced portfolio, accounting for risk appetite (usually correlated to one’s age), will contain some stocks that have “breakout” opportunities. Favorable macroeconomic tailwinds, business cycle gyrations, and friendly legislation can all raise the ceiling for a stock’s projected capital appreciation. Unfavorable elements can lower the floor, making downside movement more risky. The waiver wire makes or breaks championships. David Johnson was 2% drafted at the beginning of the year, was the player with the highest representation on ESPN championship teams (42.2% owned as reported by Keith Lipscomb). Waivers are where the bargains are; Waiver pickups can swing from a low ceiling, low floor to high ceiling high floor with just one injury to a key starter. 7: Diversify Your Positions Diversification is Investing 101. Spread your investments among different sectors/cap size companies/asset classes in order to maximize return and minimize risk. Some would say that if you can be disciplined while stocks are tanking over-diversification is “di-worsification”, leading to sluggish returns over time. Still, fear is a powerful agent, so having some green among the red can be a huge comfort, and can help one avoid panic-selling. In my opinion, a team should have a blend of top-tier players spread across different positions. I believe having one stud QB, RB, and WR is better than having three stud WRs in a standard league. For instance, taking two RBs in the first/second pick is generally viewed as a “safe play” on draft day. This year that would have absolutely killed you. 8: Buy Low, Sell High (click to enlarge) The most obvious advice in history, buy low/sell high is still the most important. Understanding valuations and being able to part with a stock you have come to love (because of how good to you it has been) is hard to do. Similarly, buying an unloved stock beaten down by news or rumors can be hard, as no one wants to try and catch a falling knife. Being able to judge what “low” and “high” mean in so many unique circumstances is a consummate skill. Every player that is lighting it up will normalize to the mean. Brady was a fantastic draft pick: a Hall of Fame quarterback with a Hall of Fame coach who was ticked off at bureaucratic debate and punishments levied. He had fire in his eyes, and that came out on the field. There came a time where his perceived value was higher than his average output, and that was the time to trade him away for someone with a lower perceived value but higher average value. It’s important to be active in your management, just as it is in stocks. Conclusion Lessons can be crossover between many different media. These eight lessons form a great platform of basic directives for investing, and as a bonus you have some things to think about for fantasy football next year as well! I hope everyone enjoyed the lighthearted article; its important change gears a bit at times. Please let me know how you liked it in the comments. Thanks to Seeking Alpha for letting me go nerdy on two different levels simultaneously.

The York Water Company: 200 Years Of Dividends, But Shares Are Expensive

York continues to be an excellent dividend payer with a great history. It recently raised its dividend by 4%. The shares look fairly expensive at these levels. In January of 2015, I originally wrote about The York Water Company (NASDAQ: YORW ). In that article, I highlighted its record setting dividend paying history as well as its more recent dividend growth history. While the company continues to be an extremely strong and reliable dividend payer, its shares are looking pricey right now. Before getting to the shares, let’s take a look at the dividend again. With its most recent raise of 4% in November, the dividend now stands at $0.622 annually. This makes the forward yield about 2.37%. This is extremely low for a utility in the first place. However, let’s give some credit where credit is due. This declaration was York’s 580th consecutive dividend declaration. Their consecutive streak of paying dividends has now hit 200 years. In the press release , the company also claims that this is believed to be the longest record of consecutive dividends in America. The streak is just downright impressive. On the other hand, “consecutive years” is a lot different than “consecutive years of growth.” But… the company has one of these streaks as well. This most recent increase bumps its current dividend growth streak to 19 years. YORW Dividend data by YCharts While the dividend growth rate has not been necessarily stellar over the past few years, it has been a lot better than nothing. The 5-year DGR is roughly 3.6%. While it has maintained this growth, it is also keeping a relatively safe payout ratio. With trailing earnings of 98 cents, the current payout ratio is about 63%. I believe considering the majority of its business is regulated and extremely defensive in nature that this is a prudent payout. While the dividend is looking solid as ever, the shares are not. Shares are up almost 35% from 52-week lows. This run up has obviously pushed the yield to a very low level historically. Its 5-year average yield is 2.84%. The point here is that while the dividend is attractive there is not a particular reason for the yield to be so low. YORW PS Ratio (TTM) data by YCharts Fundamentally, shares haven’t seen these high levels since 2006-2007. And as I said, there just doesn’t seem to be a good reason for it. Sales for 2015 are supposed to finish up 2.8% higher than last year. Next year’s sales are expected to be 3.5% higher. Earnings are expected to be up 6.4%. These aren’t bad numbers. They just aren’t all that great and certainly don’t justify such high fundamentals. Trading at roughly a little more than 26 times both trailing earnings as well as forward earnings things don’t look any better when we look at the shares from an earnings basis. This P/E is actually higher than comparable peers such as Middlesex (NASDAQ: MSEX ) and Aqua America (NYSE: WTR ) as well. Don’t get me wrong, I do believe that these water utilities should trade with a nice premium. The name of the game here is consistency. These businesses don’t falter much, even in bad times, and there are massive barriers to entry. However, I strongly believe the market has priced in too much of a premium currently and pushed these shares into overvalued territory. YORW data by YCharts In conclusion, York has been a solid dividend payer for 200 years now. It is immensely impressive that not only has the company never broken that streak but also tagged along a dividend growth streak of 19 years. With the most recent raise, the dividend is looking very good, but the shares are not. These levels are fundamentally way too high and have no real forward catalysts to justify it. The shares are far too expensive to be a buyer at these levels in my opinion.