Tag Archives: seeking-alpha

Suburban Propane Partners Q4 Earnings Review: Good Performance Despite Higher Losses

Summary Operating loss increased from $34 million to $48 million. Integration costs and pension charges skewed results. Earnings should improve once these charges are eliminated. It’s been a week since Suburban Propane Partners (NYSE: SPH ) reported Q4 earnings, and the market remained neutral. Despite declining revenue and $48 million in operating loss, I believe that results were fantastic. Let me tell you why. As with many other natural gas related companies, sales suffered, dropping from $241 million to $174 million. The difference between this revenue decline and say a midstream company with POP contracts is that a lot of the company’s costs are variable. As the result of lower commodity prices, the company was actually able to increase the gross margin from 50% last year to 67%. This is a phenomenon that is common among refiners as well. What about the net loss? After all, the company did report an operating loss of $48 million. I would like to remind readers that the propane business is highly seasonal, and losses during warmer months are expected. (see below) As mentioned in my previous article , the company sells around two-thirds of retail volume from October to March, so the goal during hotter months is really to minimize loss. Unfortunately, the company does not seem to have accomplished that goal, as Q4’s operating loss of $48 million was higher than Q4 2014’s loss by 39%. However, there were multiple one-time costs that hurt Q4 results. First there is the integration cost. As mentioned in the previous article, the company acquired Inergy in 2012, and the integration process was still in progress in Q4 2015. During the quarter, the company spent $6.4 million on integration costs versus $3.2 million last year. This may be alarming since it would appear that integration costs are ramping up as opposed to going down. However, the management stated that the integration process was essentially complete, leading me to believe to that this cost increase is related to the “final push” as the company wraps up everything. Going forward, I expect integration costs to decline significantly or be eliminated. In addition to the integration costs, the company also had two pension related charges. First there was $11.3 million relating to the company’s partial withdrawal from a pension plan covering some former Inergy employees, which will save the company money later. If we account for these one-time charges, operating loss would actually decrease $30 million, which would be a 3% improvement from Q4 2014’s adjusted loss of $31 million. Keep in mind that the company was able to achieve this result despite the warmer weathers that we’ve been experiencing. When we take the above factors into consideration, I think it’s clear that the company’s Q4 performance was very impressive. Takeaway Despite mounting losses, I believe that the company had a great quarter when we take one-time factors into account. When you invest in Suburban Propane Partners, there is always the risk of warmer weather. Unfortunately that is what we’ve experienced in Q4, but that is what makes Q4 performance even more impressive. Overall, I believe that the company will improve earnings going forward as it gets rid of the one-time charges.

VT – The Easy Way To Start Investing For Retirement

Summary Investing for retirement can be as simple or as complex as you want to make it. If you enjoy researching investments, trading frequently, struggling with your taxes and some sleepless nights when your investments are tanking – then this article is not for you. If you want to get started investing or simplify the investing process then please keep reading. Simply Investing – Philosophy Your chance of long term investment success increases significantly by keeping your investing simple, consistent and well diversified. Whether you are just starting to invest for yourself or your kids or thinking about taking control of your investing back from your investment advisor, remembering to keep investing simple, consistent and well-diversified, will help lead to success. The problem for many people is investing can get complicated quickly and when it gets complex it is easy to lose focus on your overall investment objective, which often leads to mistakes. Investing doesn’t have to be difficult, time consuming, involve large fees or lead to restless nights. Establishing a core investment in well-diversified, low expense, Exchange Traded Funds (ETFs) is a good way to either get started investing or to reduce the complexity of your investment portfolio. An investment portfolio with a “core” allocated to ETFs held for the long term is probably the best option for most people starting to invest. As one’s investing experience, the time one wants to dedicate to investing activities and desired risk, increases, an investor may want to allocate a percentage of their portfolio to “edge” positions, which offer additional risk and opportunity. Vanguard Total World Stock ETF (NYSEARCA: VT ) This article reviews VT, an ETF that Simply Investing believes can effectively make up a large portion of the core of most people’s retirement portfolios. Future articles will look at additional ETFs that can be added to the core portion of your portfolio and for those interested, potential holdings for the part of your portfolio allocated to edge positions. VT – Regional allocation and investment approach Source: Vanguard (allocation as of 10/31/2015) VT seeks to track the performance of the FTSE Global All Cap Index. It has holdings in over 7,000 stocks with broad exposure across developed and emerging equity markets around the world, including the U.S. VT’s broad global diversification helps to minimize volatility that any one region may experience. As indicated above, the majority of VT is invested in North American stocks and although not broken out above, 53% of the common stock holdings are in the U.S. VT -Equity Characteristics and Holdings Source: Vanguard (as of 10/31/2015) As the table above indicates, VT is very well diversified, holding 7,391 stocks. The median market cap is quite large at $34.0 billion. VT’s current price/earnings ratio is high compared to historical levels for global markets. The high current price/earnings ratio is not unique to VT. The price/earnings ratios for the U.S. market and many global markets are currently higher than historical norms. These high price/earnings ratios are likely due to the low returns that alternative investments, such as fixed income, currently offer. Investing for retirement should be done on a consistent basis. A simple investment plan to follow, makes it that much more likely to happen. The relatively high current price/earnings ratio of stocks suggests that if you have a large amount of capital to invest today, it is advisable to dollar cost average this investment into the market over a period of time. Source: Vanguard (as of 10/31/2015) VT’s top 10 holdings are dominated by U.S. companies, with nine out of the 10 holdings based in the U.S. However, these top 10 holdings only account for 8.2% of total net assets and as previously indicated foreign stocks make up 47% of VT’s holdings. VT makes a good core portfolio holding with a diversified mix of stocks from U.S., other developed and emerging markets. Expenses VT’s expense ratio is 0.17%, this is well below the average expense ration of similar funds at 1.27%. Given the relatively high price of the market today, it is likely that future returns may be lower than those recently experienced. In this environment, it is important that the core of your portfolio is allocated to funds with low expense ratios such as VT. Conclusion Your chance of long term investment success increases significantly by keeping your investing simple, consistent and well diversified. One of the easiest ways to accomplish this is to build a core retirement portfolio around ETFs such as VT. In fact, VT might be the only investment many people’s equity portfolio requires, but future articles will look at additional ETFs that can be added to your core portfolio and for those interested, holdings for the “edge” of your portfolio that offer additional risk and opportunity.

One Asset Class You Can’t Do Without

Summary The market has been battered by slow global growth and the uncertainty of a looming rate hike by the Federal Reserve. Nonetheless, for years to come, the U.S. is likely to perform well. The Vanguard S&P 500 ETF is the best exchange-traded fund for investing in the U.S. stock market, which is the one asset class you can’t do without. In the search for the right mix of portfolio asset classes, it is tempting to overlook the obvious: the U.S. stock market. Alternative asset classes and exotic emerging markets may look appealing for investors seeking to diversify. But it does not pay to bet against America. So far this year, the U.S. market has been beaten down by fears about slow global growth and the possibility of the Federal Reserve pushing rates higher. For years to come, however, the U.S. is likely to perform well. Keeping a primary, core position in a U.S. stock market exchange-traded index fund is a simple yet profitable investment strategy. The U.S. is still number one China, Russia, Brazil, and India are becoming economic heavyweights on the world stage. The new century brings the possibility that the U.S. will no longer be the largest economy in the world. But this macroeconomic story does not necessarily translate into a good investment idea. Emerging markets, measured by the Vanguard Emerging Markets ETF (NYSEARCA: VWO ), have lagged the U.S. market, measured by the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ), over the past ten years: Source: YCharts Faster economic growth has not resulted in better investment returns. Rather, the U.S. has produced higher returns with less risk than emerging markets. The ten-year standard deviation of the U.S. market is 14.7 compared to 23.7 for emerging markets, according to Morningstar . Emerging markets are plagued by intrusive governments that restrict free market forces and lack the rule of law that Americans take for granted. In addition, the U.S. excels at creativity and innovation. Rule of law, creativity, and free markets give the U.S. market an edge in the world economy that is likely to continue. The U.S. is still the strongest economy and stock market in the world. A basic choice to focus on the domestic U.S. asset class rather than scattering across the globe in search of exotic alternatives helps form a solid foundation for your portfolio. Investing in the U.S. market is the most important asset allocation decision for investors to make. Exchange-traded index funds are a good way to capture broad asset classes, such as the U.S. market. The Efficient Market Hypothesis maintains that the market is so efficient that current prices reflect all relevant information. Therefore, it is very difficult to outperform by picking individual stocks. Buying the index rather than select stocks within the index is the winning strategy for most investors. Index funds run on autopilot, tracking a predetermined basket of stocks. Thus, index funds trade less frequently and are more tax efficient than traditional, actively managed funds operated by a high-cost stock picker. The Vanguard S&P 500 ETF In my opinion, Vanguard offers the best index funds in the marketplace. Vanguard is the market leader in the index fund space, with emphasis on low costs and ethics that put investor interests first. The Vanguard S&P 500 ETF (NYSEARCA: VOO ) is the best choice for investors seeking to establish a core position in domestic U.S. stocks. The S&P 500 Index is one of the most widely used proxies for the U.S. market. As the name suggests, it contains 500 stocks. The S&P 500 is broader than the Dow Jones Industrial Average, which contains only 30 stocks. VOO is the lowest-cost ETF tracking the U.S. market, as far as I know, priced at 0.05% of assets per year. The fund industry average expense ratio is 1.02%, according to Vanguard . Accordingly, VOO is priced 95% lower than the fund industry average. This cost advantage along with the difficulty of picking stocks help make index funds the winning choice. Very few professional fund managers or individual stock pickers – that includes most Seeking Alpha Contributors – can consistently outperform the S&P 500. In 2014, for example, it was reported that 85% of fund managers failed to outperform their benchmark indexes . On the other hand The U.S. economy and stock market are not perfect. The last ten years included an epic housing-market crash, the Great Recession, and a U.S. Government bailout of too big to fail Wall Street banks. Reckless politicians on Capitol Hill seriously contemplated a voluntary default on U.S. debt obligations, making the U.S. seem more like a high-risk emerging market than a developed one. While it is wise to focus your asset allocation on the U.S. market, U.S. stocks should not be the only asset class in your portfolio. Asset-class diversification can help to improve long-term risk-adjusted returns. My point is that attempts to diversify away from U.S. stocks should not be overdone. The Vanguard S&P 500 ETF is likely to outperform the vast majority of those who seek to pick individual stocks. But VOO cannot do better than the S&P 500 Index it seeks to track. The bottom line It pays to invest in America. The U.S. certainly has its fair share of problems. But the U.S. is still number one when it comes to the economy and financial markets. Buying and holding a broadly diversified U.S. stock market index fund such as VOO is a smart decision. The U.S. is the one asset class you can’t do without.