Sunday, January 30, 2011

Best in Breed Dividend Stocks: Core Holdings for the Long-Term Investor (part one)

There are many factors to consider when creating a long term buy and hold dividend portfolio. First and foremost is obviously diversification. As I have stated in previous articles, a properly diversified portfolio can better withstand the occasional sell-off in certain sectors. Second, it is important to accurately identify ‘Best in Breed’ stocks within each sector. These stocks should always be the core of your portfolio. Every investor has different ideas on what constitutes a good investment, here is what I look for.

What constitutes a ‘Best in Breed’ dividend stock?  
  1. Consistent Long Term Dividend Payments: For the most part, we are looking for companies that have paid a consistent dividend for over 10 years. A few good starting points for indentifying these companies are the Dividend Champions and the S&P Dividend Aristocrat.  I prefer the Dividend Champion resource as it focuses on consistent dividend growth.
  2. Dividend Growth: Speaking of dividend growth, we are looking for companies that consistently raise their annual dividend payments. It’s easy to for investors to get stuck on current yield when doing due diligence on a stock. Although a decent current yield is important, it is your future yield on cost that will ultimately matter. The compounding returns of Dividend Growth stocks will outperform strictly high yield stocks in the long run. More on this later.
  3. ........

Tuesday, January 25, 2011

Hasbro's Fundamentals: More Than Meets the Eye

Ah Hasbro. My childhood was spent playing with cast iron Transformers and G.I. Joes with the kung fu grip. There were more fights at my dining room table during Monopoly games than in the bleachers at Fenway during a Yankee series. We all know Hasbro. There is no substitute for their products. If your kid wants a G.I. Joe, you get the kid a G.I. Joe. If he wants to play Pok√©mon- you better get the kid a Pikachu. Now if they would only make that Megan Fox action figure from Transformer’s so I can relive my youth….

What it does:

Hasbro, Inc. engages in the design, manufacture, and marketing of games and toys. It produces many of the most sought after products in the market such as: Playskool, Transformers, Nerf, My Little Pony, Littlest Pet Shop, Tonka, G.I. Joe, Super Soaker, Milton Bradley, Parker Brothers, Cranium, Avalon Hill, Tiger, Strawberry Shortcake, and Wizards of the Coast.

But Hasbro is much more than a simple toy company. It has transformed (pun intended) these popular products into popular brands, slapping these characters and logos on anything and everything. Backpacks, underwear, lunchboxes, notebooks, shirts, cereal have all been graced with Optimus Prime, My Little Pony and the likes. There is simply no substitute for a Transformer (anyone remember the Go-Bots?).  Through its aggressive branding campaign Hasbro has created a wide competitive moat for its products.

Current Stock Data

Seven Year Averages

Company:
Hasbro
Return on Equity:
15.6%
Ticker:
HAS
Payout Ratio:
28.7%
Price:
$44.61
P/E Ratio-High:
20.0
EPS:
$2.87
P/E Ratio-Low:
13.0
DPS:
$1.00
P/E Ratio:
16.5
BVPS:
$10.91
Sustainable Growth
11.1%
P/E:
15.5
Earnings Yield:
6.4%
Dividend Yield:
2.2%
P/BV:
4.1
T20YM.COM

Read the full article at  Seeking Alpha

Monday, January 24, 2011

Option Mondays: Playing Momentum Names While Limiting Risk

At my core, I am a long-term value investor. I work an 8-6 job, have a family, go to school at night and honestly don’t have time to be an active trader. I enjoy doing fundamental analysis, buying undervalued dividend paying stocks and investing for the future. Obviously, this limits the universe of stocks I invest in to a handful of companies. There is nothing exciting about investing in McDonald's (MCD), Johnson & Johnson (JNJ), Coca-Cola (KO) or Procter & Gamble (PG). There is no need to check your brokerage account every day -- or even every week, for that matter. One can sleep at night confident that one's money is safe. I’ll admit it’s boring, but it’s a dependable march towards financial freedom.

As a (relatively) young investor, I have the luxury of taking risk. While the majority of my portfolio is dedicated to broad-range ETFs and long-term stable dividend growth stocks, there is always a little slice of capital allocated at chasing the momentum companies. You know the ones I’m talking about: Netflix (NFLX), NetApp (NTAP), Apple (AAPL), Chipotle (CMG), Baidu.com (BIDU), Amazon (AMZN) and the like. These are the "castle in the sky" companies, the ones that jump 10 to 20 points depending on the mood of the market, where investors buy high and hope to sell higher.

Read the rest of the article at Seeking Alpha

Wednesday, January 19, 2011

McDonald's: A Fairly Valued Dividend Champion

Like any disciplined long term investor I have a ‘wish list’ of stocks that I purchase on pullbacks. For me, McDonalds has always been one of those companies.   Not only is the food cheap and delicious, the stock is fairly valued and yielding a substantial dividend. Plus I’m an American. It’s engrained in our DNA to eat Big Macs. 

Whether you like it or not, McDonald’s hamburgers are as American as apple pie (which coincidentally you can get from its dollar menu). I know there are headwinds to the company, the health risks, rising input costs, market saturation, bad publicity, etc.  Heck, even I saw Super Size Me.  I’ll admit that guy put on a little weight, but he looked healthy enough… in that 17th century European Royalty sort of way. 

Hey, any press is good press. But no matter how you feel about the golden arches, McDonalds possesses one of the strongest brand equities of any company worldwide and will continue to expand its empire into emerging markets.

What it does:
Just in case you live in a cave, McDonald’s sells cheeseburgers, chicken products, French fries, breakfast items, soft drinks, shakes, coffee and desserts. It also derives a considerable amount of revenue from the rent of its properties to franchisers. But mostly, it provides double cheeseburgers for my family on road trips.

The Fundamentals:


Fundamentally, MCD is a sound stable investment. It has provided its share holders with an impressive 21% Return on Equity over the last 7 years, and a ROE of 18% for the past 15....

Read the rest of the article at Seeking Alpha (HERE)

Tuesday, January 18, 2011

Option Monday: Buy when there is blood in the streets

I am up huge on AAPL today. Like I stated in last weeks article, I sold 75% of my Options on Friday for well over 100% gain. This morning on the gap down I Dollar Cost Averaged back into my Jan 335 and halved my cost basis. Additionally, I purchased 10 Feb 330 at around 227.

AAPL was off 6% on the day, and I am up $6000.

Buy when theres blood in the streets!




I am still only holding  5 of the Feb 330 Call into earnings.

Best of luck,

C

Tuesday, January 11, 2011

AAPL: Don't get shaken out just some profit taking.

11-Jan-11 Wells Fargo raised its FY11 EPS estimate to 19.33 from 18.24, and raised its FY12 EPS estimate to 22.89 from 22.42. Maintains an outperform rating on the stock.
11-Jan-11 Jefferies raises Apple target from $365 to $450.
05-Jan-11 Wedbush Securities stats Apple at outperform and $405 target.
04-Jan-11 added to short term buy list with $410 target at Deutsche Bank.
03-Jan-11 International Strategy and Investment Group raises target to $400
03-Jan-11 Oppenheimer raises target to $385
17-Dec-10 Trefis revises target from $400 to $418.
17-Dec-10 Gabelli initiates coverage at Buy with $450 target.
16-Dec-10 JP Morgan Chase raises price target to $420.
16-Dec-10 Kaufman Bros. raises price target to $395.
15-Dec-10 Piper Jaffray raises price target to $438.
14-Dec-10 BMO Capital raises price target from $330 to $355.
14-Dec-10 Morgan Stanley removes Apple from "Best Ideas" list, but maintained overweight rating and "Top Pick".
13-Dec-10 Goldman Sachs ups target price to $430.
10-Dec-10 Beyond Trading downgrades Apple from Strong Buy to Buy - not sure if BT is legitimate source??
09-Dec-10 BofA Merrill rates as buy raises to $420
08-Dec-10 Barclays Capital Analyst Ben Reitzes: Mac unit sales will surge 16% for the quarter ending in December, compared to the same period a year-ago
08-Dec-10 Stifel Nicolaus upgrade $390
04-Dec-10 Ebeling Heffernan Upgrade $400
03-Dec-10 Caris & Co. Upgrade $400
11-Nov-10 Trefis Upgrade $400 / $500
04-Nov-10 Robert W. Baird Initiated Outperform $410
03-Nov-10 Morgan Stanley "bull scenario" August 2011 target = $500
19-Oct-10 Argus Reiterated Buy $375
19-Oct-10 UBS Reiterate Buy $365
19-Oct-10 Canaccord Genuity Reiterated Buy $421
19-Oct-10 ISI Group Reiterated Buy $370
19-Oct-10 Kaufman Bros Reiterated Buy $380
15-Oct-10 Hudson Square Upgrade $500
12-Oct-10 Barclays Capital Reiterated Overweight $385
08-Oct-10 Oppenheimer Reiterated Outperform $345
05-Oct-10 Jefferies Initiated Buy $365
04-Oct-10 Ticonderoga Initiated Buy $430

Sunday, January 9, 2011

Options Monday: Back in the AAPL again

Well, last week’s Option Monday is going to be a tough one to beat.  GM was a ten bagger and the AAPL 310’s were up over 60%. I took profit in GM on Thursday as $39 is my short term price target for the stock. I sold half of the 10 AAPL JAN 22-11 $310.00 CALLS and rolled the proceeds into 5 AAPL JAN 22-11 $330.00 CALLS at $11.05 per. I wanted to lock in some gains from the AAPL trade while maintaining my bullish position. This week will be more of the same as I play AAPL’s upside into earnings.

When an investment looks too good to be true, it usually is. After all, there’s always cheddar in a mouse trap. For this reason it is prudent to look at every investment with a healthy dose of skepticism. In trading, for someone to make money, someone must lose money. There is no free lunch.

But most of the time investors overcomplicate things. They don’t see the forest for the trees.

I believe this is the reason AAPL is severely undervalued by the market. People look at the share price ($336) and immediately get worried. How can a company that makes MP3 players, Phones and over priced computers be the second largest company in America? What happens when the trend inevitably fades? Quite simply, who cares?

I don’t care if AAPL is making touchpad Shake Weights 10 years from now. All I know is it has momentum and the fundamentals that make it as excellent short term option play.

Forward Cash Adjusted Price to Earnings:  13.43

 Forward PEG Ratio:  .77

Price Target Summary
Mean Target:
374.61
Median Target:
375
High Target:
500
Low Target:
165



1 Year
3 Year
5 Year
52.02
38.45
36.17
66.91
56.81
57.7


These numbers are simply ridiculous for a company of AAPL’s size. Applying an average market multiple to one of the greatest growth stocks in the world is downright cowardly.  Cowards don’t make money, they use bank accounts.

Even the chart is telling you to buy:


The current run up into earnings has happened the last three quarters. The Verizon catalyst is simply fuel to the fire. The 20YM plans on AGGRESIVELY attacking upside AAPL Jan and Feb calls starting this week. I will sell at least 75% prior to earnings on the 18th. This might be the quarter that AAPL springs after earnings, but no need to be piggish.  This will be the biggest quarter in AAPL’s history, but the market likes to take profits.

It’s not often that the market offers such a great company at such a deep discount. Get in while you still can.

Best of luck,

Craig Mack T20YM

Sunday, January 2, 2011

Option Mondays: GM and AAPL

I have gotten away from the T20YM Option Monday report over the last few months. The main reason was that most of my trading capital was wiped out with the GOOG debacle. I have tightened my belt and scratched back to a place where I feel comfortable dipping my toes in the Options Market again.

Last month I was focused entirely on the Financial Services/Banking recovery. I was lucky enough to buy 11.50 LEAP on BAC and took a handsome profit on its run up. I was also in early on HBAN’s modest recovery. JPM and WFC both worked nicely and I turned these trades into 60%-70% gains. I am out of the banking sector for the time being, turning my attention some more current market movers.

General Motors: 10 GM Jan 22 '11 $38 Call at .15c per and 10 GM Feb 19 '11 $35 Call at $1.75 per.


It’s not often when a iconic American company is initiated at a buy by 7 different firms on the same day. Not only that the median price target was set at $45. This is the type catalysts that will drive a stock price up for a few weeks- especially at year end for MM window dressing.  I expect the stock to run up again next week on heavy volume. I will hold the Jan 38’s until week end and the Feb 35’s into Feb.


Apple Corporation: 10 AAPL JAN 22-11 $310.00 CALL at $17.30 per.

Unless there is a complete market breakdown, I suspect AAPL will have a substantial run up into next earnings report on Jan 18th. Considering we have FIVE straight days of POMO starting on Monday, I don’t think we will be breaking down. This will be the biggest quarter in AAPl’s history. Additionally, we have the Verizon catalyst that should come early/mid next week. I believe most of this is priced in, but it should have another spark for the stock. Other than the share price, AAPL is unbelievably cheap. I will add some Jan 330’s if we move higher on Monday and Tuesday. I plan on selling at least half the position before earnings to avoid Premium Suck and profit taking.

I will have my eye on a few small cap precious metal companies as well. Looking to add LEAPS on a few different names. Will post updates as they arrive.

Happy New Year…

Craig Mack