you should be looking at payout ratio as % of free cash, not eps

I'm having a bit of trouble understanding this. If a company is paying out more then they are earning isn't the dividend unsustainable long term? I'm guessing this is an accounting thing and looking at div payout ratios are probably a metric that varies greatly on a stock to stock basis on how useful it is.

If you feel like educating me I would certainly appreciate it

Okay, it's not a micro-cap, but a Chinese gaming company that piqued my interest recently is Changyou (CYOU). They seem very cheap for such insane growth. The problem is, I can't see them sustaining it indefinitely in such an extremely dynamic and competitive environment.

Just curious why CVX over BP? I just added more BP today so obviously, I'm a little curious why you like Chevron more.

Interesting to see that MCD got very little support or institutional buying today. Probably has some more downside coming up.

I'd be fine being in BP as well but I still have some mild concerns over their legal liability. In addition I'm looking at creating a strong dividend growth portfolio and while BP is on the right track they don't have the same history of growth that CVX has.

In the monthly investing thread someone pointed out COP maybe a better candidate as well however I have not had time to accurately delve into it.

Chevron’s stock price stability, strong growth and high dividend yield make it the most attractive buy for me.

You may also ask why I went with RDS.B as they have not been increasing their dividend. However I am quite content with their immediate yield and unlike the other oil stocks I don't have to pay the 15% withholding tax for this one. (being a Canadian) The stock seemed rather cheap compared to the other options available as well.

As my value investing friend told me, it's all about their overseas deals (30% of revenue) and whether they were structuring these deals to create profit that didn't exist by overpaying for towers and giving out loans in currencies that have performed very poorly.

They basically have to answer this in the filing on the 29th.

Thanks for the explanation. I'm fine with Chevron too. I'm just banking on BP still being a little undervalued from the spill. COP seems a little pricey to me trading at almost 11x earnings. That's a lot for a less than average growth stock. RDS.B looks really good at first glance. Thanks again!

simple really. the ability to pay dividends depends on the ability to generate enough cash to cover them, not eps profits. there are so many below the line (meaning below ebitda) items that dont affect cash that eps is almost useless. it only works if D&A perfectly reflects reality which is rarely the case.

ex. a company made an acquisition and is amortizing intagible assets for the next few years. that decreases eps but doesnt affect cash flow.

What a great day, checked my Stocks a bit late. I started looking at PANW which was a bit down for the day, then went over to FIRE and booom 28% up, Cisco bought it.

I bought FIRE and PANW because I felt that the Computer-securitybusiness is going to grow a lot in the next years, I also thought that they might get bought by one of the bigger players. This is quite interesting now, FIRE has Cisco in the back now which obviously weakens the other players - so it weakens PANW too.

On the other Hand some other major players might now want to grow their securitysector too. So I prolly will keep PANW and I`m also thinking about picking up FTNT. Another intersting stock for me is NQ(Mobile Securit/Games/Apps). Gonna look into them the next days.


Started investing seriously about 5 months ago and it`s been really great so far having made about ~50%.

Not necessarily if the stock has a large depreciation expense. Many fixed line telecoms have massive depreciation, thus their dividends exceed earnings but not their free cash flow.

Sometimes value investing can be just timing. Using a dependable and stable blue chip w/ implementation of cyclic movements would yield better results than just "value" growth

I just saw this last night. Cisco is actually paying $76/share cash so you could probably sell at anytime now and walk away with the cash to put in other investments instead of holding for several months waiting for the deal to finish.

The buyout isn't expected to close until the second half of the year and it's still pending regulatory approval and other conditions so there is a small probability that it won't go through.

My point is that Cisco hasn't bought them yet and there is a chance (whatever percentage that is) that it could still get shot down.

Congrats!

Yeah I did sell it today. Gotta look in what I want to invest now.

An other stock that I sold 2 months ago for a 25% gain rose another 25% over those 2 months. But guess I`m a bit resultoriented here. Not sure in what I`m going to invest, might look into Biotech again.

Hey guys,

New investment idea...like last time, for the full write-up check out my blog (in my profile):

Long Americal Realty Capital Properties (ARCP) at $14.87

Current Situation

Over the past six months ARCP has undergone a significant transformation. It started with a reverse merger with ARCT III (a private REIT) that was managed by the same team as ARCP. This added 507 net lease properties, for a total of 653. Following the reverse merger, the company announced 3 more transactions (with CapLease Inc, GE Capital, and privately-held ARCT IV) to add another 1,844 properties to the company’s portfolio. In addition to these mergers and acquisitions, ARCP also added 81 properties organically, bringing their total net lease portfolio (on a Pro Forma basis) to 2,579 properties. These properties are spread out over 49 states and across 34 different industries, with the majority investment-grade rated and the top 10 tenants representing 30% of NOI. The CapLease and ARCT IV transactions are expected to close in 3Q or 4Q of 2013.

Recently, the company’s stock price has declined by 18% since mid-May, when investors became fearful of rising interest rates due to Bernanke’s comments regarding ending QE. In comparison, ARCP’s comp set has fallen ~15% during the same period.

Thesis

Due to ARCP’s fast transformation into a major REIT, the company has flown under-the-radar (which is the reason for its undervaluation in comparison to its comp set). The closing of the company’s M&A transactions will result in ARCP having a substantially larger balance sheet (with investment grade debt) and a lower cost of capital in relation to competitors. A lower cost of capital is an important competitive advantage to fuel AFFO growth at an attractive growth rate (through acquisitions). Another competitive advantage ARCP has is that it is currently the only REIT acquiring medium-term triple net leases, allowing them to get a cap rate in the 8.5%-9.0% range (significantly higher than the ~7.5% on long-term leases) without sacrificing credit quality. With almost no lease roll-over in the next 3 years, managements AFFO guidance is very reliable, with the variance (only positive) coming from kickers (rent ramp-ups based on location performance), operating leverage on G&A and future cost of capital.

The fear of rising interest rates and their impact on REIT valuation moving forward is overblown. It is true that as interest rates rise, yields will also rise, generally resulting in an adverse impact on share price (or a higher payout ratio, taking away capital from the company). However, it is likely that rates will rise very slowly in the coming years and REITS have already been hit very hard (resulting in a much higher yield today than in May). Furthermore, management is actively positioning the company’s portfolio for rate hikes, with significant lease roll-over starting in 2015/16 (which will allow them to earn higher rents and maintain their cap rate spread) and fund matching on acquisitions (matching lease duration with loan term, so that they can lock-in the cap rate spread regardless of where interest rates go). Finally, for the company’s existing variable rate debt, management is using derivatives (interest rate swaps) to make variable payments on this debt fixed.

ARCP’s management has a lot of experience managing and investing in real estate, having been through several economic cycles. It is evident that they believe ARCP’s stock is significantly undervalued (explicitly saying so during their analyst/investor day), and they have been purchasing a significant amount of company stock lately. The CEO, CIO, CFO, and President have each bought $450k-$700k worth of shares since March (at share prices of $12.56 and $15.69). In addition, management compensation is reasonable and performance-based (share performance, absolute performance and performance against a peer group). The aforementioned factors give me additional confidence in their ability to provide superior returns to shareholders in the upcoming rising rate environment.

Valuation

There are three reasonable REIT comparables for ARCP: Realty Income (O), National Retail Properties (NNN), and W.P. Carey (WPC). Based on Price/AFFO multiple and a dividend yield comparison, I believe ARCP will trade for $20-$24 by mid-2014.

This is a conservative valuation, as management already plans to raise the dividend to $0.94 by 3Q or 4Q of 2013 (from $0.91 today, compared to $0.95 used in my valuation). This means that it is likely the payout ratio will be higher than 80% for 2014, resulting in a dividend in the $0.98 – $1.01 range. In addition, these valuations assume the bottom of management’s guidance of $1.19 AFFO/share. It is likely with rent kickers, operating leverage, and improved cost of capital that AFFO/share will be higher.

You should look at ACAS instead, and I did a small writeup somewhere in this thread. ACAS has a similar thesis (40% of business is in REITs) but is a hell of a lot safer since they are already significantly discounted to book unlike ARCP, and management has already indicated their intentions to buy back stock until the NAV is reached so that they can convert back to BDC status and issue 90% of their earnings as dividends.

If REITs are in a bubble that is going to burst, then ACAS is in a much better position than ARCP.

Finally back from Vegas and ready to go back trading again. I learned a very valuable lesson during my time away in Vegas as I said to myself I won't be doing any trading and will be entirely focusing on poker. Great thing too as I missed the entire Bernarke FED nonsense and the China credit crisis. I had checked the fundamentals of my stocks before I left for the trip and just held on tight. Now that everything has cooled off and back to normal, things are looking good again.

Got a little scary for a bit but my majority positions have reached new highs, Dang at $8.16 for a 45% gain and YY at $36.5 for a 92% gain when I bought it. Really happy with my results. I usually like to ride out my gains so haven't taken any profits yet but if I see a price dip on heavy institutional selling, I'm going lock in some profits.

I just took a look at ACAS briefly, and correct me if I'm mistaken, but it seems all of their investments are in businesses that are unable to get loans from banks (extremely high risk/distressed investments). Their ability to continue share repurchases is dependent upon the cash flow they receive from these businesses, no? If/when rates do go up, it seems their portfolio of variable rate debt and equity investments in highly levered companies (their portfolio of companies has a collective 1.6x debt service coverage ratio) could be in trouble (as the cost of capital for these businesses will go up, as will their interest payments on current debt as well). I also don't like how several insiders are selling their shares. If this is a scenario where management truly believes their share price is significantly undervalued and repurchases will allow them to realize their full value, then several members of their management team and board of directors would not be selling their shares (these sales are on top of their automatic sales). There could be several reasons for one or two executives selling, but more than that tells me that on a risk-adjusted basis, they believe their company's stock is not worth holding. And, in my opinion, no one knows a company and where its going better than its management and board of directors.

Yes and no. Their business is directed to business development/private equity, so some of it is to fund businesses in exchange for equity/mezzanine debt/senior debt. Some of it is management/consulting fees for other businesses or investments like REITs, or buying and selling companies.

However, since they are trading at over 30% discount to book, a lot of chaos would have to happen to their REITs and funded businesses for the present stock price to be justified. Further, management already expects higher interest rates and have therefore been deleveraging a lot of their present variable debt that they took to buy businesses, and hedging their REITs and other debt for an interest rate creep. Management has indicated that they are sufficiently hedged to suffer a 4% variance in interest rate, so that should not be a problem.

Basically, the stock will inexorably head towards NAV (roughly $20) with their aggressive buybacks and will pay dividends once NAV is reached. The question is basically how long will it take. My guess is at least one year, and probably two. Even in a worst case scenario where interest rates explode, a 30% impact to NAV would just bring them to the present price, whereupon they could resume paying dividends from their earnings. Downside is flat, upside is high. A bigger downside scenario would imply that everything is getting blown up with no investment/stocks out there being spared, as their business is a good pulse indicator for how small businesses is doing.

I do not understand why a lot of the officers and directors are selling, and that is a red flag. It is possible that they are doing massive profit taking as the stock has gone up rather rapidly over the past few years. However, it is a good sign that the CEO/founder of ACAS has not sold any shares since 2008.

Anyone invested in home builders?

Thinking about a starter position in RYL when this bloodbath is over. Despite the rates, I like them. Found this sort of backing up my theory on why

http://www.streetinsider.com/Analyst...l?si_client=st

Won't rising rates make lending start to loosen which will be a huge boost to first time home buyers?

Added two more longs today:
WMT 77.75
CHRW 58.95

Here's a question:

When experts talk about "The Great Rotation" of money moving from fixed income into Stocks, what does this mean in a broad sense for fixed income?

I was looking through some companies and came across Global Source, LTD. (GSOL). Their metrics have everything I look for in a long term investment: Strong earnings growth, low D/E, shareholder friendly, etc. But there's one minor problem I can't resolve...

I can't quite figure out why this company is still in business! They started in 1971 and provide media to link Asian suppliers (mostly China) with buyers across the world. Their main platforms are: Trade publications, Exhibitions, and internet. I think buying stock in a company that produces print magazines is akin to buying 8 track audio devices. Trade shows? Fine. Internet, fine.

I can see how this company worked in 1971, but in 2013 why wouldn't Asian suppliers start designing their own websites to market their products? And why wouldn't buyers use the internet to search for products? While China probably has more restrictions on internet usage, to my knowledge, they allow companies to use it.

Obviously, I'm missing something here. Again, I like everything about this company from a metric standpoint, but I just can't see how they can continue to thrive. Hopefully, I just don't understand how media companies work. I looked through their 10K equivalent: http://www.sec.gov/Archives/edgar/da...3/form_20f.htm

They don't seem to be in any way an advertising agency. Sorry if this is a dumb question, but this company seems doomed to me and I'm curious if anyone can help me understand this company and/or the business they're in. Thanks.

isnt that a reverse merger? They are usually by definition shady. From what iv read about chinese companies, its the wild **** west over there. There are a bunch of MMO gaming companies apparantly printing money, and some of them paying out pretty big dividends and all being cheap. They might be a better choice if you risk fraud. And they arent reverse mergers i think.

But the amount of shady **** going on there is crazy. And everyone is in on it. I believe with 1 fraud even the local bankmanagers were in on it when auditors checked balances in the companies bank accounts.