tag:blogger.com,1999:blog-52617103602186821902024-03-19T15:09:52.908-07:00Investment "Logic"A blog meant to share and track my analysis and investment decisions openly and for my own historic tracking. I'm just an average guy with a real job and this is something I do for fun and knowledge growth.Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.comBlogger313125tag:blogger.com,1999:blog-5261710360218682190.post-39373672186618101142019-02-06T07:01:00.003-08:002019-02-06T07:02:16.420-08:00Trade: Raytheon (RTN), BP PLC (BP)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On Monday, I closed out my position on Raytheon at a price of $169.50 as I mentioned looking to do in my earnings recap, here. This close out may have been a bit premature, given the stock is another $6 higher than my sell point, but there was no way knowing that and I wanted to close out the position quickly to avoid any further losses, given the truly sad outlook the company provided for 2019. </span><br />
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<span style="font-family: "arial";">In an effort to put money back to work that I have collected from my sales, I have purchased a 25% position in BP PLC, an oil stock yielding over 6% at the time of purchase. I've been wanting to buy this stock for a little while now, but with earnings so close, I decided it best to wait, plus I wanted to get rid of something before I added more. As a result, BP posted impressive numbers on Tuesday morning and the stock took off. My purchase price was $42.75 and while I'd like to get the stock priced more at $40, I'm not sure that will be possible any more without a significant down turn in oil prices. The stock is up more today and I may have to look into paying up for a stock I predict will be moving into the mid-50s in the course of the next 12-18 months (approximately 25-30% upside potential). I will try to be careful about doing that, but when earnings impress as much as it has, it may be inevitable, as the transformation the company is making appears to be doing better than expected and people have been excessively cautious about this stock for some time now. Should the stock pause or go stagnant, it's high yield allows me to sit back and be paid a pretty solid amount while I wait. Analysts are starting to upgrade the stock and as such we'll see some jumps over the next day or two. Whether the stock stays at those levels or comes back down afterwards will be what is in question.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-5442816965523827402019-02-02T11:58:00.001-08:002019-02-02T11:58:13.107-08:00Earnings Analysis: Raytheon (RTN)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On Thursday, Raytheon reported their fourth quarter 2018 earnings results. While I am spending some time looking into this overall, this recap will not be as exhaustive as most of my efforts because I'm in progress of liquidating my holding. This stock is currently less than 3% of my overall portfolio and is generally a non-factor - especially since I am looking to it for additional funds. The results were somewhat mixed, as revenues missed expectations of $7.45B by $9M, coming in at $7.36B. Earnings, on the other hand, were able to beat expectations of $2.89 by coming in at $2.93. These results and the general explanations that go with them probably would've been given a pass, considering how hard the stock was sold off into the end of the year and what the stock was priced at a quarter ago. However, the guidance provided really put a damper on the stock as they failed to significantly miss already subdued expectations.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Worries coming into the quarter have been that the Democrats taking the house would put a damper on defense spending and made the outlook less certain. Sales to the US have the strongest margin rates and expectations here were guided down rather significantly. Global orders were guided up, but again, they have lower margins. It was also sounding like they're reaching a peak total addressable market too - which is certainly a little disconcerting. There's a part of me that says that this low guidance was a total reset by the management team, but the fact is that the market already reset expectations, so this feels overly pessimistic and just detrimental to the stock overall. The entire defense sector is suffering and after the run up from the December lows, I find it hard to see this stock running much higher in the near future. As such, I'm downgrading Raytheon to a 3. As I said, I'm looking to sell and it will likely be on whatever strength I can find in the near-term. I would've loved to sell yesterday, but was unable to do so. So now I'm looking for an opportunity on a strong market day this next week. As such, I will not provide any price targets for the stock.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-35872636042404113602019-01-30T14:52:00.001-08:002019-01-30T14:52:10.266-08:00Earnings Analysis: Apple (AAPL)<div id="PBT-fn" style="display: none;">
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Apple announced revenues of $84.3B, which was below the adjusted consensus of $83.97B and earnings just beat expectations of $4.17 by coming in at $4.18. It's important to note that these estimates were adjusted down based upon the earnings miss notification that was provided at the beginning of the month. However, it's equally important to note that it's not as bad as analysts were expecting. When you get a preannouncement, the key certainly won't be the past numbers, as they've already set expectations there. The key information is going to be more about the deeper details as well as the forward guidance and readthrough on the current quarter performance to date. We'll get to all of that in this recap, but let's start with the deeper numbers on the Quarter.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">To start with, the cause of the poor performance in the quarter was related to iPhone sales - particularly in China. As such, it's no surprise to hear that iPhone revenues were down 15% year over year to $51.98B. That seems to be the only real under performer, though, given Mac sales were up 9% to 7.42B and iPad sales were up 17% to $6.73B. Clearly those items are a much smaller portion of the revenues for the company, though. In addition to this, wearables and home accessories (iWatch, iHome, earPods, etc) rose 33% to $7.1B and Services grew 19%, growing to above $10.8B, as the company preannounced, to $10.9B. All of these numbers came in above analyst expectations, which shows how negative they were. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">China was the clear factor as it's sales growth was down 27% compared to a year ago. The rest of the world held up well, overall, despite management's commentary calling out global economic slowdowns. The company spent about $8.2B in share buybacks, which was probably ill-advised, given how the stock got hit afterwards. That said, the rate of buybacks is slower than before and the company stated they want to be "more disciplined," which means they want to take better advantage of market conditions. Those buybacks are a strong reason for why earnings were up despite revenues down. They still have $245B in cash and only $115 in debt. The company has a goal to become net cash neutral, so don't be surprised to see more share buybacks, as they still have around $130B to go before they reach the neutral point. From a services perspective, the company has provided information, for the first time, stating that services margins are 62.8%, compared to iPhone which was 34.3%. Add to that a strong and all time high installed base and subscription growth at around 120M per year with the company looking to expand on offerings, and you start to hear more details around the impact of services, which is a reason to hold this stock.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Finally, looking more ahead, guidance was a little light with revenues expected to be around $55 - $59B, while analysts were expecting $58.9B. There will be a 2% forex hit anticipated as part of those reduced earnings and maybe the analysts are thinking the company is setting up for a number they can hit. Looking at risks going forward, it's hard to say we're out of the woods yet. The Fed has gotten softer, which should help keep the strength of the dollar and forex hits in check, but the trade war that is still wreaking havoc on the Chinese economy is still unresolved. Even if a deal is struck, there's no guarantee that their economy will take off again, either. Despite the fact that the stock took off today, I still feel a little cautious. You have to believe that the deal will be struck and everything will be fine and I'm just not there yet. I certainly don't want to be pessimistic either, because if a deal is struck, I do see the stock going higher still. I just don't feel the risk/reward for the price after the run is good. I would wait for a pullback - maybe into the mid to upper 150s before I think of buying anything more. For forward estimates, I expect 2019 earnings to be $12. I think a multiple of 15 is quite reasonable, despite the fact that revenues will be flat to slightly down on a year over year basis. The company still has a hoard of cash and 15 times is still below the S&P average multiple - probably fair for declining revenues and a company that's shifting from a sales to subscription model. That leaves me at a price target of $180. A China deal might put me to $200 again. Because of the Trade risks, I am leaving the stock as a 2 for now. If a deal is struck, I expect to upgrade the stock, but I anticipate a failure to strike a deal in this meeting to have a negative impact as we'll become uncertain and push into the final hours for a potential deal that prevents us from seeing further tariffs to 25%.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-21202470731835354372019-01-13T07:39:00.001-08:002019-01-26T11:56:18.246-08:00Earnings Analysis: Citigroup (C)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg">
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<div dir="ltr"><font face="arial, helvetica, sans-serif">Citigroup announced fourth quarter and fiscal year 2018 annual results back on January 14. Results for the quarter were a little mixed, as earnings of $1.61 beat estimates of $1.55, but revenues of $17.1B missed expectations of $17.59B. While the results weren't what the street was looking for and the initial numbers provided a hit to the stock's price, management's subsequent commentary provided a significant change in sentiment and we've watch the stock price raise closer to its tangible book value in the two weeks since. </font></div><div dir="ltr"><font face="arial, helvetica, sans-serif"><br></font></div><div dir="ltr"><font face="arial, helvetica, sans-serif">Looking a little deeper into the numbers themselves, revenues were mostly hit due to an under performing fixed income market in addition to assets that were sold off as the company continues to shed its remaining legacy businesses that doesn't fit overall goals. The fixed income issue is something that has been seen across all money center banks and Citigroup is one of the largest players in this space, so it is not a result that is fully under their control. Something to add to the overall encouragement is the 4% reduction in expenses, showing disciplined control and flexibility with their costs when macro events impact the company. This is also seen through how money flowed through to earnings despite lower revenues. In the company's commentary, they commented on how they continue to see strength in the overall economy, despite what the market has been indicating as of late. However, if that landscape changes, they have and are prepared to pull a number of levers to be agile with business conditions while also ensuring they continue to invest in their long-term view. Return of total common equity (RoTCE) results for the year were at 10.9%, which handily beat their expectations of 10.5%. This is turning out to be the measure to watch, despite the fact that the focus on FY18 was the company's efficiency ratio, which missed their goals and ended up being lower than last year by nine basis points. Global Consumer Banking (GCB) increased revenues by 3% on the year while Institutional Clients Group (ICG) increased revenues by 1%. US Mortgages were down significantly, but deposits were still on the rise. Latin America grew 8% on the year, while Asia saw some pressure this year due mostly to lower investment revenues related to poor market conditions. Credit trends were mostly stable as credit losses rose slightly related to portfolio volume growth and overall seasoning of the portfolio. Meanwhile, in ICG the total banking group increased revenues 5% from a year ago with Treasury & Trade Solutions leading the way with 7% growth. Total Markets and Securities Services took a beating, though, with revenues down 11% from last year, mostly driven by the 21% decrease in the fourth quarter for the Fixed Income Markets. Trading was volatile in the fourth quarter and the company found the environment to be challenging.</font></div><div dir="ltr"><font face="arial, helvetica, sans-serif"><br></font></div><div dir="ltr"><font face="arial, helvetica, sans-serif">Looking forward to fiscal year 19, the management team saw continued strength ahead. The company returned $18.4B in the form of dividends and share buybacks which resulted in an eight percent reduction in overall shares. All signs lead management to believe that they will continue to be able to distribute capital which will allow them to reach their goal of $60B by the end of 2020. They have changed their metric focus to the RoTCE and they are increasing their target from this year's results of 10.9% to 12%. </font></div><div dir="ltr"><font face="arial, helvetica, sans-serif"><br></font></div><div dir="ltr"><font face="arial, helvetica, sans-serif">Nothing in this report gives me reason to feel like I should be preparing for some form of recession. While the Fed will likely slow the rate at which it increases rates and improves banking margins, the increase is still in front of us and there's less likely a recessive economic risk that could cause those margins to contract. I expect the company was in the market buying shares hand over fist while the price was below TBV. I still expect them to be in there, but I also expect that they'll slow the rate of purchase to see if the market takes the price back down. Speaking of TBV, I am targeting a 2019 TBV of $67.65. I believe the stock can receive a 1.1 multiple of that price, too, setting my 2019 price target at $74.50. I'm also expecting the annual earnings number to hit at $7.50. Despite the rise in the price since the earnings release, I am going to keep my ranking at a 1 for now, but caution that there is room for the stock price to pull back on any Fed or Chin Tariff news. Keep prepared for this.</font></div><div dir="ltr"><font face="arial, helvetica, sans-serif"><br></font></div><div dir="ltr"><font face="arial, helvetica, sans-serif"><br></font></div><div dir="ltr">
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br>Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-82877842743797803992019-01-13T07:37:00.001-08:002019-01-13T07:37:49.365-08:00Trade: Canopy Growth Company (CGC)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On January 9, I pulled the trigger and purchased another one-sixth of a full position in Canopy Growth Company at a price of $32.80. This wasn't at a lower price or below $30 as my last purchase, which was a bit disappointing, but the stock had started to build a trend that it wasn't going to sell off again, so I bought in - despite the stock being up over 5% at the time. This also followed what was interpreted as a disappointing fourth quarter earnings result from Constellation Brands, who has provided a significant investment into Canopy. It was clear that commentary around the cannabis investment were strong and that more positive results were expected as we hear more from the industry. Since the announcement and the purchase, the stock has continued to climb unabated, closing the week at a price of $38.25 - a 16% increase from my purchase price. I don <b>not</b> expect this climb to continue like this, given the stock has risen over 30% on the week alone. Expect this run to fizzle out and probably even pull back again. At these prices, I still believe this stock to be well priced for long-term speculation. Unless I believe I can get in and out of the stock with 30 day gaps to account for Taxation, I'll be holding onto shares even if the stock pulls back down into the 20s, but I am certainly less likely to purchase more shares at these prices. I reiterate my rating of a 1 on the stock.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-66571212205930164762019-01-13T07:23:00.001-08:002019-01-13T07:27:08.666-08:00Trade: Raytheon (RTN)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On Jan 7, I sold another third of my position in Raytheon at a price of $154.90. As I said in my <a href="https://trackinvestmentlogic.blogspot.com/2019/01/trade-home-depot-hd-and-raytheon-rtn.html" target="_blank">last trade</a>, I've decided that while the company itself is strong, that I don't feel it is in a sector that has favorable outlooks at this time. There is too much uncertainty around the FY20 budget with the new Democrat-led congress. Given that prices have been on a rebounding jump, I felt the price increase warranted lightening up on my holding at increasing my cash position so it would be available to go after better options, should the market take a turn down again.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-86252585598451901562019-01-05T07:40:00.001-08:002019-01-05T07:40:30.426-08:00Trade: Home Depot (HD) and Raytheon (RTN)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Yesterday I made the move to do some stock trades. I bought back the shares I sold a long time ago to put my money back to work (instead of just playing with the house's) at $173.80 and I sold a third of my position of Raytheon at 153.38. These moves were made after we got a very strong jobs report and Federal Reserve President Jerome Powell finally softened his stance on the economy, inflation, and the need to raise rates.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Home Depot</b></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">While I certainly didn't get this stock as low as I would've liked to, it was harder to pull the trigger then because I had less favorable scenarios to work with. With less pressure of rising rates, ongoing positivity for job and wage growth that isn't growing wildly, and 10-year rates now back down around 2.67% we have an environment that can be helpful to home building, buying, and remodeling again. With spring around the corner and a consumer that has proven to be strong through the holiday season, I expect to see further retail strength. As such, I wanted to get back into a stock that is still down over 40 points below its high.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Raytheon</b></span><br />
<span style="font-family: arial, helvetica, sans-serif;">Unfortunately Raytheon is a play that just hasn't been playing out to my thesis that it would be a highly valued stock due to ongoing political tensions and a global military that is in need to further bolster itself due to the US stepping away from providing military support. On top of that we have a democratic congress that was just sworn in, making it likely that expecting larger military budgets to be harder to come by. While I think the company has the ability to do a good job, the industry as a whole is likely to under perform the market for now. As such, I've decided I would take a 23% loss on this part of my stock and look for continued strength to remove the position completely. As such, I'm also lowering the stock ranking to a 3.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-37626276432179070322018-11-11T07:20:00.002-08:002018-11-11T07:20:55.099-08:00Earnings Analysis: Apple (AAPL)<div id="PBT-fn" style="display: none;">
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On November 1, Apple announced it's fourth quarter results for fiscal year 2018. Revenue rose twenty percent to $62.9B and earnings rose forty-one percent to $2.91. Most important in the transforming Apple story is the continued growth of the services sector, which grew twenty-seven percent YoY. This is important, because it's this services story which I believe will change how the stock is looked at and valued more as a consumer products company than a tech provider. Services provides an ongoing revenue stream even if phone sales are choppy or peaking out. That said, phone sales are still looking good on the revenue front as the company reported a 29% increase YoY and per-unit prices were higher than expected at $793, meaning the higher end phones were wildly sought after. All of these numbers beat analyst expectations, but the headline numbers aren't what has driven the stock's action since the announcement.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Forward guidance was pretty much in line with expectations, anticipating revenues between $89M and $93M. So if the future isn't looking so bleak, what is going on? The biggest noise coming out of Wall Street since the announcement is the fact that going forward, Apple will no longer report on phone sales numbers. The company has deemed the number of phones sold per quarter to no longer be an accurate representation of the progress the company is making. To me, this doesn't seem terribly surprising. We're reaching a law of numbers point here where phone sales numbers are likely to be maximizing and growth in those numbers are likely to be slowing. The per unit price is more telling of how the company is doing as it shows their pricing power - their ability to increase the price of their product without the consumer going elsewhere. It also shows that Apple is looking to their next source of significant growth, in which I believe will be the services offerings that have been growing so well. These services create an ongoing revenue string against the millions of phones they've already sold - consider it a multiplying factor to the already made sales. This isn't how others see things, though. They, instead, feel that the company is trying to hide something and there is dangerous downfall in the future. As such, estimates are being lowered for next year and the price has been dropping. Even with the estimate cuts, though, the company is selling at 15 times next year's lowered earnings estimates while still growing earnings by over 13%. Not taking into account the large amount of cash the company is sitting on (which can be used to buy back shares and increase EPS), this valuation is really low in comparison to so many companies out there. And if you want to compare this to a consumer products company, they are growing at 5% if they're really doing well and getting valuations of 18 times or more for that growth. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In all, the quarter was spectacular. Forward guidance was acceptable and the company continues to be valued on the lower side of things while bearish people whip up any kind of negative story possible to incite fear and get people to let go of the stock. I'm not going to be one of those people as I don't see reason to flee at this time. The stock already appears to be putting in a floor around the $200 mark, though it could go lower yet if we have broad selloffs in the market. I feel the company is under valued because people just refuse to believe any one company can continue to do so well (Hello, Berkshire Hathaway? No one seems to discredit that one's ability). I'm estimating 2019 earnings of $13.75 and I'm giving it a multiple of 18. That leaves my price target at $247.50 and given the fact that leaves room for 25% growth from where we're at, I leave my ranking of the stock at a one. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-13348681233911129752018-11-04T08:54:00.001-08:002018-11-04T08:54:22.529-08:00Earnings Analysis: Cedar Fair (FUN)<div id="PBT-fn" style="display: none;">
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Back on Tuesday, Cedar Fair announced the results of their third quarter operations. Results were pleasantly pleasing as revenues came in at $664M, which is about 1% better YoY. Earnings came in at $3.76 which was well in excess of analyst expectations of $3.25. Results were bolstered by an increase of both attendance and spend coupled with cost management within the organization. July was seen as a volatile month for the company, weather-wise, resulting in lower than expected visitation during a key portion of the year. However, in the following two months of the quarter, attendance and spending rebounded and exceeded expectations as season pass holders returned to the facilities with better overall weather patterns. This trend continues into October with the various Fall festivals which they hold and 2019 season pass purchases are off to a strong start - to show ongoing strength for the next year. As a result of these patterns and how it fits into management's view of the world and the progression of their strategy, the board has approved a 4% distribution increase effective this quarter. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">To do their best to compensate for the impact weather has on the business, management continues to employ a strategy that leverages the use of hotels and amateur sports facilities to draw a continuous flow of revenue. This work requires ongoing investment over the coming years to see the results as it takes time to build facilities. From a long-term investment strategy, I think this is wise. However, I don't see it benefiting the stock over the next 12 months. Analysts are clearly worried about three things. First is whether or not the company will have to reduce their payout, which is now just over 7% after the increase announced. The second is weather pattern related, as they want to know if weather will continue to have these large negative impacts despite management saying that it typically evens out over the course of the year. Finally, they are also worried about costs - particularly in terms of wage inflation. As the economy has been heating up and the current job rates are at the sub 4% levels that they are, it is expected that wages are going to grow to get the necessary talent. The company will be challenged to keep rising costs under control as well as proving they have pricing power. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">This all brings me to my position on the stock. The quarter's results were, indeed, good. I can imagine how much better it would've been were weather patterns more favorable in one of their busiest months of the year - you're probably looking at $4 earnings for the quarter. As such, it's possible that the company is currently under valued and there is great upside in front of this. However, there are a couple things that aren't sitting well with me either. The first is the short-term view I just spoke of. I see it taking time to see the benefit of the accommodations efforts and because of that, this may not be the time to be in the stock unless you're willing to tread water. The second thing that bothers me is how promotional the company has become. CEO Richard Zimmerman said the following in his conference call remarks (bold call outs are my own):</span><br />
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Our third quarter results reflect a successful execution of a number of aggressive targeted promotional activities that not only drove volume but protected the integrity of our mission pricing structure and drove increases in in-park spending.</div>
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These initiatives include the continued expansion of multi-week special events such as Cedar Point Nights on the park's our mile-long beach, Christian Music Concerts, and DOLLAR DAYS promotion where <b>value-oriented guests</b> can buy hotdogs, pizza, and other food items for a dollar. During the quarter, we also activated incremental distribution channels such as <b>Groupon</b> and introduced new promotional product such as a park and play ticket and a <b>discounted senior ticket</b>.</div>
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<span style="font-family: Arial, Helvetica, sans-serif;">I understand promotional activities are a necessity to drawing customers to your parks and accommodations. What bothers me is that these promotions appear to be leaning towards price discounting and targeting customers who are not likely to continue to come to the parks when those discounts undoubtedly end. One thing I've learned from having Pepsico in my portfolio is that discount promotions are a double-edged sword. They may increase volumes, but if the customer isn't willing to pay more later it's going to hurt you at some point. The third thing that bothers me some is historical trends. The stock, historically, doesn't perform as well in times of high economic growth. People who feel better financially are more likely to take a big trip or go on other kinds of adventures instead of going to their local theme park. Attendance on the quarter refutes my thought process, however, on the year it is still in line, with attendance numbers still down on the year compared to a year ago. We won't know for sure until the end of the year. Finally, I'm also concerned about the company's messaging and how it has changed. In the past it was about EBITDA growth and reaching the $500M EBITDA target. Yes, it's true that they have missed this target and I'm just as disappointed as they are. However, I get concerned when a company starts promoting how great/high it's (dividend or distribution) payout is. This tends to be a red flag more often than not for most companies. So to hear management state numerous times how much value there is as shown by the 7% yield, my hairs start to go up. I want to know more about how the company is growing than how valuable they are.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">As such, I currently maintain this stock with a rating of a three. While I believe the strength in the quarter can be a positive and maybe the negatives are already priced in, I'm finding myself in a difficult position to believe otherwise yet. Admittedly, I can easily second-guess myself right now. However, I just don't see the growth the company needs to warrant a multiple of 20. Given growth and interest rate impact, I expect 18 is more acceptable. I do believe if growth can't be found, it will mean the yield and payouts are also at risk. Should the economy start to falter or growth be found, my position would change. Taking analyst expectations of earnings for 2019 to be at $3.23 (they often seem to be high with their expectations), I see a price target for 2019 of $58. So I do see about a 10% upside possibility if the markets can find reason to be hopeful of growth. If not, I find it hard to see the stock above my initial selling price of $55.25 any time soon.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-43841452967533282252018-11-03T08:09:00.003-07:002018-11-03T08:09:56.786-07:00Earnings Analysis: Raytheon (RTN)<div id="PBT-fn" style="display: none;">
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Back on October 25, Raytheon announced strong operational results for their third quarter of 2018. Sales were up 8.3% YoY and earnings were up 14.2%. These results were stronger than wall street expected with revenues of $6.81B beating estimates of $6.69B and earnings of $2.25 killing expectations of $1.97 per share. Backlogs also grew to new record levels of $41.6B, increasing by almost $5B YoY. This resulted in a guidance update for 2018 bookings to increase by $1B. Additionally, the company provided a preview to 2019 guidance. Within this guidance, the book to bill ratio is expected to be over 1 (more orders than output), which is bullish. They also guided sales growth of 6%-8%, operating margins to be in line with 2018 results, a tax rate of 17%-19%, and operating cash flow of $3.8B-$4.0B.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Looking for negatives to note, operating margin results were down some and guided down some on the year mainly due to Missiles, which is seeing a number of new development programs which hurt short-term results. Also, results from the Missiles were slightly below expectations as was the results from their cyber initiative. Finally, there were a number concerns around Saudi Arabia after the recent killing of </span><span style="background-color: white; color: #333333; font-family: Roboto, Arial, sans-serif; font-size: 16px;">Saudi Arabian journalist, Jamal Ahmad Khashoggi. Feedback from management was that they don't expect major impacts and looking at 2019 they expect Saudi orders to be flat from 2018. They are a global security company, so they don't have any reliance on 1 customer. That said, should something come about, Saudi deals equate to about 5% of 2018 revenues.</span><br />
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<span style="font-family: arial, helvetica, sans-serif;">In the end, I feel the quarter's results were extremely strong and guidance for the rest of 2018 and 2019 were rather positive. I do believe the market has decided to price in risk concerns of Saudi Arabia sanctions as a part of the overall negative sentiment that has resided lately. It's worth noting, that since this report, the stock's price dropped dramatically - around $20 and has since recovered to prices slightly above where it was when they reported. The stock did suffer hits previous to that too. Given the outlook and continued need for outside countries to support themselves, I foresee continued success for Raytheon. While the US government has increased its spend on defense and that should be seen in 2019, there are concerns, currently, around mid-term elections and whether or not defense spending will remain intact. I believe these are over reactive assessments, given both Republicans and Democrats have been in favor of defense since 9/11. I am maintaining my ranking of a 1 for this stock. I anticipate 2019 earnings of $11.50 and a fair multiple of 20. This results in a 2019 price target of $230.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-91533060303566674972018-10-31T08:16:00.001-07:002018-10-31T08:16:15.331-07:00Trade: Canopy Growth Company (CGC)<div id="PBT-fn" style="display: none;">
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<span style="font-family: "arial" , "helvetica" , sans-serif;">After watching the stock drop to the low 30s and start jumping back up with what appears to be a turn in the overall market, I have decided to purchase one ninth of a position of Canopy at a price of $36.50. This is a very small position to take advantage of prices significanctly below my cost basis while also leaving me room for the stock to go back down further - given that I am making this purchase at a time the stock is up over 8% on the day. I continue to belive that Canopy is the best - potentially the only direct pot play and I play it as a speculation for long-term gains as the company continues to gain footing and take market share of failed companies in countries where cannabis is legal as well as being a leader into the next countries that legalize it. Additionally, I am not convinced the stock is done going down. I still believe prices in the 20s are possible, and as such this is why I'm taking a more concerted effort to buy smaller positions. I wish to make sure I don't miss out on price opportunities, while also not running out of gun powder to use to take advantage of the wild price movments and my anticipation of lower prices to come.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-54162105233300018272018-10-30T18:29:00.000-07:002018-10-30T18:29:55.345-07:00Earnings Analysis: Honeywell (HON)<div id="PBT-fn" style="display: none;">
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On October 19, Honeywell announced their third quarter earnings results and they were fantastic. Earnings came in at $2.03, beating out the $1.99 estimates while revenues came in at $10.76B which just edged expectations of $10.75B. Organic sales came in at 7% which was the very high end of the anticipated range while margin expansion exceeded their range by 20 basis points on a 50 basis point high end. On top of that, the company exceeded the guided amount of capital returned to shareholders via buybacks by $1.5B on a $3B guidance. Hopefully, the company was buying back shares towards the end of the quarter when the stock was getting hit its hardest, but if it was, we certainly haven't seen it in the stock prices since - outside of the fact that they may not be in a window in which they can buy back shares now, resulting in less of a floor of protection for the stock. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">All segments performed well for the company with SPS and Aero leading the way with double-digit organic sales growth. This is a pretty impressive stat for such a large conglomerate. Growth in the portfolio was strong with very little negatives to talk about. All while spinning off 2 new companies from parts of their homes and autos portfolios at the same time - and ahead of time. While all this news from the past was good, what really catches my eye is their forward guidance. With all of the tariffs and economic slowdown talk that is taking place, this company continues to expect organic growth of 5-6% next quarter - despite the completion of the spin-offs. In fact all numbers on the year are expected to outperform despite the spin-offs. And as they provided a very early rough draft for 2019, they still see strength in their end markets despite all of the tariffs and resulting cost increases they may see in relation to this. One advantage is that the company focuses on local delivery, but if China's economy is slowing, you'd still expect this to be a concern to top and bottom line results. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Since the announcement, the stock has been absolutely trounced in line with all of the tariff and interest rate fears going through the market. There is anticipation of a slowdown from these events and this concept is getting priced into the stock - to the point that I think it's overkill. At this time this stock is priced in at 16 time next year's earnings - if they only grew earnings by 10%. Their track record is showing it'll outpace that, given the forward guidance we're starting to hear and the consideration that this company continually plays things safe. As for me, I'm expecting earnings for 2019 to be $9.00 and I still believe this company deserves a multiple of at least 18. This would place my price target at $162, which is about 15% higher than today's closing price. I truly believe we're at a point where we are seeing great value in the stock, but that doesn't mean it's done going down yet. I'm feeling just as certain that the market is still trying to find a bottom, overall. Given the value, I rank the stock a one and encourage anyone looking to get a position to think about buying small positions starting now and see if you can keep your cost basis around here or lower.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-59208314644729282352018-10-30T17:55:00.000-07:002018-11-03T06:53:44.759-07:00Trade: Rezidio (REZI)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Yesterday, I received a small number of shares of Honeywell spinoff Rezidio as a part of the spin-off process. I have decided to sell the entire position at a price of $25.51. While I expect the company to perform well long-term, in the short-term this is a declining sector given the slowdown we've seen in home building and company investments. I anticipate the company to have to deal with this pressure over the next several quarters as a result and do not expect the stock to perform well. One thing that I do see as an interesting opportunity for this company is what happens with the United Technologies/Rockwell Collins merger. Should China decide to let this deal happen, United Technologies will likely split itself into 3 companies which will also include a home/HVAC space that I can see merging or being bought by Rezidio in the future. That said, I don't think the homework effort is worth the small number of shares I will have in the company as well as the stomach to deal with another stock on the decline when my portfolio has enough other things to be dealt with. The portfolio is getting too large to manage and this will be a cut to get that under control.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-13017663149025507152018-10-27T07:30:00.002-07:002018-10-27T07:30:38.111-07:00Earnings Analysis: Citigroup (C)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On October 12, Citigroup announced third quarter 2018 earnings results and they were rather strong. Earnings came in at $1.73, above estimates of $1.69. Revenues came in at $18.38B, which was slightly below consensus for $18.45. 75 million common shares were repurchased as a part of the $6.4B in returned capital to shareholders over the quarter. The Tangible Book Value also increased to $61.91. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Loan growth was up 3% from the same quarter a year ago and deposits were up 4%. Revenues from investing were also up nicely as the company took advantage of the volatile markets we've been experiencing since February. The fact that about half of the company's business comes from overseas also seemed to be a benefit, as there was less impact to their operations compared its peers who are mostly US based. Despite the fact that revenues missed expectations, it's not as bad as it may seem, given there was a sale of a Mexican Asset Management company during the quarter which had an effect on this. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Despite the overall positive information and results, of which Citi might've had the best quarter out of all the money center banks, the stock has taken a beating and is down at levels we haven't seen in about a year. The $64 area has consistently been a solid floor and given that management said that capital returns are accelerating in the second half of the year, I can only imagine what that will mean to the number of shares they're buying up around these levels. The flip side to that is to see the stock's price drop like this is a testament to why those shares need to be bought up. I feel like there is still too much stock supply. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">I'm going to readjust my TBV estimate for 2019 to $64.90 and maintain my projection of a stock value of 1.2 times TBV for a price estimate of $77.75. This stock is clearly a one at these prices as the stock is basically selling for the price of all its assets if they were sold today without any factor to the value and revenues they're generating. Clearly a recession would be a potential problem for the stock and the company's revenues - especially in loans, but I still feel the market is overreacting to a variety of political factors. That's not to say that I think the economy is booming right now. I'm starting to see too many signs that things are stalling - housing, auto sales, loans, business investment, etc. But I do not think we are in any kind of catastrophic event that can't be turned around with a few simple decisions. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-4671310214025879382018-10-27T07:02:00.002-07:002018-10-27T07:02:22.970-07:00Trade: Canopy Growth Compan (CGC), Disney (DIS)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On October 19 I filled another third of my expected position of Canopy Growth Company at $48.50. At the time I placed the order, the stock was showing a strong floor in the $45 - $48 range and was really struggling to get below $48. Given the stock had recently run up to the mid-50s and Canada's prohibition ended two days earlier. I felt the amount the stock pulled back seemed reasonable on the sell the news situation and dove in. We now know that choice was rather early, given the stock is now in the 38s after having hit as low as the 36s. Given the current market conditions and overall chart health, I'll be sitting back for a bit to see when/where this stock stabilizes before I think about filling my position. $35 is certainly a price area of interest, but I've also read that the stock could get down into the 20s. It's important to remember that a huge portion of this company's value is in cash from investment from Constellation Brands. That money will go into further investment in the company as it buys up those that fail to do well in this surge to serving the pot market. So the value is there and the amount the stock has dropped is a bit surprising, given this. One can only be surprised for so long, though, and discipline needs to come through to provide me a chance to be profitable in this speculation.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On October 24, I took advantage of a broad market selloff to buy up some Disney shares at $115.25. This is the second third of this position as well and while I thought I was being smart, getting the stock multiple percent above recent high level, little did I know what was about to happen shortly after the purchase. While I was aware that I was buying above my cost basis, the stock had shown strong resiliency during a time others were getting beat up. Seeing the stock down this much seemed like the opportunity to take, given that strength. The stock proceeded to get back down into the $111s the next day and currently sits in the $113s. I do anticipate the stock pulling back again and am looking at prices around $110 in order to fill my position. In relation to this, I also infused some funding to help me through this down market - mainly because Cedar Fair (FUN) has been beaten into the $40s as a result of this market selloff. The company reports on Tuesday and I expect this will give me the knowledge I need regarding selling immediately or waiting. At this point, though, it doesn't make sense to sell at these lows.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The markets are tough right now and I think the lesson is that I may need to buy smaller positions at times like this. It seems hard to do when you have to deal with transaction fees on these small amounts, but if you buy too much of a position in volatile and generally negative times like this, you could also really hurt your cost basis.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-67250608736761779132018-10-17T16:26:00.000-07:002018-10-17T16:26:02.710-07:00Trade: Cedar Fair (FUN)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Yesterday I sold approximately one third of my position in Cedar Fair (FUN) at a price of $55.25. This price represented a net loss of around 11.1% (tax harvested). As I stated in my Disney initation <a href="https://trackinvestmentlogic.blogspot.com/2018/10/trade-initiation-disney-dis.html" target="_blank">here</a>, I wasn't pleased with the results I've been seeing from the amusement park industry and noticed there seems to be something larger than just weather driving the lower than expected results (not to mention I've taken way too long to react to what I was seeing). As such, I'm shifting away from Cedar Fair in favor of Disney for a more broadly diversified holding that doesn't rely on just amusement parks, but entertainment more broadly. Third quarter results are coming up towards the end of the month and should they provide solid results, I may get a price pop I can take advantage of and maybe even get a small profit from. In the meantime, I wanted to sell this position to pay for the Disney shares I grabbed. I am waiting for my next DIS purchase opportunity, hoping it will be below my cost basis and will use that time to try to find better prices to sell Cedar Fair at. Getting rid of this position also allows me to get rid of the extra tax prep considerations post 2019 preps.</span><br />
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<span style="font-family: "arial";">When looking at my selling strategy, I didn't react well enough. I gave the company way more credit for what they were doing than they deserved. Under new leadership when you don't see continued strong results you need to get out quickly and I failed to do this. By the time the first miss announcement came out I thought the stock sold off enough to compensate, but that wasn't reality. I need to be more critical of activities and be careful of falling too far into weather narratives. While weather certainly has been an impact at times along the way, there is more I missed that I need to pay attention to. In the end, I'd say my lack of homework and staying on things are a reason for missing out on the nice gains I had. At the very least, I may have been able to sell some of the position just to take profits as things were appearing to turn ugly. But there is no real guarantee I would've done that. The lesson from here is to figure out how/when to do better with selling strategies like that.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-45457561250462134552018-10-14T17:16:00.002-07:002018-10-14T17:16:24.735-07:00Trade Initiation: Disney (DIS)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On Thursday, I purchased approximately one third of a full position in Walt Disney Corporation (DIS), otherwise known as Disney. This expands my portfolio into the entertainment space, given I currently hold shares of Cedar Fair (FUN). The purpose of this purchase is to begin a transition away from Cedar Fair. The company and the stock has not been performing up to expectations as of late. Despite the strong dividend of over 5%, the company lost all of the capital gains I had in it and then some. This was poor management on my part. Regardless of what I did or didn't do right with Cedar Fair, I still have faith in the Entertainment industry. However, I felt it would be more appropriate to diversify myself outside of just amusement parks. I feel the timing of this switch is ideal too. Besides the theme parks which Disney has and are doing well, they have TV via ABC channels and ESPN, which is starting to turn itself around with it's ESPN+ app and get itself repositioned as a sports leader. The company also has a number of new movies coming out between Star Wars and the Marvel Universe in which I expect them to heavily capitalize on via merchandising and brand recognition. Add on top of this the fact that they just closed the FOX deal in which they can expand their content even further and the streaming services for their content which they'll soon be launching, as they step away from the Netflix arena. All of this seems to align to a lot of growth opportunity in the next 12-18 months.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The dividend is less than 2%, which takes away some of the yield protection I had in my portfolio, however, if the economy does stay strong (if is dependent upon how much more the Fed raises rates and how the economy handles it), yield is more likely to be a detriment, given that many companies with higher yields are released for safer treasury notes instead during these times. It's the growth I'm after here. If I feel a need for more yield protection, I may just have to get that somewhere else. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">At this point, I rank the stock a 1, however I am hopeful the current market conditions will continue to give me some more buying opportunities below my cost basis. I also need appropriate conditions to release my other shares with minimal losses. That will be the goals I have in place for going into the end of the year.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-28482471135319892262018-10-14T17:03:00.002-07:002018-10-14T17:03:44.033-07:00Earnings Analysis: Pepsico (PEP)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On October 2, Pepsico announced their third quarter earnings results while saying goodbye to their CEO. This was the last day and last earnings call to be led by Indra Nooyi, a venerable champion in the business with her strong leadership pointed towards a strong future for the company by making sure they stayed in front of and fully involved in snack and beverage trends. I'll get more into the company's future as I close this up, though. As for the earnings results themselves, the company generated non-GAAP earnings of $1.59 which beat consensus by two cents and delivered organic revenue growth of 4.9%. Core constant currency growth was 9%. This included a 2% impact from currency conversion, given the recent strength of the US Dollar. They also guided up on their expectation for organic growth from less than 3% to at least 3%, a sign of confidence that their final quarter looks bright. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">While profit was down for the North American Beverages segment, Revenues again continued to improve, however, costs like packaging and transportation were on the rise - which was a significant impact on those profits. These result will continue the cat-calls we're starting to hear for the breakup of Pepsico again where Frito Lay is spun out to get a better price for its faster growth. With a new CEO at the helm, there is speculation that Nelson Pelts and his Trian hedge fund may come back at Pepsico for another shot at breaking up the company, after accepting the results of the last investigation about a year and a half ago. While I personally hope this isn't true, I certainly understand the logic people put to this, as a new CEO is best to reevaluate the portfolio and figure out how he'll put his stamp on things anyway. Given that the company may see increased stock price pressure, anything is possible as we move forward.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Outside of NAB, growth was strong pretty much everywhere around the globe - particular in snacks. New innovative products continue to hit the shelves and are met with good results. The introduction of a low sugar Gatorade has helped the case in the sports beverages space and now the company has purchased Soda Stream in an effort to appeal to the longer term trend of people wanting to eliminate bottles. Soda Stream was interesting before, but think about how much nicer it may be when you can simply make your own Pepsi, Mountain Dew, or a wide variety of Bubly or Bubly-like flavorings of sparkling water. I think there are some strong synergies and revenue opportunities, should Pepsic go down this route, however, this will only serve the home well. It currently will not serve the mobile consumer for reducing bottle usage.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Finalizing things by looking at the stock itself, Pepsico has become more of a diversification holding for me. I do not expect it to outperform the market with rising rates that now provide solid competition in comparison to Treasury notes. This general unfavorability will result in the stock's multiple going down, however in times like this past week when interest rates and the health of the economy scare people, it will be a go-to source for safety. The company expects to earn $5.65 this year and I'm estimating 2019 earnings of $6.15. I've lowered my multiple expectations to 18.5, resulting in a 2019 price target of $114. As I said, I expect this company to be slow going. Given it's current price, I maintain my current status of a 2, but if the stock does come in a bit more, I will upgrade and start considering price points I'm willing to buy, given my low cost basis.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-79889655873330782212018-09-21T17:09:00.000-07:002018-09-21T17:09:00.398-07:00Trade Initiation: Canopy Growth Corporation (CGC)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Last week I bought an initial position in Canopy Growth Corporation at a share price of $50. This company is an early entrant to the Canadian Pot industry as a producer of both medical and recreational marijuana, a new market that opens up the first of October, now that the country has legalized it. Pot stock have been hot - really really hot. There's no doubt that many of them, Canopy probably included, are over valued right now. While I was looking to speculate there's a lot of publicity in this area right now. I would say that I felt Canopy was one of the better stocks, though we all know there's another out there that has been surging in astronomical proportions due to shortage of stock availability. The nice thing about Canopy is that they're adequately capitalized and won't likely look to raise cash through offering more shares. However, there are a lot of other companies out there that will need to and even more that will be looking to go public and cash in. As that happens, I expect the stock to get hit with dilution. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">While this stock is meant to be an investment with a 12-18 month horizon, its volatility may not allow for that. I'm looking to purchase on wide scales on the way down, but at the same time, I'm prepared for the stock to go to about $83 at which point I might sell the current position. Major catalysts are the October 17 date in which Canada's repeal of marijuana as an illegal drug is lifted. This isn't a catalyst in a positive sense, as it could become a "sell the news" kind of point to watch out for. Additionally, as Canopy and others report after this date, I don't expect there to be these explosive revenue numbers to back the valuations of many of the stocks. This is another potential trigger that could burst the bubble - and it is a bubble, have no doubts about that. We will reach a point where this will pop and stocks will lose significant value. I hope to be out or slowly buying positions when that happens and signs of a bottom form. From there, I expect Canopy to have the potential to be a long term value and the potential for a buyout, given Constellation Brand's investment in the company already.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Have no doubts. This is pure speculation. I missed the crypto run where I could've capitalized on the craze and walked away with decent money. I might be late to this one as well, but I wanted to take the chance. We'll have to see how it goes.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-34343347316348737012018-08-27T14:18:00.003-07:002018-08-27T14:32:05.244-07:00Trade: IONIS Pharmaceuticals (IONS)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Today was a wild day for Ionis. After FDA results for a competing drug failed to show signs that it was effective enough to prevent competition for FCS in the mix, IONS was up over 10% at varying points during the day. I was contemplating selling some, given I was finally back in the green on the stock. However, there was a PDUFA meeting coming on Thursday for the approval on Volanasorsen on the radar and I didn't want to try to sell out and hope to get back in to maximize gains (typically after a big jump, the stock sells off for a couple days). Then after the bell, the stock was halted as the FDA issued a Complete Response Letter (CRL) notifiying their holding company Akcea that they have rejected their drug Walivra on serious concerns on safety with antisense oligonucleotide drugs. This puts the upcoming PDUFA in some jeapordy and the future PDUFA for Inotersen in serious jeapordy (due to the fact it suffered a death related to platelet issues), significantly reducing the potential for revenues in the near term, and puts into question the entire company. As a result, I sold my entire position at $47 to take as little of a hit as possible. I fully acknowledge that I may have panicked and missed a better opportunity to get out - much less the possiblity that the company won't go down that much from here. That said, the stock hasn't been performing well all year and now its future is currently more cloudy than ever. Even if I'm wrong right now, there's probably a better and safer time to get into the stock again - even if it's at a higher price. In the meantime, I also have the opportunity to find a better speculative stock that would better fit my portfolio. As such, I'm taking my lumps, living to play another day, and will track things for a little while to see what takeaways I can learn from my decisions.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-48084624169676484832018-06-27T14:04:00.001-07:002018-06-27T14:04:30.706-07:00Trade: Citigroup (C)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In preparation of the second portion of the CCAR results that will be announced tomorrow, I refilled my position in Citigroup today, purchasing shares at $66. Unfortunately, I didn't get shares purchased yesterday when the stock was in the $64s and then I pulled the trigger a little too early today, as the market started making a massive swing to the down side around the time of my purchase. My reasoning for purchasing the stock was that it was near the price target area I've been hoping for since I sold up in the $72 range and we now have a catalyst which I believe will charge all bank stocks in the second half of the year. </span><br />
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<span style="font-family: Arial;">The CCAR results have been an inflection point for bank stocks, historically, as they are then allowed to start to distribute their excess capital as per agreement with the Fed. I believe that Citi's captial distribution plan will be well received by the Fed, enabling them to distribute approximately $20B in dividends and stock buybacks over the year. Last year the dividend was increased to $0.32 and this year it is likely to grow significantly larger to enable them to share the excess capitalization they've accumlated to ensure they are viable in worst-case stress scenarios that the Fed analyzed them on. With the stock price near tangible book value, I expect the company will be quickly jumping in to buy up stock at these low prices, driving the price higher again. My expectations is that Citigroup will have one of the best, if not the best results in capital redistribution of all the money center banks.</span><br />
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<span style="font-family: Arial;">While the stock's charts aren't looking the best, I believe this catalyst will change the tide of how the banks have been performing as of late. I maintain my ranking of a 1 for the stock when prices are at these levels and reiterate my price target of $77.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-52637024784331774372018-06-19T18:21:00.001-07:002018-06-19T18:21:57.090-07:00Stock Initiation: Raytheon (RTN)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">After much contemplation, I decided it was time to move into a new position today and purchased half of my position in Raytheon at $188.50. Raytheon is a defense company primarily known for the production of Patriot Missiles - a surface to air anti-missle defense system. However, they also produce other items, play in cyber security and deep analytical analysis as well. My theory is related to the fact that the US is looking to bolster their own military capabilities, to which Trump's declaration for a space force added to, but also the fact that the US is no longer spending as much of its money to protect its allies. This means they need to increase their own purchases and Trump is using defense as something he's trying to push in all of his trade discussions. These situations, I believe, spell out a strong runway towards ongoing profits in what is generally a robust global economy right now. It is true that the Trade war pressures has the potential to strain some of the same world governments we're hoping to have spend on products, but I currently see that as a limited risk. Additional risk that exists right now is that the market is selling defense contractors on the concept that President Trump and North Korea's Kim Jon Un's meeting for peace indicates there will be less of a need for defense spending. I just don't see that being the case here. What they signed had no further impact than what was already established. While it has deescalated activities on the Korean peninsula for now, given the US's agreement to stop military exercises with South Korea, it's hard to believe these two large egos will stay in check over a long period of time. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">One of the reasons I chose to buy this stock is because it is now almost 15% below its 52-week high which was back in April. The story is strong, but the stock is getting beat up a bit. I could see this stock pushing towards a 20 percent decline, given the stock's current chart trends, however, I needed a good entry point so I don't miss things entirely. That said, This is also a potentially dangerous time. Defense companies have had a long multi-year run. At the same time, I'm trying to pick up a stock that's breaking through its 200 day moving average floor and has generally negative charting trends. I also believe it's going to break through and below that floor. That doesn't currently deter my longer term view, though, given that management has a solid history during tough economic times. But it is this negative aspect that I have to keep testing as I move forward as well.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Analyst expectations at this time are for earnings of $9.91 for 2018 and $11.4 for 2019, meaning they expect earnings growth of around 15% year over year. Currently the stock is selling for nineteen times those 2018 forward earnings at a time where we are starting to think about 2019 earnings. I see no reason why a stock like this can't be selling at twenty-one times earnings with 15% earnings growth rate. Given that I'm looking at 2019 earnings, I'm have a price target of $239. The stock does provide a dividend, but it's less than 2%, so not very helpful on the down side at this time. I believe my next buy point is when I see signs of a bottom or in the area of that 20% pullback.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-10551024608097048312018-05-19T09:10:00.000-07:002018-05-19T09:10:10.550-07:00Earnings Analysis: Pepsico (PEP)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Back on April 30 (yeah, I'm way behind), Pepsico announced their first quarter financial earnings for 2018. Earnings came in at $0.96, beating consensus by three cents and sales were $12.56B also ahead of analyst expectations of $12.35B. Finally, organic growth came in line with company guidance at 2.3%. In all, the quarter was solid. Maybe not perfect, but definitely solid.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">As has been the case for a couple quarters already, North American Beverages (NAB) under performed the overall company. There were operating and raw material inflation costs as well as some one-time bonus impacts. That said, NAB did improve performance quarter over quarter for the third quarter in a row. Guidance has been that this is the path they're on and that it will continue, so I see that as a positive at this point. There are worries among the analyst community about competition and pricing wars, particularly in the sports drink section, but management seems to have the facts to back up their strategy as well as some new products set to be released that are aimed to target key needs and desires, particularly in low calorie refueling options. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In the rest of world, beverages performed well, with mid single digit growth. Sub-Saharan Africa pulled in some of the greatest strength. Snacks continue to do particularly well with double digit growth outside of the US. With the success of Frito-Lay, we could continue to year occasional cries that beverages is holding the snacks values back. I trust this management team and the work they've done to prove the value of having both together.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Guidance remains unchanged for 2018, so I still expect earnings to come in around $5.75. What <i>has</i> changed, though is how we price the stock. Interest rates on the 10 year have gone above 3% and for the last month the stock has been beat up hard. People are not willing to pay for steady growth for a yield that is similar to treasuries. They want growth in this environment, and as such, we are seeing multiple contraction in action. I kind of saw this coming, but maybe didn't do enough to reap some profits before hand. Instead, I have raised my rank of the stock to a 1 and will slowly accumulate my position over time. I honestly don't think the stock is done going down, though it does seem to have some stability right now. ON anticipated earnings, the stock is trading around 17 times earnings and the yield is approaching 4%. I could see yield get near 4.25% if the economy stays good and it getting closer to 4.5% if things go bad. That means downside risk between $82 and $87. I do feel the company is worth a multiple of 18 which puts my 2018 price target at $103. Just note that we may have already hit that target on the year and we're more likely to just stroll around these levels for a while.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-7296068378751690442018-05-02T19:18:00.004-07:002018-05-02T19:18:50.935-07:00Trade: Pepsico (PEP)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Today I increased my position in Pepsico by 25% at a price of $97.25. While I haven't had a chance to complete my homework and post my review on the company's first quarter results, I do know the company beat expectations and provided a solid set of results for the quarter. The one thing that I noted to like, in particular, was the fact that North American Beverages (NAB) didn't do as bad as analysts expected. While there is some concern on all of the China and Tariff talks impacting the stock and the fact that the company is seeing more competition against the 10-year treasury, we've now seen the stock drop roughly 21% from its 52 week highs. This selloff is getting to be over done and any good news could sent the stock higher. If the stock drops to $92.75 we'll see the stock yielding 4% and that's far from typical for this consistent player. I do have more room in my position and cash levels to take advantage of more down side - and I do see potential for more of it - but we're now reaching points where it makes sense to have a larger position in the stock.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Please stay tuned for my upcoming notes from the quarterly results to get a deeper understanding to why I think this was the right move to make.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0tag:blogger.com,1999:blog-5261710360218682190.post-66264650311515508062018-05-01T18:34:00.001-07:002018-05-01T18:34:14.628-07:00Earnings Analysis: Honeywell (HON)<div id="PBT-fn" style="display: none;">
<img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7iHgZ4nUeVOAfb5w-LhCVM0XQeQ_mYJVa4uoHAKQpp6EZHC137m39mP2okPoqB5qJfNQ-q83D_qb7MArQJ1pLY1s0RjxJrEZ2Ti5UkC_BnvTo8Gojea9j3I1KpM54wqPq02-Hw8_bxr8/s200/stock_blog_image.jpg" />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Back on April 20, Honeywell announced the results of their first quarter operations. Results were strong, with earnings coming in a $1.95 and sales coming in at $10.4B - both of which were beats against expectations of $1.90 and $10.02B respectively. Organic sales also beat guidance of 2% - 4%, by resulting in 5% along with 40 basis points of margin expansion and $1B of cash flow. Additionally, the company spent $1.4B in share repurchases ($950M) and dividends since there weren't ideal investment opportunities to go after. Growth was led by the aerospace division with 8% organic growth along with 6% organic growth from the Safety and Productivity solutions division. Home and Business Technologies and Performance Materials and Technologies grew 2% and 3% organically, respectively. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Results were strong enough that the company raised EPS guidance to a range of $7.85 - $8.05, raising both the lower and upper ends. They anticipate organic growth of 3%-5% and the sales of the businesses planned to be spun off this year continue to be on time with third and fourth quarter target timelines. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Despite the positive news and performance, the stock has not responded well. It seems that expectations were for higher results than what was provided and after a short jump, the stock has fallen back down some again. I see this as a short-term result, given the strong performance and guidance by the company's trustworthy management, but all of the Tariff talk is spooking people out. The company stated there was almost no impact by the initial set of tariffs and they're monitoring things closely. With much of their production actually in China, I see less of an impact to Honeywell than many perceive. It is possible the Chinese boycott the company in some way, but that's going to happen to other companies long before this one. I continue to hold onto the stock for the value creation of the spinoffs as well as the general strong performance by this leadership team in general. Aerospace is in the early stages of growth, the global economy is still doing well, overall, and Honeywell appears well positioned to take advantage. </span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Given the guidance improvement, I'm increasing both my earnings estimate and price target for 2018 to $8.00 and $168 respectively. I'm maintaining my multiple of 21 for the time being. I'm also maintaining my rating of a 1, given the prices we're currently at. Were it not for my full position, I'd be looking for small buying points at these levels with another buy point around $140. The market is extremely fickle now, after being fairly laid back last year. While it has been hard to perform well, I believe my long-term strategy in this holding is staying true to its vision. That doesn't always mean the market will price it accordingly, though. These are the times to work at taking advantage, but you have to be able to stomach the action.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span><span style="font-family: "arial" , "helvetica" , sans-serif;"></span><i><span style="font-family: "arial" , "helvetica" , sans-serif;"></span></i><i><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: x-small;">Notes:<br />Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.</span></i></div>
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<span style="color: #999999; font-family: "times new roman"; font-style: italic;">Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities. All views expressed are solely of my own and I am not a professional money manager. Please consult with your financial adviser before taking any action in your own portfolio.</span></div>
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Mikehttp://www.blogger.com/profile/05213593539131186282noreply@blogger.com0