Tag Archives: consumer

The V20 Portfolio – Relative Calm

Summary The V20 Portfolio declined by 0.51%, less than S&P 500’s gain of 0.04%. The share repurchase program will continue to support Conn’s. I wouldn’t worry too much about MagicJack. Despite lower activation, the company continued to produce good cash flow. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! The S&P 500 was essentially flat this week, rising only 0.04%, beating the V20 Portfolio’s performance of -0.51%. While the V20 Portfolio didn’t beat the index, considering its historical volatility, the “decline” was inconsequential. Portfolio Update Our biggest position, Conn’s (NASDAQ: CONN ), continued to rally, rising 5% from $25.72 to $27.02. This echoes my sentiment in my previous update, that the company’s share repurchasing activity will continue to buoy the share price. As the company inches closer to its Q3 earnings in December, it would appear that investors are quite optimistic (or at least more optimistic than before). Month to date, shares have risen by 42% from its low in October. Last week I also mentioned that we should pay attention to the consumer sentiment index, which could impact investor expectations, especially for the retail sector. Recently we’ve seen several retail stocks fall (e.g. Walmart, Best Buy). The final consumer sentiment index for November was 91.3, which was higher than October’s reading of 90.0. This hasn’t stopped investors from dumping retail stocks however. Fortunately for us, Conn’s buyback program will offset this near-term downward pressure. MagicJack (NASDAQ: CALL ), previously our largest position, continues to account for a substantial portion of the entire portfolio (~20%). It was quite surprising when I heard of news of a short attack on the stock. MagicJack can possibly take the title for the worst short candidate in the world with its high cash balance and high cash flow generation. These are the reasons why I still want the V20 Portfolio to get some exposure to the stock in the first place. I haven’t bothered to write a piece rebuking the short pitch, since it doesn’t reveal anything that we don’t all know already. The facts are right, but everyone is entitled to their own interpretation. Ever since day one, I believed that MagicJack’s value is derived from a core group of customers that will renew year after year. Now that shares have appreciated from a few months ago, more value has to come from growth. But this doesn’t change the fact that the company still has a good business (albeit declining) that is generating cash flow year after year. Furthermore, growth opportunities come at almost no cost to MagicJack. There aren’t expensive projects that would require a truckload of cash or any upfront commitments that would put a drag on the company’s current operation if things don’t go their way. In other words, the company can’t really lose with these expansions Looking Ahead Conn’s will report Q3 earnings next month. From a sales perspective, we know that Q3 numbers will experience a boost from new stores. The company releases monthly sales data, so the revenue increase should be expected. The determining factor will be the company’s bad debt expense, which forecasts future delinquency rates. The company has made significant improvements in its credit policy, so I believe that the number could improve. After all, the company is now lending to more credit-worthy customers. Dex Media (NASDAQ: DXM ) is still undergoing restructuring negotiations. The forbearance period was supposed to expire on Monday, but it was extended since the negotiation is still ongoing. It would seem that the forbearance period is really just a legal nuisance, and could be dragged on while negotiations take place. Nevertheless, I do believe that Dex Media is very close to its end-game, and shareholders will soon know the results of the restructuring. The amended forbearance period expires on December 14th, so keep your eyes peeled for any new developments. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

The V20 Portfolio Week #8: Relative Calm

Summary The V20 Portfolio declined by 0.51%, less than S&P 500’s gain of 0.04%. The share repurchase program will continue to support Conn’s. I wouldn’t worry too much about MagicJack. Despite lower activation, the company continued to produce good cash flow. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! The S&P 500 was essentially flat this week, rising only 0.04%, beating the V20 Portfolio’s performance of -0.51%. While the V20 Portfolio didn’t beat the index, considering its historical volatility, the “decline” was inconsequential. Portfolio Update Our biggest position, Conn’s (NASDAQ: CONN ), continued to rally, rising 5% from $25.72 to $27.02. This echoes my sentiment in my previous update, that the company’s share repurchasing activity will continue to buoy the share price. As the company inches closer to its Q3 earnings in December, it would appear that investors are quite optimistic (or at least more optimistic than before). Month to date, shares have risen by 42% from its low in October. Last week I also mentioned that we should pay attention to the consumer sentiment index, which could impact investor expectations, especially for the retail sector. Recently we’ve seen several retail stocks fall (e.g. Walmart, Best Buy). The final consumer sentiment index for November was 91.3, which was higher than October’s reading of 90.0. This hasn’t stopped investors from dumping retail stocks however. Fortunately for us, Conn’s buyback program will offset this near-term downward pressure. MagicJack (NASDAQ: CALL ), previously our largest position, continues to account for a substantial portion of the entire portfolio (~20%). It was quite surprising when I heard of news of a short attack on the stock. MagicJack can possibly take the title for the worst short candidate in the world with its high cash balance and high cash flow generation. These are the reasons why I still want the V20 Portfolio to get some exposure to the stock in the first place. I haven’t bothered to write a piece rebuking the short pitch, since it doesn’t reveal anything that we don’t all know already. The facts are right, but everyone is entitled to their own interpretation. Ever since day one, I believed that MagicJack’s value is derived from a core group of customers that will renew year after year. Now that shares have appreciated from a few months ago, more value has to come from growth. But this doesn’t change the fact that the company still has a good business (albeit declining) that is generating cash flow year after year. Furthermore, growth opportunities come at almost no cost to MagicJack. There aren’t expensive projects that would require a truckload of cash or any upfront commitments that would put a drag on the company’s current operation if things don’t go their way. In other words, the company can’t really lose with these expansions Looking Ahead Conn’s will report Q3 earnings next month. From a sales perspective, we know that Q3 numbers will experience a boost from new stores. The company releases monthly sales data, so the revenue increase should be expected. The determining factor will be the company’s bad debt expense, which forecasts future delinquency rates. The company has made significant improvements in its credit policy, so I believe that the number could improve. After all, the company is now lending to more credit-worthy customers. Dex Media (NASDAQ: DXM ) is still undergoing restructuring negotiations. The forbearance period was supposed to expire on Monday, but it was extended since the negotiation is still ongoing. It would seem that the forbearance period is really just a legal nuisance, and could be dragged on while negotiations take place. Nevertheless, I do believe that Dex Media is very close to its end-game, and shareholders will soon know the results of the restructuring. The amended forbearance period expires on December 14th, so keep your eyes peeled for any new developments. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

The Cheapest Domestic Dividend ETFs

Summary I found five domestic dividend ETFs with expense ratios below .15%. The yields on three are fairly compelling. The sector allocations show strong allocations for several to consumer staples. Even though VIG has a low dividend yield, the fund offers great sector exposures. The high expense ratio goes to HDV, but it is only .14% and the sector allocations are great for investors that believe big oil will recover. There are a few big dividend ETFs for exposure to companies offering respectable dividend yields. In this article I want to compare a few of them. Let’s meet the 5 of the big dividend ETFs: Ticker Name Index SCHD Schwab U.S. Dividend Equity ETF Dow Jones U.S. Dividend 100™ Index VYM Vanguard High Dividend Yield ETF FTSE High Dividend Yield Index VIG Vanguard Dividend Appreciation ETF NASDAQ US Dividend Achievers Select Index DGRO iShares Core Dividend Growth ETF Morningstar® U.S. Dividend Growth Index HDV iShares Core High Dividend ETF Morningstar® Dividend Yield Focus Index Dividend Yields Since these are dividend ETFs, the first thing investors are going to be looking at is the dividend yield. The dividend ETF space is a great option for investors looking for higher yields on their portfolio but without a large enough portfolios to justify picking 30 to 50 individual dividend champions. The yields for these five range from 2.25% to 3.75% First Impressions Investors right away may notice that the Vanguard Dividend Appreciation ETF and the iShares Core Dividend Growth ETF don’t have a very high yield compared with the other dividend ETFs. It may be rational for investors looking at these funds to ask whether they should really be considered high dividend yield ETFs, but both of the portfolios are focused on companies that they expect to grow dividends significantly. Expense Ratios These funds were all selected for having extremely low expense ratios. The ratios range from .07% to .14%. While the Schwab U.S. Dividend Equity ETF technically only has 70% of the expense ratio of Vanguard’s options, the difference of .03% is not material. Even doubling from SCHD to HDV is still only increasing the ratio .14%. For the frugal investor, any of these options would be a reasonable choice so long as they are happy with the rest of the characteristics of the portfolio. Free Trading If investors are being careful with their cash and keeping an eye on factors like the expense ratio, then they may find free trading to also be very appealing. For the investor that is regularly investing more than $10,000 the commissions would cease to be a material factor, but for the investor that wants to be able to make several small purchases to keep building up their position each month for years the impact of commissions will add up. (click to enlarge) My Thoughts I would find any of these ETFs attractive. Personally I’m holding the Schwab U.S. Dividend Equity ETF and the decision was certainly influenced by free trading since I like to be able to add to my positions whenever there is a dip in prices. I expect to average purchasing ETFs one to three times per month. That is not three times for the same ETF, but I may be adding to positions in several sectors which would cause the commissions to start adding up. The other factor influencing me was the fact that SCHD is holding about 22% of the portfolio in the consumer staples sector. I don’t want to focus my investment efforts on market timing, so when prices feel high I look for more defensive allocations such as the consumer staples sector. This is the top allocation for VYM as well, though it is only around 14% to 15% of the portfolio. DGRO is also overweight on consumer staples at 17.65%, but industrials are the top allocation with 19.15% of the portfolio. VIG deserves a great deal of respect for the investor wanting more consumer staples in their portfolio. The fund has 26.43% of the portfolio in the sector. Even though the yield is lower on VIG, this is a solid portfolio. The biggest thing for investors here to consider is that the fund has only 2.31% to utilities, 1.26% to energy, and .10% to telecommunications. If an investor in VIG wants some Verizon (NYSE: VZ ) or AT&T (NYSE: T ), they’ll need to buy those shares individually. My favorite allocations arguably come from HDV though. The fund has a 20% allocation to both consumer staples and energy. For investors that don’t want to hold the oil giants, this would be a terrible choice. For investors that are happy to hold some of the oil champions, this is a great portfolio. The ETF offers a very strong yield and the exposure to oil helps an investor if oil prices go back up. If oil stays cheap, it will be a favorable development for the rest of the economy since it will drive down transportation costs and lead to many consumers having more cash in their pockets. For investors that want the oil exposure but don’t want to buy to buy into HDV because they have free trading on the others or because they are concerned about the slight difference in the expense ratio, they could buy their ETF of choice and simply buy some shares in Exxon Mobil (NYSE: XOM ) to get their oil exposure. What do You Think? Which dividend ETF makes the most sense for you? Do you want to overweight consumer staples for more safety in a downturn or would you rather have more upside in a prolonged bull market? Do you want to own the oil companies, or do you foresee gas as being in a long term downtrend that makes the business model much weaker?