Dividends, Capital Gains and the Fiscal Cliff

One of the biggest FC threats for high-worth individuals is the increase in capital gains taxes from 15% to 20%. Consider this- a $5m personal wealth portfolio that nets 5% a year ($250,000) would have to pay an extra $12,500 annually (over $1,000/mo). Now factor in the upper echelon of folks with $50m having to pay $125,000 more money annually- there are thousands of these people/families/trusts and the FC is a serious threat to their long-term financial growth.

Now, we're within five weeks from the new year and the FC will be in the news every night until it's resolved. To counter investor concerns, publically traded companies will likely begin issuing "special dividends" in the next few weeks. The private equity firms and legacy shareholders will benefit greatly from these rare payouts because they will pay only 15% versus potentially paying 25% more in taxes this calendar year if an FC deal is not reached. To pikers like TM, it doesn't have a major impact but for folks with millions in a single company, these payouts (Dilliard's paying a special dividend at $5/share) can mean major dollars.

It makes sense for us to hold our positions in our large cap companies in case there are windfalls like this that trickle down. Then again, we need (err, Jim needs) to assess our tax situation and determine, again, how heavy the TM burden rests on his shoulders. Two years after we considered an LLC or similar holding company, we continue pressing on with our Treasurer handling the bulk of the responsibility and I'd like to move this organizational concern to the top of the agenda when we reconvene in December at 9:27pm.

Honeywell

My pick for this quarter is Honeywell International (HON). I started to look at Honeywell because my company uses there products for all of our zone controls, wireless controls, and Internet accessible thermostats. After researching them I discovered that they operate in four segments: Aerospace, Automation and Control Solutions, Performance Materials and Technologies, and Transportation Systems. I know that in my industry everyone is trending towards controlling there thermostats from there Iphone and Honeywell is the leader in that segment. It currently trades at $61.24 per share. I would designate this as a long term hold. I have read some great articles and will have more info tomorrow!

KOG IT

I propose we invest in KOG. I recommended KOG in October of 2011 and believe we have a lot more upward movement coming from them. They own a very large portion of the Bakken Shale in North Dakota is expected to produce much of our domestic oil production. The US is expected to be the leading producer of Oil, beating out the saudi's and Russia in the next 10 years. This company sits in the middle of all the action of the drilling boom that our country is currently experiencing. The cost is 9.41 per share and i expect to see it climb to the $15 range. KOG is drilling in a land that has caught the eye of big drilling companies like MobilExxon. This makes KOG prime to be bought out or sell their assets to a major player. Here is a short article that discusses this companies potential. http://www.fool.com/investing/general/2012/11/05/a-bear-of-a-time-with-kodiak-oil-gas.aspx

United Rentals - cleaning up the aftermath of Sandy

Billions of dollars of damage sits in the wake of Sandy. The clean up efforts will require years of work, and much of that work will need to be done by heavy equipment.

United Rentals (URI) is the clear beneficiary of potential windfalls as a direct result of the hurricane. Government spending will be vast, in addition to private clean up efforts. The logical way to gain access to equipment for this work is by renting the cranes, bulldozers, trucks, etc, and the largest heavy equipment company is URI.

We saw a pop in URI directly after the news hit, though it settled down after an Obama victory with the rest of the market, offering us an opportunity to get in before their next conference call where inevitably the CFO will say something to the tune of "we beat estimates in Q4 due mainly in part to hundreds of millions in new contracts related to the cleanup efforts in NY and NJ". The next minute, URI hits $48 in after hours trading. We sell at $50.

VT's Finest... Coffee

Green Mountain Coffee (GMCR) has taken a beating lately.  Down 45% ytd, K-cup patent has expired.  Thankfully we didn't buy in back at its peak of 64/s.  But now we have a chance to grab a solid company on the low, and hopefully ride out a bounce back.  They just announced on November 8th a partnership with Luigi Lavazza SpA, (italy's favorite coffee). GMCR will begin using the Keurig Rivo Cappuccino and Latte System in its stores. "The new Keurig Rivo System combines the legendary simplicity of Keurig single cup technology with the authenticity of Italy's favorite coffee, Lavazza, and marks GMCR's entrance into the espresso, cappuccino and latte brewer category"
 
I think we need to expand our holdings into different sectors and this presents a good opportunity to hopefully catch a company that is undervalued and make some money (hopefully). 

Four-Eyes

Luxottica is the largest manufacturer of eyeglasses in the world. They own Oakley and Ray Ban, as well as Sunglass Hut, LensCrafters and Pearle Vision. They build every high-end glasses brand you can think of- Burberry, Coach, Chanel, Prada, Tiffany, Polo, etc. The stock LUX is up 32% this year, as they continue gobbling up brands and eclipse the mark of 7,000 retail locations. Last quarter, Luxottica netted $180m in profits, up 24% from Q3 last year- crazy considering they are based in Italy in the heart of a plunging economy. This stock gets us back into the retail sector, a space we haven't touched for 18 months (Home Depot) as the holidays approach and flex spending accounts expire.

Another Reason Jim Hates Business & Commerce

So we all got hosed and the hosers are penalized- but we do not get compensated for the hosiery.

I own an LCD so I'm a victim. And the same thing happens with oil and other items we buy every day.

We need to find friends in higher places- no offense.

Hard on MicroSOFT

MSFT - Blue chip stock - excellent growth potential - they are making bold moves to change their image as of late - I think we should be buying some while its low. 

They just bought Yammer - a private social networking company that caters to businesses by streamlining company collaboration and communication in a secure interoffice environment. With the Skype acquisition from later year, and their already huge corporate market share for Windows and software, this has potential to be big if it catches on.   

Not to mention the new Xbox 720 in the works and the introduction of their own tablet which I emailed about last week. 

Call me crazy - but I could see Mircrosoft growing more than Apple over the next few years, I just think there is more potential with Microsoft. 

Time to Buy?

http://www.dailyfinance.com/2012/05/01/caterpillar-shares-dip-time-for-action/

CAT down close to $100/s - could be a good entry point for us if we are still on high on CAT.

I think we should seriously consider it.

Down Goes Spain

Spain is back in a recession- again.

http://money.cnn.com/2012/04/30/news/economy/spain-recession/index.htm?hpt=hp_t3

Spectra Energy Corp

Just read an article about a possible pipeline expansion project for New England proposed by Spectra Energy, a Houston based natural gas company.  Granted the project is still 3 years out, but I got me thinking about how upgrading existing gas infrastructure in this area to keep up with demand will effect the profits of some of these gas companies. Cheech knows more on this subject than I do, but just doing some quick research on this Spectra Energy company, they appear to be a pretty solid company financially. Increasing profit margin, increasing return on assets. If in the future, they can supply New England with more gas via this pipeline, I would expect that would only help.  I'm just throwing this out there as a potential long term option, we've always said we've wanted to to get into Natty Gas.  I'm interested to here your thoughts..

Amazon Spreads Wings

Amazon expanding its target to industrial supply vendors like Grainger, Cintas and other major providers of such services.

Oil

Oil is spiking! On the way to $120 a barrel! Its at 105 today & we could potentially make $15 a share if we buy. I highly doubt oil will fall in the short term. Just a thought ....
Sent from my Verizon Wireless BlackBerry

Don't Call It A Comback

Timberlake leaning on MySpace- they have more action than Spotify.

http://www.cnn.com/2012/02/13/tech/social-media/myspace-million-new-users/

CAT Out Of The Bag

Link above shows CAT just crushed projections.

Gold Bars versus Gold Mining

Click the title of this blog for a five minute video editorial on the difference in investment value between betting on gold extraction companies and the overhead/management that goes along with them against simply buying gold via GLD (which we've done) and other methods.

RAX it, again

My selection is rack space hosting. They did well for us last year and I'm sure they will do well again this year. Data construction was booming in 2011. No signs of letting up in 2012 too. http://wallstcheatsheet.com/stocks/data-center-construction-booming.html/ Great article on data center construction. They offer a lot more than just data construction and with an awesome atmosphere to work in, I think getting in now, like we did last year, will give us profits again. Go to google finance and look for news on this company. Lots of great information! Typing on an iPad is not fun! :(

FCX

My pick this quarter is Freeport-McMoRan Copper and Gold Inc. FCX. Trading at $46.13. They are a copper and gold mining company. They are all over the world. Out of all the Metals and mining companies they have the highest Earnings yield. That means most of the time that the stock is Undervalued. We all know tha the price of copper and gold are very high right now and I see us making a ten percent gain on this stock o problem.

Ps - Steph is making pulled buffalo Chkn sandwiches for tomorrow!

Thunder CAT again

My pick for this qtr is CAT. I know I've made this pick before but I still feel there is alot of potential in it. You guys all know what the company is all about so I won't bother with details. Although its trading above $100 - i think it will reach the $130s. Construction is picking up again in the US and CAT made huge profits last year and I think they will continue to beat estimates this year.

Answering the Call of Duty

On February 9th, Activision Blizzard (ATVI) announces their 2011 earnings.  I think they will beat earnings based on record sales of Call of Duty, and new games on the horizon including Diablo III and potentially The Hunger Games.

Activision reported that COD3 was their most successful launch ever, selling over $1B in product in only 16 days following their November 8th launch.  ATVI also introduced new features such as Elite over the past quarter, and over 1M paid subscribers at $50/year as of January 9th.  That's just additional income for ATVI and shows you they are looking for ways to exploit their die-hard fan base who can't get enough of the new maps and features offered to Elite subscribers.

Also coming in 2012 is the much anticipated (since 2008) release of Diablo III to consoles, courtesy of ATVI.  Diablo has a huge fan base that can't wait to get their hands on the cult-hit game.  Everything points towards an announcement for a release date on February 9th when they report 2011 earnings.

The last point I want to mention is about a book I've read recently called The Hunger Games.  The Hunger Games is set in a future post-apocalyptic world where citizens are forced to participate in an annual "game" which is basically a fight to the death to show their allegiance to the capital.  It is a great book and a must read for any of you.  Lions Gate (NYSE:LGF) is releasing a movie in mid-March 2012 which is the first of 3 films documenting the Lions Gate series.  The series is sure to be a box-office hit just going by the sheer numbers.. in mid 2011 there were just under 10M books in circulation, by the end of 2011 there were nearly 24M books in circulation and the book trilogy was the top seller on Amazon and as you can see is still #1 on the Amazon book store with nearly 500 days in the top 100.  While I can't find too much concrete evidence that ATVI will be releasing the video game series associated with The Hunger Games, a simple google search reveals a lot of "chatter" speculating that they will be the beneficiary of the video game series.  This, needless to say, would be a huge win for them considering the cult-like following.

As I mentioned before, ATVI is announcing earnings on Feb 9th.  The company is profitable, pays a small dividend, and trades at about 19x earnings, so it isn't overpriced considering future earning potential.  Most analysts rate ATVI a "buy" giving it an average rating of 1.9 on a scale of 1-5, with 1 meaning "strong buy" and 5 meaning "sell".  The median target price is $16, representing about a 30% upside to the stock.

Let's Have BSX Together

Boston Scientific is a Natick-based company that develops, manufactures and sells cardio vascular, urinary and digestive-aiding medical devices. The company has over 20,000 employees, an 8.5b market cap and a PE ratio in the 15's. This pick brings us back into the health care sector (we miss you HNT) and medical supplies/equipment are new to our portfolio. Major competitors Johnson & Johnson, Covidien and Stryker trade in the low $50's while BSX trades in our wheelhouse at $5.93/s.