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.