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Fallen Angels

In the recent steep decline of the stock market, many high fliers got hit the worst. Here’s an analysis of three and if now is a good time to invest in them.

 

Tesla

Tesla is attempting to be the first successful US automotive company since Chrysler’s founding in 1925. Tesla’s differentiation is that they are at the forefront of electric car innovation and are selling direct without dealers. They have a very loyal following and are targeting the high-end where all the money is made. However, this all takes a huge upfront investment that has not yet paid out. To date Tesla has raised nearly $5 billion and spent the bulk of that. They continue to bleed cash and post large losses with a stock price declining from $286 last year to under $160 now. Bob Lutz, a former executive at Ford and GM, believes they are doomed as they will not be able to finance the huge investment needed to sell cars without dealers, build-out charging stations across the country, and complete the $5 billion “giga” factory to make their own batteries.
So why should you consider this stock now?
Tesla is a game changer and it takes huge amounts of capital to win. Witness Amazon that invested tens of billions and finally enjoyed a 122% return last year. Jeff Bezos ignored the naysayers and now has the 6th most valuable company in the world. I believe Tesla will be the 800-pound gorilla over the next 20 years. Elon Musk is a patient visionary believing that technological advances, much of it software, will change how we think about cars. While others are coming out with electric cars, I believe this race has already been won since Tesla has the best designers and no one is even close to where Tesla is today. Plus, I believe Americans would prefer to buy American cars, everything being equal (which hasn’t been the case for decades).
While Tesla may still trade lower over the next year, this is one to watch and consider as a long-term investment.

 
Twitter
Popular with social media users, Twitter has struggled to gain advertising revenue similar to Facebook and Google, largely due to its limited 140 character “tweet” format. Unlike these companies, it posts massive losses and burns cash. It went public in 2013, quickly hit $80, traded as high as $53 in 2015, but now trades around $15. Twitter’s CEO is Jack Dorsey who is also the CEO of Square, another technology company losing lots of money. His management skills have been questioned and Twitter recently experienced an exodus of executives.
My analysis is that Twitter will continue to be challenged with high costs and slow growth in advertising revenue. Mr. Dorsey has shown to be incapable of running one yet alone two public companies. Enjoy using the product but stay away from the stock until they figure out a viable business model and hire a CEO interested in running one profitable company.

 
GoPro

GoPro is famous for inventing rugged compact cameras used by adventure seekers. The cameras enjoyed immediate success and the stock hit a high of $87, last year traded as high as $65 but now is under $10 after posting disappointing growth. To bolster demand, the company slashed prices and went into a deep cost cutting mode. Competitors are looming and the “cool factor” may have waned.

GoPro’s current valuation is compelling and in my opinion worth a look. They are profitable and do still own the segment. They have ample cash on hand, no debt and should be able to weather the storm.
With any investment decision I encourage you to discuss this with your investment advisor and CPA to see if this is suitable for you. Of the above, I recently bought GoPro and am looking pretty hard at Tesla with its new low price.

 

Ray Link is a CPA and holds an MBA from the Wharton School. He recently retired from FEI Company (NASDAQ: FEIC) where he was the CFO for 10 years. He is on the on the Board of Directors of Cascade Microtech (NASDAQ: CSCD), Electro Scientific Industries (NASDAQ: ESIO) and nLight Photonics.

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Posted in Investing

A Bakers Dozen for a Deflated Stock Market

Many of you are likely shocked by the sharp decline (about 7%) in equity values since the first of the year. Instead of a mass retreat however savvy investors resist panicking and buy newly discounted stocks and not sell.

Rather than investing in mutual funds, I prefer a diversified portfolio of individual stocks as you can decide when to buy and sell each company and you only pay fees once instead of a fund that charges you annually.

But I don’t buy just any stock, I prefer high-quality, dividend paying stocks. If you hold for the long term, they are generating a nice income stream taking the sting out of inevitable fluctuations in price over time. I focus on companies that are leaders in their fields with a long track record of profits that not only pay dividends but have a history of increasing them over time. Another nice benefit of dividends compared to interest income is that they are taxed at a lower rate (up to 19.6% lower for high-income taxpayers).

Below is a list of 13 stocks I own that meet my criteria of steady profits, leaders in their field, have a track record of increasing dividends, and a price to earnings ratio based on forward projections of around 20 or less. There is an absence of oil stocks despite their huge current dividend yields as I am concerned many will cut their dividends as profits disappear with the current low oil prices.

Ray

 

 

 

 

 

With any investment decision I encourage you to discuss this with your investment advisor and CPA to see if this is suitable for you.

Happy investing and remember – hold for the long-term!

Ray Link is a CPA and holds an MBA from the Wharton School. He recently retired from FEI Company (NASDAQ: FEIC) where he was the CFO for 10 years. He is on the on the Board of Directors of Cascade Microtech (NASDAQ: CSCD), Electro Scientific Industries (NASDAQ: ESIO) and nLight Photonics.

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Posted in Investing

The Latest from Rich Old White Man World

I spend a lot of time visiting fishing lodges all over the world. Most of the time, because of the expense, travel, and time required to visit these lodges, they are primarily occupied by rich old white men (ROWM). Not quite sure what that says about me, but….

As you might anticipate, the ROWM demographic tends to be Republican and conservative. That’s not to say they aren’t often really terrific guys. I’ve had many great times – and some really interesting conversations – with my ROWM friends (they tend to drink really good scotch too). Most are smart (despite their inexplicable love of Fox News), and I think they have a genuine sense of patriotism where America is concerned. However, things often turn a little more heated when we discuss certain subjects, especially climate change.  As you might expect, despite a decade of irrefutable evidence, ROWM tend to be climate change deniers.

So I was surprised a couple weeks ago, while visiting a fishing lodge in Argentina, to hear a major shift in a ROWM position. One night at dinner, my graying, Obama-hating, retired investment banker friends suddenly announced, “climate change is real – but there is no evidence that man has anything to do with it.”

OK, I thought.  At least they are finally acknowledging it is a problem, so I probed further…

“Wow, so you believe in climate change,” I asked one of the ROWM. “And do you think it is a big problem?”

“Oh yeah,” they replied.  ” It’s a major issue.  Course I know the verdict is out as to whether or not man really had anything to do with it, but I know it is very serious.”

And then they told me that they thought it would finish off mankind.  End of the world, Mad Max kind of stuff.  “Unfortunately there’s nothing we can do about it,” they said glumly.  “The damn Chinese and Indians are going to continue to pollute, so we’re toast.”

I didn’t point out the obvious gap in logic.  Americans are the biggest carbon polluters, and ff man really has nothing to do with climate change, what does it matter what the Chinese and Indians do?    But……  I have to admit trepidation at their willingness to just surrender.  It’s a bit frightening to see people going from utter denial of a problem, to suddenly accepting that the problem will mean the end of mankind.  It’s like a guy that ignores a huge mole on his leg, insisting it is fine, then one day announces he’s going to die of cancer.

Certainly there are a lot of reasons to be pessimistic about our environmental future. California is a year away from running out of water – threatening a large part of our food supply.  Even in Oregon, one of the last places on earth you would ever have to worry about droughts, experts are predicting dire water situations in the coming year.  Almost everywhere I travel in the world there is either not enough water, or too much. Unfortunately climate change will necessitate many major changes in the way we all live, beginning a lot sooner than any of us had anticipated.

But surrendering to the problem is not an option, and there are tiny rays of optimism in the doom and gloom.  Alternative green energy is moving much faster than anticipated. Solar energy production is 48 times higher than the projections established in 2000, and wind energy production is 17 times higher.  In fact, renewable energy now accounts for 13% of energy production (increasing 5% over the last 12 years), including wind which produces 4% of our energy.

Imagine what would happen if we quit debating whether or not climate change is real, and instead put our total attention and resources towards solving the problem.  There are a lot of ROWM out there that have a proven history of solving problems and winning battles.  I would love to have them participate in a solution.

 

 

2 Responses to The Latest from Rich Old White Man World

  1. jed duetsch says:

    Hi Tim, I’m one of the ROWM you met in Argentina and I enjoyed our conversations after dinner about climate change and various political topics about which we seemed to be at polar opposites. It probably wouldn’t be appropriate for me to go into some of the more descriptive language in this forum.
    Suffice it to say I applaud any efforts to enhance our environment and reduce pollution in whatever form and there are major concerns. However, I do take issue with some of your statements about my position on global warming, climate change as you prefer. We have had several ice ages after which the was warming. Our glaciers have been receding for the last 15,000 years and sea levels have risen to the extent that at one point Florida was considerably higher and wider and at another time it was nearly a part of the ocean. The north polar area was tropical at one time which explains the huge amount of hydrocarbons under the tundra. You totally misstated that anyone at the table said that it would wipe out mankind. “Mad Max” scenario.
    Most people realize there is climate change and there may be some influence by man but the natural cycle has far greater impact than man and mankind will never halt the cycle. Your next volcanic eruption in the Northwest will have more impact than all the solar cells you can create.
    I am not pessimistic about the future because mankind will adapt to whatever happens with the exception of an asteroid hitting earth. I have always believed that the negative influence of man is overpopulation because it exploits every resource from water to food production to fuels needed to maintain the human condition.
    My state,NJ, has had more pollution than most but it is getting cleaned up gradually. Now they are proposing wind farms 12 miles off the coast as far south as Virginia. Three billion dollars is the cost but the result will be far less power than the nuclear power plant at Oyster Creek which is due to close. Morris County is on the hook for $18 million because of a failed solar boondoggle. There are close to 100 acres of thick pine forest about to be leveled in our pine barrens for a field of solar panels because some wackos forgot that trees are a major consumer of CO2 and so it goes with clearing land for biofuels everywhere.
    Don’t you think there is a little hypocritical thinking when the ROWNs fly around in there private planes, live in Al Gore mansions, drive big gas guzzlers, small ships and power boats? They expect everyone else to conserve. Companies rape the government backed funds in the name of green energy and fail leaving billions in losses.Unless and until technology develops more efficient and economical alternatives we can’t kill our economy by limiting our fossil fuels alone. There is a basic distrust amongst many people that we are being lead by zealots with a world view that is anti-business,anti-capitalist (which you are ) and against America. We don’t always do the right thing but we are essential to some semblance of stability in the world both economically and socially.
    Just to clarify, myself and other conservatives are also true conservationists and my source of knowledge is not just Fox News. I read Scientific America as well as many other sources and even watch CNN to see their slant. The problem is the general media is so in the tank with this administration a lot of truth is never told. Finally our local paper covered the crook Senator Mendendez who has no qualms about taking private jets to the Dominican Republic and receiving tons of money.
    Where was the media when one of Obama’s 37 czars was Cass Sundstein, an academic who thinks fishing and hunting should be outlawed because animals have rights or Van Jones an avowed communist and racist.
    I won’t go on and on about our differences but I don’t like to be categorized as a ROWM. You can call me Old that is accurate, Man yes. As far as I know mine and others have mitochondrial DNA that originated in Africa, so call me Person, OPM to be exact.
    For your edification check out Dr. Spencer Wells and his research throughout the history of man. As a former research scientist I think he did great work.
    Hope your “One Fly” goes well and Martin survived Buenos Aires.

  2. Bizzy Life Author Avatar Tim O'Leary says:

    Hi Jed – thanks for the post – and I am happy to refer to you as a OPM or just Jed…

    So you make some interesting points – but I think they just reinforce my post. It would be wonderful to think that man plays such in insignificant role in global warming – as it would negate our responsibility – but science just doesn’t support such a position – just as science doesn’t support so much of the conservative agenda. Denying facts doesn’t make them go away.

    Those that know me would be very surprised to hear me referred to as anti-capitalist. Over the last thirty years I have started many companies that have employed thousands of people and generated billions of dollars in capital. And being a capitalist – I think Al Gore should be able to live in a mansion (by the way – his mansion is green powered as are many of my properties). Gore has primarily made his fortune investing in green companies – because he is smart enough to realize they are the future – certainly not the old-school energy companies that are the recipients of government welfare.

    But my point…… we need to put aside the arguments about the origins of the problem, and instead concentrate on fixing it.

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Posted in Politics

Chasing Interest Rates

It’s been almost impossible the last few years to find a safe FDIC-insured savings account that pays any kind of meaningful interest rate, but a few online banks are finally peaking the 1% mark. Not great – but if you need to park some money in a totally safe account here are a couple options:

GE Capital Bank pays 1.05% – www.gecapitalbank.com

CiT Bank pays 1.0% – www.bankoncit.com

Ally Bank pays .99% – www.ally.com

Of the three, Ally’s website is easier to use and downloads to Quicken, with GE a close second in ease of use, but unfortunately it does not offer a Quicken download.

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Posted in Investing

How The Web Makes Salespeople Lazy

I consistently receive between 150 and 200 emails a day – a large percentage of them attempting to sell me something. Most are easily disregarded – mass solicitations I shuffle off to the spam filter. But there are always five or ten emails a day from salespeople legitimately attempting to sell me their product or service.

The fact is that I like and admire good salespeople. It is a difficult job, and if you are good at it you are almost always one of the most valuable people in the organization.

But the web seems to have created an entire generation of lazy, ineffective salespeople that use digital solicitations as a crutch. It allows them to disregard some of the basics of good sales techniques, and ultimately just irritate some of their potential buyers. Here are some of the main mistakes I see on a daily basis:

Fear of phone.  I know it is incredibly difficult to reach people these days on the phone, but there are still many reasons to actually talk to someone.  While I am screened from phone solicitations, I apply a much broader filter to email solicitations, since I receive so many.  If you can actually reach a real human being your chance of closing a deal is much better.

Lack of targeting and research.  I consistently get emails from salespeople trying to sell me products that I personally don’t buy.  My organization has people in charge of buying paper, insurance, and all the other “stuff” that makes a company run.  Yet every day I receive very personalized emails wanting to “buy me lunch” so I can hear a pitch on a new printer or employee benefit plan.  If a salesperson really want to sell my company something, they should pick up the phone, take the time to find out who the buyer is, and make sure we are a legitimate lead for their product, instead of wasting both our time.

Don’t expect me to do your job.  I also frequently receive emails that seek to circumvent the above advice, and expect me to do the work.  Every day I get multiple versions of this:

“Tim, I really want to get together to show you our new whiz bang product, and if you don’t want to get together, would your forward this email to the right person, and let me know who I should contact?” 

And the answer is no.  Much of the time I am not sure who buys those kind of products in my organization, and I am too busy to make phone calls on behalf of someone I don’t know to find out, and then communicate back to them.  That falls under the salesperson’s job.  The salesperson is more than welcome to call the front desk and ask.  We have a “friendly” policy and would be happy to direct them to the right person.

Don’t assume the customer owes you anything.  Once again there seems to be an entitlement issue with many salespeople.  Here is another common email I received:

Tim, I have tried to contact you numerous times, but to no avail!  It is very important we get together….”

Often there is even an aura of anger to the emails, as if I really offended someone I don’t know who has used an automated email system to reach out to me in an effort to sell me something I don’t want.

The Fake Friend Approach.  When I receive a friend request from a person with a seven syllable name employed by a technology company in Mumbai, I make the assumption we didn’t go to high school together, and they are probably just trying to sell me something.  Personally, I reserve Facebook for friends and family, and never accept a friend request from a salesperson.  I am more liberal on LinkedIn, and do accept general business contact requests if they seem appropriate, but in my profile state “please do not send me job resumes via this site as they will not be properly read.”  Still, I receive many job resumes, which bodes even worse for the person applying as it indicates a lack of attention to detail.

 

One Response to How The Web Makes Salespeople Lazy

  1. Scott says:

    Right there with you, but also don’t call me back in 3 weeks when I tell you i’m not interested. I let our receptionist know I will take a call if they ask for me directly, otherwise to voicemail it is.

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Posted in Marketing