fbpx

“Just when you thought 2020 couldn’t get any more strange, the guy who almost lost control of his company for tweeting a 420 joke to impress his girlfriend is the second richest man on earth.” – Jeff

The market rally continued on Tuesday on hopes that a vaccine could be distributed in December.  

Today we’re talking about Tesla stopping at the moon on Elon’s trip to Mars. 

 

 

Ride the electric wave

X Æ A-12’s daddy surpassed Bill Gates, becoming the world’s second richest person, as Tesla’s market value cracked $500B. I guess this settles their recent beef.

Elon Musk’s personal net worth has grown $100B in 2020, to $128B, but he still has a ways to go to catch Jeffery Commerce who’s currently valued at $180B. Keep in mind that’s after the $35B he lost in his divorce settlement. 

 

A year for the ages

Tesla’s stock price has been on fire this year, rising nearly fivefold since March. And it doesn’t show any signs of slowing.

The electric vehicle maker reported its fifth straight profitable quarter and delivered a record (for the company) 139k vehicles, keeping it on track to hit half a million for the year.

Plus, Tesla is scheduled to be listed on the S&P 500 next month, leading some analysts to speculate that the stock could go to $1k soon.

 

The bottom line…

Of course, becoming the world’s second-richest man isn’t stopping Treelon from innovating. He announced yesterday that the company is working on an electric vehicle that can travel 600 miles. For those you unfamiliar with EVs, that’s the gas-guzzling equivalent of like 80 MPG (in the city).

Tesla is also working on a compact car to be distributed throughout Europe. Watch out Mini.

 

 

 

“We’re sorry”

Purdue Pharma, the proud producer of OxyContin and star player in the opioid epidemic, pled guilty to three criminal charges yesterday.

The (former) pharmaceutical giant admitted to paying doctors to write more prescriptions for its painkillers, not maintaining a prevention program to keep its drugs off of the black market, and providing misleading information as a way to boost company manufacturing quotas. Apparently you can’t do that… 

The admissions of guilt were part of the criminal and civil settlement last month, in which the company paid $225M of the $8.3B owed, and filed for bankruptcy. No criminal charges were filed against the founding Sackler family.

 

Dick’s head steps down

Ed Stack is stepping down as CEO of Dick’s Sporting Goods. He’s been the CEO since he and his siblings bought the company from their father, Dick, who clearly didn’t love them, back in 1984.

But after 36 years at the helm, he’ll be replaced by current President Lauren Hobart. Ed will stay onboard as chairman and chief merchant. You can take the guy away from Dick’s but you can’t take the Dick’s out of the guy.

The sporting goods giant also reported earnings Tuesday, with profits tripling from the same period last year to $172.2M and e-commerce sales jumping 95%. Dick’s rose 2% during trading, but just couldn’t keep it up, ending the day flat.

 

A beat and a drop

Best Buy reported earnings yesterday. Same store sales grew by 23% from the same period last year, EPS of $2.06 beat the estimated $1.70, and revenue of $11.85B topped the forecasted $11B. Yet shares fell 6.96%… what gives? 

Investors honed in on the CFO’s comments that he doesn’t expect Q4 sales growth to be at the same level seen in Q3. It also doesn’t help that Best Buy did not provide an outlook for the fourth quarter, and noted that higher shipping costs and inventory may present an issue as we head into the holiday shopping season. Having a PS5 before March is so overrated.

 

It’s in the computer

HP gained 2.64% on the day and over 5% after hours, as the PC maker reported its fiscal Q4 earnings after the bell. Adjusted EPS of 62 cents beat the forecasted 52 cents, while revenue of $15.3B beat the estimated $14.7B.

Notebook sales for the quarter rose 18%, as people snatched up PCs to be able to mastu-, er, work and attend school from home during the pandemic. The company expects its fiscal Q1 EPS to come in between 64 cents and 70 cents, which is higher than the estimated 54 cents.

*Results presented are not typical and may vary from person to person. Please see our full disclaimer here: ragingbull.com/disclaimer

 

Author: Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

 

Yesterday, the Dow Jones crossed the 30,000 level for the first time. Meanwhile, the gold and the dollar slipped to recent lows.

I was watching one popular analyst talk about positive catalysts for the market moving forward.

He cited vaccines for the virus… the “search for the next Tesla”… more buyers than sellers… Robinhood investors… urban flight… the economy’s reopening… Biden’s victory… Biden’s transition… trade normalization between China and America… and the “environmental movement.”

However, there was one key catalyst he missed…

Nowhere was the Federal Reserve or the expected wall of stimulus in 2021 mentioned. 

Let’s cut through the noise this morning and talk about what is happening in the market on Wednesday.

The Rundown: Today’s Outlook

On Wednesday, investors are looking to head into Thanksgiving on a positive note. Despite warnings from state leaders and the CDC, Americans are hitting the road for Thanksgiving, news that is helping to push up the price of oil.

The Dow Futures are off just 29 points this morning. The Index pulled back from a brief run over 30,000. It was the first time that the market has reached that psychological milestone. And it’s also a reminder of just how far it has bounced back from March lows.

As I said, there are people on major media outlets trying to make sense of this market rally. I was unaware that the environmental movement or urban flight were such MASSIVE indicators of economic growth – according to this prominent analyst. 

The sheer fact that they aren’t telling their audience about the role of the Federal Reserve is negligence. The fact that former Fed Chair Janet Yellen wasn’t mentioned is insanity. She will be taking over the U.S. Treasury Department in January and has already signaled that they will move on to new stimulus programs. The fact that we’ll have more money sloshing around the market is important. Because it’s got to go somewhere.

In March, Minneapolis Federal Reserve Bank President Neel Kashkari went on 60 Minutes and explained that the Fed had unlimited money to support the economy. 

He wasn’t kidding.

The U.S. M2 money stock has increased by $3.5 trillion since February. 

It’s up to $19 trillion. 

The M2 is a measure of all cash and checking deposits, and other assets that can easily be turned into cash. It’s a broad measurement of our money supply. 

Since March 2009, the height of our last crisis, the M2 has increased from $8.3 trillion to $19.06 trillion. This is the “convertible” liquidity that you’re always hearing about. 

The Fed has been the driver of the market for the better part of a decade. That factor went into overdrive this year. More money is sloshing around. But it’s not going into bonds, it’s certainly not moving into gold, and while Bitcoin has rallied over the last few months, that market remains relatively small. 

People are pouring into stocks. The Fed is the first catalyst, and the others are just window dressing for anyone who wants to ignore this trend otherwise. I’ll talk about this more in the near future.

But keep your eyes on the Federal Reserve.

MY STOCK WATCH LIST

VTO: With the vaccine in focus (and liquidity ready and waiting), we’ll likely see more focus on money rotating into the perceived value stocks. Vista Outdoor just received a price target upgrade from B. Riley Financial at $33 per share, which is 63% higher than today’s price. Strong technicals, strong fundamentals, and a neutral insider buying signal. Vista used to be a major manufacturer of firearms but sold off its Savage Arms and Stevens firearm brands in 2019. It remains in the ammunition business, which could do well under a Democratic administration based on concerns about gun taxes and ammunition regulations. More important, however, the company owns lifestyle brands like Bell, Bushnell, Camel Back, and Camp Chef. It seems that outdoor stocks are poised for a boost in the future as human behavior has changed. More people are leaving the cities and looking for something better in more rural and remote areas. 

LIVX: Livexlive Media is a beaten-down penny stock that operates in the live events market. It also has a commodity audio streaming division that competes against Apple Music and others. And it can live-stream concert events like Rock In Rio, IHeart festivals, and Electronic Daisy Carnival. Now, here’s the kicker. It has a partnership with Tesla. Every EV sold by Tesla in North America comes with a subscription to its service.  The deal represents 66% of LIVX’s revenue in 2021. Even though Tesla is subsidizing these subscriptions, for now, this is an odd little backdoor play on Tesla, and I wouldn’t be surprised to see the Robinhood traders pile into this as a speculative play. The other intriguing element at play: The Company’s CEO Robert Ellin just bought $84,000 in company stock two days ago. Wall Street has an average price target of $5.13, which is about 132% higher than Tuesday’s closing price. 

MGTX: A $6.42 million stock purchase by a director has captured my attention and sent the insider signal on this stock higher. I’m always intrigued by large insider stock purchases in the biotech field. I’ll want to dig into their schedule for the coming months to determine if it has any large announcements pending.

With momentum improving for some beaten-down companies, I’ll also be watching the following names. These stocks and many others like them could soon find themselves targets in my Portfolio Accelerator: CCL, CUBA, JBLU, BA, LYV

 

Author: Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

Understanding Dividend Yield Stocks

Investors seeking investments offering regular income may consider high-dividend stocks as an investment choice. Dividend stocks pay a percentage of a company’s earnings to shareholders consistently.

Many U.S. dividend stocks pay shareholders a specific amount quarterly. Over time, top dividend stocks increase these payouts so shareholders can establish an annuity-like cash stream. Shareholders may also elect to reinvest their dividends.

Dividend stocks are generally less volatile than growth stocks, meaning they can help diversify investment portfolios and reduce the risk.

Key Takeaways

  • Stock dividend yield measures the cash flow an investor receives for every dollar they invest in an equity position.
  • Evidence shows that historically focusing on dividends typically increases returns rather than slowing them down.
  • While high dividends are attractive, they might be at the expense of a company’s potential growth.
  • When investing in dividend stocks, investors need to find a dividend stock, evaluate the stock, and determine how much of it to purchase.
  • In addition to dividend yield, investors should consider dividend growth, financial strength, dividend stability, competitive advantages, and growth prospects.

Understanding Dividend Yield

Image via Pixabay by stevepb

Stocks dividend yield measures the cash flow you’re receiving for every dollar invested in an equity position. Essentially, dividend stock yield is how much of a return you’re getting on for an investment stock without any capital gains.

Say Company XYZ trades at $30 and pays annual dividends of $3 per share to shareholders. At the same time, Company ABC’s stock is selling for $60 a share and also pays yearly dividends of $2 per share.

The dividend yield for Company XYZ is 10% (3 ÷ 30), while the dividend yield for Company ABC is only 5% (3 ÷ 60). If all other factors are the same, investors wanting to use their investment portfolio to supplement their income likely would prefer XYZ’s stock since its dividend yield is double that of ABC’s.

Stocks that pay high, stable dividend yields are great for investors needing a minimum cash flow from stock investments. Well-established, older companies generally pay out a higher percentage of dividends than new, less-established companies. The dividend history of established companies is also typically more consistent.

Advantages of Dividend Yields

Historically, evidence suggests that focusing on dividends can amplify returns instead of slowing them down. For instance, since 1970, 78% of S&P 500 total returns are from dividends, according to Hartford Funds analysts. This assumption is because investors will likely reinvest dividends back into the S&P 500. This then compounds the investor’s ability to receive more dividends in the future. For example, suppose an investor purchases $30,000 worth of a security with a dividend yield of 6% at a rate of $200 per share.

The investor owns 150 shares, each paying a dividend of $5 for each share (200 x $6 = $1200 total). If the investor uses their $1200 in dividends to buy six more stock shares on the ex-dividend date, the price would be adjusted by $6 per share to $193 per share. By reinvesting the dividends, the investor is able to purchase 6.22 shares since dividend reinvestment programs allow investors to purchase fractions of shares.

If everything stays the same, the investor will have 156.22 shares the following year worth $31,244. They can continue reinvesting this amount accumulating more shares each time a dividend is declared. This compounds gains similar to a saving account.

Disadvantages of Dividend Yields

High dividend yields are definitely attractive; however, they may be at the expense of a company’s potential growth. It’s safe to assume that every dollar of dividends a company pays to shareholders is a dollar it’s not reinvesting for growth and generating additional capital gains. Even if shareholders aren’t earning dividends, there is a potential for them to receive higher returns if a company’s stock value increases while they’re holding it due to company growth.

Evaluating a stock solely on its dividend yield isn’t recommended. Dividend information may be based on erroneous information or be outdated. Many companies will have a higher dividend yield while their stock value is decreasing. If there is a significant enough of a decline in the stock price, the company might decrease its dividend amount or completely eliminate it.

Investors need to be cautious when evaluating companies looking distressed and having higher-than-average dividend yields. Since a stock’s price acts as the denominator in a dividend yield equation, a significant downtrend may increase a calculation’s quotient dramatically.

How to Invest in Dividend Stocks

Building an investment portfolio of dividend stocks isn’t easy; however, for many investors, it’s worth the time and effort. Follow these simple steps when buying dividend stock:

Find a Dividend-Paying Stock

Investors can use many financial sites, along with their online broker’s site, to find dividend-paying stocks.

Evaluate the Stock

When evaluating a dividend-paying stock, investors need to compare its dividend yield against their peers’. If its dividend yield is significantly higher than other companies, it may be a red flag. If nothing else, it’s worth doing additional research on the other company, along with the safety of its dividend.

Investors should then research the payout ratio of the stock. This tells them how much of the company’s profits go towards annual, quarterly, or monthly dividends. If a payout ratio is too high, typically 80% or more, it indicates the company is paying a significant amount of its income in dividends. Dividend payout ratios may top 100% in some cases, showing a company might be going into debt due to paying out dividends.

Decide How Much Stock You Want To Purchase

Investors need to diversify when purchasing individual stocks. This means they need to decide what percentage of their portfolio goes into each security. For instance, if an investor purchases 25 stocks, they could put 4% of their portfolio in each. If a stock is riskier, though, they may want to purchase less of it, putting more of their money towards safer stocks.

The safety of a stock’s dividend is the number one consideration when purchasing a dividend stock. Dividend yields of more than 4% need to be scrutinized carefully. Dividend stocks with yields of 10% or more are definitely risky territory.

A dividend yield that’s too-high may indicate investors are selling their stock or an unsustainable payout, each of which can drive down the share price and, as a result, increase the dividend yield.

It’s Not All About Yield

A stock with a high dividend yield doesn’t necessarily make it a good investment. There are several other factors to consider before purchasing any dividend-paying stock, including:

Dividend Growth

Determine if the company has a solid history of growing earnings and rewarding shareholders with consistent dividend increases. A good point to start is the Dividend Aristocrats. They are a collection of S&P 500 stocks that have had dividend increases for a minimum of 25 consecutive years. However, keep in mind that this is not meant as financial advice, and we are not recommending any particular stocks.

Financial Strength

Determine if a company has a reasonable debt load based on its investment-grade credit rating and industry. Does it have enough working capital and cash to ride out an industry downturn or any unexpected economy changes?

Dividend Stability

Does the company have a safety margin between how much it pays out in dividends and how much it earns? The payout ratio — the percentage of profits a company spends on dividends — is a useful way of measuring this.

The payout ratio is best utilized over an extended time period, more than a single quarter or year. Investors can also augment the payout ratio with the cash payout ratio since several non-cash expenses may affect the company’s net income going by generally accepted accounting principals (GAAP).

Competitive Advantages

Determine how a company consistently beats the competition or at least keeps it at bay. A brand people are willing to pay a premium for, cost advantages, and network effects are a couple of examples of durable competitive advantages.

Growth Prospects

Determine if the company is in an industry that’s quickly growing or if it’s seeing the demand for its services and products shrinking. Even top companies in a declining industry find it difficult over time to maintain or grow its dividend.

While dividend stocks are an attractive investment option for investors looking to generate regular income from their portfolio, there are advantages and disadvantages that are important to consider.

Author: Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.