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Investing

Ideas and Strategies on Investing.

Previous Articles

The Charles Schwab Corporation

3/30/2017

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No one reading this article needs an introduction to the The Charles Schwab Corporation. In fact many readers of this article may already have an account with them and actively trade using their website. So the point of this article is to determine if an investment in Schwab fits my personal style of investing and whether anyone using their site to trade has the possibility of making money trading shares of a company that they may be charging them commissions. That would be a really sweet deal.

​The Charles Schwab Corporation provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The company operates through two segments, Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services, and other corporate brokerage services; and stock plan services, compliance solutions, and mutual fund clearing services, as well as engages in the off-platform sales business. The Advisor Services segment provides custodial, trading, and support services; and retirement and corporate brokerage retirement services. The company provides brokerage accounts with cash management capabilities; third-party mutual funds through the Mutual Fund Marketplace, including no-transaction fee mutual funds through the Mutual Fund OneSource service, which includes proprietary mutual funds, plus mutual fund trading, and clearing services to broker-dealers; exchange-traded funds (ETFs), including proprietary and third-party ETFs; and advice solutions, such as managed portfolios of proprietary and third-party mutual funds and ETFs, separately managed accounts, customized personal advice for tailored portfolios, and specialized planning and portfolio management. It also offers banking products and services, including checking and savings accounts, certificates of deposit, first lien residential real estate mortgage loans, home equity loans and lines of credit, and Pledged Asset Lines; and trust services comprising trust custody services, personal trust reporting services, and administrative trustee services. The company serves individuals and institutional clients in the United States, the Commonwealth of Puerto Rico, London, and Hong Kong. The Charles Schwab Corporation was founded in 1971 and is headquartered in San Francisco, California.
(Summary) (Company) (Chart)
26 March 2017
Price $40.02
1yr Target $46.27
Analysts 15
Dividend $0.32
Payout Ratio 24.42%

1yr Cap Gain 15.61%
Yield 0.79%
1yr Tot Return 16.40%

P/E 30.60
PEG 1.51
Beta 1.66
EPS (ttm) $1.31
EPS next yr $1.97
Forward P/E 20.36
EPS next 5yr 20.24%
1yr Price Support $39.87

Market Cap $53.63 Bil
Revenues $7.64 Bil
Earnings $1.75 Mil
Profit Margin %

Quick Ratio ---
Current Ratio ---
Debt/Equity 12.20
1yr RevGR 17.21%
3yr RevGR 11.10%
5yr RevGR 9.77%

1yr EarnGR 27.18%
3yr EarnGR 18.66%
5yr EarnGR 13.35%

1yr DivGR 20.83%
3yr DivGR 6.44%
5yr DivGR 3.85%

ROA 0.80%
ROE 13.40%
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Charles Schwab Monthly Chart
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Charles Schwab Dividend History

My Path Forward

​The Charles Schwab Corporation recently dropped their commissions to $4.95 per trade to the jury's out on the affect that'll have on the bottom line. While initially one would think that would reduce sales but if it brings in more accounts, sales will increase. So only time will tell the affect that has on the company's fundamentals. 

Looking at the historical fundamentals above, it appears that this is a rock solid company that's a little bit pricey. I normally like to buy shares of companies that are about 20 times earnings. In the case of Charles Schwab, the price is now 20 times next year's earnings. But that may be the best I can do for a company that has these great fundamentals. 

A couple of things that I've noticed and I'd like to point out are the revenue, earnings and dividend growth rate and the payout ratio. Revenues and earnings have been increasing at a nice clip while dividends have been held constant for the last few years at around $0.12 per share. That's resulted in the payout ratio to dropping to only 24% of earnings and if it's not raised significantly the payout ratio will quickly fall to 16%. So I think the possibility of dividend increases is pretty high. 

So all things considered, I'd like to buy these shares in the $30s but the stock has already fallen from the mid-$40s so I think I'll begin a very small position in the next few days and buy more if it falls below $40 per share. If it doesn't pull back, I'll slowly accumulate shares on dips as funds become available. In addition, I'll use dividend reinvestment as well as the sale of call options to help me accumulate more shares without having to use my own funds. 

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RCI Hospitality in Transition

3/29/2017

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​RCI Hospitality has moved up 60% since the last time I looked at the company (Last August) but this company hasn't nearly topped out yet. I expect this company to double again in the next 18 months and continue on from there. And it's all the result of two things, (1) management finally brought several MBAs to help manage the company and (2) their decision to expand their restaurant chain "Bombshells" beyond Texas. It's a move to take everything the company has learned in entertainment and food service from a very specific niche market to a mass audience based around a military theme. It seems so obvious that you just have to wonder why nobody else ever thought of it. 

For some investors an investment in RCI Hospitality may not be suitable because of the type of business the company has traditionally been involved in, but they know the food and entertainment markets and their audience, and the company makes a lot of money. In 2013 they opened Bombshells Restaurants to appeal to the same demographic that Hooter's, the Tilted Kilt, Bone Daddies, Bikini's and Twin Peaks appeal to. And so far it's been a success.
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​RCI Hospitality Holdings, Inc. owns and/or operates upscale adult nightclubs serving primarily businessmen and professionals in the United States. The company operates in two segments, Nightclubs and Bombshells Restaurants and Bars. It operates adult nightclubs under the Rick's Cabaret, Tootsie's Cabaret, Club Onyx, XTC Cabaret, Cabaret East, Cabaret North, Silver City, Downtown Cabaret, Temptations, Jaguars, The Black Orchid, Seville, and Down in Texas Saloon. The company also operates five sports bar/restaurants under the Bombshells name. As of March 10, 2016, it operated 43 units. In addition, the company owns a national industry convention and tradeshow; 2 national industry trade publications; 2 national industry awards shows; and approximately 25 industry Websites, as well as publishes trade magazine serving the adult nightclubs industry. The company was formerly known as Rick's Cabaret International, Inc. and changed its name to RCI Hospitality Holdings, Inc. in August 2014. RCI Hospitality Holdings, Inc. was founded in 1982 and is based in Houston, Texas.
(Summary) (Company) (Chart)
1 January 2017
Price $16.81
1yr Target $27.00
Analysts 1
Dividend $0.12
Payout Ratio 10.43%

1yr Cap Gain 60.61%
Yield 0.71%
1yr Tot Return 61.32%

P/E 14.60
PEG 0.37
Beta 0.54
EPS (ttm) $1.15
EPS next yr $1.79
Forward P/E 9.89
EPS next 5yr 40.00%
1yr Price Support $71.60

Market Cap $163.39 Bil
Revenues $135.10 Bil
Earnings $11.40 Mil
Profit Margin 8.43%

Quick Ratio 1.10
Current Ratio 1.20
Debt/Equity 0.82
1yr RevGR -0.37%
3yr RevGR 6.25%
5yr RevGR 10.06%

1yr EarnGR 22.22%
3yr EarnGR 4.59%
5yr EarnGR 6.84%

1yr DivGR 0.00%
3yr DivGR ---
5yr DivGR ---

ROA 4.10%
ROE 8.90%
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RCI Hospitality Monthly Chart
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RCI Hospitality Dividend History
Operations

RCI Hospitality Holdings, Inc. subsidiaries own and operate upscale gentlemen's clubs and upscale casual dining restaurants. In addition, the company operates several websites and a media division.

Founded in 1983, the Rick's Cabaret pioneered the creation of elegant gentlemen's clubs featuring beautiful topless dancers and high quality restaurant service. Since going public in 1995 the company has transformed itself into a leading hospitality holding company. The company's subsidiaries own and operate over forty establishments under multiple brands throughout the US. The company changed its name from Rick's Cabare to RCI Hospitality Holdings, Inc. in 2014.

RCI Hospitality's subsidiaries have built powerful brand name awareness for their upscale environments and exceptionable adult entertainment. Many of the performers eventually went on to become Playboy Playmates and Penthouse Pets.

Forbes named RCI Hospitality Holdings one of America's 200 Best Small Companies. The company has also been profiled in The Wall Street Journal, Fortune, MarketWatch, Corporate Board Member, Smart Money, USA Today, The New York Daily News and other publications. The Rick's Cabaret-NYC Steakhouse is listed in Zagat's New York Nightlife and included in the TONY 100 list of fine Manhattan dining establishments by Time Out New York. 
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​RCI Hospitality's decision to create the casual dining concept around upscale casual dining and a military environment as well as starting a dividend in March 2016 has stabilized the company's financials and provided sufficient confidence to allow investors to begin to become shareholders.
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The Path Forward

With 4 Bombshells Restaurants open and more coming in 2017, RCI Hospitality is evolving into an upscale restaurant business. Any investment in the company is an investment in what the company is transitioning into rather than what it currently is. But don't get me wrong. I don't see the adult entertainment side of the business disappearing, I just anticipate a huge expansion on the casual dining aspect of the company. With the expectation that the company will expand from it current 4 locations in Texas to 100 locations spread across the country, these shares should double and triple over time. 

So why is this happening? I believe it's a direct result of the company changing from a niche product company to one that's going after a bigger audience. In addition, it's a direct consequence of bringing into management more responsible businessmen who are adding structure and discipline to the company. And I expect the company to now be more responsible to their shareholders.
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But I'm not naive enough to think that things will change overnight. They've got to work through ownership vs franchising and their ability to find the right individuals during expansion. None of these things are easy, and most are time consuming. But I think the company is moving in the right direction and that's been shown by the rise in the price of the stock and the initiation of a dividend for shareholders. 

As noted above, this isn't the first time I've reviewed RCI Hospitality. I already have a position in this company and I'm growing it through dividend reinvestment and the sale of options. It's a great strategy that gets me into stock at the right price and thens adds income back into my account for further acquisition of shares. But I expect to significantly add to my position over the next few weeks and months. This is a long term hold for me because this isn't going to happen overnight but the direction the company is moving in is correct. And I want to own shares of companies that are making all the right moves.  ​
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MGM Resorts Interntional

3/28/2017

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​MGM Resorts appears to be strengthening its US presence while Las Vegas Sands and Wynn receive more and more of their revenue from China. Rumors suggest that LVS is preparing to sell its Bethlehem, PA, casino and MGM appears to be the buyer. And this would be a perfect fit for MGM Resorts. A transaction like this would strengthen its position in the eastern portion of the US while continuing to maintain a stronghold on its home base in Las Vegas. 

Unlike Las Vegas Sands and Wynn, which now derive the greatest part of their revenues from their casinos in Macau, MGM only generates 20% of its $9.5 billion in annual revenues from the Chinese gambling enclave. Instead, it's focused mainly on Las Vegas, where 59% of its revenues originated last year, and on its regional resorts in Michigan, Missouri, Maryland, and New Jersey, from which it derived another 16%.
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For a few reasons, MGM should see that domestic percentage rise this year. In August, it took full possession of the Borgata in Atlantic City, and its National Harbor resort in Baltimore opened its doors in December. Adding Bethlehem to that portfolio would mesh with its broad plan to develop U.S. resorts of world-class caliber, including its new casino in Springfield, Massachusetts, which is on track to open next year.

Sands Bethlehem is arguably one of the most successful casinos of the dozen that operate in Pennsylvania. Located 70 miles south and west of New York City on the site of the former Bethlehem Steel Works plant, the resort features approximately 145,000 square feet of gaming space, 180 table games and more than 3,100 slot machines. It also has a hotel with 300 rooms; 150,000 square feet of retail space; an arts and cultural center; and a 50,000-square-foot event center.

​MGM Resorts International owns and/or operates casino resorts in the United States and China. The company operates through two segments, Domestic Resorts and MGM China. Its casino resorts offer gaming, hotel, convention, dining, entertainment, retail, and other resort amenities. Its casino operations include various slots, table games, and race and sports book wagering. The company operates 14 wholly owned resorts in the United States; and MGM Macau resort and casino in China, as well as develops an integrated casino, hotel, and entertainment resort on the Cotai Strip, Macau. The company also owns and operates Shadow Creek golf course, Primm Valley Golf Club, and Fallen Oak golf course. The company serves premium gaming customers; leisure and wholesale travel customers; business travelers; and group customers, including conventions, trade associations, and small meetings. The company was formerly known as MGM MIRAGE and changed its name to MGM Resorts International in June 2010. MGM Resorts International was founded in 1986 and is based in Las Vegas, Nevada.
(Summary) (Company) (Chart)
26 March 2017
Price $25.71
1yr Target $33.28
Analysts 18
Dividend $0.44
Payout Ratio 22.91%

1yr Cap Gain 29.44%
Yield 1.71%
1yr Tot Return 31.15%

P/E 13.36
PEG 0.38
Beta 1.61
EPS (ttm) $1.92
EPS next yr $1.57
Forward P/E 16.36
EPS next 5yr 34.82%
1yr Price Support $54.66

Market Cap $14.76 Bil
Revenues $9.46 Bil
Earnings $1.10 Bil
Profit Margin 11.62%

Quick Ratio 0.90
Current Ratio 1.00
Debt/Equity 2.09
1yr RevGR 2.28%
3yr RevGR -1.21%
5yr RevGR 3.79%

1yr EarnGR ---
3yr EarnGR ---
5yr EarnGR -19.33

1yr DivGR ---
3yr DivGR ---
5yr DivGR ---

ROA 4.10%
ROE 19.00%
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MGM Resorts Monthly Chart
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MGM Resorts Dividend History

Operations

MGM Resorts has two reportable segments: domestic resorts and MGM China. The company currently owns and operates 14 resorts in the United States. MGM China’s operations consist of the MGM Macau resort and casino and the development of an integrated casino, hotel, and entertainment resort on the Cotai Strip in Macau.  

Resort Operations

MGM Resort's casino resorts offer gaming, hotel, convention, dining, entertainment, retail and other resort amenities. The company owns and invests in several of the finest casino resorts in the world and they continually reinvest in their resorts to maintain a competitive advantage. The company makes significant investments in their resorts through newly remodeled hotel rooms, restaurants, entertainment and nightlife offerings, as well as other new features and amenities. Most of their revenue is cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. The company relies heavily on the ability of the resorts to generate operating cash flow to fund capital expenditures, provide excess cash flow for future development, acquisitions or investments, and repay debt financings.

The company believes they operate the highest quality resorts in each of the markets in which they operate. Ensuring these resorts are premier resorts in their respective markets requires capital investments and the quality of the resorts is measured by the company's success in winning numerous awards, both domestic and globally, including several Four and Five Diamond designations from the American Automobile Association as well as multiple Four and Five Star designations from Forbes Travel Guide.

Results of operations tend not to be seasonal in nature, though a variety of factors may affect the results of any interim period, including the timing of major conventions, the amount and timing of marketing and special events for our high-end gaming customers, and the level of play during major holidays, including New Year and Chinese New Year. While results don't depend on key individual customers, a significant portion of operating income is generated from high-end gaming customers. In addition, success in marketing to customer groups such as convention customers and the financial health of customer segments such as business travelers or high-end gaming customers from a specific country or region can affect results. 

All of the casino resorts operate 24 hours a day, every day of the year, with the exception of Grand Victoria which operates 22 hours a day. At domestic resorts, casino and hotel operations are owned and managed by MGM Resorts. Other resort amenities may be owned and operated by MGM, owned but managed by third parties, or leased to third parties. 

The Domestic Resorts. Over half the net revenue from domestic resorts is derived from non-gaming operations, including hotel, food and beverage, entertainment and other non-gaming amenities. The company markets to different customers and utilizes significant convention and meeting facilities to maximize hotel occupancy and customer volumes which also leads to better labor utilization. The operating results are highly dependent on the volume of customers at the resorts, which in turn affects the price that can be charged for hotel rooms and other amenities.

Casino operations feature a variety of slots, table games, and race and sports book wagering. In addition, the company offers premium players access to high-limit rooms and lounge experiences where players may enjoy an upscale atmosphere. 

Customers include premium gaming customers, leisure and wholesale travel customers, business travelers, and group customers, including conventions, trade associations, and small meetings. MGM Resorts has a complete portfolio of resorts which appeal to the upper end of each market segment and also cater to leisure and value-oriented tour and travel customers. Many of the resorts have significant convention and meeting space which drives business to the resorts during mid-week and off-peak periods. 

The Las Vegas casino resorts compete for customers with a large number of other hotel casinos including major hotel casinos on or near the Las Vegas Strip, major hotel casinos in the downtown area, and several major hotel casinos elsewhere in the Las Vegas area. The company's Las Vegas Strip resorts also compete with each other. According to the Las Vegas Convention and Visitors Authority, there were approximately 149,300 and 149,200 guest rooms in Las Vegas at December 31, 2016 and 2015, respectively. At December 31, 2016, MGM Resorts operated approximately 27% of the guestrooms in Las Vegas. 

Outside Nevada, MGM Resorts primarily compete with other hotel casinos in their markets and for customers in surrounding regional gaming markets, where location is a critical factor to success. In addition, the company competes with gaming operations in surrounding jurisdictions and other leisure destinations in each region. 

M-Life Rewards, our customer loyalty program, is a broad-based program recognizing and rewarding customer spending across many channels focusing on wallet share capture and increased loyalty through unique benefits and rewards. M-Life Rewards provides access to members only events and exclusive experiences. M-Life Rewards is a tiered program and allows customers to qualify for benefits across our participating resorts and in both gaming and non-gaming areas, encouraging customers to keep their total spend within our casino resorts. Members may earn points and/or Express Comps for their gaming play which can be redeemed at restaurants, box offices or the front desk at participating properties. Points may also be redeemed for free slot play on participating machines.

The company's direct marketing efforts utilize advanced analytic techniques that identify customer preferences and help predict future customer behavior, allowing us to make more relevant offers to customers, influence incremental visits, and help build lasting customer relationships.

The company also utilizes their world-class golf courses in marketing programs at the Las Vegas Strip resorts. The company's major Las Vegas resorts offer luxury suite packages that include golf privileges at Shadow Creek in North Las Vegas. In connection with the marketing activities, MGM Resorts also invites their premium gaming customers to play Shadow Creek on a complimentary basis. Marketing efforts at Beau Rivage in Biloxi, Mississippi benefit from the Fallen Oak golf course located 20 minutes north of Beau Rivage. Additionally, the company uses entertainment as a marketing tool. 

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​MGM China. MGM Resorts acquired an additional 4.95% interest in MGM China Holdings Limited on September 1, 2016, which increased the company's ownership to approximately 56%. They also have a controlling interest in MGM China, which owns MGM Grand Paradise, the Macau company that owns and operates the MGM Macau resort and casino and the related gaming subconcession and land concession. MGM Resorts believes that their ownership interest in MGM China plays an important role in extending their reach internationally and fosters future growth and profitability. Macau is the world’s largest gaming destination in terms of revenue and MGM Resorts expects future growth in the Asian gaming market to drive additional visitation at MGM Macau and their future property on the Cotai Strip. 

In October 2012, MGM Grand Paradise formally accepted the terms and conditions of a land concession contract from the government of Macau to develop MGM Cotai on an approximately 18 acre site on the Cotai Strip. Under the terms of the land concession contract, MGM Grand Paradise is required to build and open MGM Cotai by January 2018. 

Construction of MGM Cotai commenced in 2013 and it is expected to open in the second half of 2017. China State Construction Corporation serves as the sole general contractor for the project. MGM Cotai will be an integrated casino, hotel and entertainment resort with capacity for up to 500 gaming tables, up to 1,500 slots, and featuring approximately 1,500 hotel rooms. The total estimated project budget is $3.3 billion. 

The three primary customer segments in the Macau gaming market are VIP casino gaming operations, main floor gaming operations and slot machine operations. VIP gaming play is sourced both internally and externally. Externally sourced VIP gaming play is obtained through external gaming promoters who offer VIP players various services, such as extension of credit as well as complimentary hotel, food and beverage services. Gaming promoters operate VIP gaming rooms within the property. In exchange for their services, gaming promoters are compensated through payment of revenue-sharing arrangements and rolling chip turnover based commissions. In-house VIP players also typically receive a commission based on the program in which they participate. These clientele are acquired through our direct marketing efforts.

​Unlike gaming promoters and in-house VIP players, main floor players do not receive commissions. The profit contribution from the main floor segment exceeds the VIP segment due to commission costs paid to gaming promoters. Gaming revenues from the main gaming floors have grown significantly in recent years and we believe this segment represents the most potential for sustainable growth in the future. To target premium main floor players in order to grow revenue and improve yield, MGM Resorts has introduced premium gaming lounges and stadium-style electronic table games terminals, which include both table games and slots, to the main floor gaming area. The amenities create a dedicated exclusive gaming space for the use of premium main floor players. 

The company's key competitors in Macau include five other gaming concessionaires and sub-concessionaires. Additionally, the company faces competition at their Macau and Cotai properties from concessionaires who have expanded their operations, primarily on the Cotai Strip, with several openings having occurred during 2016 and additional openings expected during 2017. 

In January 2017, MGM Macau launched M-Life Rewards with a focus on non-gaming rewards to cater to an increasing number of resort and leisure customers expected with the opening of the MGM Cotai property. For customers who are primarily focused on gaming, the Golden Lion Club will continue to provide benefits to a range of members from lower spending through the highest level VIP cash players. The structured rewards systems based on member value and tier level ensures that customers can progressively access the full range of services that the resort provides. Both programs, M-Life Rewards and Golden Lion Club are aspirational by design and uniquely focus on building a rewarding relationship with their customers, encouraging members to increase both visitation and spend.

​In addition to the M-Life program, MGM Macau has also created and continues to expand several luxurious private gaming salons that provide distinctive, high-end environments for the VIP players brought to the resort through gaming promoters and the in-house VIP marketing team. MGM Macau has created a variety of incentive programs to reward gaming promoters for increased business and efficiency. 
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My Path Forward

It appears that the shares of MGM have stumbled and opened up an opportunity for me to make some serious money over the next 12 to 18 months. A month ago when the stock was priced at $30 per share the numbers just didn't work for me. At the current price the one year total return looks juicy and there appears to be support for the stock just below where it sits today. Add in that they once again instituted a dividend and I start to take notice. 

With support near $25.50 per share, today's price of $25.71 is right where I like to see it. I intend to start a position this week and grow it as fast as I can find available funds. Based upon the chart, it appears like the stock is consolidating so I may have a little time to accumulate a nice position but other investors are going to notice the price like I have soon enough. 
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Sierra Wireless

3/27/2017

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Sierra Wireless is a communications equipment designer and manufacturer headquartered in Richmond, British Columbia, Canada, with offices and operations in California, France, and Guangdong and Hong Kong in the People's Republic of China.

Sierra Wireless sells mobile computing and machine-to-machine (M2M) communications products that work over cellular networks. Sierra Wireless sells 2G, 3G and 4G mobile broadband wireless modems, routers and gateways as well as software, tools, and services.
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Sierra Wireless products and technologies are used in a variety of markets and industries, including automotive and transportation, energy, field service, healthcare, industrial and infrastructure, mobile computing and consumers, networking, sales and payment, and security. It also maintains a network of experts in mobile broadband and M2M integration to support customers worldwide.

The company's products are sold directly to OEMs, as well as indirectly through distributors and resellers.
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​Sierra Wireless, Inc. provides wireless wide area modem solutions for the mobile computing, rugged mobile, and machine-to-machine (M2M) markets. It develops and markets wireless modems for mobile computers; embedded modules for original equipment manufacturers (OEMs); and fixed and mobile wireless data solutions for industrial, commercial, and public safety applications. The company's products and solutions connect people, their mobile computers, and fixed terminals to wireless voice and mobile broadband networks. Its mobile computing products are used by businesses, consumers, and government organizations to enable high speed wireless access to a range of applications, including the Internet, e-mail, corporate intranet, remote databases, and corporate applications; and rugged mobile and M2M products are primarily used in the public safety, energy, industrial, transportation, and transaction processing markets. The company also provides various product development and integration support services, which include software and hardware integration, platform RF testing and optimization, regulatory approvals, mobile operator certification, project management, and sales and technical support training. Sierra Wireless sells its products worldwide through indirect channels, including wireless operators, resellers, and OEMs. The company was founded in 1993 and is headquartered in Richmond, Canada.
(Summary) (Company) (Chart)
23 March 2017
Price $30.05
1yr Target $22.42
Analysts 12
Dividend ---
Payout Ratio ---

1yr Cap Gain -25.40%
Yield ---
1yr Tot Return -25.40%

P/E 64.90
PEG 10.47
Beta 2.26
EPS (ttm) $0.46
EPS next yr $1.03
Forward P/E 29.23
EPS next 5yr 6.20%
1yr Price Support $6.38

Market Cap $963.40 Mil
Revenues $615.60 Mil
Earnings $15.40 Mil
Profit Margin 2.50%

Quick Ratio 1.50
Current Ratio 1.70
Debt/Equity 0.00
1yr RevGR ---
3yr RevGR ---
5yr RevGR ---

1yr EarnGR ---
3yr EarnGR ---
5yr EarnGR ---

1yr DivGR ---
3yr DivGR ---
5yr DivGR ---

ROA 2.80%
ROE 4.30%

​Products

Sierra Wireless offers products and solutions in four primary areas:
  • AirLink, wireless gateways used in industrial, enterprise, and automotive applications. AirLink intelligent gateways and routers use embedded intelligence and the ALEOS Application Framework to support remote management, control, and configuration, and application services for vertical market solutions.
  • AirPrime, embedded modules providing cellular connectivity for wireless mobile computing and M2M often used by device manufacturers to bring new 2G - 4G, GSM, and CDMA devices to market via PCI Express MiniCards, surface-mount modules, modem-only functionality, and programmable devices.
  • AirVantage, a cloud-based application facilitating M2M service delivery consisting of the AirVantage Management Service M2M device management application, and AirVantage Enterprise Platform for collecting, sharing, and integration of machine data using API standards, as well as development and deployment of M2M applications.
  • SAGEMCOM GSM-R terminals, wireless devices used in railway communications and applications.

Until the 2013 sale of all assets and operations, Sierra Wireless also manufactured and marketed AirCard, mobile broadband devices permitting users to connect notebooks, netbooks, and other electronics to the Internet over 3G and 4G mobile broadband networks via PC or express card slots, USB ports, or mobile WiFi hotspots.

​The Path Forward

​This is not a new company but the world of the Internet of Things (IoT) is finally catching up with Sierra Wireless. And that means they were ahead of the crowd and are now entrenched as the leader in the wireless communications of machines talking to other machines. That entrenched advantage has created a time moat around the company. Others may be able to do what Sierra Wireless does but they're years behind. For that reason this company is on my watch list. 

I think the fundamental analysts have totally missed identifying many of the aspects surrounding this company. So for me, that means having to rely solely on a technical analysis perspective (that often makes me a little nervous!). Looking at the chart it appears that the stock is breaking out once again as it moved above $29 per share.  

I'm looking to start a small position on this company as it breaks out into new territory above $29, and then add to that position as the stock moves higher. I expect the stock will move higher before pulling back to near $29 per share and look for that level to become support for a move higher. That being the case I do not intend to chase the stock too much above $30-$33 per share but rather wait for that pullback to add to my position. Others may disagree but I prefer not to chase shares. 

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NextEra Energy Partners

3/23/2017

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NextEra Energy Partners is a growth-oriented limited partnership formed by NextEra Energy Inc. to acquire, manage and own contracted clean energy projects with stable, long-term cash flows. Headquartered in Juno Beach, Florida, NextEra Energy Partners owns interests in wind and solar projects in North America, as well as natural gas infrastructure assets in Texas. The renewable energy projects are fully contracted, use industry leading technology and are located in regions that are favorable for generating energy from the wind and sun.

The seven natural gas pipelines in the portfolio are all strategically located, serving power producers and municipalities in South Texas, processing plants and producers in the Eagle Ford Shale, and commercial and industrial customers in the Houston area. The NET Mexico Pipeline, the largest pipeline in the portfolio, provides a critical source of natural gas transportation for low-cost, U.S. sourced shale gas to Mexico.
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​NextEra Energy Partners, LP acquires, owns, and operates contracted clean energy projects. It owns interests in wind and solar projects in North America, as well as in seven contracted natural gas pipeline assets in Texas. It has a portfolio of approximately 2,926 megawatts of renewable energy projects. The company was founded in 2014 and is headquartered in Juno Beach, Florida.
(Summary) (Company) (Chart)
22 March 2017
Price $32.90
1yr Target $35.33
Analysts 18
Dividend $1.41
Payout Ratio 70.85%

1yr Cap Gain 7.38%
Yield 4.28%
1yr Tot Return 11.66%

P/E 19.47
PEG 0.36
Beta ---
EPS (ttm) $1.99
EPS next yr $2.14
Forward P/E 15.39
EPS next 5yr 53.34%
1yr Price Support $114.14

Market Cap $1.78 Bil
Revenues $715.00 Mil
Earnings $82.00 Mil
Profit Margin 11.46%

Quick Ratio 0.90
Current Ratio 0.90
Debt/Equity 2.07
1yr RevGR 44.44%
3yr RevGR ---
5yr RevGR ---

1yr EarnGR 308.69%
3yr EarnGR ---
5yr EarnGR ---

1yr DivGR 31.92%
3yr DivGR ---
5yr DivGR ---

ROA 1.20%
ROE 5.50%
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NextEra Energy Partners Weekly Chart
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NextEra Energy Partners Dividend History

​Company Operations

NextEra Energy Partners (NEP) is a growth-oriented limited partnership formed by NextEra Energy Inc (NEE) to acquire, manage and own contracted clean energy projects with stable long-term cash flows. As of December 31, 2016, NEP owned a controlling, non-economic general partner interest and a 34.8% limited partner interest in NEP OpCo. Through NEP OpCo, NEP owns a portfolio of contracted renewable generation assets consisting of wind and solar projects, as well as seven contracted natural gas pipeline assets.

NEP expects to take advantage of trends in the North American energy industry, including the addition of clean energy projects as aging or uneconomic generation facilities are phased out, increased demand from utilities for renewable energy to meet state RPS requirements, improving competitiveness of energy generated from wind and solar projects relative to energy generated using other fuels and increased demand for natural gas transportation. NEP plans to focus on high-quality, long-lived projects operating under long-term contracts with creditworthy counterparties that are expected to produce stable long-term cash flows. NEP believes its cash flow profile, geographic, technological and resource diversity, cost-efficient business model and relationship with NEE provide NEP with a significant competitive advantage and enable NEP to execute its business strategy.

NEP was formed as a Delaware limited partnership in March 2014 as an indirect wholly owned subsidiary of NEE. On July 1, 2014, NEP completed its IPO by issuing 18,687,500 common units at a price to the public of $25 per unit.
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Each of the company's renewable energy projects sells substantially all of its output and related renewable energy attributes pursuant to long-term, fixed price contracts to various counterparties. The pipelines primarily operate under long term firm transportation contracts where counterparties pay for a fixed amount of capacity that is reserved by the counterparties and also generate revenues based on the volume of natural gas transported on the pipelines. During 2016, NEP derived approximately 19%, 18% and 16% of its consolidated revenues from its contracts with Pacific Gas and Electric Company, Mex Gas Supply S.L. and the IESO, respectively. In 2016, 2015 and 2014, approximately $136 million, $136 million and $95 million, respectively, of NEP's consolidated revenues were attributable to its Canadian operations. In addition, NEP's 2016 and 2015 revenues included approximately $129 million and $18 million, respectively, of revenues attributable to its contract with a subsidiary of Pemex. At December 31, 2016, 2015 and 2014, NEP's total net long-lived assets, including construction work in progress, located in Canada amounted to approximately $881 million, $879 million and $1,075 million, respectively. 

In connection with the IPO, NEP entered into a ROFO agreement with NEER and NEP OpCo that, among other things, provides NEP OpCo with a right of first offer to acquire the NEER ROFO projects, if NEER should seek to sell any of these projects. NEP believes that the NEER ROFO projects have many of the characteristics of the renewable energy projects in its current portfolio, including long-term contracts with creditworthy counterparties and recently constructed, long-lived facilities that NEP believes will generate stable cash flows. Under the ROFO agreement, however, NEER is not obligated to offer to sell any of the NEER ROFO projects. In addition, in the event that NEER elects to sell any of the NEER ROFO projects, NEER is not required to accept any offer NEP OpCo makes to acquire any NEER ROFO project and, following the completion of good faith negotiations, may choose to sell the project to third parties or not to sell the project at all. NEER is not obligated to offer NEP OpCo the NEER ROFO projects at prices or on terms that are consistent with NEP's business strategy. The NEER ROFO projects as of December 31, 2016 include contracted wind and solar projects in the U.S. and Canada with a combined capacity of approximately 1,076 MW. 

Effective July 2014, NEP and certain subsidiaries of NEP entered into the MSA with an indirect wholly owned subsidiary of NEE, under which operational, management and administrative services are provided to NEP, including managing NEP’s day-to-day affairs and providing individuals to act as NEP GP’s executive officers and directors, in addition to those services that are provided under O&M agreements and ASAs between NEER subsidiaries and NEP subsidiaries. NEP OpCo pays NEE an annual management fee and makes certain payments to NEE based on the achievement by NEP OpCo of certain target quarterly distribution levels to its unitholders.

In addition, effective October 2015, subsidiaries of NEP entered into transportation agreements and a fuel management agreement with a subsidiary of NEE.
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NEP's clean energy projects and pipelines

A Unique Subset of the Utility Industry

U.S. Renewable Energy Industry. Growth in renewable energy is largely attributable to the increasing cost competitiveness of renewable energy driven primarily by government incentives, RPS, improving technology and declining installation costs and the impact of increasingly stringent environmental rules and regulations on fossil-fired generation.

U.S. federal, state and local governments have established various incentives to support the development of renewable energy. These incentives make the development of renewable energy projects more competitive by providing accelerated depreciation, tax credits or grants for a portion of the development costs, decreasing the costs associated with developing such projects or creating demand for renewable energy assets through RPS programs. In addition, RPS provide incentives to utilities to contract for energy generated from renewable energy providers.

Renewable energy technology has improved and installation costs have declined meaningfully in recent years. Wind technology is improving as a result of taller towers, longer blades and more efficient energy conversion equipment, which allow wind projects to more efficiently capture wind resource and produce more energy. Solar technology is also improving as solar cell efficiencies improve and solar equipment costs decline.

Fossil-fired plants emit greenhouse gases (GHG) and other pollutants. A number of U.S. Environmental Protection Agency (EPA) rules have been proposed that are expected to impact many coal-fired plants in the U.S. While there is some uncertainty as to the timing and requirements that will ultimately be imposed by these proposed rules, NEP expects that the owners of some of the smaller, older or less efficient coal-fired plants will choose to decommission these facilities rather than make the significant investments that will be necessary to comply with environmental rules and regulations. In addition, NEP expects the current relatively low natural gas prices will affect the decision whether to make such investments.

Canadian Renewable Energy Industry. Canada is a world leader in the production and use of clean energy as a percentage of its total energy needs. Capacity additions are expected to be required throughout Canada in order to replace aging projects and meet growing demand. While a majority of Canada’s electricity is generated by hydro energy plants, non-hydro renewable energy is providing an increasing portion of Canada’s energy.

The Canadian energy industry is also benefiting from the increased competitiveness of renewable energy, due in part to improving technology and declining installation costs. Furthermore, government targets and incentives at the provincial level continue to drive the growth of renewable energy in Canada. Ontario, in particular, has been a leader in supporting the development of renewable energy in Canada.

U.S. Natural Gas Pipeline Transportation Industry. The increase in natural gas production in the U.S. has led to opportunities to construct new gas pipelines to transport natural gas from areas of strong production to areas of strong natural gas demand. Over the next several years, NEP expects electricity generators to continue to demand higher volumes of natural gas due to prices being near historic lows and the emergence of GHG emissions standards. NEP expects these factors to continue to support a growing natural gas transportation industry.

​My Path Forward

While NextEra Energy Partners came public only a couple of years ago and there is limited data available, the company was originally a subsidiary of NextEra Energy Inc and know as NextEra Energy Resources before being spun off as a separate company. Therefore I expect it to have many of the same characteristics as it's famous parent and should be an excellent investment. 

I also like the fact that it's in this special category of renewable energy. I believe it will become the energy of choice for a larger portion of the world's energy needs going forward. I realize that initially there's a lot of government support for the industry though tax incentives, but as the cost per kilowatt continues to fall, this could be an extremely valuable industry to invest in.

I've recently started a small position in this company. I looked at the numbers and was attracted to the company's dividend and analysts 5 year estimated earnings growth rate. I will continue to add to that position through dividend reinvestment and eventually, when I've accumulated over 100 shares, the sale of covered calls. I expect this to be a long term investment that will only increase over time.  
 
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Broadcom

3/16/2017

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​Broadcom is a diversified global semiconductor leader built on 50 years of innovation, collaboration and engineering excellence. The company's extensive product portfolio serves multiple applications within four primary end markets: wired infrastructure, wireless communications, enterprise storage and industrial & others. Applications designed for products in these end markets include: data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays.
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​Broadcom Limited designs, develops, and supplies a range of complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates through four segments: Wired Infrastructure, Wireless Communications, Enterprise Storage, and Industrial & Other. The Wired Infrastructure segment provides set-top box system-on-chips (SoCs); cable, digital subscriber line, and passive optical networking central office/consumer premise equipment SoCs; Ethernet switching and routing application specific standard product; embedded processors and controllers; serializer/deserializer application specific integrated circuits; optical and copper physical layers; and fiber optic laser and receiver components. The Wireless Communications segment offers RF front end modules, filters, and power amplifiers; Wi-Fi, Bluetooth, and global positioning system/global navigation satellite system SoCs; and custom touch controllers. The Enterprise Storage segment provides serial attached small computer system interface, and redundant array of independent disks controllers and adapters; peripheral component interconnect express switches; fiber channel host bus adapters; read channel based SoCs; and preamplifiers. The Industrial & Other segment optocouplers; industrial fiber optics motion control encoders and subsystems; and light emitting diodes. Its products are used in various applications, including enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. The company was formerly known as Avago Technologies Limited and changed its name to Broadcom Limited in February 2016. Broadcom Limited was founded in 2005 and is headquartered in Singapore.
(Summary) (Company) (Chart)
12 March 2017
Price $226.35
1yr Target $246.87
Analysts 30
Dividend $4.08
Payout Ratio ---

1yr Cap Gain 9.06%
Yield 1.80%
1yr Tot Return 10.86%

P/E ---
PEG ---
Beta 1.08
EPS (ttm) $-4.93
EPS next yr $15.79
Forward P/E 14.34
EPS next 5yr 15.00%
1yr Price Support $236.85

Market Cap $89.03 Bil
Revenues $15.61 Bil
Earnings $-1.76 Bil
Profit Margin ---

Quick Ratio 2.80
Current Ratio 3.50
Debt/Equity 0.70
1yr RevGR ---
3yr RevGR ---
5yr RevGR ---

1yr EarnGR ---
3yr EarnGR ---
5yr EarnGR ---

1yr DivGR ---
3yr DivGR ---
5yr DivGR ---

ROA ---
ROE ---
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Broadcom Monthly Chart
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Broadcom Dividend History
Products

Broadcom's product line spans computer and telecommunication networking. The company has products for enterprise/metropolitan high-speed networks, as well as products for small-office, home-office networks. Products include transceiver and processor ICs for Ethernet and wireless Local Area Networks, cable modems, digital subscriber lines (DSL), servers, home networking devices (router, switches) and cellular phones. It's also known for a series of high-speed encryption co-processors, offloading this processor intensive work to a dedicated chip and speeding up tasks that utilize encryption. 

The company also produces ICs for carrier access equipment, audio/video processors for digital set-top boxes and digital video recorders, Bluetooth and Wi-Fi transceivers, and RF receivers and tuners for satellite TV. Major customers include Apple, Hewlett-Packard, Motorola, IBM, Dell, Asus, Lenovo, Linksys, Logitech, Nintendo, Nokia Siemens Networks, Nortel (Avaya), TiVo, Tenda, and Cisco Systems.

My Path Forward

I already own shares of Broadcom and expect to enhance that position going forward, even though the company has already moved higher. I believe there's more to this company in the future and that the price of the shares will move even higher. I think the stock in this company will hit $250 per share within the next year and even higher after that. Therefore it only makes sense add to this position.

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Cognex Corporation

3/13/2017

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Cognex Corporation is a leading worldwide provider of machine vision products that capture and analyze visual information in order to automate tasks, primarily in manufacturing processes, where vision is required. Machine vision products are used to automate the manufacture and tracking of discrete items, such as mobile phones, aspirin bottles, and automobile tires, by locating, identifying, inspecting, and measuring them during the manufacturing or distribution process. Machine vision is important for applications in which human vision is inadequate to meet requirements for size, accuracy, or speed, or in instances where substantial cost savings are obtained through the reduction of labor or improved product quality. Today, many types of manufacturing equipment require machine vision because of the increasing demands for speed and accuracy in manufacturing processes, as well as the decreasing size of items being manufactured. 
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​Cognex Corporation provides machine vision products that capture and analyze visual information in order to automate tasks primarily in manufacturing processes worldwide. The company offers machine vision products, which are used to automate the manufacturing and tracking of discrete items, such as mobile phones, aspirin bottles, and automobile tires by locating, identifying, inspecting, and measuring them during the manufacturing or distribution process. Its products include VisionPro, a software suite that provides various vision tools for programming; displacement sensors with vision software for use in 3D application; In-Sight vision systems that perform various vision tasks, including part location, identification, measurement, assembly verification, and robotic guidance; In-Sight vision sensors; ID products, which are used for reading codes that are applied on discrete items during the manufacturing process, as well as have applications in logistics automation for package sorting and distribution; DataMan barcode readers; barcode verifiers; vision-enabled mobile terminals for industrial barcode reading applications; and barcode scanning software development kits. The company sells its products through direct sales force, as well as through a network of distributors and integrators. Cognex Corporation was founded in 1981 and is headquartered in Natick, Massachusetts.
(Summary) (Company) (Chart)
8 March 2017
Price $79.91
1yr Target $74.50
Analysts 8
Dividend $0.30
Payout Ratio 17.44%

1yr Cap Gain -6.78%
Yield 0.37%
1yr Tot Return -6.41%

P/E 46.54
PEG 1.99
Beta 1.41
EPS (ttm) $1.72
EPS next yr $2.31
Forward P/E 34.58
EPS next 5yr 23.41%
1yr Price Support $54.07

Market Cap $6.80 Bil
Revenues $520.80 Mil
Earnings $149.80 Mil
Profit Margin 28.76%

Quick Ratio 7.60
Current Ratio 8.00
Debt/Equity 0.00
1yr RevGR 15.57%
3yr RevGR 18.96%
5yr RevGR 10.09%

1yr EarnGR -19.25%
3yr EarnGR 27.18%
5yr EarnGR 15.96%

1yr DivGR 40.47%
3yr DivGR ---
5yr DivGR 10.38%

ROA 15.20%
ROE 16.40%
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Cognex Monthly Chart
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Cognex Dividend History

​Machine Vision Market

Cognex machine vision is primarily used in the manufacturing sector, where the technology is widely recognized as an important component of automated production and quality assurance. In this sector, the Company’s customers are primarily in the factory automation market. Factory automation customers purchase Cognex vision products and incorporate them into their manufacturing processes. Virtually every manufacturer can achieve better quality and manufacturing efficiency by using machine vision, and therefore, this market includes a broad base of customers across a variety of industries, including consumer electronics, automotive, consumer products, food and beverage, medical devices, and pharmaceuticals. Factory automation customers also purchase Cognex products for use outside of the assembly process, such as using ID products in logistics automation for package sorting and distribution. Sales to factory automation customers represented 95% of total revenue in 2015 compared to 94% of total revenue in 2014.

A small percentage of the company's customers are in the semiconductor and electronics capital equipment market. These customers purchase Cognex vision products and integrate them into the automation equipment that they manufacture and then sell to their customers to either make semiconductor chips or assemble printed circuit boards. Demand from these customers has been relatively flat on an annual basis for the past several years. Sales to semiconductor and electronics capital equipment manufacturers represented only 5% of total revenue in 2015 compared to 6% of total revenue in 2014.

In 2015 and 2014, direct and indirect revenue from Apple Inc. accounted for 18% and 16% of total revenue, respectively. In 2013, no customer accounted for greater than 10% of total revenue.

Business Strategy

Cognex Corp's goal is to expand their position as a leading worldwide provider of machine vision products. Sales to customers in the factory automation market represent the largest percentage of our total revenue, and the company believes that this market provides the greatest potential for long-term revenue growth.

In order to grow the factory automation market, Cognex Corp has invested in developing new products and functionality that make vision easier to use and more affordable, and therefore, available to a broader base of customers. This investment includes selective expansion into new industrial vision applications through internal development, as well as the acquisition of businesses and technologies. The company has also invested in building a worldwide sales and support infrastructure in order to access more of the potential market for machine vision. This investment includes opening sales offices in emerging markets, such as China, India, Brazil, and Eastern Europe, where Cognex believes many manufacturers can benefit from incorporating machine vision into their production processes, and developing strategic alliances with other leading providers of factory automation products.

Acquisitions and Divestitures

The company's business strategy includes selective expansion into new machine vision applications and markets through the acquisition of businesses and technologies. They plan to continue to seek opportunities to expand our product line, customer base, distribution network, and technical talent through acquisitions in the machine vision industry.

On July 6, 2015, Cognex completed the sale of their Surface Inspection Systems Division (SISD) to AMETEK, Inc. for $156 million in cash and the company now operates in one segment, machine vision technology. The company offers a variety of machine vision products that have similar economic characteristics, have the same productions processes, and are distributed by the same sales channels to the same types of customers.

On August 21, 2015, Cognex acquired selected assets of Manatee Works, Inc., a privately-held U.S.-based developer of barcode scanning software development kits (SDKs). Cognex plans to leverage Manatee's current developer network and business model of attracting new developers to drive leads for their ID products. As a result of this transaction, the company also acquired technology for use in mobile devices. 

Products

Cognex offers a full range of vision and ID products designed to meet customer needs at different performance and price points. Their products range from low-cost vision sensors that are easily integrated, to PC-based systems for users with more experience or more complex requirements. Their products also have a variety of physical forms, depending upon the user’s need. For example, customers can purchase vision software to use with their own camera and processor, or they can purchase a standalone unit that combines camera, processor, and software into a single package.

Vision Software

Vision software provides users with the most flexibility by combining the full general-purpose library of Cognex vision tools with the cameras, frame grabbers, and peripheral equipment of their choice. The vision software may run on the customer’s PC, which enables easy integration with PC-based data and controls. Applications based upon Cognex vision software perform a wide range of vision tasks, including part location, identification, measurement, assembly verification, and robotic guidance. Cognex's VisionPro® software offers an extensive suite of patented vision tools for advanced programming, while Cognex Designer allows customers to build complete vision applications with the simplicity of a graphical, flowchart-based programming environment. Cognex also offers a series of Displacement Sensors that are sold with vision software for use in highly demanding three-dimensional applications.

Vision Systems

Vision systems combine camera, processor, and vision software into a single, rugged package with a simple and flexible user interface for configuring applications. These general-purpose vision systems are designed to be easily programmed to perform a wide range of vision tasks including part location, identification, measurement, assembly verification, and robotic guidance. Cognex offers the In-Sight® product line of vision systems in a wide range of models to meet various price and performance requirements.

Vision Sensors

Unlike general-purpose vision systems that can be programmed to perform a wide variety of vision tasks, vision sensors are designed to deliver very simple, low-cost, reliable solutions for a limited number of common vision applications such as checking the presence and size of parts. Cognex offers the Checker® product line of vision sensors that performs single-purpose vision tasks. Late in 2015, Cognex introduced a new vision sensor, the In-Sight 2000 Series, which combines the power of an In-Sight vision system with the simplicity and affordability of a vision sensor.

ID Products

ID products quickly and reliably read codes (e.g., one-dimensional barcodes or two-dimensional data matrix codes) that have been applied to, or directly marked on, discrete items during the manufacturing process. Manufacturers of goods ranging from automotive parts, pharmaceutical items, aircraft components, and medical devices are increasingly using direct part mark (DPM) identification to ensure that the appropriate manufacturing processes are performed in the correct sequence and on the right parts. In addition, DPM is used to track parts from the beginning of their life to the end, and is also used in supply chain management and repair.

Cognex also offers applications in the automatic identification market outside of the manufacturing sector, such as using ID products in logistics automation for package sorting and distribution. As shipping volumes grow, more distribution centers are choosing to upgrade their traditional laser-based scanners to image-based barcode readers, which will cost-effectively increase package sorter efficiency and throughput by improving read rates. Cognex offers the DataMan® product line of ID readers that includes both hand-held and fixed-mount models. 

My Path Forward

I've been watching this company for awhile as the price of the shares have rocketed higher and higher. They make a product that's integral to the manufacturing process and can be used in all kinds of industries. So naturally I'd like to have shares of a company like that in my portfolio. But finding great companies and finding great companies whose shares are on sale are two different situations. And in this situation the shares of Cognex are currently just too expensive. 

At this point Cognex will have to remain on my watch list. I'd much rather purchase shares of this company somewhere in the vicinity of around $46-$50 per share. That would put the price of the shares near 20 times next years earnings. But that's quite a bit lower than the current price. 

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The Gladstone Companies

3/9/2017

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While I'm primarily a Dividend Growth Investor, there are times when the market looks like it's about to roll over, or at least stall, and I fall back into a more conservative mode of investing. And that investing is in income producing companies. For me that means investing and reinvesting any available funds in the Gladstone companies. Each one is different and invests in different areas of the economy so there's probably a Gladstone Company that fits most needs. As for me, I like and own them all. 

Gladstone Capital’s debt investments primarily consist of three types of loans to small and medium sized businesses in the US: senior term loans, senior subordinated loans, and junior subordinated loans.  Loans range from $5 million to $30 million with terms of up to seven years.  The company's equity investments typically take the form of preferred or common equity.  Historically the company aims to maintain a portfolio consisting of approximately 90% debt investments and 10% equity investments, at cost. The company's goals are to achieve and grow current income through their debt investments that allow distributions to shareholders to grow over time and provide shareholders with long term appreciation in the value of their assets by investing in equity securities that can grow over time. Gladstone Capital pays a monthly dividend at the end of each month. The company's current dividend is 9.16%.
(Summary) (Company) (Chart)
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Gladstone Investment makes debt and equity investments in established private businesses in the US. Debt investments primarily come in the form of three types of loans: senior term loans, senior subordinated loans and junior subordinated debt.  Equity investments primarily take the form of preferred or common equity often in connection with buyouts and other recapitalizations.  The company's investments typically range from $5 to $30 million, and aims to maintain an investment allocation of approximately 75% in debt securities and 25% in equity securities. The company's investment objectives are to achieve and grow current income by investing in debt securities of established businesses that they believe will provide stable earnings and cash flow to pay expenses, make principal and interest payments on our outstanding indebtedness and make distributions to stockholders that we anticipate will grow over time and to provide the company's shareholders with long-term capital appreciation in the value of their assets by investing in equity securities of established businesses that they hope will appreciate over time so that we can sell them for capital gains. Gladstone Investment pays a monthly dividend at the end of each month. The company's current dividend is 8.17%.
(Summary) (Company) (Chart)
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Gladstone Commercial is a real estate investment trust and its typical investment ranges from $5 million to $20 million.  Gladstone Commercial’s portfolio of real estate is leased to a wide cross section of tenants ranging from small businesses to large public companies, many of which are corporations that do not have publicly rated debt.  Gladstone Commercial intends to continue to enter into purchase agreements for real estate with existing triple net leases with terms of approximately 10 to 15 years, with built in rental increases. Gladstone Commercial provides two types of real estate transactions:
  • They purchase real estate already owned by a business and lease it back to them; therefore freeing up their equity in the real estate
  • They buy real estate that is already leased to good tenants
Gladstone Commercial pays a monthly dividend at the end of each month. The company's current dividend is 7.37%.
​(Summary) (Company) (Chart)
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Gladstone Land Corporation, an externally-managed agricultural real estate investment trust, owns and leases farmland to corporate and independent farmers in the United States. The company’s farms allow its tenants to grow row crops, such as lettuce and tomatoes; and berries comprising strawberries and raspberries. As of December 28, 2015, it owned 43 farms covering an area of 16,810 acres located in 6 states across the United States. The company also leases a parcel on its farm near Oxnard, California to an oil company. Gladstone Land Corporation was founded in 1997 and is based in McLean, Virginia. Gladstone Land pays a monthly dividend at the end of each month. The company's current dividend is 4.36%.
(Summary) (Company) (Chart)
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Granite Construction

3/8/2017

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Granite Construction Inc., through its offices and subsidiaries nationwide, is one of the nation’s largest infrastructure contractors and construction materials producers. Granite specializes in complex infrastructure projects, including transportation, industrial and federal contracting, and is a proven leader in alternative procurement project delivery. 

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​Granite Construction Incorporated operates as a heavy civil contractor and a construction materials producer in the United States. The company operates through three segments: Construction, Large Project Construction, and Construction Materials. The Construction segment undertakes various construction projects focusing on new construction and improvement of streets, roads, highways, bridges, site work, underground, power-related facilities, utilities, and other infrastructure projects. This segment serves federal agencies, state departments of transportation, county and city public works departments, school districts and developers, and utilities, as well as the private owners of industrial, commercial, and residential sites. The Large Project Construction segment focuses on large, complex infrastructure projects, including highways, mass transit facilities, bridges, tunnels, waterway locks and dams, pipelines, canals, power-related facilities, water-related facilities, utilities, and airport infrastructure, as well as provides bid-build, design-build, and construction management/general contractor contracts to various state departments of transportation, local transit authorities, utilities, and federal agencies. The Construction Materials segment mines and processes aggregates; and produces and sells construction materials to contractors, landscapers, manufacturers of products requiring aggregate materials, retailers, homeowners, farmers, and brokers. The company also performs site preparation and infrastructure services for residential development, energy development, commercial and industrial sites, and other facilities; and provides construction management professional services. Granite Construction Incorporated was founded in 1922 and is headquartered in Watsonville, California.
(Summary) (Company) (Chart)
5 March 2017
Price $53.12
1yr Target $65.22
Analysts 9
Dividend $0.52
Payout Ratio 36.87%

1yr Cap Gain 22.77%
Yield 0.97%
1yr Tot Return 23.74%

P/E 37.65
PEG 5.38
Beta 1.39
EPS (ttm) $1.41
EPS next yr $3.22
Forward P/E 16.48
EPS next 5yr 7.00%
1yr Price Support $22.54

Market Cap $2.10 Bil
Revenues $2.51 Bil
Earnings $57.10 Mil
Profit Margin 2.27%

Quick Ratio 2.00
Current Ratio 2.10
Debt/Equity 0.28
1yr RevGR 6.03%
3yr RevGR 3.50%
5yr RevGR 4.58%

1yr EarnGR -6.58%
3yr EarnGR ---
5yr EarnGR 1.62%

1yr DivGR 0.00%
3yr DivGR 0.00%
5yr DivGR 0.00%

ROA 3.40%
ROE 6.70%
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Granite Construction Monthly Chart
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Granite Construction Dividend History

Business

Granite Construction Company was originally incorporated in 1922. In 1990, Granite Construction Incorporated was formed as the holding company for Granite Construction Company and its wholly-owned subsidiaries and was incorporated in Delaware. 

The company delivers infrastructure solutions for public and private clients in North America. They're also one of the largest diversified heavy civil contractors and construction materials producers in the United States. Granite Construction operates nationwide, serving both public and private sector clients. Within the public sector, they primarily concentrate on heavy-civil infrastructure projects, including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, trenchless and underground utilities, power-related facilities, water and wastewater facilities, utilities, tunnels, dams and other infrastructure-related projects. Within the private sector, they perform site preparation and infrastructure services for residential development, energy development, commercial and industrial sites, and other facilities, as well as provide construction management professional services.

The company owns and leases substantial aggregate reserves and owns a number of plant facilities to produce construction materials for use in our construction business and for sale to third parties. They also have one of the largest contractor-owned heavy construction equipment fleets in the United States.

Operating Structure

Granite Construction's business is organized into three reportable business segments: Construction, Large Project Construction and Construction Materials. 

In addition to these business segments, the company reviews their business by operating groups and by public and private market sectors. Operating groups are defined as follows: (i) California; (ii) Northwest, which primarily includes offices in Alaska, Arizona, Nevada, Utah and Washington; (iii) Heavy Civil, which primarily includes offices in California, Florida, New York and Texas; and (iv) Kenny, which primarily includes an office in Illinois. Each of these operating groups may include financial results from the company's Construction and Large Project Construction segments. A project’s results are reported in the operating group that is responsible for the project, not necessarily the geographic area where the work is located. In some cases, the operations of an operating group include the results of work performed outside of that geographic region. For instance, our California and Northwest operating groups include financial results from our Construction Materials segment. 

Construction: Revenue from the company's Construction segment was $1.3 billion and $1.2 billion (53.3% and 52.1% of our total revenue) in 2015 and 2014, respectively. Revenue from the Construction segment is derived from both public and private sector clients. The Construction segment performs construction management, as well as various civil construction projects with a large portion of the work focused on new construction and improvement of streets, roads, highways, bridges, site work, underground, power-related facilities, water-related facilities, utilities and other infrastructure projects. These projects are typically bid-build and construction management projects completed within two years with a contract value of less than $75 million.

Large Project Construction: Revenue from the company's Large Project Construction segment was $812.7 million and $825.0 million (34.3% and 36.3% of our total revenue) in 2015 and 2014, respectively. The Large Project Construction segment focuses on large, complex infrastructure projects which typically have a longer duration than the company's Construction segment work. These projects include major highways, mass transit facilities, bridges, tunnels, waterway locks and dams, pipelines, canals, power-related facilities, water- related facilities, utilities and airport infrastructure. This segment primarily includes bid-build, design-build and construction management/general contractor contracts, together with various contract methods relating to public-private partnerships, generally with contract values in excess of $75 million. 

Construction Materials: Revenue from the company's Construction Materials segment was $295.6 million and $263.8 million (12.5% and 11.6% of our total revenue) in 2015 and 2014, respectively. The Construction Materials segment mines and processes aggregates and operates plants that produce construction materials for internal use and for sale to third parties. The company has significant aggregate reserves that they own or lease through long-term leases. Sales to the company's construction projects represented 31.6% of the gross sales during 2015, and ranged from 30.5% to 44.7% over the last five years. The remainder is sold to third parties. 

Customers

Customers of the company's Construction segment include certain federal agencies, state departments of transportation, county and city public works departments, school districts and developers, utilities and owners of industrial, commercial and residential sites. Customers of the company's Large Project Construction segment are predominantly in the public sector and currently include various state departments of transportation, local transit authorities, utilities and federal agencies. Customers of the company's Construction Materials segment include internal usage by our own construction projects, as well as third-party customers. Third party customers include, but, are not limited to, contractors, landscapers, manufacturers of products requiring aggregate materials, retailers, homeowners, farmers and brokers. 

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Martin Marietta Materials

3/7/2017

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Martin Marietta Materials, Inc. supplies aggregates products and heavy building materials for the construction industry in the United States and internationally. It operates through Mid-America Group, Southeast Group, West Group, Cement, and Magnesia Specialties segments. The company mines, processes, and sells granite, limestone, sand, gravel, and other aggregate products for use in the public infrastructure, and nonresidential and residential construction industries, as well as in the agriculture, railroad ballast, chemical, and other applications. It also offers asphalt products, ready mixed concrete, and road paving construction services; and produces Portland and specialty cements for use in infrastructure projects, and nonresidential and residential construction, as well as in the railroad, agricultural, utility, and environmental industries. In addition, the company manufactures and markets magnesia-based chemical products for the industrial, agricultural, and environmental applications; and dolomitic lime primarily for use in the steel industry. Its chemical products are used in flame retardants, wastewater treatment, pulp and paper production, and other environmental applications. The company was founded in 1993 and is headquartered in Raleigh, North Carolina.
(Summary) (Company) (Chart)
2 March 2017
Price $219.02
1yr Target ---
Analysts ---
Dividend $1.68
Payout Ratio 25.33%

1yr Cap Gain ---
Yield 0.76%
1yr Tot Return ---

P/E 33.03
PEG 1.64
Beta 1.34
EPS (ttm) $6.63
EPS next yr $10.60
Forward P/E 20.67
EPS next 5yr 20.15%
1yr Price Support $213.59

Market Cap $13.81 Bil
Revenues $3.82 Bil
Earnings ---
Profit Margin ---

Quick Ratio 1.00
Current Ratio 2.00
Debt/Equity 0.41
1yr RevGR 7.88%
3yr RevGR 20.77%
5yr RevGR 17.38%

1yr EarnGR 54.54%
3yr EarnGR 36.02%
5yr EarnGR 30.08%

1yr DivGR 2.50%
3yr DivGR 0.81%
5yr DivGR 0.49%

ROA ---
ROE ---

Business
 
Martin Marietta Materials, Inc. is a leading supplier of aggregates products (crushed stone, sand, and gravel) used for the construction of infrastructure, nonresidential, and residential projects. Aggregates products are also used for railroad ballast and in agricultural, utility and environmental applications. The Company’s Aggregates business consists primarily of mining, processing, and selling granite, limestone, sand and gravel. The Aggregates business also includes aggregates-related downstream product lines (including its heavy building materials such as asphalt products, ready mixed concrete, and road paving construction services).

The Company is also a leading supplier of cement, ready mixed concrete, and asphalt and paving services in some regions where being able to supply a full range of products is important for customer service. The Company’s Cement business produces Portland and specialty cements.

The Company also has a Magnesia Specialties business that manufactures and markets magnesia-based chemical products used in industrial, agricultural, and environmental applications, and dolomitic lime sold primarily to customers in the steel industry.

The Company was formed in 1993 as a North Carolina corporation to serve as successor to the operations of the materials group of the organization that is now Lockheed Martin Corporation. An initial public offering of a portion of the Company’s Common Stock was completed in 1994, followed by a tax-free exchange transaction in 1996 that resulted in 100% of the Company’s Common Stock being publicly traded.

The Company completed over 85 smaller acquisitions from the time of its initial public offering until the present, which allowed the Company to enhance and expand its presence in the aggregates marketplace. This included an exchange of certain assets in 2011 with Lafarge North America Inc., pursuant to which it received aggregates quarry sites, ready mixed concrete and asphalt plants, and a road paving business in and around the metropolitan Denver, Colorado, and the I-25 corridor, in exchange for which Lafarge received properties consisting of quarries, an asphalt plant and distribution yards operated by the Company along the Mississippi River and a cash payment. The Company uses its ability to distribute materials over long distances by rail and water to further expand its operations.

The business has developed further through the following transactions over the past five years.
  • In 2013, the Company acquired three aggregates quarries in the greater Atlanta, Georgia, area. The transaction provided over 800 million tons of permitted aggregate reserves and enhanced the Company’s existing long-term position in this market.
  • In 2014, the Company completed the acquisition of Texas Industries, Inc., further augmenting its position as a leading supplier of aggregates and heavy building materials. TXI, as a stand-alone entity, was a leading supplier of heavy construction materials in the southwestern United States and a major supplier of natural aggregates and ready mixed concrete in Texas, northern Louisiana and, to a lesser extent, in Oklahoma and Arkansas. TXI was the largest supplier of ready mixed concrete, concrete products and cement in Texas. TXI enhanced the Company’s position as an aggregates-led, low-cost operator in the large and fast-growing geographies in the United States and provided high-quality assets in cement and ready mixed concrete.
  • In addition to the Cement business, the Company acquired as part of the TXI acquisition nine quarries and six aggregates distribution terminals located in Texas, Louisiana and Oklahoma. The Company also acquired approximately 120 ready mixed concrete plants, situated primarily in three areas of Texas (the Dallas/Fort Worth/Denton area of north Texas; the Austin area of central Texas; and from Beaumont to Texarkana in east Texas), in north and central Louisiana and in Southwestern Arkansas. As part of an agreement with the United States Department of Justice’s review of the transaction, the Company divested of its North Troy Quarry in Oklahoma and two related rail distribution yards in Dallas and Frisco, Texas.
  • TXI was also a cement producer in California. In 2015, the Company divested its California cement business acquired from TXI. These operations were not in close proximity to other core assets of the Company and, unlike other marketplace competitors, were not vertically integrated with ready mixed concrete production. The divestiture primarily included a cement plant, two distribution terminals, mobile equipment, intangible assets and inventory. The Company also completed the integration of the TXI operations in 2015, and completed three smaller acquisitions, which included three aggregates operations and related assets.
  • In 2016, the Company acquired aggregates, ready mixed concrete and asphalt and paving operations in southern Colorado that provided more than 500 million tons of mineral reserves and expanded the Company’s presence along the Front Range of the Rocky Mountains, home to 80% of Colorado’s population. The Company also acquired the remaining interest it had not previously owned in a ready mixed concrete company that serves the I-35 corridor in central Texas between Dallas and Austin, which enhanced the Company’s position and provided additional vertical integration benefits with the Company’s Cement business.
  • Between 2001 and 2016, the Company disposed of or idled a number of underperforming operations, including aggregates, ready mixed concrete, trucking, and asphalt and road paving operations of its Aggregates business and the refractories business of its Magnesia Specialties business. In some of its divestitures, the Company concurrently entered into supply agreements to provide aggregates at market rates to certain of these divested businesses. During 2015, the Company disposed of certain non-core asphalt operations in San Antonio, Texas and divested its California cement operations of its Cement business. The Company will continue to evaluate opportunities to divest underperforming assets, if appropriate, during 2017 in an effort to redeploy capital for other opportunities. 

Business Segments

The Company conducts its Aggregates business through three reportable segments: the Mid-America Group, Southeast Group and West Group. The Company’s Cement business is reported through the Cement segment. The Company also has the Magnesia Specialties segment, which includes its magnesia-based chemicals and dolomitic lime businesses. 

Aggregates Business

The Aggregates business mines, processes and sells granite, limestone, sand, gravel and other aggregates products for use in all sectors of the public infrastructure, nonresidential and residential construction industries, as well as agriculture, railroad ballast, chemical and other uses. The Aggregates business also includes the operation of other construction materials businesses. These businesses, located in the West Group, were acquired through continued selective vertical integration by the Company, and include ready mixed concrete, and asphalt and road paving operations in Arkansas, Colorado, Louisiana, Texas and Wyoming. 

The Company is a leading supplier of aggregates for the construction industry in the United States. In 2016, the Company’s Aggregates business shipped and delivered aggregates, asphalt products and ready mixed concrete from a network of nearly 300 quarries, underground mines, and distribution facilities, and approximately 150 ready mixed concrete plants, to customers in 29 states, Canada, and the Bahamas, generating net sales and earnings from operations of $3.1 billion and $576.0 million, respectively.

The Aggregates and Cement businesses market their products primarily to the construction industry, with approximately 39% of the aggregates product line shipments in 2016 made to contractors in connection with highway and other public infrastructure projects and the balance of its shipments made primarily to contractors in connection with nonresidential and residential construction projects. The Company believes public-works projects have historically accounted for approximately 50% of the total annual aggregates and cement consumption in the United States.  

Cement Business

The Cement business produces Portland and specialty cements. Cement is the basic binding agent for concrete, a primary construction material. The principal raw material used in the production of cement is calcium carbonate in the form of limestone. The Company owns more than 600 million tons of limestone reserves adjacent to its two cement production plants in Texas. Similar to the Aggregates business, cement is used in infrastructure projects, nonresidential and residential construction, and the railroad, agricultural, utility and environmental industries. Consequently, the cement industry is cyclical and dependent on the strength of the construction sector. 

Magnesia Specialties Business

The Company manufactures and markets, through its Magnesia Specialties business, magnesia-based chemical products for industrial, agricultural and environmental applications, and dolomitic lime for use primarily in the steel industry. These chemical products have varying uses, including flame retardants, wastewater treatment, pulp and paper production and other environmental applications. In 2016, 69% of Magnesia Specialties’ net sales were attributable to chemical products, 30% to lime, and 1% to stone sold as construction materials. For 2016, the Magnesia Specialties business generated record net sales and earnings from operations of $238.0 million and $79.1 million, respectively. 

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