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Investing

Ideas and Strategies on Investing.

Previous Articles

EPR Properties

5/25/2016

0 Comments

 
EPR Properties is a unique company in that it is a growing Real Estate Investment Trust. It actually grows its revenues, earnings and dividends on a per share basis. Most REITs grow but they do that by diluting their shares so that in the end, the price of the stock and the dividend remain relatively stable. That doesn't seem to be the case with this company. Add in the fact that this company pays a monthly dividend and suddenly I'm interested. 

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​EPR Properties is a real estate investment trust. It invests in the real estate markets of United States and Canada. The firm develops, owns, leases and finances properties in select market segments primarily related to entertainment, education and recreation. It was formerly known as Entertainment Properties Trust. EPR Properties was founded on August 22, 1997 and is based in Kansas City, Missouri.
​(Summary) (Company) (Chart)
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22 May 2016
Price $69.76
1yr Target $67.60
Analysts 5
Dividend $3.84
Payout Ratio 125.90%

1yr Cap Gain -3.10%
Yield 5.50%
1yr Tot Return 2.40%
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P/E 22.89
PEG 3.69
Beta 0.84
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EPS (ttm) $3.05
EPS next yr $3.23
​Forward P/E 21.62
EPS next 5yr 6.20%
1yr Price Support $20.02
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​Market Cap $4.40 Bil
Revenues $440.30 Mil
Earnings $181.90 Mil
Profit Margin 41.31%

Quick Ratio ---
Current Ratio ---
Debt/Equity 0.91
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1yr RevGR 9.34%
3yr RevGR 9.72%
5yr RevGR 8.28%

1yr EarnGR 2.44%
3yr EarnGR 13.80%
5yr EarnGR 9.51%

​1yr DivGR 5.78%
3yr DivGR 6.64%
5yr DivGR 6.52%

ROA 4.30%
ROE 8.90%
​

Operations

​EPR Properties is a self-administered Real Estate Investment Trust (REIT). As of the end of last year their total assets exceeded $4.2 billion. The company's investments are generally structured as long-term triple-net leases that require the tenants to pay substantially all expenses associated with the operation and maintenance of the property, or as long-term mortgages with economics similar to their triple-net lease structure.

​For financial reporting purposes, the company groups their investments into four reportable operating segments: Entertainment, Education, Recreation and Other. Their total investments of approximately $4.6 billion at December 31, 2015 consisted of interests in the following:
  • $2.5 billion or 53% related to entertainment properties, which includes megaplex theatres, entertainment retail centers (centers typically anchored by an entertainment component such as a megaplex theatre or live performance venue and containing other entertainment-related or retail properties), family entertainment centers and other retail parcels;
  • $1.0 billion or 22% related to education properties, which consists of investments in public charter schools, early education centers and K-12 private schools;
  • $943.3 million or 21% related to recreation properties, which includes metro ski parks and waterparks and golf entertainment complexes; and
  • $203.4 million or 4% related to other properties, which consists primarily of $200.9 million related to the Adelaar casino and resort project in Sullivan County, New York (excluding $38.7 million related to the Adelaar indoor waterpark project included in recreation). 

Entertainment

As of December 31, 2015, our Entertainment segment consisted of investments in megaplex theatres, entertainment retail centers, family entertainment centers and other retail parcels totaling approximately $2.5 billion with interests in:
  • 131 megaplex theatre properties located in 34 states and Ontario, Canada;
  • nine entertainment retail centers (which include eight additional megaplex theatre properties and one live performance venue) located in Westminster, Colorado; New Rochelle, New York; Burbank, California; Suffolk, Virginia; Charlotte, North Carolina; and Ontario, Canada;
  • seven family entertainment centers located in Illinois, Indiana and Florida;
  • land parcels leased to restaurant and retail operators adjacent to several of our theatre properties;
  • $23.6 million in construction in progress primarily for real estate development for two megaplex theatres and redevelopment of two of our existing megaplex theatres as well as eight other retail redevelopment projects; and
  • $4.5 million in undeveloped land inventory. 

Education

As of December 31, 2015, our Education segment consisted of investments in public charter schools, early education centers and K-12 private schools totaling approximately $1.0 billion with interests in:
  • 70 public charter school properties located in 18 states and the District of Columbia;
  • 18 early education centers located in six states;
  • two K-12 private schools located in New York and Illinois and one 5-12 private school located in California; and
  • $112.8 million in construction in progress for real estate development or expansion of 11 public charter schools, 14 early education centers and one K-12 private school. 

Recreation

As of December 31, 2015, our Recreation segment consisted of investments in metro ski parks, resorts, waterparks and golf entertainment complexes totaling approximately $943.3 million with interests in:
  • 10 metro ski parks located in Ohio, Maryland, Pennsylvania, Vermont and Virginia;
  • five waterparks located in Kansas, Texas and Pennsylvania;
  • 19 golf entertainment complexes in nine states; and
  • $59.5 million in construction in progress for three golf entertainment complexes and the development of an indoor waterpark hotel at the Adelaar casino and resort project located in Sullivan County, New York. 

Other

As of December 31, 2015, our Other segment consisted of investments totaling approximately $203.4 million with interests in:
  • $183.0 million in construction in progress for development of the casino, golf course, entertainment village and infrastructure related to the Adelaar casino and resort project in Sullivan County, New York;
  • $17.9 million related to undeveloped land inventory at our Adelaar casino and resort project in Sullivan County, New York; and
  • $2.5 million in mortgage financing related to one sold winery property. 

​My Perspective

There's a lot of things I like about this company but the price isn't one of them. I like the business they're in and I like the businesses of their occupants or partners. I love the entertainment area of the economy and I think the next generation will continue to spend more and more of their income on entertainment ensuring that EPR's buildings will remain occupied and income producing. 

So I'm interested in starting a position in this company. I like REITs and I like monthly dividends, so this will fit nicely into my investing strategy. But this company has been on a roll since December and I believe it's because that's when they announced they were building a casino. That has electrified investors and driven up the stock fro the low $50s into the low $70s. So this probably isn't the best time to be buying shares of this company. 

With the weekly lower Bollinger Band near $53, I'll wait until the stock pulls back closer to this area. That may not happen for sometime but this company is probably worth waiting for if gotten at the right price. I hope I don't have to wait too long. 
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0 Comments

Residential Construction

5/24/2016

0 Comments

 
I just wanted to quickly look at two companies in the Residential Construction Industry mainly because this industry has been surfacing on my screens lately. And it seems to be larger than just homebuilding. Other types of construction, as well as home furnishings, are also surfacing. Could it be that the Millennials are finally starting to have families and buying their first home? Are the Boomers finally starting to buy that second home or retirement home? Something surely seems to be happening. 
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M.D.C. Holdings engages in homebuilding and financial services in the United States. Its homebuilding operations include buying finished lots or developing lots for the construction and sale of single family homes under the Richmond American Homes name in Arizona, California, Nevada, Washington, Colorado, Utah, Virginia, Florida, Maryland, Pennsylvania, and New Jersey. Financial services operations consist of originating mortgage loans, providing insurance to its homebuilding subsidiaries, and for work performed in completed subdivisions, acting as a re-insurer on the claims, selling third party property and casualty insurance to homebuyers, and offering title services to builders and customers. The company was founded in 1972 and is based in Denver, Colorado.
(Summary) (Company) (Chart)
D.R. Horton operates as a homebuilding company. It engages in the acquisition and development of land, and construction and sale of homes in 27 states and 79 markets in the US under the name DRHorton, America's Builder, Express Homes, Emerald Homes, Regent Homes, Crown Communities, and Pacific Ridge Homes. DRHorton constructs and sells single-family detached homes; and attached homes, such as town homes, duplexes, triplexes, and condominiums. It is also involved in the origination and sale of mortgages, title insurance policies, and examination and closing services. The company primarily serves title insurance agents, homebuyers, and homebuilding customers. D.R. Horton, Inc. was founded in 1978 and is headquartered in Fort Worth, Texas.
​(Summary) (Company) (Chart)
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22 May 2016
Price $22.35
1yr Target $25.17
Analysts 6
Dividend $1.00
Payout Ratio 73.52%

1yr Cap Gain 12.61%
Yield 4.47%
1yr Tot Return 17.08%
​
P/E 16.39
PEG 0.64
Beta 1.73

EPS (ttm) $1.36
EPS next yr $2.46
​Forward P/E 9.08
EPS next 5yr 25.55%
1yr Price Support $62.59
​
​Market Cap $1.09 Bil
Revenues $1.93 Bil
Earnings $66.80 Mil
Profit Margin 3.41%

Quick Ratio ---
Current Ratio ---
Debt/Equity 0.73

1yr RevGR 12.69%
3yr RevGR 16.46%
5yr RevGR 14.80%

1yr EarnGR 3.87%
3yr EarnGR 1.26%
5yr EarnGR ---

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

ROA 2.80%
ROE 5.30%
22 May 2016
Price $29.71
1yr Target $33.75
Analysts 16
Dividend $0.32
Payout Ratio 14.61%

1yr Cap Gain 13.59%
Yield 1.07%
1yr Tot Return 14.66%
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P/E 13.59
PEG 0.95
Beta 1.40

EPS (ttm) $2.19
EPS next yr $2.66
​Forward P/E 11.17
EPS next 5yr 14.30%
1yr Price Support $38.03
​
​Market Cap $11.04 Bil
Revenues $11.31 Bil
Earnings $813.10 Mil
Profit Margin 7.18%

Quick Ratio ---
Current Ratio ---
Debt/Equity 0.59

1yr RevGR 34.89%
3yr RevGR 35.05%
5yr RevGR 19.72%

1yr EarnGR 35.33%
3yr EarnGR -9.75%
5yr EarnGR 21.39%

​1yr DivGR 33.75%
3yr DivGR 21.03%
5yr DivGR 12.26%

ROA 7.30%
ROE 13.60%
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​My Perspective

The Residential Construction Industry is a very broad area of the economy and these are only two of the vast number of companies in this area, but I wanted to record the fundamentals at this point in time for future reference as I dig deeper into this, and other related industries. I believe if the economy is truly starting to pick up then this industry will be very profitable.

I expect to accumulate a position in this industry but it's just too early for me to pick winners at this point. As I dig deeper into these, and other, companies, I'll have a better idea of where to invest my limited funds. But this is a good place to start my research.
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0 Comments

Shoe Carnival

5/23/2016

2 Comments

 
Sometimes expectations are so high for a company that exceptional is just not good enough for the analysts. When that happens, a company's stock price can suffer and open up an opportunity for a smart investor. This may have just happened this week with a company named Shoe Carnival. 

Shoe Carnival dropped 9% after releasing its first quarter financial report on Thursday afternoon. Net sales were up about 3% to a new record for a first quarter and earnings rose 8% ($0.56 per share) setting a record as well. In addition, comparable store sales were up 2.7% marking the seventh quarter in a row of rising comps. But despite all this good news, investors didn't seem satisfied with the company's guidance for the entire year. Shoe Carnival expects comparable store sales to grow just 1% to 3% and earnings to grow between 9% and 14%. But with a forward P/E of just 11.45, this pullback may just be the move smart investors are looking for.
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​Shoe Carnival, Inc., together with its subsidiaries, operates as family footwear retailer primarily in the United States. It provides various dress, casual, and athletic footwear products for men, women, and children; and accessories, including socks, belts, shoe care items, handbags, jewelry, scarves, and wallets. As of January 30, 2016, the company operated 405 stores in 34 states and Puerto Rico. It sells its products through online shopping at shoecarnival.com. Shoe Carnival, Inc. was founded in 1978 and is headquartered in Evansville, Indiana.
​(Summary) (Company) (Chart)
22 May 2016
Price $21.27
1yr Target $28.00
Analysts 3
Dividend $0.26
Payout Ratio 17.93%

1yr Cap Gain 31.64%
Yield 1.22%
1yr Tot Return 32.86%
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P/E 14.69
PEG 0.98
Beta 1.05
​
EPS (ttm) $1.45
EPS next yr $1.86
​Forward P/E 11.45
EPS next 5yr 15.00%
1yr Price Support $27.90
​
​Market Cap $427.95 Mil
Revenues $984.00 Mil
Earnings $28.20 Mil
Profit Margin 2.86%

Quick Ratio 0.90
Current Ratio 4.20
Debt/Equity 0.00
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1yr RevGR 4.65%
3yr RevGR 4.74%
5yr RevGR 5.88%

1yr EarnGR 14.17%
3yr EarnGR 0.45%
5yr EarnGR 1.14%

​1yr DivGR 6.25%
3yr DivGR 9.04%
5yr DivGR ---

ROA 5.70%
ROE 8.20%
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Operations

Shoe Carnival is one of the nation’s largest family footwear retailers providing in-person shopping at more than 400 locations in 33 states and Puerto Rico or online at www.shoecarnival.com. They offer customers a broad assortment of moderately priced dress, casual and athletic footwear for men, women and children with emphasis on national and regional name brands. They differentiate their retail concept from their competitors by their distinctive, highly promotional marketing efforts. Stores are approximately 11,000 square feet, generate approximately $2.4 million in annual sales and carry inventory of approximately 28,200 pairs of shoes per location.

Key Competitive Strengths
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Distinctive shopping experience. Shoe Carnival stores combine competitive pricing with a highly promotional, in-store marketing effort that encourages customer participation and injects fun and surprise into every shopping experience. The company promotes a high-energy retail environment by decorating with exciting graphics and bold colors, and by featuring a stage and mic-person as the focal point in each store who announces current specials, organizes contests and games, and assists and educates customers with the features and location of merchandise. This highly promotional atmosphere results in various competitive advantages, including increased multiple unit sales, the building of a loyal, repeat customer base, the creation of word-of-mouth advertising, and enhanced sell-through of in-season goods. 

Broad merchandise assortment. Shoe Carnival's objective is to be the destination retailer-of-choice for consumers seeking value priced, current season name brand and private label footwear. Their product assortment includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes for the entire family. Their average store carries approximately 28,200 pairs of shoes in four general categories – women’s, men’s, children’s and athletics – which are organized within the store by category and brand. Key brands are emphasized by prominent displays on end caps, focal walls, and within the aisles. These visual merchandising techniques make it easier for customers to shop and focus attention on key name brands. The company's e-commerce site offers customers an opportunity to choose from a large selection of products in all of the same categories of footwear, and introduces the company's concept to consumers who are new to Shoe Carnival, in both existing and new markets. 

Value pricing for our customers. The company's marketing effort targets moderate income, value conscious consumers seeking name brand footwear for all age groups. By offering a wide selection of popular styles of name brand merchandise at competitive prices the company generates broad customer appeal contributes to a reputation of value pricing.
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Efficient store level cost structure. Shoe Carnival's cost efficient store operations and real estate strategy enable the company to price products competitively. Merchandise is positioned directly on the selling floor in an open stock format allowing customers to serve themselves which reduces the staffing required to assist customers and reduces store level labor costs as a percentage of sales. In addition, the company locates stores in open-air shopping centers to take advantage of lower occupancy costs and maximize exposure to value oriented shoppers.
​

Distribution

Shoe Carnival operates a single 410,000 square foot distribution center located in Evansville, Indiana. The facility can support the processing and distribution needs of a minimum of 460 stores to facilitate future growth. The company has the right to expand the facility by 200,000 square feet, which would provide them with the processing capacity to support approximately 650 stores. 

Seasonality

The company's quarterly results of operations have fluctuated over the years and over the seasons and are expected to continue to fluctuate in the future. This is primarily the result of seasonal variances and the timing of sales and costs associated with opening new stores. Non-capital expenditures, such as advertising and payroll incurred prior to the opening of a new store, are charged to expenses as incurred. Therefore, results of operations may be adversely affected in any quarter in which the company incurs pre-opening expenses related to the opening of new stores.
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Shoe Carnival has three distinct peak selling periods: Easter, back-to-school and Christmas. To prepare for these peak shopping seasons, the company must order and keep in stock significantly more merchandise than they would carry during other seasons. Therefore, any unanticipated decrease in demand for the company's products during those peak shopping seasons could require the company to sell excess inventory at a substantial markdown. This could reduce net sales and gross margins and negatively affect profitability. 

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​My Perspective

Offering value is always a great business strategy and the Shoe Carnival seems to have mastered this strategy. It may not be the most exciting company listed but it's a company that's brought in pretty consistent numbers over the years. But no company's perfect and this company's outlook shows just how dependent they are on the financial aspects of their customers. And to a lesser extent the overall economy.

Their recent fiscal guidance may have created an opportunity for smart investors. This company now has a P/E ratio lower than its estimated future growth rate creating a PEG of less than one. And that may have created an opportunity to accumulate these shares while they're on sale. Simply achieving a P/E ratio next year equal to it's normal P/E of 15 gets the stock to almost $28 per share, which would be an increase of more than 30% in the price of the stock. 

Consider the fact that the dividend has been growing in the low single digits while the earnings are expected to grow in the mid-teens, and it's obvious that dividends will eventually increase significantly to a level more appropriate to the growth in earnings. Add in the fact that the payout ratio is only about 18% and this company could accelerate the dividend even faster. There's plenty of room to hike the dividend even without the upcoming increases in earnings. 

I don't see anyway to loose owning this stock over the long run (although there's always a way to loose money over the short term). I believe the recent pullback in the price of these shares has opened up an opportunity for me to start a position in this company and I believe I'll buy shares of this company this upcoming week before this window closes. 

As always, I'll start with a small position and build that position over time with dividend reinvestment, selling of call options, and additional buying on the open market as price dictates. 

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2 Comments

Where Do Dividends Come From?

5/19/2016

0 Comments

 
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Seems like a simple enough question for most investors but most people don't think about it much. The simple answer is that all dividends should come from a company's earnings. I say should because sometimes there isn't enough earnings to pay the dividend so the company can pay the dividend from one or two things - retained earnings from prior periods or from borrowings. If dividends are coming from either of these things rather than earnings, that ought to raise a big, bright red flag. It also follows that in order for dividends to grow, a company's earnings need to grow too.

All this should make sense to most investors but sometimes investors just look for a growing dividend and that's the end of the search. And that's a mistake because without adequate earnings to cover the dividend, the company will eventually have to cut the dividend.

Back this up one more step and it becomes obvious that earnings are a direct outcome of sufficient sales and good fiduciary management. Sounds simple but earnings are a result of sales minus costs and if sales are sufficient and costs aren't controlled, earnings will suffer. And so will dividends.

All of this makes sense when you lay it out, but it's often forgotten during the fog of selecting a stock to buy. Often there are extraneous meaningless factors that influence an investors decisions but for me it's always back to the basics. If a company's sales are increasing, management is responsible and costs are controlled, earnings should be growing as well as dividends. And everyone is happy.  
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0 Comments

Comfort Systems

5/18/2016

0 Comments

 
Comfort Systems USA provides comprehensive mechanical contracting services to include heating, ventilation and air conditioning (‘‘HVAC’’), plumbing, piping and controls, off-site construction, electrical, monitoring and fire protection. They install, maintain, repair and replace products and systems throughout their 35 operating units in 81 cities and 89 locations throughout the United States.
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The company operates primarily in the commercial, industrial and institutional HVAC markets and performs most of their services in industrial, healthcare, education, office, technology, retail and government facilities. Approximately 99% of their consolidated 2015 revenue was derived from commercial, industrial and institutional customers and multi-family residential projects. Approximately 44% of that revenue was attributable to installation services in newly constructed facilities and 56% was attributable to renovation, expansion, maintenance, repair and replacement services in existing buildings. 

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​Comfort Systems USA, Inc. provides mechanical installation, renovation, maintenance, repair, and replacement services for the mechanical services industry in the United States. It is involved in the design, engineering, integration, installation, and start-up of mechanical and related systems; and maintenance, repair, replacement, renovation, expansion, reconfiguration, and monitoring of mechanical systems, including heating, ventilation, and air conditioning (HVAC) systems, as well as industrial process piping. The company provides its services for office buildings, retail centers, apartment complexes, and manufacturing plants; healthcare, education, and government facilities; and other commercial, industrial, and institutional facilities. It serves building owners and developers, property managers, general contractors, architects, and consulting engineers in the commercial, industrial, and institutional HVAC markets. Comfort Systems USA, Inc. was founded in 1917 and is headquartered in Houston, Texas. 
(Summary) (Company) (Chart)
16 May 2016
Price $31.01
1yr Target $36.50
Analysts 2
Dividend $0.28
Payout Ratio 19.58%

1yr Cap Gain 17.70%
Yield 0.90%
1yr Tot Return 18.60%
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P/E 21.75
PEG 0.81
Beta 1.62
​
EPS (ttm) $1.43
EPS next yr $1.91
EPS next 5yr 26.90%
1yr Price Support $78.27
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​Market Cap $1.17 Bil
Revenues $1.60 Bil
Earnings $54.10 Mil
Profit Margin 3.37%

Quick Ratio 1.20
Current Ratio 1.40
Debt/Equity 0.16
1yr RevGR 12.05%
3yr RevGR 5.82%
5yr RevGR 8.24%

1yr EarnGR 113.11%
3yr EarnGR 52.76%
5yr EarnGR 27.22%

​1yr DivGR 11.76%
3yr DivGR 8.11%
5yr DivGR -1.03%

ROA 7.70%
ROE 16.10%
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Operations and Services Provided

Comfort Systems provides a wide range of construction, renovation, expansion, maintenance, repair and replacement services for mechanical and related systems in commercial, industrial and institutional properties. The company's local management teams maintain responsibility for day-to-day operating decisions. Local management is augmented by regional leadership that focuses on core business competencies, regional financial performance, cooperation and coordination between locations, implementing best practices and corporate initiatives. In addition to senior management, local personnel generally include design engineers, sales personnel, customer service personnel, installation and service technicians, sheet metal and prefabrication technicians, estimators and administrative personnel. 

Construction and Installation Services for New Buildings. The company's business related to newly constructed facilities, which comprised approximately 44% of their consolidated 2015 revenue, involves the design, engineering, integration, installation and start-up of mechanical and related systems. The company provides ‘‘design and build’’ and ‘‘plan and spec’’ installation services for office buildings, retail centers, apartment complexes, manufacturing plants, healthcare, education and government facilities and other commercial, industrial and institutional facilities. In a ‘‘design and build’’ installation, working with the customer, Comfort Systems determines the capacity needed and energy efficiency of the HVAC system that best suits the proposed facility and estimate the amount of time, labor, materials and equipment needed to build the specified system. The final design, terms, price and timing of the project are then negotiated with the customer. In ‘‘plan and spec’’ installation, the company participates in a bid process to provide labor, equipment, materials and installation based on the end user’s plans and engineering specifications.

Once an agreement has been reached, the company orders the necessary materials and equipment for delivery to meet the project schedule. In many instances, the company fabricates ductwork and piping and assemble certain components for the system based on the mechanical drawing specifications, eliminating the need to subcontract ductwork or piping fabrication. Finally, Comfort Systems installs the system at the project site, working closely with the owner or general contractor. The average project takes six to nine months to complete, with an average contract price of approximately $512,000 and has larger projects (383 contracts in progress at December 31, 2015) with contract prices up to $24.7 million.

Renovation, Expansion, Maintenance, Repair and Replacement Services for Existing Buildings. The company's renovation, expansion, maintenance, repair and replacement services in existing buildings comprised approximately 56% of their consolidated 2015 revenue and include the maintenance, repair, replacement, renovation, expansion, reconfiguration and monitoring of mechanical systems including HVAC systems and industrial process piping. Approximately 68% of their maintenance, repair and replacement revenue were derived from renovation, expansion, replacement and reconfiguration of existing systems for commercial, industrial and institutional customers. 

Maintenance and repair services are provided either in response to service calls or under a service agreement. Service calls are coordinated by customer service representatives or dispatchers that use computer and communication technology to process orders, arrange service calls, communicate with customers, dispatch technicians and invoice customers. Service technicians work from service vehicles equipped with commonly used parts, supplies and tools to complete a variety of jobs. The company also provides remote monitoring of temperature, pressure, humidity and air flow for HVAC systems with the ability to dispatch a service crew to analyze and repair the system. 

My Perspective

​This area of General Contractors is very interesting area for investing. It's a very fragmented industry with a few large companies that take the lion share of the business primarily because they're big enough to take on the largest projects possible. And many of today's construction projects are huge. I'll be looking into other companies in the next few weeks (EMCOR Group Inc and Chicago Bridge and Iron Company) but I really like the fundamentals of this company. 

I like that this company has a P/E ratio lower than its future estimated earnings growth rate. This provides a PEG of less than one and gives me reasonable assurance that the company's earnings, dividends and stock price will most likely continue higher in the years ahead. In addition, the high level of quick and current liability coverage as well as very low debt tells me that they're in good financial shape. Finally the current payout ratio of less than 20% on a growing earnings estimate leads me to expect that the dividend can grow even faster than earnings in the years ahead.

I would feel very comfortable owning shares of this company at this price but I also feel that it's fairly valued at this level. I would love to buy these shares at any price below $30 per share with a P/E closer to 20. With a beta of 1.62 I believe getting these shares at that price is a real possibility and a great place for me to set buy limits. And that should get me into this stock within the next week or so.
 
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0 Comments

Target

5/16/2016

0 Comments

 
Finding great companies that no one wants to own is often the road to financial success. Anyone who's been watching the news lately knows that hundreds of thousands of shoppers are signing petitions to never shop at Target again. All because of their controversial bathroom policy. And investors have been dumping the stock.

None of this has to do with the company's financials. So I've decided to take a look at the fundamentals and the technicals and see if it's time to pick up a bargain. I honestly believe that Target's traditional shoppers may stay away for awhile but I don't think they'll switch to Walmart and I think Target's management team will figure out several ways to bring them back into their stores.  
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​Target Corporation operates as a general merchandise retailer. It offers household essentials, including pharmacy, beauty, personal care, baby care, cleaning, and paper products; music, movies, books, computer software, sporting goods, and toys, as well as electronics, such as video game hardware and software; and apparel for women, men, boys, girls, toddlers, infants, and newborns, as well as intimate apparel, jewelry, accessories, and shoes. The company also provides food and pet supplies comprising dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and pet supplies; and home furnishings and dcor, including furniture, lighting, kitchenware, small appliances, home dcor, bed and bath, home improvement, and automotive products, as well as seasonal merchandise, such as patio furniture and holiday dcor. In addition, it offers in-store amenities, including Target Caf, Target Photo, Target Optical, Portrait Studio, Starbucks, and other food service offerings. Target Corporation sells products through its stores; and digital channels, including Target.com. As of January 30, 2016, the company operated 1,792 stores in the United States. Target Corporation was founded in 1902 and is headquartered in Minneapolis, Minnesota.
(Summary) (Company) (Chart)
15 May 2016
Price $73.88
1yr Target $83.40
Analysts 23
Dividend $2.24
Payout Ratio 42.42%

1yr Cap Gain 12.88%
Yield 3.03%
1yr Tot Return 15.91%
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P/E 14.00
PEG 1.23
Beta 0.60
EPS (ttm) $5.28
EPS next yr $5.76
EPS next 5yr 11.35%
1yr Price Support $65.37
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​Market Cap $45.09 Bil
Revenues $73.79 Bil
Earnings $3.32 Bil
Profit Margin %

Quick Ratio 0.40
Current Ratio 1.10
Debt/Equity 0.98
1yr RevGR 1.60%
3yr RevGR 0.21%
5yr RevGR 1.82%

1yr EarnGR ---
3yr EarnGR 5.45%
5yr EarnGR 5.82%

​1yr DivGR 10.55%
3yr DivGR 16.63%
5yr DivGR 19.04%

ROA 8.30%
ROE 24.80%
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All of Target's Problems

At this point most investors are already familiar with all the problems that Target has experienced over the last couple of years. Their biggest problem during this period was having their customer's accounts and credit card information stolen by hackers. And then there was their entry and withdrawal from Canada which was extremely expensive and a huge embarrassment for the company. And more recently the controversy over their designation of gender appropriate bathroom availability in their stores. 

These issues just continue to surface and take all the publicity away from the company's real business of selling consumer goods. Add in the increased competition from Walmart and Amazon, as well as the big box stores like Costco and the small box dollar stores, and Target's fundamental estimates get a little fuzzy. 
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My Strategy

So what's a good strategy for someone like me interested in a company like Target. Well, first of all, it's falling and that's never a good time to buy. So there's two things I can do - wait for a bottom to form or estimate where the security becomes a real bargain and then sell put options. 
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With both the overall market and Target both falling and nowhere in oversold territory, I believe it's probably prudent to just wait and see just how far this stock will fall. But as can be seen in the chart above, I would expect the stock to find some support near $68 per share. Once it fall thru that level, the next minor support area is between $58 and $62 per share. The final and best support will eventually surface near $52 per share. 

​An alternative strategy, if I had a specific price I felt was a fair price to start accumulating shares of Target, would be to sell covered puts in an attempt to obtain the stock at a price lower than it is today while getting paid for waiting for the buy to execute. Puts for July at $67.50 are being quoted higher than $1 and will surely go higher as the stock continues to fall. Puts with lower strike prices are lower but I expect prices to rise as the underlying stock falls. 

Despite the strategy, the concept is very appealing. I believe that Target's problems will eventually get solved and the stock will be a great addition to my portfolio. I believe my strategy will be to wait for a bottom to be formed and then sell puts because I believe the bottom won't be a "V" bottom but rather a "U" bottom and there will be plenty of time to get into the stock at a reasonable price near the bottom while also having the time to take advantage of selling puts to depressed shareholders looking for protection at the bottom. 

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0 Comments

Cardinal Health

5/13/2016

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Cardinal Health may have finally fallen enough that it's now within a price range that makes it attractive for me to own. It's a company that's been on the list of Dividend Aristocrats for a number of years, but the Dividend Growth Investors seem to enjoy accumulating the stock and pushing the P/E ratio way too high and out of bounds for an investor like me. But that may have recently changed. And now I'm getting anxious to add it to my accounts.
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​Cardinal Health, Inc. operates as a healthcare services and products company worldwide. The company operates in two segments, Pharmaceutical and Medical. The Pharmaceutical segment distributes branded and generic pharmaceutical, over-the-counter healthcare, specialty pharmaceutical, and consumer products to retailers, including chain and independent drug stores and pharmacy departments of supermarkets and mass merchandisers; hospitals; and other healthcare providers. This segment offers distribution, inventory management, data reporting, new product launch support, and contract pricing and chargeback administration services to pharmaceutical manufacturers; operates nuclear pharmacies and cyclotron facilities that manufacture, prepare, and deliver radiopharmaceuticals for use in nuclear imaging and other procedures in hospitals and physician offices; provides pharmacy operations, medication therapy management, and patient outcomes services to hospitals and other healthcare providers; and offers logistics, marketing, and other services. This segment also provides various consulting, patient support, and other services to pharmaceutical manufacturers, third-party payors, and healthcare providers. The Medical segment distributes a range of medical, surgical, and laboratory products to hospitals, ambulatory surgery centers, clinical laboratories, and other healthcare providers; and offers supply chain services, including spend, distribution, and inventory management services to healthcare providers. This segment also develops, manufactures, and sources a line of medical and surgical products comprising surgical drapes, and gowns and apparel; exam and surgical gloves; fluid suction and collection systems; and cardiovascular, wound care, and orthopedic products directly or through third-party distributors, as well as assembles and offers sterile and non-sterile procedure kits. Cardinal Health, Inc. was founded in 1979 and is headquartered in Dublin, Ohio.
(Summary) (Company) (Chart)
11 May 2016
Price $76.96
1yr Target $92.20
Analysts 15
Dividend $1.80
Payout Ratio 42.95%

1yr Cap Gain 19.80%
Yield 2.33%
1yr Tot Return 22.13%
​
P/E 18.75
PEG 1.86
Beta 0.59
​
EPS (ttm) $4.19
EPS next yr $5.76
EPS next 5yr 10.10%
1yr Price Support $58.17
​
​Market Cap $26.13 Bil
Revenues $117.71 Bil
Earnings $1.39 Bil
Profit Margin 1.18%

Quick Ratio 0.60
Current Ratio 1.10
Debt/Equity 0.83
1yr RevGR 12.56%
3yr RevGR -1.57%
5yr RevGR 0.80%

1yr EarnGR 7.10%
3yr EarnGR 5.70%
5yr EarnGR 15.38%

​1yr DivGR 13.12%
3yr DivGR 16.83%
5yr DivGR 14.38%

ROA 4.30%
ROE 21.20%
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Cardinal Health (CAH) declares $0.4489/share quarterly dividend, 16% increase from prior dividend of $0.387. Forward yield 2.34% Payable July 15; for shareholders of record July 1; ex-div June 29.

​Operations

Cardinal Health Inc is a healthcare services and products company that improves the cost-effectiveness of health care. Their Pharmaceutical Segment helps pharmacies, hospitals, and other healthcare providers focus on patient care while reducing costs, enhancing efficiency and improving quality. Their Medical Segment provides medical products to patients in the home. 

Pharmaceutical Segment

In the United States, Cardinal Health's Pharmaceutical segment 
  • distributes branded and generic pharmaceutical, over-the-counter healthcare and consumer products through its Pharmaceutical Distribution division to retailers (including chain and independent drug stores and pharmacy departments of supermarkets and mass merchandisers), hospitals and other healthcare providers. This division:
    • maintains prime vendor relationships that streamline the purchasing process resulting in greater efficiency and lower costs for our customers;
    • renders services to pharmaceutical manufacturers including distribution, inventory management, data reporting, new product launch support, and contract pricing and chargeback administration;
    • provides pharmacy operations, medication therapy management and patient outcomes services to hospitals and other healthcare providers; and
    • manufactures and repackages generic pharmaceuticals and over-the-counter healthcare products;
  • operates nuclear pharmacies and cyclotron facilities through its Nuclear Pharmacy Services division that manufacture, prepare and deliver radiopharmaceuticals for use in nuclear imaging and other procedures in hospitals and physician offices; and
  • distributes specialty pharmaceutical products; provides services to pharmaceutical manufacturers, third-party payors and healthcare providers supporting the development, marketing, distribution and payment for specialty pharmaceutical products; and provides specialty pharmacy services through its Specialty Solutions division.
In China, the Pharmaceutical segment distributes branded, generic and specialty pharmaceutical, over-the-counter healthcare and consumer products, provides logistics, marketing and other services and operates direct-to-patient specialty pharmacies through Cardinal Health China. 

Pharmaceutical Distribution

The Pharmaceutical Distribution division generates gross margin when the aggregate selling price to the customers exceeds the aggregate cost of products sold. Gross margin includes margin from the generic pharmaceutical program, margin from the pharmaceutical distribution agreements with branded manufacturers and margin from over-the-counter healthcare and consumer products. It also includes cash discounts. Margin from the generic pharmaceutical program includes price discounts and rebates from manufacturers and may include price appreciation on some products. Earnings on generic pharmaceuticals are generally highest during the period immediately following the initial launch of a generic product because generic pharmaceutical selling prices are generally highest during that period and tend to decline over time. Margin from pharmaceutical distribution agreements with branded manufacturers refers primarily to fees we receive for rendering a range of distribution and related services to manufacturers and also includes benefits from pharmaceutical price appreciation.

Sourcing Venture With CVS Health

In July 2014, the company established Red Oak Sourcing, a U.S.-based generic pharmaceutical sourcing venture with CVS Health with an initial term of 10 years. Both companies have contributed sourcing and supply chain expertise to the 50/50 venture and have committed to source generic pharmaceuticals through arrangements negotiated by the venture. Red Oak Sourcing negotiates generic pharmaceutical supply contracts on behalf of both companies.

Specialty Pharmaceutical Products and Services
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Products and services offered by the company's Specialty Solutions division is referred to as “specialty pharmaceutical products and services.” The Specialty Solutions division distributes oncology, rheumatology, urology, nephrology and other pharmaceutical products ("specialty pharmaceutical products") and human-derived plasma products to hospitals, dialysis clinics, physician offices and other healthcare providers; provides consulting, patient support, logistics and other services to pharmaceutical manufacturers, third-party payors and healthcare providers primarily supporting the development, marketing, distribution and payment for specialty pharmaceutical products; and provides specialty pharmacy services. 

Medical Segment

The company's Medical segment distributes a broad range of national brand and the company's own Cardinal Health brand medical, surgical and laboratory products and provides services to hospitals, ambulatory surgery centers, clinical laboratories and other healthcare providers in the US, Canada and China and to patients in the home in the US through the company's Cardinal Health at Home division. During fiscal 2015, Cardinal Health entered into an agreement with Henry Schein, Inc. to consolidate the company's physician office organization into Henry Schein, Inc. as part of a broader commercial relationship.
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The Medical segment also manufactures, sources and develops higher-margin Cardinal Health brand medical and surgical products. Manufactured products include: single-use surgical drapes, gowns and apparel; exam and surgical gloves; fluid suction and collection systems; cardiovascular products; wound care products; and orthopedic products. The company expects to expand this segment's product line to include the cardiac and endovascular products manufactured by Cordis once the acquisition of Cordis is completed. 

The Medical segment also assembles and offers sterile and non-sterile procedure kits. In addition, the segment provides supply chain services, including spend management, distribution management and inventory management services, to healthcare providers. 

 My Perspective

Dividend Growth Investors need little introduction to Cardinal Health. It's a favorite on the list of Dividend Aristocrats but, like many of the companies on the list, it's often very expensive. The recent fall has brought the P/E ratio down to its current level of 18. It's below 20 so it pops up on my displays but it's not as low as it's average P/E of 16. But by simply looking at next year's estimated earnings and comparing it to today's price and the P/E is a more reasonable 13.36 and that would be considered historically inexpensive. But that assumes that the company will actually produce earnings of $5.76.  However, if it does, and the P/E settles in to its average level (16.5), that calculates out to a projected stock price of $95.04 per share. And that's an increase of 23.49% over the next 13 months compared to its current price. That a very nice return. Add in a dividend yield of 2.33% that's growing in the mid-teens and any investor can see that this could be a very nice stock to own.

I expect to start a position in this company very soon while the current stock price is depressed. I don't think that will last long because the Dividend Growth Investors won't let it stay down for long. 
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One Percent Per Month

5/12/2016

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My goal has always been to increase my wealth by one percent per month. It's a lofty goal, and I don't always make my goal, but it's still my goal. Even after all these years.

So when I start to analyze companies, one of the things I look at is both the amount I can get from the dividend and the amount I can get from the growth in the price of the shares. If the two add up to twelve percent over the next twelve months, then that's a company I'm interested in buying. Or holding onto if I already own it. It's how I judge new buys and how I determine whether to hold on to the positions I already have. As most Texas ranchers would agree, sometimes you need to add to the herd and sometimes you need to cull the herd. But the herd needs to stay healthy.

So I'm constantly going through my positions to ensure I have a solid group of companies that are producing wealth. This means that I expect each company's dividend will continue to grow each year and that the stock price of each of my positions will grow too. Anything less is sold and the proceeds are reinvested in better investments. Ones that will produce that twelve percent goal. 

By having a total return emphasis the world of investing opens up nicely. I can find a stock that's expected to grow at a ten percent rate with a two percent dividend, or a stock that's growing at two percent with a ten percent dividend. Or any combination that adds up to at least twelve. I do, however, reject companies that don't pay any dividend at all simply because I like to get paid something. And being a dividend growth investor, that dividend needs to be growing at a rate faster than inflation.

Unfortunately this strategy has kept me out of some spectacular stocks over the years. It has kept me out of Amazon and Facebook while getting me into Apple only these last few years. Many may think that was a mistake, but the rule has also gotten me out of stocks that were once moving higher but more recently have stagnated. So while my personal rules may be a little inhibitive at times, they've also kept me out of trouble at other times. 

I know most people won't agree with my strategies for investing because they're entrenched in growth strategies or income strategies, but I'm entrenched in wealth strategies. I use dividend growth, stock price appreciation, options strategies, and reinvestment of income to enhance my wealth. Hopefully one day it will all pay off. 
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Pool Corp

5/10/2016

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Pool Corp sells swimming pool equipment, parts and supplies and other backyard related products to roughly 100,000 wholesale customers around the world through 300 locations worldwide with more than 3,400 employees. The company operates their wholesale sales centers through three segments: SCP Distributors LLC, Superior Pool Products LLC, and Horizon Distributors Inc.
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Pool Corporation distributes swimming pool supplies, equipment, and related leisure products in North America, Europe, South America, and Australia. The company offers approximately 160,000 national brand and its own-branded products. Its products include maintenance products, such as chemicals, supplies, and pool accessories; repair and replacement parts for pool equipment, including cleaners, filters, heaters, pumps, and lights; packaged pool kits comprising walls, liners, braces, and coping for in-ground and above-ground pools; pool equipment and components for new pool construction and the remodeling of existing pools; and irrigation and landscape products consisting of irrigation system components and professional lawn care equipment and supplies. The company also distributes building materials for use in pool installations and remodeling, such as concrete, plumbing and electrical components, functional and decorative pool surfaces, decking materials, tiles, hardscapes, and natural stones; and commercial products, including ASME heaters, safety equipment, and commercial pumps and filters. In addition, it offers discretionary recreational and related outdoor lifestyle products that enhance consumers’ use and enjoyment of outdoor living spaces, such as spas, grills, and components for outdoor kitchens. The company sells its products through sales centers to swimming pool remodelers and builders; specialty retailers that sell swimming pool supplies; swimming pool repair and service businesses; landscape construction and maintenance contractors; and municipal, golf course, and other commercial customers. Pool Corporation was founded in 1993 and is headquartered in Covington, Louisiana.
(Summary) (Company) (Chart)
8 May 2016
Price $88.65
1yr Target $93.00
Analysts 4
Dividend $1.04
Payout Ratio 35.86%

1yr Cap Gain 4.90%
Yield 1.17%
1yr Tot Return 6.07%
​
P/E 30.58
PEG 2.04
Beta 0.84
EPS (ttm) $2.90
EPS next yr $3.82
EPS next 5yr 15.00%
1yr Price Support $57.30

​Market Cap $3.78 Bil
Revenues $2.36 Bil
Earnings $128.30 Mil
Profit Margin 5.42%

Quick Ratio 0.60
Current Ratio 1.80
Debt/Equity 2.18
​
1yr RevGR 5.20%
3yr RevGR 6.49%
5yr RevGR 7.93%

1yr EarnGR 18.85%
3yr EarnGR 19.04%
5yr EarnGR 20.32%

​1yr DivGR 19.20%
3yr DivGR 17.53%
5yr DivGR 17.23%

ROA 13.00%
ROE 55.50%
Pool Corporation (POOL) declares $0.31/share quarterly dividend, 19.2% increase from prior dividend of $0.26. Forward yield 1.41% Payable June 2; for shareholders of record May 19; ex-div May 17.
Operations

Pool Corp is the world’s largest wholesale distributor of swimming pool supplies, equipment and related leisure products known for its history of customer service coupled with the highest quality products. The company was incorporated in 1993 as SCP Holding Corp and in 1995 the company changed its name to SCP Pool Corp. On May 16, 2006, the name was changed to Pool Corporation. Corporate headquarters are located in the New Orleans suburb of Covington, Louisiana.

Pool Corp has expanded its lines over the years to include products that complement the outdoor lifestyle, incorporating construction materials, fencing and backyard accessories over the years. In late 2005 the company added irrigation and landscape products to its inventory with the acquisition of Automatic Rain Co. and its wholly owned subsidiary, Horizon Distributors Inc. As a leading regional wholesale distributor of irrigation and landscape products for the professional trade, Horizon’s addition expanded the company's offerings and provided the company with a distribution platform to the irrigation and landscape marketplace.

In August 2006 the company increased its irrigation footprint, adding Wickham Supply Inc. and Water Zone LP and their 14 distribution sales centers. In March 2008 the company further expanded its complementary product offerings with the acquisition of National Pool Tile Group, Inc. As the leading wholesale distributor of pool tile and composite pool finishes, NPT provides Pool Corp with a significant opportunity to grow its market share of product offerings used in the swimming pool refurbish and construction markets.

The company offers more than 160,000 national brand and private label products including non-discretionary pool maintenance products, such as (1) chemicals and replacement parts, (2) packaged pool kits which include walls, liners, bracing and other materials, (3) whole goods which include cleaners, filters, heaters, pumps and lights, (4) construction materials used for pool installations and remodeling, (5) irrigation and landscape products including a complete line of commercial and residential irrigation products and parts, (6) power equipment for the professional landscape market, (7) specialty products which include light fixtures and built-in barbecues, and (8) golf irrigation and water management products.
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My Perspective

Like so many companies that I discover, I found this one by reading through the companies increasing their annual dividend. These companies can be found in the drop down menu in the "Dividend Increases" portion of this website. Any company increasing its dividend by 19% easily gets noticed by me. From there it's on to calculate its fundamentals (as can be seen above). In the case of Pool Corp I found the company's dividends to be growing in the high teens for the last few years. In addition I found their earnings increasing at a similar rate. This information alone provides me with reasonable insurance that earnings and dividends are likely to continue at this pace in the years ahead. 

The next place I looked was the weekly stock chart for the company. And this was just as pretty as the earnings and dividends (see above). This company has been moving higher for the last 5 years and has, for the most part, stayed above its 20 week moving average. It's a rather nice looking chart and I wish everything I owned looked that nice. 

I very much want to add this company to my portfolio. But I need to do it at a reasonable price in order to get the returns I prefer. It's current P/E of just over 30 is simply to rich for my investing strategy. But by simply moving back to its 20 week moving average, it would have a forward P/E ratio of only 21.70 and although that may still be relatively high, I don't think I'm going to see a P/E much lower than that on a company that produces numbers like I see here.

So my strategy is to buy shares of this company as it hits its 20 week moving average and then add to that position at or below that level. As usual I will add to that position through dividend reinvestment, call option sales, and additional purchases in the open market.  I think this company will be a long term hold for me and one that could provide a significant stream of income in the future with those large dividend increases like the ones it's currently producing. 

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0 Comments

Churchill Downs

5/6/2016

0 Comments

 
With the Kentucky Derby coming up this Saturday I thought it would be a great time to post some numbers on Churchill Downs Inc. The Kentucky Derby is just the first race of the Triple Crown but by all accounts it's the most important of the three. And Churchill Downs Inc is so much more than just the Derby. Below you'll find a very quick over view of the company and its fundamentals but it may be a great starting place for and investor to do additional research.

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Churchill Downs Inc provides pari-mutuel and online account wagering on horse racing and casino gaming services. It operates through Racing, Casinos, TwinSpires, Big Fish Games, and Other Investments segments. The company operates racing facilities, such as Churchill Downs Racetrack in Louisville, Kentucky; Arlington International Race Course in Arlington Heights with 10 off-track betting (OTB) facilities in Illinois; Fair Grounds Race Course in New Orleans along with 12 OTBs in Louisiana; and Calder Race Course in Miami Gardens, Florida. It also operates five casinos, which provides brick-and-mortar real-money casino gaming services with approximately 8,500 gaming positions; and operates 2 hotels. In addition, the company through TwinSpires.com engages in the advance deposit wagering business that accepts online and mobile pari-mutuel wagers, as well as offers streaming video of live horse races along with race replays and an assortment of racing and handicapping information. Further, it offers reports, statistical information, handicapping information, pedigrees, and other data to organizations, publications and individuals within the thoroughbred industry. Additionally, the company produces and distributes social casino, casual and mid-core free-to-play, and premium paid games for PC, Mac, and mobile devices. It also manufactures and operates pari-mutuel wagering systems for racetracks, OTB facilities, and other pari-mutuel wagering businesses; and provides totalisator and Internet-based interactive gaming services, as well as operates a multimedia poker periodical. Churchill Downs Incorporated was founded in 1928 and is headquartered in Louisville, Kentucky.
(Summary) (Company) (Chart)
5 May 2016
Price $127.43
1yr Target $160.00
Analysts 3
Dividend $1.15
Payout Ratio 30.99%

1yr Cap Gain 25.55%
Yield 0.90%
1yr Tot Return 26.45%
​
P/E 34.37
PEG 2.86
Beta 0.92
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EPS (ttm) $3.71
EPS next yr $7.36
EPS next 5yr 12.00%
1yr Price Support $88.32

​Market Cap $2.24 Bil
Revenues $1.21 Bil
Earnings $64.60 Mil
Profit Margin 5.28%

Quick Ratio 0.50
Current Ratio 0.50
Debt/Equity 1.59
​
1yr RevGR 49.26%
3yr RevGR 18.15%
5yr RevGR 15.68%

1yr EarnGR 40.90%
3yr EarnGR 3.52%
5yr EarnGR 28.71%

​1yr DivGR 15.00%
3yr DivGR 16.71%
5yr DivGR 18.12%

ROA 3.00%
ROE 9.80%

​My Perspective

I'm probably not the best judge of this company simply because I have so many fond memories of wonderful days spent at Churchill Downs. It's a very special and magical place with a level of style and class that isn't found at any other race track in the country. And maybe that's why my judgement would be amiss in wanting to start a position in this company even though it may be a little pricey.

A P/E of 34 is simply too high for any rational investor but with an EPS of $7.36 the P/E drops next year to a more respectable 17. What I really like is a dividend that growing at a rate in the middle to upper teens. That's very tempting for a Dividend Growth Investor like myself. 

I'll probably start a position in CHDN in the near future. Even if it's a bad investment it won't be the first time I've lost money at Churchill Downs. And I don't think I'll be able to double my money in 2 minutes like I've done a few times at Churchill Downs too!

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    Author

    I am an Individual Investor with specific interest in long term growth and then enhancing my returns with income from dividends and derivatives. I don't recommend stocks to anyone (it's a good way to lose friends) and no one reading this should misinterpret my blog as a recommendation for any type of investment. I am writing this solely for myself and my kids.

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