Taking Over the Investing for Income Section

As you can see here, two of our recent articles focusing on dividends have climbed the Seeking Alpha charts to the most popular in the investing for income page. We thank those of you who have taken the time to read our work.

Focus on Manufacturing: 6 Dividend Stocks for Every Portfolio

This article will provide a few sound companies that every investor should hold in their portfolio. We examine the manufacturing sector of the economy and provide companies that are most likely to prosper from growth within this area. To read our ideas, please visit SeekingAlpha.com.

-Andrew

16 Dividend Stocks for the Long-Term Investor

Another look into the power of reinvested dividends in strong companies that will be here for lifetimes. The article can be found at SeekingAlpha.com. It also gives some pointers on what to look for when choosing a company to invest in for a lifetime and discusses the importance of basic technical analysis.

Its been pretty well received.


-Jeff

Archer Daniels Midland: Good Buy on Rising Commodities and Clean Energy

The farming industry has done surprisingly well given the rising costs of basically all commodities. Among the winners is ADM who specializes in corn, wheat, oil seeds, and cocoa. An article detailing their business and their future growth prospects can be found at SeekingAlpha.com.


-Jeff

Why Short the Homebuilders?

Here, we examine the current state of the housing market of the Unites States. Additionally, we explore the possibility of shorting a few companies that are likely to suffer as the housing market remains weak. To view the full article, please visitSeekingAlpha.com.

-Andrew

Top 5 Stocks for a Valentine's Day Portfolio and Beyond

In the spirit of Valentines Day, we explore a few different companies poised to gain from the holiday sales. Please visit SeekingAlpha.com to read the full article.

-Andrew

Hershey's: Strong Guidance and a Dividend Increase

This article breaks down Hershey's most recent conference call, giving opinions on their strong guidance for the rest of the year, despite the ever-rising cost of cocoa. It can be found at SeekingAlpha.com


-Jeff

Sirius XM - A Lot Riding on Next Week's Earnings

Next Tuesday Sirius XM (SIRI) will be announcing fourth quarter and annual earnings for 2010 and there is a slight chance that the company will announce a positive year for the first time in a long time. In 2006, SIRI lost 79 cents a share, but this amount has been diminishing ever since. Despite the improving earnings, it was not until the second half of 2008 when the stock price plummeted, for obvious external economic reasons. Of course, since then we have seen a recovery, corresponding with their improving earnings, culminating in the run from $1.00 to $1.79 in the last 5 months.

With 135 channels there really is something for every Sirius XM listener, whether it be sports, talk radio, business, comedy, or basically any kind of music you could want to listen to. Their licensing with the major sports leagues and their ability keep huge names on board set them apart from terrestrial radio.

Recent opinion has suggested that this company is overvalued price wise (link) or knock the company for past wrongs (link). However, this stock must be taken for what it is, and people need to realize that future earnings will be much better than the last five years. I shall explain this proclamation, but first, a quip. While writing this, listening to my iTouch (AAPL) on shuffle, Rage Against the Machine offered a very fitting line for this analysis in Guerrilla Radio:

Was is cast for the mass who burn and toil?
Or for the vultures who thirst for blood and oil?
Yes, a spectacle, monopolized.

It was 2007 when Sirius and XM announced their merger, therein by monopolizing the satellite radio industry. Some argue that they have legitimate competitors, such as Pandora, but in reality Pandora is no threat to the auto subscriber base. Of course there is internet radio, and those like me that swear by their iPod docks, but truth be told, Sirius offers a highly unique product with a bright future.

Their hold on the market is very similar to Netflix (NFLX) in that, as stated, once you try you won’t want to let it go and there are few if any bona fide competitors. So the biggest thing is for Sirius to optimize its margins. This does cap the potential market, since there are only so many people driving in the world and you can only charge so much for this product, but they can certainly be profitable for years to come.

Sirius does boast that their service can be used on a computer, in your home, or on your mobile smart-phone, but we all know that the backbone of their revenue comes from in-car units. They claim to have over 20 million subscribers, and the majority of these units are in vehicles. It is also well known that the company benefits much more from renewed subscriptions, rather than new users, because of the cost of the receiver. But, speaking from experience a new user is very likely to fall into the former category after their initial membership expires.

With this in mind, consider the following report from the National Automobile Dealers Association, which offered some very positive guidance last weekend. They predict new vehicle sales of just under 13 million for 2011 which would be significantly hirer than last year. They base this on the improving economic conditions, an apparent shortage of used cars, and consumer credit, among other things. They also believe that rising gas prices will encourage consumers to trade in for more fuel efficient vehicles.

This is good news for SIRI holders, because more new car sales equals more subscriptions. So the question becomes how much will this affect the stock price and what is going to happen to it in the near future. Consider the 1 year chart below.

You can see that for 3 or 4 months the stock was trading in a tight range in and around $1.00. Actually, looking back, there is probably a tenant formation from May to September which caused the breakout that ultimately resulted in this upward trend. Based on the prior analysis, one should argue that this stock is certainly not overvalued, as investors are paying for future prosperity. Things are looking good at Sirius and there is no reason why Sirius could not be turning a profit for years to come; people having realized this have helped to drive the stock up.

-Jeff

Dissecting Disney's Conference Call - What's Behind the Success?

Disney has been around for nearly a century, starting with movie, and then branching out to theme parks, television, media, and several other forms of entertainment. They stand today as one of America's most storied franchises and this articles dives into why that is. It can be found at Seeking Alpha.


-Jeff

Ford: Driving Toward Profitability With a Dividend

This article explores the possibility that Ford may initiate a dividend in the coming years. The full article can be viewed at SeekingAlpha.com.

-Andrew

Railroad Stocks: Training Your Portfolio to Double Digits

This article presents a look at rail traffic along with some trends within the data. The end goal will be a discussion of companies that will benefit from continued growth within this sector. Please see the full article at seekingalpha.com

-Andrew

Investing in PepsiCo: The Power of Brand Recognition

Pepsico does a lot more than just soda and they do it very well. This article dives into these other brands, like Frito-Lay, Quaker Oats, and Gatorade, and proves that PEP would be an awesome holding for the long term. The entire article can be found at Seeking Alpha.


-Jeff

The Football Fans' Guide to Safe Investing

This article offers an innovative look at building a portfolio as if you were putting together a football team. The whole article can be found at Seeking Alpha.


-Jeff

Whats Going On @ Wendy's

2/3/11

I’m sure that several of those following the fast food industry have noticed Wendy’s/Arby’s (WEN) recent two-week 15% run up (which is gaining even as I type this). It may seem very undeserved, since most of this can be accounted to their announcement that they will be selling the Arby’s franchise…and it most likely is.

First things first, I must disclose that I have owned this stock for just over 2 years and bought it while still in undergrad, in the depths of the recession, since, “it would be impossible for anyone selling Junior Bacon Cheeseburgers for a dollar to fail.” (These have gone up 30% in price since). I will admit that I did not really know what I was doing at the time, but it hindsight it wasn’t such a bad play. Furthermore this is going to be more of a macro analysis rather than number crunching because this stock is very volatile and seems to move for no reason at all on a constant basis (plus it’s much more fun to talk about Frosty's than technical analysis). With that said, let’s have at it…

What’s interesting about Wendy’s is that it was trading at over four times it’s current price in 2007. So what has happened in the last four years that has knocked Wendy’s over while allowing other fast foods to recover and prosper? Answer: An abundance of things. We’ll start with Arby’s. I’ve noted on this column before that the particular Arby’s in my hometown has done essentially no business outside of their first two months of operation a decade ago. Interestingly, the Wendy’s that was just over a mile away was closed three years ago because of declining sales but the Arby’s has tried to keep choppin’. It should be noted that within a half mile of this location stands a new Sonic (SONC), a new Five Guys, a Burger King, a McDonald’s (MCD), a Taco Bell (YUM), and countless pizza places. There is no way that Arby’s could stand this sort of competition. They rely on ads that push the quality of their roast beef and the health consciousness of their Market Fresh sandwiches. The roast beef is frozen for just as long as any other beef in the industry and then sits under a hot lamp for hours and most Market Fresh’s have enough calories for me to subsist on for a week. In short, outside of the Jamocha shake, Arby’s food is not good and has price points significantly higher than that of the competition. So yes, the Arby’s franchise has been pulling Wendy’s down and should be thrown overboard. This is basically the best alternative decision to what was originally a terrible decision. But, who is going to want to buy Arby’s? It’s like buying a professional hockey team in Arizona; a losing endeavor with no way out. I would expect that if an Arby’s sale ever does come to fruition it is not going to be anywhere near what Wendy’s wants for it.

For the remaining portion let’s imagine that Arby’s has been sold. Wendy’s also suffers compared to their competition because of their reluctance to expand overseas to the extent that McDonald’s and YUM have. McDonald’s is essentially everywhere and everyone knows about the YUM Chinese initiative. Both also deal extremely well with adversity. McDonald’s is constantly dealing with lawsuits (those Shrek glasses, Happy Meals, making kids fat, etc) and YUM has been able to handle people realizing that there is fake beef in Taco Bell tacos and the onslaught from Domino’s (DPZ) battling Pizza Hut. Wendy’s does not have these problems, mostly because people do not care enough to bring them up.

Like the others, Wendy’s has begun to offer healthier food choices like Garden Sensations Salads and natural cut fries. I have yet to try the fries, but they must be an improvement on the old ones. They also added shakes to their lineup to combat the McDonalds shakes. However, when there are generally comparable products and prices consumers look to things like timeliness of service and satisfaction and that is where McDonald’s dominates. Anyone who’s seen the CNBC special on McDonald’s has seen the living organism at work churning out finished products in no time. This goes against the convoluted idea that if the food takes a while to make it must be fresh.

On the financial front; it is very tough to get behind a stock that is barely treading water earnings wise. Based on their 2010 earnings of $0.14, Wendy’s has a P/E in the high 30s. Compare that to YUM in the low 20s and MCD at 16. So what does this high ratio tell us? It could mean that investors are very hopeful for the future and that earnings will start to accumulate. The alternative is that the stock is overpriced and those holding it are naïve. Personally I’d side with the former, mainly because it would be tough for earnings to go much lower, especially after the Arby’s sale. Additionally, the sale will allow the business to focus it’s efforts on the integral part of the business and not that roast beef pipe dream.

Lastly, everywhere you look recently there are reports on the rising costs of food. This is going to hurt Wendy’s just as much as the next guy, and people are not going to stop buying cheap fast food. The goal has to be to capitalize on this by proving that your food is the food to be buying at the time. Short term Wendy’s does not appear to be going anywhere, but with the eventual sale of Arby’s and a refocusing of corporate minds there is definite upside and this is what the high P/E indicates. Wendy’s should prosper in the future, both as an eating establishment and as a stock (but no more fish commercials, no one eats fish on a bun).

-Jeff