Fast-food dividend stock fight: McDonald’s vs. Tim Hortons

You can debate all you want about who has the better coffee or breakfast sandwich – McDonald’s (MCD-N90.11-0.79-0.87%)or Tim Hortons (THI-T54.35-0.80-1.45%). But today we’re tackling a more pressing question: Which fast-food chain has the more appetizing stock?

Certainly, Tims and Mickey D’s have plenty of things in common. Both companies pay dividends. Both have a track record of raising their dividends. And, unless consumers develop a sudden preference for tofu and Brussels sprouts, both will be hiking their dividends for years to come.

What’s more, because they sell inexpensive food, both companies should hold up relatively well even if the economy goes into the deep fryer.

But there are also some key differences that investors need to consider before they fork over their cash. Let’s see how the two stocks stack up on a range of measures.

Dividend history

Since declaring its first dividend in 1976, McDonald’s has increased its payment for 35 consecutive years. Just as customers know what to expect when they order a Big Mac, investors know they’ll get a dividend increase from McDonald’s every September. Tim Hortons has only been paying dividends since 2006, when it went public, although it, too, raises its dividend annually.Advantage: McDonald’s

Dividend growth

McDonald’s dividend has increased at a compound annual rate of 15 per cent over the past five years. That’s good, but not as good as Tim Hortons, which has raised its dividend by about 22 per cent annually over the same period. Tim Hortons may also have more capacity for future dividend growth, given that its payout ratio was a conservative 29 per cent of earnings in 2011, compared with 48 per cent for McDonald’s.Advantage: Tim Hortons

Dividend yield

No contest here. McDonald’s yields 3.1 per cent, which is more than double Tim Hortons’ yield of 1.5 per cent. So, although Tims is growing its divvy at a faster rate, if you’re looking for current income, the Golden Arches is your best bet. Advantage: McDonald’s.

Currency

For Canadian investors, owning a U.S. stock introduces volatility in the form of currency fluctuations. Exchange rates can work for you, or against you, but if you stick to Canadian stocks (or hedge your U.S. positions), you won’t have the extra volatility to worry about. Advantage: Tim Hortons.

Earnings growth

Based on analyst estimates compiled by Globeinvestor.com, McDonald’s earnings per share are expected to grow at a compound annual rate of about 9.1 per cent over the next two years. As impressive as that is, Tims’ earnings are expected to grow at an even faster 13.4 per cent.Advantage: Tim Hortons.

Brand strength

Tim Hortons is a powerhouse in Canada, where the coffee and doughnut chain is part of the cultural fabric. But outside of our borders it doesn’t have nearly the same resonance, as evidenced by its cautious U.S. expansion. McDonald’s, on the other hand, is a formidable global brand operating in 119 countries. In fact, it now generates more revenue from Europe than from North America, and income from Asia-Pacific, Middle East and Africa has doubled over the past six years. Advantage: McDonald’s.

Valuation

McDonald’s was the top-performing stock on the Dow Jones industrial average in 2011. But the shares are down more than 10 per cent from their 52-week high, hurt by April same-store sales growth that was slightly weaker than expected. Mickey D’s now trades at a reasonable multiple of about 16 times estimated 2012 earnings and 14.5 times 2013 estimates. Tim Hortons shares are up more than 11 per cent this year, and trade at a significantly higher multiple of 20 times 2012 estimated earnings and 18 times 2013 estimates. The rich P/E makes the shares vulnerable to a selloff if results disappoint. Advantage: McDonald’s.

The verdict

McDonald’s and Tim Hortons are both excellent fast-food operators that will likely reward shareholders with solid long-term total returns, both from capital gains and growing dividends. However, McDonald’s juicier current yield, more attractive valuation and proven global expansion record give it the edge in Yield Hog’s books. Disclosure: I eat far too frequently at both chains, own McDonald’s shares and would consider purchasing Tim Hortons if it dropped below $50.

From theglobeandmail.com

Wealth is a Journey, Dividend Stocks Can Take You There

Fad diets and fad investing plans rarely work. They are primarily designed to separate you from your money and make the seller wealthy. Real wealth is built with sweat equity and a sound financial plan. For most people fortunate enough to be born in the U.S., or any other industrialized country, they have access to the two main ingredients to achieve financial success: 1. Opportunity and 2. Time. 

Unfortunately, very few people are able to take advantage of the situation enough to even build a secure retirement. The formula to building wealth is rather simple - spend less than you earn and invest the difference. Implementation is where many people come up short. With the right focus and some positive feedback, building wealth can be much easier than shedding the spare tire around your mid-section. Here's how to do it...

Have A Plan

Many people are putting money into various retirement vehicles, but they haven’t taken the time to envision how it is all going to come together and ultimately if it will be enough. We often will spend enormous amounts of time planning every detail of our vacation, but I have no idea what our estimated income or expenses will be when we retire. 

As the old adage goes, ‘Everyone has a plan – failing to plan is planning to fail.’ Retirement planning does not have to be complicated, but not doing it will complicate your retirement. To help you start the planning process, take a look these FREE retirement calculators (Retirement-Calculator.xls [Excel] or Retirement-Calculator.ods [Libre/Open Office]).

Use Time To Your Advantage

Time is your most valuable wealth building asset. Everyone is born with it. Few realize its importance until they lose most of it. The asset is so valuable it can’t be bought. As a value/dividend investor, I have learned that time can cure many mistakes and provide enormous investment leverage.

When you are young time is your friend. It allows to recover from mistakes. It educates you and provides you with valuable experiences. However, time is a double-edged sword that can also work against you. It is easy to say, 'I will start investing tomorrow - I have plenty of time.' Time can also create a false sense of urgency -' I held this stock for over a year and its price has gone nowhere.' Use time to your advantage start young and be patient.

Dividend Stocks To Help Grow Your Wealth

A long-term buy-and-hold investing approach focusing on quality dividend growth stocks has provided the means for many investors to enjoy a comfortable retirement. If you start early enough, you will go beyond a comfortable retirement into the realm of building long-term wealth. For starters, you might consider these dividend stocks that have been rewarding their investors with growing dividends for 40 or more consecutive years, all with a yield greater than 3%:

PepsiCo, Inc. (PEP) is a major international producer of branded beverage and snack food products. PEP is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1952 and has increased its dividend payments for 40 consecutive years. Yield: 3.2%

Warren Buffett's $50 Billion Decision

This article, by Warren Buffett, as told to Randall Lane, appears in the upcoming April issue of ForbesLife magazine, as part of its “When I Was 25″ series.

By Warren Buffett

Benjamin Graham had been my idol ever since I read his book The Intelligent Investor. I had wanted to go to Columbia Business School because he was a professor there, and after I got out of Columbia, returned to Omaha, and started selling securities, I didn’t forget about him. Between 1951 and 1954, I made a pest of myself, sending him frequent securities ideas. Then I got a letter back: “Next time you’re in New York, come and see me.”

So there I went, and he offered me a job at Graham-Newman Corp., which he ran with Jerry Newman. Everyone says that A.W. Jones started the hedge fund industry, but Graham-Newman’s sister partnership, Newman and Graham, was actually an earlier fund. I moved to White Plains, New York, with my wife, Susie, who was four months pregnant, and my daughter. Every morning, I got on a train to Grand Central and went to work.

It was a short-lived position: The next year, when I was 25, Mr. Graham—that’s what I called him then—gave me a heads-up that he was going to retire. Actually, he did more than that: He offered me the chance to replace him, with Jerry’s son Mickey as the new senior partner and me as the new junior partner. It was a very tiny fund—$6 million or $7 million—but it was a famous fund.

This was a traumatic decision. Here was my chance to step into the shoes of my hero—I even named my first son Howard Graham Buffett. (Howard was for my father.) But I also wanted to come back to Omaha. I probably went to work for a month thinking every morning that I would tell Mr. Graham I was going to leave. But it was hard to do.

The thing is, when I got out of college, I had $9,800, but by the end of 1955, I was up to $127,000. I thought, I’ll go back to Omaha, take some college classes, and read a lot—I was going to retire! I figured we could live on $12,000 a year, and off my $127,000 asset base, I could easily make that. I told my wife, “Compound interest guarantees I’m going to get rich.”

My wife and kids went back to Omaha just ahead of me. I got in the car, and on my way west checked out companies I was interested in investing in. It was due diligence. I stopped in Hazleton, Pennsylvania, to visit the Jeddo-Highland Coal Company. I visited the Kalamazoo Stove & Furnace Company in Michigan, which was being liquidated. I went to see what the building looked like, what they had for sale. I went to Delaware, Ohio, to check out Greif Bros. Cooperage. (Who knows anything about cooperage anymore?) Its chairman met with me. I didn’t have appointments; I would just drop in. I found that people always talked to me. All these people helped me.

In Omaha, I rented a house at 5202 Underwood for $175 a month. I told my wife, “I’d be glad to buy a house, but that’s like a carpenter selling his toolkit.” I didn’t want to use up my capital.

I had no plans to start a partnership, or even have a job. I had no worries as long as I could operate on my own. I certainly did not want to sell securities to other people again. But by pure accident, seven people, including a few of my relatives, said to me, “You used to sell stocks, and we want you to tell us what to do with our money.” I replied, “I’m not going to do that again, but I’ll form a partnership like Ben and Jerry had, and if you want to join me, you can.” My father-in-law, my college roommate, his mother, my aunt Alice, my sister, my brother-in-law, and my lawyer all signed on. I also had my hundred dollars. That was the beginning—totally accidental.

When I formed that partnership, we had dinner, the seven of them plus me—I’m 99 percent sure it was at the Omaha Club. I bought a ledger for 49 cents, and they brought their checks. Before I took their money, I gave them a half sheet of paper that I had made carbons of—something I called the ground rules. I said, “There are two or four pages of partnership legal documents. Don’t worry about that. I’ll tell you what’s in it, and you won’t get any surprises.

“But these ground rules are the philosophy. If you are in tune with me, then let’s go. If you aren’t, I understand. I’m not going to tell you what we own or anything like that. I want to get bouquets when I deserve bouquets, and I want to get soft fruit thrown at me when I deserve it. But I don’t want fruit thrown at me if I’m down 5 percent, and the market’s down 15 percent—I’m going to think I deserve a bouquet for that.” We made everything clear, and they gave me their checks.

I did no solicitation, but more checks began coming from people I didn’t know. Back in New York, Graham-Newman was being liquidated. There was a college president up in Vermont, Homer Dodge, who had been invested with Graham, and he asked, “Ben, what should I do with my money?” Ben said, “Well, there’s this kid who used to work for me.…” So Dodge drove out to Omaha, to this rented house I lived in. I was 25, looked about 17, and acted like 12. He said, “What are you doing?” I said, “Here’s what I’m doing with my family, and I’ll do it with you.”

Although I had no idea, age 25 was a turning point. I was changing my life, setting up something that would turn into a fairly good-size partnership called Berkshire Hathaway. I wasn’t scared. I was doing something I liked, and I’m still doing it.

From forbes.com

Related Books

The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)

The Warren Buffett Stock Portfolio: Warren Buffett Stock Picks: Why and When He Is Investing in Them

Creating a Portfolio like Warren Buffett: A High Return Investment Strategy

The Warren Buffett of….

Here is the Santangel’s Review of how many “Warren Buffett ofs” we can find in the world.

• Warren Buffett of Asia – Lee Shau-kee
• Warren Buffett of Australia – Kerr Neilson
• Warren Buffett of Belgium – Albert Frere
• Warren Buffett of Brazil – Eike Batista
• Warren Buffett of Canada – Prem Watsa
• Warren Buffett of Canada – Stephen A. Jarislowsky
• Warren Buffett of Canada – Eric Sprott
• Warren Buffett of Canada - Bruce Flatt
• Warren Buffett of China – Guo Guangchang
• Warren Buffett of the East – Li Ka-shing
• Warren Buffett of the East – Cheah Cheng Hye
• Warren Buffett of the East – Tony Measor
• Warren Buffett of India – Rakesh Jhunjhunwala
• Warren Buffett of India – Chandrakant Sampat
• Warren Buffett of Japan – Takeda Wahei
• Warren Buffett of Japan – Kyu Eikan
• Warren Buffett of Kentucky – Pete Mahurin
• Warren Buffett of Mexico – Carlos Slim
• Warren Buffett of Spain – Francisco Garcia Parames
• Warren Buffett of Saudi Arabia – Prince Al-Waleed bin Talal
• Warren Buffett of the Southwest – Shelby Davis
• Warren Buffett of South Africa – Brian Joffe
• Warren Buffett of Thailand – [Subscription Required]
• Warren Buffett of Turkey – Jak Kamhi
• Warren Buffett of Turkey – Coskun Ulusoy
• Warren Buffett of the West – Warren Hellman

 From santangelsreview.com

What High Dividend Yield Stock Has to Offer

High Dividend Yield Stock Characteristic
Why Most Fund Managers Prefer This Stock

Summarized Overview

In this article, you'll find information about how high dividend stocks had performed and why high they are so attractive and favored by many investors.

You'll also find information on what you can expect and some precaution when dealing with this type of stocks.

How High Dividend Stock Had Performed


High dividend yield stock is often viewed as a boring pick. It offers low price volatility and charged at premium price compared to penny stocks. To tell you the truth, you won't get-rich-quick with these stocks.

But most, earnings are expected to grow between 10 per cent and 15 per cent annually over the next five to ten years.

So, over time, you can expect their share prices to move up at about the same rate.

Combining the expected price appreciation (though no guarantee) with two to five per cent dividend yields, you can expect annual returns in the 12 to 20 per cent range, or roughly at 16 per cent. To put that in perspective, at a 16 per cent compounded annual return, $1,000 turns into $4,411 in just ten years!

And that is not even considering if you invest back your dividends!

Let see what make this stocks sounds so good.

Why High Dividend Stock is so Attractive

Consistent and Generous Dividend Policy.
How often a company pays dividends to its shareholders can be used to gauge the health and profitability of the company.

Has Effective and Committed Management Team.
They are so effective that even if the company is a traditional one and in the maturing stage of its business lifecycle, they are still able to grow. They make themselves relevant all the time by keeping up to date or even ahead of its competitors with their agility, creativity and innovation.

Look around and compare yourself, from who the brains are behind blue chip companies to who are responsible for struggling and dying businesses. You can easily discover the distinction in their attitudes and mindsets.

The management team is the one that determines the financial health, proficiency, competitiveness and resilience of a company. The company’s survival is dependent on how capable the management is in manoeuvring around obstacles and challenges. Well managed companies not only will emerge safe and sound from crisis, but also able to expand their presence and dominance too.

Five Essential Metrics For Dividend Hunters

For investors that want regular returns from their investments, a well researched dividend stock strategy could be an ideal solution. Yet, in a market where headlines are dominated by glamorous growth stock stories – with plenty of upside but no immediate income – knowing how and where to look for the best and most reliable yielding shares presents its own set of challenges. 

Buying stocks that pay regular dividends is an investment approach that’s as old as the market – but current low interest rates and depressed bond yields are making it an increasingly attractive prospect for some. In tandem, dividend payouts from UK listed corporates continues to grow. In the first quarter of 2012 companies increasing payouts outnumbered those cutting by 3.8:1 – but that was down slightly on the 4.1:1 for 2011 overall. 

That said, individual investors are frequently divided on whether the most profitable returns are achieved from dividend stocks or capital growth. Indeed, with average stock holding periods among private stock pickers estimated to be around eight months, it is clear that, at least in part, many investing strategies are more concerned with value gain than long term dividend returns. In a sense this appears counterintuitive to some market stats. Two years ago, James Montier at US investment firm GMO, wrote a paper insisting that: “…to those with an attention span measured in longer than milliseconds – who are few and far between, to judge from today’s markets – dividends are a vital element of return.” He claimed that, looking at the US market since 1871, on a one-year time horizon, nearly 80 percent of the return has been generated by fluctuations in valuation. However, over five years, dividend yield and dividend growth account for almost 80 percent of the return. 

For dividend virgins, here are some of the basic metrics (and their potential pitfalls) that are required when weighing the investment case for a yielding stock. 

1. Dividend Yield

In simple terms, the dividend yield measures how much a company has paid out in dividends over the past year relative to its share price (historic annual dividend per share divided by the current share price as a percentage). A forecast yield can also be established by using consensus estimates from analysts. 

High yields are obviously a head-turner for dividend hunters and they tend to be dominated by some of the largest and most prestigious companies in the market – the top three are currently Man Group, Resolution and Aviva. Indeed, the Dividend Dogs of the FTSE stock selection screen has delivered strong returns simply by trawling the market for the top ten yielders and then chopping and changing them once a year. 

A word of warning however is that high dividend yields can also be a sign that a stock is underpriced or in trouble and that future dividends could be cut. Likewise, a low dividend yield could signal that a stock is overpriced or that future dividends may be higher. 

So, on yield alone, investors are exposed to the vagaries of the market and the occasional disasters that befall companies and sectors. For instance, back in September 2008 Lloyds Banking Group was boasting a head-turning yield of around 8 percent. Investment commentators were amusing themselves over the fact that the banking giant’s shares offered a stronger return than a Lloyds TSB internet saver account. However, the banking collapse that ensued was immediately felt Lloyds’ investors – and those dividend payments still haven’t been properly restarted. 

10 Best US Stocks To Make A Fortune On The Emerging Market Consumer

Bank of America Merrill Lynch's global equity strategy team think the best way to play growth in emerging markets is to invest in developed market stocks with high percentages of international sales.

Emerging markets (EM) consumers have higher rates of savings growth and consumption growth than their developed markets (DM) counterparts, making the EM consumer a compelling investment thesis.

DM stocks are a good way to play the EM consumer story, according to BAML, because they are much more liquid in trading and the companies have better diversified sales portfolios with exposure to multiple markets.

Here's how the screen works: it only looks at the Consumer Discretionary and Consumer Staples sectors, and it only screens for stocks with greater than $10bn in market cap and at least 30% of 2011 sales generated from emerging markets.

The team found 29 stocks, 10 of which are based in the U.S.

#1: Wynn Resorts (WYNN)

Industry: Hotels, Restaurants & Leisure

% of sales from EM: 72%

12-month forward P/E: 15.9

Description: Wynn Resorts develops and operates luxury casinos and hotels in the U.S. and Macau.

#2: Mead Johnson (MJN)

Industry: Food Products

% of sales from EM: 65%

12-month forward P/E: 24.5

Description: Mead Johnson is a global supplier of baby food products.

Stay cool: learn from the master

In 1963, American Express, the world's largest credit-card company, was involved in a huge financial scandal. The company, previously synonymous with integrity and trust, became wrapped up in a $175 million fraud.

As news of the scandal broke, the company's share price halved. Investors were caught up in a huge panic that, they believed, threatened the company.

After wearing out some shoe leather, an unknown 33-year-old fund manager came to the opposite view. Warren Buffett poured most of his cash into this single stock and made a killing.

Although Amex had a well-known banking division, the majority of its profits came from its traveller's cheque and credit-card divisions.

Nobody paid much attention to a fourth subsidiary - warehousing operations - that assessed the value of a company's inventories. The certificates issued could then be used as bank collateral.

The scam was based on a simple fact: when salad oil was poured on water, it rose to the top and formed a film. By filling tanks with water then adding a little salad oil, Anthony de Angelis, a commodities trader, fooled Amex into thinking the value of what he owned was $175 million in soy-based oil rather than contaminated, worthless water.

De Angelis may have been a crook but he was not without ambition. Instead of making his way to Rio with a few million in the bank, he used the proceeds of the scam to buy soybean-oil futures, hoping to corner the market. Problems only began when a few inquisitive souls began to wonder how the oil supposedly stored in de Angelis's tanks contained more soybeans than the output of the entire industry.

In November 1963, de Angelis and his company, the Allied Crude Vegetable Oil Refining Corporation, filed for bankruptcy. Amex was now on the hook for millions. The stock plummeted but Buffett kept his cool and followed three simple processes from which all investors can learn.

Personal Finance Experts Debate Whether Carrying Plastic Is Worth It

Lately a lot of consumers have been asking whether they really need to carry a credit card. 

It seems just as easy to get by on cash, and all the identity theft and shady lender practices making headlines aren't reassuring. 

Also, the outcry against big banks and practices like debit card fees and swipe fees put off consumers who felt taken advantage of. 

We tapped two of our favorite credit experts, Bethy Hardeman of CreditKarma.com and John Ulzheimer of SmartCredit.com, to weigh in on the pros and cons of carrying plastic. 

Do you really need a card? Here's what they had to say: 

Why you need a card 

Travel arrangements. "It's hard to travel with cash all the time," said Ulzheimer. Reserving a room a car rental are tough enough with one and using a debit card instead can be a recipe for theft. There's also a certain kind of relief that comes with knowing you can travel anywhere in the world and still be protected if there's an emergency. 

Protection and security. You'll get a lot more security with a credit card than you will with cash or a debit card. Once the cash is gone, it's gone. And debit cards, which are linked to your banking account, can easily help a crook to your wallet if the card is lost or stolen. As Ulzheimer pointed out, with a credit card, all it takes is a simple phone call to prevent further loss and identity theft. 

Financing a home or a car. It's getting tougher and tougher to take out a mortgage these days, and like it or not, lenders will be checking your credit report. If you haven't got a card, there won't be a credit history to speak of, and you'll have a much harder time proving to lenders you're responsible with money. 

Why you don't need a card 

Because you think you should have it. "You shouldn't get one just to get one," said Hardeman, who added that "it's worse to get an auto loan just to get an auto loan. Taking out a lot of debt, even if you have the cash to pay out of pocketm isn't a good idea because you'll likely be paying interest on it." 

You're not planning to buy a home (or a car). "It's really up for the individual to decide," Hardeman said. "But if at some point you're going to need these things, the credit card is the best way to do it." 

You impulse shop. "Clearly, if you're irresponsible or undisciplined, you can find yourself getting into a lot of debt quickly unless you can write a big fat check," said Ulzheimer, but "there comes a point in your life where you do need the convenience of plastic." 

From businessinsider.com

Berkshire Hathaway 2012 Shareholder Meeting Notes (part 2)

Written by Greg Speicher

Hedges
Some hedging required in operating businesses.

Buffett thinks about worse case scenarios all the time – more than most. They won’t take risks that threaten the business.

Valuations
Valuing GEICO is different than valuing Gen Re.

GEICO’s intrinsic value is greater than net worth and float. This is not true for all insurance businesses. GEICO will have growth plus underwriting profits.

Buffett would love to buy operating businesses at 9-10x pre-tax earnings if they had similar characteristics to Berkshire’s operating businesses. He would pay even more for Berkshrie’s businesses since they know the businesses.

Gold
Buffett would not buy gold. He prefers productive assets.

JP MorganBuffett bought JP Morgan for his personal account. He could not buy Wells Fargo in is personal account so he bought JP Morgan. His best ideas are in Berkshire.

Munger likes focused, long-term investing. Munger thinks investors should be thinking about the 98 1/2 percent of things that drive results, not the 1 1/2 percent.

If Buffett was not running Berkshire, he would own a lot of WFC in his personal account.

Berkshire Hathaway 2012 Shareholder Meeting Notes (part 1)

Written by Greg Speicher

The following is the first part of my notes from the 2012 Berkshire Hathaway shareholder meeting. I have tried to be accurate, but I make no guaranty that I have been so. The notes are not complete, but rather the thoughts I wrote down during the meeting. I hope they are useful. Please take them with a grain of salt and cross check them against other sources.

Managing riskBuffett’s successor must be the chief risk officer.

Insurance divisions are already overseeing their own risk. Leverage will be avoided in the future.

Berkshire may not have access to all the deals they could do with Buffett, but there will be opportunities. They will do some things better after Buffett.

The special side deals such as the warrants have not been material.

Berkshire has a strong board with deep experience managing risk.

Repurchase of Berkshire shares

Berkshire has always tried to have an attitude of partnership towards shareholders. When Berkshire issued B shares, Buffett said in the proxy that he would not buy them at the offering price.

Buffett stated that Berkshire’s intrinsic value is significantly higher than 110% of book value. Buffett feels very comfortable with 1.1x book. Significantly (dramatically) undervalued.

Some of Berkshire’s businesses are undervalued; some are fairly valued.

Buffett would love to buy “tens of billions” at 1.1x book. The value of each shares goes up if shares are repurchased at 110% of book. It’s obvious.

He won’t go below cash buffer of $20 billion.

Many companies repurchase their stock at overvalued prices.

10 Most Popular Stocks Among Hedge Funds – Q1 2012

By Meena Krishnamsetty

Insider Monkey tracks nearly 400 hedge funds and prominent investors like Warren Buffett. Last week hedge funds disclosed their 13F holdings and we finished compiling and analyzing the data. At the end of 2011 Apple (AAPL) was the most popular stock among hedge funds, followed by Google (GOOG) and Microsoft (MSFT). Apple returned 38.6% since the end of last year. Google lost 4.9% and Microsoft returned 16.1%. On average these three stocks returned 16.6% vs. a gain of 5.6% for the S&P 500 ETF (SPY). During the first quarter the number of hedge funds with Apple, Google, and Microsoft positions kept going up. These three stocks are still the top three holdings in our hedge fund universe. 

Here are the 10 most popular stocks among hedge funds:

1. Apple (AAPL): The number of hedge funds with Apple positions increased to 134 from 130 at the end of 2011. Billionaires Ken Griffin and David E. Shaw had the largest positions in the stock at the end of March.

2. Google (GOOG): There were 115 hedge funds with Google positions vs. 110 at the end of previous quarter. Billionaire Stephen Mandel had $838 million invested in Google.

3. Microsoft (MSFT): David Einhorn cut his stake in Microsoft but hedge funds in general poured more money into Microsoft. The number of hedge funds with Microsoft positions increased from 99 to 103 at the end of March. Boykin Curry had $700 million invested in the stock.

4. Citigroup (C): There were 97 hedge funds with Citigroup positions at the end of March, vs. 95 in December. Bill Ackman had $955 million invested in this financial giant.

5. Bank of America (BAC): Bank of America isn’t as popular as Citigroup but there were still 87 hedge funds with bullish Citigroup bets. Bruce Berkowitz is the most bullish fund manager with a nearly $1 billion position in the stock.

6. General Motors (GM): Who would have guessed that General Motors is one of the most popular stocks among hedge funds. Even Warren Buffett‘s Berkshire initiated a position in the stock during the first quarter. Overall, there were 82 hedge funds with total investment of $3 billion in the stock. Billioanire David Einhorn had $379 million in the stock.

7. Wells Fargo (WFC): Warren Buffett was adding to his already gigantic holdings in WFC during the first quarter. There were 81 hedge funds (up from 70 at the end of December) in Wells Fargo at the end of March.

8. JP Morgan (JPM): JP Morgan was the only stock in our top 10 that showed a decline in hedge fund interest. At the end of March there were 78 hedge funds with JPM positions. This number stood at 81 at the end of December. Matthew Halbower, Jeffrey Tannenbaum, Jim Simons, and Eric Mindich are the fund managers who sold out of JP Morgan before the banks trading losses were revealed.

9.Qualcomm (QCOM): Qualcomm saw a jump in hedge fund interest during the quarter. There were 78 hedge funds with Qualcomm positions at the end of March, vs. 66 at the end of 2011. Billionaire Ken Fisher had nearly $400 million invested in QCOM.

10. Pfizer (PFE): Pfizer is the only healthcare stock in this list. There were 74 hedge funds with Pfizer positions vs. 72 at the end of 2011.

From insidermonkey.com

Rich Man, Poor Man (The Power of Compounding)

MAKING MONEY: The most popular piece I've published in 40 years of writing these Letters was entitled, "Rich Man, Poor Man." I have had dozens of requests to run this piece again or for permission to reprint it for various business organizations.

Making money entails a lot more than predicting which way the stock or bond markets are heading or trying to figure which stock or fund will double over the next few years. For the great majority of investors, making money requires a plan, self-discipline and desire. I say, "for the great majority of people" because if you're a Steven Spielberg or a Bill Gates you don't have to know about the Dow or the markets or about yields or price/earnings ratios. You're a phenomenon in your own field, and you're going to make big money as a by-product of your talent and ability. But this kind of genius is rare.

For the average investor, you and me, we're not geniuses so we have to have a financial plan. In view of this, I offer below a few items that we must be aware of if we are serious about making money.

Rule 1: Compounding: One of the most important lessons for living in the modern world is that to survive you've got to have money. But to live (survive) happily, you must have love, health (mental and physical), freedom, intellectual stimulation -- and money. When I taught my kids about money, the first thing I taught them was the use of the "money bible." What's the money bible? Simple, it's a volume of the compounding interest tables.

Compounding is the royal road to riches. Compounding is the safe road, the sure road, and fortunately, anybody can do it. To compound successfully you need the following: perseverance in order to keep you firmly on the savings path. You need intelligence in order to understand what you are doing and why. And you need a knowledge of the mathematics tables in order to comprehend the amazing rewards that will come to you if you faithfully follow the compounding road. And, of course, you need time, time to allow the power of compounding to work for you. Remember, compounding only works through time.

But there are two catches in the compounding process. The first is obvious -- compounding may involve sacrifice (you can't spend it and still save it). Second, compounding is boring -- b-o-r-i-n-g. Or I should say it's boring until (after seven or eight years) the money starts to pour in. Then, believe me, compounding becomes very interesting. In fact, it becomes downright fascinating!

In order to emphasize the power of compounding, I am including this extraordinary study, courtesy of Market Logic, of Ft. Lauderdale, FL 33306. In this study we assume that investor (B) opens an IRA at age 19. For seven consecutive periods he puts $2,000 in his IRA at an average growth rate of 10% (7% interest plus growth). After seven years this fellow makes NO MORE contributions -- he's finished.

A second investor (A) makes no contributions until age 26 (this is the age when investor B was finished with his contributions). Then A continues faithfully to contribute $2,000 every year until he's 65 (at the same theoretical 10% rate).

Now study the incredible results. B, who made his contributions earlier and who made only seven contributions, ends up with MORE money than A, who made 40 contributions but at a LATER TIME. The difference in the two is that B had seven more early years of compounding than A. Those seven early years were worth more than all of A's 33 additional contributions.

This is a study that I suggest you show to your kids. It's a study I've lived by, and I can tell you, "It works." You can work your compounding with muni-bonds, with a good money market fund, with T-bills or say with five-year T-notes.

5 Higher-Yielding, Income Growing Tech Stocks

When you hear the names Cisco (CSCO), Oracle (ORCL), Apple (AAPL), Microsoft (MSFT) and Intel (INTC), "dividend stocks" is probably not the first thought to enter your mind. It wasn't that long ago that tech companies simply didn't pay dividends. Every penny earned was plowed back into the business. The entire focus was on growth, and investors were looking for capital gains.

Long-considered the domain of momentum or growth investors, many tech stocks have matured and begun paying a reasonable dividend. Granted, the tech sector hasn't garnered the same following from income investors as traditional higher-yielding sectors such as consumer defensive, healthcare and financial services. However, there are several valid tech options to consider that will pay us a growing income stream while diversifying our portfolios.

This week week, I screened my dividend growth stocks database for Technology companies with a yield at or above 2.5% and that have increased their dividends for at least 9 consecutive years. The results are presented below:

Microsoft Corporation (MSFT) the world's largest software company, develops PC software, including the Windows operating system and the Office application suite. The company has paid a cash dividend to shareholders every year since 2003 and has increased its dividend payments for 9 consecutive years. Yield: 2.7%

Intel Corporation (INTC) is the world's largest manufacturer of microprocessors, the central processing units of PCs, and also produces other semiconductor products. The company has paid a cash dividend to shareholders every year since 1992 and has increased its dividend payments for 9 consecutive years. Yield: 3.2%

9 Agriculture Stocks to Profit from Global Food Shortage

The inflation in the food prices is set to continue globally. The demand is rising faster than the supply can keep pace and in 2007 and 2008 there were riots in 60 countries due to run up in the prices of corn, wheat and soybeans. There are many drivers behind the rising food prices. Primary among them being the increased demand from China and diversion of agricultural resources to produce biofuels.

The result is a changing industry dynamic as established players continue to jockey to lock in supplies of essential grains and position themselves as a supplier to China. For example, the recent bid from the Japanese trading house Marubeni to acquire the US based grains merchant Gavilon (a spinoff from Conagra Foods), is squarely aimed at getting a footing in the Chinese supply channel. On the other hand, we have global giants such as Bunge investing heavily in Sugar production in Brazil for the Ethanol market.

Agriculture has the potential to be one of the most promising investment themes for the coming decade (sorry Facebook investors!). Here are some of the selected stocks that you can use to play the agriculture theme.

Fertilizers

Nitrogen based fertilizer companies are benefitting from a glut of natural gas, that makes their input costs low, and increased fertilizer demand rising out of a good season of corn plantings in 2012 and solid projections for 2013. In addition to the food applications, corn is also being increasingly used for corn based ethanol projects.

CF Industries: One of the largest US company in this space is CF Industries (CF). The company also makes phosphate based fertilizers. The stock is currently cheaply valued at 7.55 forward P/E and 0.63 PEG. The company has a 25% profit margin and pays a 1% dividend yield.

Terra Nitrogen LP: Terra Nitrogen LP (TNH) is a subsidiary of CF Industries and operates as a MLP. If you want a pure play in the Nitrogen based fertilizers to get a direct exposure to low natural gas prices, TNH is a good option. As an MLP, it pays out 8.1% distribution yield. Please note that this income is not a dividend but a partnership income and the tax treatment is generally more advantageous but could be troublesome if held in a tax deferred account. The trailing P/E is 11.21 and its profit margins are about 36%

Rentech Nitrogen Partners LP: Rentech Nitrogen Partners (RNF) is another nitrogen based fertilizer producer that recently came public in Nov 2011 and could be worth a look. It is a smaller company, with market cap of $861 million. Its distribution history is not long enough yet, but it has paid out $1.06 in May this year and has forecasted a total distribution of $2.86 for the year, which if met, gives an yield of 12.7%. The PE is a respectable 9.5 on a forward basis

Warren Buffett Trashes Higher Education, Says It's 'Not For Everyone'

Warren Buffett offered some dismissive words on higher education in a conversation with MBA students last month (notes provided by Market Folly).

Here's what he said when asked about the student loan bubble::

The best education you can get is investing in yourself. But this doesn’t always mean college or university. I have two degrees but I don’t have them on my wall, in fact I don’t even know where they are.

I used to be afraid of public speaking, and I realized that I have to do that someday. I do have one diploma I display from Dale Carnegie’s Public Speaking Course and it only cost me $100.

Thus, I don’t think college is for everyone, one benefit is that it gives you a button. In fact none of my three kids graduated from college.

John Mellor did research on group of students for a project. One group was sent to the beach while the other studied at university. Their results are not that different. It’s always about consistent improvement of your abilities.

You should always ask yourself, “does this have any value to me?” I did go to university because of the expectations of my parents.

Buffett himself earned a Bachelor of Science in business administration at the University of Nebraska-Lincoln and a Master of Science in economics from Columbia Business School.

His children have had successful careers despite not graduating from college, with his son Howard making a career in business and politics, his son Peter becoming a composer, and his daughter Susy being active in philanthropy.

From businessinsider.com

WOW! Facebook Is Now Worth More Than These 10 Huge Companies

Facebook is finally going public.

It'll be worth about $104 billion when it debuts at $38 a share, and there's guaranteed to be a pop once it starts trading.

That means that Facebook — an eight year old company — is worth more than some of the largest, most successful companies in the world that have been around for decades.

Even some of the top tech companies that have been on top of Silicon Valley for decades have fallen behind the Web 2.0 wunderkind.

Here are some of the most interesting ones:

• Hewlett-Packard, one of the largest PC makers in the world, is smaller than Facebook. It's worth $44 billion — less than half of Facebook's titanic $105 billion valuation. HP also just laid off about 25,000 employees. 

• Facebook is four times larger than Dell, another super-giant PC and server maker. Dell has a market cap of about $26 billion. It's still trying to find its way in the post-PC era.

• It's bigger than Salesforce.com, a company that is more or less partially responsible for the cloud computing revolution. Salesforce is only worth around $20 billion — and its interns end up as high-ranking officials from time to time.

• Starbucks, the coffee chain that literally appears twice on every corner. Starbucks is worth about $40 billion — less than half of Facebook. We hear plenty of horror stories about Starbucks.

• The New York Times, one of the most prestigious content publishers in the world, is a blip compared to Facebook. Sharing is apparently worth 105 times more than some of the best content available on the Internet. The New York Times is worth slightly less than $1 billion. A bunch of New York Times staffers are actually planning to quit.

• Target, a huge big-box retailer similar to a higher-end version of Walmart, is worth less than half of Facebook. Target has a market cap of about $37 billion — well short of Facebook's expected valuation. Target actually raised its guidance this week, raising its value.

• Facebook barely edges out Amazon, the largest online retailer in the world. Amazon is worth about $100 billion, while Facebook is worth just a smidge more. Amazon's Kindle has been a bit of a bust so far.

• Disney is worth about four-fifths of what Facebook is worth. The owner of ESPN and a ton of other properties is worth about $80 billion. Disney could soon be replaced by Rovio as one of the biggest media properties in the world.

• Facebook is worth twice as much as eBay. eBay has a market cap of about $50 billion.

• Facebook is worth about 10 Nokias put together. Nokia, one of the largest phone manufacturers in the world (not smartphone), is worth about $10 billion. The Nokia Lumia 900 is actually pretty nice, though.

Not much of a surprise, though. Facebook is making a world-changing piece of technology, and it also happens to pay its engineers better than most other companies in Silicon Valley — so it attracts the best talent.

But Facebook still isn't bigger than the typical tech giants: Google, Microsoft and Apple. Microsoft is worth about $250 billion, while Google is worth $204 billion and Apple is worth about $500 billion.

From businessinsider.com

Business Lessons from Highly Successful Entrepreneurs – Li Ka-Shing (Part 1)

“When you’re a self-made man, you start very early in life… You get a drive that’s a little different, may be a little stronger, than somebody who inherited.” – Kirk Kerkorian

Who is Li Ka-Shing?

Age: 84

Networth:US $ 25.5 billion (Forbes)

Education: Drop Out, High School

Hong Kong based business magnate. He is Chairman, Hutchison Whampoa Limited and Cheung Kong (Holdings) Limited. Cheung Kong Holdings is a property development and strategic investment company – includes 8 listed companies with combined market capitalization of US $ 104 billion on the Hong Kong stock market as at January 2012; leading Hong Kong based multi-national conglomerate operating in 53 countries and staff strength of 270,000; Hutchison Whampoa handles 70% of Hong Kong’s port traffic and 13 % of the world’s container traffic. Li’s companies built one out every 7 residences in Hong Kong. Besides business through his flagship companies Cheung Kong Holdings and Hutchison Whampoa, Li is personally and extensively invested in real estate in Singapore and Canada. He has personal investment in Facebook and Sportify. Referenced as Asia’s most influential businessman, Li was born in Chiu Chow, China, forced to quit school at the age of 12 and fled to Hong Kong with his family to avoid the perils of war.

Lesson 1: We Don’t All Have to Change the World

“Success can be attained in any branch of human labour. There is always room at the top in every pursuit.” – Andrew Carnegie

Li’s background is like that of many Hong Kong entrepreneurs; he is a refugee from China. Forced to work at the age of 14, after his father suffered from tuberculosis and passed away, Li Ka-Shing absorbed the lessons of desperation which later inspired his success story.

“After 17, I knew I’d have a good chance of starting my own business because I knew I’d been right in my beliefs” says Li Ka-Shing. Li had a dream – to change his world.

In employment, Li rose to become a wholesale sales man in a plastics watch strap company in 1945; Having, proved himself further, he was promoted to a manager and then general manager. He laid the foundation for his future success by studying the latest trends and technologies in the plastics industry which he believed held enormous promise.

Li set up his plastics industry in 1950, at age 22, with the start-up capital of US $ 6,450 (HK$ 50,000) from his savings and money borrowed from friends and relatives, making plastic flowers and toys. According to Li “my factory was not huge. It was in fact small”. By 1960, Li’s manufacturing business was the biggest in Hong Kong in terms of dollar value export. His profit was sufficient to launch him in to real estate investment where he made a fortune. By 1971, Li officially named his real estate company Cheung Kong. His successes in industry and real estate continued; he cultivated contacts and built a strong reputation that set the stage for the purchase of Hutchinson Whampoa in 1979 – Its diverse array of holdings range from some of the world’s biggest port operators and retailers to property development and infrastructure to the most technologically-advanced and marketing-savvy telecommunications operators.

Li’s strategies might not have earned him a page among entrepreneurs who changed the world, but he remains one of the greatest empire builders of our time and the master of his game.

Lesson 2: Poverty Inspires; You Need Not Search Further For Other Sources of Motivation

“Money is like a sixth sense – and you can’t make use of the other five without it.” – William Somerset Maugham

Most successful entrepreneurs say that their primary motivation has been to build something lasting, and not to make money.

What is Li’s ideology on money or lack of it?

On arrival in Hong Kong in 1940, Li’s father died of tuberculosis. According to Li, this was “the most terrible experience during my childhood. I too was infected. The burden of poverty and this bitter taste of helplessness and isolation sort of branded on my heart forever the question that still drive me: Is it possible to reshape one’s destiny? Is it possible to minimize challenges through lessening complexities?”

Li made a promise to his father on his death bed – that “the whole family will have a good life”. Li says “I promised myself that; (and) after saying those confident words to father, I knew that I must work doubly hard for a future.”

“His father’s misfortune made Mr. Li believe that money was somehow a better marker of human dignity…Money became linked to life itself. Money was a means to keep the family together, and it was also a means of keeping a promise…For him, money was a measure of a person’s worth and the key to freedom and independence. In his early years, money became almost a surrogate religion for Mr. Li” -Xu Zhiyuan.

By 1958, Li was already a millionaire.

At his old age, Li still remembers the source of his inspiration. He says “I can still remember poverty. I told my children and grand children that the fruit that you eat will never taste as beautiful as the fruit that I ate during the turmoil of war. You will never cherish it as much as I do”. Perhaps, this is the reason why Li has refused to retire even at the prime age of 84.

Warren Buffett Makes Another Major Newspaper Investment

Warren Buffett's Berkshire Hathaway has agreed to purchase 63 daily and weekly newspapers owned by Media General for $142 million, including titles in Virginia, North Carolina, South Carolina and Alabama. 

Separately, Berkshire took a 19.9 percent stake in parent company Media General under an agreement to provide the firm with a $400 million term loan and a $45 million revolving credit line.

The announcement by Berkshire follows the company's 2011 purchase of the Omaha World-Herald, Warren Buffett's hometown paper. 

“In towns and cities where there is a strong sense of community, there is no more important institution than the local paper,” Buffett said. “The many locales served by the newspapers we are acquiring fall firmly in this mold and we are delighted they have found a permanent home with Berkshire Hathaway.”

Media General has continually shifted from its reliance on print media as a revenue generator — with the company realizing more than 87 percent of its cash flows from its broadcast and digital businesses this political season. 

“Selling our newspapers represents a monumental change for us," Media General Chief Executive Marshall Morton said. "This single transaction for virtually all of our newspapers accelerates the timing of our strategy to focus on our broadcast television business and its future growth opportunities."

From businessinsider.com

The Five W's Of Bad Investing Behavior

Investors are prone to making irrational decisions. The simple truth is that what feels good, or what satisfies an immediate impulse, is not always compatible with generating positive, long-term returns.

But while investors know the general guidelines for building and growing wealth, they’re often blind to their own recurring mistakes. The 5 W’s of bad investing behavior are some of the most-common behavioral quirks that can keep investors from realizing their financial goals. The solution is to know which characteristics plague your portfolio and to take the appropriate steps to address them.

Winging it. A shocking number of investors – some studies indicate more than 70% — have no financial plan. Without a clear understanding of what you’re investing for, it’s difficult to create a discipline that will allow you to reach those goals. And discipline is paramount. It’s what helps investors make the choices that support their desired outcomes. Without a plan and a disciplined approach, many investors end up off track. Factors that are critical to consider when creating a disciplined financial plan are cash flow, spending rate, risk appetite, time horizon and liquidity.

Weighting the Winners. Say you have a simplified portfolio of 50% stocks held in the SPDR S&P 500 and 50% bonds held in iShares Barclays Aggregate Bond ETF as of January 1. If at the end of the year, stocks are up and bonds are down, you’re more inclined to dump the bonds and move your money into stocks. But if at the end of the following year, bonds are up and stocks are down, you’re likely to get back into bonds.

What makes investors take this all or nothing approach – 100% stocks or 0% stocks? It’s the desire to build positive returns, certainly, but merely chasing the winners is not sustainable. Dumping the “losers” in your portfolio essentially means giving up the opportunity to realize the winners of tomorrow.

Consider establishing an investment policy statement for your portfolio in order to diversify your assets and to better understand the limits of what you are willing to expose yourself to. Ideally, this investment policy statement would include periodic rebalancing to your losers while trimming your winners, which will help keep your overall risk level in check. You should also consider incorporating guidelines for diversification. This can help smooth out the bumps in the road and keep you from panicking during the inevitable ups and downs of the market.

Watching the Markets Intensely. There is such a thing as too much information. From 24/7 cable news to monthly investor publications, the sheer amount of facts and figures investors can access is enormous. But how much is really helpful?

Hot new investments are constantly being discussed and promoted, from Internet stocks such as ETF PowerShares (Nasdaq: QQQ) in the late ‘90s to real estate ETFs such as iShares Dow Jones US Real Estate (NYSE: IYR) in the mid ‘00s, to gold ETFs such as SPDR Gold Shares today (NYSE: GLD). It’s not as simple as saying you should avoid whatever is popular at the moment, but you should at the least look to limit the amount of exposure in your portfolio to these higher volatility areas, while approaching any “hot” new ideas with a healthy amount of skepticism.

Studies from Dalbar show that investors have the habit of piling into whatever is working at the moment only to bail once something new comes along. This creates a significant gap between market returns and investor returns. If this characterizes your own behavior, consider building a diversified portfolio for the core 80-90% of your assets, while limiting headline-grabbing and higher risk themes to 10% at a time in order to avoid too much damage should your positions turn against you.

Further, all of this information seldom puts investors’ minds at ease. Too much information can lead investors to focus on all the wrong things, while distracting them from their long-term plan. If Goldman Sachs is espousing stocks, that doesn’t mean that’s where all of your money needs to go. A winning investment strategy for a particular day or week might not sustain a lifetime of wealth creation and preservation.

This Man Is A Shining Example Of What To Do If You Win The Lottery

In a recent Ask Me thread on Reddit, a site user named Ididwinit shares what he did with his $2 million Australian lottery jackpot.

Rather than blow it on coke and hookers, he actually put it toward paying off debt and saving up for retirement. 

Stoked to see a lottery winner not serve as a cautionary tale for a change, we highlighted his smart money moves and what they can teach us about managing windfalls.

He paid off debt first. Rather than live it up, Ididwinit decided to end his debt cycle for good to free up his money to save and invest. When he won, he had around $400,000 in debt from car loans and a mortgage. Today, he's completely debt-free and has money to spare. 

He kept the same lifestyle. Some workers are tempted to upgrade their lifestyle with every pay raise, but Ididwinit knew the only way he'd stay afloat was if he maintained the modest lifestyle he'd had prior to winning. "We do have nice holidays," he wrote on Reddit, "but most of the remaining money is now invested." 

He invested the rest. Anyone with a $1,000 lying around can start investing, even if they don't have a clue how to do it. Ididwinit must have gotten the memo that the best way to plan for retirement is to invest and start saving as early as possible. 

He kept the jackpot to himself. "Not many people outside our direct family know," Ididwinit wrote on Reddit. "We kept it quiet and have ever since." This was smart for several reasons: Nosy, untrustworthy friends couldn't ask for a handout, and Ididwinit didn't risk alienating anyone. As we've written before, it's hard to root for the newly rich when you feel they flaunt their wealth. 

From businessinsider.com