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  It is a commonly held notion that high yield stocks tend to see a selloff in a rising rate environment. Investors begin to leave the high yielding company because bonds offer a safer means to the safe annual payment. As these investors sell the stock can experience a mild downturn in price. The pattern described is not a new one, however is the projection of a rising rate environment enough of a reason to sell a high yield stock? I believe it is not a strong enough rationale to issue a sell rating on a holding. If a stock is purchased with a sound investment rationale, the stock should be sold if the price target is reached or the original rationale no longer holds true. There are of course exceptions, but generally these are sound guidelines. In a rising rate environment the price of a stock may very well experience a small downturn, however that does not mean that the investment rationale no longer holds. It is more likely that the rationale ...

Resorts and Casinos as an industry have slightly underperformed the S&P 500 over the past 2 years. Over that same two-year span, Wynn Resorts has managed to beat both the industry and the index.   Wynn has positioned itself to take advantage of the casino boom in Macau, while others are left out due to limits on gambling permits and strict government oversight. The politics in China represent risk to Wynn, however over the long term, the Chinese government seems invested in helping to develop the area. Macau has fueled shaky growth and Wynn’s outperformance. Wynn is a relatively good value compared to its competitors, trading at a P/E of 46 and forward P/E of 20. U.S.-based companies with similar revenues average a multiple of around 50 and a forward average of 25. Why would the market place a lower premium on Wynn? The geo-political risks certainly are one aspect of the discounting and it is hard to quantify the value of that risk. Another, more quantifiable metric ...

Under our noses, YouTube is evolving. People generally think of YouTube as a place where anyone could upload a video and hope it goes big, but within the past year it has also become a platform for premium quality content. The content could be a Vlog (video log), or any manner of video with well-developed production from a frequent poster, (think video recipes, consumer product reviews, science experiments, how-to's) the list is vast. It could even be television stations uploading content from their shows. The result is that viewers are coming back to YouTube on a daily basis to watch new premium content. On this blog I have previously expressed my concerns regarding companies highly dependent on advertising revenue. YouTube is certainly helping to drive Alphabet’s ad revenue and now the transition to more frequent and higher quality content is allowing Alphabet to slowly roll out a product called YouTube Red. YouTube Red is a paid subscription service that gives the buyer a...

Maintaining a long-term investment horizon is becoming more difficult with the 24-hour news cycle creating headlines over sometimes trivial matters. From a value investor's perspective these short-term movements are insignificant so long as the fundamental investment thesis still holds true. A value investor also does not attempt to time the market, another ideology that has become harder to maintain. What does one do when there is cash that needs to be put to use when the market is at such a high multiple? The answer is to search even harder for deep value companies. Buying during volatile times is unavoidable and the key is to understand which companies will best survive a pullback. Doubling down on deep value brings an investor to companies with clean balance sheets, strong cash flows and proven business models. Companies bought-up on growth expectations are some of the first to see major declines. A company fitting the value perspective is one that an individual woul...

There are many attractive qualities to Verizon as a stock, a high yield of 4.41%, a proven business model and a relatively low P/E of 14 to the market’s 25. The income statement also tells a healthy story. The third quarter of 2016 boasted gross margins of nearly 60%, with operating margins hovering around 20%. The operating section of the cash flow statement also makes a good case for strength with Net Operating CF of $4.8 billion on $30.9 billion in revenue. The company appears to be a healthy operator, but the picture begins to fall apart in the balance sheet. Verizon is carrying an extremely heavy burden of debt, $103,000,000,000. Every quarter Verizon pays out slightly over $1,000,000,000 in interest expense. The debt to equity ratio of 6.7 is significantly higher than Comcast’s at 0.38. It is understandable that a telecom provider would need to raise debt in order to afford the infrastructure necessary to operate, however, when similar companies are far leaner it raises a ...