Smoking Hot Dividends and the Hot Summer

The good old Big Tobacco company Altria (MO) just paid me a dividend.  I got paid $4.28 which I then reinvested to get 0.1217 shares at $35.17.  

As much as I was disappointed that Prop 29 failed, it is nice that I still profited from Big Tobacco's win.  For the uninformed, Prop 29 would have imposed a $1.00 tax on each pack of cigarettes sold in California.  Supporters claim that the additional tax would have paid for cancer research, tobacco law enforcement and smoking reduction programs.  As one might expect, Big Tobacco spent $46.8 Million (Altria/Philip Morris alone spent $27,531,416 - full disclosure).  Far outspending Prop 29 supporters' $12.3 Million.  The silver lining for anti-smoking supporters is that it was a tight race: 50.3% No vs. 49.7% Yes. The fact that the difference of 0.6% was all the extra $34.5 Million could buy, perhaps they'll be more successful next time. 

Now I bet I'm confusing some people with my 2-sided position.  How can I own tobacco stocks (MO) and yet support a ballot measure that would severely affect the Tobacco Industry?  Simple, I want a cure for cancer.  If the additional $1.00 tax would bring us closer, then so be it.  I also believe that smokers would not stop smoking even if they have to pay an additional dollar per pack of smokes.  They are too addicted to smoking and it would be a hard habit to break.  Either way, I'll still profit for the habit of addiction.  

In other news, I just posted a LIMIT order for 5 shares of Lululemon.  Yes, I did a limit order instead of my usual Automatic Investment tactic.  So what did I get for the extra $5.95 in fees?  Well, I got 5 shares of LULU at $55.90 (currently LULU is at $55.85 - 8:36AM).  I do not think waiting till next Tuesday for the order to post would have made the difference.  I believe LULU will be higher than $55.90 by next Tuesday. I would rather pay a bit more in fees to catch the downward movement now than save the $5.95 only to ride the possible rally next week.  I'd rather be wrong and next week and still end up with 5 shares of LULU than be right and end up with less than 5 shares of LULU.

So here is my Lululemon thesis:

LULU peaked at $80.30 on May 3, 2012 (52-week high of $81.09) and has been moving down since then.   I believe LULU has been dragged down by the Euro crisis.  I believe this decline would reach the bottom soon and LULU, along with it's athletic retail competitors would experience a boost during the summer months and of course, the Olympics.  I am confident this would happen because of what I've been seeing on the streets and at the gym.  People are out and about walking in the streets, working out and trying to get fit.  I still see a huge number of LULU gear on women and some men.  LULU's business model and their steady expansion in North America would be enough for them to keep growing and put money back in my pocket.

The summer Olympics would be another catalyst I'm looking at.  Fans would be watching the world's best athletes and would be "inspired" to buy some athletic apparel.  Sure, Nike, Reebok and Addidas would take the lion's share of the new active wear purchases but I believe the Lululemon brand would start capturing new customers.  If LULU managed to sponsor at least 1 medal winner, this could be big boost for LULU.  Even if the athlete wore Nike or Reebok during the events, if those athletes start wearing Lululemon for their other activities... like yoga sessions perhaps, LULU would be poised to benefit from this.  Only time will tell.

One more thing about LULU.  I have noticed that the women who wear Lululemon yoga pant also wear those pants as part of their daily apparel.  It is almost like what happened to UGGs (Deckers - DECK).  I would not discount the possibility that Lululemon apparel would become more than just yoga pants and workout gear.  It may even become an UGGs-style phenomenon.  However, unlike UGGs, LULU yoga pants look great and even if the yoga wear as daily wear trend dies down, people women would still need to buy yoga pants for their yoga sessions.  

With these points in mind, I predict LULU would do the head and shoulders movement and would rise back up to it's $80-$90 mantle within the next 12-16 months.  So yes, I am long term investor of LULU.

Dividends and the Europe Recession

First some portfolio updates:

Since my last post, I have received dividend payments from Xilinx Inc. and Waste Management.

Xilinx Inc paid me a total of $1.97 in dividends which I reinvested and bought 0.0618 shares at $31.88.

Waste Management paid me a total of $4.14 in dividends which I reinvested and bought 0.1277 shares at $32.42.

On deck is Kraft (KFT).  Tomorrow is their Ex-Dividend date (06/27/12) and I'm speculating a dividend date sometime in July or August.

I recently became aware of a Real Estate Investment Trust (REIT): Realty Income Corporation (Ticker symbol: O).  What struck my fancy was the monthly dividend payments this REIT pays.  It's current dividend yield pays at 4.40% and has been up about 3 points since I got introduced to it.  

On the surface, this looks like a great investment but I still have to do my homework (and accumulate enough capital to buy a sizable position) to see if the monthly dividend is worth having another position to manage.

Meanwhile, Europe has been pulling the global economy down... at least it feels that way.  Spain and Greece are currently experiencing what the US had gone through in 2008.  Basically, all the US can do is wait and hope that Europe would figure out a way to fix this recession.  

I'm just happy that my portfolio and retirement accounts have managed to survive this Euro situation.  I'm sad that I currently don't have enough capital to double down on my positions and mutual funds (car repairs would do that).

Hopefully this would be an opportunity for me to keep buying while everyone seems to be selling.  Good times for the bullish!

Dividend Payments and the Facebook IPO Fizzles

My favorite natural gas position just paid me a dividend.

ETP paid me $9.53 (May 15, 2012) which I reinvested back to get 0.2065 shares at $46.15.

I really love dividends.

Just an update, XLNX's Ex-Dividend date was May 14, 2012.  Dividend date is on June 5, 2012.

Now for the news of the day...

Unless you've lived under a rock for the past few weeks, you would know that the Market has been tanking due to the reported European woes that focused on austerity measures and the possible Greek bank defaults.  

A lot of people may be worried and panicking while I am grinning from ear to ear because this massive sell-off may just give me another chance to buy more stocks for our stock portfolio.  It also inspired me to get more shares of my mutual funds for my Roth IRA.  Europe may be in trouble but as long as the USA does not collapse along with our European brothers and sisters, I'm very optimistic that this "bear" market is the second chance I've been praying for some time.

In other news, there's this small social networking company that went IPO today.  

Facebook (FB) was priced at $38/share and opened at $42.  The initial pop went up as high as $45 but that quickly dropped to just over $38.

Currently, FB is holding steady at $40-$41 (as of 11:41 am PST).  

My brother asked me if I'll buy FB today.  He even told me he can spare $10,000 to buy at the opening only to sell it at the end of the trading day.  I declined his offer and told him that I think FB was overpriced and that I do not invest in companies that does not show a positive cash flow (FB has yet to report their financials publicly... I'll check again later).  

With only an hour of trading left, I think I just saved my brother $10,000.  Can you imagine if I took his $10,000 and bought FB at the opening price of $42?  I would have lost him $476!  I guess I turned out to be a financial genius this time.  

Jim Cramer had warned his viewers to avoid FB in the after market (at the opening $42 valuation).  He also said that at $38, FB was way overpriced and that they should have kept the price at around $28-$30.  

Comparing FB to LinkedIn (LNKD).  LNKD opened at $45 and closed at $94.25.  LNKD outperformed FB's performance on IPO day.  There was even a time that LNKD was over $100 (Today, LNKD is at $100.18).  

What went wrong with Facebook?

Here a short video from the LA Times: 

I think the delay of the initial trading (I checked at 7am today and there was no info on any FB trading), high IPO price, GM pulling out of Facebook ads, Eduardo Saverin renouncing his US Citizenship to allegedly avoid taxes and the high amount of stocks being sold (trading volume) hurt Facebook (FB).  I guess the massive hype did not help FB and it probably disappointed a lot of investors.  I took a bet that the upside of getting the IPO will not make up for the downside of the IPO disappointing Wall Street.  I could not afford losing that much over a profit so insignificant the fees and taxes alone would eat it.  

This time, I was right.