Apple's Q2 Earnings

Info from CNBC.

Apple (AAPL) has been pummeled lately being down 47% from it's all-time high.  Stock price even went below for the first time since 2011.  With the lack of new product updates, production delays and rumored iOS software redesign, AAPL seemed to have lost it's mojo.  Analysts estimate that AAPL would still beat earnings but it's profit margins would be down year over year.

CEO Tim Cook said that the stock price decline has been very frustrating and that Apple does not control that; it controls product innovation.  That being said, new product releases are now expected towards the end of 2013.

It was not all bad news for the Cupertino company.  Apple sold 37.4 million iPhones in the quarter, compared with 35.1 million in the year-ago quarter. The tech company sold 19.5 million iPads versus 11.9 million a year earlier.  For most companies, those numbers would be awesome.

A little bit more good news for investors, AAPL's shares surged in after-hours trading (currently at $411.39) due to Apple's earnings numbers,  Apple's announcement of a dividend hike of 15% and increase of stock repurchase from $10 billion to $60 billion.  These moves should be enough to keep the stock price afloat while we patiently wait for the new hotness.

Long term, I'm still bullish with Apple and with numbers like these, how can I hate them Apples?

Mondelez (MDLZ) Dividend Payments, LULU Fires Chief Product Officer Over See-Thru Yoga Pants, Ron Johnson Out At JC Penny (JCP) and Has Apple Lost It's Groove?

Now that's weird.

 

Yesterday was dividend pay day for Mondelez (MDLZ).  We got paid $8.30.  Now remember from my previous post that I expected to be paid $3.41 for 26.2504 @ $0.13/share.  Either MDLZ increased their dividend payout (I estimated @ $0.3161/share) or for some reason, they thought we owned 63+ shares of MDLZ.  I know there's an error somewhere and I expect a correction soon. 

 

Now for some news and my opinions:

 

Lululemon has been on the news lately for having a product recall because their black Luon yoga pants appeared to be see-thru.  As you can imagine, female customers would be deeply affected by this product defect which resulted in the recall.

 

Aside from the embarrassingly bad press, future earnings of LULU are expected to drop to offset the estimated $67 million in lost revenue as the cost of the product recall. 

 

Another victim of this product snafu is LULU's Chief Product Officer Sheree Waterson.  LULU announced on April 3 that Ms. Waterson  would leave the company on April 15.  It was obvious that this was a move to help stem the drop of stock price and as the company's atonement for the product recall.  Quite frankly, I wouldn't require someone to lose their job over this and I highly appreciated LULU's quick and fast response towards the issue.  While most companies would spend months with smoke and mirrors denying any fault or even flaws with their product,  LULU faced this challenge head on.  Recalling 17% of your product was very expensive but the possible loss of trust from loyal customers was just too high of a price to risk by LULU.

 

Looking forward, I still think LULU would come back strong and there's always the possibility for a black Luon shortage which may cause a panic buy reaction from the customers (which may increase the price of merchandise - higher margins to offset the loss).  Also, customers may continue to stay loyal to LULU due to the company's fast and effective response and whatever fringe bad experiences that popped up on the internet are just outliers or isolated incidents.

 

If at all, the drop in price is a perfect buying opportunity.

 

In other news, JC Penny (JCP) fired CEO Ron Johnson after almost 2 years on the job.  Johnson oversaw a disastrous drop in earnings for JCP and the Board just had enough of it.  JCP then hired Johnson's predecessor Myron Ullman effective immediately. 

 

Who would have thought that Ron Johnson, the executive behind the highly successful (and profitable) Apple retail stores would fail horribly at JCP?

 

Well, it's easy to see now looking back.  One of the early interviews Mr. Johnson made with CBS Morning News, host Gayle King ask Ron if he was wearing a JC Penny outfit for the interview.  He answered and I quote: "No, it's not, but I will have one on the next time."  Oops.  Back then, it was easy to laugh this off and forget about it but now, I realized it was a big marketing disaster.  Can you imagine the late Steve Jobs being caught with an Android phone?  Even Bill Gates was famously quoted for never touching let alone, own an iPod, iPhone and an iPad.  Ron Johnson getting caught with his pants down figuratively was a sign of him being out of touch with JCP and it's costumers.   How would a CEO know what the customer would want or need if he himself was not a customer?  He ended the promos and coupons and even taken out customer favorite brands.  As a result, Mr. Johnson alienated his loyal customers for the gamble of gaining new "higher-end" customers.  Obviously, discounted jeans and shoes were a foreign language for Johnson who for the most part of the last decade sold premium computers, phones and music players. 

 

Would reinstalling Mr. Ullman be good for JCP? Only time will tell.

 

Finally, we go back to Apple.

 

In recent weeks, stock analysts such Jim Cramer and tech pundits like Leo Laporte have expressed their opinions about AAPL.  Mr. Cramer was not as bullish as he was before and may have implied that AAPL lost it's "cool factor".  As recently as last Sunday, This Week In Tech (TWiT)'s Leo Laporte pretty much waved the white flag for AAPL.  He said that the AAPL has ran out of innovation and that future product releases would pale in comparison to what the Cupertino-based company released in the past five years.  These opinions, for the untrained eye/ear, would seem the death of Apple and would probably push some investors to sell their shares of AAPL.  But then, I remembered a story from Jim Cramer's book Confessions of a Street Addict where Mr. Cramer's Hedge Fund was getting beat on Wall Street in 1998.  Cramer wrote in his book that there was a point during that time that he just gave up on the Market and even wrote an article for theStreet.com to SELL EVERYTHING.  He then said that was the cue for Mrs. Cramer to start buying for the fund which then saved the Hedge Fund and Jim Cramer himself.  Also, Leo Laporte admitted he was wrong about Apple in the late '90s when he pretty predicted the death of Apple.  This was before the then newly design iMac, the iPod and iPhone/iPad. So in short, I'm considering these recent statements by these two people I respect as a sign that AAPL is at (or near) it's bottom.  Plus, Warren Buffet always said: "I buy when people are fearful and I sell when people are happy/greedy." 

 

I believe AAPL still has a few products up it's sleeve.  Recent news about the iPhone 5s and iPhone 6 being designed by Jobs himself give me confidence and with iOS/Software under Jon Ive, I'm optimistic that AAPL would wow us within the next few months.  Also, let's not forget that AAPL still has that over $100 Billion in the bank.

 

Besides, it's nice that our portfolio is no longer dependant on AAPL's stock price to succeed.  And that my friend, is diversification.

Getting Stuff For Free, Apple (AAPL) May Boost Dividend Yield, Waste Management (WM) Pays Dividends, Mondelez (MDLZ), Xilinx Inc (XLNX) and Kraft's (KRFT) Ex-Dividend Dates!

I got an email from my discount brokerage. 

They gave me a free credit to use their Automatic Investment Plan service for free!  That's $4 savings! 

You might ask: "So what?"

I say: "Awesome!" 

Here's why, that $4 I would have paid (as commission) to buy stock would just go into buying more shares of the company I want to buy.  And when I'm about to chase the dividend distribution, every share counts!

Here's what I did:

Mondelez International (MDLZ)'s ex-dividend date is 03/27/2013.  I also looked into Kraft (KFRT) and Xilinx Inc (XLNX) ex-dividend dates, 03/26/2013 & 05/13/2013 respectively.  As you can see, I'll miss KFRT's must own date by a day and XLNX is just too far off.  That is why, I'm going with MDLZ.  Granted, MDLZ's dividend is "just" $0.13/share which was down from $0.29 in September 2012 (which was paid before the Kraft/Mondelez transaction), I am bullish with MDLZ's future growth.   With the economy improving, consumers would be buying more snack foods and drinks.  Also, with Easter, Memorial Day and summer just around the corner, I expect a jump in sales for Cadbury chocolates, Nabisco and Oreo cookies and Tang beverages.

Anyways, here's a recap of my purchase:

I transferred $250 into our brokerage account (expected funding on 03/25/2013, Monday).

Along with my $184.50 cash position, I executed an Automatic Savings Plan transaction to buy $434 worth of MDLZ shares.

MDLZ is at $29.81 as of 03/22/2013 11:58 am ET

I estimate to buy 14.4666 shares of MDLZ at $30/share.

I would then own 26.3008 shares of MDLZ which will pay me $3.4191 in dividends.

As always, our dividend payments would be reinvested to buy more shares (0.1139 shares @ $30).

As you would observed, without the $4 discount, the dividend payments would have been swallowed by the fee. Also, I would only be able to buy $430 worth of shares which only buy me 14.3333 shares which will bring me to 26.1675 shares = $3.4017.  A net loss of $0.0174.  Yeah, it may be a small loss but the greater loss is in the future growth due to compound growth rate.  The more shares I own, the greater my dividend payments.

In other news, Waste Management just paid me some dividends. 

We got paid $4.40 in dividends which we reinvested to buy more shares (0.1162 shares @ $37.87).

Extra Credit:  I have read/heard speculation that Apple (AAPL) is "poised" to boost it's dividend payments by 56% (from $2.65/share to $4.14/share) for a 3.7% yield. As you can imagine, shares are up (currently at $459.37) since news of the hike got out.  Although it's a far cry from it's 52-week high of $705. 07, this recent bump may be what nervous shareholders need.  I believe that AAPL being below $500 is really cheap and that it's recent drop is a result of both self-inflicted wounds and external stabs to the company.  From the botched Apple Maps launch to the profit taking during the fiscal cliff, Apple's stock has seen a nose dive to $419 before stabilizing at the $420-$430 range.

In spite of Apple's iPhone 5 and iPad sales being through the roof, Wall Street's expectations are just too high for the Company to beat.  On top of that, Samsung's victories (court judgements and sales) did not help Apple's share price.  But last week, I saw a small glimmer of hope for Apple.  Samsung just launched their new flagship phone, the Galaxy S4 with hype that matched the iPhone but execution that fell flat on Samsung's face.  The whole presentation just showed how masterful Apple's product presentations are.  Samsung's "show" was generally panned by tech journalists and even mainstream media.  The phone however, is a different story.  It told me what I needed to know about Samsung's vision of their phone's future: more of the same.  Critics blasted Apple for the iPhone 5's lack of a differentiating features and design that Samsung seemed to outpace Apple in both fronts.  But with the Galaxy S4 looking and functioning almost the same as the Galaxy S3, I believe Samsung is now experiencing a lag in their "wow" factor. 

In my opinion, it would be tough for Samsung to be "innovative" without Apple to "copy" from. 

That's just my opinion so take it as it is.

So why is this good news for Apple?  Well first, current Galaxy S3 owners have not much of a reason to buy the new S4 which could be the opening for Apple to snatch some of the market share back from Samsung.  Currently iPhone 5s or iPhone 6 rumors have been leading towards a new phone design and with iOS 7 around the corner (WWDC is usually held in June), Apple fans will have a reason to hope.  News of the iWatch and iTV also help fuel speculation that Apple may be launching a new product market that would bring back the Apple cool factor that Steve Jobs used to bring.

So will 2013 bring Apple back on top?  Only time will tell.

Uncle Sam's Cash Back, Apple Goodness, Promos and Some Cheesy Dividends

Our household recently received our State and Federal tax refunds.

After spending $1000 to help pay down my wife's car payment, we decided to split the remaining cash equally between the two of us.  Then my wife asked me: "What would you buy with your share of the refund? An iPad?"  I answered: "I'll buy more mutual funds for my Roth IRA and some stock for our taxable investment account."

She smiled.

For the past four years, I have used my tax refunds to invest in my Roth IRA.  I figured, why spend money and pay more taxes (sales tax) when I can just make more "tax free" money in my Roth IRA?  The answer is a no-brainer.  Reinvesting my tax refunds in my Roth made me more money and gave me more satisfaction compared to whatever gadget I would have bought.  I love making (easy) awesome decisions.

So what did I buy with the money?  I checked our portfolio and checked which stock had the closest Ex-Dividend date.  It turns out Kraft (KFT) would have their ex-dividend date on March 28, 2012 (next Wednesday).  I then transferred money to the account and set-up the Automatic Investment Plan for Tuesday, March 27, 2012.  This should be enough time for me to get the stock before the ex-dividend date and be eligible for the dividend.

Here is a breakdown of my transaction:

1. I transferred $350 to the account (the rest of the money will go to my ROTH).

2. I set-up the automatic investment plan.

3. I'll buy $350 worth of KFT shares - Potentially 9.1217 shares @$38.37 (as of 9:47am today).

4. There is no fee this time due to a promo (Thanks!)

5. I'll potentially own 11.6310 shares of KFT.

6. KFT currently pays a $0.29/share dividend - $3.37299 potential payout.

Thanks to Kraft, I'll have a nice and "cheesy" dividend. LOL

In other news, last Monday, Apple announced that they would pay a 1.8% dividend ($2.65/share quarterly, $10.60/share annually) to its investors.  Apple will also spend $10 billion to do a stock buyback.  This will reduce the number of stocks outstanding which would mean every remaining investor would own more of the company.  This obviously is good news for me.

The dividend payout would allow "value-oriented" mutual funds to invest in Apple.  In my opinion, this is both good and bad news.  The good news is that Apple would be exposed to more mutual funds and the bad news is that this opens Apple to more volatility as mutual funds' dollars goes in and out of Apple depending on how the stock and the market performed on a given day.  This also makes diversification a bit tougher as I expect a flood of new mutual fund investors.  I suggest checking your mutual funds' holdings and try to be as diverse as possible.

The dividend is a welcome bonus for me as an investor.  Although the dividend yield is not as huge as HP, Microsoft and the others but the growth rate and performance of Apple more than makes up for the comparatively "small" dividend.  Besides, I'm more bullish of Apple than HP.

Tempting as it is to get more Apple stock, I'll keep my emotions in check and keep our portfolio as balanced as possible.  We still have a long way to go.

Chasing Altria's (MO) Ex-Dividend Date, Dodging Yelp, Xilinx Inc. (XLNX) and Energy Transfer Partners (ETP) Pays Me Some Dividends and Can Anyone Stop Apple (AAPL)?

I just bought 7 more shares of Altria (MO).  

I executed a limit order for $30.41 which bumped my shares of MO to 10.3151.  It cost me $222.82. I bought 7 shares for $212.87 plus the transaction fee was $9.95.  This order was $5.95 more than what it would have cost if I had waited for the Automatic Investment Plan.  I did not wait for the AIP because it would buy the shares on MO's Ex-Dividend Date (Tuesday, March 13, 2012) which would make me ineligible to receive the dividend (per SEC definition of the Ex-Dividend Date).  This would have been a loss of $2.87 (7 x $0.41/share).

Where would I gain the $3.08 difference?  That would come from stock price appreciation (MO's chart has been trending up and today it closed at $30.46) and yield (I'll be paid dividends for 10.3151 shares instead of 3.3151).  I would be able to use the $4.22 ($4.2291 rounding down) to reinvest in MO pushing my yield higher.  

The dividend would be paid on April  9, 2012.

Speaking of dividends, Energy Transfer Partners (ETP) and Xilinx Inc (XLNX) just paid me some nice dividends.  XLNX paid $1.19 and ETP paid $5.91.  These dividends were reinvested in the stocks my yields.  I love dividends.

In other news, Yelp (YELP) went public recently.  Just like LinkedIn (LNKD), Zynga (ZNGA), Pandora (P) and Groupon (GRPN), I avoided these new IPOs since I did not get any shares pre-IPO and I do not have enough cash (and time) to get in the deal at the moment of the IPO.  With the exception of LNKD and in some way, ZNGA, these new tech IPOS have no profits to speak of.  Their business models rely heavily on Online Advertising and "Eyeballs" while their costs are going up (content licensing, customer acquisition and labor).

Although I'm not a total Bear on these tech stocks, I am not risking my hard earn cash investing in companies that make no money.   I am even on the belief that even Facebook would fail to satisfy Wall Street post-IPO.

Only time would tell.

Finally, Apple (AAPL) just announced their first major product launch since the death of Steve Jobs.  The new iPad is poised to keep Apple's lead in the tablet market and is targeting the market share of laptop makers.  During the keynote presentation, Apple CEO Tim Cook declared the iPad as the major leader  of the  Post-PC era.  Mr. Cook and company did really well during the keynote and even though it lacked the Steve Jobs Halo Effect, the recent keynote was filled with oohs and ahhs from the crowd and the tech community.  The new iPad boasted the new Retina Display, 4G LTE, a faster graphics processing chip and an amazing battery life all in the same "low" starting price of $499.  Apple also kept the iPad 2 at a lower $399 price.  Tech pundits and analysts predict AAPL would sell at least 10-15 million units on the first weekend.  I'm even willing to bet they would sell up to 20 million units.  My only fear with this prediction is whether Apple has enough iPads to sell that weekend.  I'm sure the workers at FoxConn worked double/triple overtime since November producing these magical devices.  

AAPL's stock price played around $528-$536 during the announcement.  Normally, an Apple event brings down the stock price low enough for a nice re-entry but this time, the stock price held its own.  Perhaps Tim Cook symbolized stability in the company and not seeing a frail looking Steve Jobs made investors "feel" secure about Apple.

Although Apple fans including me would have preferred seeing Mr. Jobs work his magic on stage, his presence, in spite of his health issues, was sorely missed.  As for AAPL's future, I am bullish that this company would keep printing money for years to come.  Their stock price though high, is cheap compared to it's competitors.  The PEG ratio is at 0.66, making it the cheapest of my positions (believe it or not).  The product line, high profit margins and brand equity would keep AAPL on top for a while.  As long as the company continues to innovate and execute, I would keep investing in Apple (and buy a product or two).