Corporate Taxes

Earlier this week, one of the largest acquisition and biggest-ever instance of corporate inversion was announced when Pfizer Inc (PFE) agreed to acquire Allergan Plc (AGN) for $160B. This has been painted by the politicians and the media as a way of avoiding corporate taxes, but one has to wonder what is really causing companies to take such steps to begin with. For some background, the deal announced between Pfizer and Allergan will result in Pfizer’s corporate headquarters moved to Ireland and will eventually save shareholders anywhere between 8% and 10% in taxes. The company does not really lose any business or marketshare in the US by doing this and simply reduces its taxes by taking this step. This move raises a few eyebrows since a Dow Jones Index-listed stock is now relocating.

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Sector Challenges – Railroads


Over the course of past few months, I have been featuring the Sector Overview series, where I take a sector (or an industry) and provide some basic/background information about the sector. In addition, I present the major companies in the field and profile at a high level comparing the peers. These articles are supposed to be what the title claims – an overview. It is up to each investor to compare and contrast individual companies and decide which one to pick if needed. These articles have garnered a lot of attention from readers (Thank you once again :) ) and the feedback really helps me in making this a better blog for more quality articles. Lately, I have been thinking on the other side of these investment opportunities and decided to highlight the sectors to present the threats and challenges in current environment. I begin this series with a Sector Overview Challenges – Railroads.

The article Sector Overview – Railroads is available here. In that article, I explored the idea of investing in the railroad sector and presented the major railroad operators in N.America – which includes Union Pacific Corp (UNP), Canadian National Railway Co (CNI/CNR.TO), CSX Corp (CSX), Canadian Pacific Railway Ltd (CP), Norfolk Southern Corp (NSC), and Kansas City Southern Inc (KSU). In addition, there is Burlington Santa Fe (BNSF), but the company was bought by Warren Buffet’s Berkshire Hathaway and taken private.

Caveat: Before I get into the details of the challenges faced by the sector, I would like to highlight that this is by no means a recommendation to short the stocks. Remember each investment carries risk, and all I am trying to do with this article is to try and highlight the existing risks in current market conditions and during this part of the economic cycle. These conditions may disappear in due time as the economy goes through its ups and downs.

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500 Posts

This blog has been around for just over two years (or more accurately 30 months)…and this post marks my 500th blog post! When I started, I had no idea where this would go and/or what I wanted this outlet to become, other than to simple provide me with a platform to share my views and share my journey – so that it may educate and inspire others. Over the course of 30 months, I have enjoyed writing each and every single article and absolutely loved interacting with all the readers and commentators.

I would like to take this moment to acknowledge and thank you for the continued patronage. Here’s to the next 500 :)


Chatter Around the World – 123

Chatter Around the World is a curated weekly update of articles related to economics, investing, dividends and personal finance. In these weekly updates, I also capture my blog updates and news related to my portfolio holdings.


Credit Rating Downgrades Outpace Upgrades in 2015

Image Source: Bloomberg Gadfly

Let’s dive into the links that caught my attention this week.

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Kansas City Southern – A Prime Target for Takeover


Kansas City Southern Inc (KSU) is the smallest of the North American railroad companies operating approximately 6,500 miles of rail network, serving business centers in south central US and Mexico.

The railroad industry is facing pressure to collapse in traffic in coal and petroleum products. This has caused companies to entertain the thought of M&A. KSU remains uniquely positioned with a great rail network and seamless access to the Mexican market – a region seeing higher industrial/manufacturing activity over the years in North America. A smaller company with a market cap of under $10B, makes KSU a great takeover target from any of the larger railroad operators. With a low starting yield of 1.5% and low payout ratio of 27%, there is plenty of room for those dividends to grow. Is this company a buy now?

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