Seasonal Investing

Seasonal Investing

Investors and traders follow various investment themes and concepts. Some prefer trading in and out on a daily, weekly or monthly basis. Some investors prefer more long term – looking at investment horizon in years and decades. There is also a middle ground, where traders/investors use a season as a horizon – aptly termed seasonal investing. Some investors consciously subscribe to this method and pursue this form of investing, while some investors follow it subconsciously. The latter form is driven more by the media than any other method. Right on cue, the media starts focusing on certain industries and sectors during certain parts of the season – for e.g., oil & energy during summer months, utilities during winter months etc. For most sectors, there is off and on-season and this article explores them in more detail. Note that this is not the same as cyclical or non-cyclical sectors of the economy.

Seasonal Investing

When it comes to seasonal investing, there are some common concepts people follow – although the validity of such concepts has been questioned more recently. For e.g., a common theme that has been followed for many years is Sell-in-May-and-Go-Away, which suggested that investors can get better returns if they stay invested only between October and May. This was suggested based on the fact that markets was fairly depressed during the summer months when people preferred being outdoors enjoying the good weather. However, we have seen that this is not necessarily true over the last few years. Investors who sold in May missed out on a great rally during the summer months in the yesteryears. The reason is quite unknown – although I suspect either the presence of QE or increased buybacks from companies. The other reason I suspect is the access to technology and the stockmarkets. With the advancements in cellular technology, investors are now able to access and stay on top of the markets anytime anywhere.

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The Death of IBM

The death of IBM

If you were asked to invest in a company with declining revenue, collapsing earnings and a company that has pretty much abandoned next years earnings forecast, would you invest in it? No? What if I told that the board of directors has a solution to this problem – which is repeated attrition and buying its own stock. Still no? Welcome to the life of (and possibly the death of IBM?) one of the oldest and largest tech companies in the world – International Business Machines (IBM).

The Tech Sector

As someone working in the tech industry, I find IBM to be a dinosaur. They are stuck in the old ways and are too sluggish to move forward. And especially in an industry where things move fast, even if you stand still – you are considered moving backward. I have written in the past about companies dying and go through a life cycle just like individuals. Nothing really lasts forever. Could this be the beginning of the end of IBM?

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Recent Buy – Apple Inc (AAPL)

Apple

I initiated a very small starter position in Apple Inc (AAPL). This might come as a surprise for some of the dividend growth investors, but the company has changed a lot in the last couple of years.

Over the past couple of decades, the company has remained growth focused and has made a lot of money for investors and traders. But I, as a dividend growth investor, was not interested due to the lack of dividends – let alone the growth of dividends. Things started changing in the summer of 2012 when Apple declared that it will start paying out dividends. While this was seen as a shift from growth to value play for investors, some headed for the exit door and the stock suffered with a fall of over over 40% from its peak. However, over the course of last two years, it has become clear that the company is not stagnant and resting on old accords – the company still maintains the drive to innovate and push forward with new products and services.

Financials

Apple Financials

Recent Buy Decision

  • Apple has tremendous pace of innovation that continues to capture the imagination of the masses. New product launches keep coming such as new iPhones, iPads, iMacs, iWatch and launch of new services as well – such as Apple Pay. Other growth opportunities include Apple CarPlay, where the Apple ecosystem is deployed in the car console systems, where Apple has already signed up with a number of luxury and mid-tier car manufacturers.
  • They have been able to command higher prices and the customers are happy to pay for it. Moreover, the brand loyalty is spectacular with some reports claiming upto 90%.
  • Lots of new frontiers still exist for Apple to take a crack at – such as health, television, media etc.
  • Apple has come of age and has become a more mature company and the dividends have started flowing to shareholders. Apple is also becoming more shareholder friendly – even listening to activist investors like Carl Icahn and tweaking their buyback plans.
  • Apple having only started issuing dividends in 2012 started raising them out of the gate. The dividend grew by 15% in 2013 and 8% in 2014. The current payout ratio is a low 30% and considering the huge cash position that Apple holds (albeit overseas), increasing those dividends in the future should not be a problem.
  • The valuation is attractive with a low P/E of 15.7, PEG of 1.29 , the company is a proven cash machine. According to my analysis, the fair value is around $140, although investors like Icahn have claimed that the Apple stock is worth $200 last week.

Summary of the stock

  • Symbol: AAPL
  • Quote: $97.67
  • 52-week range: $70.51-$103.74
  • P/E: 15.78
  • Forward P/E: 13.34
  • Debt/Equity: 25.67
  • Yield: 1.88%

 

Chatter Around the World – 66

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.

Trade weighted US Dollar

5 more years to run for the US$ bull market?

New Blog Posts

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

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Omega Healthcare (OHI) Dividend Increase

Omega Healthcare Investors Inc (OHI) announced that its quarterly dividend will be raised by 1.96% from $0.51 to $0.52 per share. This dividend increase is the company’s ninth consecutive quarterly increase. The new dividend is scheduled to be paid on Nov 17, 2014 to shareholders on record as of Oct 31, 2014. The new dividend rate results in an annualized yield of 5.56% based on today’s closing price.
My portfolio consists of 100 shares of Omega Healthcare, which increases my annual OHI dividends from $204 to $208.