Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Saturday 15 September 2012
The Basics of Wells Fargo
By Amanda Alix
September 13, 2012
September 13, 2012
For well-nigh 20 years now, the Motley Fool has been here to help you invest better and smarter, using spot-on analysis and razor-sharp wit. To celebrate Worldwide Invest Better Day on September 25, we're taking some time to get back to the basics -- of investing, that is. In that spirit, I have rounded up some sweet financial sector stocks that have been showing some real investing mojo lately.
Without further ado, let me introduce you to the focus of this particular article: longtime banking icon, Wells Fargo(NYSE: WFC ) .
A bank with historical perspective and a drive to succeed
Founded in 1852 in New York by Henry Wells and William Fargo, Wells Fargo & Co. provided express mail and banking services to frontier California. Originally employees of the American Express Company, the two men saw gold in their futures, and formed their own business to cater to gold miners. The first office out west was housed in San Francisco, and soon spread to other boom towns. When Wells was purchased in the late 1990s, the new owners obviously felt the tug of history, keeping the name of the company the same, and re-situated their main offices to San Francisco.
Founded in 1852 in New York by Henry Wells and William Fargo, Wells Fargo & Co. provided express mail and banking services to frontier California. Originally employees of the American Express Company, the two men saw gold in their futures, and formed their own business to cater to gold miners. The first office out west was housed in San Francisco, and soon spread to other boom towns. When Wells was purchased in the late 1990s, the new owners obviously felt the tug of history, keeping the name of the company the same, and re-situated their main offices to San Francisco.
Although the big banks have enjoyed somewhat of a rally in recent weeks, the four years since the financial crisis has definitely cramped their style. Where some have pulled back from some lucrative aspects of banking, Wells has jumped right in. As big boys Bank of America (NYSE: BAC ) , JP Morgan Chase (NYSE: JPM ) , and Citigroup (NYSE: C ) have retreated from writing mortgages in the years since the meltdown, Wells has corralled a full one-third of this market for itself. Although the bank has attracted criticism for its heavy involvement in the mortgage business from both regulators and lawmakers, Wells recently defended its position, noting that they have worked hard for their piece of the pie. Managers have even used the Old West motif at sales meetings to push for more loan business -- by dressing up as cowboys.
Wells is pushing its way into other loan markets, too. Noting the increase in housing activity, it has opened new loan offices in Bank of America’s hometown of Charlotte, North Carolina. The bank is not only ready and willing to loan to home builders, but is actively seeking out new business in the area.
Likewise, Wells has been tapped by General Motors (NYSE: GM ) to service the financing needs of GMC, Chevy, Cadillac, and Buick dealers in the western United States, causing troubled Ally Financial, which already has a relationship with GM, to shake in its boots. Spurred by this recent success, Wells is pushing GM for an even larger share of its loan business.
The bank’s Q2 report showed only a slight increase in revenues year over year, but deposits were up, and loan activity strong. In addition, Wells recently paid out a nice $0.22 per sharedividend, which shows signs of trending upwards again, after a slowdown last year.
A bank that sticks to its roots
The Wild West spirit is still part and parcel of the Wells Fargo mystique, and the drive to prosper helps explain why this bank has weathered so many storms throughout its long history, and has become a favorite of well-regarded investors, like Warren Buffett. When it comes to staying power, it’s hard to beat this company -- something that long-term investors can tip their hats to.
The Wild West spirit is still part and parcel of the Wells Fargo mystique, and the drive to prosper helps explain why this bank has weathered so many storms throughout its long history, and has become a favorite of well-regarded investors, like Warren Buffett. When it comes to staying power, it’s hard to beat this company -- something that long-term investors can tip their hats to.
Wells Fargo & Company Company Snapshot
Business Description: Wells Fargo & Company operates in the National commercial banksonline bookonline book sector. Company with three other companies in this sector in the United States: JPMorgan Chase & Co. (2011 sales of $110.91 billion of which 24% was Retail Financial Services), Bank of America Corporation ($107.24 billion of which 22% was Global Banking & Markets), and Citigroup Inc. ($103.31 billion of which 32% was Consumer Banking).
Sales Analysis. Wells Fargo & Company reported sales of $88.31 billion for the year ending December of 2011. This represents a decrease of 6.2% versus 2010, when the company's sales were $94.19 billion. Contributing to the drop in overall sales was the 7.3% decline in Community Banking, from $54.70 billion to $50.70 billion. There were also decreases in sales in Wholesale Banking (down 2.5% to $21.67 billion) . However, these declines were partially offset by the increase in sales of Wealth, Brokerage and Retirement (up 3.9% to $12.19 billion) .
Friday 14 September 2012
The big guns: US Fed launches QE3
The Federal Reserve has announced bold, open-ended steps to stimulate the US economy and reduce high unemployment, saying it will spend $US40 billion ($38 billion) a month to buy mortgage-backed securities for as long as necessary.
After trading flat before the Fed’s announcement, US stocks surged to multi-year highs and Australian stocks are set to follow. The Dow and the S&P 500 both closed at their highest levels since December 2007, while the Nasdaq ended at the highest since November 2000.
The US dollar fell, oil prices rose and gold hit a six-month high, and the Aussie dollar shot higher to $US1.0543, its highest level since August 10. Locally, the futures market is pointing to gains of about 0.75 per cent when the market opens.
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The central bank also extended a plan to keep short-term interest rates at record lows - close to zero - until mid-2015, or six months longer than it had planned. And it said it’s ready to take other steps even after the economy improves under a ‘‘highly accommodative stance of monetary policy’’.
The plan
‘‘The idea is to quicken the recovery,’’ Fed chairman Ben Bernanke later told a news conference. But he made it clear he thinks the economy will need the Fed’s intervention even after the recovery strengthens, saying the country’s employment situation ‘‘remains a grave concern’’.
Read more: http://www.smh.com.au/business/world-business/the-big-guns-us-fed-launches-qe3-20120914-25vld.html#ixzz26Oa2WLKu
Thursday 13 September 2012
Petronas Dagangan offers both growth and dividends.
Thursday September 13, 2012
Petronas eyes 1,000th outlet
Outperform
Target price: RM24.60
ELEVATED oil prices and subsequently higher product costs are not putting the brakes on Petronas Dagangan Bhd's expansion plans. The company is set to open its milestone 1,000th petrol station this month as it accelerates efforts to become Malaysia's No.1 petroleum retailer in two to four years.
We continue to value Petronas Dagangan at 18.6 times for calendar year 2013 price-to-earnings (P/E), a 40% premium to our target market P/E of 13.3 times to reflect its earnings visibility and attraction as a growth and dividend stock. Petronas Dagangan remains an “outperform”, supported by the prospect that it could be the all-round leader in Malaysia in four years' time.
Bernama, quoted Petronas Dagangan's senior general manager (retail trade) Akbar Md Thayoob as saying that the company was focused on growing its network to 1,000 petrol stations by the end of this month. Petronas Dagangan was eyeing total sales of five billion litres of petrol this year (increase 10% year-on-year), driven by the increase in its number of petrol stations.
This aggressive retail expansion is in line with management's guidance and our projection. The opening of the landmark 1,000th station is definitely within reach given that it had added 12 new stations in the first half of 2012, bringing its total to 980. The company plans to add a record 74 new stations to its retail network by year-end, more than doubling its annual average of 30 new stations. We expect the company to close financial year ending Dec 31, 2012 with 1,042 stations.
Petronas Dagangan's retail market share stands at 31%. Its hard-hitting growth strategy is aimed at taking over Malaysia's retail leadership from Shell, which has 35% of the market measured by sales volume. Petronas Dagangan also trails Shell in the lubricant market but beats the competition in liquefied petroleum gas and commercial. It targets wresting the lubricant market top spot from Shell in four years' time.
Stay invested as Petronas Dagangan offers both growth and dividends. Planned retail expansion supports our forecast of new net profit highs during 2012 to 2014 and a three-year earnings per share compound annual growth rate of 17.2%.
A 50% dividend policy with quarterly payments adds to the appeal.
10 years business cycle for mobile phones - iPhone 5
In the early years, it was Motorola.
Nokia dominated the market for the subsequent 10 years.
Then RIM dominated for 10 years with the Blackberry phone.
The last 5 years, Apple dominates with its iPhones.
This is the business cycle of the mobile phone. The competition is stiff. Competitors introduce new phones very quickly to capture market share. Each new phone that dominates seem to have a life cycle of about 10 years.
Nokia dominated the market for the subsequent 10 years.
Then RIM dominated for 10 years with the Blackberry phone.
The last 5 years, Apple dominates with its iPhones.
This is the business cycle of the mobile phone. The competition is stiff. Competitors introduce new phones very quickly to capture market share. Each new phone that dominates seem to have a life cycle of about 10 years.
Wednesday 12 September 2012
Mining Stocks Explained - Silver and Gold
The number the directors don't want you to find
FCF (Free Cash Flow)
You can use this FCF in the following manners, by comparing it with the EPS, DPS and Market Price per share:
1. Compare FCF/share with EPS
e.g. FCF/share divided by EPS = 80%.
2. Divide FCF/share by the DPS (Dividend per share)
e.g. FCF/share divided by DPS = 1.6x
This looks at the ability of the company to distribute dividends by looking at its free cash flow.
3. FCF yield.
e.g. FCF/share divided by Market share price/share = 5.3%.
Where the FCF yield is high, the investors should be attracted to the stock.
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