Sunday, September 18, 2011

NFLX headed down - how much?

Recent few weeks have been disastrous for NFLX. With the peak of around $300 , the stock is down almost 50% in 2- 3 months. Competition and recent pricing of its DVD rental are two main reasons in additions to the recent pull back in the market.

I had previously written about NFLX when it was heading towards in my NFLX technical analysis blog I had written that the stock was in overbought range but never saw such a downturn.

Here is a chart from MarketClub with the fibonacci analysis of the stock since its major bull run since January 2010. Question is how low can this stock go?

Fibonacci suggests around $140 range. What do you think?

Disclosure: I am long NFLX.

Wednesday, September 14, 2011

Increasing gas mileage by hypermiling

One of the key aspects of investing is also saving. Just recently I was driving my car when I was listening to this show on NPR. They were talking about something called as hypermiling. Never knew an official word for the term that some of us already use.
Back in 2008 when gas prices were at a rise people used Oil ETFs to hedge against increasing gas prices. If you buy Oil ETFs and gas prices move up so does theoretically the price of the Oil ETF. If gas prices take a dive you save money at the pump.
Lately gas prices are not in sync with the crude oil futures graph on gas buddy.
Of course you can go all green and get a electric vehicle. Can you do more with your car running on gasoline?
Yes here are couple of takeaways.

1. Brake less. Slow down from gas when approaching a red light. Caution: Look in the rear view mirror to see if you have someone speeding or bumping against you. Might be worth speeding up to save an extra buck or two. Also check if you can time traffic lights, you might need to accelerate in order to meet the next light. I usually pay attention to the sidewalk blinkers indicating that light will soon be yellow.

2. Start slowly: Dont accelerate and make that engine of your car work hard. Accelerate in stages with the tachometer needle not going past say "2".

Ofcourse maintain your car. Ensure that servicing is regular.
For more check out this link on marketplace.
Beware you might get some strange looks from people behind you and trying to overtake.
You might need to build up on your patience.
Need some practice to get used to the hypermiling rules.
Last but not the least check if you saved anything at the pump :).

Do you hypermile?

Sunday, August 28, 2011

Weekend reads and comments

I focus this article on some new terms I came across and an article I stumbled into.

1. Warren Buffett buys some BOA shares: As everyone knows . Warren Buffet bought some BOA shares and that lifted the spirits of BOA investors. While reading on, I also noticed that Warren Buffet bought some preferred shares with a dividend. Since I have been reading about dividend investing these days I looked more into preferred shares. These are a hybrid between stocks and bonds with the caveat of no voting rights including and less chance of appreciation.Investopedia and Wiki have some information on shares. Has any of the dividend investors invested in preferred shares?

2. Gold prices: Although GLD more or less accurately tracks the price of Gold I was looking at different gold miners that track the gold. Taxes for GLD are cumbersome and hence the need to look for alternatives.
I came across a seekingalpha article.
I would like to add RGLD to the mix . As Yahoo finance puts it, Royal Gold together with its subsidiaries, acquires and operates precious metals royalties. RGLD has been closely aligned to GLD than AUY simply based on end price results for various terms. RGLD has a higher P/E ratio: higher 50s. Market CAP is around $4B and average volume is less than a million.

Disclosure: I do not have any positions in RGLD as I write this article.

Wednesday, July 20, 2011

Dividend investing during bull markets

Continuing on my series of posts around dividend investing here is another one.

With the recent slowdown in economy starting 2008, interest rates started falling short term borrowing interest rates have been near the 0% mark. Average certificates of deposit rates in the US have slumped, with current 1 year CD yielding around 0.9% average annually (according to . During these times investors look for more return to their money and start investing in dividend yielding stocks. Capital /principal and steady dividend yielding is what investors look for during this time.

The purpose of this post is to check if dividend investing make sense when the interest rates are higher , the economy is doing well and CDs yield more.

Let us start with an example of the recent past. According to this source for this historical CD data Between 2003 to 2007 average one year CDs yielded anywhere between 2.0 to 5.4% annually respectively falling to 3.9%, the average being 4.0% . A CD return is one of the safest investments where the principal is guaranteed not to change.

During the same time let see the yield if a hypothetical investor had put money in the total stock market fund like VTI.

VTI started 2003 with a share price around 42 and finished around the same price by the end of 2008. During this time it gave dividends of 69 c in 2003 to a max of $1.15.
The yield on the above is anywhere from 1.6% to little over 3% and surely not beating the yield of CD. The capital / principal increase was almost negligible for this period.

The reason I selected VTI was to select one of the most stable or non risky investments in the stock market compared to the CD. I did not bring dividend re-investing or compounding interest in my calculations.Yes, one could argue that they could beat the market with another selection of stocks.

I did not compare selection during earlier bull markets however.

What are your thoughts? Are there more ways of looking at these scenarios.

Wednesday, July 13, 2011

Netflix: Poised to rise higher? Technical analysis

Over the last few days, months and probably years Netflix stock has been touching new grounds and has been on an uptrend. When the stock broke the $200 barrier there were talks of it being overbought. Let us look at some quick technical facts for NFLX.

As you can see from the chart below the stock trades in a pattern from being oversold to overbought. MACD looks to be well in the high range and has been higher. I am beginning to think that the stock is in overbought range and we will see a pullback to the late 200s.


Moreover the stock trades or tries to touch is 200 day MA and seems to rise above it or go marginally below and then rebound.
Recently NFLX has been sharing some news about latin America expansion followed by change in pricing.

Is NFLX done with its run?

Disclosure: I am long NFLX

Friday, July 8, 2011

Dividends: Dividend reinvesting calculator

I have seen some investment gurus always mention how good a dividend re-investment strategy could be. Recently I have been following some dividend stock blogs and am a dividend investor myself.

Always interested in mathematics I was curious how the numbers add up and what the compound rate of return would be under different scenarios. Let us start with a simple example:
Investment capital : $1000
Stock Price: $1
Yield : 5%
Dividend growth rate: 5%
Time span: 5 years.

I used the calculator here.

Total value of this portfolio without dividend reinvested would be $1580.88 and with dividend reinvested would be around $1,648.38. The net yield is 9.51 vs 10.51 respectively.

Lets play around with some numbers. Increasing the timespan to 20 years which is typically realistic with dividend or long term investors we can see the difference: 7.4% vs 10.5%.

If the stock price remains the same for 20 years with no variation one can get 5.16 vs 8.35 % for reinvested dividends.

Now if the stock price is 10% down annually in a timespan of 5 years then the ROI for the reinvested dividends is -3.43 which is lesser than -3.16. In my example if I set the stock price move to 5% down annually for 10 years then the dividend reinvestment scheme still proves better.

Overall I feel like a dividend investor should have an exit strategy just like any other investor. If the fundamentals for the company look good then reinvesting in a downtrend might be risky but worth it.

Before I forget, there is a definite tax advantage to these reinvested dividends which is a separate topic itself. But the flip side is that calculating cost basis for re-invested dividends could be time consuming.

What is your re-investment strategy? From most of the examples above it seems that re-investment does make sense unless ofcourse you want free cash flow.

Monday, March 21, 2011

To go , dine in or take out?

Waiting in the line for Olive garden I witnessed atleast ten groups of people marching outside, all of whom had a take out bag with them.

The financial part of me started thinking about the comparative costs of take-outs, dine-in or the to-gos.

A typical dinner menu at a restaurant like Olive garden varies from around $11-$12 to around $20 . This might not include appetizers based on what you chose. For an average price of $15 with taxes and tip we round up around $36 for a dinner for two.

If you take do take left overs home and use it as next days lunch it counts for $36 /4 which on an average is $9 per person which is not that bad. However if your intention is to cover next day's meal with the leftovers then this is not a bad choice unless ofcourse you are too hungry or your whole intention was to spend time together and did not care about take-out.

On the other hand if you go for a buffett at a restaurant at night the pitfall is you pay the price pretty much for that meal and cannot take-out. That being said specials like the Sweet Tomatoes deals for $8.79 dinner specials still end up around the $9-10 average per meal.

Can take-outs be cheaper? Answer is it depends. If you already have some food and want something more substantial to make a meal,say like left over curry, combind with the fact that you want to watch a favourite movie at home then yes it makes sense to take out. Moneywise you might save tip if you are the kind who does not tip take outs.

This is ofcourse comparing restaurants of reasonably similar standards and not comparing fast-food or subway type of food outlets.

Ofcourse at the end it depends where you are comfortable and would like to eat.