Alibaba, Facebook, and Twitter: What You Should Own

Alibaba, Facebook, and Twitter: What You Should Own

Tech companies are now the de facto leaders of the stock market. Names like Apple and Google are worth many billions of dollars and dominate headlines daily with new products and earnings reports.  Meanwhile, Wall Street hangs on to every snippet of information in its never ending search for an edge. Other investors are looking for the next up-and-coming tech giant and the flood of internet company IPOs are feeding into those desires.The dorm-room dreams of tech-savvy college students have become legitimate businesses. Since 2011, LinkedIn, Facebook, and Twitter have gone from social networking sites to multi-billion dollar companies that are changing the world.The current big thing investors have their eye on: Alibaba.The Chinese marketplace has been fertile soil for tech company growth. Since the introduction of Baidu (BIDU), a Chinese internet search engine similar to Google (GOOG), investors have kept a close watch on Asian tech companies. Alibaba’s IPO has many investors looking back at Baidu and other internet companies to see what history has taught us and what we can take away from this next offering.A Closer Look At Internet CompaniesBefore we can analyze what Alibaba is and what it might mean for investors, it might help to get a sense of what other internet companies have done to help us get a better picture of what we can expect. Four companies, three of which have begun trading in just the last three years, are close examples to Alibaba that we can find to compare to: Baidu (BIDU), LinkedIn (LNKD), Facebook (FB), and Twitter (TWTR).Baidu (BIDU)This Chinese web services company entered the U.S. market in early August...
Navigating the Energy Sector When Oil Prices Drop

Navigating the Energy Sector When Oil Prices Drop

Oil. Black gold. It’s the lifeblood of the global economy. As essential as sunlight is to plants, so too is the world dependent upon oil to function.Around 80% of the world’s total energy usage stems from fossil fuels like oil. As it stands today, without oil, the ability to power a city or transport goods becomes impossible.For investors, a product like oil has built in demand which helps to prop up prices making it the most heavily traded commodity in the market. Take a look at Exxon Mobile’s (XOM) chart over the past 10 years to get a sense of how valuable oil really is. Its price more than doubled over that time, providing investors with plenty of profits over the years. Figure in its dividend yield and an investor would’ve made over 2 ½ times their original investment.As such, the energy sector has been dominated by oil companies and offshore drillers. Other energy plays like solar, coal, and nuclear have had periods of dominance, but none have oil’s longevity. The reason is simple – the cost per kilowatt hour. In other words, it all comes down to the cost of generating electricity.At $100 a barrel, the cost of oil per kilowatt hour is roughly $0.06 while solar is about $0.38. However, government subsidies and regulation has brought alternative energy sources like solar closer in alignment with oil. Even still, solar is priced between $0.12 and $0.30 per kilowatt hour making it inferior from a cost-efficiency perspective to oil.Rising oil prices and a continued reduction in cost to generate electricity from alternative sources has led to a revolution in...
Takeover Targets: What To Look For

Takeover Targets: What To Look For

Most people are familiar with the phrase, “There ain’t no such thing as a free lunch.” Basically it means you can’t get something from nothing.Investors may have a basis for refuting that adage though. Enter the corporate takeover.A takeover is when one company purchases, or takes over, another company, usually after extensive negotiations and financing. The acquiring company becomes responsible for the target company’s debt obligations, holdings, and assets. In many cases, this transaction results in a significant price appreciation for the company that’s being taken over making it one of the most sought after events an investor can hope to be a part of.Even the possibility of a takeover can have drastic effects on a stock’s price. If a company is interested in another, they may tender an offer to buy the other out at a specific price, often higher than that company’s current stock price. The rumor is enough to lift a stock’s price by ten, twenty, thirty percent or more overnight.You can see why such an event is worth chasing after. Of course, like the mythological unicorn, actually owning a stock when it becomes a takeover target is something you almost never get to actually see.Even so, there are ways to spot takeover targets before they receive an offer. A word of warning – a stock should never be bought solely for the purpose of being taken over. It should be bought for solid fundamental reasons with the possibility of a takeover as an added bonus at most.The Key Elements Of A Takeover TargetIdentifying a takeover target isn’t as difficult as you might think. There are...
Real Estate Investment Trust (REIT) Resurgence

Real Estate Investment Trust (REIT) Resurgence

REITs (Real Estate Investment Trusts) have a reputation for being complicated, unwieldy asset classes. It’s underserved – they’re actually one of the simpler companies to invest in due to their business model.Let’s define what a REIT is to better understand how it works. It is a company that owns a portfolio of real estate properties and receives income in the form of rent and capital appreciation on the property. A simple model, but highly effective. Furthermore, REIT’s must pass on at least 90% of their profits to shareholders thanks to a specific tax structure that allows them to bypass income taxation. This enables them to pay higher-than-average dividends which often catches the eye of income seeking investors.Perhaps the confusion regarding what REITs are and the associated real estate crisis of 2008 explains the difficulty investors have had in the sector over the past few years. A quick peek at the Vanguard REIT Index ETF (VNQ) 2-year performance looks more like the Superman roller coaster ride at Six Flags than a stock chart.The sector’s unusual volatility can clearly be seen. It’s rate of return is roughly 15% over a two year time period, but has experienced large swings in value during that time. In May of 2013, the stock price was just over $78; in January of this year, the stock had dropped down to less than $65. Now it looks as if the price is climbing again with a current value of $77.13.Traditionally, REIT’s have been considered an investment with less-than-average volatility. However, the mortgage crisis and introduction of ETFs changed that paradigm and temporarily forced volatility levels to...
George Soros is Betting Against the Market and Why Investors Should Take Notice

George Soros is Betting Against the Market and Why Investors Should Take Notice

For institutional investors, keeping secrets for long is an impossible task. The Securities and Exchange Commission requires these entities to file a 13F, a quarterly filing required of investment managers of assets of $100 million or more, which contains information regarding the asset manager’s investment style and potentially even a list of equities owned.It’s a good gauge of what an investment company did in the last quarter. Taking a look back at prior quarters can paint a fairly accurate picture of what direction they’re assuming the market will take and how they’re positioning themselves to prepare – long, short, equities, derivatives, and so on.When an investor like George Soros suddenly increases a bearish position by 605% in a quarter, it raises more than a few eyebrows.For the quarter ending on June 30th, Soros Fund Management reported a large investment in puts, options that give an investor the right, but not the obligation, to sell a security at a given price, for an ETF that tracks the S&P 500.Breaking Down Soros’ PositionNormally, a large investment firm will place hedges on positions, whether long or short, in order to mitigate risk. However, Soros increased his put position from 1.6 million to 11.29 million shares. That’s the equivalent of going from $299 million to $2.2 billion in notional value.Skeptical investors dismiss any worries about an imminent market collapse due to the fact the Soros added to a few holdings like Facebook (FB) and Apple (AAPL) as well as added 182 brand new stocks. They believe his short position is simply a hedge or part of a longer term trading strategy.I’m not sure...