Stocks for the Long Term

[BlueWolf]

Which symbol is that, Antioch? Is it VIV?

[antioch6]

I want to bring up another Brazilian company. The name is Telefonica Brasil and they provide telecommunication services in Brazil. From FinViz:

Telefonica Brasil S.A. provides mobile and fixed line telecommunications services to residential and corporate customers in Brazil. Its fixed line services portfolio includes local, domestic long-distance, and international long-distance calls; and mobile portfolio comprises voice and broadband Internet access through 3G and 4G, as well as mobile value-added services and wireless roaming services. The company also offers data services, including broadband and mobile data services. In addition, it provides pay TV services through direct to home satellite technology, IPTV, and cable, as well as pay-per-view and video on demand services; network services, such as rental of facilities; other services comprising Internet access, private network connectivity, computer equipment leasing, extended service, detects, voice mail and cellular blocker, and others; wholesale services, including interconnection services to users of other network providers; and digital services in the field of financial services, machine-to-machine operations, e-health solutions, security, education, insurance, entertainment, and mobile advertising. Further, the company offers multimedia communication services, which include audio, data, voice and other sounds, images, texts, and other information, as well as sells devices, such as handsets, smartphones, broadband USB modems, and devices. Additionally, it provides telecommunications solutions and IT support to various industries, such as retail, manufacturing, services, financial institutions, government, etc. Telefonica Brasil S.A. offers its solutions through its stores, dealers, retail and distribution channels, and door-to-door sales. The company was formerly known as Telecomunicacoes de Sao Paulo S.A. TELESP and changed its name to Telefonica Brasil S.A. in October 2011. The company was incorporated in 1998 and is headquartered in Sao Paulo, Brazil. Telefonica Brasil S.A. is a subsidiary of SP Telecomunicacoes Participacoes Ltda.

This company has steady earnings, a reasonable P/E valuation, and a high dividend. Brazilian stocks are now in favor and outperforming U.S. markets. The Real has gone steady between 0.25 USD and 0.27 USD since October. Previously, it fell from the high 0.30s to lows of 0.2376 USD in 2018.

Earnings have been steady the past five years with one flat year last year in 2018. We should expect at least fifty billion Brazilian real in sales for the 2019 year, compared with 54.45 Billion, 57.89 Billion, and 59.26 Billion in 2015, 2016, and 2017. 2018 hasn't finished reporting. For the last four quarters combined, sales were 54.33 Billion.

Net incomes were 3.42 Billion real, 4.02 Billion, and 4.60 Billion for 2015, 2016, and 2017. The last four quarters show combined net income of 8.93 Billion Real. I'm not sure how net incomes can be higher without more sales revenue. From their third quarter conference call, the CEO states the company added "almost 1 million new additions in postpaid in the quarter," assuming it is postpaid telephone lines, "already representing 53% of our mobile customer base." The company is a little leveraged. I see 5.52 Billion Brazilian real of short term and long term debt (mostly long term) on their balance sheet, compared to 3.71 Billion real in cash and cash equivalents.

On further investigation, I found the company won a federal court ruling on taxes being received in the form of tax credits going forward amounting to 3.8 Billion real in the second quarter, and 2.4 Billion in the third quarter.

"Moving to Slide 14. Let me give you more details regarding the final judgment in the Supreme Court of Justice, which impacted positively our results in the second and third quarters of 2018. In March 2017, the Federal Supreme Court decided that ICMS, which is a state tax, must be deducted from the basis of calculation of PIS and COFINS contribution. Since last year, the company adopted the new methodology according to this decision. Higher -- we had processes requiring the amount paid in the last few years by some of our incorporated companies.
In the second quarter of 2018, the process related to Telesp operations for the amount paid between 2003 and 2014 had its final decision positively impacting EBITDA by BRL2 billion and financial results by BRL1.8 billion, amounting to a total of BRL3.8 billion in the quarter. In addition, in the third quarter of 2018, we had the final decision this time for Vivo related to the amount paid between 2004 and 2013, positively impacting the EBITDA by BRL1.4 billion and financial results by BRL1 billion, totaling BRL2.4 billion in the quarter.
Summing up, the positive impact on EBITDA in the first nine months of the year amounted to BRL3.4 billion while the financial results reached BRL2.8 billion, representing a total impact of BRL6.2 billion. And unlike the other examples of companies that have a reversal of provisions similar legal matters, our case generated tax credits that will turn into cash as time goes by, boosting our cash generation and creating a potential for unprecedented shareholder remuneration in the future. Finally, there are other processes still waiting for a final judgment which could generate extra gains in the future, which are -- total -- that would have a total impact of 10% of the market capital."

So there is some chance for future tax credits boosting earnings. On a normal adjusted basis, they earned 1.24 Billion real in cashflow in the second quarter and 862 million in the third quarter (the quarter impacted by 53% net increase of postpaid lines.) This is compared to their cashflows of 765 million real and 1.51 billion real the preceding two quarters, or 1.55 billion real and 1.50 real in the same quarters of 2017. Overall this shows a decreased cashflow in the third quarter because of competition in prepaid lines and IPTV (or else cashflows would be higher). They had to offer lower prices on contracts starting in 2017 and going forward. We can expect cashflows of 750 million real per quarter being conservative going forward. This sums 3 Billion real a year, or 810 million USD( U.S. Dollars.) So 810 million dollars steadily a year out of a current asking price of 21.7841 Billion USD (according to Morningstar) gives us a cash yield of 3.718% before the dividend.

The dividend was exceptionally high last year at 8%. In normal times and at current prices, Telefonica has a dividend yield of approximately and conservatively 3.63%. This gives us a total yield of 7% per year, compared to roughly 2.5% from U.S. treasury bills.

Considering the company has relatively low debt, steady earnings, and a current P/E ratio of 12-15 leaning towards the lower side, it looks like an OKAY buy at the current share price of 12.90 or lower (lower the better; higher yield). Also, the stock is outperforming major market indices for the past month, three months, and six months. The Brazilian market, represented by the etf EWZ here in the states, found a bottom in September. It trended higher in October while U.S. markets fell, and is now gaining momentum again during the past two weeks. The symbol is VIV and I am looking for a 5%-10% pullback to buy. Next I will compare it to another Brazilian stock.

[BlueWolf]

ANET

People are always looking for the next something: The next Microsoft, the next Apple, the next Amazon. Well I think Arista Networks is the next Cisco. They went public in 2015, and then in late 2016 they began a breakout that saw them double their revenue, triple their EPS, and quadruple their market capitalization. So what makes them so special? Well, they provide networking solutions (software, switching, and router products) that are targeted to high-performance applications such as data centers, enterprises, service providers, and campuses. They excel in this area and more and more companies are trusting ANET with their networking infrastructure. Basically it’s about volume, and nobody handles network volume better than ANET. In fact, the company was founded by a former Cisco executive to address this very specific opportunity, i.e., high volume, high throughput data centers. There is a real opportunity here. Transformation of data centers to handle high volume network traffic was $6.45B market in 2018. By 2023, it is expected to grow to $12B with a CAGR of 13.2%. The good news is that ANET is positioned to snag a healthy portion of that growth, adding to their already healthy annual revenue of $2B+ ( est. FY 2018 ).

AAPL, AAXN, AMZN, ANET, AYX, DATA, DOCU, EDIT, ISRG, LYV, MTCH, MA, MDB, OKTA, SQ, TDOC, TEAM, TTD, TWLO, V

Bold=Rationale Available
Underline=I own it

[BlueWolf]

AMZN

Here’s my write up for Amazon. They’re big. They’re good. They’re getting into new markets every year and they’re still growing by leaps and bounds. ‘Nuff said. I’m buying and holding. 😬

AAPL, AAXN, AMZN, ANET, AYX, DATA, DOCU, EDIT, ISRG, LYV, MTCH, MA, MDB, OKTA, SQ, TDOC, TEAM, TTD, TWLO, V

Bold=Rationale Available
Underline=I own it

[BlueWolf]

AAXN

Axon Enterprise Inc is in the development, manufacture, and sale of Conducted Electric Weapons designed for use by law enforcement, corrections, military forces, private security personnel and by private individuals for personal defense. It is also engaged in developing, manufacturing and selling of connected wearable on-officer cameras as well as developing and selling cloud-based digital evidence management software. The electric weapons, e.g. Tasers, part of AAXN’s business is mature but still growing enough on its own to sustain the business. The x-factor, however, is in the body-mounted camera market. This market, which was estimated a $260M in 2017 is predicted to grow to $3.4B with a CAGR of 38% by 2025. Whoa! That’s some pretty phenomenal growth. How will AAXN be able to take advantage of this? Well, a significant portion of this growth will be in the security segment, a segment that AAXN already dominates with other products. The key here is the presence AAXN has already developed in law enforcement. They have relationships with just about every major law enforcement organization in the US and a great many in Europe and Asia as well. Axon should be able to leverage this unique position to gain a significant degree of penetration in the emerging body camera market. Eventually, body cameras will become as ubiquitous in the law enforcement community as the Taser, and hopefully AAXN will be the dominant supplier. That’s my recipe for a winner: A big and growing market and a company with the experience, savvy, and IP to take advantage.

My current List:
AAPL, AAXN, AMZN, ANET, AYX, DATA, DOCU, EDIT, ISRG, LYV, MTCH, MA, MDB, OKTA, SQ, TDOC, TEAM, TTD, TWLO, V

Bold=Write Up Available
Underline=I own it

[BlueWolf]

Today I added positions in ISRG, DOCU, SQ. I am waiting for a pullback in TEAM and TWLO before buying. I am not sure I will buy V because I already have a position in MA and I would like to stay diversified. My updated long term candidate list is as follows:

AAPL, AAXN, AMZN, ANET, AYX, DATA, DOCU, EDIT, ISRG, LYV, MTCH, MA, MDB, OKTA, SQ, TDOC, TEAM, TTD, TWLO, V

[BlueWolf]

Here’s my rationale for ISRG:

Why do I like ISRG for a long term investment? Three words: Minimally Invasive Surgery (MIS). It’s the wave of the future in surgery. It opens up otherwise complicated procedures to more surgeons and produces more predictable outcomes, It also results in reduced blood loss and shortened hospital stays which translates into cost savings for both the patient and the care giver. I myself benefited from MIS when I had discectomy to repair a ruptured disk. I walked out after only a single overnight stay and my injury, which was so bad when I came in that I could barely walk, was 100% corrected.

ISRG was one of the earliest players in this field with the the da Vinci family of surgical robots. Their growth has been phenomenal and they now have an installed base of approximately 5,000 systems. Why do I believe there is still a growth story here? Because last quarter, their growth was a phenomenal 20%, year over year with a mature product. Listen to this breathy claim from Morningstar: “Healthy system and instrument pricing reflects the firm's monopoly status in its niche, allowing Intuitive Surgical to achieve profitability rarely enjoyed by medical equipment makers, with adjusted operating margins in the mid-30s. In fact, gross margins on Intuitive's systems are comparable to its instruments (consumable component) profitability.”

The long term picture is even brighter. The da Vinci system targets certain types of surgical procedures including prostate surgery and hernia repair. There are numerous other surgical areas that remain largely unpenetrated, and ISRG, with their existing IP, is in a great position to introduce products into these areas. Listen to these numbers: The global minimally invasive surgical systems market will grow to somewhere between $20B to $40B by 2025 with a CAGR of 10.9% from 2018 to 2025. If ISRG’s penetration of these new opportunities matches their penetration of existing MIS areas, this is going to translate into substantial growth. ISRG is on target to generate over $3B in revenue for FY 2018. Imagine grabbing 10% of that emerging market. I can easily see ISRG’s revenue and profitability doubling over the next five years. That’s why I like this stock.

My current candidate list:
AAPL, AAXN, AMZN, ANET, AYX, DATA, DOCU, EDIT, ISRG, LYV, MTCH, MA, MDB, OKTA, SQ, TDOC, TEAM, TTD, TWLO, V

Note: Stocks in Bold are stocks for which I have provided a rationale. Underlined stocks are stocks that I currently own including those that I recently purchased.

[BlueWolf]

I should add MA and V to the candidate list. One or the other is a good idea for a diversified portfolio. Disclosure: I currently have a position in MA. That makes the current list:

AAPL, AAXN, AMZN, ANET, AYX, DATA, DOCU, EDIT, ISRG, LYV, MTCH, MA, MDB, OKTA, SQ, TDOC, TEAM, TTD, TWLO, V

[BlueWolf]

Crazy week, especially Friday. First, I want to add a few stocks to my list:

AMZN (I add this as a sort of “of course”), DOCU, LYV, TWLO

I thought about adding some Chinese stocks to the list, but they were abysmal performers last year (I had to cut a bad investment in HUYA loose) and I don’t think the time is right just yet. The additions make my overall list as follows:

AAPL, AAXN, AMZN, ANET, AYX, DATA, DOCU, EDIT, ISRG, LYV, MTCH, MDB, OKTA, SQ, TDOC, TEAM, TTD, TWLO

Stocks for which I have provided a (brief) write up are in bold italics. I will provide write ups for the others as time permits.

On Friday, I bought/added 2.5% positions (this is my standard allocation for a long term investment, i.e. 1/40 of my portfolio) in the following stocks:
AAPL, AAXN, AYX, EDIT, LYV, MDB, MTCH, TDOC, TTD.

I already owned shares of the following from the list:
AAPL, AMZN, ANET, DATA, MDB, OKTA

I broke discipline a little doing this, and I hope I don’t regret it, but the market action last week coupled with the jobs numbers on Friday, overall indications that the economy is still going strong, and the resumption of trade talks with China emboldened me. I am nervous about this because I have said on several occasions that I prefer buying when the market is on the way up or in a sideways consolidation, but this time I let my intuition get the better of me a little. Intuition, however, is often worthless, so we’ll just have to see. ** Grinding teeth **

[BlueWolf]

What a wild day! It was a great day for scalping long, but I also started nibbling at some long term positions. Technically, the overall market trend hasn’t changed so I’m taking a risk, but today’s action by the bulls was hard to ignore. It was the single biggest gain in the markets on a jobs report day since 2002. I’ve been crazy busy so I will post more details this weekend.

[BlueWolf]

I had previously posted a list of candidates on another thread, but since we are moving this discussion here, I will repost, including an update, here. Here’s the list so far:

AAPL, AAXN, ANET, AYX, DATA, EDIT, ISRG, MTCH, MDB, OKTA, SQ, TDOC, TEAM, TTD

I have more to add, but before I do I will try and provide a little discussion on each of these. Let me start with AAPL and MTCH.

AAPL
Yes, I know everybody is saying that iphone and Mac sales have peaked which translates into weak growth for AAPL. What is being overlooked are the new markets APPL is about to penetrate. The biggest of this is augmented reality. Statistics reported that this market was about $14.1B in 2017. They also estimated that this market will grow to $219B by 2022. There are other estimates that vary anywhere between $60B to $500B by 2022/2023. Anyway you cut it, the point is that there is an incredible growth opportunity here. In fact, one report predicted that the Compound Annual Growth Rate (CAGR) of the AR/VR industry is expected to be in the range of 40%-80% through 2023. Just as a comparison, the CAGR for smart phones is predicted to be 7.9% through 2024. That’s a pretty healthy growth rate, and AAPL will be riding the wave of that growth, but when you add in the AR market, things start looking really spectacular. How do we know that AAPL is going to enter the AR market. Well, aside from introducing the ARKit development platform last year, there are also numerous AAPL patents related to AR capable hardware. OK, this is all starting to sound pretty good, but wait, there’s more. AAPL is apparently looking to get into the car business. According to Bloomberg, AAPL is currently developing an electric car called “Titan” and has 5,000 employees dedicated to the project. In early 2017, Apple was also granted a permit from the California DMV to test self-driving vehicles on public roads. That sounds like a pretty serious commitment to me. What’s the timetable? Well, that has everyone wondering, but the best guess by industry pundits is that the Apple car will probably launch sometime between 2023 and 2025. When it does launch, AAPL will be adding automobile sales to the bottom line. This sounds like a growth story to me and growth is what powers share price, so I am bullish on AAPL for the long term.

MTCH
I’ll start by cutting and pasting from my discussion on the other thread ...

I added the current Mr. Market pick, MTCH, to my list of long term buy candidates. After digging a little, I like the long term prospects of MTCH. Here’s some information I uncovered: “In 2017, online dating became the most common way for newlyweds to meet one another. The Knot surveyed more than 14,000 engaged or recently married individuals and reported that 19% of brides said they met their spouses online. This is a significant increase from the 5% of American couples who said they met online in a 2015 Pew Research poll. According to the Knot, meeting via dating sites has now surpassed more traditionally popular venues, including through friends (17%), during college (15%), and at work (12%).” The growth potential here is obvious and Match is the dominant player in this space by far. In particular, there are real growth opportunities for Match in Asia and South America with one analysis predicting 7% annual growth in the industry through 2020. Morningstar was somewhat bullish on the stock and in their analysis said “Our projections represent a five-year (2018-2022) compound annual growth rate of 17% for revenue and a five-year average operating margin of 37%.” Not bad. Not bad at all. It certainly warrants being added to my list of candidates.

More on the rest to come.

[Louetta]

I would recommend four plays here for long-term, two of which are functionally equivalent.

First is STOR, a Buffett favorite, who essentially buy and rent properties in strip malls, as opposed to large store anchored malls, concentrating on businesses which by their nature can't be online-ized out of business. Examples would be barber shops, pool halls, nail (fingernail I point out, since most people here are men) shops, etc. Pays a 4.5% dividend, has recently pulled back under 28 after making new highs up to the 31s consistently since after 10/1.

JDD, Nuveen Diversified Dividend and Income, which invests in dividend-paying common stocks including those of companies that derive revenues from residential real estate and debt securities from governments. It is up to 33% leveraged. Currently at a nine year low paying 10% at the current price. Rated 5 stars by Morningstar for 10 years, 4 stars for 5 years and 3 stars for 3 years.

PFF and PGX. Both are ETFs which invest primarily in preferred shares. Each has recently bounced off a 5 year low as they became less attractive as rates generally rose and now rates seem maybe to have approached near term highs if the Fed backs off. Each pays almost 6%. They may at this level offer hope for capital gains (if one sells). I've bought both just to provide some safety against the remote possibility something happens internally to either (e.g. SEC complaints). I have also held most of my preferreds which are underwater for the same reasons these are and will sell the preferreds gradually as (if) I can get my money back. Might take a while.

(Also reported elsewhere have bought AMZN, MSFT, BST, AAPL.)

[antioch6]

Oh I sold my SSRM yesterday for a 16% gain. 400 bucks. It is speculative and has been going up big while the silver price hasn't. (Might be getting ahead of itself).

[antioch6]

Update/Watchlist

Taking a quick look at my longer term trade ideas thread. Looks like the timing was perfect for the solar companies for a one year trade. VALE is still alive and near the same price after swinging lower for a few years. I saw it down near $5 at some point before trading back up around $15. I'd still be watching FSLR and CSIQ if the solars ever go through another downturn. After six years, I'm much more attracted to my mechanical stock screen versus finding longer term trends and stories from scratch.

On the gold and silver side of things, I like SSRM(Formerly SSRI). The stock has held up well relatively to its group (GDX,GDXJ.SIL). I also like CEF which holds physical gold and silver in Canada I believe. I own SSRM from around $6 and $9 and will buy on any significant declines. The gold and silver stocks are always a bit unpredictable since their earnings aren't steady. CEF is the conservative choice and I might be buying some in the next few weeks, though it is a much slower trade than SSRM. I might be waiting on this one for another six or ten years for 20 or 30 maybe even 50%.

I started my long term ideas with long term meaning a year or longer. For some reason a year makes sense to me as a minimum hold time for stocks because of taxes and giving enough time for something fundamental yet healthy to occur. I don't sense much value in this long winded post... oh well.

[riverbabe]

NEON up 9.16% today AM. Here's another article. Looking good! http://seekingalpha.com/article/1674...readmore&app=1

Well that shot up to 12+% for a quick 1.1K profit. Will get in again...