Nokia Corporation (NOK): Connecting the Next Billion to the Internet

REDMOND, Washington and ESPOO, Finland – Microsoft Corporation and Nokia Corporation today announced that the Boards of Directors for both companies have decided to enter into a transaction whereby Microsoft will purchase substantially all of Nokia’s Devices & Services business, license Nokia’s patents, and license and use Nokia’s mapping services. — Nokia Official Press Release September 3, 2013

From its founding in 1871 Nokia has twice undergone a major business segment divestiture that has resulted in a new and improved company. Once in 1967 when it shed its industrial companies to focus exclusively on mobile phones and now in 2013 when it sold its mobile phones unit (transaction complete 1st quarter 2014) to focus exclusively on mobile telecom networks and location-based services business.

Since 2008 it has become ever more clear to the layman that Nokia must take some drastic action to turn around falling profit margins and net losses. There has been plenty of chatter about the potential sale of Nokia on the blogs for the last several years. What I think 95% of people missed is the fact that Nokia has been planning for this event for years and fully intended to transform into a global mobile Internet powerhouse, supplying both the mobility networks and software solutions to the end user.

Nokia followed the wisdom of Sun Tzu when the board approved the selection of Stephen Elop as CEO and the acceptance of Windows operating system. Chapter 11 of Art of War says “On the ground of intersecting highways, join hands with your allies.” By joining hands with Microsoft the company secured not only the eventual sale of phones unit, flooding their coffers with cash, but guaranteed an alliance that will last far into the future. Is it the European company benefiting more from the alliance with Microsoft or the American from allying with Nokia? Time will tell as both companies now have a new stratagem to forge profits together from the emerging markets.

With the announcement that Microsoft will buy Nokia’s mobile phone division and license their patents for a hefty 5.44 billion, the stock has come back to life, rising +72% in half a month’s time. This is likely dumb money as the company’s two remaining units have been less profitable than the phones segment for a number of years. This little price gain is a sugar lollipop treat to reward the company for making a drastic move in the right direction. Once the high wears off, there is much serious work to be done analyzing the company’s direction into the future, albeit with a vastly improved supply of ammunition.

The fact is Nokia’s remaining businesses have reported losses since 2007. Nokia Siemens Networks has been unprofitable since 2007 and Location & Commerce has lost money since 2008. The recent per share price gain is most likely Wall Street salivating at all that cash adding to the balance sheet. The real test will come once that cash has been officially booked and questions begin to swirl about what the company will do with it.

To use an analogy from nature: the snake (Nokia) has shed its skin (mobile phones unit) and now the company can enjoy the next phase of its growth. Nokia sold their phones and rented their patents to Microsoft. Now they have the cash to build out their grand plan for the future.

What exactly is that plan?

Those who want to understand the future of Nokia must try to understand the future of the Internet in the developing markets. Because the company has as their stated goal “to connect the next billion to the internet.” Smart appliances in smart homes hook up to the smart grid in the West. Smart phones and devices hook up to Nokia’s mobile networks in the developing South and East. Nokia networks and location-based services to the rescue.

Nokia has been planning for this exact strategy since at least 2010. A company the caliber of Nokia does not hire on a CEO from Microsoft without knowing in advance that the phones unit will be sold to the software giant from Redmond eventually. Three years later it is done. A company like Nokia, with its long track record, enormous brand recognition and world-class connections to both boardroom and government lays plans years very carefully utilizing the best intelligence available. They fact they are invited to Bilderberg is also a confirmation of their connection to the highest levels of the status quo.

Beginning in 2011, Nokia went public with new strategy and operating structures. Location & Commerce (now termed HERE) consolidated and Networks forged ahead strongly with their sharp focus on developing global mobile broadband to power the intelligent Internet.

Location & Commerce. As a natural next step in Nokia’s services journey, Nokia announced in June 2011 its new Location & Commerce business, which was formed by combining NAVTEQ with Nokia’s social location services operations from Devices & Services. The Location & Commerce business develops a new class of integrated social location products and services for consumers, as well as platform and local commerce services for device manufacturers, application developers, Internet services providers, merchants and advertisers. — Nokia 2011 Annual Report, p.3


Nokia Siemens Networks. Some of the main events regarding Nokia Siemens Networks during 2011 include the completion of Nokia Siemens Networks’ acquisition of Motorola Solutions’ Networks assets, which strengthened Nokia Siemens Networks’ position in key regions, particularly North America and Japan, as well as with some of the world’s major service providers. Further, in November 2011, Nokia Siemens Networks announced its strategy to focus on mobile broadband and services and the launch of an extensive global restructuring program.
— Nokia 2011 Annual Report, p.3

In hindsight it is easy to see the company was preparing these two segments to eventually generate 100% of company revenue. This strategy was reiterated in the 2012 annual report:

STRATEGY AND RESTRUCTURING PROGRAM
In November 2011, Nokia Siemens Networks announced its strategy to focus on mobile broadband and services and the launch of an extensive global restructuring program. Nokia Siemens Networks continues to target to reduce its annualized operating expenses and production overheads, excluding special items and purchase price accounting related items, by more than EUR 1 billion by the end of 2013, compared to the end of 2011. While these savings are expected to come largely from organizational streamlining, it has also targeted areas such as real estate, information technology, product and service procurement costs, overall general and administrative expenses, and a significant reduction of suppliers in order to further lower costs and improve quality. During 2012, Nokia Siemens Networks recognized restructuring charges and other associated items of EUR 1.3 billion related to this restructuring program, resulting in cumulative charges of approximately EUR 1.3 billion [...]
— Nokia 2012 Annual Report, p.10

The final piece of Nokia’s new corporate identity before the divestiture of phones was completed with the purchase of Siemens’ stake in the Networks business, formerly a joint venture. This purchase was done at the last possible minute (less than a month) before the announcement of the deal with Microsoft. Good execution.

Espoo, Finland – Nokia has completed the acquisition of Siemens’ stake in Nokia Siemens Networks. The transaction was originally announced on July 1, 2013. In accordance with this transaction, the Siemens name is being phased out from Nokia Siemens Networks’ company name and branding. The new name and brand is Nokia Solutions and Networks, also referred to as NSN, which will be used also for financial reporting purposes. — Nokia Official Press Release August 7, 2013

Qui Bono? Nokia Networks.

The lions share of future Nokia revenues will come from the emerging markets. This is where the growth is. The very infrastructure has not yet been built in many of these countries. The following is from the 2012 annual report:

By year end 2012, Nokia had done 77 LTE deals with other deals reaching into the (soon to be) all-important emerging markets including Bharti Airtel in India; Telkomsel in Indonesia; KT in Korea; Singapore’s StarHub; Tele2 in Estonia, Latvia and Lithuania; Hrvatski Telekom in Croatia; T Mobile and Orange in Poland; Polkomtel in Poland; Si.mobil in Slovenia; COTA and Wimax Online in Spain; Zain KSA in Saudi Arabia; TOT in Thailand; Optus in Australia; Mobile TeleSystems in Russia; O2 in the UK; Vodacom in South Africa. — Nokia 2012 Annual Report, p.12

A look at the international branch office locations also supports my thesis that Nokia is intently focused on emerging markets.

nokia_office_locatinos

Conclusion:

Nokia is a world-class blue chip company that has once again reinvented itself in order to capitalize upon a market opportunity. Their reinvention comes at a time of severe share price depreciation and after years of consecutive losses in two out of three business segments with losses in mobile phones coming finally in 2012. The company has in the last few years put together a plan that sees Nokia and Microsoft as very close corporate allies. The sale of the phones and licensing of patents gives Nokia a vast sum of cash with which to execute on its vision to “connect the next billion to the internet.” I believe Nokia will execute reasonably well on this strategy and along with its long operating history, financial strength, payment of dividends, world-class connections, strong positioning in the emerging markets and strong brand recognition, the company will represent good value to investors who are able to buy shares at cheap prices.

Posted in Articles by Cornelius Chan | Leave a comment

Portfolio Update: September 9, 2013

The last month has seen a few significant developments in my portfolio.

First, the extremely hard-hit precious metals mining stocks made a nice rebound off cheap prices. Barrick Gold and Silver Wheaton both gained roughly 30% while Silvercorp gained a much more modest 6% and my shares of Harmony Gold Mining are still underwater -30%. There are a few lessons I have learned from investing in this sector the past month. Details below.

Second, I was finally able to sell Nokia for a profit due to the stock rising on news of the Microsoft deal. Nokia stock was potentially a multi-bagger for a very disciplined investor… sadly I am not yet there. I was fortunately able to sell the stock for a small profit that just covered my investing costs. As it has sold off its largest reporting segment, I am unable to value the company properly. Therefore the best thing to do is sell it off and wait and see what this company becomes.

With these changes, my portfolio appears as follows for September 9:

september_bubble_portfolio

The portfolio is up +18.5%.

Portfolio Notes

25% Conglomerate (BRK.B): I have the luxury of not having to follow this stock’s news for several very good reasons. First, the best investor in the world is the chairman. Second, see the first reason. LOL!

61% Gold/Silver Miners (ABX, HMY, SVM, SLW): We are living in a time of great changes. Gold miners could be the new REIT’s. What I mean is, as we approach the day when the US dollar loses its sole international reserve currency status, the more it pays to bet on the world’s oldest money. Like it or not, gold and silver will always be physical currency. With the uncertainty surrounding the banking system and the likelihood of new paradigms emerging, it will most likely pay to buy the cheap miners. Will the miners transition from Walter Schloss cigar-butts to Buffettology stocks? Possibly, but not overnight.

Meanwhile I will continue to favor the best ones — ABX and SLW — and avoid the problem children of gold mining companies (see HMY).

15% Oil & Gas (YPF): YPF Sociedad Anonima is up 80.3%. I have to be honest… since doing my homework on and purchasing cheap shares of YPF, I have sort of left it alone and not bothered to keep up to date on company news. This is due to a mix of laziness, lack of time and the feeling that the thing is complicated. However, being a blue chip and the crown jewel Argentinian oil & gas company helps alleviate any feelings of guilt I rack up due to my continued ignorance of company developments. Be that as it may, I do hear what seems like good news coming from this company.

Now that my portfolio is clearly imbalanced to the favor of precious metals miners, focused concentration must be on staying disciplined to buy some cheap stocks from other sectors. So far I have not felt any serious urge to look into any cheap stocks in my bargain bin lists. Neither have I set a priority order on any stocks in there should a major market correction transpire. So I have some work to do.

This concludes my monthly portfolio review.

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Bargain Bin Emerging Blue Chips Update: August 17, 2013

Cheap Emerging Blue Chip Stocks

Emerging blue chips are those companies that have not yet paid 10 years of consecutive dividends and are not necessarily over 1B market cap. I track them not so much for possible inclusion into portfolio as to see how the future blue chips are doing. Some of them are very near to blue chip status. Most of them are still far off.

It is a good habit for me to keep track of the cheap ones on this blog every month or so. Once in a while I see an emerging blue chip stock that has potential. I don’t have a rule against investing in the emerging blue chips. What I do have is a portfolio limit — no more than 25% of my portfolio should be less than blue chip quality.

At this update time there are 9 bargain bin’ners from the Americas, 9 from Asia and 17 from Europe.

(bargain bin’ner = 0.75 P/B or less)

Americas
Company Symbol Country Industry P/B P/E 5-Yr Low/High Price
Aspen Insurance AHL Bermuda Financials 0.73 12.62 $14.33 → $38.75 $36.19
Niko Resources NKO Canada Oil & Gas 0.50 N/A $5.55 → $113.02 $6.37
Petrominerales Ltd PMG Canada Oil & Gas 0.54 16.10 $5.10 → $40.98 $6.44
Petrobras Argentina PZE Argentina Oil & Gas 0.50 6.82 $2.50 → $13.80 $4.46
Banco Santander (Brasil) BSBR Brazil Financials 0.62 1106.6 $5.80 → $15.30 $5.84
Oi SA OIBR Brazil Telecom 0.47 3.35 $1.46 → $10.58 $1.61
Centrais Eletricas Brasileiras EBR Brazil Utilities 0.09 N/A $1.94 → $22.74 $2.14
Companhia Paranaense Energia ELP Brazil Utilities 0.70 7.17 $8.90 → $28.89 $12.68
Gafisa GFA Brazil Industrials 0.54 N/A $2.38 → $17.92 $2.64
Asia
Company Symbol Country Industry P/B P/E 5-Yr Low/High Price
Aluminum Corp. of China ACH China Basic Materials 0.65 N/A $7.61 → $32.37 $8.62
Sterlite Industries India SLT India Basic Materials 0.53 4.82 $4.01 → $19.80 $5.01
KB Financial Group KB South Korea Financials 0.56 9.15 $17.30→ $58.32 $32.05
Korea Electric Power KEP South Korea Utilities 0.37 N/A $7.44 → $17.46 $13.23
KT Corporation KT South Korea Telecom 0.75 10.45 $10.91 → $22.60 $15.81
Shinhan Financial SHG South Korea Financials 0.75 10.30 $13.16 → $50.51 $36.89
Woori Finance WF South Korea Financials 0.49 8.07 $10.40 → $39.51 $30.20
AU Optronics Corp. AUO Taiwan Technology 0.66 N/A $2.79→ $13.25 $3.72
United Microelectronics UMC Taiwan Technology 0.72 12.52 $1.59 → $4.19 $1.94
Europe
Company Symbol Country Industry P/B P/E 5-Yr Low/High Price
EVN EVNVY Austria Utilities 0.63 15.96 $2.19 → $6.30 $2.62
Wienerberger WBRBY Austria Industrials 0.55 N/A $1.33 → $5.85 $2.93
UPM-Kymmene Corp. UPMKY Finland Basic Materials 0.68 N/A $6.21 → $21.79 $12.85
Peugeot PEUGY France Consumer Goods 0.43 N/A $5.62 → $50.67 $14.88
Commerzbank CRZBY Germany Financials N/A 0.37 $1.47 → $30.70 $11.03
Magyar Telekom MYTAY Poland Telecom 0.67 12.54 $6.94 → $26.23 $7.15
Telecom Italia TI Italy Telecom 0.60 N/A $6.46→ $18.22 $6.90
ArcelorMittal MT Luxembourg Basic Materials 0.48 N/A $11.19 → $78.62 $13.95
AEGON AEG Netherlands Financials 0.46 12.10 $2.42 → $12.10 $7.65
ING Groep ING Netherlands Financials 0.66 10.26 $3.16 → $32.51 $11.35
Norsk Hydro NHYDY Norway Basic Materials 0.72 N/A $2.84 → $10.65 $4.30
AO MOSENERGO AOMOY Russia Utilities 0.09 2.14 $0.95→ $13.25 $1.50
Gazprom OGZPY Russia Oil & Gas 0.34 2.37 $6.18 → $21.65 $7.89
Mechel MTL Russia Basic Materials 0.46 N/A $2.84→ $33.49 $3.16
Iberdrola IBDRY Spain Utilities 0.76 9.68 $14.11 → $47.96 $22.88
Royal Bank of Scotland Group RBS Scotland Financials 0.54 N/A $3.51 → $93.07 $10.75
Posted in Bargain Bin Emerging Blue Chips | Leave a comment

Bargain Bin Blue Chips Update: August 9, 2013

Cheap Blue Chip Stocks

The phrase “cheap blue chips” sounds like a contradiction or an oxymoron. Well, life is full of contradictions and some of them upon closer inspection reveal a logic of their own. Such is the case with cheap blue chip stocks.

Among my list of 500 or so blue chips, there is a wide diversity of quality. Qualities such as size, financial condition, competitive durability, cyclicality and valuation are all over the map. No matter the geographic region (Americas, Europe, Asia) there are those companies that are doing exceptionally well, those that are doing alright and those that are declining. Since blue chips comprise every industry this is little wonder. Also, since my definer of blue chip stock is anything over 1B market cap with 10-years of consecutive dividend payments, the bar set a little low or the net cast a little wide brings in all sorts of stuff. Some good, some bad and some most definitively ugly.

Do Your Homework

Be that as it may, the dedicated blue chip investor having narrowed down the universe of stocks down to a single galaxy as it were, still has to analyze, ascertain and take action the stocks in the bargain bin.

Analyze    What is the quality of this blue chip? History of: rising earnings, rising net income, rising book value growth. What return on equity? Below, average, above? Balance sheet: comfortably low, uncomfortably high or little-to-none debt?

Ascertain    What is the stock’s action like? Cyclical, growth, uneven, range-bound, random? Take profit after a preset capital gain or hold long time stock?

Action    Buy, hold, sell? Double down? Preset buy price and wait? Preset sell price and wait?

At this update time there are 2 bargain bin’ners from the Americas, 12 from Asia and 7 from Europe.

(bargain bin’ner = 0.75 P/B or less)

Americas
Company Symbol Country Industry P/B P/E 5-Yr Low/High Price
Partnerre Ltd PRE Bermuda Financials 0.75 9.44 $48.50 → $95.24 $87.32
Petrobras PBR Brazil Oil & Gas 0.55 9.60 $12.25 → $52.83 $14.28
Asia
Company Symbol Country Industry P/B P/E 5-Yr Low/High Price
Guangshen Railway GSH China Industrials 0.74 14.78 $14.34 → $26.40 $22.55
Yanzhou Coal Mining YZC China Basic Materials 0.51 4.09 $4.55 → $39.29 $8.45
Henderson Land HLDCY Hong Kong Financials 0.62 6.30 $3.04→ $7.65 $6.26
Sun Hung Kai Properties SUHJY Hong Kong Financials 0.75 6.13 $6.80 → $18.66 $13.45
Swire Pacific SWRAY Hong Kong Conglomerate 0.66 7.97 $5.50→ $16.70 $11.94
Denso Corporation DNZOY Japan Consumer Goods 0.59 6.62 $6.81 → $24.74 $23.02
Mitsubishi Corp. MSBHY Japan Industrials 0.59 6.85 $21.76→ $57.47 $39.57
Mitsubishi UFJ MTU Japan Financials 0.59 6.20 $4.05 → $9.09 $6.24
Nintendo Co. NTDOY Japan Technology 0.13 4.86 $11.39→ $61.10 $15.91
Nippon Telegraph & Telephone NTT Japan Telecom 0.73 11.52 $18.05 → $27.17 $26.45
Wacoal Holdings WACLY Japan Consumer Goods 0.75 16.93 $41.99 → $72.55 $52.28
POSCO PKX Japan Basic Materials 0.65 12.17 $42.89 → $136.60 $74.66
Europe
Company Symbol Country Industry P/B P/E 5-Yr Low/High Price
BNP Paribas BNPQY France Financials 0.75 10.84 $13.63 → $50.27 $33.51
Societe Generale SCGLY France Financials 0.53 44.49 $3.96 → $20.75 $9.37
Veolia Environnement VE France Utilities 0.68 24.13 $9.42 → $55.85 $14.48
Deutsche Bank DB Germany Financials 0.63 187.81 $22.18 → $96.10 $45.45
E.ON EONGY France Utilities 0.65 9.25 $15.40 → $62.45 $16.67
LUKOIL LUKOY Russia Oil & Gas 0.58 4.53 $25.50 → $76.60 $57.55
Barclays BCS England Financials 0.68 N/A $3.07 → $32.50 $17.71
Posted in Bargain Bin Blue Chips | Leave a comment

Portfolio Update: August 1, 2013

Because of my “magnificent obsession” with the stock market, I take a look at my portfolio of stocks weekly, on Friday’s after I get home from work. This is definitely not necessary and is probably evidence of some kind of mental imbalance, but it is my money after all and I want to know what it is doing. Be that as it may, since I spend a few hours every day dedicated to some aspect of stock market investing, my reflecting on the stocks in my portfolio appears as just one part of the overall process.

Another one of the chores associated with DIY investing is keeping abreast of new developments in those companies of which I own shares.

I find a dedicated, regular reading of the weekly news having to do with my stocks re-familiarizes me with them. It is a way of keeping my finger on the pulse of those living organisms operating “out there” in the business world. Some of them are in far-away places like China or Argentina. I also learn things about different countries and regions by keeping up with the foreign stocks in my portfolio. I learn things like how business is conducted in foreign nations, what are the old ways, what are the new ways, what are the unique ways and such.

Google alerts is a service that sends the latest news to my email. I have set the alerts to send me news stories on each of my stocks once a week. I still have to sift through the stories to find relevant info mind you. It is not like Google sorts the content for me in order of value investing relevance :-) It would be nice if they had a tool for this eventually. Or if they would have a screener for what types of news I want.

Sometimes there is no news for a stock. Or maybe there is but Google is not bringing it up. The way I figure it is, if there is a major or newsworthy development that can possibly impact fundamentals, it will show up.

A good DIY Portfolio Manager should keep up-to-date on his holdings. A once-a-month check of holding fundamentals and valuation should be sufficient I would think. In keeping with this principle, my portfolio appears as follows for August 1:

portfolio_update_August_1_2013

I rely quite a bit on the free tools available on Gurufocus.com. I highly recommend using their 10-year history pages to do a fast analysis of stocks appearing in your various screeners. Anyway, I like their portfolio management tools quite a bit and have displayed my portfolio using their bubble view tool (stock symbols added on by me).

As can be seen from a glance, some stocks are up and some stocks are down. This month, the stocks that are up are outweighing the down stocks resulting in a net gain of 9.37%. Who knows? If gold keeps going down the portfolio may be down -9.37% on September 1st. However, because I have a bit of a diversified portfolio it is unlikely to transpire as I have just suggested.

Portfolio Notes

25% Conglomerate (BRK.B): Holding B shares of BRK is my tribute to the greatest investor alive — the great man of investing Warren E. Buffett. This is a stock where common sense alone says to buy on the dips. I notice some controversy surrounding his longevity and the future performance of the stock. I reason that whoever the greatest investor alive picks as successor should be good enough. Besides, the great businesses themselves will still keep making money whether or not the Oracle passes into the next life this year or in 2020.

55% Gold/Silver Miners (ABX, HMY, SVM, SLW): What can I say? Gold is a kind of money. Therefore gold miners (and silver) are bringing up new money from the earth and adding value to the financial system. It is a simple thing to understand. To me there is no controversy — but I understand it. As far as talking about the actual companies themselves, the best precious metals miners bring up the most stuff for the least cost and pay regular dividends — this is common sense. I take to heart the fact that Walter Schloss also invested in this sector since I am a fan of his. I am not going to own these shares forever, unlike my B shares of BRK. I will simply buy low, sell high like the good book of investing tells me to.

Barrick Gold has been the undisputed king of the gold stocks until recently when Goldcorp has taken some of the lustre off ABX’s shine. I bought ABX instead of G though because I still consider it the best gold stock and it was cheaper at only 3/4 book. I doubled down in July after buying shares in April.

I diversified internationally by purchasing shares of HMY on the cheap. Harmony Gold Mining Co. is a major South African blue chip producer of precious metal which I was able to buy at 2/3rds book in February of this year. After shares fell another 50% (already down 50% from its 5-year high in April 2011) I bought more, not quite doubling down. If shares fall to $2 I will double down again.

The silver stocks, I have two emerging blue chips in my portfolio. I bought SVM for under $5/share which has been my target price for a couple years now. Silvercorp Metals is a troubled earnings silver miner with a fortress balance sheet. I still consider it is a strong stock and the thing should rebound nicely after the crisis.

SLW is the king of the silver stocks. Silver Wheaton Corp. is not a miner but a streamer. It collects royalties without having to operate mines. A pretty smart business model. I would love to buy SLW for book but I just don’t see it going there again (it was below book in 2008 during the first financial crisis). This is one of those strong stocks it doesn’t pay to get too greedy for. Set too low a buy price and I could end up missing this opportunity. So there is definitely a element of fear and greed at play here. Fear of missing out on this awesome stock and greed to pay a bit higher price and regret it.

15% Oil & Gas (YPF): YPF Sociedad Anonima has had an interesting couple years. The stock is basically a hostile spin-off of its Spanish parent – Repsol SA. It first came across my blue chip screener when it had already fallen almost -50% in November, 2011. I bought shares of this Argentinian integrated oil & gas co. when it hit 3/4 price-to-book. I had been following its political crisis very carefully up until June 13, 2012 when I decided it was cheap enough for me (I try to be extremely cheap) to buy. This is a classic “blue chip in political crisis” stock. I took advantage of it and am now up 60%+.

5% Telecom (NOK): What can I say about my purchase of NOK stock except that it was a mistake? Every investor makes mistakes and this mistake still appears in my portfolio simply because I have not made any money on it yet. I had bought quite a few more shares when it fell below $4 and $3, but sold those after I broke even (plus carrying costs). I am waiting for the price to go above $4.96 so I can declare a pyrrhic victory. LOL!! Seriously, I have no idea what will happen to Nokia in the coming years. I never thought the company would fold or get bought out even when there was a lot of chatter on the subject when shares fell sub-$2 (I really, really wish I had waited with my dry powder until that cheap price… it will forever be one of my official missed opportunities).

This concludes my monthly portfolio review.

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A Late Bloomer U.S. Blue Chip Is Born! (NASDAQ:MSFT)

Congratulations to Microsoft Corp. (MSFT) on achieving ten years of consecutive annual dividend payments!

MSFT paid out its first quarterly dividend for 2012 on February 14 — the first of four tenth-year dividend payments. For me, this major milestone means I can now add the #2 world-wide software company to my official list of blue chip stocks. I now also have the option of investing my own money in MSFT (should it sink to low enough valuation), secure in the knowledge that even though the stock may likely trend sideways for another decade, I would receive consistent and presumably growing quarterly dividends.

Some quick MSFT statistics:

Stock history: 1986 – 2012
Dividend history: 2003 – 2012
Current dividend yield: 2.54%
10-year average yield: 2.51% (inc. 2004 special dividend of $3.08)
10-year share price high: $37.06
10-year share price low: $15.28

It seems ridiculously anti-climactic to only now give MSFT bona fide status, a blue chip stock if there ever was one. After all, MSFT is qualitatively a blue chip company from its years of gaining international fame by distributing its massively popular Windows products, establishing an enormous economic moat by achieving world-wide dominance in the desktop software industry and easily sustaining its position as the worlds largest tech company since surpassing IBM in 1996 (although eclipsed by Apple in 2010).

However, in order to quantify as a blue chip stock a company must have two important features: market cap over 1B and a minimum of 10 years consecutive annual dividend payments. These are my two quantitative factors to establish a minimum criteria for blue chip stock.

Here’s looking at the next decade of regular dividend payments from Microsoft.

Posted in New Blue Chip Stocks | Leave a comment

Do The Home-Based Stock Market Business

1. You can make money in the investment business. Stock market investment is investing in the businesses of companies. Businesses are stocks and stocks are businesses. It is the business of businesses.

2. You can be your own boss. You do your own business and pursue your own dreams, not work for your boss and pursue your boss dreams.

3. You can develop an investment plan to do the stock market business. Follow up and follow through your investment plan. Plan leads to success and no plan to failure.

4. You can operate your stock market business on your own without hiring people. No employees to look after, no job relations to bother with, no wages to pay out. Free to focus on your business.

5. You can run a simple global investment business in the comfort of your home without renting an office-space. International investing is easy with ADR’s.

6. You can build a world-class diversified portfolio of blue chip and purple chip stocks from different regions and different countries around the world.

7. You can manage your blue chip portfolio doing part time, full time or retirement time. A blue chip portfolio will let you eat well and sleep well.

8. You can buy some stocks, hold some stocks and sell some stocks at different times or wait and see. “Buy, Hold, Sell” is the first, basic investment strategy.

9. You can buy and sell stocks through your broker or do it yourself using the internet. It is a simple and cheap way of doing business.

10. You can make money from cash dividends, stock dividends, stock splits, rights issues and capital gains. It is a multiple source of income from one world-class blue chip investment portfolio.

Posted in Philosophy of Investing | Leave a comment

The O.F.F. Method of Reading the News

The O.F.F. Method

The correct use of information depends on how you relate and process it. The O.F.F. Method is a how-to for dissecting and digesting stock market information and financial news. The “O” in the acronym stands for Opinion. The first “F” is for Fact and the second “F” is for Fiction.”

Opinion
Fact
Fiction

Opinion    Opinion is merely the personal viewpoint of the writer, the speaker or the reporter and purveyor of news.. The Opinion expressed in a piece of information may be right or wrong judgment of material facts, bias or non-bias interpretation of material facts, intentional or unintentional misrepresentation of material facts.

Fact    Fact is a thing of the past. It has already happened. It is true things. It is a fact such as past earnings, dividends, track record, fundamentals and historical data of a company/stock.

Fiction    Fiction is a thing of the future. It has not happened. It is just forecast and plan. It is a fiction such as projected sales, projected earnings, projected profits and 5-year plan.

Fact-Fiction   Fact and Fiction is the present and the future. The present thing is happening, the future thing is unknown. It may or may not happen such as a merger scenario. If the merger succeeds it is a fact; if it fails it is a fiction.

What are the Opinions? What are the Facts? What are the Fictions? What is your opinion? Weigh and decide.

Posted in Uncle D's Wall Street Wisdom | Leave a comment

10 Inspiring Phrases for the Self-Confident Stock Market Investor

1. Self-confidence is the first requisite to great undertakings.

2. Confidence imparts a wonderful inspiration to its possessor.

3. To be confident is to act in faith.

4. Faith in oneself … is the best and safest course.

5. He who has lost confidence can lose nothing more.

6. You are able because you think you are able.

7. As soon as you trust yourself, you will know how to live.

8. The man who cannot believe in himself cannot believe in anything else.

9. Act confident and you will be confident.

10. Experience tells you what to do; confidence allows you to do it.

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10 Inspiring Phrases for the Self-Reliant Stock Market Investor

1. Self-reliance is the best reliance.

2. I have always regarded myself as the pillar of my life.

3. The best place to find a helping hand is at the end of your own arm.

4. Your future depends on many things, but mostly on you.

5. The best things in life must come by effort from within, not by gifts from the outside.

6. My future is one I must make myself.

7. Faced with crisis, the man of character falls back on himself.

8. The future is not in the hands of fate, but in yours.

9. If there is no wind, row.

10. Never ask of your friends what you yourself can do.

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10 Hard Truths of Stock Market

1. Know your weaknesses and psychological handicaps as well as your strengths and psychological
advantages.

2. To create long term wealth — be an investor.

3. If you don’t want to learn, why waste your hard-earned money in the stock market?

4. The biggest risk in the stock market is yourself.

5. First invest in yourself, then invest in the stock market.

6. If you don’t know who you are, the stock market is an expensive place to find out.

7. Don’t try to get rich quick in the stock market – the banks couldn’t do it, the money managers
couldn’t do it, the professionals couldn’t do it.

8. You don’t get rich quick gambling in the stock market. You only attain new levels of relative
poverty.

9. If you choose to jeopardize your retirement, speculate.

10. If you have no direction of your own, you will never reach your own destination, simply because
you will walk east when you are told to walk east, and walk west when you are told to walk west.

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10 Reflections on Mistakes

1. Mistake    Admit your mistakes and take your losses.

2. Crowd    The crowd makes mistakes and makes little or no attempt to really understand and avoid
the same mistakes.

3. Small Investor    Every small investor makes two basic mistakes: he fails to act with consistency
and he tries to act like a big man.

4. History    He who cannot learn from the past is condemned to repeat it.

5. Dumb Question    It is easier to ask dumb questions than to correct dumb mistakes.

6. Learning    A smart person will learn from other peoples’ mistakes; a foolish person will try to
learn from his own mistakes.

7. Price    The great mistake made by the public is paying attention to price instead of value.

8. OPM    Learn from Other Peoples’ Mistakes because you can’t live long enough to make all the mistakes yourself.

9. Same Mistake    Never make the same mistake … twice.

10. Blame    Never blame anyone or anything for your mistakes. Since the decisions are yours, the
mistakes are also yours.

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10 Crowd Psychology in Action in Stock Market

1. Casino    The crowd generally regards the stock market as a casino, a get-rich-quick scheme or a
hit-and-run venture. It typically believes that the stock market is a game of luck rather than a game of
skill.

2. Investment Mythology    According to investment mythology, the crowd is always wrong. A
stock market wisdom says “The crowd always lose”.

3. Syndrome    “Follow The Crowd” syndrome is mass psychology in motion in the stock market. People feel good to follow the crowd in the stock market. They feel bad to stand alone from the
crowd simply because they know too little about themselves.

4. Herd Instinct    When the crowd buys, people will join the crowd to buy; when the crowd sells,
people will join the crowd to sell. It is herding behavior.

5. Mistake    The crowd makes mistakes and repeats the same mistakes again and again, and makes
little or no attempt to understand and avoid the same mistakes. It is common practice for the public to
blame the mistakes to hot tips, brokers, timing, luck, bad “something” except to blame themselves.

6. Buy and Sell    The crowd buys at the wrong time and sells at the wrong time. It is characteristic
of the crowd to buy at the time when the minority are selling, and sell when the minority are buying.

7. Value    The crowd rarely sees value until it is most clearly demonstrated to them, and generally
buys at a relatively high price. It is easier for the public to believe a stock is cheap when it is really
dear than to believe it is cheap when it is really cheap.

8. Rising Market    When stock prices are rising, people feel good and they buy; when stock prices
keep rising, people feel better and more people will buy. When stock prices and market sentiments
are high, more and more people will follow the crowd and will buy high instead of selling high at retail
and high-noon prices.

9. Falling Market    When stock prices are falling, people feel bad and they sell; when stock
prices keep falling, people feel worse and more people will sell. When stock prices and
market sentiments are low, more and more people will follow the crowd and will sell low
instead of buying low at wholesale and bargain prices.

10. Phenomenon    The crowd behaves irrationally and illogically to “Buy High Sell Low”
instead of behaving rationally and logically to “Buy Low Sell High” in the stock market.

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10 Aspects of Crowd Psychology Related to Stock Market

1. Psychology    The market is nothing more than crowd psychology in motion, moving from optimism to pessimism, and pessimism to optimism without knowing what the hell is all about.

2. Herd Instinct    The crowd is as easily frightened as a flock of sheep and is credulous to the point
of stupidity.

3. Rule    Buy cheap and sell dear is the rule of the game. The public as a whole, exactly reverses the rule.

4. Trend    The public is right during the trend, but wrong at both ends of the trend.

5. Feeling    People feel bad to stand alone from the crowd because they know too little about themselves.

6. Follow    In the stock market, as elsewhere, people love to follow a leader.
7. Reason    The crowd does not reason, it only thinks it reasons.

8. Illogical Thinking    It is easier for the crowd to believe a stock is cheap when it is really dear than to believe it is cheap when it is really cheap.

9. Behavior    The crowd always loses because it is always wrong. It is wrong because it behaves normally.

10. Mythology    According to investment mythology, the crowd is always wrong and the crowd always loses.

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10 Contradictions Of Stock Market

1. Blue Chips    Blue chips are expensive. Blue chips are the cheapest in the end.

2. Crisis    Sell in a crisis … the market is dangerous. Buy in a crisis …. the market is full of bargain
opportunities.

3. Diversification    Put all your investment eggs in one basket and watch. Diversify your basket of
stocks to spread the investment risk.

4. Investment    If you invest and win … then speculate. If you speculate and win … then invest.

5. Time    Sell … it is the best of time in the market. Buy … it is the best of time in the market.

6. News    Sell on bad news and buy on good news. Sell on good news and buy on bad news.

7. Profits    Let your profits ride. You never go broke taking small profits.

8. Market    The market is predictable. The market is as unpredictable as human behavior.

9. Risk    The bigger the risk the bigger the reward. The most risk often brings the least reward.

10. Players    Buy when others sell, sell when others buy … The Contrarian. Buy when others buy,
sell when others sell … The Crowd.

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10 Conservative vs Aggressive, Investor vs Speculator

1. Conservative investors invest in blue chip stocks and a blue chip portfolio. Aggressive
speculators speculate on price and volume and a speculative portfolio.

2. Gamblers play the stock market like playing in a casino. Investors invest in the stock
market like running an investment business.

3. People behave irrationally and illogically “buy dear and sell cheap” in the stock
market, but behave rationally and logically “buy cheap and sell dear” in the consumer market.

4. Some buyers practice the rule “let the buyer beware” to protect themselves. Few sellers
practice the rule “let the seller beware” to the uninformed buyers.

5. Knowledge is skill and power. You tell the professionals what to do. Ignorance is no-skill
and powerless. The professionals tell you what you do.

6. Info-glut causes info-indigestion. Filter out what you need and what you don’t
need. Info-shortage needs info-facts. Filter out what you want and what you don’t want.

7. Self-discipline is control over your money management. Lack of discipline is no
control over your money management.

8. Winners have a plan to play the stock market game and win. Losers have no plan to play
the stock market game, and lose.

9. A blue chip portfolio will let you sleep peacefully. A speculative portfolio will wake
you up in your sleep.

10. Profit – bulls make money, bears make money. Loss – pigs lose. Both are stock
market wisdom.

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10 Ways of Thinking About Stock Market As A Game

1. Stock Market Game Stock market is a game of choice, not a game of chance. You can choose
to win or lose depending on how you choose to play the greatest game on planet earth.

2. Global Game You can play the game domestically, regionally and globally against all your
competitors in the stock market. You need skills and a game plan to “play” and win the global game.

3. Insider Game The Board of Directors, top management and auditors are the distributors of
insider stock in the distribution cycle. They play the insider game against the outsiders and lopsiders
in the first-in-first-out illegal insider game.

4. Outsider Game Outsiders are the stock market professionals and co-distributors of the
distributors in the distribution cycle. They play the outsider game in distributing stocks to lopsiders
and are the winners in the distribution game.

5. Lopsider Game Lopsiders are the crowd and distributees of stocks in the distribution cycle.
They play the lopsider game against the insiders and outsiders, and are the suckers and losers in the
distribution game.

6. Investment Game Investors play the very low risk game against the best and the brightest. They
invest in a diversified portfolio of high-grade blue chips and purple chips. They are the winners in the
long term investment game.

7. Speculation Game Speculators play the high risk game against the full-time and professional
speculators. They speculate on market sentiment, price movement, quotation, volatile high risk stocks.
They are the losers in the short-term speculation game.

8. Gambling Game Gamblers play the very high risk game against the white-collar crooks, sharks
and crocodiles. They bet on hot tips, inside information, stories, rumors, gossips, gut-feeling and are
the losers in the short term gambling game.

9. Manipulation Game Manipulators, syndicaters and pool operators play the stock manipulation
game against the greedy and gullible public. They rig the market, the target stock, the inflated price
and the artificial volume in the illegal manipulation game.

10. Money Game Money seekers from all walks of life – barbers and butchers, housewives and
hawkers, scams and scoundrels, professionals and portfolio managers – all play against each other.
Few are winners. Many are losers in the great money game.

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10 Reflections on Crowd Through the Lens of Stock Market

1. People    People follow the crowd without knowing where they are going.

2. Enemy    The greatest enemy in the stock market is yourself (when you are part of the crowd).

3. No Plan    No plan is a plan for failure in the stock market.

4. Free Lunch    As in life, there is no free lunch in the stock market – such as stock market tip,
insider information and free advice.

5. Greed    Losers suffer from the “Greedy Man’s Disease”.

6. Psychological Handicap    The crowd is afraid to buy low in a panic market because of fear and
sell high in a manic market because of greed.

7. Illogical Behavior    The crowd buys high and sells low rather than the common sense approach
“buy low when things are cheap and sell high when things are dear”.

8. Irrational Investing    The crowd buys and sell on the spur of the moment.

9. Opinion    The crowd holds on to their opinion, right or wrong.

10. Blame    The crowd is a loser, always blaming everything and everyone, except themselves.

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10 Knowledges of Stock Market

1. Knowledge and know-how of the stock market is a specialized stock market skill, different from all
other skills.

2. The stock market is a barometer of businesses. You buy and sell businesses. Businesses are stocks,
stocks are businesses.

3. There are hundreds of stock market theories; the bottom line theory is “Buy Low, Sell High” that
is, “Buy Cheap, Sell Dear”.

4. The market, like the Lord, helps those who help themselves, but unlike the Lord, the market does
not forgive those who know not what they do.

5. The market is never a level playing field. Only dreamers believe that with securities laws and stock
exchange regulations, all players will be on an equal footing with one another.

6. In stock market speculation as in life, few succeed; many fail.

7. The chances of something-for-nothing in the stock market will always prove irresistibly attractive
to gamblers.

8. What is complex in the stock market is simple “Buy Low Sell High” and take profits. What is
simple is complex “Buy High Sell Low” and take losses.

9. The main reason why money is lost in the stock market is because so many people persist in
thinking that they can make money without working for it, and that the market is the place where this
miracle can be performed.

10. Beware of tipsters and those who have nothing to lose.

The cheapest and most expensive commodity in the stock market is free advice.

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10 “What Is The Stock Market” Questions

1. Success in stock market investment begins with an attitude. Your attitude is more
important than knowledge, gifted skill, education, talent and what others think of you.

2. Stocks are Businesses and Businesses are Stocks in the stock market.

3. Stock market is nothing more than crowd psychology in motion, moving from optimism to
pessimism and vice versa.

4. Stock market is about animal trading. There are bulls, bears, sheep and deer. “Buy sheep and Sell
deer” is a market wisdom.

5. Stock market is not irrational. It is people who are irrational “Buy High Sell Low” instead of “Buy
Low Sell High”.

6. The market will fluctuate. It has a certain element of truth and a certain element of untruth about
it.

7. The market is most dangerous at its best – and at its best when at its worst.

8. The stock market is predictable in one thing only. “It will rise and fall”. It is unpredictable in all
other things.

9. The stock market is a game of choice or a game of chance. You can choose to invest and win or
choose to speculate and lose.

10. The cheapest and most abundant commodity in the stock market is free advice.

There is no business like the stock market business.

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10 Positive Attitude vs Negative Attitude Realities

1. A positive attitude person (a positivist) makes things happen. A negative attitude person (a
negativist) sees things happen.

2. A positivist makes commitments. A negativist makes promises.

3. A positivist listens and learns. A negativist talks and learns nothing.

4. A positivist goes through a problem and finds solution. A negativist goes around a problem and
never gets past it.

5. A positivist says “ There must be another way”. A negativist says “This is the way it has always
been done before.

6. A positivist has plans and goals that can be measured. A negativist has no plans and no goals
and hates measurements.

7. A positivist decides for himself. A negativist listens to others.

8. A positivist learns from those who are superior to him. A negativist tears down those who are
superior to him.
9. A positivist respects the superiority of others and learns from them.
A negativist resents the superiority of others and condemns them.

10. A positivist credits his good luck for winning even though it was not his good luck. A
negativist blames his bad luck for losing even though it was not his bad luck.

Positive attitude people are successful. Negative attitude people are not successful.

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10 Crowd Thinking Insights

1. I find more and more that it is well to be on the side of the minority, since it is always the more
intelligent … Goethe, the great poet-philosopher (1749-1842).

2. As a general rule, it is foolish to do just what other people are doing, because there are almost sure
to be too many people doing the same thing … William Stanley Jevons (1835-1882).

3. Follow the course opposite to custom and you will almost always do well … Jean Jacques
Rousseau (1712-1778).

4. If one can get into the habit of thinking “opposite” to the crowd he will be right in his thinking
more often than wrong … Humphrey B. Neill, author of “The Art of Contrary Thinking”.

5. When all forecasters agree, that is the time to watch out … Dr. Edwin G. Nourse, former chairman
of the President’s Council of Economic Advisers.

6. The basic difference between the crowd and a contrarian is that the crowd acts on feelings and
emotions whereas the contrarian acts on reasoning and analysis … Humphrey B. Neill, author of “The Art of Contrary Thinking”

7. Because a crowd does not think, but acts on impulses, public opinion is frequently wrong … Humphrey B. Neill, author of “The Art of Contrary Thinking”

8. The primary characteristic of a crowd is its susceptibility to “suggestion”. Suggestions, in turn, are
“contagious” … Humphrey B. Neill, author of “The Art of Contrary Thinking”

9. The crowd is attracted by rising prices and by activity … Humphrey B. Neill, author of “The Art of Contrary Thinking”

10. The crowd will remain indifferent when prices are low and little fluctuation … Humphrey B. Neill, author of “The Art of Contrary Thinking”

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10 Motivational Thoughts for Stock Market

1. Motivation is a disciplined personality. Like any discipline, motivation can be learned and
cultivated.

2. Motivation must be permanently created from within yourself, not temporarily created from
outside elements.

3. Motivation involves change – change for the better.

4. Motivation encourages a person, who is both personally and permanently motivated, not to give up
easily.

5. Motivation is a stimulus that makes you rise to the occasion.

6. Motivation fires you up to do something greater than yourself.

7. Motivation is a life energy towards your continued achievement.

8. Motivation works when you select to do one thing, not want to do everything.

9. Motivation focuses your creative energies on things that you can control, release the things that
you can’t and the wisdom to tell the difference.

10. Motivation gets you motivated toward success for your own benefit and the benefit of others.

To be motivated all the time, you must commit yourself to a magnificent obsession.

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10 Stock Market Scandal Books

1. The Complete Book of Wall Street Ethics by Jay L Walker
The moral issues of stock market as one in which nothing is what it seems.

2. Do You Sincerely Want To Be Rich by Charles Raw, Bruce Page & Godfrey Hodgson
The Full Story of Bernard Cornfeld and I.O.S. An international swindle.

3. The Predators’ Ball by Connie Bruck
The Inside Story of DREXEL BURNHAM and the Rise of the Junk Bond Raiders.

4. Mugged On Wall Street by C. David Chase
How and why the consumer gets fleeced again and again by an unscrupulous
financial community.

5. The House of Nomura by Albert J. Alletzhauser
The Inside Story of the Legendary Japanese financial Dynasty. “Makes greed and
intrigue on Wall Street look like child’s play”.

6. Lies Your Broker Tells You by Thomas D. Saler
What lies to watch for and still achieve financial security.

7. The Insiders by Mark Stevens
The Truth Behind the Scandal Rocking Wall Street.

8. The Big Six by Mark Stevens
A look at the malpractices, scandals, power plays, and professional lapses.

9. Today’s Stock Market Scams, Swindlers and Scoundrels by David Sokol.
How to recognize and avoid them.

10. Trading Secrets by R. Foster Winans
The manipulation of news at America’s top financial newspaper; The Wall Street
Journal.

Know the white-collar crooks in the stock market for self protection.

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10 Stock Market Investing Books

1. The Intelligent Investor by Benjamin Graham
By far the best book on investing ever written.

2. Security Analysis by Benjamin Graham, David L. Dodd, Sidney Cottle
Principles and Technique.

3. One Up On Wall Street by Peter Lynch with John Rothchild
How To Use What You Already Know To Make Money In The Market.

4. Extraordinary Popular Delusions and the Madness of Crowds
& Confusion de Confusiones
by Charles Mackay & Joseaph de la Vega
This is the definitive study of investment manias, crowd psychology and impact of
crowd on stock markets.

5. The Art of Contrary Thinking by Humphrey B. Neill
What is contrary thinking? What will it do for me? The bible of Contrary Opinion.

6. The Warren Buffett Way by Robert G. Hagstrom, Jr.
Investment Strategies of the World’s Greatest Investor.

7. How to Make Money in Blue Chip Stocks by Dominic Tan
A practical basic investment system for beginners, amateurs and professionals.

8. The Evaluation of Common Stocks by Arnold Bernhard
Founder and editor of The Value Line Investment Survey.

9. The Money Game by “Adam Smith”
How it is played on Wall Street, what money really is, what we think it is and how it
makes us behave.

10. How To Be Your Own Stockbroker by Charles Schwab
The Founder of America’s Biggest Discount Brokerage Company.

The more you read, the more knowledge you have in stock market investing.

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