The markets fiddled about most of the day, traded within a narrow range and then managed to close in the green, with another record in the books for the S&P 500 (SPX) and Russell 2000 (RUT). Of course, Apple (AAPL) also put in another all-time high of its own.
GoPro and Shake Shack
GoPro (GPRO) which we picked up subsequent to its sell-off after hours on the day of its earnings report while I was in Orlando, put in a solid session, gaining 12.5%. My only regret was not buying more at the time. Shake Shack (SHAK) continues its descent, now declining 25% from its IPO day spike but still 86% above its formal IPO price of $21. When it gets into the lows $30s, it might be worth ordering up some shares.
Q&A: Alibaba and Utilities
I thought that I would respond to some questions that were recently asked by way of email or on Scutify:
Q. – What’s the skinny on Alibaba (BABA)? Also, related from someone else: Scott, I’m giving up on BABA. I’d buy it again on the other side of the valley.
A – The market was not satisfied with the rather incredible results and growth when Alibaba reported earnings. It is also getting plenty of negative publicity. What is happening to BABA is similar to what occurred with Google (GOOG, GOOGL) when it was in its infancy as a public company. First was that both companies are headed up by very bright individuals who do not know how to navigate the shark infested waters of the financial markets. Google finally got smart and brought in an experienced corporate manager, Eric Schmidt, to faceoff versus the investment world, leaving its founders to build the company. Perhaps Jack Ma needs to do the same. Second, short hedge funds and their compatriot bearish members of the media tried to pin on Google the notion that “click fraud” was unjustly responsible for revenue and earnings growth. Now, the same crowd is banging the drum on BABA’s clients engaging in selling counterfeit products. In the fullness of time the click fraud was deemed unfounded as will be the assertions against BABA and patience will be rewarded for holders of BABA.
Q – … Therefore utes [utilities] at Fridays close are a gift and should now be added to a portfolios. I already did by the way. Would you comment on this when you get a chance. (Please note that the writer expects that the 10-year US Treasury will trade in a range of 1.5% to 2.5% with an average of 2.0%, in 2015)
A – I mentioned last week in My Gut Feeling that, I have begun to shave off some outsized gains in utility stocks in our Low Volatility / High Dividend Portfolio. In their place I plan on buying shares in a REIT, to be determined. Perhaps the question was posed from my proposed course of action. There is no doubt that companies’ stock with dividends in excess of that of the SPX, about 2.0%; are attractive given that medium term interest rates are also about 2.0%. At least with stocks, you can also benefit from modest, but consistent earnings growth. This is what I do in our Low Volatility / High Dividend Strategy for our clients. That being said, utility stocks have appreciated considerably over the course of the last two years, such that certain individual holdings are too large relative to our desired asset allocation within that strategy. Hence, I am taking some gains off the top of a few utility stocks and reinvesting the proceeds into REITs (real estate investment trusts) which also offer excellent yields when compared to the SPX and 10-year US Treasury. However, we are not abandoning our holdings in the utility sector as they still fit the requisite characteristics to be included in the strategy.
Keep sending those questions and I will share my answers in this daily commentary in the future. We are going to try once again, after last week’s technical problems, to conduct a weekly chat. Please join me on the specific chat page for February 18, 2014 rather than the general home chat page at 11AM.
We have finalized the speaker lists, topics and time for the 2015 Jim & Judy O’Brien Financial Markets Colloquium at Seton Hall University. It is free to the public and I hope to see you then.
Finally, tax forms are now available to our Scottrade clientele on the broker’s website.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL, GOOG, GOOGL & GPRO — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website.
LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is also a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
– You can email Scott at email@example.com
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