Friday, August 30, 2013

Here's why equities are suitable for long-term investors

Find out: When is right time to begin investing

Below is the verbatim transcript of Mashruwala's interview with CNBC-TV18.

Q: Financial advisors always say that people should invest for more than ten years to get good returns. But for someone, who invested in 2008 when the Sensex was at 21,000 are still waiting for the index to reclaim that level. How can their investments be justified?

A: Generally if you pick up a decade in any equity market whether Sensex data or Dow Jones or FTSE; in a decade there will be one or one-and-a-half complete business cycle.

I agree that if somebody invested lump sum in January 2008, when Sensex had crossed 21,000, even today the person has not reached that and to that extent there is depreciation in the asset. Having said that if somebody wants to do an SIP and wants to invest in Sensex and index fund, from that month to May and if somebody wants to do it in a systematical manner month on month then depending on which date and how he has been doing, the returns are anywhere annualised between 5.5 to 12.5.

In most of the cases if we do a standard deviation, most of them fall between 7 percent to 9 percent annualised returns, which means if somebody wants to do a systematic investment plan (SIP) in Sensex from 2008 till May this year, the person has got somewhere between 7 percent to 9 percent annualised return.

So, even when Sensex has not reached, the person is making money that is why financial planners keep on saying to locate equity from long-term perspective and keep on doing it on regular basis.

Q: What would you recommend in terms of a possible hedge in order to safeguard portfolio within the ten years?

A: We would normally encourage clients to invest keeping in mind their financial goals and hence the issue of hedging becomes little irrelevant because for financial goals, which were likely to occur in next two-three years, choose debt as an asset class because the principal will remain protected.

If one is looking at something which is seven to nine years and beyond then look at equity for interim period, make a combination. Over and above that we would always recommend contingency and health insurance, life insurance. So, planner looks at completely from different perspective; planner looks at from the perspective of the situation and how to protect that from turbulences time and other calamities that comes in instead of looking purely at an external condition. So, getting into hedging derivatives all those things doesn't play that much important role as long as one links it to financial goals and situation.    

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Wednesday, August 28, 2013

GIS Discusses Growth Plans for 2014 - Analyst Blog

General Mills Inc. (GIS), a global consumer food company, recently discussed its outlook and growth strategies for fiscal 2014 at the New York Stock Exchange.

Fiscal 2014

Outlook Retained

Growth in fiscal 2014 is expected to be in line with its long-term targets and driven by new products, increased brand support and cost savings from the Holistic Margin Management (HMM) program. The company maintained its prior guidance for fiscal 2014. Earnings per share are expected to grow at a high single-digit rate in a range of $2.87 to $2.90.

The company continues to expect net sales to grow at a low single-digit rate and exceed $18 billion in fiscal 2014 on the back of new product innovation and contribution from new businesses such as Yoplait Canada and Yoki. The U.S. retail business is expected to benefit from new product launches and increased innovation, while the international business will gain largely from the newly-acquired businesses.

Segment operating profit is expected to grow in mid-single digits. The company expects margin to expand in fiscal 2014 on the back of cost savings from the HMM program. Capital spending is expected to be around $700 million.

Moreover, the company plans to increase dividends and share buybacks in the year, thus offering greater shareholder value. The increased buybacks are expected to lower the average number of shares outstanding by 2% in fiscal 2014. The company also plans to increase its dividend by 15% effective from the quarterly payment due on Aug, 01.

Strategies

Product Innovation

The company intends to launch more than 200 new products in the first half of fiscal 2014. More products are expected to be introduced later in the year.

In 2014 and beyond, in order to drive sales growth, General Mills will focus on five global categories. These categories include ready-to-eat cereals, super-premium ice creams, convenient meals, wholesome snack bars and yogurt. These categories are highly respo! nsive to innovation and are capable of meeting evolving consumer needs. General Mills' retail sales in the five global categories are growing at attractive rates and all of these have promising long-term growth potential.

Focus on Cereals

General Mills operates a $4 billion cereal segment. The company intends to offer new cereal options and brand building in the U.S cereal market in 2014. Some of the new products are Hershey's cookies & Creme cereal and two varieties of Nature valley granola cereal. The company intends to expand the distribution of BFast, a breakfast shake.

Focus on Yogurt Business

General Mills generates $3 billion of sales from yogurt segment. The company intends to launch a new line of Yoplait Greek strained yogurt. The company also plans to increase its advertising expenditure and focus on product innovation, in order to drive sales.

The U.S. yogurt business has been challenging as increased sales prices in response to dairy cost inflation is reducing the competitiveness of its products. With the latest brand building and product innovation, the company expects its U.S. yogurt business to return to growth in fiscal 2014. The company has several products planned for its yogurt business in Europe and U.K.

Focus on Snacks

General Mills' snacks segment is a $3 billion business. The company plans to introduce products like Nature Valley soft baked oatmeal squares, Fiber One, Ckex snack chips and Betty Crocker caramel Brownies in the U.S. It has products lined up for Europe and Brazil as well.

Focus on Meals

The company has planned several innovations for the meal segment also, which includes brands like Old el Paso and Helpers. The company will also launch several new products in China and Brazil.

Ice Cream

The company has initiated a global advertising campaign on Haagen- Dazs. The company intends to open more than 70 new Haagen- Dazs cafes in 13 cities in China in fiscal 2014.

Focus ! on Intern! ational market

General Mills also discussed its plans to shift the geographic mix of its business towards the international markets with particular focus on the emerging markets. Currently more than 1/3rd of its sales are generated from the international markets including about $2 billion in sales from the emerging markets.

General Mills carries a Zacks Rank #3 (Hold).

Other food companies that have been doing well consistently are Flower Foods Inc. (FLO) and B&G Foods Inc. (BGS) both carrying a Zacks Rank #1 (Strong Buy) and Campbell Soup Company (CPB) carrying a Zacks Rank #2 (Buy).

Sunday, August 25, 2013

And An Almost Octogenarian Shall Lead Them

Last week I was wondering where the next catalyst was going to come from.

After a couple of years of headline grabbing events and man made disasters such as "Fiscal Cliff" and "Sequestration," it was actually good to have a summer off. We didn't even have the obligatory Greek banking crisis this August. The downside, of course, is that there's nothing to react toward. Instead, stocks have had to trade on such fundamentals and basics as valuation and earnings. As with many traditions, there are fewer and fewer people who can remember the origins of such things.

If you can remember back almost a year, Apple (AAPL) was just hitting $700/share and it was the reason you could have discounted the other 499 stocks that comprised the S&P 500. As went Apple, so went the health of the overall market.

It was a simpler time.

Things have changed, but then came news that Carl Icahn had put together a "large" Apple (AAPL) position. Then came word the Leon Cooperman, Chairman of Omega Advisors, was equally ebullient about Apple.

Its shares immediately shot up an immediate $22 upon a simple Icahn Tweet. The "Cooperman Bump" was good for another 2%, but he's much younger.

Wonderful. We needed market leadership and Apple was ready to take the reins once again thanks to a couple of guys who have a combined 147 years between them. Can George Soros be far behind? Based on what his ownership had done for J.C. Penney (JCP) shares before he curiously added 2 million shares during the course of his divorce from a much younger Bill Ackman, you would probably prefer that he kept his distance if you were long Apple shares.

As it turns You can't predicate an entire market on the basis of a nearly octogenarian investor's lust for overseas cash piles. While Apple piled up even more cash res! erves, it also added on to its share value while the market had a recently rare triple digit move downward and just came off its worst week in 2013.

That wasn't supposed to happen. He was supposed to lead us to a better place where we know only of profits, dividends and buybacks. A place where we are always renewed and bathed in truth.

For me the market starts anew every week as I scan to see what positions have been assigned due to the sale of call options. As occasionally happens when a monthly cycle ends my world is essentially recreated, but you never know where the truth lies. What I do know is that far fewer of my positions were assigned this week than I had expected, even with the gift of Icahn.

With continually competing voices citing reasons we go higher matched off with equally compelling reasons we go lower, the standoff is as old as that between good and evil, but suddenly evil is looking stronger.

While it may seem inviting to have an octogenarian activist lead the way, the greatest likelihood is that such a shepherd has his own interests more at heart than that of his willing flock.

As usual, the week's potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum and "PEE" selections this week (see details).

While my preference ordinarily is to focus on selling weekly options, given some uncertainty last week, I may look to sell more monthly contracts as a defensive measure in the event of a short term downturn.

In the past year the astute have noted that "as goes Google (GOOG), so does Apple not follow," as the prevailing thesis was that it was not possible to be invested in them concurrently. While recent attention has deservedly shifted to Apple as its price moved higher on news of a new iPhone and then Icahn's position, so too has attention shifted away from Google.

I haven't owned shares of Google in more than a year and even though it has advanced steadily since then, its recent 6%! decline ! is enough to get me interested once again. With the next lower support level nearly $100 away the risk may be greater than the underlying "beta" might suggest, but perhaps at any sign of Apple infatuation cooling we all know where the money has to be going.

If you have the stomach for such things J.C. Penney reports earnings this week. I own shares, including some bought just this week and subsequently assigned. However, had you asked me a few weeks ago, I would have believed that J.C. Penney comparative quarter results were going to be very positive. But once the high profile dissension from Bill Ackman, calling for a speedy appointment of a permanent CEO became known and that short term melodrama played itself out, my opinion changed considerably. It would seem unlikely that such internal controversy would arise before a surprisingly good earnings report.

However, for the adventurous selling puts expiring August 23, 2013 can return an 1.3% ROI and leave you without the need to own shares if a post-earnings related drop ends up being less than 25% The options market is anticipating a 17.5% decline.

Among the walking wounded this week was Macys (M). I've been waiting a long time for an opportunity to own shares again, although those opportunities usually come when bad news is at hand. In this instance it was the same as had wounded numerous others this earnings season. With no other distractions during a quiet late summer people actually pay attention to such mundane things as earnings and guidance. In this case, they didn't like what they heard, but that has by and large been the lot of retailers of late. Under the leadership of Terry Lundgren you do have to believe that if any retailer will be able to pull out from underneath the doldrums, it will be Macy's (M).

Another of my favorite retailers, especially coming off price weakness, like most everything this past week, is Coach (COH). However, as with many of the stocks in this week's listing, the challenge is whether! what app! ears to be value pricing is instead, a value trap, as an overall declining market takes the good along with the bad lower. With an almost 14% drop since its earnings, Coach has had a head start on any general decline which gives me some solace if investing new funds.

Following Cisco's (CSCO) disappointing earnings report, which may have added fuel to the market's weakness, the technology sector didn't fare terribly well. John Chambers, the CEO has alternated from genius to out of touch and back to genius in the span of just a few years, but may now be returning to the "out of touch" category in the eyes of some.

However, for me, he evoked an image of Hoard Schultz, chairman of Starbucks (SBUX), who a number of quarters ago following a brutal reaction to a disappointing earnings report, provided one of the most ardent defenses of his company and why the reaction was so wrong. If you had faith in Schultz, you were well rewarded. I think Chambers offered a similar post-earnings response and despite the immediate concerns there is reason for following his zeal.

Oracle (ORCL) on the other hand, may offer a better return, based upon the option premiums which may reflect an earnings report near the end of the September 2013 option cycle. It's often difficult to distinguish its CEO, Larry Ellison, from its product, but he was in the news this week with sometimes less than flattering comments about Apple and Google. The last times Oracle disappointed with its earnings reports Ellison didn't follow the Schultz lead and instead, pointed fingers. While I may be looking for more monthly options during this week's trading activity, an Oracle trade may be an exception.

Among the vanquished last week was Seagate Technology (STX). It's 27% decline, however started in mid-July. I owned shares the previous week and they were assigned. Seagate is another position that I would strongly consider as a candidate for weekly option sales, particularly if using deep in the money strikes.

Mc! Graw Hill! Financial (MHFI) goes ex-dividend this week and has been on a nice ride ever since the initial reaction to news that their role in the financial meltdown was to be investigated. In fact, it recently surpassed that point from which it fell off the cliff upon the news. Normally that would be a warning signal for me, however, shares have recently scaled back 5%. I think that McGraw Hill was unduly punished by the market and still, in fact, has catching up to do, despite its great run since February 2013, when there was a near immediate realization that the reaction was well overdone.

I'm a little ambivalent about adding additional shares of Transocean (RIG) to my two existing lots. Just a few days earlier I felt reasonably assured that the $47 lot would be assigned. At that time I was already thinking of re-purchasing shares in order to capture the upcoming dividend. Also in the Icahn stable of companies in his radar scope, Transocean hasn't fared quite as well as others, and has not yet increased its dividend as Icahn suggested, although its change has come to its executive offices. Together with Halliburton (HAL) and British Petroleum (BP), Transocean is one of the "Evil Troika" that consistently offers a good place to park money owing to its narrow trading range, option premiums and dividend payout.

Finally, although Mosaic (MOS) has appeared in each of the past two weekly articles, its selection never gets old as long as it keeps doing what it has so reliably done ever since news of the dismantling of the potash cartel became known. In this case, what it has done after suffering a 20% plunge is to slowly begin raising the bar higher as questions arise regarding the ability of the cartel to stay asunder. For the past three weeks I've erased substantial paper losses by adding shares and selling in the money calls whose premiums are enhanced by fear and uncertainty of what tomorrow will bring. The pattern that Mosaic has been taking is essentially two steps forward and one step back! and that! is just perfect for executing a serial covered call strategy that hopefully follows shares back

Traditional Stocks: Cisco, Google, Macy's, Oracle

Momentum Stocks: Coach, Mosaic, Seagate Technology

Double Dip Dividend: McGraw Hill Financial (ex-div 8/22 $0.28), Transocean (ex-div 8/21 $0.56)

Premiums Enhanced by Earnings: J.C. Penney (8/20 AM)

Remember, these are just guidelines for the coming week. The above selections may be become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The over-riding objective is to create a healthy income stream for the week with reduction of trading risk.

Source: And An Almost Octogenarian Shall Lead Them

Disclosure: I am long JCP, MOS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I may purchase, add shares or sell puts in CSCO, COH, GOOG, JCP, M, MHFI, MOS, ORCL, RIG and STX (More...)

Saturday, August 24, 2013

Raymond James Improves Securities Results in May

Raymond James Financial (RJF) said Wednesday that its total securities commissions and fees were $271 million in May, an increase of 8.6% over results in April and jump of 12.5% over May 2012 results. 

Total assets under administration were $412.7 billion, up 0.2% from April and 14.3% percent over the year-ago period. Total assets under management hit $52.7 billion, up 1.7% from April and 32.1% over May 2012. 

(In May, the S&P 500 rose 2.24%, while the Dow Jones Industrial Average improved 2.34%.)

“These metrics represent the primary drivers of our Private Client Group and Asset Management segments, respectively,” the company explained in a press release.

“We continue to execute on our cost savings initiatives following the Morgan Keegan integration,” added Raymond James, which is led by Paul Reilly (left). “We believe our businesses are well positioned but still face uncertain economic and capital markets environments."

Outstanding loans at Raymond James Bank grew 1.2% to $8.4 billion, which represents the recovery of April's drop—and fundings exceeded payoffs during the month of May, according to Raymond James.

The company says its Equity Capital Markets group had an improved syndicate calendar, “which helped drive commissions in both its business and that of the Private Client Group.”

Still, within its Fixed Income unit, commissions were flat, “with last month's depressed level while the business generated no trading profits as rising rates and a noncorrelated Treasury market made it difficult to hedge interest-rate risk in the tax exempt municipal portfolio.” 

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Due to the “challenging” rate environment, these trends have continued into June.

Raymond James has more than 6,200 financial advisors serving more than 2.4 million accounts in 2,500-plus locations in the United States, Canada and the United Kingdom.

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Friday, August 23, 2013

Major Community Foundation Benchmarks Hit New Highs in 2012

Community foundation asset, gift and grant amounts reached new highs in 2012 for the first time since the recession, according to a report released Tuesday by the Council on Foundations and CF Insights.

Researchers collected data from 276 organizations, including those representing more than 90% of total estimated community foundation assets.

The study found that the community foundation sector represents $58 billion in assets, $6.9 billion in gifts and $4.5 billion in grants. Seventy-nine percent of community foundations had 2012 asset levels that exceeded those of 2007.

Between 2011 and 2012, assets experienced average growth of 9%, gifts 15% and grants 6%.

Seventy-five percent of community foundations increased their operating budget in 2012.

According to the study, administrative fees still drive community foundation revenue, accounting for about 65% of total revenue on average. Although most community foundations surveyed had a diversified revenue base, this was particularly true for smaller entities.

Half of small community foundations’ revenue came from administrative fee, compared with 70% for midsize ones and 76% for large groups.

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In another significant finding, donor advisors increased assets held in community foundation donor-advised funds by 22% on average, faster growth than for assets overall.

Excluding supporting organizations, DAFs represented 69% of total gifts and 61% of total grants for community foundations.