With the new season of Entourage close to a month away it’s time to talk about the greatest business mind. Want to be the best? Then mimic everything Ari
Gold does. This is what I love about Ari Gold and why he has the tools to succeed:
1. His swag, his style. His quick twitch, ADD behavior which is a wrecking ball to anyone who gets in his way. He never takes NO as an answer.
2. Ari Gold may be considered an a**hole to many but results don’t lie and that’s something you need to learn in life. The key in life is to get the job done. If your boss asks you to do something, do anything to get it done. Of course follow some form of moral/ethical code as we don’t want to create another Bernie Madoff but beside the point get the job done.
3. Ari Gold knows how to work the system. Never cheat the system, use it to your advantage. Its not lying if you don’t tell them the full extent of the details, find out the information you want to know first then let them in. find flaws in a system and take advantage of them.
4. Ari Gold is scared of no one, no opportunity. Take on any challenge any opportunity in life as worst comes to worse you fail but once in a while you will succeed and reap the riches and be glad you made the jump. Remember, you miss 100% of the shots you don’t take.
5. Ari Gold knows how to convince anyone in any situation. Learning to convince people to side with you, take a shot in you, believe in you is the key in life. If you .
6. Ari Gold has a compassionate side and knows the importance of friendship/relationships. Throughout the series you will see the bond grow between Vince and Ari. Never burn bridges that hold you up. There is no satisfaction in success if there is no one to share it with.
Becoming a success investor is not rocket science but it does take some intelligence along with setting out a plan of action. Below are Five of Stocks on Wall Street’s Rules to Becoming a Successful Investor:
1. Invest without emotions. Use your head not your heart. Emotions get in the way of logic, make a plan that will let you be accountable and disciplined. Don’t get overcomplicated with your plan either. It can be a simple trading strategy with simple rules. Like Warren Buffet always has said, “you don’t need to be a genius to make good money investing.”
2. Don’t set your expectations too high, be realistic. Don’t expect to make $1,000 off a $2,500 investment in six months time. While it is always doable, don’t count on it. Set realistic expectations and then be happy when you exceed them.
3. Don’t think a trade is always going to recover; sometimes it’s the smarter move to take a small loss now instead of taking a large loss later.
4. Don’t always think a good company is going to make you good money. You make money from the company’s performance. Sometimes good companies will struggle and the stock can go down whereas sometimes-bad companies stocks will soar.
5. End of day do your own research and be comfortable with the trade before you make it. Don’t make a trade solely on what someone else says, do your own analysis and if you agree with their investment idea then be confident and make the trade.
We are always hear to help you with any of your investment questions or needs. Two programs we now offer are Free Portfolio Reviews where we will overlook your investments, let you know what we think about each position, inform you on whether or not you have a balanced portfolio, & give you a detailed report on our findings.
Also if you don’t invest at all we do comprehensive Free Brokerage Account Setup’s where we will get you setup with the right brokerage account that fits your personal financial needs along with giving you an investment plan to help you reach financial freedom.
Recently we were thinking about movies with some kind of financial lesson. The financial side of making films has always intrigued us. Historically the Oscars have always been proof that the biggest budget doesn’t always give the best ROI. In 2010, the lowest grossing Oscar winning film in history – The Hurt Locker – beat out the highest grossing picture in history – Avatar.
Here’s my list of the top 10 movies ever made that have a financial lesson inside of them.
1. Boiler Room (2000) – A college dropout gets a job and enjoys fast success at a brokerage house selling phony stock. However, the job turns out not be as legit as it sounds. This film is mix of Wall Street and Glengarry Glen Ross thrown in. Although there’s no character here that can compare to Michael Douglas’ Gordon Gekko.
Lesson: Great morality lesson dealing with the desire to get rich quick, regardless of the consequences.
2. Wall Street (1987) – “Greed, for lack of a better word, is good”. This line by ruthless corporate raider, Gordon Gekko, summed up the business ethics of the 1980s, when greed, corruption and the predatory nature of the financial world was at its most conspicuous. The film charts the ascent of a young, ambitious stockbroker who’s taken under Gekko’s wing and struggles with whether it’s better to have money or integrity. Gekko is the embodiment of corporate malfeasance, but also portrayed as a business guru. His glamor and power probably inspired a lot of young men to enter investment banking over the last two decades. As Gekko said, “It’s all about bucks, kid. The rest is conversation.”
Lesson: Greed is good. What’s worth doing is worth doing for money. Lunch is for wimps. If you need a friend, buy a dog. So goes the wisdom of Gordon Gekko, ruthless investor, legendary financier – and the star of one of the best movies ever made about money. This film also provides a great backdrop to the landscape that led to the financial crisis of 2008.
3. Glengarry Glen Ross (1992) – Times are tough. This is the ultimate real estate high pressure sales environment film where making money is the bottom line. A desperate group of Chicago investment property real estate salesmen suffer in a down market, a sales contest is launched and anyone who fails loses his job.
Now that the property bubble has burst, some real estate offices may soon seem a little bit more “Glengarry”. There’s no room for losers, only ‘closers’ will get the good sales leads. Some regarded this film as a critique of the impact of Reaganomics.
Lesson: Too much pressure to succeed can boil over into tragedy with unforeseen consequences.
With the upcoming premiere of the film “Wall Street – Money Never Sleeps” it got me thinking about movies with some kind of financial lesson. The financial side of making filmshasalways intrigued me. This year’s Oscars were yet again proof that the biggest budget doesn’t always give the best ROI. In 2010, the lowest grossing Oscar winning film in history – The Hurt Locker – beat out the highest grossing picture in history – Avatar.
Here’s my list of the top 10 movies ever made that have a financial lesson inside of them.
4. Maxed Out. Hard times. Easy Credit. The Era of Predatory Lending (2006) – This documentary shows how the modern financial industry really works. It explores America’s love with credit and leveraged debt and tells us why the poor are getting poorer and the rich getting richer. When Hurricane Katrina ravaged America’s coast, it revealed that America was far from the world’s wealthiest nation. It also highlighted America’s crumbling beneath a staggering burden of individual and government debt. Maxed Out shows how predatory lending was out of control, including credit cards pumped to college kids who had no income. This is a great movie. It’ll make you feel different about your money.
Lesson: It delivers a great lesson on how to borrow and shows why you don’t want to live on credit. Credit is the devil. Do you know anyone who got into trouble because they didn’t borrow too much money? Maxed Out paints a picture of a national nightmare which is all too real for most of us – out of control spending and an irrational use of credit.
5. Enron: The Smartest Guys in the Room (2005) – Before Bernie Madoff, there were Ken Lay and Jeff Skilling who ran the Houston energy firm that was going to reinvent how energy was going to be done in America. Enron was highly profitable, had a great amount of cash flow and earnings and the stock price soared. Its executives cashed out options worth millions and told employees their best 401K option was Enron stock. Thousands lost all their retirement savings because they put all their bets on one company. Took Enron 16 yrs to from 10b assets to 65b assets, but it took them 24 days to go bankrupt. It won the Academy Award for best documentary.
Lessons: Have a financial plan, have a discipline. If you have a stock that looks too good to be true and it just keeps going up, up, up, it’s probably too good to be true. Diversify, Diversify, Diversify. Don’t put all your eggs into one basket.
6. Working Girl (1988) – Melanie Griffith plays Tess McGill. Endearing 80s film. Ultimately she takes a job as a secretary but she wants to rise in investment world. Wants to rise to power, combines her business degree from night school w/ her street smart acumen & pulls of a mega-merger. Total fantasy. Prince charming happy ending w/ Harrison Ford. “I have a head for business and a body for sex.”, says Melanie Griffith’s character. Go back to night school, go back & get a degree. Go get educated, you’ll get leverage. No one can take your education away from you.
Lessons: Your education, your smarts can’t be wiped out in a recession. Your earning power is rooted in your skills, in your education. Provides an entertaining reminder that if you have something to offer your co. & they don’t seem too interested, then take your skills elsewhere. If you are a super powerful earner at one job, you can make yourself a super powerful earner anywhere.
7. Treasure of the Sierra Madre. 1948. Classic western cautionary tale about how not to launch a venture. If you took everything that Howard Dobbs & Kutan did in this movie: “Get rich quickly without a credible business plan.” “Badges, we don’t need no stinking badges.” Don’t swing blindly, don’t come up w/ a get rich quick scheme, don’t do a pyramid scheme, don’t sell products from your house to your friends or recruit your friends.
Lesson: In life, as in baseball, you’re gonna strike out. You don’t want to strike out blindly while your pursuing a huge home run. You gotta know your business, know your partners, know where you are in all of this.
8. Mr. Blanding Builds His Dream House (1948) – Was remade into The Money Pit, starring Tom Hanks & Shelly Long. Owning a home ain’t cheap. It can turn into a massively expensive ordeal. Home is really a money pit. Owning a home comes w/ a lot of responsibility, gotta have credit, gotta have a down payment, pay your bills, maintain the home, gotta know the risks up front. It’s expensive. You gotta know the worse case scenarios, all the risks, the downside.
Lesson: Shows how the American dream of owning a home can go terribly wrong. Home ownership is not for everybody and shouldn’t be promoted as such by the government.
9. Confessions Of A Shopaholic (2009) – About a chic who’s struggling with a debilitating obsession with shopping and has 12 maxed out credit cards. She unintentionally lands a job as a financial journalist and falls for a wealthy entrepreneur. Don’t buy a $400 watch because it quickly depreciates to nothing. I will buy a $4,000 Rolex – nothing less than a Rolex — because it can still be sold 10 yrs after you buy it for what you paid for it. You use credit to buy things of value: an education, a car to get you to work, (I prefer to buy 2-yr old used cars because it loses half its value up front when you drive it off the lot, but you can still get 50-60,000 miles out of it.)
Lesson: Only use credit for things that have value. Pay cash for everything else.
10. Brewster’s Millions (1985) – The ultimate spending spree is something that most of us have daydreamt about at some time. A minor league baseball player, Montgomery Brewster, (Richard Pryor) has to waste $30m in 30s days in order to inherit $300m; however, he’s not allowed to tell anyone about the $300m deal.
Lesson: How corruptible too much money can be and how difficult it can be to use it responsibly.
Hedge Fund titan Jon Paulson pulled off the greatest trade of all time in 2007, raking in a cool $15 billion in his bet against subprime mortgages - according to the International Business Times who ranked the top ten greatest trades of all-time. Some were brilliant masterminds, others were just plain lucky.
The Top Ten Greatest Trades of All-Time
1. John Paulson’s bet against sub prime mortgages made him $15 billion in 2007
2. Jesse Livermore’s call on the Crash of 1929 (a legendary trader featured in the popular book, Reminiscences of a Stock Operator).
3. John Templeton’s foray into Japan in the 1960s (a true investment pioneer, Templeton foresaw the rise of Japan after World War II and profited hugely from it).
4. George Soros’ breaking of the Bank of England in 1992 (Soros made $1 billion).
5. Paul Tudor Jones’ shorting of Black Monday in October 1987 (he predicted the crash, bet a bundle & tripled his money as the market crashed 22% in one day).
6. Andrew Hall’s $100 oil prediction (with oil trading at $30 per barrel in 2003, Hall bet prices would rise to $100 in 5 years; they did and he took home a personal paycheck of $100 million in 2008).
7. David Tepper’s 2009 bet on financials (as the market hit its low in early 2009, Tepper bought financial services stocks & his fund earned $7 billion that year ($4 billion of that went to Tepper).
8. Jim Chanos’ prescient shorts (his sharp analysis led him to predict the demise of Enron, WorldCom, and other firms, and he is known as the best short-seller in the world).
9. Jim Rogers’ early call on commodities (he was bullish on commodities back in the 1990s & has been riding them to great profits ever since).
10. Louis Bacon’s geopolitical play (he correctly predicted that Saddam Hussein would invade Kuwait in 1990 & profited handsomely by going long on oil & shorting stocks, which helped his fund return 86% that year).
Most of these trades were ‘global macro’ plays where huge, concentrated bets were made by analyzing fundamental economic/business conditions. These investors excelled at turning a great observation about the world into a great investing idea. But, while these make the headlines, you never hear about the other investors who made a big call and missed, and ended up out of business.
It’s almost impossible for regular investor folks to make a ‘big score’ like these traders. Rather than trying to throw a touchdown pass on every play and make a big score like these traders, the smarter game plan is to focus on trying to get consistent first downs. Do your homework, watch market/sector developments, don’t chase stocks up or down. Do that, and the score may take care of itself.
Source: International Business Times
Shares of the iShares MSCI Turkey Investable Market Index Fund (NYSE: TUR) has soared throughout 2013 and has even hit its 52-week highs trading at $77.38. Turkey as a whole has been experiencing robust growth as the Borsa Istanbul National 100 has surged to its highest levels in the past 25 years. We have been huge supporters of TUR dating back to August 8th, 2011 when we issued our first ‘BUY’ rating for the ETF in our article ‘iShares Turkey ETF (TUR) Poised for Success‘. Since then, TUR has appreciated +69.67% over the past 22 months.
What Attracts Investors to TUR
Investors looking to play the Turkish markets have few options. iShares MSCI Turkey Investable Market ETF (TUR) originally launched in 2008 is the only option avaliable to investors seeking a pure play exposure in the Turkish equity space. TUR is also the only ETF with dedicated Turkish exposure. The banking sector also plays a prominent role in the investable market in Turkey and TUR has a high concentration of financials in its portfolio.
What To Expect Going Forward
When it comes to Turkey, it has been the talk of a higher sovereign debt rating that has been lifting TUR, the lone ETF devoted exclusively to the country. Turkey, which has been engaged in a multi-decade conflict with Kurdish militants in the Southeast part of the country, is working to end the conflict. The government there is in negotiations with Abdullah Ocalan, the jailed leader of the Kurdistan Workers’ Party or PKK, in a bid to end the bloodshed.
Just last month, Moody’s Investors reported that Turkey’s ongoing efforts to bring an end to the conflict could be a positive credit step. Fitch Ratings upgraded Turkey’s long-term foreign currency Issuer Default Rating (IDR) to BBB- from BB+ back in November and the Long-term local currency IDR to BBB from BB, this is huge news as it’s giving Turkey its first investment grade ratings in nearly two DECADES.
This has been great news for investors as the speculation of a possible credit rating upgrade has lifted Turkish banks shares. TUR is heavily centered on the Turkish financial sector with 51.9% of its holdings in financial services stocks, quadruple its next largest sector weight, industrials.
Turkey’s economy has some good signs heading their way. Beyond this falling inflation rate, investors should note that Turkey has seen a plunging growth rate as well.
Turkey has good medium-term growth prospects and a diverse economy. The nation’s debt-to-GDP ratio stands at 39.9%, much lower than the debt-to-GDP ratio of many developed economies. On top of this, the country has a low employment rate, government reforms, strong, solid banking system, and improved credit rating. Adding all these solid growth factors together and Turkey could prove to be a great investment market in Europe for years to come.
If you have any further questions on either TUR, Turkey’s economy or any investment at all don’t hesitatet to contact us at all by emailing us at jameshartje@StocksonWallStreet.com or Follow our Contact Form
Also make sure to tune in later this week for our long-term outlook on TUR along with more detailed analysis on both Turkey and other emerging markets.
If you haven’t booked your summer plans yet, brace yourself. There’s actually good news this year, for a change. Airfares to many popular U.S. destinations have dropped. This is according to the Wall Street Journal who earlier this week posted an insightful article detailing the best places to fly this summer. WSJ added an entertaining graphic as well which you can see below:
As for the airline industry, as many of you know Stocks on Wall Street has been very bullish the past two years. Most specifically when it comes to the five airline stocks we hold:
Allegiant Travel (NASDAQ: ALGT)
Boeing (NYSE: BA)
Delta Air Lines (NYSE: DAL)
Southwest Airlines (NYSE: LUV)
UAL Corp (NYSE: UAL)
For those of you who haven’t read any of our past articles on the airline industry, simply click on the links below:
Going forward, we think that the airline industry might have seen it’s best days. We will be going into more detail about our thoughts in our article next week so make sure to tune into SWS throughout the week to find out more!
Source: The Wall Street Journal
If you were able to flip a switch & go back a year ago today you know what you would have? A lot of big questions marks & some major unknowns about what to expect from Stocks on Wall Street most recent investment advice. On April 30th, 2012 to a lot of people’s surprise, Stocks on Wall Street published an article titled:
The title is rather self-explanatory but just to make sure it’s clear to everyone we recommended our readers to invest in three relatively unknown, highly speculative small to mid cap Chinese tech stocks.
When we originally made these picks it was an interesting time to be involved in the technology sector. Mark Zuckenburg has just taken Facebook public and thanks to the IPO heard around the world, many analysts and investors alike focused their full attention on Facebook’s IPO not recognizing that there was plenty of better investment opportunities out there, they just needed to be found. At the time, analysts were raving about America’s growing tech boom and all the different strong technology giants we had in the U.S. The thing was, many of these U.S. tech giants had done nothing to prove themselves and really it was the media blowing everything out of proportion most infamously the whole Facebook IPO and it’s 24/7 news coverage. When you looked at the facts, it was really China with the upper hand and the one in the driver seat. With a population of over 1.4 billion and a booming tech industry it was really China who had emerged as the true player in the tech world holding many of the top up and coming tech stocks. At the time our favorite Chinese tech stock was Tencent Holdings who is the equivalent of Facebook to China. All you need to do is put both Tencent Holdings (0700.HK) and Facebook’s (FB) charts next to each other to see which company was leading the way. At the time, we had already been current Tencent shareholders leading even more to our reasoning of finding a completely new investment route than we are use to.
Instead of choosing to invest in what many considered to be China’s three can’t miss, large-cap tech stocks. They are as follows, Baidu (NASDAQ: BIDU), China Mobile (NYSE: CHL), & Sina Corporation (NASDAQ: SINA). We on the other hand decided to take the road less traveled and in this case steep.
Collectively we decided we would target three small to mid-cap Chinese tech stocks. The highly speculative nature of the picks was something that intrigued us quite a bit. While these stocks were relatively unknown to the average investor they weren’t to us. Like when making all our investment decisions, we made sure we new the inside and outs of all three picks and while they had some relatively high risks to them we believe the potential gains made them worth the risk. As a result, we invested in the following three Chinese tech stocks and for those of you who have read our original article you would know that we did outline the speculative nature of these picks just so our readers new that they weren’t your typical, conservative investment opportunity. The three stocks we invested in were the following:
- RDA Microelectronics (NASDAQ: RDA)
- Spreadtrum Communications (NASDAQ: SPRD)
- Vimicro International (NASDAQ: VIMC)
Hands down we had made the right decision & no we were lucky we avoided investing in any of the Large Cap Chinese Stock Picks. Instead going the route of our three speculative Chinese tech plays ended up being the right call. You can overlook these things in every possible nature but overall our decision paid off big-time especially when you factor in how our three Large Cap counterparts performed during that same time period.
If we had gone with our large cap tech strategy we would have held positions in the following:
- Baidu (NASDAQ: BIDU)
- China Mobile (NYSE: CHL)
- Sina Corporation (NASDAQ: SINA)
Over the past year, all three stocks performed well below their expectations producing negative overall yields across the board.
- Baidu (NASDAQ: BIDU) -36%
- China Mobile (NYSE: CHL) -2%
- Sina Corporation (NASDAQ: SINA) -6%
How happy do you think our readers would have been if all we had to show them was a total net loss of -44%? Not happy one bit, we can tell you that.
Luckily, we chose the alternative route & as a result we believe our readers will be extremely pleased with our overall performance. Over the past year, all three stocks have taken virtually a different route than planned but the good part is RDA was the only pick that failed to produce any substantial gains. That’s right, RDA really struggled last year & heading into 2013 with the overall share price falling -28%. The good news is that SPRD decided to have an exceptional year grossing +57%, which will put us comfortably back in the lead. Finally, last but not least we have VIMC who performed steady & strong all year long grossing a total of +17%.
1. RDA Microelectronics (NASDAQ: RDA) -28%
2. Spreadtrum Communications (NASDAQ: SPRD) +57%
3. Vimicro International (NASDAQ: VIMC) +17%
As you can see, it was quite a different tale of the two story lines.
A large part of our success comes directly thanks to the exceptional year that SPRD had appreciating over +57%.
You can’t let VIMC’s performance & achievements go unrecognized, as +17% is still a great one-year yield.
As for RDA, there’s not much we can say other than it just wasn’t their year. If anything, they were lucky they got to team up with such a dynamic duo as RDA’s -28% would them only behind BIDU as the worst pick of the group.
Not quite done just yet, there is one last thing we’d still like to analyze. Lets see how our 12-month price targets matched up with each picks actual total net gains.
To start we have VIMC who we originally bought at $1.28 per share. While VIMC had a solid year appreciating +17%, it didn’t come close to our 12-month price target as we set the bar ridiculously high with a price of $2 per share. This would have resulted in a total yield of 56%. C’mon now they’re not SPRD lol!
As for SPRD, they were another pick where we set the bar ridiculously high. We bought our original shares at $13.80 so issuing them a 12-month price target of $21 per share is a tough feat as that’s a total yield of 52%. We sure hope you all remember just how great SPRD performed & the yield they brought in this year as even though we set the bar high, they still beat it by a cool +5%.
Last but not least we have RDA holding up the bottom at -28%. When we first invested in RDA it was trading at $12.87. Originally we had anticipated RDA would at least be trading in the positive territory throughout 2012 & 2013 so we set a modest 12-month price target of $14.50 resulting in a total yield of 12.66%. Sadly even with the modest expectations it just wasn’t RDA’s year at all, lets just hope they come back next year stronger than ever.
To some people the RDA pick will bother them as they have a tough time accepting defeat especially if that was your decision making that let to the defeat. But since all three picks were made collectively together it’s in our best interest to put RDA behind us & focus in on the all the good things that came of today. It’s all about looking at the big picture & seeing that there is nothing worth complaining about as in fact we should be quite satisfied with ourselves & equally impressed as producing a total net yield of +46% is a great achievement. It stands even more impressive when you factor in just how bad the Chinese large cap tech stocks performed. If there is one thing you can still easily see is that our economy is still struggling worldwide & that we are still a ways away from times of economic prosperity. These aren’t your fathers boom years where whatever you put your money into in the markets it just went up. You try that kind of strategy now a days & you’ll be quickly asking where’d your money go. It clearly takes a strategic investment mind & someone with in-depth knowledge about the markets & what they’re doing to produce consistent gains trade after trade.
A comparison we always like to make is to see how both the NASDAQ & Dow Jones Industrial Average have been performing during the same time period. Over the past year it was actually the NASDAQ who slightly edged out the Dow Jones appreciating +14% compared to +12.15%. That’s where I like to factor in our average yield per pick which was +15.33% & you can see that even with RDA’s struggles we were able to beat the markets & that we made the right overall decision in investing our money. Now the next question is where to next?
Everyone make sure to tune in later this week for more in-depth analysis on all three of our picks. Stocks on Wall Street will be reassessing our overall position on each of them, offering new analysis & guidance going forward, we will be again handing out our 12-month price targets along with offering our final overall decision on whether we are going to hold onto any of the three stock picks or whether we decide to take our gains & relocate somewhere else to find the next great investment opportunity.
Mark Cuban went onto CNBC to discuss the current state of the markets and Cuban responded by saying ’I rarely invest in stocks as there are no new names, new energy or new opportunities in stocks because of a lack of trust in the market.’ Does Cuban have a valid point with his call on the markets lack of new products, names, or opportunities?
Here are three of the biggest risks and threats to your financial future and your wealth today. Also read for advice on how you can exert more control over each one and enjoy more of what’s yours.
Risk #1: Currency Fluctuation. The U.S. dollar has taken a real beating this past year and is expected to stay down over the long term. Having all of your assets in U.S. dollars (or any single currency) is not sound financial planning. You don’t have a diversified portfolio if all your assets are in one currency. By going offshore and holding portions of your assets in other currencies, you are truly diversifying and protecting yourself from the ups and downs of one currency.
Investing in currencies on your own, without an ETF, can be difficult. Most retail investors are better off with currency ETFs (exchange-traded funds) which track a single foreign currency or basket of currencies by using foreign cash deposits or futures contracts. Currency ETF’s allow investors to speculate in the currency market without the risk of investing directly in currencies and without entering the forex market. Some of the most popular currency ETFs are offered by Wisdom Tree Dreyfus, Rydex, PowerShares, Market Vector and Barclays. But you need to do your homework before diving in.
Risk #2: Rising Taxes. Beginning Jan. 1, 2013, all American citizens will experience significant tax increases, many in the form of hidden taxes and fees. At the same time, U.S. citizens with foreign bank accounts may pay a withholding tax of 30% on transfers of funds to and from these accounts (a provision of the recently amended and little-known HIRE Act). So, if you run your own business, it makes great sense right now to think about moving your business to a more tax-friendly environment offshore. Or, you could stay in the U.S. and keep an account offshore where it is free of U.S. tax obligations.
The key point is that, whatever you’re going to do, you should do it as soon as possible and well in advance of 2013.
Risk #3: Litigation. The U.S. is a litigious society; a new litigation suit is filed every 17 seconds. This may or may not affect everybody. But, if you’re a doctor, for example, or someone with a high profile who’s more susceptible to being sued, then you understand the increased risk. In this case, the best solution is to protect your assets by moving them offshore. Your offshore assets will be outside the realm of U.S. judgment and, therefore, far more difficult for creditors to get at. This should not be confused with the fact that U.S. citizens and green card holders will continue to be taxed on their worldwide income, no matter where they reside or hold their assets. Income tax is unavoidable other than legitimate tax reduction strategies. However, you can minimize litigation risk to your assets by going offshore.
Back on July 2nd, Stocks on Wall Street released an article on Rex Energy (NASDAQ: REXX) recommending the stock as a ‘BUY’ and signaling to investors to purchase shares at the price of $11.62. Due to overall strong performance and increased optimism around both Rex Energy and the growing region they drill in we decided to upgrade our position and offer some new changes and updated guidance on Rex.
How Has Rex Energy Actually Performed?
Since our recommendation REXX has performed exceptionally well soaring over 39% in a 9-month period all the way to $16.11. At its peak, shares hit $17.33 a total yield of well over 50%. After further examining REXX’s financial statements we are still optimistic especially since overall numbers have improved, better positioning the company for the long-run. Below are some five reasons to continue to be bullish on Rex.
Five Reasons to Continue to Be Bullish on Rex Energy
- REXX’s PEG Ratio improved substantially rising from 0.96 back in July 2012 to currently 0.51. This is direct proof that management’s overall strategy and efficiency have been very effective positioning the company for a strong year going forward.
- The company has beat earnings estimates the last two quarters and as a result consensus earnings estimates for 2013 and 2014 have increased.
- Three initial test results from the Utica prove to be hugely successful and big wins for Rex indicating the liquid-rich area is even more prosperous than they originally projected.
- As a result of all the positive feedback, strong numbers, & overall consistent performance analysts across the board have raised their price target for REXX from $16 to well over $19 a share while continuing to maintain an ‘Outperform” rating on the stock. Overall 82% of the analysts watching the stock have issued a ‘BUY’ rating or higher.
- Like we have mentioned before REXX continues to be a logical acquisition candidate for a bigger player. Why? It’s due to the fact that REXX is a small cap company worth a little over $1B however their robust production, growth and valuable set of assets make them a very desirable company in the eyes of the big players.
What Risk Factors to Account For
REXX is not immune to everything and if there is a weakness it’s the concern in their liquidity going forward especially if gas prices were to fall much lower. Investors shouldn’t be all to concerned however as we continue to see management effectively combatting this issue and in the past they have always found ways to keep production fully up and running so we have no reason to doubt that they would stop such efficient business practices now. In addition, Rex still has various assets for sale, which have helped provide a safety net if liquidity issues were to ever arises. After examining the books, it looks like REXX is in a much better financial situation now then it was just 9-months ago which is a good indicator going forward. When we first recommend Rex, the company had about three years of liquidity before they would have had to start cutting back on their drilling program or finding other sources of cash. Today’s current rate shows Rex has well over four years worth of liquidity, an optimistic sign for investors and further proof of management’s effectiveness.
Increased Spending Followed By Increased Expectations
Going forward expect Rex to continue to perform exceptionally well as they increase the amount of capital they’re spending on production, which in return should deliver much higher revenue numbers. When talking about the successful recent tests and the future potential in the region Rex’s CEO, Tom Stabley, said, “that the company believes the past results demonstrate the huge opportunity that exists for continued superior well performance in this region going forward.” Stabley used these tests as a key reasoning behind the company’s huge capital spending program. Rex isn’t the only one increasing their spending either as both Gulfport and Magnum Hunter Resources are following suit and spending a large portion of their 2013 capital budget on the play. With such a huge increase in capital spending, expectations are very high, as hopefully the move will prove it’s worth generating significant liquids-rich growth for all three companies.
Overall Long-Term Outlook
Overall, we continue to be very Bullish about Rex Energy anticipating huge liquids growth production coming from the Utica shale. As a result we expect REXX shares to continue to outperform their peers and as a result we are raising our original 12-month price target from $18.50 to $20 per share, a total net yield of 72% on the year and an additional 32% from the current stock price.
Delaying making investments in order to launch your career can cost you dearly later on. Smaller investments made between the ages of 18-25 will yield much greater returns than larger investments made later on over a longer period from ages 26-65. Consider the classic parable taught in many basic economic courses:
Jack decided not to go to college. He got a job at 18 and invested $4,000 each year into an IRA. He stopped after eight years after investing a total of $32,000. His sister, Jill, went to medical school, started her medical practice at age 26, at which point she began contributing $4,000 to her IRA. Jill did this for 40 years from 26 to 65. She invested a total of $160,000 and put her money into the same investment as her brother. Jill started investing the same year Jack stopped, and she saved for 40 years compared to just eight years for her brother.
By age 65, whose IRA account do you thing was worth more money?
Assuming both Jack and Jill earned a 10% annual return, Jill accumulated $1,327,778. But Jack had $1,552,739 – $224,961 more than his sister!
|8 Investments ($4,000/yr) – Ages 18-25||40 Investments ($4,000/yr) – Ages 26-65|
Ultimate value at age 65:
Ultimate Value at age 65:
Jack’s account grows to a higher value because he started sooner!
Jack stopped investing at age 26 having invested only $32,000 to Jill’s $160,000. But Jack’s money earned interest for eight years longer than his sister. It wasn’t the money that made him successful – it was the time value of money. Jack didn’t put off investing when he first launched his career. By investing sooner than Jill, his account grew larger.
The moral of this story is not to forego a college education and its promise of higher earning potential. No doubt, Jill earned more disposable income during her career. But Jack’s investment head start was far superior, resulting in substantially greater savings.
Without question, procrastination is the most common cause of financial failure.