Archive for March, 2012

Why I am Long on Coca Cola Co. (NYSE: KO)

I recently wrote a post talking about selling my HPQ stock and having some cash laying around, and I made my first move with the excess. I purchased two options for Coca Cola Co. (Symbol: KO). The options expire Jan 18th, 2014 (669 days from now). The cost was $4.70 at a strike price of $70 (which is now $.59 in the money). All in all I have $960 in KO.  The 5-year chart and breakdown is below:

Coca Cola Stock

I know what you might be thinking right now. It is virtually at all time high, why would you possible buy this stock for the long haul? This stock is consistently producing profits even in down times (maybe people find comfort in small pleasures?). Also if the economy recovers, I think this stock is prone to show some growth.

A P/E of 19 might seem a bit higher than my normal tastes, but when it comes to industry standards for beverages, it really is relatively normal. Dr. Pepper Snapper Group (NYSE: DPS) has the lowest P/E, but even if it stands at roughly 14 and Pepsi (NYSE: PEP) has a P/E of 16.20. Monster Beverage Corp is the highest with a P/E of 39.39. I would be absolutely worried about owning beverage companies that might be a trend, because just look at companies like Jones Soda Co (JSDA), once trading at $28.22 a share is now at $.49 (-98.26%).

Overall I think Coca Cola Co. (Symbol: KO) is good fit for my investment style and I look forward to seeing what it can do in the next 669 days.

Why I am Selling My HPQ Stock

As I mentioned in my update on my portfolio, I have been holding HPQ stock even though it has been a complete flop. All of that changed Friday when I took a look at the option chains. I have previously mentioned that you can see how the market perceives a stock’s potential by taking a look at the option chains, and HPQ was looking dismal.

I needed the stock to hit $27.63 to break even and it is trading for $24.49, which would mean I needed a $3.14 a share run to break even. I also had completely lost faith in the stock and clearly the market was not feeling HPQ either. Just take a look at the option chain below.

HPQ Stock

$3.60 for a $23 call expiring Jan 19th, 2013. That is $1.49 in the money! Option chains like that tell me one thing, most people do think this stock is going up any reason amount from now until Jan 19th, 2013. Could it go up, certainly, but the market doesn’t think it will. Why continue to own $2,449 of HPQ stock when I could just throw down $360 and take everything over $23 dollars from now until Jan 2013.  What makes it even worse is the 2014 option chain.

HPQ Option Chain

Instead of paying $360 for the profits over $23 from now until 2013, I can pay $140 more extend it out until January 2014. Simply put, the options showed me that there were not many people thinking this stock could go sky high anytime soon. This is what ultimately motivated me to sell. Let me prove my point even further about option chains showing you how the market perceives a stock.  An apple option chain is shown below.

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You want all of the profits from Apple stock from now until January 2013, its going to cost you $71 an option. That means the stock would have to go to about $656 a share to break even. This option chain shows that the market believes that Apple could go berserk sometime soon.

Even though I took a hit selling out of the HPQ position, I am happy that it is off my portfolio. There is no question that HPQ is not a “sexy stock” right now especially with all of the Apple related news now a days. Ultimately the option chains pushed me over, because if I do want to remain in a position in HPQ, I would rather buy an option at $360 (that is $149 in the money) than have my $2,449 at risk. However I don’t know if I have much faith in HPQ right now. Fundamentality I would still argue it is a strong stock, but that isn’t always what matters with stocks. I think if I was going to buy an option though, it would surely be the 2014 option.

Disclaimer: Always consult a financial professional for investment decision making. Do not use anything on epicfinances.com for decision making of any kind.

Make a Living off Google PageRank

Google PagerankDo you know there are people on the internet that make more than you and they aren’t actually producing anything? Sadly it’s true. How can this be possible? Making a Living off Google Pagerank.

Google Pagerank is effectively how well your website ranks on a given keywords and/or searches,and  the better your rank is the more traffic and potential revenue you are likely to generate.  Google calculates your pagerank based on a very advance scoring system. One of the best ways to “score points” and gain page rank with Google is to have backlinks. When a website links to another website, it effectively marks the website as being more relevant. For instances, the other day when writing about small housing living, I linked “the tiny house blog.” By linking to this site, I have effectively told Google that this site is “the real deal” and legit.

The amount of voting power I have is based off my site’s Pagerank (Scale 1 through 10). This voting power then effectively has value to people who want their website to be viewed as “the real deal.”  So what do web admin professional do? They setup hundreds or even thousands of websites and try to establish Pagerank to sell. You might think this sounds fairly legit, but it rarely is.

Most of these web admins steal their content for their websites or use generators to take existing content and rework it. In fact there are programs out there that can completely rework and reword an existing article to make it unique content within seconds. Luckily my grammar and punctuation is so bad, I think those reworking programs would probably fail on my articles. Heck there are even free web based versions of these rewriters online.

Don’t feel like being the guy ripping off people’s content? Well then buy “unique” content from someone else. There are various forums where you can buy databases of articles for literally pennies. On these forums you will see things like “100 unique articles about personal finance for $12.” Newflash: those are not unique articles.

Suppose that you do find these “unique article” by the barrel full, you can now generate 100’s of websites and wait for a re-ranking from Google. Google re-ranks Pagerank about once a quarter. The question then becomes how much is a Pagerank 1,2,3, etc. website’s backlinks worth? This is a question that is hard to answer, but I would say a Pagerank 2 should be able to generate at least $80 a month. You have 100 of these sites running, you are looking at a cool $8,000 a month or $96,000 a year.

I have talked to two individuals who are building their empire now on backlinks and many of them do not see anything wrong with buying cheap “unique” content and establishing these websites. Most will also go on to tell you how hard maintaining that many websites can be, but frankly I don’t care. These people are generating nothing of value and some are making a good living off these websites.

To make it worse, some of these people preset their websites with hoppers of content to be published. They take a database of 100 articles and have them publish once every 4 days. This means they can buy a domain and $20 worth of “unique” articles, and put their site on autopilot for well over a year.

I thought about posting some examples of these websites, but I don’t want to give these sites backlinks! I also want to make it clear that I know there are some of these web admins that try to do this and fail miserably, but there is a good amount of people who are succeeding. You would also be surprised to see how well some of these people are at hiding the fact that the website’s content is not unique, websites you wouldn’t imagine.

Thinking about launching a career in web admin and website owning? Just be warned it is a dangerous game. Google can discover what you are doing and assess penalties against your websites. Imagine have an empire of 100 successful websites generate $8,000 a month and then waking up one day to find out 90 of your 100 websites are now pagerank 0 and your income just went down 90%.

It’s a crazy world out there and the internet is definitely the wild west when it comes to making money and its amazing to think people are making a living off Google Pagerank.

There are tons of personal finance blog outs there, but I want to take a minute to honor the ones that I find are publishing quality content. Consider this a “carnival” of types of blog articles. These are a few of the articles that stood out to me.

Executing the Defensive Plan by Selling Covered Calls – Cash Flow Mantra

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No one ever gets rich by being frugal Retire by 40

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The Decision To Get A New Job Modest Money

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Why Most Bloggers Miss Out on Passive IncomePassive Income to Retire

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Improving Our Communities Through Real Estate InvestingThe Dollar Disciple
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