Archive for July, 2015

Whether you’re a bullish investor or a bearish investor, stock buybacks are something that you’ve probably been talking about over the last couple of years.

The fact is, buybacks have long been touted by bullish investors as having many excellent benefits, including the fact that shareholders get return capital without being taxed twice, which causes the per share earnings increase and, technically, increases demand for the company’s shares as well.

If you talk to a bearish investor however, they will tell you that buybacks are the reason that earnings have risen during the last few years, and will likely insist that buybacks are just “financial engineering”. Even worse, many bears will tell you that buybacks demonstrate a company’s a lack of strength in their fundamentals.

The truth is that both of these arguments have merit, depending on the specific situation in which they are used.

Take a company that’s in a highly cyclical industry, or one that doesn’t have any barriers to competition, and you’ll find a company that shouldn’t be buying back stocks. The same can be said with a company that has structural issues, or no confidence in being able to sustain a specific level of earnings.

A perfect example would be Weight Watchers International.  The company repurchased 18.3 million shares back in 2012 at $82 dollars per share, totaling $1.5 billion. Recently their stock closed at $8.19 however, and their entire market Is now under $500 million.

On the other side of the coin you have consumer staple companies, utilities and telecom companies, which have proven the stability of their business through several different market environments and built excellent barriers to competition. In this case, any extra cash they have could certainly be returned to shareholders in the form of buybacks.

This of course assumes that they aren’t over-leveraged or don’t have the option of investing that cash in an area with higher returns.

The simple fact is that the more stable an industry is, the more debt they can take on due to their ability to pay interest and principal at maturity, and also because of the confidence that the market has in them.

In short, all buybacks are definitely not alike. Before taking a side whether they are “good” or “bad”, it pays to dig deeper into the specific company and stock that you have in mind.

Most investors looking for and equal-weight exchange traded fund look first at its age but, If you look at the Power Shares Russell 1000 Equal Weight Portfolio (EQAL), you quickly realize that, sometimes, age doesn’t matter.

Tracking the Russell 1000 Equal Weight Index,  EQAL debuted in December 2014. One of its direct competitors in the ETF market is the iShares Russell 1000 ETF (IWB) and, since December, it is handily been winning the competition.

If you look at the year-to-date to comparison it looks like EQAL is only slightly outperformed IWB but, if you go back to their December launch, the gap is much greater, with EQAL having better than a two-to-one margin over its competitors.

One of the main reasons for this is that, rather than merely assigning the same allocation to each holding in their fund without regard to the weight of each sector,  EQAL instead applies an equal weight to 9 sectors as well as an equal weight to each security from those respective sectors.

Another reason that they have outperformed the IWB is that they overweigh energy and healthcare, allocating just 10.2% to both of those sectors respectively instead of the currently allocated 22.5% of the index. They do the same with financial service names, allocating a still commanding 10% of their weight to them in comparison to IWBs 17%.

Rolf Agather, the managing director of global research and innovation at Russell, recently explain the reason that he believes EQAL is performing so well, to whit; “Equal weight indexes are designed to include every sector within an investment universe while potentially lessening the impact of any one sector or company on overall index performance. And Russell’s equal weight approach of equal weighting sectors, and then companies within sectors, is unique,”

5 Habits of Successful Investors

If you were to take the time to look at someone who’s very successful you would find that, no matter what they do, they have certain habits that they never break, and those habits are the backbone of their success.

It’s the same thing with successful investors; they do certain things habitually that lead them to success. With that in mind, below are 5 Habits of successful investors that, if you want to be successful at investing yourself, you should definitely copy. Enjoy.

Habit #1: Successful investors save regularly. If there’s one key to being a successful investor, it’s that you need to save money all the time, even if you have to force yourself to do it. What we mean by that is setting up things like payroll deductions and scheduling online transfers so that your money is saved for you automatically.

Habit #2: Successful investors are extremely patient. While you definitely want to monitor your investments, keep an eye on your credit reports, watch the stock market occasionally and keep abreast of what’s going on, the best thing you can do is sit back and let the market, and your investments, take care of themselves. Long-term investors have always done well, historically.

Habit #3: Successful investors create a strategy, set goals and take action.  Have you ever written a to-do list? That’s what successful investors do all the time, and then take action on the things they have on their list. They create a strategy, based on their knowledge of the market, and take action on that strategy. If it doesn’t work, or needs to be changed, they make those changes.

Habit #4: Successful investors do their homework. Let’s face it, investing isn’t easy and being successful at investing is just plain difficult. You can make it a lot easier by doing your research, reading white papers, attending seminars and otherwise educating yourself. There’s so much information out there, and so many viable information streams available, that there’s really no excuse not to. Successful investors are always increasing their knowledge so that, if an opportunity arises, they can make a decision and take a vantage of it.

Habit #5: Successful investors know went to say “no”.  Habit #4 is very important for this habit, because an educated investor will know when an opportunity is a good one, and more importantly, when it’s not. Being able to say no and not second-guess yourself is extremely important, maybe even more important than being able to spot an excellent opportunity and take advantage of it. The reason is simple; a good investment will make you some money, but a bad investment might lose you a lot of money.

Your website has been shifting product like hot cakes, you’re staring at the big bucks and it doesn’t seem as though demand is tapering any time soon – but you’ll need a business property if you want this success to continue.

Indeed, while the web can help you reach a global audience, your market reach will always be tempered by giants like Amazon or Play. Small web companies are destined to become little more than boutique enterprises without some presence in the real world.

But finding a shop to let can help you reach a local audience and give your service a greater level of respect than a lone wolf operating from their bedroom can command.

There are, however, an almost endless number of perils and pitfalls when searching for a property. So when you’re taking on such a major outgoing, what should you consider?

Location is everything

Imagine a vintage clothing shop in an industrial park, or a funeral parlour in the nightlife district. They’re about as likely to succeed as a unicorn is likely to appear in your local branch of Morrisons.

Before you sign a lease, consider how much of your demographic will actually appear in your chosen location. More than this, know your nearest competition. Is it really worth investing in a prime city centre location when a similar, better established shop is just around the corner?

While your website will appeal to anyone making the right Google search, your business has to be able to reel in casual browser off the street. So make sure you choose the perfect location.

Sharing’s caring

As the internet comes to dominate the mind of shoppers, high street stores have been closing their doors in increasingly large numbers. Store closures trebled last year, with the retailers most severely hit being usurped by their web-based counterparts.

But some savvy businesses have figured out that they need to team up if they want to survive, by offering a service that the net can’t compete against.

Take Waterstone’s as the perfect example. Learning that their customers favour a fresh cup of coffee with their purchases, they teamed up with caffeine experts Costa to share their retail space – and their strategy is keeping customers in-store for longer.

Take a leaf out of their book and join forces with a business to complement your own. It’s almost guaranteed to boost business.

An atmosphere that sells

Ambience is everything in a property. Do you want the cold clinical air of a chain supermarket? Or the kind of warm style that could make customers mistake your company for a sultan’s palace?

Look at your demographic to find the answer. Are they hip and happening, suited VIPs or blue-haired grannies? If you already know, you’ll be able to mould their values to your shop’s design.

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