Thursday, August 16, 2012

Maple Leafs, Toronto FC, the Raptors, and the Marlies Under the Control of Bell and Rogers. Great Cash-Flow for Bell (TSE:BCE) and Rogers (TSE:RCI.B).

Good news for owners of Bell (TSE:BCE) and Rogers (TSE:RCI.B) today as the CRTC has approved their purchase of Maple Leaf Sports and Entertainment (MLSE).

As part of the conditions to the approval, Bell and Rogers have to invest $7.5 million over the next seven years on new sports themed programming by independent Canadian producers. Essentially, a drop in the bucket for the billion dollar Canadian media titans.

MLSE, and now Rogers and Bell, own the Toronto Maple Leafs, the Toronto Raptors, the Toronto FC, the Toronto Marlies, Leafs TV, Gol TV and NBA TV Canada, as well as two other services that have not yet launched. As a whole, MLSE will be a cash-cow for its new owners, and an excellent source of new incomes for future dividend increases.

Since Rogers already owns the Toronto Blue Jays, the Rogers Centre, and Sportsnet, and Bell owns CTV and TSN, as well as a minority ownership stake in the Montreal Canadiens, the two companies are cementing a dominating position in Canadian media and entertainment.

Both Bell and Rogers already support healthy dividends and solid business franchises. The new acquisition bodes well for Intelligent Investors if they are looking for reliable income and cash-flow generation.

Full Disclosure: Matthew Clarke owns or indirectly controls shares in Bell Canada (TSE:BCE).

Wednesday, August 15, 2012

Great-West Life (TSE:GWO) Poised for Continued Growth and Dividends. Upgraded to Buy by Catalyst Research.

Canadian based insurer Great-West Life (TSE:GWO) has been upgraded to a buy by Catalyst Research. In their recent report, they noted that Great-West Life is "operating above expectations" and that the insurer "continues to be a steady earnings performer." 

1 Year Performance for Great-West Lifeco
Chart from Big Charts

Earnings per share for the last quarter rose 8%, and operating return on equity is close to 16%, the highest among Canada's life insurance companies. Earnings for 2012 are expected to be in the range of $2.05 per share, and with shares currently selling for about $22, that represents a significant value for shareholders. 

At only 10 times 2012 earnings, Great-West Life provides an excellent earnings stream to its owners at a better valuation than the overall market and many other financial companies. 

The dividend payout ratio (or percentage of the company's earnings that are returned to shareholders in the form of a dividend payment) is expected to be 55%, which is fairly low and sustainable over the longer-term. What is Great-West Life's Dividend Yield? 5.5%! In today's current low-yield environment, a dividend of this stature is hard to pass up, especially when it is backed by healthy earnings power.

For the Intelligent Investor, Great-West represents a strong value and a disciplined choice. 

Cheers and Happy Investing. 

Full Disclosure: Matthew Clarke owns or indirectly controls shares in Great West Life (TSE:GWO). 

Tuesday, August 14, 2012

Netflix CEO Buys More Facebook (Nasdaq:FB). Is Facebook a Good Value? Or are Other Technology Companies Cheaper?

Netflix (Nasdaq:NFLX) CEO Reed Hastings bought 48,000 shares of Facebook (Nasdaq:FB) last week at a price of $21 per share. Hastings already holds about 20,000 shares, which brings his holdings to about $1.5 million.

Hastings currently owns $62 million of Netflix stock, and $5.4 million of Microsoft (Nasdaq:MSFT), so Facebook is not one of his larger holdings. Generally, an insider (like a member of the board of directors) is seen as a positive sign for a company's health. Insiders should know more than the general public, so if they are buying, perhaps they know some good news that might be on the way.

Does Hastings know something that we know? Perhaps, but that does not necessarily mean that Facebook is a good investment at today's levels... and certainly not at its IPO price of nearly $40. Since making their d├ębut on the market, Facebook has lost nearly 50% of its value. Once thought to be a $100 billion company, the shares are now worth about $40 billion.

Facebook is cash-flow positive to the tune of about $639 million over the last 12 months, but technology requires continued and significant investments in research and development to stay competitive... so the valuation has to be right to invest.

Facebook Cash Flows:

So what is a good value for Facebook? Most people have no idea! And that should be scary for any investor. Sure, it has about 900 million users... but how many will continue using Facebook? How many accounts are doubles or fakes? How many users actually click on the advertisements? How many new users will join once it is solidified as the social networking tool for old fogies that graduated from school years ago?

Are there other technology companies cheaper than Facebook? Google (Nasdaq:GOOG), Microsoft (Nasdaq:MSFT), Intel (Nasdaq:INTC), Oracle (Nasdaq:ORCL), Apple (Nasdaq:AAPL), Cisco (Nasdaq:CSCO), the list goes on and on and on...

Cheers and Happy Investing Intelligent Investors.

Home-Depot (NYSE:HD) Reaches Turning Point. Richelieu Hardware (TSE:RCH) a More Interesting Investment.

Atlanta based Home-Depot (NYSE:HD) announced a 12 percent increase in earnings and a positive outlook for the remainder of the year.

Home-Depot, the largest home improvement retailer in he world, struggled under the weight of the American housing collapse, but now looks poised for continued strength going forward.

Citing its performance this year, Home-Depot raised its earnings guidance to a respectable $2.95 per share. At a price of $54 per share, that represents a valuation of 18 times one year of earnings. For a fairly mature retailer, a valuation of 18 times earnings is not cheap, so at present levels growth in earnings would be needed for the Intelligent Investor.

The balance sheet of Home-Depot, however, is clean, with about $10 to $11 billion in long-term debt under assets of about $40 billion, so there is little concern in this area:

Should the housing market continue to improve, Home-Depot will show more strength, but since the stock is already up almost 80% during the past year, an improvement in the American housing market is clearly already priced into the shares.

For those interested in something a little off the beaten path in the hardware area, investigate Richelieu Hardware Ltd., (TSE:RCH) a Canadian concern with steady growth, a reasonable valuation, and little debt.

Cheers Intelligent Investors.