If you think about the telephone for years to use a phone people needed to have lines coming into the house and the biggest company in the world which did that was AT&T. The logistics of the connecting of the lines meant it was a very good thing to have a monopoly because the act of placing the lines on poles and in the ground was very capital intensive. The capital costs would keep up competitors, all went well until the invention of the mobile phone and then the model changed. It took a few years and now people’s first choice is mobile. When the choices of the consumer changed, the company with all the assets had to ask could the assets be used for something else? The answer was yes and telephone companies ended buying media companies because they could send the content down the similar system. AT&T bought Time Warner and all was good, until consumers changed what they wanted and willing to pay for. Mobile communications have continually improved and during wait times, consumers are buying streaming services to watch media.

The resulted in declining revenues for AT&T which means content is no longer king at the telephone system. In an article by Reuters, AT&T which is the controlling shareholder of Time Warner has decided to merge its media assets with the Discovery Inc. The Discovery Inc has programs such as HGRV, TLC, Animal Planet and a host other programming. AT&T bought Time Warner for $108.7 billion in 2018. The new company of Discovery which had a market value of $30 billion would be valued at $150 billion. Prior to the merger, Discovery Channel reached 88.3 million homes in the US and its Discovery Plus had 15 million subscribers. HBO and HBO Max has 63.9 million subscribers. The competition of Netflix has 207.6 million subscribers and Disney Plus has over 100 million subscribers.

Linking to dividend paying stocks, every large company which has regular stable income always looks to enhance it. The companies examine their assets and see what would consumers pay for and we have a built in advantage. How it is executed and how well it does are different questions because the regular stable income portion of the company tends to require different management skills. The ability to grow requires more competitive management skills and the people have to fight for a larger piece of the budget to do their work. Consumers change and companies have to change to be valued as highly multiple as possible and stay profitable. If they are profitable, then strategies can be altered as long as the profitable aspects of the business remain for shareholders who are interested in that aspect of the business.

There are more questions than answers, till the next time – to raising questions.

If you think about Microsoft, eventually the name Bill Gates will come up, not only was he the co-founder he owns a lot of shares in the company which has made him one of the wealthiest people in the world. For the past 27 years, he has been married to Melinda, but he recently announced he was getting divorced. With every divorce there is a separation of assets and it may or may not be decision making will be done differently. It could be the two exchanged information about the family investments and both were happy in the investments. The Gates used a firm called Cascade. For a number of years, Cascade has been buying farm land and with the numbers Mr. Gates has the firm is one of the largest private landholder in the US,

In an article by Eric Atkins, Cascade transferred 14 million shares of CN worth about $1.8 billion and 3 million shares of AutoNation worth $315 milion to Melinda Gates for no consideration.

CN was the largest holding of Cascade at 24.4%, followed by Republic Waste Services at 23.9% and John Deere and Co at 18%.

For the world, the New York Times reported the Bill and Melinda Gates foundation which has given away more than $55 billion to health, hunger and education will not change. Bill and Melinda will remain co-chairs and trustees.

Linking to dividend paying stocks, while building and holding a position allows for stability in voting and dividend receiving it is important to remember life is always nearby. People live and die, marry and divorce and relationships change. Depending on the size, it can affect the company and as senior management worry if they have the votes. As long as senior management has the votes, the company can continue to be profitable and pay dividends and change will be at the edges not in the center.

There are more questions than answers, till the next time – to raising questions.

One of the many methods to evaluate whether you should buy a stock is the PE multiple of the Earnings per Share. The price of the share is divided by the earnings per share. If a company does well the earnings can go higher and then keeping the same PE multiple means the stock trades higher. Companies can buyback shares which reduces the number of shares which also means keeping the same PE multiple the stocks trades at a higher price. Most people focus on the earnings, which is done quarterly, will the company meet or beat the estimates for the earnings?

In an article by Thyagaraju Adinarayan and Sujata Rao of Reuters, trillions of dollars in corporate bank accounts are starting to flow to shareholders largely through stock buybacks.

According to JPMorgan strategist Nikolas Panigirtzoglou noted about $360 billion in buybacks were announced in the first 4 months of 2021 compared to $190 billion in the 2020. If you project it to a year, that would be $900 billion which is what happened in 2019. (former President Trump cut corporate tax rates and companies bought stock).

Analysts attribute the buyback rebound to corporate cash that stem from last’s years record borrowing and cuts to shareholder rewards. According to data from Refinitiv cash and cash equivalents rose by roughly $3 trillion at S&P 500 and STOXX 600 companies.

Linking to dividend paying stocks, every company buy back stock, every CFO has an good idea of what the range the stock should be worth and when they are fortunate to generate extra cash, the money has two choices. Reinvest in the business or give back to the shareholders either in dividends or buybacks. Treasurers tend to like buybacks because the number can be adjust each year, while if dividends are raised (which is good), Wall Street punishes the company if they decreased them the following year. Buybacks are part of corporate strategy, you can ask what does your investments do?

There are more questions than answers, till the next time – to raising questions.

Every company tries to grow to where the markets are growing and it takes time and patience. Depending on the company it can try to build operations, but often it much faster and seemingly simpler to buy a company. In the railway business there is a natural moat around it and one of the reasons Warren Buffett has a large interest in a railway company. The natural moat is it is very difficult to put in another railway to have too much competition or in many areas where the railway goes there is often one choice. Economics tell you that if you need to transport over a 500 miles, railways are a very good and if the raw material is a bulk commodity, railways are less expensive than the competition of trucking. There is another factor in any takeover of a railway – a regulatory body called the STB or the Surface Transportation Board. The Board is charged with the economic regulation of surface transportation such as rail and allows prices to increase and mergers to go ahead or be declined. The STB has declined mergers for competitive reasons or has told winning companies to sell off assets in order to have limited monopolies in major cities.

In an article by Andrew Willis two Canadian based railway companies are eyeing the merger with Kansas City Southern which operates a railway network in the Southwest and Mexico. The Canadian based companies are seeing the growth in Mexico and both operate facilities stretching down the Mississippi in the case of CP to Kansas and in the case of CN to New Orleans. If the CP won there would be very little overlap in operations in the case of CN, the STB would likely say they have to sell off assets because of the overlap.

In takeovers, there is usually a saying from the movies, if you ever have seen Tom Cruise staring as Jerry Maguire, in one scene he shouts Show Me the Money. In the middle of May, the CN bid is higher of $200 a share in cash and 1.129 common shares versus the CP bid of $90 in cash and 0.489 common shares. The totals are $30 billion versus a $25.2 billion bid. The Board of Kansas City Southern is willing to pay $700 million to CP and go with the higher bid by CN.

Linking to dividend paying stocks, sometimes companies are seen as better operators and can give up less money, but in the past 10 years railroading has undergone many changes and both CN and CP are very good operators so the difference is cash and people. Cash that shareholders like and people that KSC people will work with in the future.

There are more questions than answers, till the next time – to raising questions.

One of best investors by any definition is Warren Buffett, over the years Berkshire Hathaway has consistently had great results. The company is a cash machine and has over $140 billion in cash to look for value and grow the company. Every year, Mr. Buffett and his partner Charlie Munger discuss Berkshire Hathaway’s values and what they see and expect in the next year. Given the consistency of earnings for Berkshire, many people have gone to the AGM over the years. Berkshire major divisions include: insurance, tech (Apple shares), and energy (including shares in Chevron and pipelines), financial services and manufacturing.

In an article by Ross Kerber, Jessica Dinapoli, Jonathan Stempel of Reuters wrote the audience and shareholders are beginning to change. Mr.Buffett does not like bitcoin, bank-cheque acquisition firms (SPAC) and wild bets on trading app Robinhood and shareholders agree. However when it comes to ESG (environmental, social and corporate governance) standards they disagree.

Shareholders typically vote overwhelming for management, listening to a couple of annual meetings there was over 95% vote for all the motions; during the Berkshire AGM two motions on ESG 25% of the votes were against management. In most AGMs. the Chairman and President count votes before hand knowing the directors often control 35% to over 50% going into the meeting.

What is important is who voted against management – BlackRock, world’s biggest investment management, California Public Employees Retirement System – the largest US public pension fund, and Federated Hermes – has $625 billion in assets under administration (AUM) where among the sponsors of the motions and one expects voted against management.

Mr. Buffett said the ESG motions would not fit the decentralized model the company runs and impose restrictions on their ability to function, however if you believe in climate change you want to see the companies you invest in trying to mitigate their contributions. If the companies are doing it then it works through the supplier systems to stay suppliers.

According to proxy solicitor Georgeson, shareholder proposals on ESG at S&P 1500 companies average 28% support up from 20% in 2017.

Linking to dividend paying stocks, companies do not operate in a different silo than the rest of the economy, they are both part of the solution and part of the problem. The supply chains have moved to particular responses for both financial and practical reasons, to change means an investment to change which may or may not result in an increase in sales. However, companies need to relate the needs of its customers.

There are more questions than answers, till the next time – to raising questions.

Dividend stock buyers are attracted to utility companies and many operate pipelines to move oil and gas. The reason is our economy is dependent on oil and gas and there tends to be a steady stream of usage which translates in stable earnings. In addition, the regulators of the utilities tend to listen carefully to the utilities and offer the ability to raise prices once a year, which continues to produce regular income streams. As an investor you like that.

In an article by Richard Valdmanis of Reuters, the pipeline operator Colonial Pipelines which transports about 2.5 million barrels of gasoline and other fuels from the refiners on the Gulf Coast (which over 50% of the refinery capacity in the US is) to consumers in the mid-Atlantic and south eastern US. The Pipeline was hacked into by ransomware and forced the company to shut down. Gasoline supplies will be limited and prices rise for consumers and the bigger issue is will the company have to pay the hackers to have their company again. The pipeline carries 45% of the gas used in the eastern US and runs straight from Houston to New Jersey. It also carries aviation fuel for airports including the busy airport of Atlanta.

Commerce Secretary Gina Raimondo has enlisted the government officials and cybersecurity firm FireEye to help solve the problem. There is another pipeline which carries a third of what Colonial does, however any lenghty shortage would increase tanker and truck volumes. The good news for consumers is the White House has a number of actions they can do and are doing. Perhaps because Colonial is headquartered in Georgia, Governor Kemp suspended state taxes for a week.

In a follow up, it took a week before Colonial Pipeline was up to speed again and the best news was the company was did the hacking was shut down and the money taken from their bank accounts. By who, no one is quite sure but it was likely related to the government of the US or Russia.

Linking to dividend paying stocks, many are the lifeblood of their communities and during AGMs it would be good to ask about cybersecurity.

There are more questions than answers, till the next time – to raising questions.

If a company experiences higher costs, what are the options? Try to cut costs? Raise prices? Absorb it so margins are less? There never is a perfect answer but it generally all the above. When prices rise, inflation is a concern.

In an article by David Randall of Reuters, during the end of April earnings season many companies have mentioned inflation and the effect of it on the recent earnings calls, according to Bank of America Merrill Lynch. Saira Malik, chief investment officer of Nuveen’s global equity division, said short term, the struggle will be to reopen. However as demand comes back faster than expected it is leading to logistical and supply-chain issues.

At the moment, equity investors do not appear to overly nervous about the prospects of inflation, with expectations it will be transitory rather than persistent. Consumer prices rose 0.6% in March, while over the past 12 months inflation is up 2.6%.

Federal Reserve Chairman Jerome Powell expects inflation to be in the 2% for several quarters and then falling as the labor market and supply chains readjust to economic recovery.

Frank Rybinski, chief macro strategist at Aegon Asset Management noted as long as the higher input costs are moderate and not excessive for a long period of time, it is not a bad thing.

Companies in the S&P 500 are expected to report a total profit margin of 12.3%, the highest of any first quarter since 2006, according to data from S&P Dow Jones Indices.

Linking to dividend paying stocks, there are always some things you know and some things that need to be confirmed by the market. Is the Federal Reserve Chair correct? why would there be an adjustment? maybe he is wrong? when you invest in the dividend the price of the security will fluctuate, but the overall value over the long term is the reason why you invest. If inflation jumps to over 3% and bonds give you a 5% plus return, it is an easier decision to move money, but when rates are low, what are the alternatives?

There are more questions than answers, till the next time – to raising questions.

When people look at the market and the valuations, often there is a reference to the dot com bubble on 2000. If you go back 20 years, people looked at the internet and how to many money from it, there was a theory the more likes or the more people had access to your website somehow the more money would flow into the accounts. At this time a company called AOL using this theory sent hundreds of millions of discs with their information and people could use their email. People did use the email and the stock of AOL rose to allow it to merge with Time Warner as equals. Time Warner is a media company with billions in dollars of revenues, but it was seen as a non internet company and valuations on internet companies were the thing. Time Warner continue to produce billions in revenue, but AOL did not monetize because advertising were not rushing to the door just because the company had potentially millions of users. AOL revenues never materialized, companies such as Facebook and Apple and Google came in and swept up the billions of dollars of revenues which made them the giants they are.

Companies have assets, AOL was sold to Verizon Communications which itself is very good at making money from the telephone and mobile phones. They thought the cross selling would work, spent a great deal of money and time to make money in the media and advertising world. In an article from Reuters, Verizon decided while AOL and Yahoo have value, Verizon will not be able to grow the business at multiples they expect and sold the companies to Apollo Global. Verizon wrote off $4.6 billion in 2018 and sold the business at half at what they bought it at.

Linking to dividend paying stocks, during the dot com bubble, multiple companies arose to be the next big thing because Wall Street buyers were buying a theme of number of people who see you website or viewers; the only thing is viewers do not translate into buyers. Some do which ones? When Budweiser advertises, some people will drink Bud, but everyone? When prices rise on the “greatest thing since slice bread” you have to be cynical or be able to remove your money from the table quickly. The theory will be everywhere you look but does it make money for the company? If all you see is cash burn or using cash to stay in business, then the money you invest should be speculative money not stable money. For stable money look to companies which can make profits every year and use the tools to continue to make consistent profits. In all industries it takes time to figure out which company will dominate and which ones are an idea to be tested.

There are more questions than answers, till the next time – to raising questions.

The stock market has been on a record run and that is very good, in all likelihood because the fed is keeping interest rates low, the bull run will continue. When things are good, people and money flow into a winning formula. Some of that run will be new money and new ideas are always welcomed on Wall Street.

Wall Street has been dominated by institutional investors for years and the retail investor or the average person has been using pension funds or mutual funds or index funds to invest in the market. In an article by Tara Siegel Bernard of the New York Times News Service the retail investor component according to Piper Sandler is now 22% up 13% from a year ago. The prime reason for the increasing number is the 0 commission accounts.

Robinhood has millions of people downloading its apps; Charles Schwab added 866,000 retail customers up 81% from 2019 and half were younger than 41, most with less than $10,000. 1/3 of the growth is from people under 35.

The young people are watching investment manager Cathie Woods, there are reading Reddit and many are watching videos over TikTok. Similar to other areas on the internet, marketing campaigns by investment firms are using influencers to sell their products and services.

Linking to dividend paying stocks, when everyone first invests they want to make money or change a thousand to tens of thousands to hundreds of thousands. It does happen in the rare instance, if someone is fortunate and used margin and likely more risk than normal. The reality is over a long period of time investing in profitable stocks with a dividend will be more advantageous but it takes time to understand how compound interest works. Those who want to make money help ensure there is plenty of trading and that is why stocks go up and down, but the real winners are the long term winners, and patience is part of the strategy.

There are more questions than answers, till the next time – to raising questions.