When politicians around the world talk about an global economic rebound and it actually happens, the laws of supply and demand are not far away. In the laws of supply and demand, when there is great demand for a good or service the price goes up until new companies come into the market and cause too much supply and then the market sorts itself out. As prices rise, alternatives are found to ensure all those in the supply system can actually make money. If for example, it something was a component costing 10 cents and now it costs a dollar, research and development will find another material doing the same thing costing less because some companies can not pass the higher prices to their consumers.

In an article by Tim Shufelt, Goldman Sachs released a report saying Copper is the new oil. The price of copper on the London Metal Exchange is close to its record high set in 2011, at the writing it was $9,965 a tonne. The reason for the increase is the demand from China.

While some factories left China, many have remained and China’s factories are operating while the rest of the world is in semi-shutdown. In the rest of the world, copper demand drop by 6.4%, but in China demand increased by 4.8%.

In an normal year China consumes half the world’s supply of copper. If you are a bull on copper, you would expect demand to pick up in the rest of the world coupled with a recent estimate suggested 60% of current investment by major global copper producers is aimed at maintaining existing projects, rather than expanding production said David Burrow, president and chief investment strategist at Barometer Capital Management.

Linking to dividend paying stocks, if you own commodity stocks you need to pay attention to supply and demand because the price of commodities rises and follows with the simple supply and demand charts. If you own a company that has services, it can increase prices, for your investments are prices increasing or the same?

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

The information age has taken leaps during the pandemic which is a good thing for just about all tech companies, but similar to most things in life some companies benefit a little more than others. One of the big winners has been Apple. Last month Apple announced it was going to spend $430 billion in the next 5 years including opening a $1 billion dollar research centre in North Carolina.

In an article by Stephen Nellis of Reuters, in addition to the announced spending, Apple said it was generating enough cash to buy back $90 billion of stock, along with its other plans.

In computers, there are 2 large markets, US and China, in China Apple’s sales have doubled led by more than $6.5 billion in iphone sales and Mac computers were a 1/3 higher than analyst’s estimates.

At the present time, the global chip shortage has not been a problem for Apple and one of the strength’s of Apple is their supply chain expertise.

Apple is making more money from its App Store, music or itunes and services for fitness.

For the quarter ending March 27, Apple sales were $89.6 billion and profits at $1.40 a share. Analysts were expecting $77.4 billion and $0.99 a share.

Besides the buyback of shares, Apple raised its dividend 7% to 22 cents a share.

The iphone sales were $47.9 billion; sales of Mac and iPads were $9.1 billion.

Apple has 660 million paying subscribers on its platform up from 620 million (which is the reason why services fees have increased).

Linking to dividend paying stocks, Apple is the type of stock you want to own over the long term because it has products it can sell at high margins (iphones) and a guaranteed subscription base of fees. The ability to add extra fees is easily possible with over 600 million subscribers. Given the ability of Apple to research and development and big tech to track everything people do, advertising fees should increase. As an investor you like that, as an individual, sometimes you think it is too much, but there is a trade off.

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

In late April. Microsoft reported its quarterly earnings and similar to many large tech companies, they are making a lot of money. According to a report by Reuters, Microsoft met analyst’s expectations and beat profit estimates. Revenue and adjusted earnings for the company was $41.7 billion and $1.95 a share.

If you have a computer which is not an Apple you are using Microsoft’s system which means most of the world’s computing is done on Microsoft. This means there will always be a steady stream of income to Microsoft which is good for investors.

All companies including Microsoft wish to grow and some actually achieve growth. One of the methods Microsoft is growing is through the cloud. The cloud is where the real growth is occurring and to understand the Cloud, various research must be done. One example of research is a You Tube Video by the biz doc or Tom Ellsworth who is based in Dallas, Texas. Mr. Ellsworth does case studies and there are very easily to follow and in video he examined Amazon and AWS.

Amazon through AWS is the market leader in the cloud and it accounts for 65% of the profits of the company. The person who headed AWS is taking over as President of the company. AWS has kept 33% or a third of the market for the past 5 years and it is important to note the cloud has been grown rapidly and is still growing. Microsoft was late to the market and its market share grew from 10% to 20 to be number 2; Google has grown from 5% to 10% to be number 3; IBM is in fourth and has not grown market share with less than 5% and all other companies who had market share are losing market share to the big three.

If you think about cloud services, the key is volume and the ability to large capital upfront costs to have the servers and infrastructure and security. The costs of equipment and security tends to mean the largest companies will have the greatest advantage and they do. Similar to most industries there are always alternatives.

Linking to dividend paying stocks, when you buy the companies you want them to have a steady stream of income and growth potential. The steady stream of income draws you and the potential and actual execution to achieve growth allows you to hold onto the stock. In the case of Microsoft, as a market leader in operating systems, it will always have sales, but how many extra computers will you buy? or the market is relatively stable. However when you know that cloud services is 65% of the profit of Amazon and Microsoft is gaining share, there are more reasons for owning the shares.

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

Climate change is happening and most people in the world believe it is true. When that happens companies have to do something to ensure their products will be continually used with very little interruptions. That is good for the company and the consumer will continue to spend money. With climate change the biggest companies which people come to see as a problem or those that produce carbon or oil companies. What is a oil company to do? They can do nothing, fight the issue, or try to be part of the solution because the world is not going to go off oil in the next calendar year. It will take much longer than that.

In an article by Terje Solsvik and Nerijus Adomaitis of Reuters, Sweden’s Lundin sold what it said is the world’s first oil cargo certified as carbon-neutral at the point of production to Italian refiner Saras.

The crude from the Norwegian Edvard Grieg oil field was certified as carbon-neutral from exploration, development and so called Scope 1 and 2 emissions, the major emissions caused by the oil’s final use. Lundin Oil said the North Sea Grieg field causes only 3.8 kilos of CO2 emissions a barrel, 5 times less than the global average.

Emissions from producing the 600,000 barrel cargo amount to 2,302 tonnes of CO2 an equivalent of which will be captured by a tree-planting project in Mexico. Lundin said in would invest $39 million in a project to plant 8 million trees in northern Spain and Ghana as part of the company’s wider $750 million to decarbonize its output.

The other option is buy carbon credits.

Linking to dividend paying stocks, some of the best dividend stocks in the world are oil companies and if all they go into carbon neutral, there should be millions of trees being planted around the world. Whether that is the best solution to the problem, it is a good thing to plant trees. Consumers will decide, for your investments you may have to determine whether their efforts are sincere to combat global warming or not?

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

Large profitable companies often remain large and profitable because they constantly buy smaller companies and integrate them into the larger company. It is the nature of the beast, when companies have excess cash flow they can reinvest in the company, buy back stock, increase their dividend or wait for opportunities to buy another company.

In an article by Andrew Willis of the Globe and Mail, a software company called Constellation Software is one of the leading software companies in many niche or specialized markets and is worth over $40 billion. Over the past quarter of a century it has bought over 90 companies. The company specializes in vertical market software. For example 10,000 libraries around the world use a firm called Softlink International, Constellation owns it.

Constellation was looking to do more acquisitions of over $300 million, however they found they had a problem. The company tracked every major software acquisition over the past 6 years which is between 40 and 70 companies a year. Most of these companies were sold by investment bankers at an auction, but Constellation was not being invited to the auction. The company’s research showed they were being asked to bid on just 16% of the sales.

The reason is investment bankers viewed Constellation as tied to high returns for the acquisitions or hurdle rate. The bankers believed private equity funds were likely to pay a higher price and went to them as they can and did pay premium prices. (if the premium price is paid, commissions to the investment bankers are higher). The reason why private equity firms pay higher prices is the expectations of the company. The funds hope to bring the company to an initial public offering (IPO) within 5 years and when the company trades on the public markets the private equity can sell its holdings and do the process all over again. In contrast, Constellation makes it money by making the company better over the long time. (think about if you went to a charity auction and bid on something, are you going to use it, keep it, donate it to something else or sell it?)

Constellation wrote in their annual report, which investment bankers read, they were dropping its hurdle rate, accepting a lower return on the $1 billion they generate each year. In the past, Constellation was expecting to generate $30 in cash for every $100 invested or Return on Invested Capital (ROIC) on 30%.

To maintain the higher cash margins it can invested, the company stopped making special dividends, but can keep expanding using a 20% ROIC. It also spun out a subsidiary as a public company marking the first time it had gone through the process.

Linking to dividend paying stocks, one of the reasons for owning dividend paying stocks is to allocate the dividends when they come in during the month or the excess cash. As dividend owners you have time and patience or the ability to be disciplined in what you do with the cash. As the total gets larger you have more options and that is a good thing. Time and patience are on your side to buy what you want rather than what is hot. There are many shareholder meetings at this time of the year, maybe you want to know what is your company’ s expected ROIC?

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

Investing in the stock market, particularly in the last few months hopefully has given you gains and that is part of the reason you invest. Once you have made gains, then you want to ensure that you do not lose money and one of the best methods is to invest in consistently profit large companies which no matter the economic cycle will make profits. When they make profits and pay dividends you have choices what to do with the dividends and that is a good choice.

Which companies to look for, Anthony Menard of Inovestor Asset Management has some ideas: his criteria was:

market cap higher than $10 billion

EPI of 2 or higher, the return on capital divided by the cost of capital

Relative EPI of 0.6 or higher – the ratio uses the return on capital adjusted for its market capitalization divided by the cost of capital

Positive 3 month percentage change in the economic value added (EVA) metric. This metric gives investors a sense of how much value the stock is adding for shareholders and is arrived at by taking the net operating profit after tax and subtracting the cost of capital.

One year sales growth higher than 2% or higher growth than inflation.

Company Mkt Cap EPI Rel 3M EVA 1 Yr Sales ROC P/E Div Recent

US $Bil EPI Grth % Grth % % Yield Price

Clorox 23.990 4.5 0.9 27.6 22.7 25.3 20.0 2.3 190.73

Progressive Corp 57.790 4.4 1.2 98.2 9.3 38.8 10.2 0.4 98.76

AutoZone 32.960 3.7 0.7 10.3 10.9 29.3 19.0 0.0 1495.84

Vertex Pharm 56.780 3.6 0.6 18.0 50.3 28.7 21.3 0.0 219.39

Regeneron Phama 53.840 3.2 0.9 63.4 8.1 23.5 16.5 0.0 502.60

Bio-Rad Lab 18.570 2.7 0.6 30.2 10.1 19.4 4.8 0.0 600.87

Dollar General 51.860 2.6 0.8 12.9 21.6 16.2 20.4 0.8 216.74

General Mills 37.390 2.4 1.3 46.2 11.1 12.1 14.9 3.3 61.30

Target Corp 103.990 2.3 0.6 32.3 19.8 16.7 24.1 1.3 208.55

PerkinElmer 14.920 2.0 0.7 80.5 31.2 16.2 20.5 0.2 133.16

Linking to dividend paying stocks, part of investing is not to lose money, which means try to invest the bulk of your investments in dividend paying companies. There will be growth as stock prices go up, but if the market is sideways you will still be earning dividends. Whether you use the data above, the most important aspect is to do your homework and many platforms offer the data so you do not have to calculate everything, you can. However there should be some ratios you look to for comparison and have an idea of when to ensure your portfolio needs to be managed through diversification. When do you sell? As a dividend investor you tend to hold for a longer period of time, but when do you sell or seek alternatives?

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

Every few years, a new investment manager rises from the ranks of many investment managers to gain prominence among retail investors. The investment manager typically has a winning record on the market, looks to continue and is among the many people who are regularly interviewed on the MSNBC and other shows. In the past it was Wall Street Week, but the shows come and go.

One of the most prominent investment managers is Cathie Wood of Ark Research and she focuses on growth stocks. Telsa’s stock has increased the profile of Ark.

In an article by Thyagaraju Adinarayan of Reuters, Cathie Wood’s Ark funds bought $246 million worth of Coinbase shares which went public on the Nasdaq Stock Exchange. Coinbase is a cryptocurrency similar to Bitcoin.

To buy the shares, Ark sold some Tesla shares. Recently, Ms. Wood said Telsa could move from $700 to $3,000 in 2025. The Ark fund sold $178 million in Tesla shares but it remains the biggest holding, which could easily be linked to portfolio management. When a stock becomes too big of a holding for a fund, it has choices to hold or sell, otherwise the portfolio is too dependent on the one stock. (if the stock continues to go up, few are concerned; if the stock dips, then they will be redemptions in the fund because the growth is slowing).

The Ark fund saw its assets under administration rise from $1.86 billion in 2019 to $22 billion in March of 2021.

Linking to dividend paying stocks, whether you should put money in cryptocurrency or not is up to you, however given some stocks trade on the exchanges if you own an index fund tied to the exchange the stock could factor into the price of the index. With portfolio management, you should ensure that if you do own index funds, they are not the same thing as your individual stocks otherwise there is very little diversification. While it is true index funds go up over the long term because they have rules to change the makeup of the index, if you have to sell or when it comes to sell, there likely will be fluctuation. Invest over the long term and they will have increased.

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

The wonderful aspect about companies competing in mass markets is there is never only one method to accomplish the task. There are a variety of reasons why companies do what they do and be examining different strategies, as an investor you can determine which one works for you the investor and you the consumer.

In an article by Norihiko Shirouzu of Reuters, he compared the strategies of GM and Toyota in relationship to the biggest market in the world for electric vehicles – China. GM and Toyota compete as the number one auto vehicle company in the world.

In North America, the world’s most successful hybird car is made by Toyota the Prius.

In China, there is competition at the high end from Tesla, the low end Mini EV and in the mid range VW and Renault and Chinese companies Nio and Xpeng.

The Mini EV is a no-frills vehicle made a joint venture of GM and SAIC and Wuling. This small vehicle costs less than $5,000. The Mini EV has cut corners that would not be allowed in the US and Europe for example it only has one air bag (for the driver), the car has an anti-lock braking system but no stability control technology which can cause tipping at high speeds. The vehicle is designed to be a commuter friendly in city traffic. The Mini EV is selling 100,000 a quarter. It should be noted, the Mini EV generates green car credits which helps offset the production of internal combustion engines.

Toyota has focused on the mid sized market and SUV, it makes more money, but is taking steps to produce a low cost EV vehicle recently teaming up with BYD – a Chinese battery and automaker in research and development.

Linking to dividend paying stocks, sales are good but how much money does the company make is the key. If a company goes low cost, then it has to do great volumes. If the company does lower volumes, then the margins have to be higher to make profits. There is never one method, but many combinations to take advantage of government incentives and what the market buys.

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

Last month a firm from Hong Kong run by Bill Wang for family money lost a ton of money for itself and the prime brokers who were helping it. Goldman Sachs, Morgan Stanley, Credit Suisse and others lost money. What can be learnt from the collapse? Larry MacDonald at mcolumn@yahoo.com has some ideas:

1. Small investors can compete against institutional and professional investors.

Archegos Capital had a portfolio of $10 billion leveraged to $50 billion to 8 stocks. The firm received a margin call, prices went down and the brokers sold the positions. The brokers were able to absorb the losses, which is a good thing for everyone.

2. In every regulations, some big investors or whales, will find a method to get around the regulations. In this case, as a family office, the regulations or reporting to authorities are less than hedge funds and security dealers. This was compounded by Archegos not owning the stock directly but through swaps or derivatives to increase leverage. The stocks were held by the security dealers.

3. The Archegos’s portfolio was based on a short squeeze. Stocks were heavily shorted and experience rapid gains and then the market collapsed. Carson Block of Muddy Waters said it appears Archegos went long because they thought they could squeeze the stocks, but there was no fundamental reason for the action to happen over a long period of time. Otherwords, once the price increased, Archegos should have sold to lock in capital gains.

4. Former Prime Minister of Britain Winston Churchill once said, “Never let a good crisis go to waste” The forced selling of the 8 stocks may have created opportunities for value investors. The 3 top companies wre Tencent Music Entertainment Group, Baidu, and ViacomCBS.

Linking to dividend paying stocks, the last takeway is something that all dividend buyers should do. Every day there are millions of people trying to figure out the best company and make money. As dividend buyers, you do not have to invest everyday, you can wait till your dividends built up, but when they do then you need to do your homework to see which opportunities you can invest in. There will always be companies shares going up and down, you will need to watch the down ones and what level they become good investments. The aspect you have is the time can be today or tomorrow or the next week. This is what homework is for to be able to invest at the correct price for you, then reap the rewards.

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