In any industry where there are a monoply or essentially two companies competing, it is a given that each should be making money the question is how much? In the airline business, the two companies are Boeing and Airbus, although along with commercial airliners, which as average citizens we fly, they have other divisions which most of us do not think about for example military and space.

In terms of Boeing, the company came out with the 737 Max and it was going to be their cash cow for the next decade, but something happened and 2 flights crashed and all the regulators grounded the planes. Boeing has been scrambling to fix the problem and has lost a CEO, although he left with a healthy package. In an article by Alistair Smout and David Shepardson of Reuters, despite finding another flaw in the software, Boeing remains highly confident the plane will be flying in mid 2020.

US Federal Aviation administrator Steve Dickson mentioned the flaw but did not think it would cause a significant delay. The most important regulator in the world is the US regulator. If they are confident that is good news.

Linking to dividend paying stocks, companies which try to follow the rules of the regulators, when good news is given, stocks tend to rise. It tends to mean, there is continuing work to be done but light can be seen at the end of the tunnel. For your investments, in understanding the industry also understand who regulates it. The corporate loves and hates regulation, but for investors regulation can help keep competitors at bay or ensuring one company has a built in advantage. In many industries regulators are a good thing and companies should try to stay within the regulations.

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

In January China shut down the country to stop the spread of the coronavirus. For China had no choice because at that time, it was moving to the Lunar New Year celebration and many people travel to their ancestors home. (If you ever watched the Disney movie Mulan – the ancestors had a role). As investors, first you worry about the people and then you think what stocks could come out ahead and which ones will lose revenues because of the disruption.

In an article by David Berman he examined the drug companies. It is good for humanity that drug companies are working on possible cures for viruses such as coronavirus and as investors you need to examine the companies. They could be winners, but how much?

Gilead Sciences jumped 5% on news there is a drug in the pipeline, however the pipeline takes time to receive approval. In addition, Gilead Science has a market capitalization of $85.4 billion and estimated revenues of $22.5 billion in 2020. If the drug is used and used intensively will that make a meaningful impact on Gilead Science bottom line? The answer is likely no because the last big outbreak was H1N1 which affected 60 million people, Roche developed Tamiflu and reported sales of $1.9 billion. The number of cases of coronvirus is about 20.000 or double it, in the world of money making the drug is important but not significant for Gilead. The good news, the drug does serve to highlight its antiviral platform but it is not a billion dollar drug platform yet.

Other drug companies announced they are working on possible solutions and their shares increased then pulled back. If you are going to invest in the drug companies you need to understand how the Drug Approval Process works and what stage are the possible solutions at. The steps include: work in the lab, then work on small animals, then bigger animals and finally testing on people. All of this testing to see what the side affects are and if the drug actually helps takes time, usually years.

Linking to dividend paying stocks, when you buy them for the dividend the company has to have active management to ensure the conditions which allow them to pay a dividend remain. Dividend paying companies are not static companies, but companies which are constantly ensuring the competition stays at bay and profit margins remain healthy. They are similar to Gilead Sciences having multiple billion dollar revenue streams and constantly looking for more.

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

All investors know China is important player in the world of trade and for supply chains around the world, many manufacturing jobs moved from North America to China and South east Asia. However when the coronvirus went through China and the government of China effectively closed down the country, as investors you want to know how much of an impact the shutting down of China has. The good news are there are companies which breaks down every public company to where they receive their revenues. One company is called FactSet GeoRev.

In this example, Arjun Deiva of FactSet broke down revenues from China

He started with the S&P 500 with US companies

Then companies with greater than 10% of their revenues from China using FactSet GeoRev

The US-China Phase 1 trade deal was signed on Dec 13, FactSet examined the weeks of Dec 6 to Dec 20 stock price performance and limited the results to outperformed the S&P 500 to see if there was any correlation of the announcement with stock performance.

Company Mkt Cap Annual Sales Chinese TLT Returns Dividend Recent

$ bil $ bil Revenue % Yield Close

Western Digital 19.997 16.569 23.2 24.5 3.0 67.24

Qorvo 12.443 3.090 55.0 9.4 0.0 107.56

Skyworks Solution 19.572 3.376 20.6 17.3 1.5 115.03

Nvidia 147.082 11.716 23.2 12.8 0.3 240.33

Applied Materials 54.859 14.608 28.4 9.2 1.4 59.72

Micron Technology 59.742 23.406 15.4 14.9 0.0 53.78

Lam Research 43.941 9.642 21.7 10.7 1.5 308.44

Maxim Integrated Prod 16.389 2.314 34.1 7.4 3.2 60.84

KLA Corp 26.813 4.564 25.8 9.0 2.0 169.93

Qualcomm 98.788 24.273 46.4 6.0 2.9 86.48

Baker Hughes 22.088 23.838 14.9 13.0 3.3 21.51

Texas Instruments 115.012 14.383 43.1 5.4 2.9 123.40

Linking to dividend paying stocks, most of the companies above are in the technology sector, which is a good place to have your money invested. You might be surprised at how dependent they are towards China. It also makes policy and trade deals more complex because whether the services are software or hardware, the Chinese eventually learn and they could become competitors. The trade deal was supposed to be about intellectual property, as an investor is hard to know what the results are. If you own an Nasdaq Index fund, many of the companies have Chinese connections.

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

Most people have heard of Netflix and people willingness to pay for streaming services to their devices and in true capitalism fashion – other companies saw the success of the company and wanted to duplicate it. The big questions about streaming services are how many services will the average consumer buy? and when does the consumers switch between the many services available?

At the moment a key streaming service is Disney, most of us have much goodwill towards the company and its franchise movies including Marvel movies. In early February Disney reported on its success on its streaming services – Disney expected 20 million subscribers, demand exceeded expectations, they reached 28.6 million subscribers.

In a column Lisa Richwine and Neha Malara of Reuters, Netflix had 67.7 subscribers in North America, subscribers at Hulu, a streaming service Disney now controls, climbed to 30.7 million as of Monday, the company said. ESPN + customers reached 7.6 million this week.

Disney Chief Executive Bob Iger told CNBC 50% of the Disney + subscribers came from the company’s own website. Mr. Iger said I believe we are now well positioned to not only withstand the disruptive forces of technology but thrive in today’s increasingly dynamic media environment.

Earnings for the quarter grew with help from healthy business at Disney’s theme parks and the strong performance of animated movie Frozen 2.

Revenue increased to $20.9 billion up 36% from a year earlier. The Disney earned $1.53 a share up from $1.44.

In a world wide business, China has the coronavirus concerns, there are always concerns in a world wide company.

Linking to dividend paying companies, in business there are always companies copying other companies – success breeds success. The top companies retention rates or people renewing on a year to year basis is higher, with streaming services that is a key statistic to look for. Not only how many people signed up, but how many people renewed their service for more than one year. Disney is a large company in the communications world that cross sells its products very well, which is the reason most of us never tire of Disney, but quality and emotion is important in the product.

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

The next time you are at the grocery store or department store, see how many people pay cash. Likely fewer people do for they use debit or credit cards. Next consider who owns the credit cards, it is not the banks, the banks are the distributors of the cards, it is Visa and Mastercard with a 90% share or higher. The rails or wires that connect the machines are propelling the credit card companies shares higher. It is also the reason why instead of being in the financial part of the index, they are in the technology part of the index. The rails and dominance of the companies imply the companies are a long term buy.

In a recent article by Lewis Krauskoff of Reuters, he interviewed analysts who suggested the Visa and Mastercard stocks will become trillion dollar valuation stocks. The facts are in early February, Visa’s valuation was $449 billion and Mastercard’s valuation was $324 billion. The billion dollar valuation includes companies such as Apple, Microsoft, Alphabet and Amazon. The price of Visa would have to double and Mastercard go up 3 times, it is possible yes, likely in 2020 no.

The stock price has soared for the companies as well as revenue and at the moment 43% of consumer purchases are made in a digital form, that is up from 28% in 2010. Will it go higher, highly likely.

Visa has 60% share of the credit and debit card market, Mastercard has 30% and American Express has 8.5%. The rest fight over the 2.5% of the market.

Linking to dividend paying stocks, the reason to own the shares is the revenues and dividends have been growing, but also Visa and Mastercard have 90% of the infrastructure for credit and debit cards to work. Both cards have a high margin to make money. Full disclosure, the writer owns both shares. Will they be $1 trillion valuation, it would be nice, but trying to find monopoly like companies who consistently increase their dividends is good enough. The revenues will pay for the dividends and being profitable will send the P/E ratios higher as investors want to own profitable companies.

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

In the US smoking rates have declined, but people are still buying cigarettes which allows companies such as Marlboro maker Altria Group to make a great deal of money. It was thought that vamping was better than cigarettes until some young people became sick. However, the biggest company in the vamping space is called Juul and in December of 2018, Altria bought 35% for $12.8 billion.

In an article by Aishwarya Venugopal of Reuters, Altria has been writing down their investment to $4.2 billion at the end of December 2019.

For a number of years, Juul and other companies in the vamping industry were very profitable and had increasingly number of flavored e-cigarettes, which were targeted to the youth market.

Altria CEO Howard Willard said he is highly disappointed in the financial performance of the Juul investment and the company does not expect to receive earnings contributions from Juul over the next 3 years.

The e-cigarette companies are facing a May deadline to submit applications to the US Food and Drug Administration proving that their products provide a net benefit to public health. If the company fails to make its case. the US Food and Drug Administration rules, the products could be pulled from the market. Juul is working on a compelling and complete application.

Altria will stop providing services including logistics, distribution and access to shelf space to Juul and two directors of Juul will be designated by Altria.

Linking to dividend paying stocks, cigarette companies are legal and generate strong cash flow for investors. Every once in while they need to find something like vamping which seems to be both legal and profitable. The public reacted to vamping, but the companies have the ability to spend and write off vast amounts of money and still be profitable. Do you buy or not buy?

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

Much of the economy is based on the consumer, and Amazon did well in the holiday season. In an article by Jeffery Dastin and Akanksha Rana of Reuters in January, Amazon released its holiday quarterly results and they were good.

For Prime membership, there was a 50% increase to more than 150 million people paying $125 a year for membership. The number went from a 100 million to 150 million. This means $18.750 billion comes into the Amazon coffers every year.

On top of that AWS or the cloud computing division increased its share and profits.

Total net sales rose 21% to $87.44 billion beating estimates of $86.02 billion. On the expense side, net operating expenses rose 21.8% to $83.56 billion. About 800,000 people work for Amazon,

Linking to dividend paying stocks, Amazon continues to change the marketplace and generates cash to have both short and long term goals. The argument used to be Amazon was willing to forgo short term results as it was focused on long term goals, now they can do both. Amazon continues to be a category killer, if you have investments what are being affected by Amazon, how do they compete against Amazon?

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

In an article in late January by Lucia Mutikani of Reuters, the US economy missed the Trump’s administration’s 3% growth target for the second straight year. The growth rate was 2.3%.

The President has been suggesting the $1.5 trillion dollar tax cut to corporations would jump start the economy to greater growth which would lower the trillion dollar deficit and everyone would be increasingly happier.

The domestic economy has maintained a moderate pace of growth and Fed Chair Jerome Powell has kept the Federal interest rates unchanged.

Growth was helped by increased government spending on defense however because of the tariffs with China inventory accumulation was down. According to Chris Rupkey, chief economist at MUFG in New York, the economy is in a good place only because the trade war made imports so expensive that American businesses and consumers cut back their purchases. Now the trade war is over, maybe prices will fall.

Economists have discussed that slashing the corporate tax rate from 35% to 21% would not boost long term growth because of productivity and population growth.

Linking to dividend paying stocks, what the expectations of the government for the economy matters to the deficit and one day it will have to be paid. Many suggest it is manageable but we all know who the government will turn to pay it off. It is harder to increase taxes on companies than it is on individuals.

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

Apple is the leader in the smartphone segment, however 70% of its revenues comes from the iphone. This is good when the sales number goes up, but in all markets sometimes sales go sideways or not at a steep line upwards. In an article by Reuters, in late January, Apple worked with the telecommunication companies which sell the iphone to increase sales and it worked. The phone is still expensive, but new credit initiatives which enable customers to pay monthly installments without paying interest helped sales.

Apple is trying to decrease the 70% by focusing on the Services business or recurring revenues. The Services business includes AppleTV, streaming service, iCloud storage, fees from app developers and those sectors are increasing. In the quarter they amount to $12.7 billion and analysts see the Services business as a $50 billion target.

Linking to dividend paying stocks, one of the reasons as an investor you like utilities is they have a near monopoly and everyone needs to have access to electricity and pay monthly or quarterly. In similar fashion, Apple has dominated the smartphone segment, but it was a one off purchase. It was always a challenge to ensure the next phone is an iPhone. Services mean monthly payments and greater sense of loyalty for the customer and ensured money for the company. We all like innovation, but recurring revenues are what makes investors happy.

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