In the world of consumer food tastes, things change and there are many choices. At one time many people ate meat on a regular basis, now they have cut back. One way to cut back is to eat plant based food shaped similar to meat products. In an article by Bharath Manjeshr and Tina Bellon of Reuters, the first company to issue stock is a company called Beyond Meat. The shares were priced at $25, opened at $46 and closed at $65 a share. It was a good day for underwriters, so expect more offerings of other companies.

Beyond Beef is based in the Los Angeles area and aims to market its meatless burgers patties to meat loving consumers displaying its products in the meat case of supermarkets. Plant based substitutes for meat are gaining popularity for both health concerns, animal welfare, environmental hazards of intensive animal farming.

Tyson Foods the number one meat processor owned a 6.5% share, but sold its holdings as it intends to develop meatless products in house.

Burger King, Impossible Foods, Carl’s Jr. all use Beyond Meat for their burgers which accounted for $37 million. The burgers are made with peas for proteins, fava beans and soy. Currently 70% of sales are the Beyond Beef patties.

In supermarkets such as Whole Foods and Kroger, Beyond Meat generated $50 million.

Linking to dividend paying stocks, Beyond Beef is the first of many companies in a very crowded space. While Beyond Beef hopes to be the largest producer, other companies can and will occupy the space For dividend investors, it is best to wait until a few mergers happen and then one can own for your dividend accounts. In the meantime, the dividends you receive can buy companies such as Beyond Beef as you wait to see who emerges as market leaders.

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

Every year it seems to flood in parts of the world, some areas have seen 100 year events in 6 years, which tends to mean people are beginning in the financial world are beginning to see climate change as an event and the need to change calculations on normal agricultural cycles. In an article by David Randall of Reuters, fund managers are now evaluating the long term value of companies that make or sell products ranging from tractors to fertilizer.

The issues is not just the uncertainty of the weather, but how to model how extreme events from droughts to more powerful storms will affect commodity prices and in turn spending by farmers on equipment and seeds.

A report by the US government expects climate change will boost costs for industries which include farming and energy production. The US Department of Agriculture has no way to compensate farmers for crops that were damaged when floods overtook their record high stockpiles of grain. In Nebraska flood costs are estimated at $1 billion.

The ripple affect of higher grains prices affect margins of egg producers such as Cal-Maine Foods. The flood affects companies moving grains down the Mississippi River because sections are out of service.

Michael Underhill, Chief Investment Officer at Capital Innovations is focusing on grain merchants such as ADM or Archer Daniels Midland and John Deere to see if the greater volatility in commodity prices helps or hurts them?

Nobody really knows what will happen, thus there are many theories to be heard as climate changes affect the country.

Linking to dividend paying stocks, one of the things investors like about these stocks is predictability of consistent profits and dividends. Often we have a good idea of what the costs will be, but with climate change different variables are added which increase the unknown. What your company is doing about climate change is a good thing to ask and if they are doing something what are the politicians?

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

If you ever had a ride in a Tesla you will enjoy it, however you may or may not want to buy the shares. In an article by Tom Krisher of the Associated Press, Elon Musk will be buying $25 million worth of shares up from $10 million. Similar to many companies, Tesla needs to raise money on a regular basis and many analysts follow the cash flow of the company. Tesla reported its cash balance at the end of the first quarter shrunk by $1.5 billion since December to $2.2 billion. Mr. Musk said during a conference call that Tesla might need to raise capital again.

The company expects the debt to rise from $9.79 billion to $11.63 billion. It should be noted Tesla will have enough money to pay the $566 million due in November of 2019.

The Tesla sells for about $55,000, to increase sales a drop in price to $42,000 is needed. To do that Tesla has to reduce the costs to make the vehicle while maintaining a 25% gross margin target. The problem according to a Moody’s analyst is the competition, all the other companies now have and shorter will have very good electric vehicles and Tesla does not have a sustainable technical advantage over the competitors.

Although sales were down in the quarter and expected to be down again in the second quarter, the optimistic Mr. Musk expects a profit to be turned in the near future and sales would be increasing. One has to bear in mind, Mr. Musk has been saying for the past year, no new capital would be needed, but losses do change predictions.

Linking to dividend paying stocks, while Tesla does not pay a dividend, it is an interesting company to watch and hope for. It is hard and expensive to revolutionize any industry and Tesla has spent $6 billion trying to change the auto industry. One can hope, one can dream, but watch the margins and cash flow.

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

On You Tube there are many interesting interviews published for many reasons. Once in a while you can learn somethings which helps in your decision making process. A few weeks ago, listened to interviews from one of the Berkshire Hathaway’s Annual General Meeting. The first question was asked if there was some book or special thing to read in order to gain knowledge to help investing. Mr. Buffett said investing in the markets is one in which the more you do, the better you can do because investing is accumulative knowledge. Every year you learn more, the more you read and can see beyond the press releases. Mr. Buffett says he reads a great deal, besides the financial press including the Wall Street Journal, 10 k reports, annual reports. Mr. Buffett says he tries not to read analysts reports, for he does his own homework.

Another question was why do you have cash, rather than fully invested? Mr. Buffett noted he was looking for a certain return on investment and if you can wait and have the patience, you can find the “fat pitch”. In baseball a good hitter misses 70% of the time or .300 is a good hitter. A great hitter is closer to .400. One of the those hitters was Ted Williams who said he waited for the fat pitch or the pitch he thought he could hit. Patience is a key. Passing opportunities is something that happens or if you miss something that is okay. Successful companies are the business that you can understand in a relative short period of time.

Linking to dividend paying stocks, patience is the key but balance it off with keeping the majority of money in profit making companies. It is easier to be patience when the company you own makes money. Companies which make profits tend to trade at higher multiples than non profit making companies, as well if it pays a dividend you get paid while you wait. Waiting also means cycles happen, when stocks prices are down in price you have the ability to buy more, the dividends help gain the money to do that. If you are patience, you will buy low and wait for the capital gains.

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

If you watch pundits on the process which goes on in Washington, one person who you may watch is Lawrence O’Donnell. Mr. O’Donnell was an aide to US Senator Daniel Patrick Moynihan and the Staff Director for the Senate Finance Committee. He has a good understanding of how things get done and should work in Washington.

Recently, Mr. O’Donnell has been particlularly optimistic because of the midterms which changed the committee structure in the House of Representatives. During the first two years of President Trump’s term anyone who was deemed by the President as good would rarely hear a discouraging word about what they were doing. After the midterms, a new crop of Representatives came in with a wide knowledge how institutions work and can be accountable. In the committee hearings, the freshman Representatives receive 5 minutes to ask questions. This is the time to showcase to the folks back home what you do and can do. The process is the person at the committee has been asked multiple questions or been prepared about the issues and often prior to the hearing, they have met the Representative in their office so little should be new. It is just execution.

Some of the new freshman members have been able to stand out and hold people accountable for their and their companies or departments actions or inactions. If a Secretary really wants to change their departments to slim in down to doing just the basics, they have to explain why they choose to do so and why they believe the consequences of doing so is best for the average American. The freshman class of Representatives are holding the committee accountable.

Linking to dividend paying stocks, these are some of the most profitable companies in the land and generally we expect them to do a good job in their execution of their business plans. All types of issues will come up and sometimes they can be dismissed, but if changes are happening, what part are they playing. It is up to the company to decide what part and explain why they have chosen that path. It is helpful, if the CEO has someone or a group of reasonably independent directors to ask beforehand to ensure the path they are taking has been chosen for the good reasons. The freshman House of Representatives are making the House committees more accountable, how does your company maintain accountablity?

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

President Trump often sends conflicting ideas, for example he is for the every day person on the street trying to make it through the next month and he loves tariffs, In his mind, raising tariffs on things will encourage the manufacturer’s to build more of the things in the US, in addition the tariffs revenues will pay down the national debt. Then reality begins to settle in.

In an article by Barrie McKenna, he noted new research by 3 economists at the University of Chicago and the US Federal Reserve. President Trump imposed tariffs of 20%, then 50% on washing machines.

While the 3 big companies of Whirlpool, Samsung and LG added 1,600 jobs which is good for those employees. Appliance makers permanently raised prices on all washers by an average of 12%, including those not affected by the tariffs. The price of dryers also went up 12% or $100. The manufactures raised prices because they could.

The affect of the tariffs is Americans, including those who President Trump says he is working for, paid an extra $1.5 billion for washers and dryers which are no better than the cheaper ones they were buying before the tariffs. The 1.600 jobs cost an average of $820,000 a job.

In terms of raising money to pay for the debt, the tariffs rasised $82 million a year, the debt is a little over $22 trillion. The US trade deficit raised $81 billion.

The big winners are the makers of the tariffs are the appliance makers.

Linking to dividend paying stocks, often one of the good things about them is because the companies have a monopoly or near monopoly, they can raise prices and stay in the great competitive space where they are. In the case with the appliance makers, whom people would tend to shop for the best price, they were able to pass on the price of the tariffs and then some to earn a nice profit.

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

 

In the Wall Street Journal, Samsung Electronics announced it would invest about $116 billion by 2030 to further diversify its semiconductor production beyond memory chips.

The more advanced chips used in smartphones, computers and self-driving cars increasingly need more horsepower as they integrate artificial intelligence and faster 5G networks.

Memory chips account for about 1/3 of the roughly $475 billion semiconductor industry. The competitors are Intel, Qualcomm, Nvidia and the most dominate player is TSMC or Taiwan Semiconductor Manufacturing Co. TSMC controls about half the market. Samsung represents 19% of the market. The issue is the prices for the two major types of chips that Samsung produces called DRAM and NAND have fallen 20% and that means they are no longer the cash cow Samsung had relied on.

The new investment in better chips requires heavy investment, with expensive equipment and large facilities, betting that customer demand will eventually come in the future. The race to manufacture the most cutting-edge semiconductors is generally thought to between TSMC, Samsung and Intel.

Linking to dividend paying stocks, sometimes the numbers in large organizations are hard to put in context as the headline Samsung to spend $116 billion on chips, remembering Samsung is a large conglomerate of companies in South Korea. The thing you should remember is the simple aspects to doing business – what is the margin? do they make a profit? can it continue?

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

In early April, all the major oil companies decided the West Texas oil was the place to be and Anadarko was sitting on some very good properties. Chevron bid first and it looked like it was a done deal. Occidental Petroleum saw the proposal and has decided to go one better. In an article by Bradley Olson and Rebecca Elliot, Occidental Petroleum has decided to go one better with a higher offer of $38 billion versus the Chevron bid of $33 billion.

Occidental Petroleum is offering $76 a share with 50% stock and 50% cash. Chevron offered $65 a share with 75% stock and 25% cash. Occidental Petroleum would use a bridge loan for the cash portion of the shares. Zoe Sutherland an analyst at Wood McKenzie said the Occidental Petroleum deal would increase the company’s leverage and stretch its balance sheets.

Occidental Petroleum has a large operation in the West Texas area but would be expect to sell billions in assets to pay for the deal. They had been talking to Anadarko for a few months.

Linking to dividend paying companies, there are always positives and negatives in every deal. If you are a shareholder you like cash to reinvest in another position, but the shares would be leveraged and if oil prices went down, the shares would be worth less money. Chevron offers less money but perhaps a better fit and higher medium term advantage if you want to keep their shares.

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

Last year, AT&T bought Warner Communications to add content to its properties and analysts were looking for the future. In the Wall Street Journal article by Drew FitzGerald and Kimberly Chin, AT&T lost 544,000 premium TV customers or those who no longer pay for cable TV. Chief Executive Randall Stephenson said we continue to see declines in traditional TV subs, particularly those area where we cannot bundle with broadband. Hopefully they will lesson as we get through 2020.

The unit that hold the customer defections operating income increase 4.8% to $1.48 billion by gaining 45,000 broadband customers and by keeping a tighter lid on expenses.

Wireless operating income improved and it added 80,000 more postpaid phone subscribers, a valuable category because they tend to more loyal and renew their subscriptions. Even though there is new crop of smartphones, customers are tending to hold onto their phones longer.

Overall AT&T’s net income was $4.01 billion or 56 cents a share, down from $4.66 billion or 75 cents a share. Warner Media added $1.2 billion in operating income.

Linking to dividend paying stocks, Netflix and Disney’s new streaming service is the expected route Warner Media. Just because it is big company, does not mean they will do it well, similar to most companies it is about the execution – how well do they match customer expectation to reality.

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