If you think about which companies in Germany made armaments and steel in the World Wars, near the top of the list would be Krupp, which merged with Thyssen. For generations, Thyssenkrupp has been one of the key industrial companies in Germany. The company has evolved over the years and is still a premier company involved in construction, engineering and service of industrial plants – essentially Thyssenkrupp helps any company around the world after the raw materials have been extracted from the earth and the next stage is to produce something from them. They have a long history and recently merged their European steel operations with Tata Steel in a 50/50 operation. Tata which is based in India owns a steel mill in the Netherlands which is close to Thyssenkrupp’s mill in Germany and it is believed money can be saved with a merger. If you been in an elevator you might see the Thyssenkrupp name.

In the world of the stock market sometimes being stand alone business is worth more to shareholders, sometimes conglomerates are worth more because they are diversified. Thyssenkrupp is a conglomerate and at the moment, the shares have not move upwards in 2 years even though the company continues to do well. Activist shareholders believe the sum of the parts would be worth more than combined and have pushed management in that direction. The pushing meant Heinrich Hiesinger the current Chief Executive submitted his resignation and the company will be restructured in some fashion keeping in mind the biggest shareholder is the Krupp Foundation.

Linking to dividend paying stocks, often times as shareholders you want the company to fully diversified in the operations it does. The company can control its destiny from raw materials to the goods and services it delivers. Sometimes this is worth more than the sum of its parts and sometimes some shareholders will call for outsourcing of some of the parts. There is no perfect answer and companies will and do go through the process on a consistent basis. In the same fashion, sometimes shareholders will worry about debt, sometimes they believe the company could carry more debt. Companies continue to balance the competing vision of where the stock will be in a few years. As dividend shareholders you want to ensure your company does not go to far on the pendulum.

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

One of the internet providers had an advertisement slogan is Where will you go on the Internet or it was featuring one of the great things about the internet – if you are curious about a subject you can learn or find information till your heart’s content. You can find others who are interested in subjects you are interested in and you can be a more informed person. Most people including me are sometimes curious about subjects, but not 7 days a week. Sometimes seemingly mindless activities are equally as important. It is the seemingly mindless activities that a book was written about the subject. The book is called The Internet Trap by Ashesh Mukherjee published by U of T Press, Toronto, 2018. The author is an Associate Professor of Marketing at McGill and can be reached at ashesh.mukherjee@mcgill.ca.

Too Many Comparisons

When we compare ourselves we tend to compare upwards. Upwards means in our minds, people who are better than us. If you are on Facebook, you tend to post something more than routine or more interesting. The best of the 100’s of pictures taken or the places seen. This can lead to envy because the viewer has not have not done anything interesting.

Too Little Privacy

The Internet never forgets. Everything we do online is recorded in data bases and big data is becoming more important. Companies will continue to mine the data and as long as it is in the general grouping we are likely good. As data mining becomes more specific perhaps it is better to be off line every once in a while.

Linking to dividend paying stocks, while the above related to individuals, companies are making the connections and for really good reasons. Not long ago, an elevator company connecting all their elevators was a good thing. The data will help the company and potentially give it a competitve advantage. That type of collection and information may help the stock price to go up because the company is no longer just an elevator company. The information can be used for other purposes and the information allows you to examine a company differently.

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

 

 

One of the internet providers had an advertisement slogan is Where will you go on the Internet or it was featuring one of the great things about the internet – if you are curious about a subject you can learn or find information till your heart’s content. You can find others who are interested in subjects you are interested in and you can be a more informed person. Most people including me are sometimes curious about subjects, but not 7 days a week. Sometimes seemingly mindless activities are equally as important. It is the seemingly mindless activities that a book was written about the subject. The book is called The Internet Trap by Ashesh Mukherjee published by U of T Press, Toronto, 2018. The author is an Associate Professor of Marketing at McGill and can be reached at ashesh.mukherjee@mcgill.ca.

Too Much Information

One of the wonderful aspects of the internet is the amount of choice one can find. Instead of one of two store to browse, you can as potentially hundreds. Choice is the basis of free markets, driving competition and economic growth which are are good things. However choice has some negatives – choice paralysis, choice shortcuts, post choice satisfaction, and barriers to learning.

Why does too much choice lead to paralysis? Some of the reasons are regret, anxiety and effort. Sometimes will all the choice one can make, the question is did you make the best choice? Research has shown thinking about choice options creates a sense of attachment to all the considered options. The giving up of one option creates a feeling like you lost. Too much information can create anxiety which results in not making any choices.

In order to make a choice, we make shortcuts and this is why firms spend heavily on branding and jealously guard their brand equity. Brands bind customers with invisible chains of assurance and convenience in a world of excess information.  We tend to go with top ranked websites on the search engine. This tends to entrench the dominance of big brands in the marketplace.

Most people after purchasing their product will compare to others and some people will have received better deals than others. Did you receive the best deal?

The barriers to learning is partly due to the tools of the internet which can help you, you delegate to outside sources. The issue of relying on information can lessen our ability to learn because we now make less effort to organize and understand information in our mind.

Too Much Customization

More and more the internet can customize what you like to you which can be a very good thing. The issue is do you only associate with things and people which are similar to you, there is a world beyond you. If you only associate with people like you, it is very hard to think outside the box or be creative.

Customization can increase the costs because of the ownership feeling. This sense of virtual ownership or virtual endowment can create higher expectations of performance.

If the product is a luxury item, the less regular people input, the better. If the product is everyday, the more regular people having an input the better.

Linking to dividend paying stocks in life and on the internet there is balance for the individual. What is great for the company, may not be great for the individual. As we continue to evolve, how does the company balance the two and keep sales?

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

 

 

 

One of the internet providers had an advertisement slogan is Where will you go on the Internet or it was featuring one of the great things about the internet – if you are curious about a subject you can learn or find information till your heart’s content. You can find others who are interested in subjects you are interested in and you can be a more informed person. Most people including me are sometimes curious about subjects, but not 7 days a week. Sometimes seemingly mindless activities are equally as important. It is the seemingly mindless activities that a book was written about the subject. The book is called The Internet Trap by Ashesh Mukherjee published by U of T Press, Toronto, 2018. The author is an Associate Professor of Marketing at McGill and can be reached at ashesh.mukherjee@mcgill.ca.

Mr. Mukherjee uses the latest research in consumer psychology to highlight the 5 hidden costs to living online – Too Many Temptations, Too Much Information, Too Much Customization, Too Many Comparisons and Too Little Privacy.

Too Many Temptations

Desire is the wish for something – the stronger the wish, the greater the desire. Most of do not live in ideal world, we live in the reality we have based on our income. When you look for things on the internet, the presentation will be in the ideal world and thus the gap between the ideal and the actual strengthens our desire to spend money and time online.

Our minds are wired to keep the ideal above the actual state through a psychological process called the hedonic treadmill (Loewenstein, 2005). This state helps explain why we upgrade to the latest model even though the model we have works fine.

The internet makes us vulnerable to temptation by reducing self control. The self control is often lower because of goal clarity, the foot in the door effect, lower energy and product pricing on the Internet.

If you are browsing the internet without a particular reason you will often go on tangents. The more you browse the higher the opportunity to buy on impulse.

The foot in the door is the psychological process whereby taking a small step towards an object increases the chances we will take a bigger step towards the same object later. One method used by car sales people is – you are interested in the price of a vehicle. The sales person offers you a lower rate than expected, you fill out the paperwork. The sales person goes to his/her manager and the manager says no to the price and says the final price is higher. Many people say yes to the higher price because they filled in the paperwork.

The greater you energy, the more self control you have. If you browse and are tired, the chances are higher you will buy on impulse.

As consumers we love all inclusive. We think we will take advantage of all the offers, later you find out life came in the way and we only take advantage of some of the features.

Linking to dividend paying stocks, the above helps companies sell products which makes profits. An aspect of every consumer retailer is to have an active internet site which increases sales, this is good for the company. It may not be great for the consumer, but you want to ensure companies are doing what is necessary to have consistent sales to make profits. How does their internet site enhance the company?

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

In our economy there are many trends going on, for many of them we will not know how to profit by them because we are not positive how to make money from it. However in the economy somebody will try and if they succeed, the companies will be on written about. One of the methods we can try to figure out what companies to invest in or to try to avoid is read books such as Microtrends Squared – the new small forces driving today’s big disruptions written by Mark Penn with Meredith Fineman, published by Simon & Schuster, NY, 2018. The book is divided into 6 sections – Love and Relationships; Health and Diet, Technology, Lifestyle, Politics and Work and Business. The great thing about the topics is we can able identify with some part. The more difficult question is what do you do about it? The problem is for every move or desire to move in one direction seems to inspire a countermovement by another group in the opposite direction.

You will likely have or heard people talking about watching a movie on Netflix. In the book, the author says 40% of all internet traffic today is generated by Netflix alone. But Netflix does not have the only business model – Cable TV made people pay for a tasting menu with lots of courses, whether they wanted them or not. Netflix has a similar all-you-can-eat model for the cord-cutting generation. iTunes illustrates the pay-per-unit business model. Amazon created a mix of both, giving Prime members the older content for free and charging per piece on the new stuff.

In the internet bandwidth, one minute of video essentially uses all of the internet bandwidth that years of email would require. In the third quarter of 2017, Netflix reported having 109.25 million streaming subscribers compared to 11.17 million in 2011. Since 2012, Netflix has been producing its own content and reaped major rewards. At the moment the average American is watching 5 hours of TV a day. This means TV producers can win big, even if the show has a small following.

When the baby boom generation was young, many of them read comic books. Comic books turned to movies and Marvel Cinematic Universe has brought in $12 billion in worldwide box office receipts – to say nothing of the billions more in merchandise. The movies also created conferences or comic-con events. Thousands of people spend millions of dollars on their favorite movies and pay to take pictures and autographs of the actors who portrayed the characters.

There are many other trends covered in the book, but these ones highlight why technology companies including Disney need to be either in your investment portfolio or on your radar. Does anyone believe they will not be around in 10 years plus?

Linking to dividend paying stocks, when a company consistently earns a profit it is easy to sit back and continually collect it. However the economic world continues to change and the issue is how does the company adapt to the changes. In the book microtrends there are forward trends and pushback to the trends. What aspect do you think the companies you invested in are doing? how well are they capturing the trends in the industry as you see them. Most of do not know which trends will lead and which trends are not very profitable for the average investor and this means you need to keep doing your homework.

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

 

 

In our economy there are many trends going on, for many of them we will not know how to profit by them because we are not positive how to make money from it. However in the economy somebody will try and if they succeed, the companies will be on written about. One of the methods we can try to figure out what companies to invest in or to try to avoid is read books such as Microtrends Squared – the new small forces driving today’s big disruptions written by Mark Penn with Meredith Fineman, published by Simon & Schuster, NY, 2018. The book is divided into 6 sections – Love and Relationships; Health and Diet, Technology, Lifestyle, Politics and Work and Business. The great thing about the topics is we can able identify with some part. The more difficult question is what do you do about it? The problem is for every move or desire to move in one direction seems to inspire a countermovement by another group in the opposite direction.

In the information age – there is also a disinformation age. By offering as many choices under the sun, people are making fewer choices. Would one expect that advances in our ability to customize goods and services would open the world to never ending experimentation, but the people are finding what they like and sticking to their choices over and over again.

If you have a smartphone, for marketers, it is the ultimate spy. In the years ahead data will be the precious asset on the planet. Data allows the on-demand service to give you the right thing at the right time and the data makes the system work. The better its resolution, the better the targeting and the fatter the profits for someone in the digital chain.

An example is a leading elevator company has linked all its elevators they have installed or serviced in the world. They get data about every trip every elevator makes and this makes sense in terms of elevator maintenance. The data is becoming increasing valuable for other things such as AI and facial recognition and encoded fobs tell them where people are going and can calculate the loads on the elevators. If an elevator company can do this for its services, what can other companies do? The trend is what you think a company is personalizing for you is actually profit-maximizing for the company. If they work hand in hand, no one minds, but… The concern is a growing market concentration in the tech industry. One company is selling 50% of on line goods. On company has 98%of the search engine worldwide. In theory the power of the top 5 tech companies is mushrooming. Invest now.

We now the baby boom generation after WW II is 60 years older or more – there is a lot of people with wide interests and in general the older you are the more conservative you become. Some are empowered with technology, some are not and that changes voting.

Linking to dividend paying stocks, in each category of the microtrends square are things that are happening and some companies will cater to the changes. Which area you spend the greatest amount of time in, you should look at what companies can benefit and which are benefiting from the changes. Also do your existing investments in companies are they adjusting or not and do you like it. If they are seeing and doing something maybe they are keepers, if the industry is ripe for disruption, then find alternatives.

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

 

 

John Heinzl of the Globe and Mail writes about dividend stocks for the paper and at the end of June, he focused on a company called Corus. The company owns radio stations and TV programming. The company yield was 18% and has been reduced to 4% or from $1.24 to 24 cents as expected the stock declined. What lessons can be learned? Mr. Heinzl has a few:

Use Your Common Sense

If it seems to good to be true, it probably is. If the yield of a Treasury bill is closer to 0 and the yield on the stock is double digits, the yield on the stock will not last long. Part of using your common sense is being skeptical.

Read Between the Lines

If a company is preparing to cut its dividend, it often gives clues. For example we are committed to this fiscal year’s dividend. They do not say anything about next year.

Study the Dividend History

Companies can not afford to cut their dividends out of the blue. They typically stop raising the dividend after years of increases. The payout is the same, why?

Watch the Financials

For dividends to be sustainable, the company must make a profit and have the cash flow to pay dividends. If cash flow goes down, the sale of assets can make up for one year, but look further down the road at revenues, earnings and cash flow.

Pay Attention to the Payout Ratio

How much does the company payout in dividends compared to their piers. The piers are the ones they compare themselves to when deciding on executive pay. If they are above the companies they compare themselves ask why?

Stay in the Loop

For companies which you have significant resources invested in, you can listen to or read conference call transcripts and investor presentations to allow you to sleep better in the evening.

Linking to dividend paying stocks, if you invest in them the main reason is the dividend which increases your total return. Over the long term, companies which pay a dividend stocks will rise and you will be wealthier. Your task is to set up reasonably simple indicators to see if you wish to continue to hold or look for alternatives. We have all followed companies or industries which we think are wonderful only to find the individual company is not that great. Use the simple indicators to ensure your dividend is safe and then you can determine if the stock is still a keeper.

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

 

 

 

 

 

According to Ankur Banerjee of Reuters, at the end of June Amazon is purchasing a small online company called PillPack. The cost of the transaction is estimated by Bloomberg to be about $1 billion. In the world of drug supply companies, a billion dollars is not a large number but PillPack supplies drugs and other services to people who take multiple medications. This is a growing market as treatment for numerous, complex, chronic conditions and PillPack expects to have a $100 million in revenue this year. The effect of Amazon getting into the drug supply business sent down prices of Pharmacy chains and drug wholesalers. It is likely they will bounce back up.

Amazon teamed up with Berkshire Hathaway and JP Morgan Chase to form a joint venture to significantly cut health care costs. The joint venture has named a Chief Executive. PillPack and other companies are expected to be part of this strategy.

Linking to dividend paying stocks, although PillPack is a small company, the question is the drug business rip for disruption of the type Amazon has been known for? It maybe however the cost of medicine has been and will continue to be an issue. The large companies do run on line pharmacies which offer incentives to fill and refill their drug needs at their pharmacies.  In the health care business everyone agrees health care costs are rising and it is the fault of the other person so not much changes.

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

Constellation Brands is an alcohol company and if you have been into a bar you may have had one of their brands. Their brands include: Corona, Modelo, Robert Mondavi and SVEDKA vodka. According to David Milstead of the Globe and Mail, last October Constellation brought some shares in Canopy Growth Corp – a medical cannabis company. In Canada and slowly in the US, cannabis is becoming legal, upon becoming legal the market size is expected to increase.

When Constellation Brands bought the shares, they were likely thinking long term because this is a new industry, but what it did was offered a stamp of legitimacy for smaller investors (full disclosure I own some shares in an Index fund) to buy and for institutional investors to begin nibbling at the stocks.

Constellation spent $245 million to buy 18.9 million shares at $12.97 a piece. In addition it bought warrants to buy another 18.9 million shares at 12.97. The warrants expire in 2020.  At the end of June, the shares were trading at $36.93. This means the investment is worth close to $1.2 billion – $700 million for the shares and $500 million for the warrants.

The company because it owns 9.9% of the company avoids the equity method of accounting where it would take a proportional share of Canopy’s losses and place them on the balance sheet. According to Robert Willens a Wall Street analyst, if the company owned 10% or more, given Canopy lost $70 million, the company would report a $5 million cut in Constellation earnings.

Linking to dividend paying stocks, the reporting of taxes helps you understand why companies do some of their actions. The purchase by Constellation was a long term benefit because the laws are changing, but not the taxes. There are many considerations and taxes and the rule of law are important aspects that go into making investments profitable companies make. It is prudent for profitable companies to have investments in multiple companies and industries shift. Sometimes these investments help make the company an even easier company to make an investment in.

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