At some point in time, what is known as Obamacare will be repealed and replaced by something else, if you believe President Trump it will be done in one day. If it is replaced the theory is the private sector will jump in and compete for the business. Why they would want to fight over the people who can not afford to pay higher rates for preconditions of their health and those who generally cost the system more than they pay is something the minds in Washington seem to know. Many insurers might look at the market and then want government guarantees so the bills get paid, but we will see when the change is made. In the meantime what is the outlook for heath stocks?

Peter Aston of Recognia looked at health stocks in early February. He set up the criteria of:

minimum market capitalization of $2.5 billion    (stock price times number of shares outstanding)

companies that make money demonstrated by their projected earnings per share  (EPS)growth and their return on equity (ROE)  -looking for forward EPS growth rate of 10% or more and at ROE of at least 10%

part of the idea is to have a capital gain so you do not want to pay too much and the forward Price Earnings (PE) ratio is 22 or less

Company                                  Mkt Cap           Fwd P/E      ROE      EPS Growth        Dividend

in $ Bil                Ratio                          Projected            Yield

Centene Corp                        30.8                    14.5               18.3%         43.2%                0

Express Scripts                    42.5                     10.6               13.2             15.5                    0

HealthSouth                            3.5                    15.5                31.1               14.3                   2.5

UnitedHealth Group          154.3                  20.4                20.0             18.2                   2.0

Laboratory Corp                    13.8                   15.4                11.3                11.1                   0.0

Humana                                  29.6                   21.2                12.8               23.0                   0.6

INC Research Holdings         2.8                    21.6              38.4               24.9                   0.0

 

Linking to dividend paying stocks, there will be and is many opportunities in the health care field as the baby boom population ages. People over 65 as their bodies need more care need more health care and soon the biggest group of people will be the over 65 years. As you determine, try to use the research to find the best company for your needs. Mr. Ashton picked criteria that may or may not eliminated your company, by changing the criteria you can see what you have and consider alternatives.

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

 

There are many how give investment advice and generally it takes a number of years to beware of the flows of the market before you can give advice. Scott Barlow (sbarlow@globeandmail.com) wrote a column about the best investment advice I ever heard and offers it in a column. Michael Mauboussin is the managing director of Global Financial Strategies at Credit Suisse and has been in the industry for over 30 years. You can see a you tube view of him talking about luck and skill.  Mr. Barlow recommends his Decision Making for Investors report and he recently wrote Reflections on 10 Attributes of Great Investors.  The 10 are:

be numerate ( try to understand accounting)

understand value – the present value of free cash flow

properly assess how a business makes money

compare effectively – expectations versus fundamentals

think probabilistically –  the expectation of winning and losing on a trade

update your views effectively

beware of behavioral biases

know the difference between information and influence

how to size investment positions

read – keep an open mind

There is little in the above that all can not do.

In his article Mr. Barlow focused on think probabilistically – the frequency of being correct does not matter, what matters is how much money you make when you are right and how much you lose when you are wrong.

You have to do your homework to determine what you can make, what you downside is and how to limit your downside if you are wrong or the market does not react to the way you think it should.

Linking to dividend paying stocks, the concepts are simple however there is complexity throughout the layers which makes investing more difficult. Part of the reason is we are people, have demands on us and never have perfect information. Much of investing is trying not to lose money and one of the best methods not to lose is having patience in your approach. If you invest in profit making companies, the upside unless the market is near a bottom may not be 5 times, but if you receive a number of years of returns with limited losses you might be better off in the long run.

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

 

 

President Trump has decided the number of work visa is too high and aims to reduce the number which tech companies have been using to hire tens of thousands of workers. The tech companies hire thousands of people every year and have been allowed to bring people from overseas, one of the biggest places of recruitment is India. A number of companies have grown to meet the demand and the largest three are Infosys Ltd., Tata Consultancy Services; and Winpro. Last year according to their website, Infosys had 25,000 visas. These types of numbers have made the tech companies nervous about their people requirements. According to Sandrine Bastello of Bloomberg News, a company from Canada which is in the same field called CGI Group has hired 11,000 employees and only 485 have a visa requirement.

CGI has an onshore delivery model which offers cheaper services while being on American soil by staying outside the largest cities – close but not in them.

Linking to dividend paying stocks, all governments have regulations, having established a regulation companies develop models to fit and take advantage of the opportunity. Different models work better at different times, the India companies recruited and brought over Indian engineers and they have benefited from the model. If the government regulation regarding H-1B visa is changed, a model such as CGI Group works better. As an investor, you have to ensure whatever model the company you own is following is adaptable to changing regulations.

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

Whether the Presidential Executive Order was a good thing or a bad thing, the courts will decide. No matter how you view the order, everyone can agree the execution was terrible. In every company the most important aspect of the company is the execution of its ability to make sales and introduce new products and services to grow the company. The execution from the idea to the service to the sale and receiving money is the lifeblood of any organization and if they can not do any of the parts the whole chain the company  needs help. In politics, sometimes the idea is the important thing – in this case some level of security, although one can easily debate what level? why those countries? and what were they trying to solve? In the case of visas, there is more than one visa depending on how long the person expects to stay in the country  – tourist? study? work? and each of the visas have their rules and regulations. When a Presidential Executive Order is signed, it becomes the policy the moment it is signed. In this case, the President signed and then it appears the other departments the policy had to change policies  based on what they thought the new policy is. Sometimes making policy on Friday afternoons, when the decision affects multiple departments may not be the best thing to do. In terms of visa control – the senior management had to send the new policies to middle management who explained the changes to front line staff. From all indications, rather than taking minutes it took a days and it the meantime front line staff took most of the abuse and used their discretion to do – some saw ban and banned; some saw delay and delayed, and most did not know.

Linking to dividend paying stocks, one of the reasons for buying these companies is they have gone through numerous new policy executions in terms of changing products and services. The customers have stayed and has grown and the company continues to be profitable because it knows how to execute new policies. If one of your investments did such a bad job as the President Executive Order you should find alternative company because it will take some time to regain any goodwill in the marketplace

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

 

In late January, President Trump signed an executive order to ban the entry into the US from 7 countries in the middle east. He used a variety a reasons why, but one was a campaign promise to extreme vetting. It might have been a very good thing to do, except for it seemed nobody in the room told anyone else the ban to go in place. Since a large organization has many parts, including Foreign Affairs, Department of National Defence, Homeland Security, many internal security agencies and Border Patrol. How would these groups interpret the executive order? The presidential authority is overriding so they took it at its face value and implemented the ban. It turns out, there was supposed to be some exceptions and the ban is not really a ban, because no one was positive what extreme vetting had changed, was it a ban or not a ban? The reality is the government does extreme vetting, which means the process is measured in months and years, rather than days. The process is slow, but has never had a ban. The communication process was a disaster and that is putting it mildly because all the other interested parts had to be informed of the proper procedures and what they mean or did not mean.

Linking to dividend paying stocks, when new management comes in, they have their agenda or things that they would like to do. Like to do and can do often need to be adjusted and similar to every large organization the people want to hold onto their jobs. The new way is implemented but not effectively and things go back to what it was. Change takes a great deal of communication for people to buy into. If you see management is not communicating, then results will not be remarkably different. This is when you can see if management is any good or the company continues to make profits without the noise of management. Chaos is not the best method to run any organization. It might work in a small business but size and complexity matters.

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

One of the first things we do when we go outside is gauge the power of the wind – in the northeast at this time of the year is the wind coming from the Arctic or the north wind; what we are looking forward to is those southern winds which brings warmer weather. For most of us in the urban environments, the wind will add or subtract from one of many things to do in our daily lives. In the 1800’s the wind was one of the most important elements to daily lives for the wind allowed sailing ships to sail and turned windmills. The wind is something you that happens to you, to describe it means to observe something else. One of the most used table of wind is called the Beaufort Scale and there is wonderful book about how the scale became to be known. The book is titled Defining the Wind by Scott Huler published by Three Rivers Press, NY, 2004

Mr. Huler loves the simplicity of the Beaufort Scale which was adopted by the British Navy in 1862 and can be seen in Webster’s New Collegiate Dictionary and a host of other places. Mr. Huler was a copy writer which requires to pick the exact words to tell a story and when he reads the scale he was wondering how and why does the Beaufort Scale come to be written. The wind has to be observed to be felt; it had to go through regular science authorities to be adopted and it had to come about at the right time by the right person. Mr. Beaufort was an Admiral in the Navy, he was one of those people who like to draw maps of where everything is. This was extremely useful to the Navy – the ships need to miss the rocks and reefs around the ports. Mr. Beaufort was educated in the latest science and navigation equipment.

According to Mr. Huler, the words of the scale do work. Those works have a job – to make you understand how the wind is blowing, exactly how the wind is blowing, in comparison to other winds. They express perfectly a fundamental thing about language: Language is technology. It is a tool to accomplish a task.

It turns out there were other scales, other people had tried to quantify how the wind could be placed on a scale, however Mr. Beaufort tightened up the language so everyone would know and understand and that is a good gift.

Linking to dividend paying stocks, when you pick these types of stocks, many people will have picked them before. You will not necessarily be breaking new ground but you will be following the principle of trying not to lose money. If you do not lose money, then overtime your wealth grows both in terms of the stock price and the dividends you receive. Simple is hard to do, but simple often works.

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

 

Last year, the United Kingdom voted to leave the European Community to be more independent. In many ways, the idea is appealing to the individual. However to companies, they follow the rules of the land. One company looking at the new rules is Ryanair – the home of inexpensive flights across Europe. It is cheaper to fly through Ryanair than drive your car, so many short term flights are done. Ryanair is Europe’s largest airline by passenger numbers, the Irish carrier flies over 120 million people from British airports.

According to Connor Humphries and Victoria Bryan of Reuters, Ryanair has been going through a  number of possibilities including “Armageddon”. In breaking from the EU, England will have to negotiate with the EU and similar to divorce settlements some are easy and some are hard to work with. At the moment no one really knows which way it is to go. Will England still have access to Europe? under what conditions can people and goods and services be moved? While  Britain is part of the EU, it operates under the open skies deregulated aviation market which allowed all EU airlines to fly to and from any airport within the bloc. Once Britain begins to break from the EU, the open skies will no longer be allowed and Ryanair will move its planes to Europe which means people in England will be unemployed and it will cost them more to travel. Will the Europeans want to fly to England in the numbers the English hope to bulk up their tourism?

Linking to dividend paying stocks, people in a democracy have the right and ability to vote anyway they wish to. There are generally business consequences to the actions – sometimes it is favorable, sometimes it is unfavorable. There is a big picture and there is a picture for companies. The companies might prefer to be in one place, but they will move on a dime, if market conditions are more favorable to them.

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

 

Last year England voted to leave the European Union, which as a country is has the right to do. It has taken a little while before the reality is beginning to set in, London is one of the banking centers of the world including Europe. The other cities have banking operations but London had an advantage in terms of language (English tends to be the international trading language); reasonably stable governments  and good life style for the bankers.

Within the rules of European Union was all companies had similar access to the other countries rules or a seemingly passport to sell financial services to the others. With Britain leaving the European Union the passport will be revoked. Thus those traders will have move to an European Union country to continue the business. It was reported by Pamela Barbaglia of Reuters at the annual economic forum in Davos, Switzerland, the CEOs of HSBC and UBS and since then Citibank and Morgan Stanley have announced they are moving people from London to another city, unless Britain can negotiate the status quo. HSBC is looking at Paris, other companies are looking at Frankfurt. Every other city in the European Union are lobbying for any of the other jobs the banks provided – either front end or support services. There will be office space for rent in London as well as other changes as the years go by.

Linking to dividend paying stocks, all democratic countries are allow to turn inward or go outward as their citizens choose. In England, the country decided to be independent, as soon it will be facing more consequences with the change. Some will be good, some will be bad depending on your point of view. With President Trump’s speech he is going to focus on what is good for the US, rather than what is good for the US in the worldwide context. It will have an effect if your company has operations outside the US. The more the US tightens its borders and regulations concerning the borders, the less the diversification of business to over countries will be a good thing. Time will tell.

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

When President Trump says the US is going to place a 35% tariff on imports from China and Mexico, he may have been thinking about the automobile industry but he has not thought about Silicon Valley’s products. One glaring example is Apple and in a recent article by Eric Reguly titled Apple deserves to feel Trump’s pressure on jobs.

Apple by market capitalization is one of the most successful companies in the world, its shares at $120 are worth $630 billion. It has helped define the Silicon Valley and is building a new round office building in Cupertino, California which is termed the spaceship and will house 13,000 employees. From the perspective of highly educated and paid workers, it is good thing.

Apple builds almost none of its hardware in the US, most of it is done in China. If President Trump is talking manufacturing jobs, he can look at his iPad. Apple is better at design, packing and marketing than coming up with breakthrough innovations.

What powers the iPhone, iPad, and iPod? Lithium-ion batteries developed by the Department of Energy. The liquid crystal displays came from the National Institutes of Health, the National Science Foundation, and the Department of Defence. Apple devices are connected to the internet which is not an Apple invention.

Nor is the micro hard drive, the microprocessor, GPS, Siri or DRAM cache which emerged from the US Defence Advanced Research Projects Agency and other government departments.

Apple benefits from government research, benefits from Research and Development tax breaks, and benefits from government subsidized university graduates. In 1960 a law was passed that allows companies to avoid paying a 35% federal tax on profits made outside the US until those profits came back into the US. Apple has $216 billion in overseas accounts. President Trump is considering lowering the tax which will benefit Apple.

One can look at the good Apple has done and continues to do for millions of people have a device that works almost flawless and gives them a communications and entertainment device. Shrinking the size of the laptop to a phone size was genius.

Linking to dividend paying stocks, when the government offers rhetoric it offers a broad brush which many companies get painted by. Apple is a successful company with a well paid and growing workforce in the US, but it does no manufacturing; it does take government research into the private sector to make money (should it pay a royalty to the agencies?), it does not do manufacturing in the US – will prices go up 35%? and it does have billions in offshore accounts paying little or no tax on. Similar to most things in life, what seems simple is often complex.

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