We all know companies have cycles the best time to buy is when the price is low and as the price goes up, you can sell some of your holdings and the rest are essentially free. How long you hold them afterwards is dependent on how the company is doing. Ideally the company is growing, and when companies are growing, they will have and do have many different issues around the growth. The company will have to internally restructure, bring in new people and sometimes they work out sometimes they do not. Somewhere in the growth are signs of a decline which if you see and they are not corrected, it is time to find alternatives.

Before everyone had either an iPhone or Google android such as Samsung, there was the Blackberry, the most famous user was President Obama. The phone was often called crackberry because everyone who had one was on the phone all the time, now days it is normal.

In an article by Marc Gingras who wrote an opinion piece for the Globe and Mail, he sold a calendar service to Blackberry and was asked to lead the product management team. Mr. Gingras wrote the article for readers to learn, sometimes hubris and the inability to change mindsets can sometimes be the kiss of death, even for once great companies.

When Mr. Gingras joined Blackberry, the product management team reported to one SVP and the R&D team reported to another SVP. This created an adversarial environment because the product team wanted to more features to its customers, while the R&D team want to make sure they could deliver on their produces to reduce the scope of what features were needed, which lead to many compromises.

Mr. Gringras wanted a change that both departments would report to him. The SVP of Product was good with it, the SVP of R&D had reservations. He asked why do you want to change the way we have been doing things? Mr. Gingras said because from my perspective we are failing. The other person said, failing? we have managed to ship our releases on time, they are good quality, we have things under control. I said, but Apple (the competition) is kicking our butt. We are failing users, we are failing in the marketplace.

The perspective was the SVP of R&D saw the measure of success was whether our products were being delivered on time. For me, it was whether we were delivering a product that delighted our customers.

Eventually, Blackberry changed their phone to look like an Apple iphone, but why choose Blackberry if it looked like an iphone. Customers began to leave Blackberry and although it still exists, it does not have the market share it did. Could it have remained a dominant market player? no one really knows.

Linking to dividend paying stocks, there are many companies that come from the “garage” and become a dominant company and then slowly go lose market share. There are a wide variety of reasons for the downturn, but often it can be seen in retrospect how they did not adapt to the changing marketplace. There will be parts of the company that worked wonderfully when it was smaller, then okay as the size grew and behind the scenes was not really working behind the scenes. People in the company will see different aspects of the company. For example, in the cellphone business, who sells smartphones – it is the big communication companies, a buyer goes to Verizon or someone similar. Do the carriers worry what brand they sell, as long as they make a profit from it? maybe the carriers changed their policy but the company still thought it was number one. There are many reasons that are possible but often delivering a product that delights your customers is rarely a reason why a company would fail. Does it?

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

Every economy in the world depends on many aspects but tourism or hospitality industry ranks as a large contributor to the GNP. Within the tourism sector are the local and the international aspects. International is people travelling across borders to visit a country, local are the people who live in the country. Sometimes the local tourism is based on the weather, if you were to visit New York City in the summer, you would notice it is hot and humid. There is a reason why people leave the city to feel better – past the suburbs are parks, cottages and cooler temperatures. There is another topic of how much money people spend – from camping to five-star resorts, there usually many price points for tourism.

In an article by Eshe Nelson of the New York Times News Service, an event was held in London, England during the first week of May. The event was the coronation of King Charles. With the royal party, there is many traditions and pomp and ceremony for the event and the public was invited to watch on the screens.

The issue of what happens to the Coronation can be related to the Championship event for sports. People gather at the stadium as well as bars and restaurants to watch and cheer to the teams. The bars and sponsoring beer companies will have put up signs and encourage everyone to participate and spend money at their establishment.

In England, the coronation of the King started a 3 day celebrations and even if someone does not like the monarchy, they were likely watching because the coronation of a new King and Queen does not happen every generation. In this case, the King is in the position until they die or just before they die. Charles is about 70 years of age and if he lives to 90ish, there will not be another coronation for 25 years.

Stephen Millard, a deputy director at the National Institute of Economic and Social Research, believes there will be a upswing in consumer confidence but unlikely to fundamentally change the British economy. The UK Hospitality, estimates an additional $600 million in spending on hotels and at pubs.

Linking to dividend paying stocks, in the hospitality industry, there needs to be events on a regular schedule to ensure occupancy and spending on food and beverages. For a dividend producing company, it should not rely on big events, it should rely on normal day to day spending. If the company has to rely on events, then as investor you need to pay attention to how it makes it money and does it? If you invest in a local or national utility, then you need to know does the lights work when I turn the switch on. There are a number of methods to invest your money, but always try to find relatively boring ways which is very consistent and high margins.

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

One of the most owned and watched companies on the stock exchange is Apple. The smartphones from Apple have changed the world, maybe for the better and people love the product. During the pandemic with many people staying at home, consumer products including Apple’s sales skyrocketed. That is good, but when sales take off, they will be expected to fall at some point.

In an article from Reuters, Apple’s sales have remained constant as Apple sales were $94.84 billion which is better than the street estimates of $93 billion. Profit was $1.52 a share compared to the estimates of $1.43 a share.

Chief Financial Officer Luca Maestri said Apple’s gross margins was between 44 and 44.5% versus the estimates of 43.7%

The Board approved of buybacks of $90 billion.

iPhones set a sales record thanks in part to the new users in markets such as India where Apple owned new Apple stores.

Linking to dividend paying stocks, one of the roles of investment banks is to provide estimates at what they think will be a company’s performance. It is up to the company to try to beat the estimates, but it is noted most of the time the estimates are generally accurate. The estimates for the companies that pay dividends should be within a couple percentage points for the analysts tend to know the industries very well. It is a rare dividend paying company that the analysts get wrong. If the analysts’ estimates are off for your investment, it is time to find alternatives.

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

In the world of business, we often believe that because a large corporation makes an offer to buy another company it will eventually go through. Some shareholders may ask for a higher price, but generally the offer will go through. We often believe this because in every large corporation there are teams of people who examine potential mergers and acquisitions on a regular basis. The teams report to the President and when an offer is made, outside legal and banking talent are working to ensure the potential merger passes the legal concerns and funds are available to pay for the acquisition. The group also stays abreast who the largest shareholders are for their company and the one they will potentially buy. In seems Microsoft’s groups missed one element in the planning process – ensure governments are on your side. When a merger is announced, the public and interested groups – both pro and con, will try to attached themselves to the best outcome.

In an article by David McCabe and Kellon Browning of the New York Times News Service, the British antitrust regulators dealt a major setback to Microsoft and giving a win to the government enforcers around the world who want to rein in Big Tech.

Most people know the cloud in relationship to corporate users and the growth of cloud services with Amazon, Microsoft and Google. Another cloud service is the gaming industry and with the gaming industry the spend is similar to what people spend on Hollywood movies. The technology allows people to stream games to their devices without the need for special devices to play the game, such as gaming consoles.

In the British decision, there were hints at reigning in Big Tech or the era of easy blockbuster deals by tech giants is over.

Microsoft was hoping to combine Microsoft’s Xbox console and video game subscription with Activision’s games such as Call of Duty, World of Warcraft, and Candy Crush. Microsoft has more than 25 million subscribers for its gaming services.

Cloud gaming is relatively new, but the projections are to be worth $1.3 billion in the UK and $14 billion globally by 2026. Cloud gaming does encounter frequent glitches and requires a strong WiFi connection. However, every year the big communication companies such as Verizon make WiFi easier to connect to.

Linking to dividend paying stocks, all companies do mergers and acquisitions, the larger the number, one would expect the more work has gone into ensuring the shareholders of the proposed company and the government regulators are on side before announcing. In our information society, there will be more pros and cons heard by the government regulators because it is relatively easy to make submissions and the pros and cons reflect sentiment in the news. In this case, are Big Tech companies too big? do they have too much power? There are plus and minuses to the questions, but it is up to the company to deal with regulators and allow competition to occur. In many semi-monopoly industries, the regulators are often on the side of the industry which helps the companies maintain profits to pay dividends. One example is the electrical utility regulators which often raise rates every year. Companies often have short term outlook to ensure their quarterly results are steady and growing, government regulators can look years out, but politicians have a very short time period which means corporately it is balancing act. How does your management manage the balancing act?

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

Every country in the world likes some sort of growth in the sector which provides the greatest economic activity for the country. For a number of countries around the world, tourism is a large generator of economic activity. If you ask people you know where are they going for holidays? you might be able to gauge how the global tourist economy is doing. During the past 30 years, China became the manufacturing center for the developed world.

In an article by Ellen Zhang and Ryan Woo of Reuters, the official manufacturing Purchasing Managers’ Index (PMI) declined to 49.2 from 51.9 in March, according to data from the National Bureau of Statistics (NBS). The 50 point on the index marks either expansion or contraction on a monthly basis.

The manufacturing sector in China employs about 18% of the workforce and China is the world’s second largest economy.

To boost trade and employment, the Chinese cabinet unveiled plans including supporting auto exports, facilitating visas for overseas businesspeople and providing subsidies to firms that hire college graduates.

Linking to dividend paying stocks, governments of all stripes try to encourage economic activity. If you own a profitable company they often benefit from the government’s push to help the economy, whether directly or indirectly for most subsidies are wide reaching. If the companies that you invest in does not receive government help, you should look for alternative investments for they are giving up free funds for doing what they normal would do.

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

Every once in a while a food chain rises and soon people have tried it. Many continue and the chain expands and the family that started the chain wishes to sell out. Franchise operators such as McDonald’s is a public company, but many companies remain family owned and controlled. A franchise which many people have tried is called Subway, founded in 1965 by Fred Deluca and Peter Buck. Fortunately the families have adapted and remained in control since, but the families made the decision to sell.

Who are the buyers – private equity firms.

The appeal to the private equity firms are the royalties paid by each franchise. The term of this method is called Whole Business Securitization or WBS. The royalties expected can be used as collateral for bank loans. The private equity firms have access to credit and can borrow money, the future royalties paid down the debt and the private equity owns more of the firm. Eventually it can sell the asset or merge it with its other holdings in the food business.

When interest rates rose, the cost went up and the normal financing became a challenging environment. Subway retained JPMorgan Chase for assistance, and they came up with the solution of a $5 billion acquisition financing plan. The owners of Subway want a final price in the $10 billion range and with the loan, the private equity companies could come closer to the target price. Bids from the private equity firms came in between $8.5 billion and $10 billion.

The temporary financing would be replaced by the WBS method, however, to do the WBS method, a store-by-store due diligence by the rating agencies needs to be done and that can take up to a year. The idea being the private equity used JPMorgan and then refinance after 9 months with the WBS.

The remaining bidders are Bain Capital, TPG, Advent International, TDR Capital and Roark Capital. In the final round of bidding, the companies can team up if desired or go alone.

Linking to dividend paying stocks, when companies have streams of income there are possibilities that can happen. Although the stream of income can fluctuate, there are abilities to securitize the income streams to use debt financing. In similar fashion, if you are employed the bank can give you a loan based on you continuing to receive the income from the company. The important aspect is to have a stream of income, one method is to have regular dividends coming in which allows you to either reinvest or use the income for other purposes such as pay off debt. The best solution is always looking back, but having the option is a very good thing for your lifestyle balance.

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

On Wall Street, the analysts really like it when a company exceeds the estimates, because it is doing better than the analysts have forecasted. The other aspect about Wall Street is although it loves growth and growing companies, it loves discipline to make cost cuts when the growth slows. During the pandemic, e-commerce for the consumer and business was the big thing and it seemed Amazon was expanding to every state and every country around the world. When the pandemic was announced it was over and people could go back shopping, Wall Street demanded Amazon cut because growth levels were down or leveling off. In a tech company, Wall Street wants to see layoffs.

In an article published by Reuters, Amazon reported quarterly sales and profit ahead of expectations and the stock price rose.

Chief executive Andy Jassy has aimed to slash spending across Amazon’s vast array of business. Both the cloud and advertising business remain profitable. Amazon had 300,000 corporate staff and 1.47 million people in total and has reduced the work force by 9%.

Sales of the company was $127 billion and they are expecting the same ballpark in the next quarter.

Linking to dividend paying stocks, trends on Wall Street come and go, sometimes it is growth at all levels, sometimes it cutting costs, sometimes it is what divisions are profitable, sometimes it debt levels, sometimes it is raising equity. trends come and go. What is never a trend is investing in profitable companies which can pay a dividend helps you manage the trends to a greater degree. If a company can maintain its margins, as an investor you will notice the trends but to not have to participate in them. Sometimes you will ask management how are they taking advantage of the trends?

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

Almost every who listens to politicians dislike the politicians spending money on what they do not like, however if the same politicians were to spend money on something they do like, the attitude quickly changes. Sometimes the reasons to spend are very sound, for the good of the long term and a whole host of very reasonable rationalized answers, but it is still government money.

In an article by Ana Swanson and Don Clark of the New York Times News Service, the Biden Administration outlined plans to spend money building computer chips in the US at a cost of $70 billion. The money included money for computer chip companies to build new factories and to do research on the next generation of chips.

The US Commerce Deptartment is in charge of the administration’s efforts said its new National Semiconductor Technology Center would bring together companies, universities, and others to collaborate on next generation chip technology. The organization would include a string of research centers, the locations of which have yet to be chosen and aims to be operational by the end of the year.

To put into perspective the $11 billion investment by the US government is coupled with the semi-conductor industry has in the past years spent about $70 billion on research and development, according to Laurie Glandomenico, the VP and Chief Acceleration Officer of MITRE, an nonprofit that operates federally funded research centers.

Companies, universities, lawmakers and local governments have been lobbying the administration to sept an outpost of the new organization in their area. Senator Chuck Schumer is pushing Albany, NY as a site. Part of a Senator’s job, no matter their political stripe, is to lobby for government research and development money). For a private sector lobbying remember the cities which proposed to Amazon for their second headquarters.

Linking to dividend paying stocks, personally people may not like the government but if the government programs help the company they are attached to, they like it just fine. If your investment is not benefiting from some form of government assistance, it is time to find alternatives.

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