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It is just the facts. No inside info or naysaying. The reality is public.
Al is going to collect nothing
I read the story about the ambulances. OSK will do well as long as the US keeps fighting these unwinnable wars.
Nordic American Tanker Shipping Ltd. -- (NYSE: NAT) Further Fleet Expansion; Delivery of Vessel no. 19
On Monday December 6, 2010, 9:23 am EST
HAMILTON, BERMUDA--(Marketwire - 12/06/10) - Nordic American Tanker Shipping Ltd. (NYSE:NAT - News) (the "Company") today took delivery of the Nordic Vega, a suezmax newbuilding, built at a Far Eastern yard. Including the Nordic Vega the fleet of the Company consists of 19 suezmax vessels (approx. 150,000 deadweight tons each) of which two are newbuildings being built at Samsung Heavy Industries Co., Ltd. These vessels are expected to be delivered in 3Q11 and 4Q11, respectively. The Nordic Vega will be employed in the spot market through the Gemini Suezmax cooperation.
Going forward, the Company is continuously seeking to expand its dividend and earnings capacity through further acquisitions. No equity issue is under planning. The Company has ample financial resources -- having no net debt after delivery of the Nordic Vega.
Good question. It looks like the price of oil and gas is on the way up again so we should see some movement here.
Don't Get Too Worked Up Over Oshkosh's Earnings http://www.fool.com/investing/general/2010/11/29/dont-get-too-worked-up-over-oshkoshs-earnings.aspx
Seth Jayson
November 29, 2010
Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.
Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.
Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow (FCF) once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That brings us to Oshkosh (NYSE: OSK), whose recent revenue and earnings are plotted below.
Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.
Over the past 12 months, Oshkosh generated $530.2 million in FCF on net income of $790.0 million. That means it turned 5.4% of its revenue into FCF. That sounds OK. Still, it always pays to compare that figure to sector and industry peers and competitors, to see how your company stacks up.
Company
TTM Revenue
TTM FCF
TTM FCF Margin
Oshkosh $9,842 $530 5.4%
Honeywell International (NYSE: HON) $32,401 $3,881 12.0%
Navistar International (NYSE: NAV) $12,058 $737 6.1%
Terex (NYSE: TEX) $4,288 ($599) (14.0%)
Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. TTM = trailing 12 months.
All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash comes from high-quality sources. They need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).
For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much.
So how does the cash flow at Oshkosh look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.
Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.
When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.
With questionable cash flows amounting to only (0.6%) of operating cash flow, Oshkosh's cash flows look clean. Within the questionable cash flow figure plotted in the TTM period above, changes in taxes payable provided the biggest boost, at 3.4% of cash flow from operations. Overall, the biggest drag on FCF came from changes in accounts receivable, which consumed 54.8% of cash from operations.
Depends..... It can go two ways, if the Irish government takes a part interest for the money owed then then you just get some dilution - if they actually nationalize it then your shares are worthless.
EU agrees on $89 billion bailout loan for Ireland
By GABRIELE STEINHAUSER and SHAWN POGATCHNIK, Associated Press Gabriele Steinhauser And Shawn Pogatchnik, Associated Press
30 mins ago
.BRUSSELS – European Union nations agreed to give euro67.5 billion ($89.4 billion) in bailout loans to Ireland on Sunday to help it weather the cost of its massive banking crisis, and sketched out new rules for future emergencies in an effort to restore faith in the euro currency.
The rescue deal, approved by finance ministers at an emergency meeting in Brussels, means two of the eurozone's 16 nations have now come to depend on foreign help and underscores Europe's struggle to contain its spreading debt crisis. The fear is that with Greece and now Ireland shored up, speculative traders will target the bloc's other weak fiscal links, particularly Portugal.
In Dublin, Irish Prime Minister Brian Cowen said his country will take euro10 billion immediately to boost the capital reserves of its state-backed banks, whose bad loans were picked up by the Irish government but have become too much to handle. Another euro25 billion will remain in reserve, earmarked for the banks.
The rest of the loans will be used to cover Ireland's deficits for the coming four years. EU chiefs also gave Ireland an extra year, until 2015, to reduce its annual deficits to 3 percent of GDP, the eurozone limit. The deficit now stands at a modern European record of 32 percent because of the runaway costs of its bank-bailout program.
Cowen said the accord — reached after two weeks of tense negotiations in Brussels and Dublin to fathom the true depth of the country's cash crisis — "provides Ireland with vital time and space to successfully and conclusively address the unprecedented problems that we've been dealing with since this global economic crisis began."
However, in a surprise accounting move, European and IMF experts decided that Ireland first must run down its own cash stockpile and deploy its previously off-limits pension reserves in the bailout. Until now Irish and EU law had made it illegal for Ireland to use its pension fund to cover current expenditures. This move means Ireland will contribute euro17.5 billion to its own salvation.
The three groups offering funds to Ireland — the 16-nation eurozone, the full 27-nation EU, and the global donors of the International Monetary Fund — each have committed euro22.5 billion ($29.8 billion). Extra bilateral loans from Sweden, Denmark and Britain are included within the EU contribution totals.
Ireland's finance ministry said the interest rates on the loans would be 6.05 percent from the eurozone fund, 5.7 percent from the EU fund and 5.7 percent from the IMF. That's higher than the 5.2 percent being paid by Greece for its own May bailout.
Ajai Chopra, deputy director of the IMF's European division who oversaw the Dublin negotiations, confirmed Ireland's government would have freedom to set its own spending and tax plans.
He said Ireland will have 10 years to pay off its IMF loans, and that the first repayment won't be required until 4 1/2 years after a drawdown. Greece, in contrast, has three years to repay its loans.
Chopra said Ireland's decision to use its pension reserve fund had helped win the confidence of those who offered help. He declined to say if negotiators had demanded Dublin use its reserves under terms of the deal.
"It makes total sense to use them at this time. I think this is quite unique in this type of arrangements and it will be taken as a sign of underlying strength," he said.
Embattled Prime Minister Cowen told a press conference that Ireland had no choice but to take help, because international investors had decided that lending to Ireland was too risky and were demanding unreasonable returns. The yield on 10-year Irish bonds rose Friday to a euro-era high of 9.2 percent.
"If we didn't have this program, we would have to go back to the markets, which as you know are at prohibitive rates," Cowen said. "We would pay far more."
Still, analysts and opposition leaders in Ireland warned that the country of 4.5 million was taking on a bill it couldn't afford to repay at rates exceeding 5 percent.
Michael Noonan, finance spokesman of the main opposition Fine Gael party, said he believed that fellow EU members — particularly Germany, the eurozone's bankroller — didn't want to give money too cheaply to Ireland, for fear that Dublin would grow addicted to it.
Noonan said the loans were "pitched high to drive us back into the market," and would encourage Ireland to pursue maximum austerity measures in hopes of reassuring the bond markets.
Cowen told reporters there had been no support in talks to ask senior bondholders to lose part of their stake on loans made to Ireland's debt-crippled banks.
"There was no agreement from the European Union for such a proposal, because of the impact it could have in the relation to the stability of the entire banking system," he said.
Ireland in recent days committed to slashing euro10 billion from spending and raising euro5 billion in new taxes over the coming four years, with the harshest steps coming in the 2011 budget to be unveiled Dec. 7.
Cowen has only a two-vote majority in parliament. Last week he pledged to dissolve parliament for early elections next year — but only after the budget is fully enacted. Opposition leaders won't say if they will support the budget, leaving Cowen vulnerable to losing a key budget-related vote within the next two months.
To shore up longer-term confidence in the euro, EU finance ministers also agreed on a permanent mechanism that from 2013 would allow a country to restructure its debts once it has been deemed insolvent.
Jean-Claude Juncker, the head of the Eurogroup, which represents the 16 euro nations, said private creditors would be forced to take losses only if ministers agreed unanimously that the country had run out of money.
He said that if a country is merely facing a crisis of liquidity, it would get financial help similar to the bailout agreed for Ireland.
European Central Bank chief Jean-Claude Trichet said making senior bondholders — chiefly banks that loan to other banks — suffer losses when a nation's finances head toward bankruptcy would be "fully consistent" with existing IMF policies.
___
Pogatchnik contributed from Dublin. David Stringer in Dublin also contributed.
Ireland bailout nearly a done deal; protesters decry painful cuts
IMF, EU and Irish officials hurry to forge an 'outline agreement' before financial markets open Monday.
Meanwhile, demonstrators denounce decreases in welfare, pensions and the minimum wage, tax hikes and job elimination.
By Henry Chu, Los Angeles Times
12:06 PM PST, November 27, 2010
Reporting from London
Ireland is on the verge of reaching a preliminary agreement with international finance officials on a massive bailout package, a government minister said Saturday, even as thousands of angry demonstrators marched through Dublin to protest the country's latest round of painful public-spending cutbacks.
Irish Communications Minister Eamon Ryan told broadcaster RTE that his colleagues and their counterparts from the International Monetary Fund and the European Union were working hard to produce an "outline agreement" in time for the opening of financial markets Monday.
Dublin is deep in the hole because of its devastated banking sector, whose losses have pushed the government's budget deficit to a staggering 32% of gross domestic product. Nervous investors have been dumping Irish bonds for days, making it prohibitively expensive for Ireland to borrow money on the open market.
In addition to jittery international markets, Dublin also must contend with an increasingly angry populace, including many who blame the government's coziness with the banks for bringing Ireland to its knees and who reject the tough austerity measures it has introduced to rein in the deficit.
Under the latest austerity plan, unveiled last week by Prime Minister Brian Cowen's government, thousands of public-sector jobs will be eliminated, property and sales taxes will rise, welfare benefits and pensions will be cut, and the minimum wage will decrease.
"If Brian Cowen was a true leader, instead of cutting the minimum wage, he would have said, 'I'm cutting my salary and all my ministers' salaries in half,' " said Sandra McLellan, 49, who braved heavy snow to travel to Saturday's protest from her home in County Cork. "Cutting the minimum wage by a euro per hour will affect those at the bottom."
Protest organizers chose a symbolic destination for their 15,000-strong march through Dublin: the city's General Post Office, an icon of Ireland's long struggle for independence from Britain. Critics lambaste the IMF and EU bailout as a shameful loss of sovereignty.
In fact, Fianna Fail, the party that has governed Ireland for nearly its entire history as a modern independent nation, is now on the rocks.
Communications Minister Ryan declined to give precise details Saturday of the expected bailout, beyond its projected price tag of about $115 billion. That amount is likely to shield Dublin from having to raise cash in the bond market for up to three years. But observers are eagerly waiting to hear what conditions will be imposed on the government in return.
The announcement of even a draft agreement Sunday would represent a speedy outcome to negotiations originally expected to take weeks.
In the last few days, however, fears over Ireland's precarious finances began spreading to other troubled nations that use the euro, particularly Spain and Portugal, whose borrowing costs also have hit almost unsustainable highs. Officials hope that a quick resolution to Ireland's plight will soothe investor anxiety and stabilize the euro, which has dropped to its lowest level against the dollar in two months.
henry.chu@latimes.com
Special correspondent Genevieve Carbery in Dublin contributed to this report.
Maybe our ship is coming in......
Feds turn up heat on Wall St., raid 3 hedge funds
WASHINGTON — Federal investigators have turned up the heat on Wall Street, raiding three hedge funds in what one of the targets called a wide-ranging probe of insider trading.
The FBI on Monday searched the New York offices of Level Global Investors LP, and the Stamford, Conn., headquarters of Diamondback Capital Management LLC, a law enforcement official said. The official spoke on condition of anonymity because he was not authorized to discuss an ongoing case.
Another FBI official said the agency also searched a third site, at 30 Federal St. in Boston. Hedge fund Loch Capital Management LLC has its headquarters at that address.
The FBI said in a statement that it had executed search warrants in the three states "in an ongoing investigation." Agency spokesmen said they could not comment further because the court documents are under seal.
A spokesman for Level Global acknowledged the raid took place.
"We can confirm that agents from the Federal Bureau of Investigation visited our offices this morning as part of what we believe to be a broader investigation," the spokesman said in a statement.
Four men wearing overcoats and badges emerged late Monday from the Level Global offices in midtown Manhattan, pulling rolling suitcases behind them and carrying nylon backpacks. They declined to answer reporters' questions.
HRCT managed to end up where they are without a plan. Or I guess, more accurately, they ended up where they are with a lot of plans that didn't amount to anything.
HRCT has a business plan?
You can tell when a politician is lying by watching to see if his lips are moving.
Ireland Opens Door to Massive EU Bailout
By DAVID ENRICH And CHARLES FORELLE - WSJ
DUBLIN—Top Irish government officials acknowledged for the first time Thursday that the country is grudgingly edging toward a massive international bailout.
Patrick Honohan, the head of Ireland's central bank, said he expects the country will receive "tens of billions" in international loans. "It will be a large loan because the purpose…is to show Ireland has sufficient firepower to deal with any concerns of the market," he said in a radio interview.
Intervention Inevitable for Ireland Access thousands of business sources not available on the free web. Learn More Finance Minister Brian Lenihan added: "It's clear we will need some form of external assistance. ... We have to find a resolution to our banking difficulties with whatever external assistance is appropriate."
The comments came as a team of officials from the International Monetary Fund, the European Central Bank and the European Commission descended on Dublin to examine the severity of Ireland's banking crisis. Irish government officials have until now rejected the notion that the bailout is necessary, but that position seems to be wilting as leaders gently prepare the public for the idea that a politically unpopular bailout is coming.
Fears that the Irish government will be unable to shoulder the mounting costs of rescuing its troubled banks have eroded market confidence in the country's financial viability and reignited concerns about other members of the 16-country euro zone.
As Ireland copes with the aftermath of a large property bust, it faces a new wave of emigration but also innovation, as a group of architects band together to create a micro economy. WSJ's Andy Jordan reports from Dublin.
.The structure of an anticipated Irish bailout remains unclear. Mr. Lenihan told lawmakers Thursday afternoon that the negotiations will be focused on "providing capital—or a contingency capital fund—that can stand behind the banks."
Anxiety about Ireland has rubbed off on other financially shaky euro-zone countries. On Wednesday, Portugal shelled out a lofty interest rate to attract investors in a routine auction of government debt. On Thursday, a Spanish auction fared better, but the country still had to offer a yield that was 11% higher than when it last issued debt two months ago
Jean-Claude Trichet, president of the European Central Bank, also sounding an alarm Thursday, saying he had "grave concerns" about how much was being done to toughen the EU's fiscal-discipline rules, which were widely ignored for much of the past decade.
Trying to quell public furor over how much the Irish government has already spent in vain on bank-rescue efforts, Mr. Lenihan said an international bailout "would not necessarily" create additional burdens on the taxpayer beyond fees for the borrowing.
Still, borrowing tens of billions of euros a year could add billions in extra interest payments for the Irish government.
The public statements by Messrs. Honohan and Lenihan represent the government's clearest acknowledgments yet that Ireland's repeated attempts to stabilize the banking system have failed. Most recently, the government in late September said it would inject billions of euros more into the banks, pushing the total investment to about €50 billion ($67.52 billion). At the time, Mr. Lenihan vowed the banks wouldn't need more.
"It's true that the banks need additional confidence," Mr. Honohan said Thursday. "The huge sums of money that have been put in by the government to support the banks have not generated sufficient confidence yet."
One source of market angst is Allied Irish Banks PLC, the country's second-largest bank and a major player in its property-lending binge. So far, Allied Irish has posted smaller losses than some rivals, but some industry officials worry it could be plagued by a new wave of bad loans.
More clarity could come Friday, when Allied Irish is scheduled to issue an update on its third-quarter performance. But unlike in the U.S., Irish companies aren't required to disclose audited financial statements each quarter, so the update could have relatively few concrete numbers.
Despite the pressure of financial markets, the Irish government isn't likely to take a bailout lightly. Ireland's independence from Britain, long fought and hard won, still resonates in the public sphere.
Journal Community
.."Was it for this?" the Irish Times editorialized Thursday, lamenting that the martyrs of the 1916 Easter Rising should have died for such a humbling: "a bailout from the German chancellor with a few shillings of sympathy from the British chancellor on the side."
The editorial continued: "There is the shame of it all. Having obtained our political independence from Britain to be the masters of our own affairs, we have now surrendered our sovereignty to the European Commission, the European Central Bank, and the International Monetary Fund." In Ireland's Parliament, a deputy recited the stanza of Yeats from which the editorial takes its title, an elegy for the dead of an earlier, failed, revolution.
A small band of protesters stood outside the Finance Department building where IMF and European officials were meeting. At the Central Bank's nearby headquarters, a lone woman stood in protest with a home-made sign that read: "Ireland's new absentee landlords—ECB and IMF. Famine next!!!"
Now what: Sadly, the situation in Ireland is a really big mess. And whether we're talking about Allied Irish Banks or competitor Bank of Ireland (NYSE: IRE), the future is as clear as mud. While uncertainty often creates opportunities, I get particularly nervous when that uncertainty is doused in political wrangling. Undoubtedly some investors will want to continue to speculate on Allied Irish Banks' shares, but most investors are probably better off looking elsewhere.
that said, it is far more than a scam.
What "more" might that be?
Brookfield Infrastructure Partners Announces Strong Third Quarter 2010 Results
No, thanks to Hodges. He never had a case in the first place.
The judge did dismiss it. He gave Hodges an opportunity to refile an amended complaint and the SEC has filed another motion to dismiss. The judge will rule on that next month.
Since Hodges refiled esentially the same thing, you can expect the judge to dismiss this one also.
Oshkosh Corporation Announces Grand Opening of Tianjin, China Plant
Monday October 25, 2010, 6:00 am EDT
OSHKOSH, Wis.--(BUSINESS WIRE)-- Oshkosh Corporation (NYSE:OSK - News) announced today the grand opening of its new manufacturing plant in Tianjin, China. This state-of-the-art facility is producing JLG access equipment for China and other Asian markets. The new factory marks yet another milestone in the Oshkosh commitment to the important Far East markets and further enhances the Corporation’s international presence.
“The completion of the Tianjin facility gives Oshkosh Corporation and JLG, our access equipment business and the world leader in aerial access equipment, a strategic advantage to better serve our Asian customers,” said Charles L. Szews, Oshkosh Corporation president and chief operating officer. “It allows us to quickly respond to customer requirements in this very important market.”
Construction on the Tianjin plant was completed in the spring of 2010. Since then, JLG has gradually introduced additional product models into the plant for local fabrication and assembly. The facility utilizes the latest in manufacturing, subassembly, fabrication and paint technologies.
“With the Tianjin plant, we have brought together the most advanced manufacturing processes to continue our long, proud tradition of building the best access equipment in the world,” said Szews. “Producing in the region will allow rapid product delivery to customers, and complement our other manufacturing locations.”
Oshkosh has a rich history in China. The Company first entered the Chinese market in 1982, when it began supplying Aircraft Rescue and Fire Fighting (ARFF) vehicles. In 2002, a JLG sales office was opened in Hong Kong, followed in 2006 with an Oshkosh corporate office in Beijing. In 2008, Oshkosh opened an additional corporate office in Shanghai, primarily dedicated to sourcing parts and components for the manufacturing of Oshkosh and JLG products. Tianjin is a municipality located in northeast China, two hours from Beijing.
Today, many different Oshkosh Corporation products are in use throughout China, including ARFF and snow removal vehicles, fire trucks, tow trucks, mobile communications vehicles and access equipment. JLG equipment is in use at some of the largest and busiest shipyards, construction, building maintenance, and aviation and aerospace sectors. More than 100 Oshkosh ARFF products are in operation at major airports such as Shanghai Pudong Airport, Hangzhou Airport, Quzhou Airport, Ningbo Airport, Beijing Capital International Airport and Tibet Lasha International Airport, the worlds’ highest airport at 4,500 meters. In 2010, Pierce Manufacturing, a subsidiary of Oshkosh Corporation, received delivery orders for new fire trucks from the Nanjing, Jiangsu Province Fire Bureau.
In addition to China, Oshkosh has manufacturing operations in nine countries including Australia, Belgium, Brazil, Canada, France, Mexico, Netherlands, Romania and the United States. Sales and service centers are strategically located throughout the world.
And the Yankees are going home in shame.....
I assume Botany was not your favorite subject.....
Wild rice (also called Canada rice, Indian rice, and water oats) is four species of grasses forming the genus Zizania, and the grain which can be harvested from them. The grain was historically gathered and eaten in both North America and China. While it is now something of a delicacy in North America, the grain is no longer eaten in China, where the plant's stem is used as a vegetable.
Wild rice is not directly related to Asian rice (Oryza sativa), whose wild progenitors are O. rufipogon and O. nivara, although they are close cousins, sharing the tribe Oryzeae. It is also not the plant described as ??????a (zizania) in the Parable of the Tares in the Bible, which is thought to be Lolium temulentum.
I case you were wondering where Xers come from..........
O'Donnell questions separation of church, state
'You're telling me that's in the First Amendment?' asks Senate candidate
How many people do you need?
About 217 in the House and 51 in the Senate.
Have a joint and calm down.
At least 165 million
You are 1 of 330 million
Whatever Prop 19 is....
6 Dividend Companies with Huge Economic Moats
An important aspect of long-term dividend investing is identifying companies that have durable economic advantages that allow them to remain profitable for the foreseeable future. For the dividend growth strategy to work, time is needed, and lots of it.
Company economic advantages are often called “economic moats”, because they act as a durable defense to separate the company from its competitors. Companies that do not have moats face a lot more pressure from competitors, while companies with large moats have better chances for higher margins and bigger profits along with consistent growth. This article highlights 7 companies with superior moats.
Canadian National Railway (CNI)
Canadian National Railway is the largest railway in Canada and has significant operations in the United States. The rail network extends from the Atlantic Ocean to the Pacific Ocean through Canada, and also extends southward to the Gulf of Mexico through the United States.
Railways have big economic advantages because once track is put down, there’s little reason for a competitor to put down track in the same area to serve the same routes. A railway’s biggest concern is the economic trends in the areas it serves, rather than fierce competition from other railways. Railways also tend to be very efficient compared to other forms of transportation, particularly when transporting large amounts of commodities.
Canadian National Railway’s dividend yield is currently only 1.60%, but the dividend growth is high. The last increase was 7%, and the five-year dividend growth rate is 17%.
Wal-Mart (WMT)
Wal-Mart is the biggest, baddest retailer around. The company pulls in over $400 billion per year in revenue. When it purchasesproducts to sell, it purchases so many at a time, that it can demand pretty much any price it wants. Simply by being so huge, it can buy products cheaper than any of its competitors, and therefore can sell at a lower price while simultaneously having an excellent profit margin compared to other retailers. Since it sells at a lower price, everyone flocks to Wal-Mart to buy things, and the retailer gets even bigger, continuing to dominate its competitors. It’s a cycle.
How would a retailer go about trying to compete with Wal-Mart? A given competing retailer isn’t big enough in terms of purchasing power to match Wal-Mart’s prices, so people shop at Wal-Mart instead. Since people shop at Wal-Mart instead, this competing retailer does not grow very quickly, and so they can never outpace Wal-Mart in terms of purchasing power. It’s a catch-22. It’s like not being able to get a job because you don’t have enough experience, and not having enough experience because you can’t get a job.
Most economic moats are viable because they form an endless cycle; a catch-22 against competitors. Wal-Mart offers a dividend yield of 2.20% with a five-year dividend growth rate of 15%. Costco (COST) and Amazon (AMZN) have been innovative enough to chip away at the moat, but Wal-Mart’s current valuation and continued growth offer considerable upside and a fairly low downside.
Johnson and Johnson (JNJ)
Johnson and Johnson has a moat made up of two things: a) Scientific know-how and patents, and b) A collection of strong brand names.
When healthcare companies develop a new medicine or a new product, they patent it, and this stops companies from producing similar products. This allows the company to charge high prices. With the vast size of the company, JNJ has the vast technical know-how to continue to research and develop new products, and to patent them against competitors. At any given time, Johnson and Johnson has a huge patent shield in diverse categories, and it has a healthy pipeline of new products coming out to be patented.
In addition, Johnson and Johnson’s collection of brands are well-known. Its consumer products can sell for 2x as much as an exact non-brand name copy of the formula because people tend to buy it anyway. This patent-shield-wielding juggernaut offers a 3.40% yield and more than 10% annualized dividend growth over the past five years.
Brookfield Infrastructure (BIP)
Just about any utility company or pipeline has a large economic moat due to the local monopoly they have on their communities. A utility or pipeline invests in a large amount of assets that return a stable cash flow over time, and nearly untouched by competitors.
I picked BIP in particular because its operations are global, and I wanted to point out that a company with a huge moat does not have to be a huge company. BIP has ownership or partial ownership of the following:
Utilities:
Transelec- Electric transmission lines in Chile
NGPL- Natural gas storage and pipeline in the US
Powerco- Electricity and gas distribution in New Zealand
IEG- Electricity and natural gas connections in UK
Ontario Transmission- Electric transmission lines in Canada
TGN- The only natural gas distributor in Tasmania
Transportation:
DBCT- Coal terminal that supplies port export services from Australia
WestNet Rail- Australian rail infrastructure
PD Ports- Collection of shipping ports in UK
Euroports- Ports in Europe and China
Timber:
Island Timberlands- timberland in British Columbia
Longview Timber- timberland in Northwestern US
Social Infrastructure:
Peterborough Hospital- UK hospital
Long Bay Forensic and Prison Hospitals- Australian hospital
Royal Melbourne Showgrounds- Exhibition Center in Australia
BIP offers a yield of 5.50% and their last distribution raise was nearly 4%. Looking forward, BIP management hopes to boost the distribution by 3-7% per year. Still, their leveraged position and exposure to cyclical infrastructure should be carefully considered.
United Parcel Service (UPS)
UPS is a logistics company that is strong mainly because of its massive scale. It has an international distribution system that allows it to ship packages all over the world. The company uses hundreds of planes and thousands of vehicles to ship millions of packages each day.
Unlike a retailer, however, one can barely even start a business in this field. The barrier to entry is massive. One can’t start a delivery service without an enormous capital investment, and there’s no reason to even try because UPS is large enough to do it better and cheaper than you no matter where you start it. This keeps the number of players in this industry fairly low.
UPS offers a dividend yield of 2.80% and 7% dividend growth.
Microsoft (MSFT)
Usually, large companies with strong moats tend to have an equally famous brand name, but this is certainly not the case for Microsoft. In fact, its brand name is infamous for crashing PCs, buggy software, inferior updates, and annoying paperclips. Although it’s true that everyone knows Microsoft, almost everyone has something negative to say about Microsoft, and yet we still use the company's products. Why? Because Microsoft's moat is just absolutely huge.
The strength of its moat comes in the form of high switching costs. It’s difficult to switch to one of its competitors even if you want to. Everyone is familiar with Windows, but not everyone is familiar with Apple (AAPL) products or Linux. Windows has a huge percentage of the PC software market share. Even more powerful in terms of switching cost is Microsoft Office. Nobody can switch, because unless a large portion of the market switches at the same time, nobody will be able to read the documents of the people that switched first. There are even entire training and licensing programs about learning and becoming certified in Microsoft Office usage.
Microsoft currently offers a dividend yield of 2.60% and has grown its dividend by an annualized 10% over the past five years. The danger, however, is that Microsoft’s epic moat may be matched by the speed in which it is crumbling away. Innovative companies like Google (GOOG) and Apple are stealing its market share, and online document software threatens the future of the Microsoft Office model.
Summary
A moat isn’t everything, and some of these companies have pretty substantial threats to their economic advantages. Google and Apple are attacking Microsoft, Amazon and Costco are attacking Wal-Mart, UPS has Fed Ex (FDX) and a union to deal with, Johnson and Johnson is letting its collection of brands receive bad press with poor quality, and BIP, CNI, and all of them are affected by what the global economy is like at any given time.
But these aren’t just any old moats; they’re some of the biggest around, and the companies skillful enough to put up these moats might be good enough to keep them. Companies with huge moats don’t go away overnight, and if their valuations are reasonable, they may make solid investments. A thorough analysis should be performed on any stock before investing.
The feds are supposed to turn inflation loose on Nov 2nd. Cash will lose value faster.
Yes, I do.
So why are you repeating an obvious lie?
Things are looking up.
A HUGE dividend would be nice - lol
Your mythical "truth" is nowhere to be found.
Show Me the Money, Oshkosh
http://www.fool.com/investing/general/2010/10/11/show-me-the-money-oshkosh.aspx
Seth Jayson
October 11, 2010
Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.
Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the latest batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.
Black Holes in Nordic American Tanker's Model
In a previous post, I described the problem with Nordic American Tanker's (NAT) strategy, a problem that management actively ignores. In this post I shall go deeper into the reports, history and even more problems with this strategy, and reveal some possible hidden interests that may easily remain unseen to the inexperienced eye.
In my previous post, we saw how NAT's equity offering model falls short of its stated target, as the share count vs. vessel count ratio has not been decreasing since 2004, even though management claims otherwise. We also saw how share count vs. ship count represents the dividend generation power of the company. I also stated that a non-decreasing ratio is good for this company, as it can still deliver good returns with the current ratio. Hopefully management will be wise enough not to cause the ratio to rise by overpaying new vessels or by over-issuing stock. The bottom line is that the ratio will HAVE to rise in the near future, a rise that will eliminate the return and will cause a permanent capital loss. This unavoidable rise in share/vessel ratio will be caused by the ships' advancing age - and eventually by the ships' demise.
Now I shall elaborate a little bit on my calculation methods and add some more previously unmentioned issues that will strengthen the final conclusion.
First, let's inspect how one might calculate the current share count per ship ratio. This task may seem fairly simple; just divide the current share count - which is obtainable from the latest company report - by the current fleet size. In reality, one must take some more issues into account.
Let's review the common case in which the company issues about 10% more shares in order to buy a few more vessels. It will often take the company several months to close deals and actually have the ships working in the fleet. Sometimes, aside from the time that it takes the company to close a deal, there is a major delay between a ship's contractual purchase time to the ship's physical delivery time. A good example is the newbuilds, which take three years between equity offering to delivery. Thus, dividing the current share count in the current fleet vessel count will yield (unfairly) unfavorable results for the company. To be more accurate, one must consider planned number of ships, rather than current number of ships. After each equity offering, the company states how many vessels it intends to buy with the money it gets from the market. The table in my previous post was generated using planned number of ships, and this is also the reason why some of you got different numbers. To generate this list I sifted through all of the equity offerings and the shareholders letters that followed them.
Now we are aware of another aspect of NAT's equity offering model - the time difference aspect. The time difference aspect represents the time that passes between the equity offering and the actual vessel delivery time. This aspect has a major negative effect on the current shareholders of the company, although they are unaware of it. Let's see how the time difference aspect hurts the investors over the long term.
1. Money from the market (and the inevitable capital loss generated after it) is injected in the company now, but vessels arrive only long after. Sometimes the company loses more than 10% after an equity offering. In this time, the money earns interest for the company, but not for shareholders. This is a minor problem, I would dismiss it in a second if it were the only problem.
2. Many, many times, the company declares a dividend to be paid in the coming months, and in between, it declares an equity offering. This creates a very serious problem. I'll explain using an example. Imagine a situation where the company has 40M shares outstanding, and it declares a $1 dividend per share, or a total of $40M. As we saw in my previous post, this amount should be equal to the previous quarter's operating cash-flow.
Now, in order to purchase a new vessel, the company wants proceedings that are equal to issuing 3.5M shares to the public. It issues the shares before it distributes the dividend. When the distribution day will come, the company will have to distribute more than $40M - $43.5M, not as planned, since newly issued shares must also get a dividend. Where will the extra $3.5M be taken from?
The answer, which is also officially stated by the company, is that the money is taken from the equity offering funds, by issuing a few more shares, say 4M shares, instead of the calculated number of 3.5M shares that are actually required to purchase the vessel. Now, let's see what happened: The company issues new shares, some of them are going to finance the dividend of this new batch, instead of going to fund a vessel purchase. The investor loses twice in this transaction, once since he is paying money of which some will NOT go to vessels purchase, and second, more importantly, is that the investor is losing pieces of future dividends because those shares that are issued in order to cover the newly issued shares dividend are, as we seen previously, eternal, so they will take a bite into the company's future dividends, forever, lowering the dividend generating capacity.
I call this by the unflattering name - "The Ponzi effect", since new shareholders are buying in when the company issue new shares, and some of their funds are used to pay other shareholders. In the way of paying those other shareholders, new shares are created that are used for nothing but thin air, yet nevertheless still take their cut in future dividends.
The severity of the Ponzi effect can be eliminated if management acts correctly, by calculating when it is right to issue new shares in relation to the close dividend distribution, and issuing small debt instead of shares for the new shares dividend. Management can also close vessel purchase deals first and only then issue equity offerings, saving "dead" time for investors, time that will perpetually affect the company performance.
Unfortunately, management's past behavior teaches us that it does not take this into account whatsoever. Sometimes it takes well over 6 months to physically get the ship working to cover the dividend of the stocks issued for its purchase, 6 months in which at least 2-3 dividend cycles are distributed. NAT can do better when it comes to timing and capital management. Equity offering is a powerful instrument and one must use extra caution when using it; when used slightly erroneously it can cause more harm then benefit.
3. Since NAT is almost always in the process of growing, there will always be shares outstanding that are "waiting" for a vessels purchase or delivery to cover those shares issuance and get the dividend capacity back to what it was. It is a never ending cycle. For example, NAT issues 10M shares to buy 3 vessels, they close the deal and the vessels are to be delivered in 6 months. In those 6 months, the 10M "new shares" eat away some of the dividend capacity of the investors that held the "old shares". After 6 months, they receive the vessels and issue more shares, some more shares that will again have to wait for new vessels. This again lowers the previous holders' dividend in favor of ships they did not yet receive, and this continues endlessly.
These three problems, and some more that I omitted, demonstrate the problems in NAT's model. Some of the impact of these problems can be lowered if management acts correctly, and in a timely manner. Such action, if taken by management, can dramatically improve future dividends for any given shipping rates that are currently available.
Another overlooked issue about NAT is its management's alignment of interests with shareholders. NAT's CEO, Herbjorn Hansson, reserves a perpetual 2% of the company. This means that the CEO retains 2% of any company equity issuance in a way that his 2% stake in the company is always maintained. The problem is that the CEO gets those shares FOR FREE. This puts him in a different playing field than other shareholders.
Taking this a step forward - it is in his interest that the company will grow as much as possible, because for the CEO, a 2% stake in a company with 50 vessels is much better than a 2% stake in a company with 10 vessels. For the investors, on the other hand, it's not growth that matters, it's the WAY growth is done that matters. Investors in NAT see that their portion in NAT is always shrinking as the company issues more shares. They must make sure that the offerings are done in a way that will reduce the shares/vessel ratio, as we demonstrated before, in order to preserve or increase the value behind their shares. Numbers show that the company is eager to grow, but the ratio is NOT decreasing. This ratio is the most important factor when investing in NAT, more important then the share price.
As discussed in my previous post, NAT's management need to act in the coming 2-3 years to reduce the fleet's age as about 8 ships (~50% of the fleet made in 1997-1998) will retire in the near future, but the shares those ships are feeding have no plans on retiring whatsoever.
In the current strategy, with time, the "last shareholders" of the company will pay the price that the "first shareholders" should have paid. This is because the later invests in the company, the older its ships become, and the closer they come to retiring. Upon vessel retiring, share count will remain constant but the vessel number will decrease. Each share will represent a smaller vessel portion - share value is likely to drop as well as the dividend.
In the next post I will outline how management can fix their strategy, not without a cost, and turn NAT into a perpetual money making machine.
Can Nordic American's Fat Dividends Continue?
Nordic American Tanker (NAT) is an all-Suezmax oil tanker company. It operates its Suezmax vessels in the spot market - i.e. prices for chartering NAT's oil tankers are changing every day. Prices for oil shipping are very volatile, thus NAT's revenue is highly unpredictable. NAT's return comes mainly from its dividends, and here we shall try to asses its capacity to continue its magnificent past performance.
Over the last decade, NAT had delivered no less than amazing returns with its fat dividends - about 17% annual average - mostly with little to no debt. NAT's returns were possible thanks to a very special capital work model, which is very different from the model of its debt ridden peers. This model allows a company to grow fast, utilize a very high payout ratio without fear of financial instability and reward investors with fat cash-flows.
Nordic American Tanker (NAT) is an all-Suezmax oil tanker company. It operates its Suezmax vessels in the spot market - i.e. prices for chartering NAT's oil tankers are changing every day. Prices for oil shipping are very volatile, thus NAT's revenue is highly unpredictable. NAT's return comes mainly from its dividends, and here we shall try to asses its capacity to continue its magnificent past performance.
But can this continue?
Let's inspect NAT's capital model:
NAT's policy is to distribute its entire operating cash-flow in one quarter as dividend in the following quarter. Since operating cash-flow does not take depreciation into account, its payout ratio is mostly above 100%.
NAT does not use debt to finance purchasing new vessels. Instead, it uses equity offerings. Money from newly issued stocks is used to purchase new vessels. Equity offering is a very strong instrument that mostly destroys value, but not always. NAT's management and its CEO, Herbjorn Hansson, are constantly arguing that the equity offerings are accretive - which means that the company's dividend capacity is growing after each offering, and that the offerings are not dilutive in nature.
This raises a few questions :
1.How can one measure the dividend capacity of this company, given the constantly changing shipping rates? After all, dividends for different years are not comparable since shipping rates are very volatile in character. A lower dividend than the year before does not necessarily suggest a lower dividend capacity. We must think of a measurement that is indifferent to the shipping rates.
2.How can one tell that those equity offerings are not dilutive in nature?
Well, fortunately, there are simple answers to these questions. Equity offerings do increase the number of stocks outstanding, effectively diluting current shareholders, unless the count of shares per vessel is decreasing.
A company with 100 shares and two vessels can produce less dividend than a company with 120 shares and 3 vessels, since for the latter, behind every vessel there are 40 shares while for the former, behind every vessel there are 50 shares. NAT strives (not always successfully) to purchase vessels in such a way that the increase in share count will still lead to a decrease in the shares / vessel ratio.
Another way of looking at it is to see how many vessels one shareholder holds. Let's take, for example, a shareholder that own 1000 shares, while the company has five vessels and 5,000 shares outstanding. Basically, this shareholder owns one vessel out of the company's five and will get one vessel's worth of dividends. If the management buys a new vessel for 2000 shares, the company will now have 7,000 shares for 6 vessels; now every vessel is worth 1167 shares and our shareholder was basically diluted, since he still holds only 1000 shares. He will now get less than one vessel worth of dividends. The case was opposite with less than 1000 shares, when 1000, the ratio of shares/vessel, is the tipping point between building value and destroying value.
If we take it one step further, the current ratio of shares per vessel, multiplied by the current share price in the open market, puts a cap on the price that NAT can pay for a new vessel without diluting its current shareholders, thus decreasing the company's dividend power.
As you can see, the company does not really manage to lower the number of shares per vessel at a constant rate. Except for a sharp drop in 2004, the rate is almost unchanged, if not increasing slightly.
This suggests that the company is paying too much for new vessels, as it must issue more shares per each new vessel than the current share/vessel ratio.
Nevertheless, the model is good. Even if management fails to calculate the math correctly, the company can still deliver handsomely.
So, can this continue? Can NAT deliver such returns forever? The answer, unfortunately, is a big, emphatic 'NO'. The reason for such an emphatic 'no' is that shares are eternal, but vessels are not. Once you issue new shares, they will never go away, but vessels do get old and retire.
An average vessel life is 20 years, after which it is sold for scrap. During its adult life, it is mostly rented at lower prices and is more prone to malfunctions and problems, just like an old car. At this stage, the vessel is sold for metal parts (which counts only towards a very small fraction of its original cost). As old vessels are phased out, share count per vessel will increase rather than decrease, which will cause the dividend to slowly diminish. This is already happening; the oldest vessel NAT owns was manufactured in 1997, and is already almost 14 years old.
Let's take the first example and see what happens:
The company has 100 shares and two vessels. The current ratio is 50 shares per vessel. Every dollar one vessel makes is spread over 50 shares. Now it offers new shares to buy another vessel - let's assume the company follows the model rules and buy the new vessel in a lesser amount of shares, 20 per vessel. Now we have 120 shares per three vessels, 40 shares per vessel. Dividend power is increased. Every dollar one vessel makes is now spread over only 40 shares. Now, if one of the vessels dies of old age, the company will end up with 60 shares per vessel! Dividend capacity has decreased.
NAT may still have a few more years of grace, but the time when the share count will overpower the vessel count will eventually come, and the results for the shareholder might be devastating.