What’s Walmart’s Gameplan with Humana?

Rumors are circling that Walmart (WMT) might be acquiring Humana (HUM) or, at the very least, deepening its partnership with the health insurer.

I have my own thoughts on the matter. As I shared with Reuters’ Nandita Bose,

“The end goal here is to get more people in their stores, get them to buy drugs and make an additional purchase while they are in the store,” said Charles Sizemore, founder of Sizemore Capital Management LLC, who owns shares of Walmart.

If Walmart can offer “competitive rates” on primary care and other health services, he said, it “can grow traffic and push store visits.”

To view full article see Come for your drugs, leave with more shopping: Walmart’s new growth strategy?

Walmart has been the master of cutting out the middle man for its entire multi-decade history, and the company is well known for squeezing its suppliers. By acquiring or partnering with a major health insurer, Walmart can guarantee rock-bottom pricing for prescription drugs. And if their ultimate goal is to simply attract more foot traffic to their stores, they can sell the drugs at breakeven, and it still makes economic sense.

Looking at the bigger picture, the government has failed miserably to contain health costs. And this is not a partisan complaint; the failure is shared by both parties. Yes, ObamaCare has been a disaster and accelerated healthcare inflation, but there would have never been political demand for the flawed program if either party had been successful in containing costs over the past several decades.

The private sector is stepping in where the government has failed. Walmart is potentially partnering with Humana, while Amazon (AMZN), Berkshire Hathaway (BRK.B) and JP Morgan (JPM) are working on a collaboration of their own to lower costs.

All of this is fantastic for consumers. Some of these attempts will almost certainly fail (success is created by trial and error, after all), but the important thing is that we’re seeing the beginnings of innovation. That’s good, because we sorely need it.

 

 

 

This article first appeared on Sizemore Insights as What’s Walmart’s Gameplan with Humana?

Emerging Markets Set to Take the Lead?

The following is an excerpt from Best ETFs for 2018: iShares Emerging Markets Dividend ETF Is Still in the Race.

If there is a dominant theme in the Best ETFs for 2018 contest, it would seem to be “Go America!” and specifically “Go American tech!”

The Market Vectors Semiconductor ETF (SMH) is leading the pack, up 7%, and four of the top five places are all held by ETFs specializing in tech or biotech.

But we still have a long way to go in 2018, and tech is starting to show signs of breaking down as we finish out the quarter. I expect my pick – the iShares Emerging Markets Dividend ETF (DVYE) to ultimately take the crown.

The U.S. market has been the undisputed winner of the post-2008 bull market. Since March 2009, the SPDR S&P 500 ETF (SPY) is up about 240%. The iShares MSCI EAFE ETF (EFA) and the iShares MSCI Emerging Markets ETF (EEM) — popular proxies for developed foreign markets and emerging markets, respectively — are up 111% and 142% over the same period.

But with that outperformance has come major overvaluation. The U.S. market is the most expensive major market in world based on the cyclically adjusted price/earnings ratio, or “CAPE” (only tiny Denmark and Ireland are more expensive). The U.S. market trades at a CAPE of 31 … which is the level it reached in late 1997, in the midst of the dot com bubble.

Meanwhile, emerging markets are downright cheap. As a sector, emerging markets trade at a CAPE of less than 18, and many individual countries are even cheaper. Brazil trades at a CAPE of 14, and Russia 7.

To continue reading, please see Best ETFs for 2018: iShares Emerging Markets Dividend ETF Is Still in the Race.

This article first appeared on Sizemore Insights as Emerging Markets Set to Take the Lead?

Someone Fat Finger an MLP Trade?

Interesting price action in MLPs today. Some Twitter banter:

ETE and EPD both ended down on the day, along with most of the rest of the market. But it was a wild ride!

This article first appeared on Sizemore Insights as Someone Fat Finger an MLP Trade?

Are the FANGs Holding Up a Weak Market?

Data as of 3/26/2018. Past performance no guarantee of future results.

It remains to be seen whether the market is in the midst of a garden-variety 10% correction or if this is the start of a deeper bear market. But it does seem like this market is being held aloft buy a small handful of large-cap tech stocks: the infamous FAANGs.

Let’s play with the numbers a little.

The S&P 500 cratered in early February but quickly rebounded, recouping about two thirds of its loss. And when the market rolled over again this month on trade fears, it stopped short of hitting new lows.

Data as of 3/26/2018. Past performance no guarantee of future results.

But stripping out tech and telecom stocks, we see a different picture. the S&P ex-Technology and Telecom Services Index fell in lockstep with the S&P 500, but the recovery was less robust. It recovered a little over half the prior losses. And when stocks dropped again in March, the ex-Tech and Telco fell to new lows.

Data as of 3/26/2018. Past performance no guarantee of future results.

Now, let me be clear that this is by NO means a thorough analysis. This is a superficial first scan, and I plan to dig deeper this week.

Furthermore, the data as presented here doesn’t specifically isolate the impact of the FAANGs. The S&P 500 ex-Technology and Telecom Services index actually includes one of the FAANGs — high flier Amazon.com (AMZN) — which makes its performance look better than it should. It also excludes stodgy old telecoms like AT&T (T) and Verizon (VZ), both of which have gotten obliterated this year as interest rates have risen… and which didn’t participate at all in the rally earlier this month. Excluding telco also makes the ex-tech index look better than it should.

I’ll dig deeper into the data later to build a true S&P 500 ex-FAANGs index, but this initial look would suggest that the this market is indeed narrow, being held aloft by Big Tech. That’s worrisome… and it makes me believe that more pain could be coming.

Disclosures: No positions in the stocks mentioned.

This article first appeared on Sizemore Insights as Are the FANGs Holding Up a Weak Market?

Best Stocks for 2018: Enterprise Products Off to a Slow Start

Source: InvestorPlace. Data as of 3/21/2018. Past performance no guarantee of future results

Alas, Enterprise Products Partners (EPD) is off to a rough start. I’m squarely in LAST place with a loss of 5%.

Between rising bond yields and a rough year for energy stocks in general, EPD has gotten dragged down along with the rest of the MLP sector.

But we still have a long way to go in 2018, and I epect a strong finish. Barring a tech stumble, it’s going to be hard for me to catch up. But win or lose, I expect EPD to generate a decent return. And if I were going to buy and hold any of the stocks on this list for the next five years, it would be EPD.

Disclosures: Long EPD

This article first appeared on Sizemore Insights as Best Stocks for 2018: Enterprise Products Off to a Slow Start

Best Stocks for 2018: Emerging Markets in the Race

Source: InvestorPlace. Data as of 3/21/2018. Past performance no guarantee of future results.

As we wind down the first quarter, my pick in InvestorPlace’s Best ETFs for 2018 — the iShares Emerging Markets Dividend ETF (DVYE) — is up a respectable, though not spectacular, 5%.

At this stager of the game, Dana Blankenhorn is off to a strong start, up 13% in the Market Vectors Semiconductor ETF (SMH).

But it’s still early, and we have a lot of time left in 2018. Tech stocks have lead the U.S. market higher for years, and that trade is looking long in the tooth. Meanwhile, emerging markets have been in the doldrums for years and have only recently started moving higher again. I’m betting that emerging markets prove to be the best trade for 2018… and likely the next five years.

Disclosures: Long DVYE.

 

This article first appeared on Sizemore Insights as Best Stocks for 2018: Emerging Markets in the Race

Monthly Dividend Stocks to Pay the Bills

Source: GotCredit

The following is an excerpt from 7 Top Monthly Dividend Stocks and Funds to Buy, originally published on Kiplinger’s.

The mortgage is due every month. So are utility bills, car payments and the membership to the gym that many of us don’t actually use.

That’s not a major problem for many people because they get regular paychecks. But when they eventually retire, it would be nice to at least partially match income to their expenses.

Enter monthly dividend stocks. While bonds generally pay twice per year and most American stocks pay quarterly, a few select few stocks, ETFs and closed-end funds pay monthly, making them ideally suited for retirees living off their investments.

Naturally, you should be skeptical of gimmicky stocks, and you should never buy a stock simply because it pays a monthly dividend. Any investment you buy should meet your basic smell test for quality and should be attractively priced.

Thankfully, plenty of monthly dividend stocks make the cut. Today, we’re going to take a look at a diverse lot of seven monthly payers. Three are high-quality REITs, two are conservative ETFs, one is a dirt-cheap closed-end fund and one is a more speculative business development company trading at a deep discount. But all have one thing in common: They pay their dividends monthly.

EPR Properties

Certain “oddball” dividend payersdon’t have a built-in base of buyers or that institutional investors tend to avoid because they don’t fit nicely into a style box. This tends to make them perpetual value stocks.

One such quirky stock is EPR Properties (EPR), a REIT that specializes in entertainment and educational properties.

Most REITs specialize in broad categories of real estate, such as offices or apartments. EPR’s specialty is far narrower. Forty-four percent of its portfolio is invested in entertainment properties, primarily movie theaters. Another 32% is invested in recreational properties, such as TopGolf driving ranges and ski resorts. And 21% of the portfolio is invested in educational properties such as charter schools and daycare centers. It’s an eclectic mix you’re not going to find anywhere else.

EPR Properties also sports a high yield that you’re unlikely to find anywhere else without taking a lot more risk. EPR boasts a 7.3% dividend at the moment, and it has grown its payout at about 7% per year since 2010.

REITs have gotten absolutely thrashed over the past year, and EPR is no exception. Its stock has lost more than a quarter of its value in less than a year, and the selloff might not even be over yet. But at today’s prices, expect EPR to deliver solid, market-beating returns over at least the next five years.

To continue reading, see  7 Top Monthly Dividend Stocks and Funds to Buy.

Disclosures: Long EPR

 

 

This article first appeared on Sizemore Insights as Monthly Dividend Stocks to Pay the Bills

Today on Straight Talk Money: What’s Next for Facebook after the Data Breach?

I joined Peggy Tuck this morning on Straight Talk Money. First on the agenda: We talk about the still simmering trade tensions and what they might mean for the market. We then dig into the Fed and what new Chairman Jerome Powell’s plans for interest makes might be:

 

Up next, we dig into Facebook’s (FB) data breach and ask what the future holds for the iconic social media giant:

 

 

This article first appeared on Sizemore Insights as Today on Straight Talk Money: What’s Next for Facebook after the Data Breach?

Review: Skin in the Game

It’s morally wrong to enjoy the benefits of something while leaving others to accept all the risks.

This is the central theme of Nassim Nicholas Taleb’s latest work, Skin in the Game: Hidden Asymmetries in Daily Life, a book that should be required reading for anyone in public office or in any position of authority or influence. And by “position of authority or influence,” I’m not speaking only of politicians or journalists. I would include everyone from the town doctor to the b-list celebrity with a large Twitter following.

The concept of skin in the game can be best understood by what Taleb calls the “Silver Rule,” or the flip side of the Golden Rule to do unto others as you would have them do unto you: Don’t do onto others what you wouldn’t want them to do to you. Don’t expose others to harm unless you are also directly or indirectly exposed.

As an example of what that looks like in the real world, consider ObamaCare. Our leaders passed legislation that caused a massive spike in the cost of health insurance — doing real harm to tens of millions of Americans — while accepting none of the risk. Congressmen don’t buy their health insurance on an ObamaCare exchange and are given — at taxpayer expense — vastly superior health plans.

Or, as Taleb has pointed out in the past, consider the Iraq War and the various Western interventionisms in the Arab world. Our leaders might have been less interested in regime change if, like the kings of ancient times, they had to lead the army from the front.

Skin is less structured and less technical than Taleb’s previous books and will be far easier to digest for a non-financial reader. It feels less like a book and more like a long, animated chat with Mr. Taleb in a cafe over several strong cups of coffee.

I  thoroughly enjoyed Skin in the Game and that I strongly recommend it. But if you are new to Taleb’s work, you shouldn’t start with this book. It will make more sense and you’ll get more out of it if you’re already familiar with Taleb’s core ideas: the role of randomness in life, naive empiricism, black swans (low-probability but high-impact events), fragility vs. antifragility, etc.)

I recommend you start by reading his first book, Fooled by Randomness, particularly if you have a background in finance or trading. I first read it in 2002, and there are precious few books that have had more of an influence on me.

But if you are familiar with Taleb and generally like his work, you’ll find Skin in the Game to be a worthwhile addition to your library. It has that peculiar cocktail of  logical reasoning, historical perspective, statistical rigor and good old-fashioned street smarts that Taleb is known to mix.

Before I sign off, I’d like to end with a quote of Taleb’s that made me smile… because it is something that I myself have done. If you’re going to start a business, you should put your name on the door. As Taleb puts it, “products or companies that bear the owner’s name convey very valuable messages. They are shouting they have something to lose. Eponymy indicates both a commitment to the company and a confidence in the product.”

I couldn’t agree more.

Kudos to Mr. Taleb on another solid work, and I look forward to the next one.

See also:

The Bed of Procrustes

Antifragile

This article first appeared on Sizemore Insights as Review: Skin in the Game

Oddball Dividend Stocks With Big Yields

 

Copyright Wintertwined

The following is an excerpt from 5 “Oddball” Dividend Stocks With Big Yields, originally published on Kiplinger’s.

It’s not the easiest market out there for income investors. With bond yields being depressed for so many years (and still extremely low by any historical standard) investors have scoured the globe for yield, which has pushed the yields on many traditional income investments – namely, bonds and dividend stocks – to levels far too low to be taken seriously.

Even after rising over the past several months, the yield on the 10-year Treasury is still only 2.9%, and the 30-year Treasury yields all of 3.2%. (Don’t spend that all in one place!) The utility sector, which many investors have been using as a bond substitute, yields only 3.4%. Yields on real estate investment trusts (REITs) are almost competitive at 4.4%, but only when you consider the low-yield competition.

Bond yields have been rising since September, due in part to expectations of greater economic growth and the inflation that generally comes with it. This has put pressure on all income-focused stocks. This little yield spike might not be over just yet, either – especially if inflation creeps higher this year.

Even if bond yields top out today and start to drift lower rather than higher, yields just aren’t high enough in most traditional income sectors to be worthwhile. So today, we’re going to cast the net a little wider. We’re going to take a look at five quirky dividend stocks that are a little out of the mainstream. Our goal is to secure high yields while also allowing for fast enough dividend growth to stay in front of inflation.

The GEO Group

Few companies are as quirky – or have quite the pariah status – as The GEO Group (GEO). GEO is a private operator of prisons that is organized as a real estate investment trust, or REIT.

Yes, it’s a prison REIT.

Prison overcrowding has been a problem for years. It seems that while getting tough on crime is popular with voters, paying the bill to build expensive new prisons is not.

This is about as far from a feel-good stock as you can get. It ranks alongside tobacco stocks on the scale of political incorrectness. The sheer ugliness of its business partially explains why it sports such a high dividend yield at well above 8%.

It’s also worth noting that this stock is riskier than everything else on this list. The U.S. is slowly moving in the direction of legalization of soft drugs like marijuana. While full legalization at the federal level isn’t yet on the horizon, you have to consider that a significant potential risk to GEO’s business model. Roughly half of all prisoners in federal prisons are there on drug-related convictions. At the state level, that number is about 16%.

GEO likely would survive drug legalization, as the privatization of public services is part of a bigger trend for cash-strapped governments. But it would definitely slow the REIT’s growth and it would seriously raise questions of dividend sustainability.

Furthermore, prison properties have very little resale value. You can turn an old warehouse into a trendy urban apartment building. But a prison? That’s a tougher sell.

So again, GEO is a riskier pick. But with a yield of more than 8%, you’re at least getting paid well to accept that risk.

To read the rest of the article, please see  5 “Oddball” Dividend Stocks With Big Yields,

This article first appeared on Sizemore Insights as Oddball Dividend Stocks With Big Yields