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SockMarket (41.14)

February 2010

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5

The Bloom Box, Facts & Analysis

February 26, 2010 – Comments (11)

I have heard a lot about it, most of it positive, but I have seen very few facts backing it up. It appears the company (Bloom) is being quite tight lipped about how the thing actually works (indusry watchers still don't know) and are telling everyone it does great things, hoping the public will believe this.

So before we go any further lets get some of the facts floating around right now:

- Initial Cost: $700K-800K. It supposedly pays for itself in 3-5 years, except that

- "Bloom has still not released numbers about how much the Bloom Box costs to operate per kilowatt hour" (fortune, Wednesday). Recently they stated it cost 8-10 cents if run on natural gas (I assume this is using current pricing)

- efficiency: we don't really know; again this is a tight lipped company. The general branch of this technology is about 60% efficient at best. From several quotes I gather that the efficiency is between 28%-60% (maybe a bit higher) depending on the type of fuel used.

- it runs at 600-1000 degrees F

- it runs on: methane, butane, propane, natural gas, biofuels, and supposedly solar power (why you would run something that makes electricity on electricity is beyond be so I suspect this is a rumor)

- the boxes will have a 10 year life span, according to Bloom's CEO.

- supposedly there is some use for these things in military operations as they are "lighter, more efficient, and generate less heat than what the military uses now." (wikipedia).

- Bloom’s CEO is claiming he can get costs down to $2,000 per box (CS monitor) and he wants to put one in every household.


Conclusions

This isn’t really a feasible alternative energy solution. Billing it as such is complete and total BS. When you run on oil and natural gas derivatives for your current source of fuel you do not run an alternative energy product. The Box has the option of switching to corn and soybean based fuels (ethanol and bio-diesel) which we have proven are economically not feasible, which means that this fuel cell either burns fossil fuels or is not feasible in and of itself. As such I don’t see how anyone can call it an alternative energy solution.  [more]

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Dividend Investing: Why Dividend Growth is Useless as an Investing mechanism

February 22, 2010 – Comments (27)

It seems to be all that we hear about when listening to people about dividend investing the rage seems to be buying up companies with 2-3% yields that are growing at ~30% a year. This strikes me as a ridiculous investing strategy; why? Well…

When you invest you look for one of two things (or a mix):
1) the maximum possible return
2) a decent (lets say 6% for the sake of getting something concrete to work with) return with a good safety net.

When you buy for either of the above you don’t buy a dividend growth company. There are no garuntees that a growing dividend makes it undervalued (what you look for when you want #1). Or that it is stable (#2).

When you buy a dividend growth stock you are inherently getting a business that is not in a stable business (because they must grow earnings at the rate at which the dividend grows, or they will increase their payout ratio) or one whose corporate growth will slow (if they allocate more and more of their income to dividends they cannot buy capital, etc.). So you are either getting a mediocre growth/value investment or an unsafe proposition.   [more]

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An Excellent Piece On Fiat Currency...From The Onion

February 19, 2010 – Comments (4) | RELATED TICKERS: F , IAT

  [more]

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Utilities, Thoughts from a Utilitarian ( :-) ) Investor

February 18, 2010 – Comments (16)

As some know I am generally a safe investor. I am a sucker for anything that I can get a good dividend on or anything that I can be sure is undervalued and has good management. Utilities are one of the best places to go for a good yield, so naturally that is where you will find some of my holdings. This isn’t a comprehensive list, nor can I promise it is entirely accurate. I can, however, say that I know this industry quite well, have been investing in it since I started picking stocks (it was the industry I learned on, so to speak) and I do know my way around.

So, without further ado here are some thoughts on what I consider to be major utilities.


Cons. Edison (ED)

We are kicking things off with my favorite company. They control gas and electric assets in NYC and the surrounding area. Rock solid and a great dividend payer. It has been raising dividends annually since some time in the 1970’s (I believe) and I see no reason for anything to change here. Excellent company. Buy anywhere over 5.5% yield. Over 6% is a damn good deal.


Southern Company (SO)

Rock ribbed stock, if I ever saw one. Probably safer than most bonds. I like their preferred stocks more than the common though, as their yield is better. There are about a dozen, which go under the names of: Georgia Power, Gulf Power, Alabama Power, and Mississippi Power. Most yield 6% and are redeemed at $25. GAT trades closer to $29.5 and has a higher yield, I don’t remember what it is because it took 6 or 7 years to pay for itself it you held it to maturity (so I was not interested).

In any case the common is generally a good buy for the ultra-conservative investor when the yield is north of 5%. Be warned you will usually get less than 1% capital appreciation compared to the usual 2-3% you can get on other utilities. Also if we do get a carbon tax/cap and trade SO will be hit badly. That said the stock really doesn’t excite me. If its yield goes north of 6% I would buy it.



Ameren (AEE)

Great yield. Bad management. I called their decline back at $50/share, so I have some understanding of the stock. Earnings are on a downward spiral and with daffy duck leading the charge I really wouldn’t count on a turnaround. That said they just sliced their dividend by ½ so it is probably safe for some time. I would suggest steering clear unless you are a risk taker.


Duke (DUK)

Yuck. My grandfather, who has been following the industry for neigh 50 years said: “those (expletive deleted)! By all rights their business should be booming right now." The stock should have been up over the past 5 years but no, its down from $28 to $16 Generally I go with his advice and this is no exception. Nice dividend be damned I don’t want to go near them.


Great Plains Energy (GXP)

Fairly good region to do business in, and a fairly bad set of managers here. By all rights the middle of the country should be a VERY safe place to do business and earnings should stay solid and increase slightly. EPS over the past 4 years (excluding 09):
05 $2.21
06 $1.73
07 $1.40
08 $1.17
09 (their earnings will likely be ~0.10 lower than 08)
This should not be happening. Until they turn the ship around I won’t touch them.


National Grid (NGG)

Interesting situation. They are the 2nd biggest utility in the US (maybe the biggest since Ameren collapsed) and seem to be very well run. The only issue is that their dividend policy is that of the brits: pay what you can when you can. They pay a wildly fluctuating  every 6 months. You can get anywhere from 7-8% to 2-3%. Trading range is low $40’s-80.


Otter Tail (OTTR)

This is a fun little company. I think they will do quite well long term. The issue, right now, is that the yield is north of the short term earnings power (probably a little over $1 a share annualized until business conditions improve). Long term they will be able to meet the current dividend but they may cut it in the short term. Since they have so many other side businesses this one trades based on price. I will take a risk on them south of $20 and really like them under $15. It is probably worth adding as a small position, at the proper price, of course.


Exelon (EXC)

I really don’t know very much about this one. I found them back in 05 when they were trading well out of a range that I would have been willing to pay for them. Since then they have about halved in price and are looking a bit more reasonable. Just looking at the measurable: book value, earnings history, etc. I would probably be interested when the yield tops 5%.


American Electric Power (AEP)

Pretty much the same story as EXC. Frankly I would rather buy EXC, given a choice, because the Ill. market is quite a bit safer than the south (and Michigan) where AEP operates.


Florida Power and Light Group (FPL)

I don’t care how much wind power you have installed. It doesn’t justify having only a 4% yield. Let me know when the yield hits 5.5%.  [more]

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An Interesting Comparison

February 16, 2010 – Comments (9)

In case you saw this before I am reposting it because that air cleaner moron pushed me off the board in ~10 min and I would like this to be seen.   [more]

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An Interesting Comparison

February 16, 2010 – Comments (0) | RELATED TICKERS: PPY

Rankings for the happiest states (well actually the states with the happiest people on aggregate) came out today with some interesting surprises, to me at least. Since it is generally assumed, at least among my generation, that money = happiness I figured I would take a look at the data and compare it to rankings for GDP Per capita. I didn't do all the states (obviously), that would do little to show the trend, but as usual I took the top 20. Format is:  [more]

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Some History for the Day: A Presidential Blog, Humor with a Little History

February 15, 2010 – Comments (1)

It is president's day and, being a history buff, I decided to put out a piece on some of them. Since I can't go through every president I will simply share some of the most humerous and interesting stories I can remember.  [more]

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US Airways to Introduce $100 Million Bomb Fee

February 13, 2010 – Comments (2) | RELATED TICKERS: BOOM

Many thanks to the Onion for the following piece:   [more]

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The Best Idea the UK has had in a While/ Bringing it Across the Pond

February 12, 2010 – Comments (9) | RELATED TICKERS: ROB.DL2 , IN

The idea is the Robbin Hood Tax. For those who don't know it is a tax on high frequency trading and speculative moves in the bond, mortgage/other interest bearing products, stock, foreign exchange, and OTC swap markets.   [more]

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Re: Fear. The. Dollar (by GMX) / The Bear Dollar Argument

February 06, 2010 – Comments (5) | RELATED TICKERS: USD , DOW , N

This is a response to a piece that GMX penned (so to speak) a day or two ago about his strong dollar theory. The format is his quote in italics and my response below.    [more]

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6

An Interesting Presentation by Petrobras CEO

February 04, 2010 – Comments (10) | RELATED TICKERS: OIL

Sergio Gabrielli gave a presentation in December of last year on the topic of future oil production. His work showed a peak in 2010, the same year M. Hubert predicted it. Whether peak oil is real remains to be seen but this is the first big company I have seen predicting it before 2017 (BP's prediction), although Chevron has made noises about everything relating to peak oil, except the topic itself (to my knowledge their official prediction is 2020 or 2030).   [more]

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