Share Market

Apple & Tesla Announced Stock Splits; Here’s How It Could Impact Your Investments

Published

1 month ago

August 14, 2020

What’s A Stock Split And How It Could Affect Your Current Holdings

Apple and Tesla, arguably two of the hottest companies on Wall Street, both announced stock splits in recent weeks. The question is, can it positively affect your current holdings? First, let’s understand what a stock split is. Essentially, a stock split is exactly what it sounds like. One share is splitting up into a few individual shares. This often comes after a particular share price has been inflated to a level that may be ‘too high’. For example, in Tesla 5-for-1 stock split example, one share worth $1500 now will be broken into 5 shares worth $300 each. This way, it will lower the entry barrier for investors who wish to buy a stake in the company.

A stock split can typically result in a share price increase following a decrease immediately after the split. Since many retail investors find the stock now more affordable, they end up boosting demand and driving up prices. A stock split also reminds investors that the share price had been increasing in the past. It is not surprising that many investors extrapolate the historical growth into the future and bid up the share price again. One thing to also note is that even though the number of outstanding shares increases and stock price decreases, the market capitalization doesn’t change.

Who Tend To Benefit From Stock Splits?

Generally speaking, stock splits are neutral events for current shareholders. In the case of the Apple 4-for-1 stock split, you used to own 1 share, but moving forward you will own 4, but the total value remains the same. Essentially, a stock split wouldn’t change the company value, all else being equal. But the truth is, all else is rarely equal when we apply it in the market.

Both TSLA stock and AAPL stock jumped after the announcement. This may be the fifth time for Apple to do a stock split, but it is Tesla’s first. The price change will be more dramatic for Tesla, whose stock split will bring individual share to the $300 range. Compared to Apple’s post-split of $100 range, Tesla’s post-split stock might find it harder to attract smaller investors.

Certain online brokerages offer investors to buy fractional stocks. Conceptually, it offers the same thing in the absence of stock splits. Then again, not all brokerages will offer such services and it’s not that easy to move shares between brokerages. Therefore, it will not create a much stronger demand than actual stock splits. Now, like it or not, news of stock splits tend to cause share prices to jump. And that is not really rational. But who cares? As long as the prices go up, existing shareholders would not be complaining.

Tesla & Apple’s Stock Splits Could Restart The Trend Again.

Is stock splits a thing in the past? Tracing back the history, in 1997, 102 companies in the S&P 500 split their stocks, and in 2016, only 7 companies did so, a decline of more than 90%. That is about to change when two of the hottest tech companies announced they will be splitting their shares at the end of this month. The zero brokerage fees environment gives companies a greater incentive to split shares today. In addition, it creates a more affordable and accessible stock for Robinhood traders to start trading. After all, many retail investors are nonetheless still prone to judging how “expensive” a stock is based on its dollar value. That said, it is not surprising to see other tech companies like Amazon, Shopify, or Alphabet make such moves on their own timeline.

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Share Market

3 Undervalued Dividend Stocks to Buy for Long-Term Gains

Published

16 mins ago

September 21, 2020

pribizco

Stock prices have been unpredictable in 2020 due to COVID-19. While the broader markets have staged a comeback after entering bear market territory earlier this year, several stocks across sectors still trade at a discount. We’ll look at three large-cap Canadian stocks that trade at cheap multiples, making them attractive to value investors.

An undervalued energy giant

When it comes to investing in dividend stocks, it is difficult to ignore Enbridge (TSX:ENB)(NYSE:ENB). The sell-off in the energy space has driven Enbridge stock to $40.2, indicating a forward yield of 8.1%.

The Canadian infrastructure giant has lost over 20% in 2020. However, despite volatile crude oil prices and tepid demand, Enbridge is on track to achieve its full-year forecasts. Enbridge has a resilient contract-based business model, making it immune to commodity prices.

Despite a high yield, the company’s payout ratio is less than 70%, giving it enough room to increase dividends once the market stabilizes. Enbridge currently has allocated $11 billion for expansion projects that include new oil and gas pipelines.

The company expects the expansions to increase cash flows at an annual rate of between 5% and 7% through 2022. The company has increased its dividends at an annual rate of 11% since 1995, making it one of the top income stocks on the TSX.

A banking behemoth

Shares of Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) are trading at $55.15, which is 28% below its 52-week high. The high unemployment rates in Canada amid the pandemic have made investors wary, as there is a risk of rising defaults.

In order to boost spending, the federal banks have lowered interest rates, which will also impact the bottom lines of banking companies. However, the sell-off provides an opportunity for Canadians to buy a blue-chip company at an attractive multiple.

BNS stock is trading at a forward price-to-earnings multiple of 3.3 and a price-to-book multiple of 1.06. The banking Goliath also has a tasty yield of 6.5% and given its payout ratio of 70%, a dividend cut is unlikely.

In the last 20 years, BNS has increased dividends at an annual rate of 8%.

A utility heavyweight

The third stock on the list is Canadian Utilities (TSX:CU). Shares of this utility company are trading at $31.7, which is 26% below its 52-week high. This indicates a forward yield of 5.5%. Utility companies are some of the safest bets during an economic slowdown, and holding domestic heavyweights such as CU will recession-proof your portfolio.

Canadian Utilities has increased its dividends for 48 consecutive years due to its strong balance sheet and a steady stream of cash flows. The company has over $20 billion in assets, and its rate-regulated business ensures cash flows will remain constant and predictable.

Canadian Utilities generates 95% of sales from its regulated business and the rest from long-term contracts. CU has survived multiple slowdowns and is trading at a price-to-book multiple of 1.7.

The Foolish takeaway

The three companies discussed here have been around for several decades. They have a huge market presence and the potential to create massive long-term wealth. If you invest $10,000 in each of these three stocks, you can generate over $2,000 in annual dividend payments.

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The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends BANK OF NOVA SCOTIA. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

The post 3 Undervalued Dividend Stocks to Buy for Long-Term Gains appeared first on The Motley Fool Canada.

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Share Market

Tyson Foods: A Quick Discussion

Published

1 hour ago

September 21, 2020

pribizco

Just last week, Germany had a swine fever affect almost its entire hog population causing Tyson Foods to spike 5 percent. https://www.theguardian.com/environment/2020/sep/10/german-farmers-face-possible-pig-culls-as-african-swine-fever-discovered

About 16 months ago, China´s hog population was decimated from another swine fever.

It is going to take China 3 to 4 years to get their hog herd just back to where they were. https://www.reuters.com/article/us-china-meat-consumption/chinas-pork-consumption-falls-as-african-swine-fever-spreads-idUSKCN1SN0HG

Additionally, Each person in China eats 74 pounds of pork a year. It is very Hard to change a habit like that.

The US farming industry gets a lot of flack but the USDA and regulations we have here are superior to countries around the world. Tyson has had issues with workers getting sick, but for the last two quarters they have spent hundreds of millions putting in equipment such as thermal body scanners, air purifiers, and more extensive personal protection equipment that will be permanent investments that will help the health of their factories into the future.

About 12 months ago, Tyson has started actually making plant-based meat products, and hybrid protein products that are appealing to consumers who want to eat less meat. https://www.cnbc.com/2020/06/13/tyson-foods-unveils-plant-based-nuggets-in-move-into-meat-alternatives.html

Yes Beyond Meat and Impossible Foods are growing every year but the numbers are just not there. Tyson´s Revenue 2018 — 40.1 Billion. Tyson´s Revenue 2019 — 42.4 Billion. Beyond Meat 2018 Revenue — 31.5 Million. Beyond Meat 2019 Revenue — 98.5 Million. Beyond Meat projected 2020 Revenue — 440 Million. I really hope Beyond Meat succeeds and it is awesome this company is creating lasting revolutionary jobs, but I think we are simply comparing apples to oranges.

Tyson Foods is a BEHEMOTH and it is time to start saying how can they improve as a company rather than just telling people to stop eating meat! Tyson even produces all of the chicken and most of the beef products that supplies McDonald´s corporation! McDonald´s employs 2 Million people and has an annual revenue of 22 Billion dollars!

Maybe farmers can start giving their cattle a different diet(Wendy´s looked into this and proved that emissions from cows can be cut drastically just on the type of feed the cattle are given). Maybe Tyson can start to build smaller and more spread out slaughtering houses so that several thousand people do not have to come together and work at one location. Maybe we should stop condemning this company that employs 145,000 extremely hard-working Americans.

Because Brazil, with their enormous animal agriculture, is simply going to fill the vacuum if companies like Tyson shrink. Before you start thinking of Tyson as the enemy, just keep in mind that Brazil actively burnt down their rainforest last year in order to clear land to have more ranches and to further expand the amount of heads of cattle they can produce. Remember that hashtag that trended on Twitter #savetherainforest for about 2 weeks and then we all forgot about it and went back to browsing the internet. https://www.washingtonpost.com/world/the_americas/why-brazilian-farmers-are-burning-the-rainforest-and-why-its-difficult-for-bolsonaro-to-stop-them/2020/09/05/3be5fb92-ca72-11e9-9615-8f1a32962e04_story.html

More than 30,000 fires burned in the rainforest in August alone, a nine-year high, according to the space research institute.

The fires have prompted activists to call for boycotts of Brazilian goods. Fifteen fashion labels, including Vans, Kipling and Timberland, have said they will not import Brazilian leather. Finland has called for a ban on Brazilian beef imports to the European Union.

One last final thought - Yes, raising beef and chicken is very water intensive, but so is many other industries and crops. It requires 600 gallons of water to produce one pound of cheese.

https://water.usgs.gov/edu/activity-watercontent.php

One pound of potatoes requires 450 gallons of water to reap. Just one cup of coffee has a carbon footprint of 35 gallons of water! One pound of wheat flour has a carbon footprint of 200 gallons of water!

Let´s looks for solutions and ways to improve and understand the global and complex nature of feeding 8 Billion humans. Thoughts?

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Share Market

Which Way Wednesday – Fed Edition

Published

2 hours ago

September 21, 2020

pribizco

And once again the Futures are up.

As you can see from the S&P chart, we have had some massive gaps up in the thinly traded open and then drifted down during real trading at the end of the day. This is like someone who works for the auction house shouting "100 Million Dollars" on the first bid for a painting to make sure the other suckers in the audience start bidding higher.

In the case of the markets, the Banksters buy up the Futures on thin trading (so it's very cheap to do) and cause the Retail Suckers to pour in and chase the momentum so the Banksters can dump their stocks all day long during real volume trading. This is how rich people exit the market - they create a buying atmosphere and they take their profits while poor people follow their advice - which doesn't actually apply to their own actions. You see the big brokerage houses doing that all the time, exiting positions while their analysts are pumping the ~~Tesla~~ stock.

We had a good day yesterday shorting the Dow (/YM) Futures from our trade idea in the Morning Report and congratulations to all who played along. Our morning call for our Members was:

So we're sticking with our strategy of shorting the indexes (which didn't work yesterday) as we're likely to be rejected here (Dow (/YM) 28,100, S&P (/ES) 3,405, Nasdaq (/NQ) 11,475 and Russell (/RTY) 1,550) and, as usual, we can just short the laggards, which would be /ES crossing below 3,400 and /YM confirming below 28,000 - we should catch a quick ride down but the Fed goes tomorrow and that should give the marketsupport until they are disappointed by that so tight stops above!

As you can see, this wasn't rocket science, the pivot points on the Dow were 28,014 and 27,795 and we simply allowed for the pre-market BS pump job and took a stab at shorting early but once we confirmed the move below 28,000, it was a no-brained to jump in for the 200-point drop on the Dow (at $5 per point, per contract!). This morning we're back to 28,000 again but we have a Fed Meeting at 2pm so it's not a good day to play the futures - too volatile.

Speaking of volatile,

IN PROGRESS

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