Monthly Archives: March 2014

Alibaba to Invest In Chinese Department Store Operator

Alibaba Group Holding Ltd. recently announced an impending investment of $692 million in a Chinese department store operator. The Chinese e-commerce empire is hoping to expand its reach to customers who prefer to shop in-store.

The investment in Intime Retail Co. Ltd. will come in two parts. Alibaba will purchase $214 million in shares as well as $478 million of convertible bonds to acquire a 26.1% stake in the department store. The company’s announcement comes after a $2.7 billion investment in efforts to expand its media, mapping and chat services across the globe, and ahead of an upcoming IPO which will take place in the U.S. later this year.

As part of the new arrangement, Intime and Alibaba are creating a joint venture to develop their O2O, or online-to-offline, business in department stores, supermarkets and shopping malls throughout China. Nearly 80% of this venture will be managed by Alibaba, and Intime will control the rest.

Reuters.com reported that shares in Intime have increased by around 17% since the market opened on Monday. This follows a “trend of Hong Kong-listed companies whose shares gained sharply after receiving investments from Alibaba.”

Reuters added that “Appliance maker Haier Electronics Group Ltd. soared 20% in December after Alibaba unveiled plans to invest $361 million,” while “ChinaVision Media Group more than tripled earlier in March after Alibaba agreed to buy a controlling stake for $804 million to gain access to TV and movie content.”

4 Investment Suggestions for 2014

Credit Suisse analysts recently offered a research report with suggestions for their investment picks of 2014. Here is a rundown of the four companies they have picked as recommendations for investors like White Bay Group, Uriel Cohen Founder; BlackFin Capital Partners,  Laurent Bouyoux Chairman; and Westlead Capital, Inc., among others.

1. Cameron International: This is an oil and gas equipment and services provider which recently approved a $500 million increase in the company’s share repurchase program. Based in Houston, Texas, they have a market capitalization of over $13 billion and their long-term earnings per share (EPS) growth forecast is at approximately 18%. Of the 29 analysts surveyed by Thomston/First Call, seven rated the stock as a Strong Buy and 11 recommended buying shares.

2. Discover Financial Services: This is a credit services company with a market cap of more than $27 billion. It has a dividend yield of about 1.4% and their return on equity is more than 24%. 26 analysts were polled and all but five recommended buying shares in this company. 11 rated it as a Strong Buy.

3. KeyCorp: This is a Cleveland-based regional bank with a market cap of less than $13 billion and a dividend yield around 1.6%. Year to date, their share price is up over 8% and is up by almost 73% in the last five years. The consensus recommendation from the financial analysts has been to hold shares, although more say to buy than are saying to sell.

4. Tesoro: This is an independent petroleum refiner that offers $300 million in senior notes to pay down its debt. They are based in San Antonio, Texas and they have a market cap of more than $6 billion and a dividend yield of about 1.9%. Out of the 17 analysts who were surveyed, ten recommended buying shares and three rated it as a Strong Buy.

 

ETF-Managed Portfolios Gain Momentum

Customized managed portfolio strategies involving low-cost exchange traded funds (ETFs) are continuing to attract advisors and investors in 2014. A recent report from Morningstar revealed that ETF-managed portfolios saw a 40% increase in assets last year, reaching $96 billion. Other strategies with more than half of their assets in ETFs had similar results.

ETFtrends.com explains that these strategies enable ETF strategists to create unique tactical short-term and strategic long-term portfolios in a remarkably dynamic market.  For example, the Financial Times recently reported that the largest ETF portfolio manager F Squared “has broken away from conventional benchmark investments, switching over to strategies that protect against falling markets.”

Morningstar’s report went on to identify the best performing strategy as the AthenaInvest global tactical ETFs portfolio managed by Thomas Howard. A former professor of finance at the University of Denver, Howard’s extensive research has “led to an investment strategy that seeks to take advantage of the ‘emotional crowds’ that drive equity prices.”

According to Howard, the current environment is ideal for equities, and may be the best seen in more than half a decade. He added that concerns about the outlook for the U.S. stock market are groundless.

American Express to Sell Portion of Global Business Travel Division

American Express recently announced its plans to sell 50% of its Global Business Travel division for $900 million. Though American Express will hold on to a 50% stake, the venture will split from the rest of the company and be managed by an investor group led by Certares LP. Other group members include Qatar Holdings, Macquarie Capital and a number of funds managed by BlackRock. According to the company, the new venture will establish agreements in an effort to prevent service disruptions.

Bill Glenn, CEO of the joint venture, said:

“To our knowledge, this would be the largest single investment made in a travel management company. We believe it will accelerate our growth by funding meaningful advances in technology, analytics and service excellence that will benefit suppliers, partners and our global customer base. We account for more corporate travel sales than any other TMC, and these initiatives will put us in a better position to help travel buyers manage travel spend and support their travelers.”

The division plans were initially announced last September, and are expected to close by the second quarter of 2014. The venture is managed by Glenn, former President of Global Commercial Services at American Express. Greg O’Hara, founder of Certares, will serve as chairman.

The American Express travel group works with corporate customers with travel consulting, services and research. It employs 14,000 people and has partners in over 130 countries.

 

Warren Buffet’s “Fundamentals of Investing”

Investment tycoon Warren Buffet recently shared an exclusive clip from his letter to Berkshire Hathaway shareholders, in which he lists the “fundamentals of investing”.

Fortune Magazine shared Buffet’s points with the following bullets:

  • You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”

  • Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn’t necessary; you only need to understand the actions you undertake.

  • If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.

  • With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field- not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.

  • Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important.

Buffet continued: “My two purchases were made in 1986 and 1993. What the economy, interest rates, or the stock market might do in the years immediately following- 1987 and 1994- was of no importance to me in making those investments. I can’t remember what the headlines of pundits were saying at the time. Whatever the chatter, corn would keep growing in Nebraska and students would flock to NYU.”