What Are Stock and Reverse Stock Splits?

     



       Stock splits are a lot less complicated than people think. A stock split is when a companies board of directors decides to increase the number of outstanding shares. The board of directors will decide what kind of split there is. The most common split is a 2 for 1 split. This means for every one share you own- you will now own two.

       For example, let's say you own 10 shares of ABC financial for $100 each- Then ABC financial decided to split the stock 2:1. So now instead of owning 10 shares, you own 20. But the shares are no longer worth $100. Instead, they are worth $50. So your equity of $1000 did not change, just the amount of shares you owned did.


       Although the 2 for 1 split is the most common, there have been bigger splits. For example, Berkshire Hathaway (BRK.B) had a 50:1 split in 2010. Meaning a single share was worth 1/50 of what it was before. But you owned 50 instead of 1.

But why would A company want to do this?

       Liquidity is one reason, the lower price makes and more attractive for smaller investors to buy and sell shares.

Stock splits on reputable companies generally result in a short-term boost for companies- the lower price is more attractive to smaller investors causing the supply and demand to fluctuate.  Another reason the stock may increase is because a split is an indication to the market that the stock is doing well. 

       On the flip side, companies sometimes go through a reverse stock split. A reverse stock split is not a good sign for your company. It's the exact opposite of the regular stock split.



       Let's say you have 100 shares at $1.00 each. The board of directors then decides to have a 1:2 split. The 1:2 split indicates that for every two shares you owned, you now own 1, but worth twice the value. The company doing these generally do it to avoid being delisted on the NYSE or Nasdaq.

       The higher price is also for the companies image, no company wants to be a penny stock.

Why I Don't Care About Netflix Beating Earnings

     Netflix (NFLX) crushed earning after falling flat on their face in their quarter two earnings call. But I'm not buying in on Netflix being a solid long-term investment just yet. They have a lot of fundamental issues that makes me want to avoid them at all cost.



     For one, do they have no concept of income to debt ratio? They have a massive amount of debt that does not coincide with their income. They have about 500 million in net income with about 15 billion dollars in debt. The debt has outpaced almost every measurable category on the income and balance sheet.

Look at the changes in these major categories over the last three years.
Debt- 197%
Net income- 109%
Cash and Equivalents- 153%

     

They have no short-term investments... Compared to the 500 million they had invested three years ago. Even with their 160% growth in assets, over 50% of their assets are intangible. Which brings me to my second point. What happens when real competition comes into their space? For 11 years they have owned 75%+ of all video streaming market share and they have rightfully dominated that space. Sure there have been a few small players such as Hulu, Amazon Prime etc. but what happens when other massive tech companies want to get in on the movie streaming service?

Disney(DIS) already announced they are pulling all of their content from third-party streamers and starting their own streaming service, and who owns more original content than Disney?

Apple(AAPL) is launching their own FREE streaming service and will be creating original content as well.

Facebook (FB) already launched the Facebook watch, where you can watch top videos from your favorite pages. They already started streaming live events such as sporting events.

Google obviously already has Youtube, who is able to offer free movies and generate revenue from advertisements

Netflix will not be able to hold 75% market share forever, it's simply not possible. Apple, the largest company in the world by market cap has less than 19% of the worlds smartphone sales. So what happens to Netflix' biggest asset when they have to share it? Licensing, trademarks, copywriters etc. will all have to share with the biggest companies in the world- quite frankly, Apple, FaceBook, Amazon, Google, and Amazon are the last companies I would ever want to compete with. 




Netflix Earnings Recap

       The streaming mammoth Netflix(NFLX) share price rose 11% in after hour trading after crushing their quarter three earnings. They reported an earning per share of $0.89, a strong beat on the expected $0.68. But that's not the reason why the stock shot up- really the big surprise was the addition of new subscribers. They crushed the 5.1 million expected new subscriptions, adding nearly 7 million users globally. This comes after the quarter two disappointment of just 4.47 million new subscribers. The stock took a 24% hit in result to the quarter two disappointment.
                             



Total revenue was up 2.35% from quarter two. 
United States revenue was up 2.32% from quarter two. 
Streaming revenue 36% year over year. 
net income was up over 300% from Q3 of last year. 

They are carrying more cash on the balance sheet, 200 million more to be exact. They now have over 3 billion in cash and cash equivalents. 
Total assets have risen 4 billion since December 31st, 2017. 

Their debt has grown with the assets- up three billion in total since December 31st, 2017. 






The One Brick and Mortar Industry Amazon Can't Touch

       As another once-prominent S&P 500 stock files for bankruptcy due to the ever-growing e-commerce competition, I decided to research what went wrong for Sears... But I was actually more shocked to find a specific brick and mortar industry that has not been affected by the wave of cheap online products. But I shouldn't have been as surprised as I was. I mean, who could offer cheaper products then dollar and wholesale stores?



        At their core- Amazon is known for having an everlasting reservoir of inventory for low, affordable prices. But so are dollar stores. You can look at almost any major dollar store in the United States and see their net income rising over the last few years, Dollar General (DG) is up 50% in three years, Dollar Tree is up nearly 150% in the same time frame, Even Costco(COST) has a positive net income of over 600 million dollars since 2014.

         One of the biggest arguments people make when talking about investing in brick and mortar retailers is that the prices are a lot better on Amazon. So I decided to do some self-research and see if this was true. I picked a few random items from Dolar General and Dollar Tree and compared them to the Amazon price. I found little to no discrepancy at all. If anything the few cent difference leans in favor of the dollar stores more.



         The next biggest argument is Amazon's "convenience", yes their shipping is a lot faster than other e-commerce platforms and a lot cheaper... But it's only cheaper to those that order a lot online. Otherwise, it does not make any sense to have Amazon Prime. But you know what's even faster and more convenient than ordering something online? Buying it in store. You will get the item instantly, there is absolutely no shipping or handling cost ( Yes, you still pay for shipping with Amazon even if you have prime, you're just paying for it on a monthly or annual basis.) and you can physically hold multiple products in your hand and compare them.


        Even if the rumor of Amazon opening up physical store locations is true, can they compete? the rumor was that Amazon is planning on opening 3,000 cashier-less stores by 2021, the cashier-less part is impressive and all.. but what if you have a simple question and need to ask an employee? Can the 3,000 Amazon stores compete with over 30,000 Dollar Tree and Dollar General Stores? There are a ton of logistics that Amazon will have to figure out to be successful in the brick and mortar space. This expansion (which has not even been confirmed yet) could easily be a flop for Amazon.


       I do not own any of these companies but plan on buying shares of Amazon (Not for the retail reason) and will continue to monitor dollar stores. I will want to wait and see if Amazon can legitimately figure out the logistics of the stores.





10 Tips to new Stock Investors

Investing in the stock market is always exciting, whether you are investing for income, preserving your wealth or to build wealth. It has consistently been one of the best ways to make your money grow. On average, the S&P 500 grows about 8% a year- While that may not seem like much, the average savings account in the United States pays just 0.06%. But with the potential for growth comes the risk- The stock market could crash at any time and you could lose more than you make.
That's why it's important for all investors to consider the risk before investing.

1. Invest in yourself

When I first got into investing in the stock market I thought I was going to be able to just buy low and sell high with ease. Try to ride trends and read charts- that was not the case. After a few hundred dollars lost I decided this strategy was not working. So I invested in myself, I read book after book, watched Youtube videos, listened to famous investors such as Warren Buffet and tried to soak in as much information as I could. Once I started doing this, I could see my investment strategy changing and along with that so did the results. But I never stopped. I continue to try to learn something new every day.

2. Only invest what you can lose
It's important to know that the market goes up and down, sometimes it enters what is called a bear market. A bear market is when the market is down 20%. This does not happen often- but definitely happens from time to time. The likelihood of you losing your entire portfolio value is slim to none, but for it to lose value on your investment is likely if you don't do your due diligence.

3. Trust in yourself

When I first started investing I was just buying everything "successful" stock traders told me too. This could be anyone from Jim Cramer to a popular Youtube personality. Most of the time the trade lost me money. When you do your due diligence and stick to your strategy, you will prosper. It might take a lot of trial and error but you WILL find a strategy that works for you.

4. Only invest in companies you understand
It's easy to say " I like iPhone, I'm going to buy shares of Apple " But do you understand the overhead cost to manufacture an iPhone? Do you know what the company is invested in? Do they rely on imported goods? are they subject to tariff changes? Do they have other sources of incomes? How do they compete in the market against their competitors?

5. Find what broker is best for you
There are tons of brokers that want to earn your business. The broker acts as a middleman when your buying or selling shares of a company. Most charge a fee to execute the trade.

So it's important to see who fits your needs better. If you plan on making a ton of trades, a lower trade fee would make sense. If you only make a few trades a year and would value better research tools, a broker that offers that would make sense.

Some of the most popular brokers are Robinhood, Fidelity Investments, TD Ameritrade and Merrill Lynch.

6. Don't panic sell 
My biggest problem to this day is panic selling. Anytime there is a significant drop in the market people (Including myself) like to sell because a specific investment does not look as good now that it's in the red. But if you believed in a company one day when it was up 4%, you should believe in it when it's down 2% a week later. If the company fundamentals did not change, neither should your investment.

7. Don't overlook ETF'S

Exchange traded funds are a great easy way to diversify your investments. You invest in multiple companies in one trade and are stretched across multiple industries. They usually have a good return rate and take away the risk factor of one company crashing.

8. Hold some cash
It's important to have some cash on hand and ready to invest. You always want to buy when a company stock is low.. and nothing sucks more than not having buying power to buy into a really nice position.

9. Avoid day trading, swing trading, and margin trading
Day trading is speculation, you invest in a company in hopes that the stock goes up in a one day spam. You can certainly make money in the short term- but this is an unproven method of gaining long-term gains.

Swing trading is similar, instead of investing in companies in a day that plan to be in and out within a week or so. Again, it's possible but there has been no evidence of this being a legit way to make large returns.

To quote the great Warren Buffet, "it's stupid to borrow money to invest".

10. Don't be lazy
If you are going to invest thousands, if not tens or hundreds of thousands in a company- you better know every nook and cranny of the company. Email the company, ask questions about operations. Look at all financial statements- listen to earnings calls. Ask for second opinions (take it with a grain of salt).



What $10,000 Investment a Year ago Would look Like today

       Everyone knows the safe long-term investments tend to have larger market caps. But yet, as humans we take the risk of buying lower cap stocks in return for a larger return- but what if we didn't? What if we just bought the largest market cap in each sector? Let's look at nine different sectors, basic materials, conglomerates, consumer goods, financials, healthcare, industrial goods, services, technology, and utilities. Let's see what $10,000 would look like if you bought the largest market cap stock of each of these sectors a year ago to the day.


Consumer
Apple(AAPL)

The highest market cap on this list is Apple. they recently hit a trillion dollar market cap and have been one of the greatest investments of all time.

Price one year ago- $154.40

Shares owned-  64

Total investment- $9,881.60

Today's price- $222.90

Total value today- $14,265.60

Change- $4,384

Return- 44%

Services 
Amazon (AMZN)

I remember this stock being a few hundred dollars and thinking it was overvalued.. now nearly five years later it is worth nearly $2,000 a share and briefly hit the trillion dollar market cap.

Price one year ago- $1006.34

Shares owned- 9

Total investment- $9,057.06

Today's price- $1790.86

Total value today- $16,117.74

Change- $7,060

Return- 77%

Technology
Microsoft (MSFT)



Price one year ago- $76.27

Shares owned- 131

Total investment- $9,991.37

Today's price- $109.73

Today's total value-$14,374.63

Change- $4,383.26

Return- 43%

Financials
Berkshire Hathaway (BRK-B)

Price one year ago- 187.50

Shares owned- 53

Total investment- $9,937.50

Today's price- $207.89

Today's total value- $11,018.17

Change- $1080.67

Return- 11.31%

Basic Materials
Exxon (XOM)



Price one year ago- $80.39

Shares owned- 124

Total investment- $9,968.36

Today's price- $81.30

Today's total value- $10,081.20

Change- $112.84

Return- 1.23%

Health Care
Johnson And Johnson (JNJ)

Price one year ago- $132.50

Shares owned- 75

Total investment- $9,937.50

Today's price- $133.87

Today's total value- $10,040.25

Change- $103

Return- 0.64%

Industrial goods
The Boeing Company (BA)


Price one year ago- $254.35

Shares owned- 39

Total investment- $9,919.65

Today's price- $360.75

Today's total value-  $14,069.25

Change- $4,149.60

Return- 39.85%

Utilities
NextExtra (NEE)

Price one year ago- $147.51

Shares owned- 67

Total investment- $9,883.17

Today's price- $169.36

Today's total value- $11,347.12

Change- $1,463.05

Return- 14.91%

Conglomerates
Icahn Enterprises (IEP)

Price one year ago- $50.58

Shares owned- 197

Total investment- $9,964.26

Today's price- $67.79

Today's total value-  $13,354.63

Change- $3,390.37

Return- 35.37%


Obviously it's been a good year in the stock market but most of the shares have crushed the S&P 500 rate of return.. So what if you owned all of these stocks a year ago?


Total investment- $88,640.47

Total return(Not including dividends collected)- $26,127

Portfolio Value- $114,767.47

Total % change- 29.55%

Total dividends received- $2,946


The Only Three Penny Stocks I would Buy

       For anyone that knows me and my investing style- I like long-term investing... Stocks that have a proven track record with a massive fan base and healthy financial statement. But that doesn't mean that from time to time my eyes don't wander to the elusive value penny stock.

       For the most part- penny stocks are penny stocks for a reason... They are usually unprofitable, have poor management and cant delivery quality, competing products. But that's not the case with all penny stocks, some just haven't reached their full potential yet. (see Monster beverage, Starbucks and Xerox.)

       So for that simple reason, I always keep my eyes open for high potential penny stocks.

1. Zynga (ZNGA)
Currently trading at $4.18, Zynga creates and develops social games for Android, IOS, and Facebook. Owning some of the most popular social games ever- Such as Farmville, Mafia Wars and Words with Friends it's no wonder why they have nearly a billion dollars in revenue in 2017. The revenue, by the way, has risen every year for the last four years. Which has lead to the company having a positive net income for the first time ever. What's even more impressive is that they have been able to raise revenue and income without adding any debt. Their balance sheet is showing $0 debt for both long and short term.

But what I like most about this stock is simple, the potential. Recently Zynga and Disney have partnered up to create the star wars mobile game. If they nail this game and really get gamers involved... It could be a game changer (pun intended). For those that don't think a single game could generate enough to make a huge difference, look at Clash of Clans, which generates $5 million a day in revenue.

2. Patriot one technologies 

The Canadian technology company specializes in anti-terrorism equipment. Currently trading at $1.80 per share- which is a 45% increase from just three months ago. Patriot one technology really has cutting edge technology. Still in their early stages of research and development, they have developed a scanner that can detect when someone has a gun, knife or bomb on them. But what's most impressive about this technology is that is scans people automatically, without their knowledge.

In August 2018 they reached in principle with a major international defense contractor pursuant. Subject to government approval, this contract would give funds to further develop the award-winning PATSCAN CMR. 

Some resorts in Las Vegas have already started using these as they are more efficient than older, obsolete technology.

3. 22nd Century group

Countries all around the globe are starting to pursue nicotine reduction policies- which is great news for 22nd century who is able to grow tobacco with 97% less nicotine. Trading at $2.82- The founder, John Pandolfino asked the question " If you can buy beer without alcohol and coffee without caffeine, why can't you buy cigarettes without nicotine?". Which is what he set out to do.

The most popular product being the X-22, which is used as an aid to quitting conventional cigarettes. They give the satisfaction of the smoking while weaning the smoker off of the nicotine. Some of their other products such as the spectrum have been used in research by NIDA (National Institute on Drug Abuse).

They have grown revenue by 300% since 2014, they have over 7B in intangible assets and have paid off all debt.

What Are Stock and Reverse Stock Splits?

             Stock splits are a lot less complicated than people think. A stock split is when a companies board of directors decides t...