Facebook Massive Earnings Beat

      Could Facebook's earning beat finally be the boost that tech stocks need? They are up 6% today after crushing earnings... Other companies have beaten earnings and fell flat on their faces the next day... But could Facebook be different? Microsoft beat earnings and fell 9%, Amazon fell short and has dropped 13% in a week, Netflix knocked earnings out of the park and fell 23% in the last month and 13% in the last week.


      So will Facebook be more of the same or the anomaly? Let's look at their earnings.

      Their financials are highlighted by a 33% growth in advertisement revenue- compared to quarter three of 2017. That's on top of the 1% growth in revenue in other payments and fees. The growth in revenue has increased earnings per share by 11%, to $1.76. It also helped their assets, cash, cash equivalents, and marketable securities increased to over 41 billion... But revenue has never really been Facebooks issue, going back to quarter two the sharp decline in stock price was due to their users.


      They crushed user totals on almost every measurable scale. Daily active users (DAUs) increased to 1.49 billion, an increase of 9% year over year. Monthly active users (MAUs) increased to 2.27 billion, an increase of 10% year over year. The increase in the users has resulted in the increase in ARPU, or average revenue per user. Every region except " Other " have expanded their ARPU. Worldwide their average revenue per user increased from $5.97 to $6.09.

      Overall, I was very impressed with Mark Zuckerberg's honesty and ability to easily explain who, what, where, when and why... He had an answer for all questions and was easily able to elaborate on what the company is planning on doing in the future... Including better monetization of Instagram stories, Instagram shopping, upgraded Facebook stories, and even more expansions into Facebook TV, Facebook marketplace, Jobs (which has already helped connect 1million people with new careers) and even in dating (Maybe a new Facebook acquisition is on the horizon?)

       Overall, Facebook is a buy for me. In my few years of investing, I have never felt this good about a company, I love Mark Zuckerberg and his vision, they have the goodwill and reputation to be the most recognizable and profitable brands in the world.

     


IBM Closes Deal to Purchase Red Hat For $34 Billion

       First off, a massive congratulations are in order for all owners of Red Hat(RHT) shares- Your shares are going to be purchased at a 63% premium, thanks to International Business Machine Corporation, better known as IBM.



       IBM announced on Sunday that they came to an agreement to buy Red Hat, the multinational software company that provides open-source software products to the enterprise community. IBM, one of the largest and most reputable technology services company will purchase all outstanding shares of Red Hat for a premium of $190. That number represents a $73 upgrade on the Friday closing price for a total of $34 billion.


        The acquisition, which is IBM's biggest acquisition ever and the third largest tech acquisition ever is much needed for the company, as they have lost about 17% of their share value in the last year. But could this really be the boost the company needs? IBM chairman seems to think so, stating " The acquisition of Red Hat is a game-changer. It changes everything about the cloud market. Most companies today are only 20% along their cloud journey, renting compute power to cut cost, the next 80% is about unlocking real business value and driving growth. This is the next chapter of cloud."

       IBM has been trying to get into cloud service but have been bumped by Amazon web services, Google cloud, and Microsoft Azure. Who Red Hat already has a partnership with, one that will be continued even after this move.  

       IBS said that it will halt its share buyback program, but the dividend will remain untouched. 







Stock Vs. Real Estate Investing and How You Can Do Both

       One of the most popular questions in the world of investing is " Should I invest in real estate or the stock market?" my answer is always the same- why not both? Both investments have pros and cons and both can make a poor person wealthy if done right. They both take lots of due diligence and patients but are well worth the wait. So what are the pros and cons of each?

        Stock Investing

When you invest in the stock market you have the advantage of a low upfront cost. You can literally open a brokerage account for a few dollars. On average, the market gains about 8% in value a year. You can easily diversify your stock portfolio with an exchange-traded fund or just a large slew of different stocks.

You can form streams of passive income in the form of dividends.

But the largest benefit the stock market has is liquidity- even in the worse bear market you almost always find a buyer for your shares. You can turn your portfolio into liquid cash in just a few days.

Stock investing has been the single best wealth creator ever, in a recent study done by Fortune magazine, if you bought a single share of Johnson And Johnson during it's IPO in 1944 at the price of $37.50 and had reinvested the dividends, the share would now be worth $900,000.

        Real Estate Investing

There is no better feeling than buying your first house. Or maybe there is... How about your first investment property? There are a few different ways to invest in real estate... you can buy, restore and sell a property for a higher amount than you bought ... or you can buy a house, multifamily or apartment complex and rent it to tenants.

The real estate market has boomed since 1962. The average cost of a house has risen 1,760%. Yes, one thousand seven and sixty percent.

So yes, real estate has appreciated in value at a massive rate, but there is a risk that is involved that is not involved in the stock market. The liquidity issue- if the market is down, no one is buying houses. Your assets are sinking in value and there's nothing you can do except wait it out.

On top of that, the upfront cost could be massive, Generally, mortgages require a 10-20 percent down payment. A three-family house in Boston averages about $600,000- that, at a minimum, would require 30-60 thousand down.

However, a Boston apartment can run about $3,000 a month.

Multiply that by three apartments, then by 12 times a year, you could be making $108,000 a year before any deductions.

Multiple that by three or four investments, you could be making a pretty penny for not lifting a finger.

       Invest in them both?
There is a way you can invest in both at the same time, you can get the liquidity of the stock market, the passive income of the real estate and the growth of both. It's called a REIT, also known as a real estate investment trust.

It trades on the stock market like a regular stock, there is no huge upfront cost and is a great form of passive income.

REITs are required to pay out 90% of their net income in the form of dividends.

If you took the same $60,000 you used for a down payment on the three families and used it to buy some REITs, let's say EPR properties.. you would have yielded nearly 8% in dividends alone.

You would have made $9,000 in dividends and capital gains.


Time to Load Up on Tesla Shares

      I want to first congratulate everyone that has been holding onto Tesla (TSLA)for the long haul. The chance investors have taken on the stock has had a massive pay off... the companies shares are up 670% in the last five years and I would even send my congrats. to people that are new investors in the company. It seems like for the first time ever, Tesla can turn a profit and actually show some stability moving forward.

       With that being said, Tesla blew wall streets expectations out of the water during their last quarterly earnings. The Tesla 3 was the highest grossing revenue vehicle in quarter three, easily beating the next two largest revenues from The Honda Accord and Toyota Camry. They were able to push up volume sales as well- they had the fifth largest sale volume falling behind the Civic, Accord, Camry and Corolla. But what's even more intriguing about the Model 3, is that from all the customers that had trade-ins- half traded in a vehicle that had an MSRP under $35,000. That means that customers are trading up in value and that the Model 3 has larger market potential than just the luxury sedan market.


       The long-standing issue Tesla was the inability to grow their revenue(And make a profit)- but it did not disappoint this time around. Due to the growth in Model 3 deliveries, they were able to achieve 82% QoQ revenue and 158% YoY.

EPS was $2.90.. compared to the ($0.19) expected.


       You can compare almost any financial metric from this 10q and compare it to last years and see a massive change in the company.

Automotive sales are up nearly 3x
Net income went from ($671,163,000) to $254,673,000

      Overall, the company seems to be turning things around, even though they fell short of production of 5,000 per week for the quarter.. they came close- due to their large push of 5,300 cars per week for the last few weeks of the quarter. They are receiving more and more orders and are delivering more cars in a timely manner.



     

FAANG EARNINGS RECAP

Facebook (FB), upcoming earnings on October 30th

Apple (AAPL), upcoming earnings on November 1st.

Amazon (AMZN), upcoming earnings on October 25th

Netflix (NFLX) 
       Netflix delivered strong earnings for quarter three, revenue grew by a billion dollars from quarter three of last year. Cost of revenue rose but revenue growth outpaced it. They are invested heavily in their intangible assets... Which has increased nearly 5x since quarter three of 2017.

       They crushed EPS, reporting $0.89. Easily beating the expectation of $0.68

       Total net income is up 250 million since last year, that goes up alongside the 3 billion in licensed content.

       But what was most impressive was the fact that they added 7 million new domestic memberships and over 19 million new international members.

       The one concerning piece of information they released is the forever growing debt... Which is growing at a massive rate.

Alphabet INC. (GOOG)

Googles parent company, Alphabet INC. announced earnings after the bell on October 25th. Shares dropped as much as 7.6% during after hours in large part due to their miss on revenue which came in at 33.7 billion- that is compared to the 34.04 billion consensus estimate. They are still up 24% in revenue for the year.

but despite falling short on revenue- they still crushed EPS. They reported an earning per share of $13.06, beating the estimated $10.44. 

As always- Googles ads accounted for 86% of revenue, the 86% accounts for nearly 29 billion in revenue.

The "other" 14% of revenue came from its cloud business and hardware sales. The "other" revenue hit 4.64 billion, which is up 30% this year.

Their spending continued to increase, mostly for research and development- as you would expect from a company like Google. 






We are already in a bear market..

       Technically speaking- No we are not in a bear market. There may be a few companies in bear territory, but according to the standard and poor five hundred... The market is only down slightly in the year. But I think the S&P 500 is skewed. The S&P 500 represents the 500 largest market cap stocks that are traded in the American market. But it represents some more than others.
 
       For example, Apple- which has the largest market cap in the world has an S&P weight of 4.41. That 4.41 is larger than the bottom 100 stocks on the S&P 500 combine. So Apple, which is up 40% in the last year alone, is weighed more than 100 other companies... Of those 100 companies, 64 of them are down for the year. 

        Out of those 64 companies, 49 of them are down at least 10%.

        Of those 49 companies, 30 of them are down over 20%. 

        Some are even down 40%. 

        But despite the 64% of the bottom of the S&P 500 being negative for the year, it is outweighed by Apples Good performance. 

         But Apple isn't just the only heavy weighted stock- the Top 50 heaviest weighted stocks AAPL, MSFT, GOOG, AMZN, BRK.B, FB to name a few, outweigh the other 450 stocks. 

         When those Mega-cap stocks perform well, it gives the impression that the entire market is doing that good. Which could not be further from the truth, over 260 companies in the S&P 500 are down for the year. Nearly 20% of the components are down 20% plus. 

         This correction is nothing but a good time to buy in on some mega stocks at a discount. 


Warren Buffet's Top 5 Stock Positions

       Warren Buffet is considered the Michael Jordan of investing- He started investing when he was just 11 years old and has successfully amassed a 60 billion dollar net. During his seven decades of investing he has earned the title of being the most successful investors ever. People are always curious about what he's investing in. Him speaking positively about a company is enough to send the stock soaring. But what is he currently holding onto?

       1. Apple (AAPL)

Apple is Buffet's largest position by far- It's almost two times as large as any other investment he has. It comprises 24% of his portfolio and this investment makes perfect sense, the biggest market cap in the world and the first company to hit a trillion dollar mark. Apple has been innovative, profitable and the best company in the world at marketing. They have a massive cash reserve, pay a good dividend and still have great growth potential- up 44% in the last year and 236% in the last five.

       2. Wells Fargo (WFC) 

Wells Fargo is one of the largest and most recognizable banks in the world. But their reputation did not protect them from committing what Buffet called a "cardinal sin". If you don't recall, Wells Fargo was opening fake consumer accounts, charging people fees and overcharging for insurance to meet their crazy incentive-based goals. Buffet compared this situation to what happened to American Express in the 1960's. Essentially, Buffet realizes the mistake that Wells Fargo made, but see's no reason why the bank is inferior to other large banks. He likes the CEO and is confident that it will turn around.

         3. Kraft Foods (KHC)
Kraft Heinz has been able to grow revenue, net income, assets and cash equivalents over the last five years. The thing i'm concerned about with this investment is the massive debt they have. The debt which has outpaced revenue in the last five years has had a massive weigh down on the stock.. which is down 25% in the last year and 10% since it's IPO.

I'm not to sure about this company. Sure it has a reputable name, but so did General Electric at one point.

         4. Bank Of America (BAC)
I don't understand why Bank Of America has been stagnant for the last year, it's down 2% for the year, but i'm not sure why. It's the second largest bank in the world in terms of market cap. They handle over 2.2 trillion in assets and have a retail presence in over 40 countries.

They are expected a 13% growth in revenue in 2019 and are extremely under valued.

They pay a dividend that yields 2.4% and that could easily be raised- as they have a payout ratio under 30%.

          5. Coca-Cola (KO)

They say you should only invest in companies that you believe in their product, and Warren Buffet drinks 5 Coca Colas a day.. No joke. He drinks 60 ounces of Coca Cola a day. This position is one that he started back in the early 80s. Even if I don't see the growth value in this stock, I understand why he's holding it. It still pays a healthy- juicy 3.4% dividend that has been increased every year for nearly 6 decades.

Even being out paced by the market growth, KO represents a safe gamble with a nice form of passive income.

They have a wide range of products and are looking to expand. 

Facebook Massive Earnings Beat

      Could Facebook's earning beat finally be the boost that tech stocks need? They are up 6% today after crushing earnings... Other co...