Friday, April 21, 2017

Moving from Loyal3 to Merrill Edge

As many readers will know Loyal3 is sadly abandoning the game and charging everyone a $5 monthly fee for using them. So on April 21, 2017, I'm transferring all of my Loyal3 account to Merrill Edge.

Why Merrill Edge? I spoke with a representative today over the free trades and transferring of accounts.

"You may also qualify for 30 $0 online stock and ETF traders per month if you have $25,000 or more in combined balances in your Bank of America deposit accounts or $25,000 or more in combined cash balances in your Merrill Edge self-directed Merrill Edge online brokerage accounts and/or IRA accounts through 09/30/17."

As my Loyal3 account is $36,000, I automatically qualify for free trades. Also Merrill Edge is willing to pay for all transfer cost if I also bring my Scottrade and Motif account. After combining all three I'll have over $100,000 which qualifies me for 100 free trades a month. Here were some of my questions

  • Does ME allow for partial shares?
    • yes
  • Does ME allow for drip?
    • yes
  • Is there a limit on the minimum dollar contribution per trade?
    • no
  • Will you pay my transfer fee?
    • We have to talk to HQ but ME have done so in the past
  • Is there any promotion for transferring?
    • $250 bonus for transferring in $100,000
  • What do you mean not FDIC insured?
    • Means not FDIC insured but SIPC insured up to $500,000 in equity and $250,000 in cash 
  • So if I hit 500k does that mean everything above will not be insured?
    • Yes. But our brokerage normally adds an extra layer of insurance for our higher invested clientele 
In summary, I'm thinking of switching all my accounts to ME and getting 100 free trades a month. This is free for all stock and ETF. No margins, no penny stocks, and mutual funds have their ordinary fees. This is not a recommendation of ME but just how I'm dealing with Loyal3 shutting down.

Disclaimer: trust no one

Tuesday, April 18, 2017

Recent Buy: Cardinal Health, INC

On April 18, 2017, I bought 22.16 shares of Cardinal Health, Inc. (CAH) at $72.50/share for a total of 1606.60. Current yield is at 2.5%. 

Did I get the best deal? Probably not. Should I have waited for it to go lower? probably. Am I an idiot for buying to early? Always. Will I buy more if it goes down? Definitely.

Forward dividends stand at $3,720.77.  

Disclaimer: Trust no one!

Monday, April 17, 2017

Recent Buy: GIS and HRL

On April 17, 2017, I bought 22.30 shares of General Mills at $57.45 for a total of $1,286.09 and 37.41 shares of Hormel Foods at $34.25 for a total of $1286.24.

Forward dividend stands at $3,669.53. 

Disclaimer: Trust no one

Monday, April 10, 2017

Recent Buy: CVS

On April 10, 2017, I bought 25.94 shares of CVS at $77.08 for a total of $1999.46.  It's currently at a discount per M*, S&P, and people on SA. Ferdis and Dividend Diplomats.

This pushes my forward dividends to $3,547.44.

I still have my auto Motif and Loyal3 buys at the end of the week and been dripping AQN in my scottrade and just initiated my Employee Stock Purchase Plan from Walmart. It's going to be an interesting year. $4,000 forward dividends and 300k total wealth by the end of the year? Maybe Mr. Market will give us a i CVP all those deli items at walmart. 😜

BTW If you're looking for a cheap lunch go to Walmart on Sunday Morning. There should be a few discounted large box salads on sale for $1.99. There's nothing wrong with them, but WMT's policy is we must sell them within X amount of hours after we open the "mother bag." And for every discounted salad you buy we make 30 cents. Great for a cheap monday lunch.

Disclaimer: trust no one online.

Sunday, April 2, 2017

March Review: Onward and Upwards



Cash Flow

Cash $44,601.69
Scottrade Roth$2,077.34
Edward Jones$12,738.39
Total Portfolio$206,164.63
Full+partime job$4,998.72
Side hustle$436.35
Total Cash Flow$5,733.63
Electricity Bill$128.51
Water Bill$118.90
Gas Bill$73.76
Car Bill$435.45
Misc. Spending $696.02
Total Liability$1,452.64
Total Cash Flow$5,733.63
Total Liability$1,452.64
percent saved74.66%

April Plans

  1. Continue buying GIS and HRL near 52-weeks low.
  2. Buy VFC is it hits $52 or below again
  3. Try and add more to KO.
  4. Portfolio updated
  5. Do more research on BGS.
  6. Forward dividends stand at $3,468.87. I updated my goals page. $4,000 or bust!

See you next month.

*Disclaimer: trust no one on the internet.

Wednesday, March 29, 2017

Recent Buy: $1,046.18 GIS and HRL

On March 29, 2017, I bought 17.65 shares of General Mills (GIS) at $59.01/share for a total of $1,046.18 and 30.33 hares of Hormel Foods (HRL) at $34.33/share for a total of $1,046.18.

Both are near 52 week lows and near or at fair value. This increased by forward dividends to $3,462.17/year.

Thursday, March 16, 2017

Recent Buy: Store Capital (STOR)

On March 15-16, I bought 69.3053 shares of Store Capital (STOR) with an average price $23.26 for a total of $1612.00. at 5% yield this buy increased by dividends by $80.39 for a total of $3,385.47. This buy increase my Stor Position to 118.552 shares. I'm going to hoard as much as I can at 5% yield.

For those unfamiliar with STOR it's the O Jr. of the stock market. Whereas O deals in A-AAA+ leases STOR specializes in BBB-B+ (some unrated) companies such as restaurants, movie theaters, etc. If you're interested below is an article on STOR. It's also one of the fastest growing reit in the market with an extremely low payout ratio. Caution Grander Mountains (one of STOR leasee) is currently in bankruptcy. It makes up a small amount of STOR income and Grander Mountains has agreed to pay all of its leases in bankruptcy but you know how the market is. Also STOR is a small cap so it's riskier than O

My next buy might be Compass Mining (CMP). At 4% yield with a 60% coverage and near 52 weeks low CMP is looking interesting. there is a huge negativity on its next quarter earnings so I might buy now or wait. Not sure yet.

Disclaimer: trust no one.

Wednesday, March 1, 2017

February Review: Almost to 200k

I'm so excited!!!!

Dividends Received


Cash Flow Statement 

Cash $45,668.77
Scottrade Roth$2,070.02
Edward Jones$12,729.51
Total Portfolio$198,653.70
Full+partime job$4,814.82
Side hustle$257.02
Total Cash Flow$5,245.30
Electricity Bill$130.84
Water Bill$102.68
Gas Bill$97.59
Car Bill$435.45
Misc. Spending $471.43
Total Liability$1,237.99
Total Cash Flow$5,240.82
Total Liability$1,237.99
percent saved76.38%

  1. Forward Dividends stands at: $3,224.47.
  2. Portfolio updated. I made a bunch of buys in my motif. 
  3. Two more grands and I'll join the 200k club!
Disclaimer: Don't trust me or anything I say.

Tuesday, February 21, 2017

Recent Buy: Hannon Armstrong Sustnbl Infrstr Cap Inc

It feels like spring in the midwest. 

On February 21, 2017, I bought 100 shares of Hannon Armstrong (HASI) at $19.41 per share for a total of $1948. I originally bought this at $13, sold off at $22 and now back in at $19. 

It's a BDC/Bank for green energy projects and taking a stroll through the midwest over the weekend really make me think this oil/gas thing is really going to disappear in our lifetime. 

Forward dividends stand at $3002.81. 

Disclaimer: trust no one! 

Tuesday, February 14, 2017

Recent buy: More Coke

Btw, a friend sent me this picture from Hawaii. Lucky bastard. On Tuesday, February 14, 2017, I bought 24.7831 shares of Coca Cola (KO) at $40.35 per share for a total of $1000 in my Loyal3 account. I now own 160 shares of Coke and will probably buy 140 more shares if it hits below $40.00. Nibbling around the icing and smashing my face into the cake when time comes.

My forward income is now $2790.95. FLO is crashing again. Maybe we'll get another chance at 4%!

disclaimer: you know the rule. don't trust people on the internet. 

Monday, February 6, 2017

Graphic Packaging Holding Company Stock Analysis

5 steps
  1. Is it something I can identify and understand?
  2. Is the revenue/profit growing?
  3. Does it pay a dividend and is it covered?
  4. Is it trading at a discount to the market and why is it trading at a discount?
  5. What do analysts think of this stock?
  6. What are the potential risks?

Step 1: Is it something I can identify and understand?

What separates a pre-civil war fence nail vs a post-1850s nail? Part of my investing career have been an absolute failure because I had no idea what I was investing in or had all the facts before entering. As Peter Lynch famously said, “Never invest in any idea you can’t illustrate with a crayon.” GPK makes packaging for many multinational companies such as Kellogg’s (K), Coca Cola (KO), and Kraft-Heinz (KHC). Many companies cut cost by outsourcing the cardboard and aluminum containers to an outside company allowing them to focus more on internal organic growth. At some point in your life you probably have been in contact with a GPK product.

Step 2: Is the revenue/profit growing?

Some people want 20-30% revenue growth year over year. Some people want 1000%. I like sustainable growth. Is the revenue steady and can it at least grow a little bit every year? Can a company continue to grow year after year and not fall into the too big to grow issue? I call this the Apple (AAPL) conundrum. At some point a big company can’t continue growing 20% year over year like the old days. Growing $100 Million to $250 Million is a lot easier than growing $100 Billion to $250 Billion. I enjoy companies that grow sustainably and increase its dividends over time. In my experience these companies tend to fare better over time than the majority of the high risk/high reward stocks.

“2016” in my charts refers to the trailing 12 months. Meaning that the data is current as of today. It is subjected to change upon earnings release.  If 2016 is not included, the data was not available or impossible to calculate. GPK’s revenue and net income have been flat for four years, but let’s dig a little deeper and find out why. GPK revenue peaked in 2013 and only since 2016 started going back up. I reviewed past transcripts and determined a few things that caused the drop:
  1. GPK divested numerous lower margin factories and focused on its higher margin brands in 2013.
  2. In 2014, GPK made a bigger push into the European markets. At the same time GPK debt was huge and management was aggressively paying it off. More of the debt issue will be discussed below. Reviewing the past transcripts, it looks like GPK was leverage at 3x debt to asset ratio in 2014. By not fully investing the divested monies into new factories and acquisition, GPK revenue lagged for two years.
  3. In 2014-2015, weaknesses in the dry cereal and soda markets caused a slowdown in revenue. GPK is more of an industrial stock than a true defensive stock. It relies heavily on demand of other companies products.
  4. Although a small sample, it looks like from 2015-2016 management has straighten the revenue ship. Note that even though revenue dropped in 2015, GPK was able to increase its net income.
  5. Please also note the dip in operating margins in 2014, but the huge and sustaining jump in 2015 and 2016 ttm.

Earnings per share and free cash flow have been all over the place. We do see that since 2013 when management decided to take the company into an entirely different direction FCF has skyrocketed and EPS made a significant jump in 2015. Does that guarantee that 2016 FCF and EPS will continue to increase? No, but there is a high correlation between the increase in 2015 revenue, net income, operating margin, gross margins, eps, and FCF carrying into early 2016 ttm numbers.

Step 3: Does it pay a dividend and is it covered?

Everyone has a different ways of determining dividend coverage. I am more of a conservative investor and prefer dividends paid from free cash flow. Any company that pays dividend from money it doesn’t own is likely to go bankrupted. I am limiting my review to only 2015 and 2016 because these are the only two years that GPK paid dividends.

Operating Cash Flow
Capital Expenditure
Free Cash Flow

So far in 2016 TTM, the capex has increased by ~$80 Million while the operating cash flow has increased by ~$40 Million. It is concerning that for every dollar spent on Capex $0.50 goes to operating cash flow. However, this is a complex business and I am in no position to question the management. I just wanted to point out this 2:1 ratio. The big question is are the dividends covered? Earlier in 2016, mangement increased the dividend by 50% from $0.05 to $.075.

Free Cash Flow
Stock repurchase
Dividends paid
other financing act

GPK’s dividend is fully covered by its free cash flow. In fact it is covered 4.8x if the 2016 stock buyback was cancelled. GPK nearly doubled their stock repurchase in 2016 and increased their dividend paid out by $16 Million. But the most important question is answered. GPK is paying its dividends from cash flow and not borrowing debt.

Step 4: Is it trading at a discount to the market and why is it trading at a discount?

As many on SA love to say, the market is never wrong! You are! The market is trading approximately around 26x P/E. GPK is trading at 16.68x P/E. So why is GPK cheaper than the market? To be honest I don’t really know. GPK is not being sued by the US government or in any legal battle. If I were to make two guess it would be:
  1. GPK is an outlier in the packaging industry,
  2. GPK downgraded its full year expectations, and
  3. GPK’s debt.

Regarding the first, GPK’s main competitors are Bemis (BMS) trading at 20.4x PE with a dividend yield of 2.33%, Silgan Holdings (SLGN) trading at 20.3x PE with a 1.3% dividend yield, Sunoco Products (SON) trading at 23.1x PE and a 2.74% yield, and Grief Inc (GEF) trading at 33x PE and a 3.26% yield.

Regarding the second, in its 3Q earnings, GPK expects a 1-3% EBITA growth vs the predicted 4-7% for the full year of 2016. GPK reported that in the third quarter, volumes increased by 2.5% driven by acquisitions, but decreased 1.4% in core volume. And the A.C. Nielsen reported that the food and consumer volume declined mid to single digits. GPK followed with this trend. However, increase in beverage volume remediated some of the declining food and consumer volume. Analysts expect a $0.15 eps and 19% decrease in revenue Y-o-Y. Meaning coming into the fourth quater, analysts aren’t expecting much out of GPK. In my opinion this could be the perfect time to strike. If GPK misses, it will get hit but not much because analysts weren’t expecting much. However, if it beats expectation watch GPK soar. Who knows what will happen. GPK is reporting on February 7, 2017.
The third is also a big problem. From a debt to equity ratio, GPK is near 3x leveraged, but digging deeper it looks like GPK have been aggressively lowering its debt.

Debt Issued
Debt repayment
Total Debt

Short Term Debt
Long Term Debt
Total Cash on Hand
Total Cash after Paying Short Term Debt

In 3Q, GPK paid down $22 Million net debt and decreased net leverage ratio to 2.89x from 2.93x. Global liquidity stands at $1.1 Billion. As a dividend investor I don’t like the high debt, but I do like management aggressiveness and commitment in paying off debt. I believe GPK is trading at a discount because of its lower expected guidance and higher debt ratio.

Step 5: What do analysts think of this stock?

  1. Thomson-Reuters rate GPK a Positive 9: Buy Rating.
    1. Low target: $14.50
    2. Mean target: $15.20
    3. High target: $16.10
  2. Yahoo Finance
    1. One year target: $15.22
  3. Simply Wall Street
    1. Future Cash Flow Value: 18.96
  4. The Street
    1. Quant Rating: B (Buy)

Average of the three analysts: $16.46
Kick out the outlier: $15.21

Step 6: What are the potential risks?

GPK relies exclusively on consumer demands. Not any consumer demand, but demand for their client’s products. As such, GPK relies on the consumers willing to buy Kellogg’s cereals, drink a coke, or use Kraft’s ketchup. Trying to predict what product will be en vogue next season is like calling market tops and bottoms. Next to impossible. GPK can only acquire diverse clients to offset this risk.

This is just my speculation, but another risk is possible regulations in the packing industry. California and many other states have banned the use of plastic bag and styrofoam takeout boxes because of their inability to decompose. I am not arguing if this is right or wrong, but there is always a possibility of stricter regulations on cardboard boxes, aluminum cans, and plastic bag/wrap.


Although not perfect, GPK is currently trading at a discount to the market and analysts predictions. There is a huge negativity coming into the fourth quarter earnings. If it misses, GPK will see limited downside trading at such a discount as it is. If it beats or meets expectation, I can see a jump towards fair value range. In either case GPK has enough free cash flow to pay its dividends while paying off its debts. I am not arguing that you should invest in GPK. All investment should be done after careful scrutiny and investigation. I’m just asking for an open mind towards this little treasure.

So what are your opinions on GPK?

Disclaimer: I am not a financial adviser. these are just my opinions.