Good Evening! One housekeeping item before we get to today’s update.

I am trying out shorter emails, delivered two to four times per week, instead of one long email, delivered once a week. Each email will contain two to three items, instead of 10.

Let me know what you think.

Oh, and I am introducing videos!


Oil Companies are Printing Money, Again…

 

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Companies mentioned in the video

  • Exxon (XOM)-Div. yield: 4.74%
  • Shell (RDS.A)-Div. yield: 4.79%
  • Chevron (CVX)-Div. yield: 4.12%
  • BP (BP)-Div. yield: 5.66%

Extra information on Exxon

  • Investor presentation-In this 80-page presentation, Exxon gives their outlook for the energy industry (p. 5) and their plan to create long-term shareholder value (pp. 7-17).

Out of the four, Exxon has the most intriguing chart

If we were trading it…

We would buy dips near $65-$68, stopping out with a weekly close under $64, and looking for a breakout above the downtrend line (green arrow) with a target of $95.


Despite the Bad Press, Facebook Keeps Humming Along…

Source: Axios

Facebook beat estimates on revenue, earnings, and user growth, despite the beating it took from the press in 2018 (rightly so). Facebook is covered endlessly in the news, so we won’t spend much time on them.

But I think Facebook is a good reminder of how the news affects investor perceptions. Bad news flow usually results in a price decline for the company getting dunked on.

Facebook’s business is just fine

Facebook’s business model is attention based. They make money by placing ads in front of you and me. Advertisers want to reach and convert people to customers at the lowest possible cost.

Right now, Facebook and Google offer the best products to help advertisers achieve that goal. Until another platform emerges that offers the reach, targeting, and tracking capabilities of Google and Facebook, advertisers won’t leave.

Let’s contrast Facebook with Snap

Like Facebook, Snap is getting crushed in the press for their bungled app redesign and their poor results (though their most recent earnings were good). But the difference is that Snap’s business isn’t in the same stratosphere as Facebooks.

Without knowing anything else about the companies, a comparison of their financials tells the story.

Snap’s financials

Facebook’s financials

To clarify,

  • When Snap went public, they had an operating loss of $382 million. Meaning their core business (advertising) was a money loser.
  • When Facebook went public, they had an operating profit of $1.03 billion. Their operating margin was 52% (which is fantastic).

Play the man, not the hand

In public equities, it’s important to watch what other people are doing because it’s their orders that will push your stock to a profit or loss.

In this case…

Always, always, always, find the sucker. The media will tell you who they are. The skill is making sure it’s not you.

By the way, I’ve been the sucker before and will be in the future. It’s part of the game.


Thanks for reading and have a great day.

Caleb

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