Investments

Now that the Apple numbers are out, here’s a review of the numbers and my thoughts on the good and the bad from them. Some of the numbers that the market will be focusing on in the release for the 2nd quarter and the 3rd quarter are: On the good side, Apple did surpass both its own guidance and the latest analyst guidance for the 2nd Quarter. The balance sheet cash also increased by $7.5B in the quarter bringing the cash per share to $154. Apple will use that cash to increase the annual dividend to $12.20, which based on last night’s close is a yield of 3.0%. Most importantly, Apple increased their stock buy-back, as I had hoped for, to $60.0B over the next 2 ½ years. This buy-back is the largest buyback ever announced by any company and returns the cash that Apple expects to generate over that period to shareholders. David...

I appeared on Headline with Howard Green on BNN earlier this afternoon, prior to the release of Apple's 2nd Quarter earnings release after the close today. If you missed the show, here is the link to BNN’s website. Some of the numbers that the market will be focusing on in the release for the 2nd quarter and the 3rd quarter are: I believe that the decline in Apple since the last earnings report has been discounted into the current stock price, unless there is a huge disappointment in the 2Q results (earnings below the low end of Apple’s guidance). The key for the short term direction of the stock will be the 3Q guidance. In the short term, any disappointment from the current consensus could lead to further declines. Longer term, however, the sentiment on Apple has become so negative that any positive catalyst over the next several weeks could have a dramatic impact...

sure don’t mean to keep beating a dead horse, but maybe the horse is rising. With apologies to my friends at BNN, here’s a CNBC clip from this morning of Bill Miller of Legg Mason and his take on the markets and on Apple. Enjoy. This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change without notice. To receive The Lato Letter by email from now on, please click here....

The last Lato Letter was exactly one month ago today and since that time, US markets have hit all-time highs and the Padlock composite portfolios have advanced at an even better clip. The last time I wrote about Apple in The Lato Letter was the morning before their 1st Quarter earnings release on January 23rd. Although Apple exceeded the analysts' consensus estimates that day, the stock fell 12.3% the next day, has been down 18 out of the next 27 trading days and at one point was down over 40% from its September 2012 high and all of this in a strong market. As mentioned, fortunately for the clients of Padlock, in spite of the decline in Apple, their portfolios have more than weathered the storm and exceeded their benchmarks as the other holdings have more than carried their weight so far this year. In my 32 years of advising investors, there...

Late last year, Padlock was hired to manage the US Equity portfolio of an area foundation. I have recently received a request from the foundation to provide a description of the holdings that were purchased on their behalf in that portfolio. The information below is the material that was sent to them earlier today and so I thought I would share it with you. Air Methods (AIRM-NASDAQ) Air Methods Corporation is a provider of air medical emergency transport services and systems throughout the United States of America. The company is the leader in the air ambulance business and is a major beneficiary of enhanced healthcare coverage in the US. Price/Earnings (P/E) multiple reflects projected earnings growth in the high teens. Amtrust Financial (AFSI-NASDAQ) Amtrust Financial Services, Inc. is a multinational specialty property and casualty insurer company, focused on generating consistent underwriting profits. Very well managed company has grown both organically and through acquisitions. Very...

Google reported earnings last night that were comfortably better than the estimates but the stock price took a huge jump today. Google, as usual, did not provide specific guidance for the next quarter but they did offer a positive view of how the company is managing the transition from desktop search to mobile search. Although investors, myself included, do focus on the quarterly earnings reports it is the broader picture and the stock’s valuation that are far more critical. Google laid out that its business plan continues to be on track and that with its still very reasonable valuation prior to and even after today’s move, the stock remains very attractive. The next big earnings report is tonight, when Apple reports its fiscal 2013 1st quarter results. I was asked to comment on the results by Proactive Investors and here is the link to their article. Although the article does focus on today’s...

The start of 2013 has been encouraging as a bit of optimism is creeping back into most parts of the market.  The Winter 2013 quarterly version of The Lato Letter should be out to you later this week or early next, at which time I will more thoroughly discuss my outlook heading into the rest of the new year. In the interim, today’s commentary from Don Hays can be found here.  I have referred to Don and his team in earlier issues and I thought you would like to see his outlook.  Rest assured, I am not in violation of the warning on his letter that I have agreed not to send it out because I do have a long understanding with the Hays Advisory Group that allows me to send the occasional letter out.  Hope that you enjoy the letter and the longer term perspective that it contains.  My outlook...

I have followed the work and writings of Laszlo Birinyi for many years but have never had the privilege of meeting him. In spite of never having met, Mr. Birinyi and Barron’s gave me an early Christmas gift this weekend with the article “Three Stocks for an Aging Bull Market”. The three stocks that Mr. Birinyi recomended were Apple, Sears Holdings and Walgreen’s; all part of the Padlock portfolios. In addition to the details on why he likes the three stocks, Mr. Birinyi also discusses the reasons he continues to believe that the current equity market still has potential upside. I think that you will find his views on both the stocks and the market very sensible. The Lato Letter is a market commentary and not a political forum but with the tragedies in Newtown last week, we all, even if we are Canadians, must make our views known on the need...

Needless to say, given the volatility in the stock recently, I talked about Apple today during Market Call. To provide far more insight into the company, Tim Cook, the CEO of Apple, was interviewed for the cover story of Business Week. The lengthy article is well worth reading and provides many insights into Tim Cook and Apple. Here is that link. Finally, tonight at 10:00pm Tim Cook will be interviewed on the NBC show Rock Center. As they say, check your local listings for the time and station in your area. As I said to a client earlier today, for years it has been easy to be a shareholder of Apple but now we are having to earn, through our patience, what I still believe will be above average returns. To receive The Lato Letter by email from now on, please click here....

About the only 100% certain thing that can be said about equity markets is that they will fluctuate. Although their purpose is to provide an outlet to buy and sell shares of businesses that you either desire to be a shareholder of or no longer wish to be a shareholder of, the day to day market prices change more frequently and sometimes randomly compared to the underlying value of the business and its potential. Therefore, in times when markets appear to be valuing things more randomly than rationally, investors are sometimes provided with opportunities to invest in good businesses at prices that could provide above-average rewards when prices once again align with values and become more rational. We are in one of these more random periods and I have used that period to add three new holdings to many clients’ portfolios. The companies that we have invested in are all US...

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