This is Not the First Time Apple Pays Dividends

Today, Apple announced that it will join the club of dividend-paying corporations. Many have forgotten that this is not the first time the tech giant gives back part of its cash to shareholders. Apple was paying dividends on a regular basis between 1987 and 1995. In this 8.5 years period Apple actually losses 11% of its market cap. Curiously, Steve Jobs wasn’t at Apple at the time. He left the company in 1985 and didn’t come back until 1997.

My initial reaction to the news was a bit emotional:

I still think that Steve Jobs would have thought of a more creative way to use the cash. Build a small factory on U.S. soil for example for a tax-free treatment of Apple’s $50 Billion that sits overseas.

The surest winner of Apple’ new dividend policy is the government due to the double taxation involved, first on a corporate level and then on a shareholder’s level. There is a reason why Warren Buffett has never paid a dividend. Companies that know how to use their cash do a favor to their shareholders when they don’t pay them a dividend and reinvest their money in their name.

On a second thought, the payout is relatively small and Apple still have enough cash to run its operations and pursue strategic acquisitions. The introduction of a dividend will open the doors for a whole new set of potential buyers. I have a suspicion that Tim Cook is not trying to manage actively just Apple – the company, but also $AAPL – the stock. This is good news for shareholders in short-term perspective. I am not so sure it will be a big positive in long-term, but few on Wall Street care about the distant future.

Understanding IPOs and a Brief Look at 12 of the Hottest IPO Stocks of the Past Year

All stocks start with an IPO. It is a well known fact that some of them build their investors an enormous wealth over time. $SBUX for example is up 7800% since its IPO 20 years ago. $PNRA is up 2450% since its IPO 11 years ago. There are countless other examples, but is buying on the IPO day a wise choice?

For most retail traders, who by default don’t have access to initial offerings, blindly buying IPO stocks when they become available is a losing proposition.

You have to understand the incentives behind IPO offerings. There are so many willing suppliers of stocks: from the VCs, who want to bring back some money after years of waiting; to employees, who are in a hurry to taste their newly acquired wealth; to investment banks that are looking for a quick flip. This is why, most new issues are not a good investment during the first 6 to 12 months of their existence, when the lockup period expires.

If you take a look at the charts of most of the long-term big winners, you would notice that the majority of them didn’t have any traction in their first year of becoming a public company. There are some rare exclusions, like $GOOG for example. The odds of investment success are better if you wait out the first 6 to 12 months and buy as a stock is breaking out to a new all-time high, preferably with earnings catalyst behind the move.

Most new issues might not be a wise investment, but many have proven to be perfect trading vehicles due to their underlying nature – small float and intriguing story, which fascinates the mind with its potential, encourages the dreams of future profits and gets all the press attention. As such, they could offer great short-term trading opportunities.

Make sure you don’t overstay your welcome. It is perfectly appropriate for many of the new stocks that go up substantially in a short period of time, to issue secondary offerings and dilute current shareholders. Wall Street is a printing press and a marketing machine. It carefully gauges the health of the market and the current appetite for certain industries and at the end of the day, it offers what the market desires. The supply is unlimited.

Here is my list of the hottest IPO issues of the past year: $INVN $UBNT $IMPV $BODY $BCOV $JIVE $ZNGA $FRAN $KORS $TEA $TNGO $FIO

Let me know if I missed any, deserving my attention.

14 Stocks Doubled YTD

“It is the anticipation of growth rather than the growth itself that leads to great profits in growth stocks. The biggest factor in stock prices is the lure of future earnings. The dream of the future is what excites people, not the reality.” – Nicolas Darvas

The year is still young, but there are already more than a dozen of relatively liquid stocks that have appreciated more than 100% YTD:

– 6 biotechs: $AGEN $BCRX $REGN $OMEN $THLD $VVUS;
– 2 semiconductors: $IMOS $INVN;
– 1 medical practitioner: $LCAV;
– 2 department stores: $SHLD $BONT;
– 1 computer peripherals company: $KTCC
– 2 Internet services companies: $TUDO $BVSN

The odds are that most of these stocks will mean-revert by the end of the year, but a few of them could become the best performers. The philosophy is simple. Before a stock reaches 400% gain YTD, it will double first. Under the surface, the catalyst behind the move is always the same – expectations for future earnings.

History rarely repeats, but it often rhymes. The truth to the matter is that it is always different and it is never different. The hot investing themes and stocks change, but investors’ psychology and the charts of the best performers often look similar.