Revenue jumped 30% to $137.8 million while profits rose 19% to $22 million ($0.16 EPS). It’s not great but certainly not terrible either. However, from the looks of it, most expected way better and also expected better guidance.

The impact this morning was brutal with TRIP trading down 15% or so… I thus easily reached my stop loss at today’s close and will be closing out the trade on tomorrow’s opening. That and a bad start to my GOOG/VCLK trade have taken down my average trade return down to 2.89%

Still not too bad:) But I will learn from this. I have been asked about providing more post-trade analysis and I would say that it’s difficult to draw conclusions from most trades. On this one however, I made a clear mistake that I should have known about. There is a reason why I tend to stay away from newly issues stocks. The first few days of course always have more volatility than I’d really like.

The bigger reason though is that it’s always tempting for companies to make their financial statements look better or worse in the few quarters before turning public. There are perfectly legal ways to do this and I usually prefer to wait a few quarters before making a trade to see if growth can keep up.

I Thought TRIP Was Different

For some reason, I thought that TRIP would be different. Since it was part of the already public Expedia (EXPE), I expected that the statements would provide a fairly accurate image. I’m not saying that they didn’t but it’s true that Expedia had a lot of business with TRIP so even if it did intend to provide accurate statements, it certainly makes it very tricky to do so. Was EXPE paying TRIP enough for its traffic, did that cost change? There are plenty of valid questions. Especially when you consider that in the previous quarter, 34% of TRIP’s revenues came from Expedia while that proportion dropped to 27%… not saying it’s fishy but.

I will certainly spend more time looking into all of this and will continue to provide more thoughts both here and in the technology stocks newsletter which you can join for free:

On a side note, Expedia (EXPE) which was reporting last night also ended up coming up with disappointing results, though I’m not sure how related both of those numbers are but it’s certainly possible that the entire online travel industry is suffering a bit these days.

Dividend investors will tend to do much better in such markets. That being said, I think that dividend investors still need to build an optimal portfolio to manage risk as efficiently as possible. Why?

Not Optimizing Your Portfolio = Leaving Money On The Table

Basically, a portfolio that does not manage risk correctly might do better for a few weeks or even a few months but over longer periods of time, a portfolio that has good risk management will perform better, have less volatility and is less likely to have serious problems.

How Can I Manage Risk In My Dividend Portfolio?

There are a few different things that should be done when managing a dividend portfolio:

-Diversify the industries that you buy: Owning a stock that is heavy in financials, commodities or any other type of industry is not optimal. You ideally have a few names in each industry in order to do well no matter how the economy does.

-International Diversification: Holding a few international names or US stocks that have strong international business will help you from suffering big losses if one economy such as the US one suffers from big problems. This also gives you protection from dollar weakness and provides you with significant opportunities in foreign markets.

-Monitor Your Holdings: At all times, you should monitor your holdings by doing the following:

-look for signs of weakness in sales and/or earnings
-look for any slowing down/halts/reductions in dividend payment increases
-keep stop losses that will limit the losses you can suffer on one stock. Big declines also often signal upcoming dividend reductions.

Ideally, you get rid of your weaker stocks early on in order to keep a strong looking portfolio.

How Often Should This Be Done?

I personally feel like all names should be looked at on a monthly basis (at a minimum) while things like having solid diversification and international exposure can be looked at on a quarterly basis.

How Do You Manage Risk In Your Dividend Portfolio?

As many of you know I believe in the bucket approach to investing, I’ve discussed it more in the mailing list but basically, dividend investing and a diversified ETF portfolio are my most important investments. The ETF portfolio as you would expect includes bonds.

A few weeks ago, I had money to reinvest and noticed that I was under invested in bonds. I hesitated. Should I? Shouldn’t I?

Everyone Says Bonds Have Peaked

At their most basic, bonds have two components to their returns:

-coupons
-price variations

The big problem these days is that few expect bond prices to increase. Why? Because as a general rule, the biggest influence on bond prices are interest rates. As those increase, bond prices diminish. The opposite is also true of course. So you could say that all things being equal buying bonds is a good thing when rates are likely to decline.

Now take a look at current interest rates level. Tell me, how much further can rates go? Rates are basically at 0 except for very long term rates. The odds that one or two years from now, rates will be lower or even at the same level are basically 0%. So yes, on the surface, buying bonds these days seems like a losing proposition.

Go Back 12 Months

Of course, 12 months ago, most experts said basically the same thing. Rates were near 0, the outlook was dark but still, few expected rates to remain at those levels. Forward to today and those that bought long term bonds ended up doing great. In fact, it turned out to be on of the best investments in 2011. Why? Continued economic issues, Europe, etc.

Could 2012 Be Exactly The Same?

I guess it’s more than possible that bonds, even long term bonds will continue to do well this year. Why? Depressed economy and struggling governments remain central themes and it’s very likely that interest rates will remain depressed for a very long time. Could they go even lower? Certainly it’s possible. I would say that it’s unlikely that they could go much lower so if prices of those bonds do go up, it will not be as much.

Still… I Am Buying Bonds

In the end, the whole principle behind a passive ETF long term portfolio is to stick to certain asset allocations and avoid trying to time the market. It’s difficult to accomplish, especially in times like these where it seems obvious that I should overweight or underweight certain asset classes. In the end though, I firmly believe that over long periods of time, it is much safer to stay away from such temptations. You could say I don’t live up to this blog’s name (Intelligent Speculator) but I would argue that some investment accounts should be more aggressive and others shouldn’t. I buy bonds in the long term/retirement accounts.

What about you, are you buying bonds? Do you think it’s a bad time to buy more? I’d love to get your thoughts

Zuckerberg, who is yet to turn 30 will likely officially become the 9th richest man in the world once Facebook goes public. Believe me, I will be discussing the Facebook IPO and what I think about buying the shares (most already know my opinion) but today I simply wanted to talk about Mark Zuckerberg.

The guy has been able to build one of the most important companies in the world from his dorm in Harvard and looks as determined as ever to take Facebook to the top.

It’s Not About The Money

You might think that no one becomes this rich without being driven by money, by its power and by the though of passing by Bill Gates and Warren Buffett in the top rankings. I think it’s becoming more clear every day that Zuckerberg was not about the money.

Sure, you could say that it’s easy for him now. He announced he would be making $1 per year, exactly the same as Steve Jobs who seemed to mentor the Facebook founder in the later years of his life and actually said he had a lot of respect for the guy that wouldn’t sell out unlike others he had accused of doing so (Bill Gates would be the main guy). So clearly, Zuckerberg is not motivated by money these days. He also pushed off his IPO much longer than most would have and has signed the giving pledge, promising to give away at least half of his fortune.

It Never Was In Fact

Sure, you might say that it’s easy to forgo getting a salary of a few million dollars when you’re worth billions. I don’t think ,any would have been to resist selling their stakes in the earlier years. Imagine yourself being offered millions, then tens of millions and even hundreds of millions while you are still barely able to afford your own place. Props to Zuckerberg for resisting. Just take a look at founders of other companies such as Google. By the time those companies turned public, the founders barely had a few % of the company. Zuckerberg has almost 30%!!! If you saw the “Social Network” movie, you might think that he was able to accomplish that through dishonest tactics. Some parts are unclear of course but I think that overall, what he was able to do is impressive.

Facebook’s Direction

One of the big critics that Facebook faces when being compared with Google is that revenues are much lower than Google at the same stage and revenue growth as well. That is more than fair. I will discuss my opinion on why that is soon but the basic story is that Facebook still to this day probably does not spend much time on revenues and monetization. A few years from now, I expect many more companies like Zynga (ZNGA) to build a business model centered around Facebook.

I also think one recent move by Zuckerberg, the hire of Sheryl Sandberg, says a lot about him. This woman is exceptional, well liked and a strong leader. That is one more proof that Zuck is after improving his product, not acting in his self-interest. Many leaders would hesitate to put such a high profile leader next to them.

Clearly Not Perfect

It has been well discussed that Zuckerberg and Facebook had many privacy issues, especially in the earlier times of the company. Even recently, changes were done to the company that created a stir among users. There was also that now famous “meltdown” when Zuck was interviewed about privacy concerns at Facebook. But I don’t think anyone would argue that he has gotten much better at his position and at dealing with the media, users, etc. He’s not perfect, but I would argue that he is the perfect leader for Facebook as it moves towards its IPO.

Do you think Facebook is in a good position?

I would also like to invite you to see how I calculate my returns for long & short tech stocks.

Today I had a more difficult time finding the right stock pick and even did contemplate shorting Groupon (GRPN) but as I’ve explained in the tech stocks newsletter (join now if you have not done already), I’m trying to resist that for now. So today I open a 5th trade:)

Let’s start off by looking at the numbers:

Ticker	Name	Price	EPS	PE Ratio	PE Next Year	Return YTD	Sales Growth	Analyst rating	Book Value	Beta
IACI	IAC/InterActiveCorp	45.8	2.05	23.59	14.67	8.52	25.82	4	23.22	0.98
TZOO	Travelzoo Inc	28.16	0.2	18.54	15.31	7.85	31.53	4.33	2.18	1.58

Long Travelzoo (TZOO)

Travelzoo made the top 10 in my 2012 Tech Stock Power Rankings in good part because the company continues to be very targeted towards its goal of high growth. There is certainly less hype than there was a year ago when the stock made it to $100 or so… Now the stock is down over 70% but I am a believer as the financials continue to look good.

Short IAC Interactive (IACI)

IAC Interactive has been able to grow much faster than I would have expected thanks to many of its segments, even including search. Who knew people used Ask.com to search the web:) On a more serious note though, I do not expect that performance to keep up. Even if it did, keeping up with the very impressive Travelzoo seems very unlikely which presents a great trade opportunity since they trade at comparable P/E ratios.  IAC will start paying a dividend which is great for dividend investors but does not indicate that growth opportunities abound.

Disclosure: No positions on Travelzoo (TZOO) and IAC Interactive (IACI) but this trade will be opened on Monday morning

“Look for companies that you know and do business, look at how well they are doing and then make stock purchases on that basis”

It’s Insane To Think In Such A Simple Manner

Investing is NOT easy, it really isn’t. If you are looking for a clear method to make good stock picks, then dividend investing might be the right thing for you. Again, you would not be judging the company based on how many friends you know that shop at the local store or how good of a service you get every time you visit. I’m not saying that it’s irrelevant… ok maybe I am.

If All You Needed Is To Find Companies That You Liked, Life Would Be Easier

Take two companies that I’ve been praising over and over, Amazon (AMZN) and LinkedIn (LNKD), not only do I know both companies well but:

-I use them on a weekly basis
-So do most of my friends and family
-We would pretty much all have great things to say about our experiences working with AMZN and LNKD
-I love their business not only from the consumer point of view but also from the investors perspective. Why? These companies will end up making tons of revenues and profits in the coming years and totally dominate their markets
-I would love nothing more than to call myself a shareholder of these names

But I’m Not Pulling The Trigger because…

Everything Has A Price…..

In my opinion, investing is all about valuations. Dividend investing takes a slightly different perspective but even that incorporates valuations to a large degree. Buying stocks based on how well the business seems to be doing is insane.

Take Amazon. The company does TONS of business, sells products more than almost any other retailer, at very low prices. It is also spending millions reinvesting into its business through shipping centers, new digital products, etc. All of those will end up paying, I’m 100% convinced about that. But is Amazon a big bargain at its 100+ P/E ratio? Honestly, I’m not even sure it’s a decent price, it probably isn’t. At some point, Amazon will be able to diminish its investment level which will help margins a great deal. That could take some time though.

As for LinkedIn, I think the company has incredible upside, it will most certainly take the place of companies such as MonsterWorldwide (MWW) in the near to medium term future. That being said, it’s P/E ratio for next year is over 100….

They Both Have Upside

I would be fearful of shorting either of these companies. I was asked on yesterday if I regretted not being short Amazon (AMZN) going into its earnings (stock ended up tanking after very disappointing results and outlook). My answer? “Not at all”. I could not short Amazon or LinkedIn. They both could easily explode and turn out to be great investments or terrible shorts.. I like to think I’ve learned my lesson.

Caution Ahead

So why not buy a stock that could explode? Because it’s all about probabilities. In both of these cases, I think that while the stock could explode, there is an even bigger possibility that LNKD and AMZN will end up going down. They are valued for such strong growth that anything short of “exceptional” will mean losses for those shareholders. Exceptional might happen and I hope it does for those 2… but I’m not putting money behind it.

Can you relate any way? Have you heard some friends or family that bought stocks for reasons that had nothing to do with valuations?

What I Mean

In the past, executives would get a large amount of cash paid every year

Now, these execs get some cash and a lot of interests in the company (shares and options) that will be worth a lot if the stock performs well.

Growing number of investors looking for dividend stocks will help companies that are willing to commit to such payments. Since the execs want the stock to do well, creating, paying and increasing their company’s dividend is a great way to increase their overall compensation.

Dividend Investors Will Tend To Become Much Richer Than Others

I strongly believe that dividend investors will tend to be much better off over their lifetime for a few different reasons:

-Better Investing Discipline: Dividend investors have very clear ways to select stocks and determine if they can be kept. That generally helps them be less emotional and more rational about those picks which is a great thing in the end. Also, having a clear model is an important aspect of being a successful investor

-Controlled Spending: Ask anyone about getting that brand new tv and few would say they’re not interested. Dividend investors though have a clear view of the downside of such a purchase. Basically, every expense can be looked at from the point of view of a dividend stock. $2000 might get you a nice tv, but it could also mean an annual cash flow of $60 that increases every year for your entire life. This does not mean avoiding to spend but it does mean considering the future lost revenue when spending. And yes, that generally ends up meaning less spending.

-Clear Objectives: In most cases, dividend investors are trying to gradually replace the income that they live off by dividend income. That process does not happen overnight but with steady investments and good picks, it does eventually become a possibility. Dividend investors tend to have a rather clear image of where they need to get and far away those objectives are. Why? Because as time goes by, the amount of dividends received every month will evolve and become closer to whatever money you feel is required to live off of. Contrast that to the typical investor that has no idea how much money he will need, how to get there, etc.

In the end:

Dividend Investing = Investing Discipline + Diminished Spending + Clear Objectives
Dividend Investing = $$$$

Can you believe that none of the top 20 companies in this chart have a payout ratio under 50%!! To me that is shocking.  Dividend investing is about much more than finding a big yield, it is about finding longer term stocks that will be able to increase their dividend yields over time.

I wrote about why dividend investing is not just a trend and I think that finding the right stocks to include is a critical part.

Today, we are back with our list of the top 100 dividend stocks from the S&P500 and there is no surprise in who is on top. I would caution greatly against investing based only off of a dividend yield though.

Frontier Communications Corp (FTR)

No big surprise again this month as Frontier Communications Corp (FTR) remains at the very top of our top dividend stocks in the S&P500 with a dividend yield over 17%.  Why is that yield increasing every month? 2 reasons:

-The stock’s price keeps diminishing
-No one expects the company’s dividend to actually remain so high

The dark side of course remains that the company is paying out much more than it is actually able to make, making that dividend everything but sustainable. Every month, I do more in-depth research to find dividend names and FTR has never come out on top of that research..!!

We highly recommend that you join our free newsletter to receive more analysis and research about such stocks, sign up here for Free!

FTR’s Dividend Payout History

FTR’s days at the top of this chart are nearing its end in my opinion. Not only is FTR going to likely announce a dividend cut later this month but if things keep up, it will not be able to remain in the S&P500… should be interesting! Next week, we will do further research on the 100 stocks listed here to determine which ones are more likely to do well in the long term both based on sustainability and the 20 things that we look for in dividend stocks.

In the meantime, here is the list!

That being said, if possible, please set aside that part of the debate. Let’s only talk about the fact that there is outrage all over the country over the fact that Mitt Romney has been paying less than 15% of taxes on his income in the past 2 years despite being in that “1% group”.

It’s sad to say but there are countless ways to legally avoid paying taxes. With the internationalization, it is becoming much easier for companies to pay almost no taxes as has been discussed in some of my previous posts. As individuals become richer, their income and tax situation can easily become similar to what companies are able to do. I’m not saying it’s fair but it’s the way things are. Until we admit that fact, we’ll be stuck arguing on details. Are there solutions? Yes. But they’re not easy at all.

Mitt Romney is paying less than 15% on his taxes. What does that prove? That he was smart enough to get help to legally diminish the amount of taxes that he paid.

Wouldn’t You Do The Same?

I mean honestly, if you have 2 stocks, one that pays high dividends and another that will accumulate capital gains, you’d be smart to put the one that pays dividends in a tax deferred account such as a 401K or a RRSP (in Canada). That would be the smart thing to do. Trying to get all possible deductions that you are allowed under the tax code is also SMART.

I mean seriously, when is the last time you passed on a deduction in order to do “your fair share”?

“Yes, But He’s Rich”

That would be the common argument. Sure, Mitt Romney is rich. But chances are that you are also much richer than the average American. At what point should you “stop looking for ways to improve your bottom line”? I’m not talking about acting illegally or anything like that. At what point? When you make $50,000/year? 100K? 200K? $1 million? There is no clear answer of course.

Mitt Romney Has Many Issues To Defend

However, I don’t see paying few taxes as being one of them. It simply proves that he is smart and plays by the rule.

Tax Efficiency Is Too Often Overlooked

I personally think that being tax efficient is critical over time and makes a huge difference. Why so many investors spend tons of time on asset allocation, commissions, fees for funds/ETF’s and other areas without even spending a few hours to optimize their tax expenses blows me away. It can end up making a tremendous difference.

Any thoughts on all of this? Am I way off in your opinion?

I would also like to invite you to see how I calculate my returns for long & short tech stocks.

Today I am opening a trade that I was looking forward to doing. I wanted to go long Google against Valueclick, two advertising plays because I think that as the industry evolves, Google will end up doing much better. I wasn’t confident about Google’s earnings though and I turned out to be right to not buy Google ahead of its earnings. Now that the stock has declined, I am ready to go ahead!

test Tech Stock Power Rankings and while it was even more attractive a few weeks ago, I still think it’s a great buy and AOL is in many ways a very easy stock to short.

Let’s start off by looking at the numbers:

Ticker	Name	Price	EPS	PE Ratio	PE Next Year	Return YTD	Sales Growth	Analyst rating	Book Value	Beta
VCLK	ValueClick Inc	17.52	0.99	14.83	11.06	4.67	1.91	4.11	6.97	1.2
GOOG	Google Inc	579.98	30.17	19.10	11.55	(12.05)	29.28	4.59	176.73	1.05

Long Google (GOOG)

Google, an incredible power and one of the top names in my 2012 Tech Stock Power Rankings but the company did come up short of most forecasts. I do still think the company is a great buy at this price and there is no logic to me of having Google and Valueclick trading at similar P/E ratios for next year. Clearly, Google has a ton of momentum in social (not likely to have an impact in revenues/profits soon) but also in mobile through Android (this one will!), I think Google will continue to increase revenues at a quick pace and is well positioned despite the soft advertising market.

Short Valueclick (VCLK)

Valueclick used to be a company that I truly believed in. Being a small player competing against the likes of Google (GOOG), Facebook (FB), Yahoo (YHOO) and others has made things very difficult for Valueclick though. It is simply having trouble coming up with enough innovative solutions to keep up with competitors and while the revenues have increased significantly in recent quarters, I don’t see that keeping up. I don’t think there is any doubt that GOOG can outperform in terms of growth.

Disclosure: No positions on Google (GOOG) or Valueclick (VCLK) but this trade will be opened on Monday morning