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Eli Lilly and Company Message Board

jad1148 47 posts  |  Last Activity: Feb 9, 2016 4:57 AM Member since: Dec 8, 2002
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  • Reply to

    Grandma buys more T @ $61.16/share

    by axpkocop Dec 10, 2015 12:56 PM
    jad1148 jad1148 Feb 9, 2016 4:57 AM Flag

    Well, I'll assume you're referring to me, and I'm not sad, just grumpy most of the time. I've retired from this message board. I might participate again some day if you folks choose to engage in an intelligent discussion of investments, and then again I might not. I'm pretty much done tweaking my portfolio. I did make a small (~3% of portfolio) buy last Friday and have now brought my "no need to sell" horizon down to five years. That is, current cash plus anticipated investment income should cover my next five annual withdrawals. IMO, T is still a good buy even at these prices. I believe it has a NWTHCD, "No Worse Than Holding Cash Duration", of about 3 years.

    =NPER((1+0%)/(1+1.6%)-1,1,-37.11/(0.48*4),1/6.5%,1)

    Assumptions: If your goal is to make a return, 0%, that is no worse than holding cash, how long would you have to hold an investment that you bought at 19.33 times the current annual dividend, 37.11/1.92, that you believe will grow both the dividend and price by at least the same rate as inflation, ~1.6% per year, and also assume, pessimistically, that the projected future selling price will be equal to the future dividend capitalized at 6.5%?

    3.1 years?

    As always, just my opinion.

  • jad1148 jad1148 Feb 2, 2016 5:19 PM Flag

    « He'll post non stop til we get to $131. »

    I believe his target is $140.

    My guess is, there's no profit to be made selling covered calls (shearing the sheepies) until the stock price is north of $140.

    Assumptions: $150 Strike (I doubt that he'd willing take the risk of assignment, i.e., giving up his shares, for anything less), 3 months to expiry, 0.33% risk free rate, and 20% volatility.

    Stock Price, Theoretical Call Premium
    $125, $0.19 {pfft}
    $140, $2.13 {major mad money}

  • jad1148 jad1148 Feb 2, 2016 9:11 AM Flag

    I gave that post a negative recommendation for two reasons. It was excessively wordy (are SA authors paid by the word?) and valued BRK using an obscure model. I spent several hours researching the Residual Income Model. The most helpful source turned out to be:

    « CFA Tutor Tips, Tricks, and Tutoring Residual Income Models »

    Scroll down and find the equation under the following sentence:
    « Assuming constant growth, the value of equity at t = 0 can be expressed as »

    I spent the rest of day thinking about it and playing with it. I've come to the conclusion that it is way too goofy for me to take seriously.

    BTW, Buffett told you what he thought BRK was worth years ago, to paraphrase, if I repurchase shares at a P/B of 110% I'm buying a dollar bill for ninety cents, implying an IV/BV of 122%. Bumping the threshold up to 120% a year later didn't change that. Finally, Mr. Market gets it.

  • jad1148 jad1148 Jan 25, 2016 5:41 AM Flag

    Dear Phony,

    Generally speaking, I don't respond to phonies, but FYI answering a question with a question is the accepted lingua franca for some people. IIRC, someone once sent Dear Abby the following question: I have some friends of a particular persuasion. I love them dearly, but they have a habit that just drives me up the wall. Every time I as them a question, they answer with a question. Why is that? Dear Abby's answer: How should they answer? The writer apparently wasn't aware that Dear Abby was also a member of that particular persuasion.

  • jad1148 jad1148 Jan 25, 2016 4:48 AM Flag

    « do earnings matter ? »

    I'll answer your question, hjc, by asking you a question. :^)

    Below is data for the S&P 500. I've disguised the actual data by normalizing it (the numbers were divided by the book value per share number and then multiplied by 100). Construct whatever ratios (P/B, P/Rev, P/E, P/D) you believe are important and then tell me: Was the S&P 500 a buy or a sell on that date and more importantly, WHY.

    Per Share:
    $177.53 Price as of date
    $100.00 Book Value as of date
    $222.18 Revenue, TTM
    $1.526 Earnings, TTM
    $6.063 Dividends, TTM

  • jad1148 jad1148 Jan 23, 2016 8:33 AM Flag

    Thanks, hjc, I did see, and read that, earlier this morning.

    I'm less concerned with the payout ratio than I am with the growth rate going forward and therefore use, what I believe, is a more credible growth in my calculations.

    The following excerpt spoke to me:

    "He’s also sticking with utilities and telecoms. What they all have in common is the ability to pay their dividends no matter what the economy does."

    I've found something I like better than OUSA and will probably buy it if it just goes a little bit lower. The lower the market goes, the safer it gets for me, and the more willing I am to reducing by cash reserve.

  • jad1148 jad1148 Jan 18, 2016 7:59 AM Flag

    Dear hjc:

    Oy vey!

    What can I say?

    Veren zol fun dir a blintsa.

    Uncle.

  • Reply to

    The rational walk on buybacks and floors,

    by hjclasvegas6969 Jan 7, 2016 10:43 AM
    jad1148 jad1148 Jan 7, 2016 1:25 PM Flag

    I was pleasantly surprised to read that his 10 year BV/s target was actually quite reasonable.

    On a related note, Jim, on the other board (#221431), made a good case for doing a buyback: "It burns off excess cash."

    JMO, but, theoretically speaking, if the relative increase in the ROE, E/BV, is greater than the relative decrease in BV/s, then the IV/s should increase.

  • Reply to

    The rational walk on buybacks and floors,

    by hjclasvegas6969 Jan 7, 2016 10:43 AM
    jad1148 jad1148 Jan 7, 2016 11:26 AM Flag

    Wow, that article was tough to find, but it was worth reading.

  • Reply to

    Wow! If 2015 was just one Single bad year.

    by portered115 Dec 31, 2015 11:22 AM
    jad1148 jad1148 Jan 6, 2016 4:50 AM Flag

    Jeez, is calculating a 10-Yr ATR (annualized total return) really that difficult?

    Using the "Adj Close" column (the last column on the right) on Yahoo's "Historical Prices" page.

    BRK-B
    $132.04 on 12/31/2015
    $58.71 on 12/30/2005
    8.442% ATR

    VFINX (Vanguard's "500" mutual fund, dividends reinvested)
    $188.48 on 12/31/2015
    $94.17 on 12/30/2005
    7.185%% ATR

    By the way, if you can, check your work against a primary source.
    Vanguard's officially reported 10-Yr ATR, as of 12/31/2015, for VFINX is 7.18%.

  • jad1148 jad1148 Jan 6, 2016 4:19 AM Flag

    Yes, I do look at the summaries at the end of each day. I'm glad the only thing I've invested in this thing is my time and even that has been a waste.

  • jad1148 jad1148 Jan 3, 2016 3:53 PM Flag

    « u think buffett is THAT shallow? »

    In his own words: "We don't do due diligence — we just look into your eyes." - Warren Buffett, 13Oct2015.

    Wouldn't it be a hoot, if when he had dinner with Ginni, he had pulled out his ukulele and serenaded her with a rendition of Elton John's "Blue Eyes".

  • jad1148 jad1148 Jan 3, 2016 10:24 AM Flag

    « the only hope is an activist steps in and buffett supports him »

    Seriously hjc, WEB is NOT going to mess with Ginni, like Becky, she's a cute, blue-eyed, blond.

  • jad1148 jad1148 Jan 3, 2016 9:10 AM Flag

    hjc, I wouldn't put too much faith in VL's projections. Like everyone else, they're just guessing about the future. I still have a copy of their 8Jan2010 report. Six years ago they were projecting a 2012-14 P/s range of $170 to $210, and an ATR (dividends included) range of 8% to 14%.

    My guess is partially based on VL's 2020 projection that the absolute net profit will be about 13,800 M$, which is roughly 16.2% of absolute revenue of $85,000 and partially on Ginni's slide #30. If, at yearend 2015, there are 960 million shares outstanding and she makes good on her plan to repurchase roughly 2.5% of the remaining shares each year for the next five years that suggests that by yearend 2020 there may be 846 MSO. Slide #30 also implies an expansion of the payout ratio. My best guess is it will expand from 38% to about 48% by yearend 2020, putting the dividend per share at ~$7.83, 48% x $13,800 / 846. Slap a Price to Dividend ratio of 25.8, {1.035 / ( 0.075 -0.035 ) } on that, and the price goes to ~$200.

    FD: I don't own IBM and have no intention of buying it in the future. I've been selling off individual stocks and accumulating cash. My goal is to eventually reinvest some of the proceeds in dividend paying ETFs.

  • jad1148 by jad1148 Jan 2, 2016 2:50 PM Flag

    hjc, you follow CEF, here's one for you to ponder, on December 31, NCZ's trading volume was roughly 30% of the shares outstanding. Some interesting theories are being discussed over on that message board. Your thoughts?

  • jad1148 jad1148 Jan 2, 2016 12:53 PM Flag

    « Should they borrow to buyback and raise the div ? »

    No, Never! If that isn't illegal, it should be.

    From page 6 of , "Dividend Policy: Its Impact on Firm Value":

    "The first dividend statute in the United States was enacted in New York in 1825 and quickly emulated by other states. This new law made it illegal to pay dividends except from profits. An insolvency rule, first adopted in Massachusetts in 1830, prohibited dividends if the firm was insolvent and/or the payment of the dividend would create insolvency. Again, this regulation was quickly adopted by other states.
    ...
    In the years following World War II, corporate dividend policy remained relatively unchanged, and payout levels have stayed fairly constant. By 1960, the payout level for all corporations was slightly in excess of 60 percent. Management continued to smooth dividends and, indeed, does so to this day."

    This book was published by the Harvard Business School Press in 2000.

  • jad1148 jad1148 Jan 2, 2016 9:08 AM Flag

    Good morning, hjc. I've noted at least one inconsistency in that report. The analyst suggests that dividends per share will grow about 8.0% per year over the next five years (which I believe is in the ball park) but offers no path to show how that will happen. She has absolute revenue growing by about 1.5% per year (from 80 to 85 billion), share repurchases averaging only 1.3% per year (Ginni's hint was 2% to 3%), and the analyst has frozen both the net profit margin at ~16.2%, (I'm OK with that), and the payout ratio at ~38%. What if Ginni sticks with her (2% to 3%) buyback plan and also expands the payout ratio from 38% to 48% over the next five years, wouldn't that generate an annual growth rate of 8+% per year over the next five years?

    Let's assume that dividends grow by 8.5% per year (see below) for the next 5 years and then grow by 3.5% for the 95 years that follow, what would that 100 year stream of dividends be worth if you discounted it by 7.5% (about 5.5% more than inflation)?

    =PV(1.075/1.085-1,5,-5.2,0,0)+PV(1.075/1.035-1,95,-5.2*(1.085/1.075)^5,0,0)

    Why 8.5% per year?
    =(1+1.5%)/(1-2%)*(48%/38%)^(1/5)-1

  • Reply to

    2016 Will Be All About the Cloud, barrons,

    by hjclasvegas6969 Jan 2, 2016 8:25 AM
    jad1148 jad1148 Jan 2, 2016 8:30 AM Flag

    Search for:

    « IBM Cloud to run AT&T’s managed app and hosting »

  • Reply to

    Jack Bogle's Guide to a Winning Strategy

    by hjclasvegas6969 Dec 30, 2015 7:33 PM
    jad1148 jad1148 Dec 31, 2015 2:39 PM Flag

    syzygyzys, I'm not happy with a 3% real equity return and, IMO, no one else should either. According to the folks over at GMO, the historical real total return for equities has averaged 6.5%. They do acknowledge that the 6.5% includes a gentle expansion of the multiple over the decades and do not expect that to continue, and so they've lower their target for the future to 5.5%. One of the reasons I own T, AT&T, is that the dividend yield is ~5.5%, and that the company consistently increases the dividend each year by a rate equal to, or slightly greater, than the rate of inflation. The point of my post was that the folks (pumptards) who promote higher prices are destroying the future returns of the naive folks who are currently buying.

  • Reply to

    Jack Bogle's Guide to a Winning Strategy

    by hjclasvegas6969 Dec 30, 2015 7:33 PM
    jad1148 jad1148 Dec 31, 2015 4:58 AM Flag

    I just don't get it. How is making 5.4% per year over a 10 year period a "winning" strategy? "Winning" in the sense that it is better than holding cash or a 2.3% YTM 10-Yr Treasury?

    Using Bogle's example, if you start the ten year period at a P/E of 22, end it at 17.5, with an initial dividend yield of 2% (equivalent to a D/E of 0.44, D/E = D/P x P/E) and both earnings and dividends grow annually by 5.5%, that should get you an average annualized total return (growth adjusted internal rate of return) of about 5.4%.

    =(1+5.5%)*(1+RATE(10,0.44,-22,17.5,0))-1

    Now, imagine a more rational world, where pumptards didn't exist, and the P/E was always 13. We could all be making 9.0% by simply investing in a "500" index fund.

    =(1+5.5%)*(1+RATE(10,0.44,-13,13,0))-1

LLY
74.68+1.45(+1.98%)10:29 AMEST