Out Fox The $treet

Despite surging past a $1 trillion market cap, Apple remains cheap trading at roughly 14x FY19 estimates, ex-cash. Active iPhone device growth continues to provide a boost to service revenues. Apple remains on pace for a 10% net payout yield. Due to huge free cash flows in the December quarter, the tech giant will hardly reduce cash balances in the 2H at the $25 billion quarterly capital return pace. Now that   Apple   ( AAPL ) has crossed the $1 trillion market cap threshold, the capital returns need to be reviewed again to derive whether value still exists in the stock. The famous plan for a $100 billion boost to stock buybacks was impressive at much lower values. My   investment thesis   that the stock wasn't still priced for the EPS boost still stands. Read the full article on Seeking Alpha.  Disclosure: Long AAPL. Please review this disclaimer page for more details.   

Summary Top net payout yield stocks outperformed the market in August. The top ten net payout yield stocks average 12.6% yields to start August. CF Industries and Illinois Tool Works jumped to the top of the list with massive stock buybacks.  This article is a continuation of a monthly series highlighting the top net payout yield (NYSE: NPY ) stocks that was started back in June, 2012 (see article ) and explained in August, 2012 (see article ). The series highlights the best stocks for the upcoming month. Please review the original articles for more information on the NPY concept. Read the full article at Seeking Alpha. Disclosure: Long CTL, KSS, NLY, NOC, SDRL, TRV, WLP. Please review the disclaimer page for more details.

Summary Apple’s capital program enhances shareholder returns. Despite returning record amounts to shareholders, the cash balance remains extremely high. Research shows that high net payout yield stocks outperform the market. For whatever reason, a company can't repurchase stock or execute a stock split without market participants claiming some level of financial engineering these days. The high profile announcement by Apple ( AAPL ) along with the Q214 earnings report brought out all sorts of sarcasm, but is it justified? Read the full article at Seeking Alpha. Disclosure: Long AAPL. Please review the disclaimer page for more details. 

Interesting charts on mega caps Intel (INTC) and Pfizer (PFE) presented on Fast Money . It appears that after roughly a decade of no movement, at least some of these huge stocks are starting to break out of long term confined patterns. These stocks will help push the major indices up if the breakouts continue. This is interesting as some mega cap stocks such as INTC appear on the Net Payout Yield list. The yields are incredibly high considering that the 10 year yield remains below 2%. INTC alone has a 3.3% dividend yield without counting any buybacks. Shouldn't be that much of a surprise that investors are finally catching on to these attractive yields.  Disclosure: No positions. Please review the disclaimer page for more details. 

The dividend trade sure seems played out so I was shocked to see Cramer still pushing dividend stocks on Mad Money . Still no mention of Net Payout Yields. Still ignoring buybacks. Why? What is a dividend after all? Isn't it just the company returning capital to shareholders? Aren't investors more concerned about where the dividend money is coming from?  This is exactly where investors apparently get lost. What matters is the earnings yield. The profits divided by the market cap.  Is FirstEnergy (FE) a better investment because it pays a large portion of earnings to shareholders or is Apple (AAPL) better because it grows a lot faster and trades at a lower PE? Does AAPL become a better investment by paying a 5% dividend? Everybody knows it can afford such a yield.  Lately investors have become confused with what a company earns and what the company pays out to shareholders. Don't get those concepts confused or you'll get burned by the apparent latest bubble. Th...

After about 14 months of running a Net Payout Yields Model on Covestor, I'm still stunned how few people understand the concept or even incorporate it into investing. Net Payout Yields are the combination of the ever popular dividend yield and the always controversial net stock buyback yield. Or another way, the yield a company pays out to shareholders. No preference is given to whether the yield is obtained via dividends or buybacks. It seems that most investors are in love with the dividend paying stocks, but hardly anybody can get behind stock buybacks. Oddly though, very few investors take advantage of the combination. Read the full article at Seeking Alpha.  Disclosure: Long DTV, LMT, TRV, LO, WLP. Please read the disclaimer page for more details. 

This report is very behind schedule this month, but I thought it was worth writing anyway. This model continues to work well and the word needs to get out more about the advantage of net payout yields over just focusing on dividends. November was yet another solid month, with a 0.05% gain for this portfolio, on both a relative and absolute basis, as the benchmark S&P 500 lost 0.51%. When the market has down months this model continues to shine and overtime the results become much more evident. For the last 12 months, the portfolio was up 12.72% versus the 5.63% for the benchmark. Despite all the volatility in the markets, the Net Payout Yields Model has had a great absolute and relative performance. Trades The model had only one trade in November. Lowes (LOW) was purchased on November 1st as the net payout yield (NPY) surpassed 16% at the end of October. While LOW only paid a dividend of 2.6% at the time, 2.3% now, the company bought back a significant amount of stock in the f...

On Thursday, purchases MedcoHealth Solutions (MHS) for the Net Payout Yield Portfolio. As mentioned back on Aug 23rd [ MedcoHealth Solutions: Ultimate Net Payout Yield ], MHS was on the radar for addition to this portfolio. It almost ran away from us after hitting bottom just one week after writing that post, but this recent pullback touch the 50ema and gave us an entry point. MHS is on a massive stock buyback spree signaling not only a financially strong company, but also a cheap stock. Just bought a half position at this point as typical for this portfolio size. Note: This portfolio will be available soon at Covestor.com under Mark Holder. It will be the 2nd model I offer after the successful Opportunistic model that currently has 16 subscribers. This portfolio has consistently beat the SP500 by 6% since being tracked first by hand since the start of 2007 and then the last 27 months at Marketocracy.com . The important key to this portfolio is that it has a Beta of 1 and involves...

Texas Instruments (TXN) stock is up some 4% after hours because of an announcement to increase the existing buyback by $7.5B and increase the dividend by 8%. Another example of why Net Payout Yield stocks provide very compelling investments. A company with an expensive stock or one that has very little cash flow could never provide this much money back to shareholders. Also, its very compelling to own a stock that increases the dividend by 8% a year which alone is much better then Treasury Yields with the 10 year below 3%. Over the last 12 months TXN had a Net Payout Yield of 7.7% with roughly 5.7% coming from buybacks. Lately investors have been lashing back at buybacks, but it is much more efficient then paying taxes on those dividends. Its also worth noting that the Yield exceeds 12% when considering the buyback run rate in Q2. Considering this announcement it wouldn't surprise Stone Fox if TXN isn't keeping up with that pace of $700M in buybacks. Many companies reduced pu...

MedcoHealth Solutions (MHS) provides investors the rare opportunity of a growth stock with a strong enough balance sheet and earnings to have a massive Net Payout Yield. MHS recently announced another $3B stock buyback program and they only have a market cap of $19B. That's an easy 15% yield if they spend it this year. Considering they bought back $1B+ in each of the last 2 quarters the yield is very attractive. Companies with this much cash flow just don't trade at these multiples. Unfortunately in this market most investors are looking for yields in bonds and dividend paying stocks. Considering MHS only offers the buyback portion of the Net Payout Yield, most investors are missing this high yielding stock. Considering the likely increase of dividend taxes in 2011 at least for high income individuals (the ones buying dividend yielding stocks in the first place), buybacks should be treated more advantageously but investors are too busy looking backwards. Buybacks are also tar...

Bought Cisco Systems (CSCO) for the Net Payout Yield portfolio after its follow thru selloff this morning. CSCO was down roughly 10% yesterday following what were decent earnings especially compared to their value. Does valuation matter anymore? After hours on Wednesday we wrote a little note [Cisco Whacked 7% on 18%+ Guidance] . At that point, we mentioned potentially buying the stock considering how cheap it has become so after letting the market over react we made a purchase today when it was down nearly 1% again and it closed nicely at breakeven. Way too much pain for a generally strong quarter. Remember, in the long run its not whether or not they beat revenue estimates that drives the stock, but whether or not revenue and more specifically earnings expand. CSCO has great potential on that front. The reason CSCO was purchased for the Net Payout Yield portfolio was two fold. First, we needed better technology exposure in the fund as Microsoft (MSFT) just isn't cutting it and we...

Texas Instruments (TXN) ups the midpoint of guidance for Q3 to .69 from .64 but the stock sells off 6% after hours based on a basically in line Q2 number. Our expectations would be for the stock to rebound by market opening tomorrow as the Conference Call likely calms the market concerned that revenues were a touch light in Q2. What blows our mind is that TXN reported the highest quarterly operating profit on record, guided up for the next quarter and its not good enough for a market trading at low end valuations. The market appears to expect doom right around every corner yet its not happening. Q3 is going to be very strong for TXN even in the face of a dismal Q2 for the markets. TXN is a 2.4% position in our Net Payout Yield Portfolio so we just love the part about the $750M used for share buybacks in Q2. Thats 2.5% of the outstanding float and 10% on an annual basis on top of a 2% dividend yield. Assuming the price action remains the same into the opening tomorrow, we'll likely ...

Earnings, earnings, earnings! Ultimately nothing matters more then earnings. You work for a paycheck or earnings. You invest for the earnings of the company. Unfortunately the stock market has become much more of a game of playing the technicals or riding the latest momentum trend when ultimately it should be about the future earnings potential of a company. That's the basic theme behind the philosophy of Warren Buffett. Lots of other investors chase dividend yields or the safety of treasuries. Amazingly very little is talked about the earnings yield of stocks or investments. Good SP500 stocks can yield 3 or 4% and is some cases even 6 or 7% dividends. What does that really mean? Can they really afford to pay that dividend or can they afford to pay a ton more. Heck even our Net Payout Yield Portfolio that has beaten the market on average of 5%+ over the last 3+ years only focuses on buyback + dividends and nothing on the earnings yield. Sure its a sign of the cash flow coming plus ...

Our Net Payout Yield Portfolio has always maintained that stock buybacks play a bullish story and lead to outsized returns. That portfolio has beaten the SP500 by nearly 5% per year since starting in 2007. Too many investors focus squarely on dividends which are double taxed and provide very little flexibility for the corporation. Its increasingly common for a company to pay a 4% dividend and buyback 2% of stock. The combined yield would be 6%. Isn't that better then just a 4% dividend alone or even a 5% dividend? If you need the cash, why pay take some profits on the larger gains. Mark Hulbert reported that buybacks are starting to tell a bullish story for the market. Unlike in 2008 when corporations dramatically reigned in buybacks in order to conserve cash, this time they are starting to announce some serious increases over last year. Corporations are flush with cash just like in 2009 but now they are choosing to move forward with repurchases. Most investors say they would rat...

Some good points today from Barry James of James Advantage Funds. With the expected repeal of the Bush Tax Cuts and the future Medicare Tax of 3.8% on unearned income will favor stocks that buyback stock over dividends. During the crushing losses in the 2008 bear market, we've alot of negative comments about companies that bought stock at much higher prices. It seemed alot of investors were leaning back towards dividends, but the higher taxes could very well favor companies that buyback stocks as investors won't be taxed on those. Our Net Payout Yield Portfolio has always sought a balance between dividends and buybacks to provide cash flow for clients from dividends but also to limit any tax burden with companies that buyback stock. Besides history has shown that the combined yield is much more predictive of returns then dividend alone. It very much appears that the buyback portion could shift back into focus starting in the 2nd half of this year. In the past stocks like Caterp...

Being the anniversary of the Bear Market low on 3/9/09, today seems like a good day to review our performance since then. When March started last year, we were about ready to give up. So many stocks were unbelievable buys yet the market kept spiraling down. A year later we feel vindicated as all 4 portfolios have easily beat the market since we started tracking them back in 2008. The Opportunistic Model had the biggest gain in the last 12 months at 165% (200%+ by our calculations) followed closely by the Growth Portfolio. Going forward, were looking towards another strong year as the markets likely provide another solid gain in the 2nd year of this bull market. Its very unlikely that a bull market dies after only one year. As always we'll adjust the portfolios if it appears that the market won't continue the rally. At some point in late spring or summer we're like to finally face a true 10% correction so 2010/2011 won't be as easy as the last 12 months. Growth Portfolio...

Cramer seems to be backing our Net Payout Yield Portfolio. Retail investors continue to push massive amounts of money into bond funds instead of stock funds. As Cramer suggests, this isn't prudent with the government continuing to dilute the market with massive issuance now and in the future. The better option is clearly high paying dividend stocks which the Net Payout Yield Portfolio is loaded up with. Check out our performance at marketocracy.com . Then watch the clip and move your money into our portfolio or a similar one.

The Net Payout Yield Portfolio continues to report strong results. Over the last year, the portfolio is up 11.74% compared to the SP500. The Portfolio is also up nearly 10% YTD. Incredible results with a turnover rate of only 14% over the last year. This portfolio has beaten the SP500 each year over the last 3 years since we began tracking. For that time period, we're up 14.5% versus the market. FYI....only the last 16 months or so are being tracked on marketocracy.com, but the results have been better since we began using their system. Investments in CSX and Agrium (AGU) have been very profitable with gains around 40% since purchases earlier this summer. A solid rally in our biggest investment, Banco Itau (ITUB), has definitely helped results. In general though, the solid dividends and stock buybacks by the stocks we invest in continue to benefit the stocks as the market recovers. Companies that have cash to give to shareholders tend to be much better investments long term. Please...

The Net Payout Yield portfolio continues to excel. The portfolio is beating the S&P500 by nearly an 8% annualized gain with a sub 1 beta and less then 15% annualized turnover. So a superior gain with less risk and limited turnover. A couple of the better performers have been the most recent additions of CSX and Agrium (AGU). Both stocks have gained more then 30% this year since being added. The portfolio is close to fully invested with only $25K in cash left. Stone Fox Capital continues to expect a year end rally to at least 1,150 or 1,200 on the S&Ps. At that point we'll likely increase the cash position. The below returns are from marketocracy.com and contain assumed fees 1% higher then what Stone Fox charges for this type of portfolio. So the annualized returns of 6.93% would be 7.93%. Please contact us at stonefox27@ymail.com with any questions. RETURNS Last Week 2.69% Last Month 2.48% Last 3 Months 12.12% ...