US shares

[TheMotorcycleBoy]

If anyone is interested I shared my spreadsheet-style analysis for Coca-cola (NYSE:KO) right here:

viewtopic.php?f=93&t=20961

due to lack of recent sales growth, I'm not taking my research on this one any further.

Matt

[TheMotorcycleBoy]

Hello again, flyer

Matt - what about more Disney or a US REIT? I recently bought my wife some shares in Corecivic CVX (her SIPP is set up for maximum income).....or you could try something like APLE Reit.

By Corecivic do you mean these guys?
https://www.sprinklebit.com/stock/company/CXW

Also, I'm not exactly au fair with these REITs. So very briefly what's a US REIT and why could they make good investments? So I just looked up REIT. I get it.

I guess, my very first impression, is that since I'm hearing that property funds taking a hammering, I'm a little bit guarded about these entities. Maybe that's only UK property funds, perhaps Stateside properties are doing well. So are "property funds" and "REITs" fundamentally different beasts?

Apologies for seemingly going off at a slight tangent, and for my rude barrage of questions, but I'm just eager to try to learn more!

Matt

[SalvorHardin]

I guess, my very first impression, is that since I'm hearing that property funds taking a hammering, I'm a little bit guarded about these entities. Maybe that's only UK property funds, perhaps Stateside properties are doing well. So are "property funds" and "REITs" fundamentally different beasts?

REITs (Real Estate Investment Trusts) are property companies. There are a few REITs which just own properties and rent them out (I think that Aberdeen Standard Life operate a couple). A lot of property companies converted to REITs when the rules were introduced in 2007. The key thing about REITs is that investors receive their share of the rental income gross (a property income distribution (PID)). Some REITs sometimes pay dividends that are a mixture of PID and non-PID (e.g. Great Portland Estates) - these companies will have a considerable property development business which generates the non-rental profits which are paid out as non-PID dividends.

Property funds' big problem is that they are open-ended (like unit trusts), so investors who sell their units are paid out of the fund's assets. But the fund's assets are mostly illiquid properties. In theory this isn't a problem as normally there's enough cash in the fund to meet the typical level of redemptions (and this cash is replenished regularly from the rents paid to the fund for the use of its properties). But when there's a bit of a panic you get a situation like a run on a bank (and as we've seen with Woodford's funds). That's when they stop allowing redemptions and then find it difficult to sell their properties except at firesale prices (because prospective buyers know of their difficulties).

REITs don't have this problem because investors can only get their money out by selling their shares on the market. In a panic their share prices will fall sharply, just like other operating companies' shares, but the REIT will not be forced to sell assets to pay its shareholders (unlike funds).

Allowing UK property companies to call themselves REITs has caused a bit of a problem. REITs are an American invention; "Investment trust" has a very different meaning in America to that in Britain. I'm sure there are people out there who've bought REITs who think that they own investment trusts. Investors wanting a property investment trust should start by looking at TR Property (whose assets are 90% property company shares).

[Alaric]

The key thing about REITs is that investors receive their share of the rental income gross (a property income distribution (PID)). Some REITs sometimes pay dividends that are a mixture of PID and non-PID (e.g. Great Portland Estates) - these companies will have a considerable property development business which generates the non-rental profits which are paid out as non-PID dividends.

If not held in a sheltered account, PIDs are taxable and outside both the savings limit of £ 1000 and the dividend limit of £ 2000. Platforms may receive the PIDs after tax has been deducted, reclaiming it themselves for ISAs and SIPPs and leaving it to the individual if a non-taxpayer.

[TheMotorcycleBoy]

Many thanks, for this Salvor!

I guess, my very first impression, is that since I'm hearing that property funds taking a hammering, I'm a little bit guarded about these entities. Maybe that's only UK property funds, perhaps Stateside properties are doing well. So are "property funds" and "REITs" fundamentally different beasts?

REITs (Real Estate Investment Trusts) are property companies. There are a few REITs which just own properties and rent them out (I think that Aberdeen Standard Life operate a couple). A lot of property companies converted to REITs when the rules were introduced in 2007. The key thing about REITs is that investors receive their share of the rental income gross (a property income distribution (PID)). Some REITs sometimes pay dividends that are a mixture of PID and non-PID (e.g. Great Portland Estates) - these companies will have a considerable property development business which generates the non-rental profits which are paid out as non-PID dividends.

I get it: potentially two different income streams.

Property funds' big problem is that they are open-ended (like unit trusts), so investors who sell their units are paid out of the fund's assets. But the fund's assets are mostly illiquid properties......REITs don't have this problem because investors can only get their money out by selling their shares on the market. In a panic their share prices will fall sharply, just like other operating companies' shares, but the REIT will not be forced to sell assets to pay its shareholders (unlike funds).

Fair enough - the classic open vs closed issues, obviously magnified by illiquidity of property.

Allowing UK property companies to call themselves REITs has caused a bit of a problem. REITs are an American invention; "Investment trust" has a very different meaning in America to that in Britain. I'm sure there are people out there who've bought REITs who think that they own investment trusts. Investors wanting a property investment trust should start by looking at TR Property (whose assets are 90% property company shares).

Thanks again Salvor. For the sake of not derailing this one any further - I'll search the rest of TLF to further my knowledge on this.

Matt

[TheMotorcycleBoy]

I am very impressed by your analysis by numbers. My first step would be to take a look at the Annual Report for the last two or three years and I suppose you must have done to get these numbers but when I Google Coca Cola Annual Report I am told that the latest report (for 2018) 'has reached its limit for free report views' and that no hard copies are available.

Have you pinched all the free views?

Dod

Hi Dod,

I cross posted over to this US shares general thread - since it appears to be a more generic question.

I was unaware of the limits on which you speak. To be honest, for a quick view of US stocks, I don't bother with ARs, as such, I go straight for the 10-K forms. These are the Stateside Stock "Annual financial filings", opposed to the 10-Q forms which are the Quarterly filings. So for the annual updates you can either get the 10-Ks which are mostly a financial breakdown, and the regular ARs which are more qualitative, words and statements.

When I'm really keen on a Yank firm I start with 10-Ks, then I look in depth at last 2 or 3 ARs, then at the current year's 10-Qs. Finally just google around and look at places like Zacks, SeekingAlpha, SimplyWallStreet for more info. (Unfortunately I just gave up for KO.)

I personally find the 10-Ks a little more in depth than the UK financial reports. But maybe it's because, since I think the US investment is a bigger commitment (due to the FX charge) I try to read more out of them.

The Coke 10-Ks:

https://investors.coca-colacompany.com/ ... 10-K&year=

Matt

[PrefInvestor]

Hi Matt, Well REITs are much favoured by income investors as they typically pay good dividends. They have a unique tax status which means that they are tax exempt provided that the majority of their operations are buying properties, renting them out and paying at least 90% of their income from these activities to shareholders. Those comments apply to UK REITs with which I am most familiar but I’m pretty confident that that the same applies to US REITs as well.

REITs usually have huge debts that they accumulate as a means of purchasing the properties that they then let out to tenants. So in general low interest rates are preferred. Types of property vary and include retail, offices, industrial and logistic (including last mile locations). Retail properties have caused significant headaches for some REITs due to the current problems on the high street, CVAs etc. and reducing rental income as a result.

There are a plethora of successful US REITs some paying significant dividends. But as usual you need to beware of what tax shelter you hold them in otherwise 15% US withholding tax will apply (W8-BEN completed, 30% otherwise) though you might be able to reclaim this if you hold them in a SIPP but not otherwise.

There are many well known UK REITs that are very popular with UK investors, NRR, RGL, AEWU,BBOX and WHR to name but a few. You can obtain a list of US REITs very easily with a bit of googling. I had a flutter with Brookfield REIT (BPR) some while back but baled when I saw the likely spike in the GBP / USD coming as a result of a Conservative election win. As with all US investments major moves in the GBP / USD can be either very good or very bad IMHO.

ATB

Pref

[TheMotorcycleBoy]

Sorry, I'm being negative again. Still sceptical about longevity of the bull. This article reminds me that the US has not only been buoyed along by tax cuts.

https://edition.cnn.com/2019/12/21/poli ... index.html

So whilst I agree with other posters that I should focus on great companies, and forget the index, I do wonder how much of the recent market been engendered by Trumponomics and whether there will be a dramatic end to all this exuberance.

Matt

[PrefInvestor]

Well Matt, a correction in US markets is likely (inevitable ?) at some point in time – but will that be next week, next year or maybe even longer than that ?. But all the while the US avoids recession then I suspect that any corrections will be limited – unless there is some major financial black swan event and/or the US goes into recession. And were the worst to happen being invested in other markets would likely be no defence. Do you really want to put your investing life on hold for fear that such an event is imminent – when it may not be ?. That is the conundrum.

As for investing in great companies rather than the index, that may be a Warren Buffett’s approach (but his wealth always allows him to negotiate some kind of advantage on all of his deals). Personally I find that I am increasingly doing EXACTLY the reverse of that, passive investing in low cost ETFs that track an index or in investment trusts – all things that hold a basket of stocks and never just one, to avoid that all too common phenomenon of a 10% drop (or worse) in an individual stock. This may not deliver the returns that some achieve with their HYP portfolios but it does certainly let you sleep more easily knowing that one of your cherished stock picks isn’t going to take a big hit at random - like they have an annoying habit of doing.

ATB

Pref

[TheMotorcycleBoy]

Well Matt, a correction in US markets is likely (inevitable ?) at some point in time – but will that be next week, next year or maybe even longer than that ?. But all the while the US avoids recession then I suspect that any corrections will be limited – unless there is some major financial black swan event and/or the US goes into recession. And were the worst to happen being invested in other markets would likely be no defence. Do you really want to put your investing life on hold for fear that such an event is imminent – when it may not be ?. That is the conundrum.

As for investing in great companies rather than the index, that may be a Warren Buffett’s approach (but his wealth always allows him to negotiate some kind of advantage on all of his deals). Personally I find that I am increasingly doing EXACTLY the reverse of that, passive investing in low cost ETFs that track an index or in investment trusts – all things that hold a basket of stocks and never just one, to avoid that all too common phenomenon of a 10% drop (or worse) in an individual stock. This may not deliver the returns that some achieve with their HYP portfolios but it does certainly let you sleep more easily knowing that one of your cherished stock picks isn’t going to take a big hit at random - like they have an annoying habit of doing.

ATB

Pref

Hi Pref,

I don't allow fear of correction prevent my purchase of US stocks. Certainly hasn't stopped me so far. But I'm circumspect about being carried away by the momentum of others. I appreciate this may be a minor point but with my US purchases so far,I tried to ensure I buy in a slight dip, so I can at least convince myself of upside potential. (MSFT being the exception here since my experience in the S/W sector leads me to believe that their upward destiny is pro!ongable).

My fears incredulity stems from the fact that DJT in my naive opinion has pressured the Fed to pursue policies which I'd thought were only used to assist in dire economic conditions. That is, as a medicine, not as a recreational stimulant so to speak. He is even reported as wanting negative rates and QE like the Germans. This seems crazy. Presumably he's either attempting to devalue the $ for trade leverage, or in order that any domestic companies can re finance for even less, or he is in mortal fear of the markets perception of an inverted yield curve, and will do anything possible to avoid it's occurance. So my fears/interest has me curious as to what tools will they have left, if and when a real disaster strikes. That's all really.

So I'm not really as bothered as you by smallish drops in the current value of particular holdings, it's just the surreal atmosphere Stateside which I find both interesting and alarming.

Matt

[TheMotorcycleBoy]

Sorry, I guess I shouldn't have posted my last few about DJT's actions re. tax and rate stimulus. Since other posters here have already maintained that the SP500 and US shares almost certainly will correct, I will lose some capital value (hopefully temporarily), but on my investment timescales (possibly for another 30 years or more if I look after myself), the correction won't matter. And furthermore as I can't predict it's nature, size or longevity I should forget about it. (My mother-in-law is forever telling me, that I shouldn't worry about events I can't control!)

Matt

[PrefInvestor]

Hi Again Matt, Well personally I remain no great advocate for direct investment in US stocks. The FX charges levied by my broker (1% on any buy, sell or dividend receipt) produce roughly a 2.5% spread on any US investment in addition to any spread on the stock itself and the brokers dealing charges. No stamp duty I know but that’s little compensation. I can still look forward to suffering a 15% deduction on any dividends though despite having a completed W8-BEN form, and of course many US stocks pay little or no dividends (not good for me as these are a central theme of my investment approach).

Despite these headwinds I decided to take the plunge and following my review of the Microsoft share price (posted a while ago on this thread) I bought about £5,000 worth at about 152.x. On Friday this holding finally moved into profit at 157.x with a bit of help from the falling pound. Onwards and upwards from here I hope in 2020.

People I have discussed US direct investing with over on ii (where I also operate) tell me that having a SIPP which permits multi-currencies to be held (including USD) solves most of my problems:-
a) Using the multi-currency feature you can choose when to move money between GBP and USD (typically at a time when the rate is attractive) and only pay FX costs then. You can buy, sell and receive dividends in USD all without currency charges.
b) And SIPPs being pensions they benefit from the international double taxation agreements which means that US dividend withholding tax can be reclaimed.

I cannot personally vouch for these benefits you understand, I have just been told that this is the case by other people.

Of course these are in addition to the other HUGE benefits of SIPPs ie tax shelter, ability to contribute up to £40,000 a year if you are working AND receive a top up from HMRC at your marginal tax rate. And SIPPs are exempt from Inheritance Tax (IHT) as any money therein falls outside of your estate for IHT purposes.

Sadly I have only become aware of all of these benefits in recent years and since I am now retired and can only contribute a maximum of £2,880 a year to a SIPP the opportunity no longer exists for me, as I can no longer build up a sizeable pot therein. Had I known about these things when I was younger it might well have affected my financial planning – but I was busy working then….

So for me, operating with an ISA as my tax shelter, I find that investment trusts (eg BRNA, STS, SMT, PCT and JUSC) and ETFs (eg VUSA, VWRL and VHYL) are my preferred means of obtaining exposure to US stocks. Right now I am tending to prefer the ETF route which provides some dividend income (without WHT). Both routes provide exposure to a basket of stocks (which I personally prefer to single stock exposure) and are reasonably low cost, in general I am happy to do either.

Just wish I had a nice big SIPP though……

ATB

Pref

[JamesMuenchen]

Hi

This is a really nice post over on TMF on some of the racier tech-stocks
https://boards.fool.com/the-technology- ... 69941.aspx
doesn't cover ROKU, but a few better ones, in my opinion. AYX and MDB are my 2 largest holdings in that area.

On crashes and currency risk here is a long term chart of GBP:USD
https://www.macrotrends.net/2549/pound- ... ical-chart
If you look into the "events" it shows, they are mostly Dollar-driven. It's hard to spot, say, Brexit, without knowing exactly what you are looking for.
But compare that to the 2008 "Global crash that started in America" … the Pound sank hard against the Dollar.
As SalvorHardin says above, there's an advantage to being the world's reserve currency.

That said, the UK market is very cheap right now
https://www.starcapital.de/en/research/ ... valuation/
This data is before any "Boris Bounce", but I still wouldn't personally be in a hurry to switch to the US per se.

As others have also said, it's better to focus on finding the right companies first and ignoring the other stuff.

[ADrunkenMarcus]

Costs are certainly something to be borne in mind with US or other foreign shares.

For me, I hold Mastercard and the dividend yield is around 0.5% - so losing 15% of it due to withholding tax is not so much of an issue for me.

For dealing charges, I get a 1% FX charge on the first £5,000 and then it falls to 0.75% on the next £5,000, with further falls to 0.25% - however that is clearly a reduction (in percentage terms) which you benefit from if you're placing a large deal. And the FX charge on dividends applies, too.

However, my intention is to hold MasterCard for a long time to come. I think the growth and economic model of this company is so strong that any downside through direct ownership is really not a concern for me. I am pleased I can access it by buying directly. It's also in an ISA so, if I ever do need to sell any, I don't have CGT to worry about.

I do worry more about European withholding taxes. My holding in Kone, for example, listed in Finland, attracts a 30% withholding tax and the Finnish government is planning to raise that to 35% from 2021.

Best wishes

Mark.

[TheMotorcycleBoy]

3) Roku. This company has just appeared on my radar due to my buying one of their products (to replace an old Amazon Fire Stick). Roku makes streaming media players, selling to consumers and Smart TV manufacturers. In June 2019 it was reported that in the first quarter of 2019, some 89% of TVs sold in America were Smart TVs with Roku's technology being in 37% of them.

https://www.flatpanelshd.com/news.php?s ... 1564056000

https://deadline.com/2019/06/rokus-lead ... 202638383/

https://www.fool.com/investing/2019/10/ ... share.aspx

Roku is on the edge of my "circle of competence"; I'm happy to make a judgment on the media aspect of the company but less so with the technology. That's because all too often a seemingly dominant technology has been suddenly replaced by a competitor seemingly out of nowhere (at least to someone like me who doesn't follow the sector). That's why I generally avoid information technology focused companies. Streaming is clearly going to be the primary way of receiving video entertainment - the question is how much of this market can Roku take and can it become the dominant gateway?

Was chatting to Mel and my eldest this morning and mentioned Amazon Fire Stick. I'm not really much of a TV watcher (more of a bookworm), so despite my dayjob being tech, I know little of these beasties. KT and Mel were instantly familiar with the tech, and proceeded to pull out this little dongle from the back of our cheapo stupid TV. It's a "NOW TV" freebie offer streaming stick. Lo and behold with a ROKU chip fitted. So these things are certainly getting around a bit.

Matt

[TheMotorcycleBoy]

I read a comment elsewhere today that on a forward PEG basis the S&P is slightly better value than the FTSE.

Ok. Thanks - that's interesting to know. I guess my Devil's Advocate remark would be presumably the Earnings jump was mostly due to the Tax cuts a la Trump. So it does not necessarily speak volumes about US-side efficiencies. And on that note, does the comment to which you refer (re. forward PEG) price in potential tax cuts in a future UK, out of interest?

I was referring to the forward PEG i.e. for FY 2020, so historic tax cuts have washed through and if anything they only make the forward picture for EPS growth look even more impressive.

I claim over here that in terms of EPS growth, historic tax cuts do not simply wash through, but rather that their effect persists for the duration of their lowered rate.

Matt

[TheMotorcycleBoy]

Is there such thing as US equivalent web site to investegate for US companies' news bulletins and press releases.

I googled with the search strings including "disney investegate" and only really came up with this:

https://www.investegate.co.uk/Index.asp ... ey+studios

where the last entry is dated 2009, so presumably investegate.co.uk does not offer this kind of service.

Matt

[SalvorHardin]

Is there such thing as US equivalent web site to investegate for US companies' news bulletins and press releases.

The closest I've seen is "Business Wire". I used to use it but found it to be less user friendly than Investegate.

https://www.businesswire.com/portal/site/home/

Most American companies operate an email service whereby you register at their website and they email you their main announcements. I prefer this over Business Wire.

Most key announcements for American shares generally appear on your homepage at Seeking Alpha (everything on your portfolio watchlists). You can get it to send email reminders. You don't need to be a paid user (I'm not!).

https://seekingalpha.com/

For Canadian shares, the Toronto Stock Exchange operates a service that's very similar to Investegate's emails from its website. It allows you more discretion as to what types of notice are brought to your attention.

https://www.tsx.com/

[TheMotorcycleBoy]

Is there such thing as US equivalent web site to investegate for US companies' news bulletins and press releases.

The closest I've seen is "Business Wire". I used to use it but found it to be less user friendly than Investegate.

https://www.businesswire.com/portal/site/home/

Most American companies operate an email service whereby you register at their website and they email you their main announcements. I prefer this over Business Wire.

Most key announcements for American shares generally appear on your homepage at Seeking Alpha (everything on your portfolio watchlists). You can get it to send email reminders. You don't need to be a paid user (I'm not!).

https://seekingalpha.com/

For Canadian shares, the Toronto Stock Exchange operates a service that's very similar to Investegate's emails from its website. It allows you more discretion as to what types of notice are brought to your attention.

https://www.tsx.com/

Many thanks Salvor,

I do have a login (freebie one) for SeekingAlpha, but from what you've just remarked I need to spend more time perusing the home page. (Wish I had more hours in the day). Will check up Business Wire too.

BTW we topped up Disney yesterday. Hooked some at $135.99 p/s. I updated my spreadsheet with their latest AR19.....was alarmed at the lower EPS and cash flow but I figured this was mainly due the massive investments they've made in the year (big acquisitions). I also saw they were hit harder for tax in 2019. Had a chat with my kids....the rebellious 17 year old is very upbeat on Disney...she knows more about them than the pundits!! She says her and her mates are watching various "Mandalorian?" things using illegal downloads since they can't access them legally in the UK yet. She also mentioned that loads of Marvel and Star Wars series are due to be aired soon. Her and Mel were also remarking about how Disney+ will roll out across more countries over 2020-2021. So I chuffed that my $140.10 limit order was filled at about $4 less per share.

Do you know what the story is re. DIS disposing of their RNSs? That is, is it good or bad....I mean at first glance one assumes it equates to *less* revenues, ain't that bad?

Matt

[SalvorHardin]

BTW we topped up Disney yesterday. Hooked some at $135.99 p/s. I updated my spreadsheet with their latest AR19.....was alarmed at the lower EPS and cash flow but I figured this was mainly due the massive investments they've made in the year (big acquisitions). I also saw they were hit harder for tax in 2019. Had a chat with my kids....the rebellious 17 year old is very upbeat on Disney...she knows more about them than the pundits!! She says her and her mates are watching various "Mandalorian?" things using illegal downloads since they can't access them legally in the UK yet. She also mentioned that loads of Marvel and Star Wars series are due to be aired soon. Her and Mel were also remarking about how Disney+ will roll out across more countries over 2020-2021. So I chuffed that my $140.10 limit order was filled at about $4 less per share.

Do you know what the story is re. DIS disposing of their RNSs? That is, is it good or bad....I mean at first glance one assumes it equates to *less* revenues, ain't that bad?

Nice buy! Disney's cashflow will be all over the place for a couple of years due to buying Fox, selling off bits of it, investing heavily in streaming, etc. Expect eps to drop for a few years, especially in 2020 thanks to the Chinese coronavirus hitting theme park attendance (and 2019's box office won't be bettered). I'm not concerned about Disney which is still my largest shareholding.

The Mandalorian is very good. I think of it as the Star Wars Spaghetti Western (with some of the Samurai "Lone Wolf and Cub" series). 8 episodes in series 1 (renewed for series 2), there's only one Mandalorian "product" (so far) and the breakout star is "Baby Yoda".

Disney are planning a lot of Marvel and Star Wars TV series for Disney+, such as an Obi-Wan Kenobi series starring Ewan McGregor.

I'll be signing up for annual membership once Disney+ comes to the UK. In the meantime here's a fan made Mandalorian trailer, in the style of Sergio Leone.

https://m.youtube.com/watch?v=IJH_RbnrGUs

The Regional Sports Networks came with the purchase of Fox. In order to get regulatory approval for the takeover Disney had to sell them.