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Overview:

Shares of Signet have had a sizeable decline relative to the overall market and the retail index (RLX). This was due to weaker earnings, poor visibility, and a real fear among investors of mall based retailers. However, based on the cash flow and valuation of the underlying business, the fears seem overdone.

Investors have placed too much focus on the negatives and ignored excellent cash flow as well as the announcement of a plan to reduce debt and buyback around 25% of the shares outstanding.

Companies don’t become incredibly undervalued unless there is some risk involved with the business.

Risks to shareholders in Signet include a continuation of negative same store sales trends and a lack of earnings visibility. In my opinion, the shares have priced in much of the negative trend scenario.

Company initiatives include: Cost reductions, a transition to digital, and reducing underperforming stores.

Weak Earnings and visibility:

Current Fiscal 2019 guidance:

Same store sales down low-to-mid single digits,
Total sales of $5.9 billion -$6.1 billion,
non-GAAP diluted EPS of $3.75 – $4.25

Earnings Estimates:

For fiscal year 2019, analysts estimate that SIG will earn USD $3.97.
For fiscal year 2020, analysts estimate that SIG’s earnings per share will decline by 5% to USD $3.77.

Negative analyst sentiment:

9 out of 10 Wall street firms have a “HOLD” rating on the stock. (vis S&P).

Analysts don’t have earnings visibility due to recent disappointing comps and sales as well as concerns regarding mall based retailers in general.

Mall traffic continues to be a concern but the question for investors is, has the worst of these trends already been priced into the shares?

Positive Catalysts:

Selling credit portfolio: Sold in October for $950M. The company has stated on their earnings conference call, they plan to repurchase nearly one quarter of all shares outstanding.

At the completion of Signet’s transition to a fully outsourced credit model, we expect that the credit transactions will have generated more than $1.3 billion in proceeds, which are being used for debt repayment and significant share repurchases. – Gina Drosos, CEO

Growing E-Commerce business:

Ecommerce sales at banner websites and R2Net rose 52.8% to $253.8M in the latest quarter.

Signet aims to grow its digital sales as a percentage of total revenues to at least 15% in Fiscal Year 2021, compared to 8% in Fiscal Year 2018.

Closing underperforming stores; Signet expects to close 200 stores by the end of 2019.

Use Cost Reductions to transition to higher online sales. The Company estimates online savings will total $85M in 2019. (CC)

Financial Strength:

With Signet, we see all the classic signs of a value stock that is significantly undervalued:

P/E: 5 (well below historical average of ~ 15)

Price to Cash Flow: 1.56 – Incredibly attractive

Price to Book Value: .912 –

Based simply on the valuation, Signet is clearly one of the most undervalued companies in the stock market. Since management is being pro-active, so I would not expect the shares to stay at this level.

P/E Ratio:

Price to earnings is not the most sophisticated metric to evaluate a company. However, in this instance, it provides a good representation of how undervalued the shares of signet have become. A pretty consistent 14.5 x earnings has deteriorated to a p/e of five. The shares are incredibly undervalued relative to the stock market as well as to its’ historical value.

One would expect a return to a double digit p/e once earnings normalize. In addition, the announced buyback will shrink the shares outstanding by up to 25% resulting in improved earnings as well.

Liquidity:

The current ratio (liquidity) above 2 demonstrates a company that has tremendous financial strength.

Deep value investors (like Ben Graham), typically look for a current ratio of 2 or higher. As we see, Signet has consistently had a current ratio over 3. This is due to the tremendous cash flow that their business generates.

The company is forecasting free cash flow of $781M for this year. (CC)

As we can see, even compared with some of the best performing companies in this market, like Apple (AAPL) and Amazon (AMZN), Signet has tremendous liquidity.

Again, it’s hard to find any valuation metric where Signet isn’t incredibly attractive to a value investor.

Dividend: The company raised the dividend 19% to .37 creating a yield of ~3%. Another move to enhance shareholder value.

Technical Overview & Earnings:

Signet has a relative strength of (4), which means that 96% of the stocks in the market have outperformed it in the past year. The shares seem to have support at the $40 level and with a large buyback, would expect the shares to hold this level unless the upcoming earnings (6/6), disappoint analysts’ very low expectations.

How to participate:

The uncertainty surrounding the company has resulted in high implied volatility for the upcoming earnings (June 6th). Investors who are comfortable with options should consider using this situation to their advantage.

Regular:

For regular investors, I would advise a buy/ write strategy: buying the stock ~ $39.49 and selling a call to take in premium and take advantage of the high volatility.

Buy/ Write: Buy the stock and sell the $50 calls for $1.45 at the October 19th Expiration. If the shares are called away, the position gains ~$11.45 or ~28% for the position and ~58% annually.

Conservative:

For more conservative investors, I would advise selling a put.

Sell: The $37.50 Signet puts for 1.33 expiring on June 8th.

If the stock trades below $37.50, the cost basis would ~$36. If the stock continues to trade at or above $37.50, the investor makes about 3.5% on the position or ~42% annually.

Conclusion:

Investors have driven Signet shares down nearly 50% on fears of short-term earnings and sales trends. When we step back and look at the overall picture, Signet is incredibly undervalued based on liquidity, cash flow, p/e, and price to book. Positive catalysts for Signet include: debt repayment, a 25% stock buyback, and a dividend raise For Signet, the shares are too attractive to stay at this level too long.

Access to my Investing Newsletter Below

*Legal Disclaimer: Investing involves risk. Options may not be suitable for all investors. Consider your risk tolerance before investing. The Frugal Prof is not a registered broker/ dealer or registered investment advisor. Recommendations are for educational purposes only.

17 of the Best Totally Free Stuff Ever- (Freebies, Samples, and Free Stuff)

April 30, 2018 by Frugal Prof

17 of the Best Totally Free Stuff Ever- (Freebies, Samples, and Free Stuff)

Being frugal is usually about choices. And frugal people usually take the extra step to save a dollar or two to find a less expensive way to do things. Free is always the least expensive way to do anything. It is also the most fun!

*My aim is to recommend products that will truly benefit you. I believe in transparency and want to disclose that I’ve included certain products and links to those products on this page that I will earn an affiliate commission for any purchases you make.

1. Free Ice Cream

I’ll never pass up an opportunity for free ice cream.

When you download the Slab Happy Rewards app from Marble Slab, you’ll get free ice cream just for signing up. After that, you’ll earn points for each dollar you spend, and you can cash them in for $5 off future purchases.

2. Free Credit Score

If you’ve ever tried to get your credit score, you know most services make you sign up for a trial or charge you an outrageous amount of money. But it’s your credit score! Where do they get the nerve?

Credit Sesame will give it to you for free.

Once you get your report, check for errors. Finding and correcting just one could give your credit score a significant boost!

3. Free Baby Diapers

Is your family growing? Create a Target baby registry to get over $50 in free baby stuff!

Even better, when your due date is eight weeks away, you’ll get a 15% discount on any items remaining on your registry.

Relevant Articles:

4. Free $10 Walmart Gift Card

Have you heard of Ebates?

It’s a cash-back site that pays you for shopping online. I use it all the time — it’s an instant way to save on everything you buy.

Right now Ebates is offering a pretty sweet deal: Spend $25 and they’ll send you a free $10 Walmart gift card!

Here’s how it works…

Sign up for Ebates here (you just need to give them a name and email address).
You’ll need to make at least $25 in purchases through Ebates online shopping portal within 90 days of signing up. If you do, Ebates rewards you with a $10 Walmart gift card. Easy!

On top of that, Ebates is currently offering 5% discount on Amazon purchases!

Want to Get Paid for Sharing Your Amazon Purchase History?

Such an easy way to Earn an extra $36

Shoptracker is operated by The Harris Poll, a well known survey company that measures U.S. public opinion.

In order to get paid, you must download the shoptracker program.

Then, every month, you will receive a $3 VISA Gift Card.

I did it and it works. More information about ShopTracker here.

5. Free EBooks

Looking for some new reading? BookBub offers email subscribers access to free and discounted ebooks, including bestsellers.

Just enter your email here and browse the company’s archives. Deals are available for a limited-time only and change daily. Choose from over 20 categories and read on any device: Kindle, Nook, iPhone & more.

6. Free Godiva Chocolate

Free Godiva chocolate — what could be better?

Oh, maybe the fact this offer isn’t a one-time deal. Once you sign up, you get free chocolate every month at participating locations.

7. Blue Bottle Coffee

Want to try a bag of some of the best coffee in the country — completely free?

You can get a 2-ounce trial of Blue Bottle’s famous beans for nothing at all.

It’s part of their monthly subscription service, so you’ll need to enter your credit card info, but you’ll get an email before Blue Bottle charges you and sends you more coffee. Just make sure to cancel your subscription if you don’t want to keep getting coffee.

But after you suck down that sweet freebie, you might actually want to stay subscribed to the service and have beans delivered to your door every month.

8. Sephora Beauty Products

Oooh, Sephora.

Become a “Beauty Insider,” and you’ll have your choice of a free beauty kit from Fresh or Marc Jacobs on your birthday.

9. Free Coffee Mug

Want to be more environmentally friendly with your daily coffee — without shelling out $20 for a travel mug?

Nab a free lightweight travel mug from Au Bon Pain when you subscribe to its eClub!

10. Free Movies

Does your family still watch movies with a DVD player? We hope you’re using Redbox to find cheap rentals!

Plus, if you sign up for Redbox’s Text Club, you’ll get free movies and other deals.

11. Family First Aid Kit

You can never be too prepared, especially if you’ve got little ones running around.

Order your free family first aid kit from Florida Hospital so you’ll be ready for any scrapes or scratches, should they occur (they will).

12. Free Kind Granola Bar

This free Kind granola bar isn’t necessarily a freebie for you, but a gift you give to someone else for being kind.

Get it? You’re doing something kind for someone who did something kind — paying it forward.

Just go to Kind’s site and choose how you want a gift card delivered to a friend, co-worker or acquaintance and you’re done.

13. Prenatal Drink Mix

Expecting?

Try this free prenatal drink mix, which also comes with a coupon for $5 off your next purchase.

14. Awesome Hair

If you’re looking for even more free haircare products, you’re in luck.

L’Oreal Paris will send you cost-free samples, specific to your hair type. All you have to do is sign up for the company’s email offers on its website.

15. Emergen-C Vitamin Drink Mix

Getting sick is the worst. The next time you feel a case of the sniffles coming on, you might want to blast your system with vitamin C to try to stay healthy.

One of our favorite ways? Downing a glass of Emergen-C vitamin supplement drink mix with water — and with that link, you can try a free sample!

16. Banks still offer Free checking accounts with interest.

Some examples of checking accounts offering interest and free checking:

Ally Bank Interest Checking: Offering (.1% to .60% annual percentage yield depending on balance amount)
Capital One 360 Checking: (.20% to 1%) Capital One
FNBO Direct Online Checking: (.65% annual yield) FNBO Direct
More info
(I have no relationship with these companies)

17. Here are 300 FREE Ivy League University courses you can take online right now.

Join 1,148 smart people on my E-mail list. Subscribe below!

Value Investing vs. Jim Cramer

April 3, 2018 by Frugal Prof

The Value Investor Wins When The Mad Money Crowd Panics

Thesis:

By most measures, this Nine year bull market is quite expensive. It takes discipline to wait for attractive prices in stocks, but it is always worth it.

The “Mad Money” Crowd always finds a stock to buy no matter what the valuation. The problem is that buying overpriced stocks leaves you with little ammunition during a panic and when prices are incredibly attractive.

The more you invest when the market is overpriced, the less cash you have available to invest when prices are attractive.

I run value screens on the market everyday that tell me there are only a handful of stocks that are attractive. It’s not easy to be patient.

The issue is not one of bullish or bearish. It is one of probabilities and potential returns.

Relevant Articles:

Jim Cramer: Time to get out of the stock market

October 8, 2008: Jim Cramer Panics at the bottom

Bullish investors should turn into shrinking violets as the stock market continues its shocking downward spiral, CNBC’s “Mad Money” host Jim Cramer told Ann Curry on TODAY Monday.

In what Curry called a “dramatic statement,” Cramer emphatically urged any investor who has money they may need in the next five years tied to stocks to pull their dough out.

“I thought about this all weekend,” Cramer told Curry. “I do not want to say these things on TV.

“Whatever money you may need for the next five years, please take it out of the stock market right now, this week. I do not believe that you should risk those assets in the stock market right now.”

2008 Crisis: Lessons Learned (Genworth, Buffett, Goldman Sachs, And Washington Mutual)

While Jim Cramer was panicking on the Today Show, smart value investors like Warren Buffett (NYSE:BRK.A) were putting money to work.

His investment in Goldman, Sachs preferred shares was an incredibly successful investment in an undervalued company.

And since 2008 the stock market has had an incredible run thanks to buybacks, low interest rates, continued spending by the debt- heavy consumer, and expanding valuations. (SPY)

Relevant Articles:

The Country Has Racked Up $1 Trillion In Credit Card Debt

Debt: Clouds on the horizon

With consumers feeling better about the economy, the amount of money borrowed on plastic has reached a high not seen since the Great Recession.

Outstanding credit card debt topped $1 trillion at the end of 2016, according to The Nilson Report, a card and mobile payment trade publication.

While household income has grown over the past decade, it has failed to keep up with the increased cost of living over the same period.

To bridge the gap, more Americans rely on credit cards, one of the most expensive ways to borrow.

The average credit card interest rate is 19.36 percent and the average household pays a total of $1,332.80 in credit card interest each year, according to a separate report by NerdWallet.

Consumer Confidence:

I listen to a lot of conference calls and this quote from the Nike (NYSE:NKE) call stood out to me as we just passed this $1T mark in just credit card debt alone.

Nike conference call:

And one other things too I’d just say, that the brand is extremely strong in North America and consumer’s appetite for our brand continues to really be almost unsatisfied. Trevor Edwards, President Nike Brand

These comments refer to $150 basketball shoes and their main customer is a millennial. The consumer appetite here with $1T in debt is almost unsatisfied. Really.

Investment Fads: FANG Stocks

FANG stocks: The popular moniker for Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), Google (NASDAQ:GOOGL).

Investing fads usually end in painful losses when a bear market comes and the price to earnings ratios contract as well as share prices.

Expensive stocks based on p/e ratios versus their nominal growth rates.

FB PE Ratio (Annual) data by YCharts

The nifty fifty were very good companies for the most part. The problem was that due to p/e expansion, they were expensive and investors suffered huge losses.

It seems quite similar to what we see today with the “FANG” stocks.

NIFTY FIFTY:

Investment fads usually run their course quickly and end badly. The Nifty Fifty captivated investors for the better part of a decade prior to its demise in 1973, but not before reviving the high-risk investing that had been out of vogue since the Crash of ’29.

The 50 stocks identified by Morgan Guaranty Trust represented some of the fastest-growing companies on the planet in the latter half of the 1960s.

Their popularity among institutional and individual investors sparked a quantum shift from “value” investing to a “growth at any price” mentality that resurfaced with a vengeance in the tech-stock bubble a quarter century later.

By 1972 when the S&P 500 Index’s P/E stood at a then lofty 19, the Nifty Fifty’s average P/E was more than twice that at 42.

Among the most inflated were Polaroid with a P/E of 91; McDonald’s, 86; Walt Disney, 82; and Avon Products, 65.

Along came the stock market collapse of 1973-74, where the Dow Jones Industrial Average fell 45% in just two years.

As a Forbes columnist described it, the Nifty Fifty “were taken out and shot one by one.” From their respective highs, for instance,

Xerox fell 71 percent,

Avon fell 86 percent

Polaroid fell 91 percent.

Valuations: A very expensive market.

The best gains for the intelligent investor occur when others are fearful. Today, we have incredibly high levels of complacency. And we also have an incredibly expensive market.

Nothing to fear. Typically a bull market would climb a wall of worry. Today, there is almost nothing to worry about as evidenced by the VIX or fear indicator. (NYSEARCA:VXX)

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” –Warren Buffett

VXX data by YCharts

Pockets of value:

I am not saying one cannot make money in this market. In fact, a majority of my recent ideas have been very profitable.

I am saying that the probabilities of gains versus losses is now against the intelligent investor.

Every dollar of stock one purchased near the top in 2008 prevented one from buying lifetime bargains at Dow 8K and Dow 7K. There are pockets of value that I have written articles about.

However, for the index buyer of the S&P 500 stocks at 26x earnings and buoyed by buybacks, there is considerable risk both in the short-term and medium-term.

The goal is to buy when the risk/ reward is overwhelmingly in the investor’s favor. And by many objective factors, this market is more than fully valued. As evidenced by the Market cap to GDP.

Stocks in the mainstream:

1929: Shoeshine Boys

WHEN THE SHOESHINE BOYS TALK STOCKS IT WAS A GREAT SELL SIGNAL IN 1929.

JOE KENNEDY, a famous rich guy in his day, exited the stock market in timely fashion after a shoeshine boy gave him some stock tips.

He figured that when the shoeshine boys have tips, the market is too popular for its own good, a theory also advanced by Bernard Baruch, another vested interest who described the scene before the big Crash:

“Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day’s financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929.”

Investing Guru Tony Robbins:

Self-help guru, Tony Robbins, has released his second book on investing since this bull market began, Unshakeable. His investing advice is in addition to his full schedule as a self-help guru.

“If you don’t sell, you don’t lose money,” says Tony Robbins. “Every single bear market has turned into a bull market.”

Tony Robbins, March 2016

Conclusion:

We’ve come a long way from panic to complacency.

There are small pockets of value, but the risk/ reward is very challenging. The consumer has tremendous debt, and interest rates are set to climb higher.

This is the market we have: full panic at 8,000 and full complacency at 25,000.

Read my post, How to profit from the next panic.

Things can and do change quickly. And higher interest rates will have an impact on both consumers and investors.

I expect buying opportunities as volatility returns and uncertainty comes back in the market.

That allows me to be patient and wait for better opportunities to come.

Join 1,148 Investors on my e-mail List Below

7 Ways to Minimize Your Chance of an IRS Tax Audit

April 3, 2018 by Frugal Prof

Financial Freedom

7 Ways to Minimize your chance of an IRS Tax Audit

I am sure we agree that anything related to Taxes are not your favorite topic. However, there are ways to lessen your chances of having a problem with the IRS. And there are steps you can take to increase your odds of avoiding a costly and stressful tax audit.

To be candid, there is no way of being sure that your federal tax return won’t be audited. Even overpaying won’t protect you from IRS scrutiny. Some returns are pulled out by random selection.

Others are chosen by IRS computers, which analyze returns to to score the likelihood of collecting further. Computers select a return for audit if medical expenses, contributions, property taxes, etc … represent an unusually high percentage of the taxpayer’s income (according to nationwide models.)

Returns also invite scrutiny when figures do not agree with other information received by the IRS, such as when a corporation reports on FORM 1099 that it paid $2,000 in dividends to a taxpayer, but that taxpayer reports only $1,000.

And returns may also be selected for audit because of tips received by “tax informants.”

Relevant Articles:

The Best Personal Finance Books

Survey Sites That Actually Pay

It’s not about the Money. It’s about Taking Charge.

But your chances of being audited can be Greatly Reduced if you follow these 7 suggestions:

Answer All questions on the tax return form
Complete All schedules that are Required

Include Full Documentation of items that are likely to be questioned, such as large casualty losses, or large moving expenses. If the IRS asks for supplied substantiation, expect this request to lead to additional questions on other areas of the return at the same time.

1. Send Tax Returns and other documents to the right office at the right time so that the correspondence and personal contact aren’t necessary. Once begun, such correspondence or contact is often difficult to end- one thing leads to another.

2. Don’t deduct a type of item that had been disallowed on a previous tax return. The IRS may remember this and look fo r a repeat.

3. Don’t use a tax preparer of a dubious character. If the IRS, through its investigators, find a preparer who is grossly incompetent or worse, the name of all his/ her clients will be obtained. All of them, however, innocent, will have their tax returns checked by experts.

4. Be certain that the return has the right signatures and identifying numbers. If it is a corporate return, the title of the signer should be one of the officers authorized by law to sign.

Many Audits are triggered by…

Information returns from banks, investments, or employers that show payments (dividends, interest, salaries, or fees) that differ from those that were reported.

5. Unusually large deductions. The computer flags deductions that are much larger than the average amount taken by most taxpayers in the same income group.

Suggestions:

Provide some details on extra large deductions. Big casualty loss? Describe the hurricane or flood, maybe even enclose a newspaper article. Give dates and details of a long illness that produced large medical deductions.

6. Unbelievable numbers:

Examples: Claiming that you held IBM stock for 25 years and sold it at a loss. Business expenses that are out of line with the amount of gross income or the nature of the business … Mortgage interest and property tax deductions that are unusual for your area.

7. Large Round numbers raise questions as to whether you picked an exaggerated number out of the air without supporting documentation.

8. Home office: This set-up usually receives closer scrutiny.

When are Taxes Due:

Every year since 1955, taxes have been due on April 15 … except for sometimes. Like the last two years. And this year.

Tax Day falls on April 17 for 2018.

That’s the deadline for filing your 2017 federal tax return, the last day to make a contribution to an individual retirement account for it to count against 2017 income, the deadline to file a tax extension, and the day when quarterly estimated tax payments are due for those who make them.

Make sure you are taking full advantage of all the tax savings available to you beyond a standard deduction:

Fund an IRA

Health Savings Accounts: (Basically an IRA type vehicle to pay health-care related expenses)

-Must have a high deductible health plan

-Annual deductible above $1,300 ($2,600 for families)

Withdrawals: Can be made tax-free to pay qualified medical bills. Unused HSA money can be carried over to subsequent years to grow tax-deferred through investments in mutual funds, stocks, bonds, etc… – potentially for decades. Money withdrawn before age 65 that is not used for health related expenses is subject to income tax and a 20% penalty. After age 65, you pay only income tax.

Student-Loan Interest: You can deduct up to $2,500 worth of interest paid on student loans, regardless of how many students there are in the family and whether the loan financed higher education for you, your spouse, and or dependent, provided your income is below a set amount.

Alimony: Alimony is 100% deductible for the payer and is considered income for the recipient.

Nobody wants to have scrutiny and the stress of an IRS audit. So, by being careful to avoid these 7 mistakes can lessen the probability of an audit.

*Legal Disclaimer: The Frugal Prof is not a certified accountant and the information provided should not be construed as accounting advice. Please consult with your own tax preparer.

7 Golden Rules For a Profitable Blog

March 24, 2018 by Frugal Prof

7 Golden Rules to Create a Profitable Blog

I believe that starting a profitable blog is one of the best ways to create extra income. And I am passionate about helping people to learn how to make money from blogging. A successful blog can do many things for you and your family.

A successful blog:

• It may help you pay off your debt;
• It may help you save for a vacation for your family:
• It may help you stop living paycheck to paycheck;
• It may help you reach retirement sooner;
• It may help you not feel as stuck at your job;
• It may help you to become debt free:

It takes work, focus, and perseverance to be a successful blogger. And there is no reason you cannot create a profitable blog too.

*Disclosure: I believe in transparency and want to disclose that I’ve included certain products and links to those products on this page that I will earn an affiliate commission for any purchases you make. My aim is to only recommend products that will truly benefit you.

1. Start today. Or Start as soon as you can.

There’s never been a successful blogger who has ever said, “I wish I waited.” Ever.

Most say, “I wish I started sooner.” Imagine a few months from now cashing checks and earning a nice side income for yourself and your family.

As a passive income source, blogging allows you to earn income while you sleep and enjoy more time with your family. And of course, blogging is a great way to get out of debt.

My guess is that you’ve already been thinking of starting a blog. And you have some idea of what you would want to do. The next step is to check on the best name for your blog.

“Well, I’m not technically savvy.” Guess what- Me neither! And most of the successful bloggers I know in certain niches (like Mommy blogs) aren’t either.

In fact, being technically savvy is not helpful in creating a successful blog. What’s important is creating quality content and connecting to your readers. Everything else can be learned.

Since I’m not technically savvy, I love Bluehost. I’ve used their technical support many times. In fact, they will help you set up your blog if you have need any help. Either by phone or via chat. I’ve never waited for their representatives more than 5 minutes. Even at odd hours. They are Amazing!

Simple steps to creating a wordpress Blog with Bluehost:

Go to Bluehost
Select your plan

Pick a name for your site
Enter your account info, choose a password, and enter your payment info
Pick a theme for your new WordPress blog!

And if you have any questions, click the Chat button at the top right to speak with them directly.
And they will be happy to help you.

2. Content Counts.

Content is king (or queen). A blog needs helpful, engaging content. If you can do that, you will be very successful.

There are no advanced blogging tricks that can overcome a boring blog that doesn’t help people. Keywords, SEO, Lead magnets, and monetization can be learned.

There is no way to monetize a blog that doesn’t help and engage people. Content is really important!

Blog Posts: The longer the better. “Expert bloggers” rarely share this CRITICALLY important blog tip: write longer articles.

Don’t stop at 500 or 550 words. The longer the better. Shoot for a minimum of 700 words for anything your write. This will help you with Google ranking, but also with your reader. All of the data and research supports this tip. The most popular and shared pieces of content are always the longest. Yes, many of those are longer than 2,000 words. Write long pieces.

Relevant Articles:
The Best Personal Finance Books
Survey Sites That Actually Pay
It’s not about the Money. It’s about Taking Charge.

3. Take your blog seriously. View your blog as a profitable business and it will become one.

One of the reasons why new bloggers have trouble getting traffic is because their posts are too short. And they haven’t written enough helpful, engaging content. They aren’t really serious about their blogs. It’s a just a hobby. And that’s ok.

My focus in this article is for you to earn an income from your blog. And in order to do that you need to take it seriously.

Successful bloggers may pretend they woke up and had thousands of views and an e-mail list full of eager subscribers. Let me be honest: that doesn’t happen.

Blogging is competitive and takes work, dedication, and focus. Especially if you want your blog to make money.

Sometimes I have to wake up really early to finish a post before I go to work. I did this long before my blog was profitable. But, I had a plan to follow through on my goals and wanted to see results.

Blogging success takes time. In order for Google to rank your articles a certain amount of time needs to pass. You may write an incredible article today that will go on to bring you a lot of traffic and followers. But, it may take a few weeks or months for the articles to gain momentum.

Stay the course. And plan accordingly. I would never tell you that your blog can be profitable next month. And people that say that are exaggerating.

View your blog as a profitable business and it will become one. Take your content seriously. Take credible advice seriously. Have a plan. Have a strategy. And Invest in resources that will help you.

4. Have a Strategy to build traffic

Once you have great content, (Yes, I know I am repeating myself because content is really important.) You need a strategy to attract viewers to your blog. Each niche is a bit different, but right now many successful bloggers are using Pinterest to achieve excellent results. Pinterest can be a great source of traffic, especially if you use the right tools.

“Write it and they will come” is a poor traffic strategy. Blogging is too competitive and there is too much content out there. That is why you need to consider your ideal reader/ customer.

Your Ideal Reader: Thinking about your ideal reader is really important.

Who are they?
What are their problems?
How can you help them?
Where are they?

Some have been incredibly successful and others have been a learning lesson. Have a strategy to build traffic and know that you can keep revising it.

Use the right tools:

Tailwind is another great resource for Pinterest. What typically happens is that people wait to use Tailwind until their blog has traffic and is making money. And then they subscribe to Tailwind and get access to their Tailwind tribes and community and they have a big spike in traffic and Revenues.

And then they say, “Why did I Wait to use Tailwind?” That is a common experience. So, it is probably worth joining now and getting access to their great tools to help you schedule pins and access to their tribes and boards to increase your traffic. More about Tailwind here

I highly recommend using Canva to create pins on Pinterest. The cost is about $12 and if your strategy involves creating traffic with Pinterest, then this is a good choice.

I work with Bluehost because their technical support is amazing. One morning I woke up and there was zero traffic on one of my more profitable blogs. At 5:00 AM I called them and they fixed it in 5 minutes. They saved me a ton of time and money.

Invest with companies and courses that can help you. I use tools like Tailwind to grow my Pinterest following.
And as long as I am receiving value and these are helping me grow my business, I will continue to use them.
Don’t invest in expensive courses unless you are absolutely sure they will be a good investment. And that you are committed to doing whatever it takes to follow through.

5. Have a strategy to Monetize your blog:

There is no need to wait until you have engaging content to begin to monetize your site. It takes a while to build traffic and to create a relationship with the affiliate companies. Depending on your niche, there will be numerous opportunities with these companies to help you make thousands of dollars in the future.

It makes sense to apply to the programs as soon as possible since some companies evaluate you by how long your relationship is with the affiliate company. If you wait to join the affiliate company, some advertisers see you as a new blogger even if you have an established blog.

Great content allows you to build traffic. Traffic will allow you to monetize (make money) from your blog. Without traffic, it is very difficult to monetize a blog.

Affiliate Companies:

My advice is to check out their offers to see which ones are a good fit for your niche. Share a sale is an industry leader and has great offers in a variety of niches.

Share a Sale High quality affiliate company.

Other Quality Affiliate Companies:

Flex Offers High quality Affiliate Company. Strong with fashion, retailers.
Max Bounty, Their interface is attractive, easy to use, and fun affiliate contests are held regularly. Run by a very friendly and fun group of people who have been in the business for over 12 years.
Igain Network: iGain specializes in market research offers and features high quality advertisers. They offer a real-time tracking platform, which is great.

If you want to check to see which of your favorite companies are offered through an Affiliate program, a great resource to use is Offer Valult (it’s totally free).

7. Keep Learning

Today, bloggers are doing really well today converting traffic from Pinterest. If you read this post in 2020, bloggers could be using Facebook Live or YouTube videos to drive traffic.

I say this because current trends actually suggest that video is becoming more and more important in driving online traffic.

That is why it is so important to keep learning and developing your skills as a blogger and social influencer. Part of what is unique about blogging is that there is so much to learn: SEO, Blog Themes, Driving Traffic, Paid Ads, Lead Magnets, and on and on.

All of this presents an opportunity for you to increase your audience and to make more money. The more you know- the more you can teach others and create value.

I hope this post has added value to you.

Please consider sharing it on Social Media and Join 1,148 bloggers on my e-mail list for tips and strategies.

Facebook Stock (FB): Insider Selling and 9 Serious Risks for Shareholders

March 20, 2018 by Frugal Prof

Financial Freedom

Facebook Stock (FB): Insider Selling and 9 Serious Risks for Shareholders

Thesis:

Up until now, money managers competing with the S&P 500 (SPY) had to own Facebook (:FB) shares due to the performance. That trend could be reversing as risks to the business model appear. The medium-term risks to Facebook stocks are significant:

- Increased regulation,
- Unhealthy product,
- No barriers to entry,
- Competition for younger users
- Trends away from social media
- Depression Link
- Privacy issues
- Few barriers to entry
- Extreme valuation,
- Insider selling.
- Business strategy of copying or buying better competitors
- “Facebook is for old people”

Insider Selling:

Mark Zuckerberg will sell up to $12.7 billion in Facebook stock over the next 18 months

Facebook CEO Mark Zuckerberg will sell up to 75 million shares of Facebook over the next 18 months, he said in a post on Friday.
At the current Facebook share price of $170, that means Zuckerberg could sell up to $12.7 billion in Facebook stock.
He could also sell as few as 35 million shares of Facebook, which would work out to just under $6 billion in Facebook stock.
Zuckerberg is selling some of his Facebook shares to fund the Chan Zuckerberg Initiative, the philanthropic organization he formed in late 2015.

The significant selling begs the question of how committed Mark Zuckerberg is to continue as CEO of Facebook. It seems as if his interests in philanthropy and politics make it unclear whether he will continue to be with the company beyond three to five years from now. Especially in light of regulatory battles in Europe and the growing political scandal involving Cambridge Analytica.

1. Risk: Unhealthy Product for User

Investors can make money in companies that sell products that are unhealthy:

cigarette companies,
liquor companies,
soda,
burgers, on and on.

The real issue is that we now live in an information age. And investors used to be protected by the lack of customer knowledge.

It should be startling to any investor in Facebook not only how quickly everyone in the world realized the product was linked to depression, but how fast the research supported it. In previous generations, this type of information would have been hidden from the the public for decades.

Using Facebook actually makes you feel depressed, research says

“Exposure to the carefully curated images from others’ lives leads to negative self-comparison, and the sheer quantity of social media interaction may detract from more meaningful real-life experiences,” the report says.

Exploring Facebook Depression (via Psychology Today) Facebook seems to be a perfect social tool for staying in contact with friends and family members without ever needing to leave the house. So why do so many Facebook users report feeling depressed and lonely?

Risk: Consumers’ reaction to an unhealthy product.

The expectation for investors is continued growth and expansion. A change in consumer behavior or parents attempting to curb social media use is a known risk being ignored by shareholders.

As we see from the soda industry, when consumers deem a product to be unhealthy, there are consequences for growth and valuation.

Without a diversified offering, Pepsi Stock and Coke Stock (:KO) would have suffered significant losses as soda consumption declines. Facebook is a pure play in social media.

Soda Consumption Falls to 30-Year Low In The U.S.

… also reported that annual per capita consumption of carbonated soft drinks dropped to about 650 eight-ounce servings in 2015 – the lowest since 1985.

The industry has found itself out of favor as consumers seek beverage alternatives to soda that they deem healthier, notably juices and flavored waters. Those alternatives don’t contain as many calories as soda, and also don’t include ingredients like the sweetener aspartame, which has fallen out of favor in recent years.

The changes in soda consumption happened over a long time period. However, we know about the effects of social media now. Facebook needs growth and engagement to sustain the stock at these levels.

2. Risks: Social media loses momentum

The hottest topic for discussion on social media is the best strategy to leave social media. Again, since the valuation of Facebook is predicated on continued growth in users and engagement, these are clear risks to the shares at this level.

Google Search Results:

Social media break: 98,000,000 results

Kylie Jenner: 33,000,000 results

3. Risks: Competition, New Trends, and Innovation:

Instagram was a very good acquisition for Facebook. And copying Snapchat (SNAP), appears to be successful for now, although its user metrics are being questioned by some.

Regardless, the issue for Facebook shareholders is if buying and cloning competitors will be enough in the future to stave off competitors, sustain growth, and justify current valuations.

Noted investor Andrew Left of Citron on competition:

the continued rise of Snapchat as well as the Pokemon Go craze as demonstrative of how “volatile and fragile” Facebook might be to new trends.

“We all are addicted to our phones, that we know, but what it shows is that people will do different things with their phone if given a choice … the company lives and dies on engagement levels,” he said.

4. Cloning and buying competitors

Instagram: Good and Bad

Facebook buys Instagram for $1B

Instagram was an excellent acquisition at a very reasonable cost to Facebook. It was a great acquisition due to an unbelievable price: $1B. That’s the good news, but also the bad news. Since Snapchat has gone public, everyone in the space now realizes that Instagram left at least $49B on the table and more like $79B.

Next time: Facebook is not going to buy its next competitor at such a discounted price ever again, in my opinion. Continuing to buy or clone competitors is a risky and difficult business strategy.

You Pay A Very High Price In The Stock Market For A Cheery Consensus – Warren Buffett

‘As sweet as Cookie Layer Crunch’ – analysts are still incredibly bullish on Facebook post-earnings

Deutsche Bank: “Results as sweet as cookie layer crunch”
Stifel: “The best is yet to come”
Citi: “4Q16 results were ahead of even the most bullish expectations”
Goldman Sachs: “More beats to come”
Pacific Crest: “Significant room for growth in excess of current estimates over the next several years.”
Raymond James: “We reiterate our strong buy rating”

Groupthink:

What’s amazing about Facebook is the amount of group-think involved, thinking that they can just evolve, evolve, evolve, without any hurdles in the way,” Left said in an interview with Bloomberg TV.

“I just think that expectations and investor expectations are a little bit outpaced the realities of what they’re going to face in the next 12 to 24 months.” Andrew Left, Citron

5. Risk: Younger users

“Facebook is for old people”

Three Reasons Young People Think Facebook Is Lame

Facebook no longer discusses teen user rates.

Bloomberg notes that Facebook first warned investors a year ago that teens weren’t as active on the social network as they had been in the past. The company stopped discussing usage rates among teens on its earning calls after 2013’s numbers, alarming investors. Even as Facebook and its investors try to overlook the decline, with rising advertising revenues a welcome distraction,

The Verge reports that young Americans are not only crucial to the company’s advertising success but serve as an indicator of its future popularity.

Facebook Losing Teen Audience. Now, It’s Just Old People Socializing

Facebook isn’t the only social network apparently turning off young users. Twitter is also experiencing a notable decline in its demographic of 18- to 34-year-olds.

Again, since the real Facebook customer is advertisers, losing a younger user is problematic, since they are most sought after by advertisers.

6. Premium Valuation:

The issue for investors is whether the price to growth and price to sales are in line with a company facing medium-term and long-term threats and competition.

Again, we see the large move in the shares since the election and compare the market cap to revenue and income.

Valuation:

The company needs to keep growing users and engagement to sustain this valuation. 14-15x sales is an incredible figure and assumes sustained growth and engagement.

Estimates for earnings in 2018 of $6.72 (via Marketsmith) suggest 24% growth over 2017. The P/E of 41 suggests a premium to the actual growth rate in earnings.

Cash Flow:

As a value investor, it’s hard to imagine paying 35X cash flow for any investment. And this valuation assumes that none of these risk factors will impact earnings in the future.

Institutional Demand: Technical Buying

Institutions feel pressure to own Facebook:

Money managers that index to the S&P 500 are under pressure to own the shares, since they are such a large component in the index.

the top five S&P 500 stocks by market capitalization represent 12 to 13 percent of the index’s overall weight, and all of them – technology-related stocks – are trading in positive territory year to date.

Five companies have become the pillars of the stock market in 2017, and their names shouldn’t sound unfamiliar, either. Apple, Alphabet, Microsoft, Amazon and Facebook are carrying a load of weight on their shoulders.

Due to market cap weightings in the index, Facebook has a larger influence on the index than JPMorgan (JPM) or Berkshire Hathaway (BRK.A)

If I ran Berkshire Hathaway

Benjamin Graham: Dean of Wall Street

Institutional demand has not only helped the shares but also pushed the valuation to extreme levels. If trends reversed and Facebook lagged the indexes, money managers would feel less pressure to own the shares relative to the index. In fact, Facebook shares have outpaced the S&P 500 over the past 3 years by nearly 6X.

8. Medium-Term Risk: More users start to dislike Facebook:

Targeted Ads, privacy issues, and manipulation of users.

Survey: Facebook scores low in customer satisfaction

End Users of Facebook don’t like the company due to issues with Targeted Ads and Privacy Issues.

Some Americans still love to hate Facebook and other social media services.

That’s according to an annual survey from the American Customer Satisfaction Index (ACSI) released Tuesday.

Social media companies are the fourth-lowest scoring with consumers after Internet service providers, subscription television companies, and airlines.

Facebook and LinkedIn ranked the lowest of the seven companies surveyed. Twitter didn’t fare much better.

9. Manipulation of end-user:

Brain Hacking: A recent 60 Minutes piece caused a stir by suggesting social media companies were working on algorithms to make their productmore addictive for the end user (and especially kids).

The silicon engineer suggested that social media on a phone was similar to a slot machine. And users would be rewarded with likes, share etc…

Tristan Harris: And it’s not because anyone is evil or has bad intentions. It’s because the game is getting attention at all costs. And the problem is it becomes this race to the bottom of the brainstem, where if I go lower on the brainstem to get you, you know, using my product, I win. But it doesn’t end up in the world we want to live in. We don’t end up feeling good about how we’re using all this stuff.

Conclusion:

Optimism by Wall Street ignores looming risks to Facebook shares: an unhealthy product, no barriers to entry, competition, younger users looking elsewhere all loom as risks to the growth model and valuation.

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Buffett was Right about Sears Stock

March 14, 2018 by Frugal Prof

Financial Freedom

Buffett was Right about Sears Stock (SHLD)

The demise of Sears Stock (NASDAQ: SHLD) provides important lessons for every investor.

Media hype,
cult of personality,
overreaching,
management with different interests,

and other lessons can help investors avoid the next investment disaster.

Going Concern

After a recent $900 million sale of its Craftsman brand, store closures and other cost cuts, Sears warned late Tuesday that there’s “substantial doubt” that it will survive (via USA TODAY).

Lampert owns about 48% of Sears stock, according to the company’s annual report, including holdings through his hedge fund, ESL Investments. Besides his stock, Lampert holds about $381 million in unsecured notes issued to Sears.

USA TODAY estimates that the value of Lampert’s Sears stock has declined by roughly $519 million since the end of 2014.

Closing Stores:

Sears is closing over 100 more stores

Sears told its employees Thursday that it will be shuttering over 100 more stores.
That consists of 64 Kmart stores and 39 Sears stores, all of which are expected to close between early March and April of this year.
Liquidation sales will begin as early as Jan. 12.

Retailing Is Hard

Warren Buffett (NYSE:BRK.A) (NYSE: BRK.B) on why retailing is so hard:

“Retailing is like shooting at a moving target.

In the past, people didn’t like to go excessive distances from the street cars to buy things. People would flock to those retailers that were nearby.

In 1966 we bought the Hochschild Kohn department store in Baltimore. We learned quickly that it wasn’t going to be a winner, long-term, in a very short period of time.

We had an antiquated distribution system. We did everything else right.

We put in escalators. We gave people more credit. We had a great guy running it, and we still couldn’t win.

So we sold it around 1970. That store isn’t there anymore.

It isn’t good enough that there were smart people running it.” -Warren Buffett (via BI)

Articles related to Warren Buffett:

Buffett Investing Mentor, Benjamin Graham

Why Lebron James is a Big Risk for Nike Stock

Eddie Lampert:

AutoZone (NYSE:AZO) vs. Sears

This chart speaks for itself. It’s incredible. AutoZone shareholders have had an incredible run while Sears shareholders have suffered huge losses. And Eddie Lampert was running both companies.

Cult of Personality: The One Decision Stock

The pitch for investors via the media and some investors was that Sears was a one-decision stock, i.e. that investing alongside Eddie Lampert was the only decision an investor needed to make. And based on the performance of AutoZone, it was a simple decision.

Relevant Articles: