Unlike a Larry King interview, I wanted my chat with Derek Foster to be real, not staged.   Sorry Larry.

I’d like to say Derek shared many personal experiences with me over the phone a few weeks back but I’m not that naive.  Derek has shared his investment experiences (and some failures too) in many National Bestselling Books:

• Stop Working: Here’s How You Can!
• The Lazy Investor: Start with $50 and no Investment Knowledge
• Money for Nothing: And You Stocks for FREE
• Stop Working Too: You Still Can!  AND
• *The Idoit Millionaire (*Latest book, Fall 2010)

However, I think you’ll find a few nuggets from Derek that his books don’t cover by reading Part 2 below.  Even CTV missed some of the goodies I was able to get from Derek.  Now that I’ve got you curious about this TV interview, a link will follow.  Onto Part 2; more from Derek Foster, millionaire dividend investor and early retiree from the rat race…

* * * * * * * * *
My Own Advisor: Thanks again for the interview Derek.  It’s great to finally chat with you.  Ready for the long list of questions?

Derek:   Ready Mark.

My Own Advisor:  We talked before about your investment strategy, you’re still a dividend investor.  I’m curious to know what your portfolio allocation looks like?  I mean, do you have any bond component?

Derek:  Im 100% stocks, both Canadian and U.S. dividend-paying stocks. I have no bond component. Not that I think bonds are bad, simply, Im a forty year old Derek Foster and I dont see why I need bonds right now with my multiple income sources. The empirical evidence is overwhelming about how stocks beat bonds over the long-run, Im talking 20 or 30 years. Im working on growing my dividend portfolio over the next 30-some years so this is why I dont personally follow any conventional bond allocation protocol. Ask the seventy-five year old Derek Foster and hell probably give you a different answer about his bond allocation. Im just not there yet.

My Own Advisor:  Whats your take on index investing?

Derek:  I think index investing is very safe way to go. The problem I have with index investing personally (and maybe you can help me on this since I read your blog, you own some ETFs dont you?) is the cap weighting associated with some index funds or index ETFs. At one time, Nortel and JDS made up something like 30% or more of the TSX, thats major over-representation if you ask me.

My Own Advisor Yes, but you can invest in index funds or an index ETF like XIC whereby each constituent of the fund is capped at 10%, avoiding the overemphasis.

Derek – True, I know about those products but you are still overweighted in the hot sectors. But let me ask you this. Do you think your dividend-payers with your dividends reinvested, compounding over time, dividend increases plus stock price growth, stock splits, etc. will do better in the long-run than those capped index products or worse?

My Own Advisor I think my index ETFs will never hit the proverbial home run but I also know Im always going get market returns, on the equity side of between five to seven percent over time. Thats good. If my dividends get reinvested, dividends increase over time and I hold my dividend-paying stocks long enough I should get at least that. Thats provided I own the right companies though.

Derek – Thats precisely my point. Investors can. Not to discredit index investing, I think its a good strategy. I think its good for those who dont have or want to take any time to analyze stocks, but I like my strategy. Its worked out pretty well for me so far.

My Own Advisor:  Tell me your top three all-time favourite investing or personal finance books.

Derek:  Good question, wow, there are so many. Can I tell you my three favourite authors?

OK, well I love the Peter Lynch ones, his One Up on Wall Street and Beating the Street two of my all-time favourites and he pretty much covers everything in those books.

I also really liked The Future for Investors by Jeremy Siegel (who also wrote Stocks for the Long Run). I mean he says so many great things that just make sense and he backs it up with loads of empirical data. Have you read it?

My Own Advisor Uh, no.

Derek You should. I think its a must.  I guess the last one would be The Warren Buffet Way. What else can I say? Hes the greatest investor of them all.

My Own Advisor:  Have you learned more about investing from your successes or failures and why?

Derek:  Thats a good question.  For me, failures because I think I question myself so much more. As an investor you can take failure as an opportunity to reflect on what didnt work and what could be better next time. I think sometimes many investors are blinded by their success because they fail to recognize the degree that luck was involved with their result. That mindset can have painful consequences.

This interview was originally published on December 17, 2010 at thekirkreport.com

Charles Kirk: It is with tremendous pleasure that I offer my last interview of 2010 with Mark Minervini.

As with many traders I interview, Mark requires no introduction as he is one of the most highly-respected independent traders of our generation. His blog in recent years has instantly become one of the must reads out there as he often shares market commentary and analysis which shows why the respect so many have for Mark is so well-deserved.

Moreover, his experience and past history of savvy market calls is legendary. It is with little doubt that we can all learn a lot from him! We hope you enjoy and find this focus interview helpful in your own journey toward more success in the markets.

Kirk: Hi, Mark. First of all, thank you for taking the time to answer our questions. I speak for many members who have a great deal of respect for you and we sincerely welcome you to this interview series.

Mark Minervini: You do a great job, Charles, and Im honored to be a part of it.

Kirk: Please tell us a little bit about how you got interested and started in trading.

Mark Minervini: I dropped out of school in the eighth grade in pursuit of a career as a drummer. From the money I made working as musician, I bought my first stock in 1983, which was a few hundred shares of Allis Chalmer. Shortly after, I read Richard Loves book, Superperformance Stocks: An Investment Strategy for the Individual Investor Based on the 4-Year Political Cycle. Everything Ive created with regard to my trading approach since stems from Loves initial impression on me, specifically from his writings in chapter 7.

Kirk: What was one of the most important lessons you learned early on?

Mark Minervini: That no one was going to do it for me; no one was going to make me rich except me. I learned that you must take responsibility for your results in the market and in life if you want to be exceptional. Secondly, I learned that in order to do well in the market you must be consistent; consistency is what separates the pro form the amateur. In order to have consistent success, risk must be managed in relation to potential reward as standard operating procedure. Youre not going to make just one trade, rather hundreds or even thousands of trades; its all about how much you make on average versus how much you lose on average over time. Lastly, I realized that I simply had to get to the bottom of what actually worked in the marketplace and ignore all the opinions and theories.

Kirk: Was there anyone out there who helped you greatly during your initial learning curve? If so, what did you learn most from them?

Mark Minervini: My Mother and my Father. I learned it was ok to do what I love; to go after my dream. I also learned it was ok to be unconventional. I was given the room to be creative. My parents trusted me. I always knew I was supported emotionally. Financially, we were poor but my parents supported my dreams.

Kirk: Indeed, it is so important to have a strong support structure in place. In a nutshell how do you currently approach the market and what is your primary trading strategy?

Mark Minervini: I approach the market from a risk first approach. My trading strategy is called Specific Entry Point Analysis or SEPA. We look to enter trades at low risk entry points relative to potential reward. Primary focus is not to lose money. Secondary focus is not to lose money. And, the final focus is to make more on average than I lose.

Kirk: You remind me of Buffett who said he had only two rules: 1) Never lose money and 2) see rule number 1! What do you see as the primary benefits from employing a strategy that focuses on both fundamentals and technicals?

Mark Minervini: The benefits are having all the pertinent information that is consistent with big winning stocks. We know what to look for both fundamentally and technically. I have seen stocks bought on pure technicals and the guy buying the stock doesnt even know that there was a cash offer or a proposed merger right at the price he paid. Refusing to look at fundamentals or any information that gives you an edge is usually because the individual just doesnt know how to use the info, or has some bias based on personal opinion or tradition.

Kirk: Why is this kind of trading best for you and, more importantly, why do you think it works so well?

Mark Minervini: My strategy works well because its my strategy. I know the strengths and, more importantly, the weaknesses of what it is I do. It also works well because I allow it to work and stick with it even when it runs into difficult times. Nothing works well if you keep changing your approach. To be a master you must be a specialist, not a jack of all trades.

Kirk: What do you trade mostly? Equities, options, futures, ETFs, currencies, etc.?

Mark Minervini: Only equities.

Kirk: In an average week how many trades do you make? What is your average hold time and how many positions do you have open at any given time?

Mark Minervini: During an average year I may make 400-500 trades. About half of that turnover is a result of taking small losses, which Im out of pretty quickly.

Kirk: What would you say are your primary strengths and weaknesses as a trader?

Mark Minervini: Discipline is my primary strength. And the willingness to admit when Im wrong and move on. My weakness is I usually sell early and often leave money on the table. But I dont really view that as a weakness, just something that could be improved upon. When you move in size you have to get out when the getting is good.

Kirk: In my experience it is often better to sell too early than too late Mark! How have you learned to mitigate your weaknesses and focus more on your strengths?

Mark Minervini: By not focusing too much on my strengths. If youre good at buying and bad at selling I would focus on selling; if you improve your selling you will have a complete game. Focus on making your weaknesses strengths and then you will have no weaknesses. Exploit your strengths and improve your weaknesses.

Kirk: What have been some of the most challenging lessons you have learned?

Mark Minervini: That you cant be everything. You must commit to a strategy and sacrifice other strategies. The problem with the market is its like playing poker however; you always get to see the next cards even though the hand is over. You always see what would have happened. This is very difficult to deal with for many people. To be successful, you have to understand that trading is NOT about picking highs and lows, its about making money.

Kirk: Very good. What are some of the key rules that you consider before selecting any potential trading opportunity?

Mark Minervini: How much am I risking is the very first concern. Also, does the stock meet all the necessary criteria? If the risk is acceptable and all the entry criteria are met, I enter the trade.

Kirk: What would you say is your average win: loss ratio for your trades?

Mark Minervini: I average 2 to 1.

Kirk: How has your overall performance been recently, as well as over the past few years?

Mark Minervini: Its been about the same as always. Im a consistent 2:1 trader.

Kirk: What would you say are your favorite kinds of technical and fundamental set-ups?

Mark Minervini: The ideal set-up is a stock emerging from a constructive consolidation with strong accelerating earnings and sales.

Kirk: Can you give us a recent example of a set-up you found to be very attractive and worked well in this market?

Mark Minervini: CML. Bought it on 11/24. Sold it on 12/7 for a quick profit.

Kirk: Have you noticed any trading set-ups more prone to failure than they have been in the past?

Mark Minervini: No. Not much has changed. Contrary to what many believe, its not different this time. LOL

Kirk: To help us understand your trading approach, can you talk about a recent successful trade from start to finish?

Mark Minervini: LULU. Supported by excellent fundamentals, the stock emerged from a double bottom pattern that formed from 4/15 11/04. I bought the stock on 11/05 the day the market topped just before a pullback of about 5% in the major averages. The stock was held through that market pullback because it acted normal and held above our stop. This gave me the conviction to add to the position as it emerged through its next buy point in November. I sold the stock (most likely too early) on 12/09 when they reported earnings up about +50% from the initial purchase from about a month earlier.

Kirk: Now please tell us about a recent unsuccessful trade.

Mark Minervini: Shorted GMCR; shorted the rally in October and November after the big break on SEC news. Stock rallied and stopped us out

Kirk: One of the things I most appreciate about you is how much you stress proper risk management. If we can, lets talk a little bit about position sizing. Can you provide an example of a recent trade and explain your method for determining the size relative to your own trading portfolio?

Mark Minervini: I want to own as much as I can but generally no more than 25% of my portfolio (as liquidity permits). You are not going to make huge returns being too diversified. However, I only risk what I can get out of safely based on liquidity.

Kirk: Thats interesting. I think many would be surprised at the idea of having any position anywhere near 25% of an entire portfolio. Besides over diversification and liquidity concerns, what common mistakes do you think many traders make concerning position sizing?

Mark Minervini: They dont know what an optimal position size should be based on their own risk/reward and risk tolerance. For instance, if youre a 2:1 trader, your optimal position size is 25%.

Kirk: Ok. I think I understand what you mean, but please explain this position sizing formula more in detail so others can perhaps apply it in their own trading. Can you offer another example?

Mark Minervini: Ok. First, its important to understand that you are not going to achieve huge returns consistently being overly diversified or by relying on diversification for protection. You will only get a smoothing effect. When you own a bunch of stocks you end up with two problems: the first being that you just cant watch and know all you need to know about each of them. The second problem is that you will have a difficult time getting fully invested quickly when opportunity presents itself and more importantly, getting liquid if you need to raise cash in a hurry. In addition, the math just doesnt support it. Depending on the size and risk tolerance of your portfolio you should typically have between 4 or 8 stocks and for large portfolios maybe up to as many as 10 or 12 stocks. This would provide sufficient diversification but not too much. The Optimal-f formula can act as a starting place for you to understand optimal position sizing based on expectation. If Ken Heebner of CGM Funds can move around billions of dollars in just twenty names and still manage to beat the market, then a personal portfolio can surely manage sufficiently with 4-5 or 10-12 stocks. If you lose 5-6% on average and even if your position size is at 25% exposure, youre still only be risking about 1.25% of your capital per trade. Of course, if you dont have an edge, then you will lose no matter what your position sizing is.

Kirk: Good, thats helpful. So, do you use and set stops, Mark? If so, whats your stop loss method?

Mark Minervini: I always know where Im going to get out of a trade before I get in. I aim to lose no more than 5-6% on average over time on my losers.

Kirk: Do you ever average down into a losing trade?

Mark Minervini: Theres a reason Paul Tudor Jones had a sign posted on his wall that read Losers average losers, and that reason is because its true. I almost always only add to a position if it proves itself and then I may add to my position at a higher price, not lower.

Kirk: Do you scale up and into winning positions? If so, how do you know when to increase a position size relative to your overall portfolio?

Mark Minervini: Yes. I generally move money into the better performing names at subsequent pivot points or set-ups.

Kirk: All good traders dedicate a lot of time and effort to improvement and reducing mistakes. How has your trading method evolved and improved over the years?

Mark Minervini: It just becomes more and more crystallized because I continue to focus on the same timeless principles, which allows me to become more and more of a specialist. The power of a narrow focus is amazing. The key is to be a real pro at something. Know all you can about a style or a tactic. Then you can build on that foundation. Traders give up too easily and jump around too much when things get difficult. How good do you think Kobe Bryant would be if while he was developing his skills growing up every time he had a really tough game he changed to a different sport or played a different position?

Kirk: I couldnt agree with you more Mark. I see this problem among many. Can you provide an example of something you thought was true when trading early in your career and now believe is just completely wrong?

Mark Minervini: Yeah, everything. But I learned very quickly sound principles. It just took me many years to master the application.

Kirk: Why do you think most traders fail?

Mark Minervini: Here are 6 reasons:

1. Poor selection criteria; usually based on personal opinion, theory or tips and bad advice
2. They dont stick to and commit to an approach; style drift
3. Dont cut losses (#1 mistake made by virtually all investors)
4. Dont know the truth about their trading they fail to conduct in-depth post analysis
5. Treat trading as a hobby not a business
6. Want too much too fast; learning a skill takes time

Kirk: Please describe a typical trading day for you. How do you organize and dedicate your time?

Mark Minervini: Most of my work is done the night before. I already know what Im going to trade before the open. I watch the market all day long, never leaving my desk for more than a few minutes during trading hours.

Kirk: How much time and attention do you pay to others opinions about the market and/or stocks you are trading?

Mark Minervini: Zero. I avoid outside opinions like the plague!

Kirk: Are there any tricks of the trade that you use to help maintain a consistent successful approach over a long period of time?

Mark Minervini: Yeah, long hours, hard work, a sound approach and discipline. There are no tricks or big secrets. Again, is there a secret to having a good basketball shot? It starts with a good coach, proper practice, plenty of hard work, discipline and sacrifice.

Kirk: Amen. However, most traders I know have a set of rules that they have learned from past mistakes. What are a few of yours that you think most traders would benefit from?

Mark Minervini: Hard work alone wont cut if you dont have a sound approach and if youre not doing the right things. You must be facing west if youre looking for a sun set. Approach each trade from risk first; ask how much can I lose. Dont risk more than you can expect to gain on average. Know the truth about your trading; study your results carefully. Never average down. Always cut your losses; keep your losses small. These are fundamental rules that should never be compromised.

Kirk: I suspect like all good traders you are working on improving your performance in some manner. Can you share what youre specifically working on right now?

Mark Minervini: Sticking to the rules. Always making sure we stick to the rules. We have a great approach, I dont like to get to tricky and over complicate something that requires a straight forward approach.

Kirk: Youve been trading for some time now. What would you say are the biggest changes in the markets and trading in general youve seen during your career, both good and bad?

Mark Minervini: The order handling rule change in 1997 has changed the way stocks move short-term because Market Makers dont really keep inventory anymore. Its a topic that would require a lengthy discussion; maybe we could talk about it another time. Other than that, not much has changed except more information moves faster than before.

Kirk: What advice would you give a person just now beginning to trade the markets?

Mark Minervini: Find a good mentor. Commit to a strategy. Cut your losses. Tune out the media. Take full responsibility for your results.
Kirk: What do you think are the greatest misconceptions beginning traders have about trading the markets and about trading systems?

Mark Minervini: Way too many to mention. Just about everything a beginner thinks is a misconception.

Kirk: A number of people who read my website desire to trade for a living and I receive a lot of questions concerning capital requirements needed to start and how to make the transition to trade full-time. Do you have any words of wisdom or rules of thumb to share along these lines?

Mark Minervini: I started with a very small sum of money and turned it into a fortune. Capital is not the challenge. Mastering yourself is the challenge. Discipline is the challenge. Persistence is the challenge.

Kirk: Do you think trading for a living is getting more difficult or easier for the average individual investor? Why?

Mark Minervini: Much easier. Tools for pros and amateurs are virtually identical. The pro has no edge. The individual has the advantage. No real liquidity concerns for the small trader versus the big fund manager. Its a fantastic time to be a stock trader!

Kirk: When all is said and done, in your experience, what is the best way to learn how to trade?

Mark Minervini: Trade. As Ralph Waldo Emerson said: Do the thing and you shall have the power. And then conduct post analysis. Learn to be objective. You could try and find a mentor. However, the chances of getting great advice are slim at best. Trading is just like any other profession, there are only a handful of really outstanding practitioners.

Kirk: Do you have any books, websites, etc. that you highly recommend beyond your own website?

Mark Minervini: The Kirk Report. Why is there anything else? LOL!!!

Kirk: You are too kind Mark. Although I know both of us share a love for the markets and trading, what are your long-term career plans and future for your website?

Mark Minervini: I honestly dont know for sure. My long-term plans are too stay healthy and be a good father to my daughter. This past year I started a pilot training program. Also, we now offer my research to the individual investor not just exclusively to the institution anymore. It feels good to help others achieve their goals. I think I may continue to develop that. Why hog all the good trades for myself? LOL!

Kirk: What are some of your personal passions beyond the market?

Mark Minervini: Ive been a drummer since I was 6 years old and I continue to play. I play tennis, train boxing and lift weights to stay in shape, and I play an occasional round of golf.

Kirk: Finally, if you had only one piece of advice to share with all traders, what would it be?

Mark Minervini: Believe in yourself and never give up. Persistence is more important than knowledge. Make an unconditional commitment to trading and you will not fail.

Kirk: Thank you so much Mark. I really enjoyed this interview and Im sure others will find it helpful.

I dont know about you, but applying for a mortgage can be frustrating and time-consuming. From our perspective, we were just another number applying for a bunch of numbers. Insert a great mortgage broker into the equation.

Heres a short (but not inclusive) list of great things a great mortgage broker can do you:

Give you customer focus – Unlike banking representatives, mortgage brokers are not tied to any one bank. Sure, they might have some favourites, but great brokers canvas the full field. Our guy was looking out for the customer (us), our terms, conditions and pre-payment options. He was working to find a product that fit our needs and situation, not his agenda. In brief, our mortgage situation is not ideal, we have a hefty penalty to pay if we break our existing mortgage and go with another lender within the next two years. (This is a reminder to look at the detailed print of your mortgage agreement before you purchase a new home .) In our case, a great opportunity arose and sometimes you simply cant pass those up regardless what the fine print says – life happens, choices need to be made and chances need to be taken. Back to my point, you can certainly make a strong argument that mortgage brokers work for themselves, not you, however without attention to personal detail, they wouldnt be in business. Our broker put our needs and requirements #1. He was always very responsive. He never said he didnt have time for us or needed to take another call.

Give you leverage The way I see it, using a mortgage broker to fund a mortgage, youre going to get more attention because the lender wants that broker to continue sending business their way. As an individual customer, were just a number apply for a bunch of numbers. In talking with our broker, I know if he sensed any run around from a prospective lender hed move on and our mortgage prospects would go with him.

Save you money No doubt mortgage brokers are compensated by the lenders they strike the deal with but a) that means you dont pay them and b) as long as the rate and conditions of the mortgage are better than what you could have obtained youre saving money. Potentially lots. Like I mentioned earlier, our broker worked hard to get us a good deal. He knew his stuff and actively monitored bond yields for us. We more than appreciated that because without our new great rate and its associated terms, we wouldnt be coming out ahead over our hefty mortgage penalty. Weve taken our lumps and learned from them. My advice? Dont take a five-year mortgage term if theres even a chance you might move within that term period. Sure, you can sometimes port your 5-year fixed term to your new home (it doesnt cost anything but the mortgage appraisal and sometimes a small discharge fee) but that wasnt ideal for us. In hindsight, we should have taken a shorter fixed term a few years back or instead, given historical research, a variable rate. Click here to read more about variable mortgage rates and how more often than not, you come out a winner over a fixed rate mortgage.

In closing, mortgage brokers can be a tremendous resource, if you have the right one. Were glad we worked with our guy. Actually, we still are.  He’s still checking in with us to ensure all the rebates we were able to take advantage of are coming our way, including one for the mortgage appraisal.

I know if I have mortgage question going forward, Ill drop him a line. Hell take my call, hell listen, hell provide good customer service and objective feedback. I dont mind sharing who we used because the experience was very positive.

Thanks very much Rob!!

Click here if you want his contact information.

Do you agree or disagree what a great mortgage broker can do for you?
Any positive or “other” experiences youd like to share?

Cheers,
Financial Cents

Many investors look for debt free stocks selling at or near cash per share. These are stocks which have virtually no debt and are trading close to the amount of cash the company has on a per share basis. Without any debt and a lot of cash, it would be hard for a company to go out of business, unless it is a biotech company with a high burn rate. In addition, the cash might make the company a possible takeover candidate.

WallStreetNewsNetwork.com just updated its list of Low Price to Cash per Share Ratio Stocks with No Debt, which shows the recent price, cash per share, forward PE, and price per cash ratio. Almost all the stocks have price to cash ratios less than 4.

On example is Electronic Arts Inc. (ERTS), the video game manufacturer, has $4.99 in cash per share, with the stock selling at less than 15.80, giving it a 3.16 price to cash ratio. The company, with no debt, has a forward PE of 18.8.

FormFactor Inc. (FORM) is another stock with lots of cash. This debt-free manufacturer of semiconductor wafer probe card products, which sells for less than 9.50 per share, has a significant $7.35 per share in cash. Recent earnings were negative, however, revenues for the latest quarter were up 8.2%.

If you want a free downloadable Excel list of ten stocks that have a Low Price to Cash Ratio with No Debt, go to wsnn.com.

Disclosure: Author did not own any of the above stocks at the time the article was written.

By Stockerblog.com

The Beatles are considered to be one of the most successful popular music bands in history, and the band’s four members, John Lennon, Paul McCartney, George Harrison, and Ringo Starr can be recited by music fans of all ages. So is there a way for an investor to jump on this bandstand?

Apple (AAPL) television commercials have been appearing since November 16, announcing that Beatles music is now available through the company’s iTunes Store, playable on iPods, iPhones, and numerous other devices. So Apple, the very successful debt free company, would be the primary way of playing the Beatles market. The stock trades at 14 times forward earnings and reported a 70% boost in quarterly earnings on a 67% rise in revenues. The company has an incredible $25.62 billion in cash, which works out to almost $28 in cash per share.

Analysts seem to favor the stock. Ticonderoga and Jeffries recently initiated coverage on the company, giving it a Buy rating, and Robert W. Baird, which also just initiated covered last month, gave it an Outperform rating.

Investors could also look at some of the Apple product component manufacturers, such as Samsung Electronics (SSNLF.PK), which makes flash memory chips and applications processors, Toshiba Corp. (TOSBF.PK) which makes iPod hard drives, and Liquidmetal Technologies Inc. (LQMT.OB), a developer of amorphous metals which have been used in some iPhones and which owned numerous patents that Apple purchased the exclusive licenses to.

Samsung trades at 14 times forward earnings and reported an 83% increased in earnings for the quarter ending June 30, on a revenue increase of over 16%. Toshiba sports a price to earnings ratio of 30. The company reported an enormous 29,000% increase in quarterly earnings on a 3% increase in revenues for the quarter ending September 30. Liquidmetal just reported earnings yesterday, announcing a 686% increase in revenues over the prior quarter. However, the company generated a net loss of 23 cents per share for the quarter.

In regards to the Beatles music catalog, which featured nearly every song written by John Lennon and Paul McCartney until the Beatles broke up in 1970, a series of owners have been involved including Michael Jackson. Jackson purchased the catalog for $47.5 million back in 1985. Ten years later, Sony (SNE) offered Jackson $90 million for half ownership of ATV Music Publishing, the holding company for the songs. The catalog is now owned by Sony/ATV Music Publishing, which is 50% owned by the Michael Jackson Family Trust and 50% owned by Sony. Sony has the right to buy out the Jackson portion at any time for $250 million.

Sony/ATV receives as much as $45 million per year from Beatles songs. Sony’s share, at $22.5 million, represents about 2.4% of Sony’s income.

Sony has a forward PE ratio of 20. Latest quarterly revenues were of 4.3% and earnings were 94 cents per share versus a loss during the same period last year. The company has about $16 in cash per share.

Paul McCartney and Ringo Starr, the two surviving members of the band, recorded a song together ‘Walk with You’ which is the lead single from Starr’s most recent album ‘Y Not,’ distributed by Universal Music Group, a division of Vivendi (VIVDY.PK), the digital media company based in France. Vivendi also owns Mercury records, the United Kingdom distributor of McCartney’s album ‘Good Evening New York City.’ The stock has a PE of 36, and reported an 8.5% increase in sales but a 38% drop in earnings.

Interestingly, the US distributor of ‘Good Evening New York City’ and McCartney’s 21st studio album ‘Memory Almost Full,’ is distributed by Hear Music, owned by Starbucks (SBUX), the largest coffeehouse chain in the world. The stock trades at 26 times earnings and sports a yield of 1.6%. Earnings for the latest quarter were up 86% on a 17% rise in revenues.

Of course, the ticket sellers are benefiting from McCartney concerts. As a matter of fact, fans crashed the Ticketmaster servers due to huge demand for McCartney’s Mexico City concert in May of this year. Ticketmaster is owned by the worldwide concert promoter Live Nation Entertainment, Inc. (LYV). Live Nation has a forward PE of 285.5 and reported a 2.3% increase in quarterly sales but a 26% drop in earnings for the quarter.

For a list of all the stocks in the Beatles portfolio, which can be downloaded, sorted, and updated, go to WallStreetNewsNetwork.com.

Disclosure: Author owns AAPL and LQMT.

By Stockerblog.com

Fred Fuld
Stockerblog.com

A guest article by John Nyaradi, author of Super Sectors: How to Outsmart the Market Using Sector Rotation and ETFs

In this era of ultra low interest rates, income is hard to find almost everywhere. Money markets yield next to nothing, treasury bonds and bills are about the same, and corporate dividends were drastically slashed when profits dropped.

Dividends are starting show signs of revival, however, and dividend producing Exchange Traded Funds are one option for investors to consider.

Dividend ETFs give you opportunity to gain exposure to dividend paying stocks and at the same time eliminate single stock exposure because youre buying a basket of stocks. Plus the ETF providers have the resources to pick the best candidates and so do the research for you and can save you money, time and costly mistakes.

If youre interested in ETFs that pay dividends, here are some for your consideration.

One of my favorites comes from the iShares family and is the iShares Dow Jones Select Dividend Index (DVY). It has more than $4 billion in assets under management, charges a 0.40% management fee, and returned 10.99% in 2009. The ETF’s main holdings are:

Lorillard Inc.
Entergy Corp.
Centurylink
Chevron
McDonalds
PPG

Other good candidates are PowerShares High Yield Dividend Achievers (PEY) which focuses on financial sector stocks. For investors who are afraid of the financial sector because of its recent near death experience, Wisdom Tree offers a dividend paying ETF called the Wisdom Tree Dividend ex-Financial ETF (DTN).

More ETFs to consider are Vanguard Dividend Appreciation (VIG), Claymore Dividend Rotation (IRO) and Wisdom Tree Small Cap Dividend Fund (DES) each of which takes a slightly different angle in search of quality dividend production.

So in todays tough environment where growth has been tough to find and interest income options have wilted, dividend paying ETFs offer another option for investors looking for ways to try to maximize current income and total return.

John Nyaradi is Publisher of Wall Street Sector Selector, an online newsletter specializing in sector rotation and exchange traded funds and author of Super Sectors: How to Outsmart the Market Using Sector Rotation and ETFs.
(www.supersectors.net)

Disclaimer:
All material herein is believed to be correct but its accuracy is not guaranteed. This article represents solely the opinions of John Nyaradi and readers are encouraged to consult their investment advisors prior to making any investment decisions. All information herein is for general informational and educational purposes only. The information is of an impersonal nature and should not be construed as individualized advice or investment recommendations. There is risk of loss in all trading and readers are encouraged to read the full disclosure statement at http://www.wallstreetsectorselector.com/disclosure.html. None of the information in this article is intended to be investment advice or any kind or offer or solicitation to buy, sell or otherwise invest in any fund, company or security. Nothing herein represents a recommendation, claim, promise, guarantee or warranty regarding the suitability or profitability of any investment.

Ken Fisher Interview Part 3
Please note: Interview took place on Wednesday, October 27, 2010

Stockerblog: Let’s talk about Bunk number 11, A Good Con Artist is Hard to Spot. As a follow-up to your How to Smell a Rat book from last year, do you think things have change in terms of the government taking a look at possible rats, or individual investors being more alert and aware, or do you think nothing has really changed?

Fisher: I think there’s been a little bit of change on the part of the government but only a little bit, and let me address that. First, while my book How to Smell a Rat made the best sellers list, for the most part in today’s world, book sales are down anyway. You can make the New York Times best sellers list if your book sells 35,000 copies in the first year, which isn’t that much. My Only Three Questions book had to sell 125,000 copies in 2007 to do that. Today you can do it for about 35,000 copies. So that tells you 35,000 people bought the book, probably half of them never even opened it, and gave it to somebody as a gift or whatever, and people got it as a gift, and so on. So my point is not that many people as a percent of the investor world actually gets past the basic methodology.

There’s this notion that nobody could have figured out Bernard Madoff was Bernard Madoff. Bernard Madoff, as I wrote about it in the book, had ALL the classic signs of the con artist, every single one, straight on down the list, and the most telling about that was that he took custody. Now what the SEC is starting to do, which is very good in the aftermath of Madoff and as I prescribed in that book, not that they listen to me, they understand this, the SEC has accelerated their inspections of those who take custody and put more emphasis on them and less emphasis on those that don’t take custody, because they understand that this kind of thing happens 100% of the time where somebody’s taking custody. So if you are looking for Bernard Madoff’s, you look among the realm of those that take custody.

The dilemma unfortunately, is that you’ve got a lot of people that operate in realms that don’t require an SEC registration, and unless somebody complains about them, they’re not going to see them, smaller hedge funds and what have you. I think Bernard Madoffs will be harder to do at that size. If Madoff hadn’t existed, Stanford would have been the biggest one in history. Both of these were lots and lots of much smaller ones, and that world is still out there. That world, that I wrote about in How to Smell a Rat, every time you have a bear market, Ponzi scheme operators get uncovered. It’s kind of the Warren Buffett line that “you don’t know who’s swimming naked until the tide goes out.”

Whenever you have a bear market and sentiment falls drastically, Ponzi scheme operators that are dependent on raising new money from optimistic people to pay off redemptions, which is the game of the Ponzi operator, they can’t do it so they get uncovered for the first time. And guys that have successfully Ponzi schemed through a whole market, they get uncovered in a bear market and the consequences of a bear market. So the big ones for this cycle have been done. But that doesn’t mean there aren’t people out that are still doing it. There will be and the next cycle around there will be another raid.

Unfortunately, I don’t believe that this stuff ever goes away. It’s a little like the notion of mildew in a moist environment; you may clean it off here and clean it off there but once you wait, it just comes back. Or maybe Neil Young’s line in a song he did a long time ago that “rust never sleeps.”

End of Part 3

The Debunkery book is available at Amazon.

Ken Fisher obviously doesn’t give individual stock recommendations in his interviews, but some stocks he likes that were mentioned in his recent Forbes columns, including high dividend stocks, are available in the form of a free Excel list at WallStreetNewsNetwork.com.

Part 1 of this interview is available HERE.

Part 2 of this interview is available HERE.

By Fred Fuld at Stockerblog.com

Disclosure: Interviewer doesn’t own any of the stocks mentioned in this interview series at the time the article was written.

Copyright 2010. All rights reserved. Reproduction of this interview prohibited without permission. All opinions are those of Ken Fisher, and do not represent the opinions of Stockerblog.com or the interviewer. Neither Stockerblog nor the interviewer nor the interviewee are rendering tax, legal, or investment advice in this interview. If you want tax, legal, or investment advice, contact the appropriate professional.

In my October 8, 2010 commentary, I warned that attempts to sell overbought conditions as a trading strategy can be risky business. Since then, short sellers have learned this lesson the hard way. Most traders that expected an overdue pullback since mid-September have been confounded as the market has marched considerably higher with little pullback or breather.

Since September 20, 2010 I have focused my commentary on the fact that the markets refusal to pullback in the face of an overbought condition is a positive, and that strong bull markets always begin with such a condition. More recently on October 13, 2010, I pointed out a particular overbought condition that has had a perfect track record as a forecaster of future stock prices (see October 20, 2010 Market Commentary http://is.gd/gJq8W).

While this commentary may sound redundant keeping with the strength begets strength theme; what has changed since our risk model turned bullish on September 9, 2010 is the market continues to be overbought and thats a good thing.

The markets continued strength has now triggered our long-term indicators to the buy side. Based on our work, this simply indicates the odds favor a continued bull market advance. Pullbacks over the near-term should be contained to 4-6%, give or take a percentage point or two.

Based on our models, the primary trend of the market is up.

Mark Minervini

Ken Fisher Interview Part 1
Please note: Interview took place on Wednesday, October 27, 2010

Stockerblog: I’d like to first ask you about your new book Debunkery. Why don’t we start out with you giving a description of what debunkery is and how you came up with the name?

Fisher: The name popped into my head. Debunkery is the process of what I talked about in my first question of The Only Three Questions That Count book, which is ‘What Do You Believe that is Actually False’. In Debunkery, the game, if you will, is to take things that are widely accepted and see if you can subject them to some catechism that shows that they are not true. That which is thought of as conventional wisdom is exposed as actually false, and therefore bunk, and therefore the process of debunking or debunkery.

Debunkery is a game that I try to convey in the book by using some techniques that aren’t necessarily terribly complicated, some of which are easier to learn than others but pretty much anyone can learn if they wanted. So part of it is not just showing the 50 things that people often believe that are bunk, but teaching them how to do the debunking themselves so that when they finish reading the book, they can do their own debunking.

Stockerblog: Let’s talk about Bunk #2 which is ‘Well Rested Investors are Better Investors.’ Now I think what you mean by that is the classic conservative type of investments like bonds or bank accounts, that type of thing, is not really the way to go; you really have to go into stocks to get the returns you are really looking for.

Fisher: Well you can view it that way, and that is one way to view it, but you see a lot of people on different web sites saying that you need a sleep-at-night factor, or sell down to the sleeping point; you hear all these things about sleeping and conventional wisdom. Or people say things like, “Well I’ve gotten out of the market and I’m not going to get back in until I’m more comfortable with things,” “I don’t think I could sleep if I owned category X now.” And the fact is, capital markets, in all their aspects, are ones where comfort is a very expensive item.

If you are prone to be comfortable based on what you own, you better reconcile yourself to low or negative returns. Most of the time when people buy the things that are most comfortable, they actually end up getting negative returns. The history of buying comfort is very expensive.

So if you think of any asset class, doesn’t matter whether it is stocks, bonds, commodities, anything, the time people are most comfortable with it is mostly really close to the peak. When people think they have the clearest future, it’s close to the peak. When they think they can’t see a clear future out there at all, that’s more often, close to a bottom.

Stockerblog: I know that some investors feel comfortable with municipal bonds, they are looking at possible increases in capital gains taxes, they are wondering, well if I can get 5% tax free versus nine or ten percent on my stock portfolio, which is going to be taxed at the state and Federal level, maybe that’s what I should be in.

Fisher: One of the things that they don’t think through in the way capital markets work is it’s not about whether you’re rational, and it’s not about whether your smarter or more rational than the guy down the road, the reality is capital markets discount that which everyone has been digesting for some time, and it’s virtually impossible to think that a concept such as the ones you just articulated isn’t exceptionally, widely digested by a very large number of people, who processed it and pressed it into securities at current prices.

So for someone to think, “I can get a better return off of something like that,” whatever it is, it’s very hard for people to get but it’s an arrogant statement. It’s saying my rational observation is somehow unique compared to all the other people confronted with the exact same phenomenon.

That’s one of the hardest concepts that people have is that markets are discounters of all known information. And while markets are not perfectly efficient, they are relatively efficient. So something as simple as taxes, millions of people have forever made decisions based on tax rate changes, and there is actually a very clear and demonstrable history which people don’t want to hear about, which is tax rate changes don’t end up having facts that people would predict because they are priced into the market long before those tax changes ever come to pass.

Stockerblog: I remember that was in one of your bunk chapters.

Fisher: One of the things you hear people say all the time are things like “Stocks will do well or badly, bonds will do well or badly,” you pick a category, it doesn’t matter to me, “because capital gains rates are going up or down, or because income tax rates are going up or down.” They somehow seem to forget that, and this is one of the points I use in Debunkery, is that history is actually very useful for debunking, because we’ve had a lot of times in the past where interest rates have gone up and own, and tax rates have gone up and down, and so if something as simple as that were to have the effect that people think it might, they would see those changes when those simple changes occurred in the past, and that’s easy to demonstrate.

I tell people all the time, stop and go back and check things. And very few people do, because what most people do is they go into simple observation of the way they think it out to work and they don’t go any further than that. This is Bunk #7, which is Go With Your Gut. Your intuitive reaction to things, again everybody else’s reactions which are not that different than yours, unless you think you are really unique which is a really arrogant statement, they are already priced into the market already.

End of Part 1

The Debunkery book is available at Amazon.

Ken Fisher obviously doesn’t give individual stock recommendations in his interviews, but some stocks he likes that were mentioned in his recent Forbes columns are available in the form of a free Excel list at WallStreetNewsNetwork.com.

If you missed last years interview, you can check it out as follows: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6

By Fred Fuld at Stockerblog.com

Disclosure: Interviewer doesn’t own any of the stocks mentioned above at the time the article was written.

Copyright 2010. All rights reserved. Reproduction of this interview prohibited without permission. All opinions are those of Ken Fisher, and do not represent the opinions of Stockerblog.com or the interviewer. Neither Stockerblog nor the interviewer nor the interviewee are rendering tax, legal, or investment advice in this interview. If you want tax, legal, or investment advice, contact the appropriate professional.