Going long? Diversify!

After going back and reviewing all of my recent posts I came to one conclusion. I have not stressed the need to diversify a long term stock portfolio at all. In real life, any financial advisor worth his weight will tell you to diversify your long term investments in many different avenues. Investing in one single stock, commodity, or other financial instrument will cause two different problems.

One. If the item crashes in value, for whatever reason, your hard earned wealth will be going along for the ride.

Two. The flip side of that issue, if you place all of your money on one investment and that investment underperforms versus inflation; you will not be able to keep pace and when you move to retire you will not be able to afford a comfortable life.

Those are real life standard trains of thought. In Second Life the implications are much, MUCH less serious. However the same principles still apply. If you are investing for the long term, you do not want a single bad investment to cause you to lose everything you have or fall behind.

There are a few ways for long term investors to work around this issue.

One, use a brokerage firm such as LLC or NBC to do the investing for you, they are well versed in the markets and have a good idea how to find good SL investments, and will inherently diversity your investments so they can mitigate their own risk. These brokerage firms do come with a fee. However the level of expertise you should be receiving from the funds will far exceed the cost to you. You are paying the fees so they can find good investment for you, essentially they have done and are doing the work listed in option number two and are just charging you for their work. Weigh out the amount of time you have to find good investments, and see if you can commit enough time to be sure about what you are doing. Most new investors can’t or will not, that is where these guys fill the void.

(Just as an idea, I personally spend about 25 to 30 hours a week just to read forums, review financials and keep up to date, and I still don’t know everything.)

Two, there is a phrase among investors “do your own due diligence” or DYODD. This means, do the research yourself to figure out what investments (CapEx Stocks) work for your portfolio. Talk to CEOs, read financial reports on the company, read the forums, and read blog posts. Essentially, get a feel for how the company is performing; if communication with the CEO and his/her investors is low that is a big red flag. But not a deal breaker, they may be tied up IRL. Never assume anything, and always get as many opinions as you can. Then after you have a found a few good companies, spread your L$s among them.  This option requires the most work and risk but can be the most rewarding. This is not exactly recommended for people brand new to the market.

Third, invest your L$ into one of the Greek Funds. The Greek Funds are designed to spread the risk and the reward around so that it balances out and makes for a more secure investment. I am sure the brokerages will hate to hear this. But the Greek Funds are a great way for new long term investors to get into the investment scene. There are no fees except the standard trading fee and the fund is diversified by design. The issue with this method, and this is why I don’t think they will be much competition for brokerage firms, is the funds invest blindly or equally among all companies listed under their field no matter their performance or “feel”. This means they will have a reduced level of income compared to what you should be able to expect from a private brokerage firm, however the risk should be lower as well.

Pick your poison, investing long term on CapEx is tricky and as always only invest what you can lose, because ultimately this is a game.

Questions, Concerns, Comments, leave a message bellow.

DIG’s take on the CapEx presentation

If you are very wired into the CapEx like I am, you will not learn anything new from this live presentation. However, even if you think you know everything there is to know about CapEx. You should still watch the video because Skip Oceanlane does a marvelous job of explaining what CapEx is, the risks that come with playing the game, and the benefits to the companies that are listed.

If you are new to the exchange, this is by far the best medium you will find to explain everything that CapEx stands for, and what you are really doing when you play the game.

Unlike CapEx CEOs in the past, Skip does not dodge around questions. At the end of the video he is asked directly, how do you screen companies for fraud. He explains the system he has developed for screening, but comes out and says there is no way to completely remove fraud, but he is going to try his hardest. The fact that he was willing to admit there is no way to full proof the system, to a live audience, and didn’t dodge the question with a series of half-baked answers gives me more confidence than I have ever had in the exchange. A few days ago, I would have questioned if the exchange could survive through a major fraud situation. If Skip would stay committed if the great news coming out of CapEx started turning sour. The presentation leaves me believing that the exchange could survive and Skip, like he has always said to me and everyone else, is in this for the long haul.

As Skip said in the presentation, CapEx is a game of skill. But before you even need skill, you need to understand the game and this video is the explanation of the game.

I normally like to work in numbers when I judge what company is the strongest. But every once in a while a non-quantitative piece of evidence comes to the surface that gives a company that extra edge over all other companies. To me, this presentation by Skip makes CapEx the best all-around investment on the exchange.

Link to the Video

http://www.ustream.tv/recorded/16618205

Questions, Concerns, Comments, leave a message bellow.

The Greek Funds

When I saw the funds my first thought, what returns could one expect on these types of funds? I ran the numbers and based on the past dividends of the companies in each fund. This is the breakdown of how each fund would have performed year to date had the existed since January, based on the companies they hold.

Beta	2.87%
Delta	2.77%
Gamma	2.12%
Sigma	1.64%
Omega	3.14%

 It must be noted that Sigma has SEC in the fund’s holdings, and SEC has just listed.

It also needs to be noted Delta has DMC, also a company that has just listed.

These numbers are based on previous dividends. I would double these amounts if you were trying to figure out a return on a year for each fund. They are also based on current stock prices, only to give you an idea of what funds will perform well.

I didn’t add in the extra revenue from trading, and the extra dividend from IPO the fund would give out because they will all be relatively equal.

However, based on similar stocks in the .25 price range, the 1% on trades would yield L$300 to L$1,000 a month for the fund. The IPO fee would equal L$3,500 a month for the first 3 months.

So one could expect %1.1857 return for the first 3 months of the fund just from the IPO and trading.

So first year operation, based on past performance would look like

Beta	10.96%
Delta	10.77%
Gamma	9.46%
Sigma	8.51%
Omega	11.50%

These numbers are only estimates, and change with market price and conditions.

Limited upside, with limited downside, that is the idea of a fund and these suit that perfectly.

Questions, Concerns, Comments, leave a message bellow.

DMC - To Bit Coin or not to Bit Coin

DMC – As the first company on CAPX to deal exclusively in bit coin mining, the Digital Mining Company (DMC) is a trailblazer. I am not going to go in depth about explaining bit coins; I believe that the IPO’s Chairman Letter did a good job. But I am going to discuss why this company may be worth your investment. First and foremost it has the potential, and this is possibly the largest drawing point, to bring fresh capital into the CAPX stock market. Even if the amount is small L$10,000 to L$15,000 a month, the dividends will mean new L$. That can then be used to invest in other companies. New L$s that are not just switching hands in SL, but coming from RL into SL. Just like its title you have to treat this company like a RL mining company, lots of risks but with lots of upside. All who read the IPO know the risks. Bit coin collapse, costs get to high, no returns on a month, and hardware/software issues. And the upside, fresh capital in the CAPX system, new innovative company, small public float, and chance to strike it big with bonus finds. But for this company to be successful as a stock, what does this really mean. Companies that are worth investing in will post a dividend, unless sufficient reason for why not is given. For this company to be moderately successful all it would have to do it turn an L$7,500 a month dividend. That would be equal to .01L$ a share. If that is all the company was able to achieve, by market standards the IPO price is undervalued by 20% to 30% for a new company, and if that is all it can achieve every month for the next year it would be undervalued by over 80%. The beauty of it is the company can seemingly do better. With expected gross income of L$35,000 minus out L$18,000 for electricity (based on an L$70 increase) and L$5,000 for other expenses. The company would net L$12,000 and pay a dividend of 0.016. Just for comparison, the good investors of FED currently hold the companies 0.01 div a month value at 2.5 L$ a share. If this company stock price was on par with FED it would be worth L$ 4 a share. All that being said, this company will experience diminishing returns, that is the nature of bit coins, but as the public becomes more comfortable with bit coins, the price would seemingly go up. Question really is will demand out pace supply or vice versa, that is where you decided if this company is worth your L$. If you think bit coins are the next big internet “thing” or could be that “thing” then this company is for you. IF you think they are a fad and a waste of time, this company could make a great short term stock play and that is all.

EARN's Earnings

EARN – It seems good news is all we have for this week, earning reports are out on many of the companies and all have been above par, with some being fantastic. EARN released earnings yesterday and recorded a 45% increase in net revenue. The dividend yield on a standard forward looking basis has this company at 15% on reported numbers. The profit margin on gross income for the last three months have been 42% in May, 42% in June, and  47% in July. This shows us that not only is EARN’s business mobile scalable, there have been no diminishing returns to this point. Leaving reason to believe that growth in this company would directly lead to increase in net revenue and increased dividends. The CEO said his self that he was surprised at how well things are going for the company, considering the summer months, and he is inspired to try and have the company perform even better as Second Life picks up steam leading into Q3. At this price, EARN is undervalued by L$2 to L$3 a share based on dividend. If you calculate for earning however EARN is only under Valued by L$ 0.50 to L$1.5 a share. This means, you will not be disappointed if you buy higher than current price. But one bad month will lead to wild price swings downward. Expect to see it drop buy L$0.50 to L$1 if a bad month is reported, and the company is over L$4 a share. Target price is L$3 a share until the end of next month to see if the earnings can truly be sustained.

Investing without day trading on CAPX

Not everyone has the luxury of being able to constantly check their second life stocks, and since day trading requires the ability to change your buy and sell positions on the fly. It makes it nearly impossible for those individuals who can’t find the time to constantly check stocks to day trade.

The solution is to pick stocks that have great growth potential, and a strong dividend policy/performance.

Two companies really come to mind when you put those two qualifiers on the search.

ADS - If you haven’t heard the news, or are new to CAPX, ADS is performing wonderfully. Since IPO the company is up 71%, and total earnings are up over 670%. The price to earnings ratio is under 13.5 (S&P 500 standard is 16). Their gold hunt program is just starting to come online and has a large amount of room to grow. Their year to date (YTD) dividend yield as of the 5th will be 7.1% (based on 3.48 share price), extend that over a year and compound it and you are looking at an over 15% return on investment (ROI). IF you would have bought the company at IPO or for around L$2 you would have already made near 13% of that money back. All of this in only 5 months, the clear front runner for best investment for returns today. The company is undervalued by about L$1 to L$2 (from 3.48), and that is not factoring in expected growth. The only issues I see moving forward, all SL Stocks seem to hit a wall when it pertains to stock price. A number over 5 seems to scare people away; price movement and volatility seem to go out the window until something extremely drastic happens. Be it a large investor buy or selling, or the company making or losing a ton of money out of the ordinary. Simply put, the higher it goes the harder it will be to keep going up, but that’s just math.

CAPX – As all the listed companies grow as more people show up to invest in companies on the exchange. There is one undisputed direct beneficiary, the exchange itself. Skip has taken a failing system and turned it on its head. Gross revenue has went from L$45,940.67 to L$700,751.89. An over 1500% increase since February. In that time he managed to pay off a L$558,388.5 loan, add programing content, and restore the CAPX brand. There is one thing that CAPX has that no other company does, all other companies must run through CAPX. If CAPX disappears the exchange goes with it and so does the ability to trade stocks (for the short term at least). As Skip has said, “we are not going anywhere”. CAPX comes with a level of security in being the standard company. Couple that with a consistent .05 to .1 dividend per month, and you are looking at the safest company giving investors an annual return of min 6% upwards of 12%, and it’s not even done growing. As with ADS, CAPX is undervalued by L$ 1 to L$ 2, (from L$ 8.30) not factoring in future growth or returns. We will see pressure from people looking to make a profit and devaluing from those worried about buying an “expensive” stock. My only concern will be to see how the exchange handles its first scandal, time will tell.

If you are the type who does not have time to watch the market, these are two companies you should be interested in watching, or even buying. Try to buy in as low as you can, but don’t miss the opportunity.

On a side note, these companies make wonderful investments for institutional investors. To me an institutional investor is anyone managing a fund, or with L$ on deposit in excess of L$100,000. Since there is not enough volume to day trade with a large some of capital yet. Buying into a growth company such as the two above can be the best way to return profits for you, or your clients.

Questions, comments, concerns, comments below.

Best Stocks by Dividend Yeild

	April	May	June	July	August	Trailing Year
Company	RDX
Shares	3,968,094	3,968,094	3,968,094	3,968,094	3,968,094	3,968,094
Price, Closing or Average	L$ 1.660	L$ 1.874	L$ 1.882	L$ 1.917	L$ 1.930	L$ 1.930
Market Capitalization	L$ 6,587,036.04	L$ 7,436,977.97	L$ 7,466,631.53	L$ 7,608,498.83	L$ 7,658,421.42	L$ 7,658,421.42
Earnings	L$ 183,569	L$ 179,819	L$ 95,740			L$ 459,128
Earning Per Share	L$ .04626	L$ .04532	L$ .02413	L$ .0	L$ .0	L$ .11570
P/E Ratio	35.88316132	41.35813216	77.98863101	#DIV/0!	#DIV/0!	16.68036238
Dividend	L$ 183,569	L$ 174,880	L$ 102,082	L$ 92,009	L$ 95,740	L$ 648,280
Dividend Per Share	L$ .04626126	L$ .04407157	L$ .02572573	L$ .02318720	L$ .02412742	L$ .16337318
Dividend Yield	2.7868%	2.3515%	1.3672%	1.2093%	1.2501%	8.46%
	April	May	June	July	August	Trailing Year
Company	MLS
Shares	2,000,000	2,000,000	2,000,000	2,000,000	2,000,000	2,000,000
Price, Closing or Average	L$ 3.147	L$ 2.643	L$ 2.896	L$ 2.384	L$ 2.10	L$ 2.10
Market Capitalization	L$ 6,294,000.00	L$ 5,285,162.00	L$ 5,792,000.00	L$ 4,767,096.00	L$ 4,200,000.00	L$ 4,200,000.00
Earnings	L$ 55,419	L$ 62,425	L$ 34,098	L$ 50,684		L$ 327,260
Earning Per Share	L$ .02771	L$ .03121	L$ .01705	L$ .02534	L$ .0	L$ .16363
P/E Ratio	113.5711579	84.66418903	169.8633351	94.05524426	#DIV/0!	12.83383243
Dividend	L$ 54,000	L$ 30,000	L$ 59,000	L$ 50,000	L$ 50,000	L$ 339,000
Dividend Per Share	L$ .02700003	L$ .01500004	L$ .02950002	L$ .02500007	L$ .02500007	L$ .16950025
Dividend Yield	0.8580%	0.5676%	1.0186%	1.0489%	1.1905%	8.07%
	April	May	June	July	August	Trailing Year
Company	VHEA
Shares	500,000	500,000	500,000	500,000	500,000	500,000
Price, Closing or Average	L$ 3.855	L$ 3.431	L$ 3.245	L$ 2.964		L$ 3.0
Market Capitalization	L$ 1,927,666.50	L$ 1,715,645.00	L$ 1,622,333.50	L$ 1,481,774.00	L$ 0.00	L$ 1,500,000.00
Earnings	L$ 19,077	L$ 21,124	L$ 26,627	L$ 19,212		L$ 135,702
Earning Per Share	L$ .03815	L$ .04225	L$ .05325	L$ .03842	L$ .0	L$ .27140
P/E Ratio	101.0466268	81.21780913	60.92813685	77.12752446	#DIV/0!	11.05363222
Dividend	L$ 13,007	L$ 15,262	L$ 16,899	L$ 21,302	L$ 15,369	L$ 97,433
Dividend Per Share	L$ .02601404	L$ .0305240	L$ .03379794	L$ .04260408	L$ .03073802	L$ .19486604
Dividend Yield	0.6748%	0.8896%	1.0416%	1.4376%	#DIV/0!	6.50%
	April	May	June	July	August	Trailing Year
Company	VTM
Shares	500,000	500,000	500,000	500,000	500,000	500,000
Price, Closing or Average	L$ 1.640	L$ 2.389	L$ 2.107	L$ 2.095	L$ 2.210	L$ 2.210
Market Capitalization	L$ 819,833.50	L$ 1,194,516.00	L$ 1,053,333.50	L$ 1,047,580.50	L$ 1,105,000.00	L$ 219,002.75
Earnings	L$ 35,163	L$ 28,878	L$ 29,206	L$ 47,592		L$ 219,003
Earning Per Share	L$ .07033	L$ .05776	L$ .05841	L$ .09518	L$ .0	L$ .43801
P/E Ratio	23.31513909	41.36472324	36.06579015	22.01174402	#DIV/0!	5.045598742
Dividend	L$ 15,000	L$ 10,500	L$ 8,369	L$ 8,001	L$ 13,295	L$ 67,966
Dividend Per Share	L$ .030	L$ .0210	L$ .01673740	L$ .01600120	L$ .02659080	L$ .1359320
Dividend Yield	1.8296%	0.8790%	0.7945%	0.7637%	1.2032%	6.15%