Thursday, September 11, 2014

S&P 500 lacks of insiration and talent to create value

Earlier this year I suggested that so-called most of the Companies are not ran in shareholders’ interest.
It took some time to do the actual facts digging, but here they are:
Out of S&P 500 index 449 companies used 54% of their profits ….to buy back their own stock, this represents $2.4 trillion dollars. Dividends payouts consumed another 37% of the earnings.  This was happening last ten years from 2003 through 2012 and continues today.
There is three main reasons for it:
- -   One of the main metrics CEOs are being rewarded based on so called total shareholder return. It combines share price appreciation and dividends paid to show the total return to the shareholder expressed as an annualized percentage. It is calculated by the growth in capital from purchasing a share in the company assuming that the dividends are reinvested each time they are paid.
         This means that they are inevitably driven to push shares prices at all cost.  Average  CEO salary in S&P 500 index is $30.3 million each in 2012, 42% compensation comes from stock options.
-   -    In Western Europe some countries actually establish minimum returns on pension funds, meaning that the companies have to achieve it, or their shares will be unloaded.
-  -     Lack of vision and talent to invest back home. Obviously, the leaders are run out of profitable investment opportunities. One of the chief functions of top executives is to discover new opportunities.  Buying the socks back begs the question whether the CEOs are doing their job.  For example, the only money that Apple ever raised from public shareholders was $97 million at its IPO in 1980.

Friday, September 5, 2014

September 2014 update ($ 332,287 -$17,051 or - 5%)

Accumulated $8,000 USD as part of my annual saving goal for August & September
Received $6,314 USD as Gazprom dividend (6.6% a year).
Received $ 490 USD as Rosneft dividend (7% a year)
Received $65.5 USD as Vanguard S&P 500 dividend (2% a year)
Company shares went up & dividends reinvested $603 USD
Vanguard S&P 500 gained $ 400 USD
Grand total additions: US$ 15,870

Precious metals lost $540 USD
EUR lost to USD $9,346 USD
GBP lost to USD  $2,895
Vanguard Energy ETF lost $ 600 USD
$30 USD Confiscated by Company due to cancellation of the reinvestment programme
  Gazprom shares down by $18,080 USD
Rosneft shares down by $1,170 USD
Loss due to forced selling of Vanguard funds and additional investments 290 USD
Grand total losses: US$ 32,951