Apple plans second U.S. campus, to pay $38 billion in foreign cash taxes

(Reuters) – Apple Inc (AAPL.O) will open a second U.S. campus as part of a 5-year, $30 billion U.S. investment plan and will make about $38 billion in one-time tax payments on its overseas cash, one of the largest corporate spending plans announced since the passage of a tax cut signed by U.S. President Donald Trump.

Between the spending plan, tax payments and business with U.S. based suppliers, Apple on Wednesday estimated it would spend $350 billion in the U.S. over the next five years.

Apple, however, did not say how much of its $252.3 billion in cash abroad, the largest of any U.S. corporation, it would bring to the United States, after the U.S. tax changes cut costs on bringing funds back from overseas. It also did not say whether the spending plan was driven by the new tax law. Apple has traditionally declined to publicly announce its spending plans.

The iPhone maker, whose products are mostly made in Asian factories, said it plans a wave of investing and hiring in the United States and will create 20,000 jobs through hiring at its existing campus and the new one. It will announce the location later this year.

About a third of the new spending will be on data centers to house its iCloud, App Store and Apple Music services, a sign of the rising importance of subscription services to a company known for its computers and gadgets. The company has data centers in seven states and also on Wednesday broke ground on an expansion of its operations in Reno, Nevada, where local officials granted it tax breaks on a downtown warehouse.

The U.S spending would be a significant part of Apple’s overall capital expenditures. Globally, the company spent $14.9 billion in 2017 and expects to spend $16 billion in 2018, figures that include both U.S.-based investments in data centers and other projects and Asian investments in tooling for its contract manufacturers.

If Apple’s overall capital expenditures continue to expand at the same rate expected this year, the $30 billion investment in the U.S. could represent about a third of its capital expenditures over the next five years.

The announced tax payment was roughly in line with expectations, said Cross Research analyst Shannon Cross. The tax bill requires companies to pay a one-time tax on foreign-held earnings whether they intend to bring them back to the United States or not.

Apple had set aside $36.3 billion in anticipation of tax payments on its foreign cash, meaning the payment would not represent a major impact on its cash flow this quarter.

Apple also said it would boost its advanced manufacturing fund, which it uses to provide capital and support to suppliers such as Finisar Corp (FNSR.O) and Corning Inc (GLW.N), from $1 billion to $5 billion. Apple said it plans to spend $55 billion with U.S.-based suppliers in 2018, up from $50 billion last year.

AMAZON VS APPLE

Apple joins Amazon.com Inc (AMZN.O) in scouting for a location for a second campus. Amazon finished taking applications from cities in October for its second campus. Apple has not said whether it has settled on a second campus location yet.

Currently, Apple’s largest U.S. operations are in Cupertino, California, at its new “spaceship” Apple Park headquarters, followed by a facility in Austin, Texas where it houses customer service agents and where contract manufacturers assemble some Mac computers. The company also employs several thousand workers and contractors in Elk Grove, California, where it has customer service agents and refurbishes iPhones.

Apple also has built its own data centers in North Carolina, Oregon, Nevada, Arizona and a recently announced project in Iowa and leases data center space in other states.

Additional reporting by Sonam Rai and Laharee Chatterjee in Bengaluru; editing by Patrick Graham, Peter Henderson and Marguerita Choy

The Project Veritas Twitter Videos Show the Conservative Backlash Against Moderation

Conservative activist James O’Keefe has returned. In a series of illicitly filmed videos with current and former Twitter employees, the right-wing provocateur claims to have exposed partisan bias at the social network. The offensive may have been inevitable. While O’Keefe’s Project Veritas has mostly focused on the media and liberal institutions, recent moves by platforms like Twitter, Facebook, and YouTube to more aggressively moderate user content have left them exposed them to this exact sort of attack.

The Project Veritas videos, filmed without apparent awareness or consent, show a range of selectively edited insights from inside Twitter. One engineer for the company says that Twitter would theoretically comply with a Department of Justice investigation into Trump’s Twitter account. Another video shows a series of current and former employees explaining “shadowbans,” a practice by which Twitter will sometimes make it more difficult to find and view a user’s tweets, rather than banning that person outright. And a third, released Monday, explains how the company tracks user behavior and screens direct messages for prohibited content, like porn spammers and unsolicited dick pics.

Many of the employees filmed used sensational language, but they also thought they were talking candidly to strangers at a bar. It’s not exactly unusual to embellish your job—and to elide its nuances—to a potential new friend or romantic interest.

And in any case, none of these gotcha moments amount to anything revelatory. Tech companies comply with valid legal investigations all the time; if anything, Twitter has historically taken a relatively hardline stance against federal intervention. Shadowbanning is such a closely guarded secret that Twitter details the practice in its easily accessible online Help Center. Tracking is how Twitter—and every free platform online—sells ads. And Twitter employees don’t read every single direct message sent on the platform—an insurmountable task—but the company does screen instances in which abusive behavior is reported.

These videos don’t prove that Twitter has a partisan bias against its far-right conservative users. (Indeed, they’re some of its most prolific users.) They do show, though, that the right-wing backlash against tech giants has reached a new height. With every new policy intended to curb abuse, Twitter, YouTube, Facebook, and other platforms invite rancor. The new rules have been necessary to fight an increasingly toxic atmosphere online. But Project Veritas sees those steps, and the ban of high-profile far-right users—over clear, apolitical terms of service violations—as an attempt not to improve discourse online, but to quash the free exchange of ideas.

The Mounting Backlash

O’Keefe’s videos quickly became the top story on sites like Breitbart over the past week, and Fox News host Sean Hannity discussed them on national television. The videos also put Twitter on the defensive, despite uncovering a whole lot of nothing.

“The individuals depicted in this video were speaking in a personal capacity and do not represent or speak for Twitter,” a spokesperson said in a statement. “We deplore the deceptive and underhanded tactics by which this footage was obtained and selectively edited to fit a predetermined narrative.”

But to a large segment of right-wing internet users, the videos’ substance doesn’t matter. The way they were filmed matters even less. The footage validated a deep-seated suspicion that social media companies treat conservatives differently.

In one sense, critics are right to say that Twitter has treated its users differently lately. In December, the social media platform rolled out a series of aggressive policies meant to curb abuse and the glorification of violence. When the new rules took effect, a number of far-right accounts were suspended, including the anti-semitic Traditionalist Worker Party and the American Nazi Party.

Removing hate groups from Twitter has been a net good. But deciding whether a user violated these new policies sometimes involves making a subjective decision. By giving up what Twitter saw as absolute neutrality—former executive Tommy Wang famously once described the company as “the free speech wing of the free speech party”—Twitter and other platforms have opened the door to specious claims of bias.

It’s not just O’Keefe. The first Project Veritas Twitter video debuted just two days after “alt-right” troll Chuck Johnson filed a lawsuit against the company. In 2015, Twitter permanently banned Johnson after he tweeted that he wanted to “take out” civil rights activist DeRay McKesson. While Johnson likely won’t win his case, it’s significant that he chose to sue now, and not three years ago when Twitter first suspended his account. The narrative has shifted in his favor.

The so-called alt-right also isn’t only mad because some of their most prominent voices—including Johnson and Milo Yiannopoulos—have been banned. Even those that remain on the platform often allege that Twitter suppresses their views through other means.

After last year’s presidential election, for example, some users said when they tried to respond to Donald Trump’s tweets, their replies disappeared. It turned out that Twitter likely couldn’t handle the volume of replies that Trump generated, and thus the threads were “breaking” by accident.

The incident highlighted how Twitter and companies like it often don’t—or can’t—explain exactly how their services work, leaving users to craft their own conspiracy theories. It doesn’t help, either, that every major tech platform is headquartered in notoriously liberal Silicon Valley, leaving right-wing users to suspect that few tech employees care much about advocating for their viewpoint.

Take also another incident from last summer, when Google fired James Damore, a former software engineer who penned a 10-page memo advocating against Google’s diversity hiring programs. Damore argued in part that biological differences between men and women accounted for gender disparities in fields like software engineering. He was let go for “perpetuating gender stereotypes.”

Right-wing news sources held up Damore’s firing as evidence that Silicon Valley doesn’t welcome conservatives. Damore appeared on Fox News, and Breitbart started a “Rebels of Google” series, where it interviewed former and current employees about partisan bias. Far-right groups even planned a “March on Google,” that never materialized. Damore is now suing Google, alleging that the company is systematically biased against caucasians, males, and conservatives.

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Damore’s firing wasn’t the smoking gun that right-wing media made it out to be. For one, the engineer was only one employee, and others have written memos alleging that the company doesn’t do enough to promote diversity, rather than too much. Damore also said that Google gave special privilege to women, but the company is currently wrapped up in a dispute with the Department of Labor over “systematic compensation disparities against women pretty much across the entire workforce.”

Doubling Down

As pressure against these platforms continues to mount, the most instructive case for Twitter might be the one that has the most merit. A 2016 Gizmodo investigation found that Facebook’s “news curators,” who were in charge of managing Facebook’s Trending Topics bar, had systematically suppressed stories from conservative outlets. The story immediately caused a massive backlash from right-wing users.

Instead of making an earnest, if flawed, commitment to filtering out untrusted sources, Facebook instead fired its entire Trending team, and let an algorithm take over. The trending bar soon filled with fake news and conspiracy theories. Facebook shied away from making its platform a better place in the name of neutrality, and everyone suffered as a result.

So far, Twitter has done the opposite. In the face of persistent backlash from the right, the company has doubled down on its intention to curb abuse and threats of violence. It hasn’t made a public show of firing moderators, or claimed it wants to be entirely neutral. Good. To improve their platforms, companies ultimately have to make value judgements that lots of people won’t like. The question now is whether Twitter’s convictions can survive the backlash.

Social Media and Speech

-Should Facebook and Twitter be regulated under the First Amendment?

-How WeChat Spreads Rumors, Reaffirms Bias, and Helped Elect Trump

Science Says These Factors Determine Good Leadership

For a company to evolve and grow, entrepreneurs must develop into good leaders.

But what are the factors that determine good leadership? Do good leaders share common traits? Are there secrets to becoming a great leader?  What is the impact of gender in regards to leadership? 

The development of sound leaders is a complicated process that is both dependent on the individual, his or her team, and the industry in which they work. But working to become a good leader is essential, especially in today’s business environment, where studies have shown that over 80% of people don’t trust their boss. Eventually, employees leave jobs where they don’t respect their boss. Good leadership is imperative to employee retention and creating long-term organizational success.

There are a variety of skills that provide a solid foundation for good leadership. However, science says that some people are pre-disposed to be better leaders than others.

Inherent traits play a role in leadership potential.

Scientific studies reveal that good leaders are ambitious, curious, and sociable. By having these characteristics you have a better chance to grow within your discipline or company and become a leader. Another critical aspect of leadership is integrity. By having integrity, you can build trusting, supportive teams, with positive work cultures where people feel valued and supported. While a high IQ does have an impact on leadership potential, the correlation is extremely small, less than 5%, when compared to these broader positive traits.   

Are some people born leaders?

Personality traits and intelligence levels are impacted by genetics, which means some people are born with stronger pre-disposition to take on roles in leadership. In fact, estimates suggest that 30-60% of leadership is heritable. However, if you don’t naturally have the traits listed above – sociability, curiosity, ambition, and integrity – it doesn’t mean you won’t become a leader. Through training and coaching, it’s possible to develop the competencies necessary to stand at the helm of a project or company.

Does gender play a role in leadership?

From a leadership potential perspective, gender has little impact. In fact, data has shown that women can be extremely successful as leaders. Over an eight-year study of publicly traded companies, it was discovered that organizations with female CEO’s or female Director’s of Boards produced a better annual return when compared to male counterparts. We don’t have fewer women leaders because of a lack of female leadership potential or a propensity for business. In truth, the number of leaders is currently skewed in favor of males because of social factors such as gender biases, lack of fairness in hiring opportunities, and a history of male dominance in business.

Being in a position of leadership may not feel comfortable for everyone, and that’s okay. As individuals, we engage with the world in different ways, and we have innate strengths that should be utilized to our advantage. Specific traits may lead to a higher propensity toward taking on leadership roles, while other factors such as gender play a much smaller role.

But let me be clear. If you want to become a leader, don’t let scientific studies, your family, or any article convince you that goal is unattainable. You can learn, grow, and evolve, becoming the leader you want to be.

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Bitcoin And Altcoins – You Are Missing The Wave

When I was 11, I collected baseball cards. We had a “dealer.” He taught me something very important…something is worth what someone is willing to pay for it – no more, no less.

Haejin Lee is a technical analyst on YouTube and Steem for Bitcoin. I watch his videos – you should too. The other day, he said something that resonated with me and led to an epiphany last night (epiphany is a bit farther down). What he said is that Bitcoin is the truest reflection of market sentiment. The idea behind charting isn’t a bunch of lines; it is social psychology – crowd psychology. He was saying that at this point sentiment is the holy grail of price movement for Bitcoin.

I got into OTCQX:GBTC, a pink sheet fund that only invests in Bitcoin, about two years ago. I did it because I thought it was stupid, literally. And I had seen too many things I deemed stupid go on to turn into huge things, such as Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN). I didn’t put much money into it as all I could use was my IRA and it was depleted from some withdrawals during bad years. Never having had more than 20% of my IRA in the fund, I have a 12-month average return exceeding 125%. Even after that, I did not realize what is really going on.

So, I’m not doing an introduction into cryptocurrencies; if you are reading this and want the basics explained, there are sources for you to learn the basics. Today, I’m sending this out because not sending it out, not telling the people I know that what they are witnessing is the largest inflection point of their lifetime would be wrong. This is the dawn of a new age. You may or may not remember life before the internet, or cell phones, or smart phones. But stop and think how long each one of those took to be fully adopted and what impact it ended up making in the long run. HUGE! Right?

This is bigger and will happen faster. Each successive one of those technical innovations had a shorter adoption cycle. While cryptocurrencies have been around for almost 10 years, they have just now hit public awareness; before now, maybe the 5% of really technical people might have known what bitcoin was – now, at least most people have heard of it.

The epiphany I had was simply this – the new coins, as they come out, they are not currencies, they are not a representation of ownership, they are – in short – the representation of an idea. People then vote for that idea with their money. So, that idea might be a quick way to exchange money across the globe in a private way, or it might be a new way to rent your next home and run your rental company through digital contracts and tokens. The value is crowd-sourced; this means people vote, in this case, with money. YES, some people are there to ride the ups – get out and then find the next one. There is nothing wrong with that. But, this is not equities, this is not CD with a specific return. This is valuing an idea through crowd-sourced funds.

So, where are we in the adoption cycle? We are crossing the chasm – like a rocket. On the other side is a ton of money about to come in through hedge funds, ETFs, futures, swaps, and whatever other financial instruments people can come up with.

Bitcoin is the most uncorrelated asset there is when compared to the stock market. This means it doesn’t move in any type of relation with the market. That means it is a great investment for someone looking to diversify their portfolio, because owning non-correlated assets is the goal of large fund managers and should be for you, as well.

Where does it end? I don’t think it does. It is not a bubble. Individually, one coin may or may not have a large return, but as a basket, the returns will continue to be in the never before seen category for the immediate future. Simply because of where we are in the cycle. There are even tokens that simply invest in other tokens. THAT is a brilliant place to put your money. Buying the basket will even out the risk. But honestly, given where we are, you could buy ANY coin with an active team working on it and the value will go up. I know that isn’t going to compute for many of you, but literally, I believe you can buy ANY coin and experience large returns. There are coins made as a JOKE that have a total market capitalization in the hundreds of millions of dollars.

I am NOT a financial consultant – you are welcome to look at my profile. I have a degree in chemical engineering and an MBA with an emphasis in Management Information Systems, plus 20 years in data architecture. I cannot “recommend” that you invest in these things. I can tell you I have and will continue to. I can tell you that alt-coins are generally mined with graphics processors and that you basically cannot buy ANY decent processor for anywhere within 25-50% of the price it should cost and you cannot buy them in bulk at all. They are all being bought by very large currency mining companies. They will continue to be bought by such companies for the foreseeable future. There are two more investment ideas for you if you know where to look.

I really love my job, but if I see a situation that makes me think I can retire in a few years, you can bet I will be working towards that in every spare minute I can find.

Disclosure: I am/we are long ARKW, GBTC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long Bitcoin, Ethereum, Litecoin and many altcoins and upcoming icos.

Trump's 'Shithole Countries' Comment Tops This Week's Internet News

Last week Facebook decided that maybe it should make some changes to the information people see on the platform; also, a lot of people got very interested in the pay discrepancies between Mark Wahlberg and Michelle Williams. But, beyond that, it was also a week where everyone learned that a school kid could play the Cantina Band song from Star Wars with a pencil.

Yes, it was yet another strange, wonderful week on the internet. But what else happened? Here we go.

President Trump’s Unsavory Comments

What Happened: President Trump reportedly referred to Haiti, El Salvador, and some African nations as “shithole countries.” The internet responded in kind.

What Really Happened: There is absolutely no denying that Trump has had an impressively full week, declaring himself a stable genius, denying the possibility that he might be deposed as part of the Russia investigation, and avoiding Kendrick Lamar. But it was his comments reported Thursday that will likely have the longest-lasting impact.

Oh.

Some were concerned about journalistic standards…

…but many more were concerned about presidential standards, instead.

Naturally, media reports came fast, furious, and horrified. As the fallout from the comments continued, perhaps the most surprising reaction was the fact that the White House didn’t even try to deny it initially.

And they weren’t the only ones failing to denounce Trump’s crude language.

Still, at least one prominent conservative was willing to correct Trump.

As some of the countries mentioned started asking for comment on the comments, Trump said this:

Well, that’s what he said publicly, at least…

The Takeaway: Twitter?

Breitbart Says Goodbye to Bannon

What Happened: Apparently, when shadow presidents fall, it happens quickly and they even lose their satellite radio shows. Sorry, Steve Bannon.

What Really Happened: As those reading Michael Wolff’s Fire and Fury book know, there is one figure that looms arguably even larger throughout the entire thing than Trump himself: self-proclaimed genius (hey, another one!) Steve Bannon. Turns out, the ego-stroking he might have gotten from the book was likely a farewell gift, considering how the rest of his week went.

Yes, Bannon has lost the Breitbart job he swiftly returned to after leaving the White House back in August, despite releasing a full-throated walk-back of his comments in the Wolff book. So, what happened?

That’d do it. Sure enough, Breitbart was tweeting about his departure.

But it wasn’t just Breitbart that dumped him, it turned out.

(Bannon lost his Sirius show because it was a Breitbart-related venture, for those wondering; it wasn’t a coincidence, just cause and effect.) As would only be expected, news of his departure was everywhere in the media, but how did the rest of the internet respond?

It wasn’t only glee at Bannon’s misfortune, of course; some were also wondering just who could replace him at the outlet. Or maybe that should be, “what.”

The Takeaway: If only there was some kind of lesson to be learned from the swift rise and fall of Steve Bannon. Maybe it’s this?

The Leak of the Week

What Happened: In a political environment consumed with the concept of leaking, a surprise release of previously secret testimony to Congress took the internet by storm.

What Really Happened: Despite what certain POTUSes might have you believe, the investigations into potential collusion between the Trump campaign and Russia are ongoing, although at least one—the one being carried out by the Senate Judiciary Committee—is running aground thanks to internal strife between Republicans and Democrats on the committee. At the start of the week, one of the topics causing the most upset was the testimony of Fusion GPS co-founder Glenn Simpson over the origins of the company’s infamous “Russian dossier.”

Simpson testified in a closed session in August, but faced new calls from Republican committee chairman Chuck Grassley last week to testify again, publicly. Simpson and co-founder Peter Fritsch, in an op-ed that appeared in the New York Times, argued that Congress should simply release the transcript of his earlier testimony. Things seemed at an impasse… and then they didn’t. What changed?

People were surprised at how hardcore the move was…

…especially after Senator Feinstein responded to questions about why she did it.

This kind of thing is, well, unusual to say the least, so of course it was everywhere almost immediately. The 312 page document was, unsurprisingly, very enlightening.

This was, in other words, a really, really big deal. Although what kind of a big deal apparently depended on which side of the ideological spectrum you were on.

Expect this one to run and run.

The Takeaway: Actually, wait, we never checked in on how Trump responded to this news. Mr. President?

She Is Spartacus

What Happened: When it looked as if a news story was going to out the creator of a secret list of crappy men, the internet took it upon itself to handle the situation first.

What Really Happened: Perhaps you heard of the “Shitty Media Men” list before last week; it was a Google spreadsheet shared and edited anonymously that listed more than 70 men who were accused of being, to some degree, abusive towards women, whether it was creepy DMs or physical and sexual abuse. Since its creation in October of last year, it’s been the topic of much speculation and discussion, not least of all because no one actually knew where and how the list got started. And then, last week, that all changed.

It all started with a thread from n+1 editor Dayne Tortorici.

There’s much more in that thread, but those are the most salient points. Tortorici’s comments prompted a response from journalist Nicole Cliffe, and follow-ups from other journalists and editors.

It turned out that the writer of the piece, Katie Roiphe, was willing to comment that she was not about name anyone involved in the list.

Maybe the creator(s) of the list wouldn’t be named, and there was no need to worry about doxing! Well, OK, that was unlikely (for reasons we’ll soon get to). But then, something wonderful happened.

Indeed, so many women came forward to claim responsibility that a hashtag was created, #IWroteTheList, to share collective responsibility:

And then, the real author stepped forward.

Donegan’s piece for The Cut had an immediate impact.

The Takeaway: Nicole Cliffe, want to wrap this one up?

The (Flagging) Power of CES

What Happened: Someone at CES 2018 took the idea of “lights out” a little too literally.

What Really Happened: What would be the most unfortunate thing to happen at a trade show where electricity is kind of important?

Yes, the 2018 Consumer Electronics Show was hit by a twohour power outage last week. Before the cause was known—apparently, it was just rain—some people had some… special theories about what was happening.

Others were just philosophical about it all.

Some were even wondering who “won” the blackout. To be fair, a couple of brands definitely tried their best to claim the crown.

Ultimately, though, the answer to who won is fairly obvious, surely.

Some people at the show really seemed to enjoy the darkness, even if they didn’t make off with any free gifts. Hell, some went to so far as to hope it wasn’t a one-off.

The Takeaway: Of course, it’s worth keeping some sense of perspective about things…

Airbnb Has Some Breathtaking Listings in ‘Shithole’ Countries

Responding to President Donald Trump’s reported denigrating comments in a meeting on immigration, vacation-rental platform Airbnb says it will spend at least $100,000 on digital ads promoting listings in Haiti, El Salvador and African countries.

Airbnb says the 75,000 hosts in those locales earned $170 million in 2017, during an expansion push there. The company says it wants to “encourage more travelers to visit these special and beautiful places,” as part of “our mission to create a world where anyone can belong anywhere.”

Following Trump’s remarks, Airbnb CEO Brian Chesky also highlighted several Airbnb listings on Twitter, including sites in Kenya, Ghana, and Haiti.

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Kenya and Ghana are among the nations least fairly maligned by Trump’s alleged comments. Both have strengthening civil institutions and saw very healthy 2017 GDP growth – 6.1% for Ghana and 5.5% for Kenya, according to the World Bank. Nairobi, the capital of Kenya, has been described as Africa’s Silicon Valley. Foreign investment is accelerating across Africa, substantially driven by China – suggesting that outdated views of Africa are leading to missed opportunities for American influence there.

Trump’s comment, which he has denied but which were confirmed by Democratic Sen. Dick Durbin, adds to a growing list of White House initiatives and stances widely seen as racist. Airbnb has cannily translated its cosmopolitan ethos into a series of headline-grabbing gestures pushing back against them. It offered free housing to those impacted by Trump’s attempted ban on travel from some Muslim countries, and ran a Super Bowl ad critical of isolationism. Airbnb later preemptively canceled the accounts of white nationalists attending a Charlottesville rally. When that rally turned deadly, Trump was slow to condemn racist demonstrators.

Airbnb is not without its own problems, though, with both specific incidents and careful research highlighting racial discrimination by some hosts on the platform. Airbnb has adopted several initiatives and partnerships to try and remedy the problem.

HP, Inc. – Strong Buy On PC Sales Data

Surprise – people are buying PCs again. Long thought to be a dead market after replacement cycles lengthened and tablets/phablets and hybrids like the Microsoft Surface (NASDAQ:MSFT) increased in popularity, it seems that consumers are treating themselves to computers again.

When you think about it, this doesn’t appear to be a huge surprise – consumer confidence is up, stocks are at record highs, and consumer spending is on the rise, with reports of Christmas sales up ~5% y/y and representing the largest spike in six years. It stands to reason then that some of those dollars flowed into PCs, which have also been in decline for six years.

I’ve been an HP, Inc. (NYSE:HPQ) bull since its stellar earnings report in November, and despite my general aversion to hardware stocks, I can’t help but to think that HP is materially undervalued, in the Warren Buffett sense of the word. HP’s innovative moat and brand power within PCs (which represents two-thirds of its revenues; the other third derives from printers and printing supplies) cannot be understated. Profits are up double digits this year as HP achieved PC shipment growth even as the rest of the PC industry is stalling – this doesn’t sound like a company that deserves to trade at a 12.7x forward P/E, based on analyst consensus estimates of $1.81 in EPS in FY18.

Here’s a look at HP’s one-year chart. The stock has certainly climbed out of its depths, but the ascent in the stock price, in my view, hasn’t kept pace with the ascent in its fundamentals. With its above-average earnings growth, HP should be trading at least at 17x forward P/E – in line with the rest of the market – implying a price target of $31. There’s plenty of room for this company to ride the bull run higher, especially as it’s surfaced from the down-cycle of the PC market.

Chart
HPQ data by YCharts

Let’s take a closer look into the IDC report, which has caught headlines across a wide array of both tech and non-tech publications, including Bloomberg and The Verge.

IDC reported that global PC shipments in the fourth quarter of 2017 totaled 70.6 million units, up 0.7% y/y from 70.1 million units in 4Q16. This is the first y/y rise in six years. Most notably, of the major PC vendors, HP is the one that saw that largest growth in Q4, with 8.3% y/y increase in shipments.

Figure 1. IDC 4Q17 PC shipments report

Source: International Data Corporation

HP’s market share moves are also worth noting; in 4Q16, it trailed 60bps behind lower-end Chinese vendor Lenovo (OTCPK:LNVGY). In 4Q17, Lenovo saw flat shipment growth (trailing the wider industry at 0.7% growth) while HP galloped ahead and gained 170bps of market share, making it the clear PC leader with more than a point of market share ahead of Lenovo.

Obviously, investors are mostly interested in how this will impact HP’s financials. Well, we won’t know for sure until HP’s Q4 earnings release, but we can look backward at IDC data to understand the correlation between PC shipments growth and HP’s earnings.

In Q3, total PC shipments were down -0.5% y/y while HP’s shipments grew 6% y/y, as reported by IDC’s third-quarter report.

Figure 2. IDC 3Q17 PC shipments report

Source: International Data Corporation

Concurrently, in Q3 (HP’s fiscal Q4), HP’s Personal Systems division reported 13% y/y revenue growth (6 points of unit growth plus ASP growth). This translated into 11% y/y growth company-wide, which beat analyst consensus estimates by 4%, and flowed through to a 24% y/y growth in net income.

Clearly, there is a strong correlation between IDC’s growth data and HP’s earnings – as long as ASPs hold up, HP should be well positioned to report >8% revenue growth in PCs and deliver outsized earnings in its fiscal Q1.

Qualitatively, it’s intuitive to understand why HP’s PC business is so strong; there’s really something for everyone. Its higher-end Spectre line serves the $1,000+ market, HP ENVY serves the ~$800-1,000 market, and its lower-priced HP Pavilion offerings cater to the cheaper end. HP laptops resonate well with all segments of buyers and have a cachet of quality – unlike Lenovo, which despite having higher-end offerings of its own, is often perceived as a budget system.

Key takeaway: HP has had a strong batting average during its past few earnings seasons, and given the extremely bullish data coming out of IDC, there’s good reason to believe the strength will continue into Q1 this year.

Disclosure: I am/we are long HPQ.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Why Apple Could Soon Save More Than $4 Billion in Taxes

Along the spectrum of good and bad weeks for Apple, this past one was middling, at best.

The week kicked off with some debate over just how much Apple is doing to safeguard kids who are spending too much time on their iPhones and not enough time communicating with others. It then turned to reports that Apple will be handing over control of its iCloud data center operations in China to a local company there to comply with Chinese law.

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But behind the scenes as CES—touted to be the world’s largest tech trade show—was in full swing with major tech announcements from all of Apple’s competitors, the company still featured prominently in the news cycle. Apple optioned rights on a new TV drama this week and a little tax quirk could net the tech giant a $4 billion cash windfall.

Here’s a look back at Apple’s week and the good and bad that came with it:

This is Fortune’s latest weekly roundup of the biggest Apple news. Here’s last week’s roundup.

  1. Apple responded to shareholders last week that called on the company to do its part in combating kids’ smartphone addictions. In a statement, Apple said that its products, including the iPhone and iPad, all come with a variety of controls to curb a child’s use of its devices. But the company also promised more controls in future software updates.
  2. Apple might not have been at CES, but its products were featured prominently. Appliance-maker Whirlpool announced at the show that more than 20 of its products, including washers, dryers, and ranges, will get Apple Watch support soon. The feature means users will be able to adjust their range temperatures and see the status on a load of laundry all from Apple’s smartwatch.
  3. The iPhone maker confirmed this week that all Chinese iCloud user data will be handed over to a local company starting on Feb. 28. The move is a response by Apple to Chinese regulatory authorities that are clamping down on foreign companies housing Chinese user data overseas. Some critics see China’s move as another way for the government to spy on its users. Apple, however, has said that user data will be encrypted.
  4. Apple has reportedly green-lit a new “epic” drama series set in a futuristic world called See. The series will likely have eight episodes in its first season and will be directed by Francis Lawrence, the well-known director of films The Hunger Games: Catching Fire and Mockingjay Parts 1 & 2. There’s no word yet on when the show might air on Apple’s streaming services.
  5. A quirk in the tax bill passed at the end of 2017 allows companies that don’t have fiscal years starting on January 1 to reduce through the end of their fiscal years the amount of foreign cash they accumulate. The less companies stockpile overseas between now and the end of their fiscal years, the less they’ll have to pay in tax on offshore cash. Stephen Shay, a tax professor at Harvard Law School, estimated that Apple could save more than $4 billion in taxes by taking advantage of the loophole.
  6. Follow last week’s speculation that he was leaving the company, Apple Music chief and music industry veteran Jimmy Iovine said this week that he’s staying on at Apple. In an interview with Variety, Iovine said that he’s “loyal to the guys at Apple.”

One more thing…A MacBook Air that never connected to the Internet and was kept in a safe was home to the Star Wars: The Last Jedi script, the film’s director Rian Johnson said this week. Johnson said his producer was worried he’s leave his MacBook Air at a coffee shop for anyone to steal.

Want Reach Millennial Customers? Try These Digital Marketing Secrets From Top Media Brands

Millennials–born between 1982 and 2004–spend more than $65 billion each year and influence upward of $1 trillion in total consumer spending. It’s no wonder that brands are practically stalking them. Unfortunately, it seems that they are immune to standard marketing tactics. In fact, some think marketing to them is a lost cause. However, there is a guaranteed way to connect with this attractive and elusive generation: content.

The growth of digital content, both text and video, has transformed the way people engage with information and yes, the content, marketing, and advertising ecosystem has grown incredibly complex. But the good news is that digital content offers a way for companies to forge strong bonds with consumers, according to new research from Nielsen Digital Content Ratings. (For those unfamiliar with them, Nielsen is a global information and measurement company that provides market research, insights and data about what people watch, listen to and buy.)

Recently, Nielson worked with worked with several major digital publishers to learn more about the audiences that engage with their content day-to-day, to help them to put the pieces of the consumer picture together from across digital content types, social platforms, and devices. The results are not only useful to these media brands. They offer insights that are applicable to any brand that is leveraging content to engage millennials.

Here’s a snapshot of what Nielsen found for each publisher and how content marketers can put these insights to work:

BuzzFeed

BuzzFeed is a leading tech-powered media company, with a cross-platform news and entertainment network. Millennials are particularly drawn to BuzzFeed’s posts and video content. They watch an average of 38 BuzzFeed videos each month, showcasing loyalty to the site’s beloved content, including popular franchises such as Tasty, a massive social food network that provides users with recipes and cooking tutorials. The company’s successful content strategy is evident in their audience engagement figures, with BuzzFeed reaching 83% percent of all Millennials per month.

Show off: Not only does Buzzfeed know how to tell a story that will resonate with this audience, it was early to grasp the appeal of visual, particularly on mobile. Tasty tears a page straight out of Pinterest, leading with large attractive images and clear catchy captions. If your brand lends itself to the visual, do not miss out on any opportunity to paint a picture if you want to engage Millennials. 

Group Nine Media

Group Nine, one of the largest digital media companies and parent of NowThis, The Dodo, Seeker and Thrillist, formed less than a year ago and is already a powerful player in the world of social video. Group Nine attracts audiences from devoted animal lovers to lifestyle enthusiasts to avid news and information junkies. Group Nine has a highly engaged audience, boasting almost 1 billion minutes of content consumed across its four brands. Group Nine’s content performs incredibly well among young adults–reaching 81% of Americans in their 20s.

Positively impactful: Group Nine brands NowThis and The Dodo understand that the Millennial generation cares deeply about the environment, sustainability, corporate responsibility, and more. These brands tap into their passions to connect emotionally while Seeker and Thrillist understand Millennials enthusiasms and interests. Do good and let the world know through engaging stories. Expose your positive impact on the planet. Tell the tale that will take them someplace new and wonderful. Be uplifting and fun. Content that connects with what this generation cares about will carry you far.

Mic

Bringing modern and diverse perspectives to how news is reported, Mic provides its audience with a fresh approach to journalism and storytelling. The news network attracts over 40 million unique viewers each month. Mic’s stories demonstrate an ability to connect with and compel younger news followers and engagers, reaching over a quarter of people ages 21-34 in the U.S. Showcasing dynamic content, Mic’s videos have an audience that is 56% female and 42% male.

Keep it real: Mic is a media brand that isn’t afraid to go there. Via its lively reporting and bold delivery, this brand tells it like it is. Millennials are all about transparency and straight talk. If you want to truly connect with them, you need to lean in as more of a trusted ally than objective expert. Share your knowledge but it should feel more like lively dinner party debate than pedantic professor. 

Refinery29

A leading digital media and entertainment company focused on women, Refinery29 provides its engaged audience with stories across categories, including fashion, beauty, entertainment and money. The company’s video and text content reach 62% of women between 18 and 34 and sees even further connection within more narrow, younger groups, reaching over 88% of women between 21 and 24.

Broad interests: Sure, you may want to specifically target female Millennials. But the worst mistake you can make is to box them into one adorable demo that shares the same passions and goals. Yes, we make generational generalizations, but Millennial women are characterized by their wide-ranging interests and Refinery29 treats them like well0rounded human beings. If you want to genuinely engage them, you will too.

VIX

VIX, a leading multicultural digital media brand, attracts a largely Millennial audience with a blend of lifestyle tips, social video, entertainment, food and life hacks. With women making up 62% of VIX’s audience, the site’s highest engagement comes from Millennial females, a coveted demographic among consumer brands. Through its content, VIX reaches over 40% of adult women between 18 and 49 in the U.S., attracting viewers to the brand’s English and Spanish language content.

Meet the multicultural millennials: Nielsen previously identified what it calls the multicultural Millennials, which blend a variety of cultures into a new mainstream. They deemed this particularly significant given their growing influence and affluence. VIX hits the sweet spot here, recognizing the varied cultural interests and influences on this generation. If your team, your brand, or your products reflects this emerging Millennial mindset and market, you want to tell that tale in your content. This is a largely untapped approach that will capture a very attractive audience.

There’s more to understanding digital engagement than clicks or even repeat visits. These content companies not only understand their Millennial audiences, but have forged deep relationships with them that brings them back week after week. But content strategies like these don’t have to be for media pros only. Content marketers can tap into their strategies and follow in their successful footsteps to truly engage the elusive Millennial. 

After rejecting Uber, London renews Addison Lee's license

LONDON (Reuters) – London has renewed premium car service Addison Lee’s license to operate in the capital for the next five years, less than four months after Uber [UBER.UL] was stripped of its license.

In September, regulator Transport for London (TfL) refused Uber’s application, citing problems with the company’s approach to reporting serious criminal offences and background checks – a decision the Silicon Valley firm is appealing.

Addison Lee, the second-biggest private hire operator in London, was granted a five-year license in 2012, which was extended in 2017 for six months until the end of February this year.

Last year, TfL had been considering a new operator fees system which will now see firms with between 1,001 and 10,000 drivers such as Addison Lee pay 700,000 pounds ($957,000) compared to the 2,414 pounds charged in 2012 for its original license.

Addison Lee’s license now expires on Feb. 28 2023, according to the TfL website.

“Our license has been routinely renewed by Transport for London,” said a company spokesman.

“Addison Lee looks forward to continuing to offer Londoners a high quality, reliable service in getting around town. We are fully supportive of TfL’s efforts to enhance the standard of regulation in the private hire industry.”

Both TfL and Uber declined to comment.

Reporting by Costas Pitas; editing by Stephen Addison

Hyundai invests in Grab to gain 'foothold' in Southeast Asia ride-hailing market

SEOUL (Reuters) – South Korea’s Hyundai Motor Co (005380.KS) said on Thursday it had invested in Southeast Asian ride-hailing firm Grab, as it seeks to expand into the region to reduce its reliance on China following a damaging diplomatic row between Seoul and Beijing.

Hyundai’s first direct investment in a ride-hailing firm gives it a “foothold” in the world’s third-biggest ride-hailing market after China and the United States, it said.

Singapore-based Grab, the biggest operator in the region’s third-party taxi hailing and private-vehicle hailing sector, has expanded to eight Southeast Asian countries.

“The deal should help raise the exposure of Hyundai Motor in the region, while responding to the future mobility market,” said Lee Sang-hyun, an analyst at IBK Securities.

Hyundai’s interest in Southeast Asia has grown since South Korean companies were targeted last year in a Chinese backlash over Seoul’s decision to deploy a U.S. missile defense system against Beijing’s objections.

The region of about 500 million people is dominated by Japanese carmakers, while Hyundai has focused on China and the United States.

FILE PHOTO: A Grab motorbike helmet is displayed during Grab’s fifth anniversary news conference in Singapore June 6, 2017. REUTERS/Edgar Su/File Photo

CATCH-UP

Hyundai is also looking to catch up with its peers in future mobility, the personal transport innovations from ride-sharing to self-driving cars that are expected to reshape the auto industry.

While it does offer car-sharing services in the United States and Europe, until now it has watched from the sidelines as competitors like GM (GM.N) and Toyota (7203.T) have allied with ride-sharing partners.

Hyundai and Grab said they would jointly develop services in Southeast Asia, including one utilizing Hyundai’s eco-friendly models such as the IONIQ Electric. They did not disclose the value of Hyundai’s investment.

Hyundai last week announced for the first time a self-driving technology partnership with Silicon Valley start-up Aurora, a shift from its usual preference for developing technology itself.

The Hyundai tie-up is part of Grab’s latest financing round that raised $2.5 billion and included Chinese peer Didi Chuxing, Japan’s SoftBank Group Corp (9984.T) and Toyota Tsusho (8015.T), a Grab spokeswoman said.

Hyundai Motor vice chairman Chung Eui-sun said on Wednesday it is considering building a car plant in Southeast Asia, possibly in Indonesia or Vietnam.

Reporting by Joyce Lee and Hyunjoo Jin; Additional reporting by Aradhana Aravindan in SINGAPORE; Editing by Stephen Coates

Exiting Your Startup: The Grand Finale

Your company has finally achieved success.

You’re finally looking to cash out on the effort you invested.

Deservingly so, but you’re not done yet. The most critical stage is near-;the exit.

Founders can’t simply hand over the reins in exchange for a handsome payday. It’s more complicated, as exiting is a strategic decision-;one that founders must be aware of early on.

We have invested in over one hundred successful startups, and founded our own açai-infused vodka company, VEEV. We learned lessons the hard way, and we want to make it easier for you.

Here’s a fact that most founders overlook. You need a reason for potential buyers to actually want to buy your company.

What about taking your company public via an initial public offering (IPO)? The reality is that IPOs comprise a small percentage of total exits, so we’ll focus on more common acquisitions.

Consider how your company will be positioned for an attractive acquisition. There are many areas of your business to focus on to ensure a successful exit. Mastering any three of the following areas will greatly work in your favor:

  1. Your distribution model

  2. Your access to a particular demographic

  3. Your brand’s strength

What about revenue?

Revenue is important, but potential acquirers rarely buy a company for the added revenue. Odds are that the incremental revenue barely moves the needle for your acquirer.

While revenue-;especially revenue growth rate-;is important, the three aforementioned areas carry more weight. Let’s discuss them in further detail.

Create a nimble distribution model that an acquirer couldn’t replicate.

PetSmart’s acquisition of Chewy for $3.5B in the spring of 2017 is a great example of a purchase based on a distribution model. PetSmart, the brick and mortar retailer of pet supplies, needed Chewy, an e-commerce provider of pet supplies, for its direct-to-consumer channel.

In the end, PetSmart gains critical online access while Chewy receives the expertise and resources necessary to refine and expand its business.

A win for both parties.

Additionally, corporations realize the need to gain access to new demographics-; especially Millennials.

Consider RXBAR, the maker of simple ingredient, protein bars. Founded in 2014, the company has experienced meteoric growth, due in no small part to its support from Millennials who are attracted to RXBAR for its simplicity in both labeling and ingredients. Food manufacturer Kellogg’s-;eager to enter the space-;announced in October 2017 its intention of acquiring RXBAR.

RXBAR plans to remain an independent company within Kellogg’s all the while expanding its product, and Kellogg’s can effectively leverage the access to RXBAR’s target demographics.

Again, a win for both parties.

Finally, it’s impossible to overstate the importance of your brand image. Corporations are seeking ways to capitalize on emotion-based purchasing.

We’ve previously mentioned the increasing role that emotion is having on consumer purchasing behavior and significance of brand image here. However, it is worth reiterating the point again.

Why?

Because corporations-;not just consumers-;are looking for products with a strong brand that evokes a particular emotion. Oftentimes, this is not their area of expertise. Corporate competitive advantages traditionally lie in the form of a cost advantage.

Now, they’re looking to acquire companies with an emotional advantage.

PepsiCo’s acquisition of the sparkling probiotic drink maker KeVita is a prime example. A slogan of KeVita’s, “Revitalize from the Inside,” represents the pathos that PepsiCo was looking to capture. In a time where consumers are turning away from traditional soft drinks, PepsiCo found a perfect opportunity in the health-conscious KeVita.

The acquisition places Kevita on a larger stage, giving it increased access to new distribution channels and resources. PepsiCo now has the means to leverage KeVita’s image to ideally position itself in a time of changing consumer behavior.

Yet again, a win for both parties.

Determine early on what makes your company a threat to potential acquirers. If they need you more than you need them, you’re in a good position.

You know what to focus on.

Now you need to balance the operations of your company with the intricacies of an exit.

Now let’s address the less concrete aspects of selling your business and how to best-position yourself. Two pieces of advice come to mind:

  1. Base your exit on operational milestones, not a timeline

  2. Keep potential acquirers in the loop

A fundamental misunderstanding that many founders have is basing exits off a timeline, and not an operational milestone.

This principle can be applied in a greater context, especially when it comes to fundraising. All too often, founders seek a certain amount of capital to grant them X months or years of runway. Rather, they should seek this capital to reach a particular milestone, such as achieving a particular customer acquisition cost or breaching a given revenue threshold.

The same issue occurs with exits.

Founders are too focused on exiting in Y years, and not based off a given milestone. A major reason we sold VEEV was because we realistically could not keep growing the business. We had reached an intermediate size, and realized that we didn’t have the distribution capacity or necessary connections to expand VEEV internationally and further grow.

This telltale milestone was far more helpful than any time-based method in determining the right time to sell. Additionally, milestone-based exits are also more flexible than their time-based counterparts. They account for unpredictable macroeconomic factors that can either expedite or slow your timeline.

With that said, build relationships with potential acquirers well-before you reach your desired exit milestones. You should keep them in the loop from an early date.

It’s known that you should contact investors well before your intent to raise the next round of fundraising. The same logic applies to exits.

There a few reasons for this.

The first is simply the importance of getting your foot in the door and establishing relationships with corporate partners early on. The second-;and equally as important-;reason is that they can help you reach or tailor your operational milestones.

Essentially, your potential acquirers can outline the kind of milestone that would spark their interest in a deal.

However, be straightforward if challenges arise that may hinder the completion of a milestone. Acquirers should be willing to work with you. They will not be willing if you paint a rosy picture, only to have them later discover issues in the due diligence process.

That should go without saying, but we have seen it adversely affect many deals.

A final note is to realize that this process takes time. We may have mentioned the importance of stressing milestones over time, but it’s important to realize that a corporation moves slower than a startup. You should be in discussion with companies at least a year before any intention to sell, and know that exit deals usually take at least six months.

In the end, it’s no secret. Exiting is difficult.

Applying this advice will differentiate yourself from the competition and increase the odds of gaining the attention of an acquirer.

The earlier you start the process, the better your odds of success.

From experience, we realize that the timing is never perfect and an ideal match is rare. With that said, it’s important to always keep the exit in the back of your mind, and explore the many ways that you can capture the value of the business you created.

Now, get to work!

And if you need help to guide you along the way, find resources from people who have been there and done that. 

What's Behind This 24% Yield?

We last wrote about the popular InfraCap MLP ETF, (AMZA), in October ’17. At that point, it was trading at $8.51. We stuck a toe in the water, bought some units, collected a $.52 payout, and, as of 1/5/18 am, it was at $8.51.

Normally, you might think, “OK, it’s a breakeven on the price, no cap gain, but I’m ~ $.52 ahead from the distribution – if I sell, I’ll walk away with a 6% profit, and just owe 15%-20% on the qualified distribution”.

Not so fast pardner – there’s a problem with your calculation. If you bought those shares in a taxable account, about 80% of your $.52 distribution would have been return of capital, and would have decreased your cost basis by ~$.42.

So, your taxable short term capital gain would = $.42, plus the normal 15%-20% tax on the qualified distribution.

This problem wouldn’t have arisen, if you had bought AMZA in a tax deferred account, such as an IRA. AMZA also gets rid of K-1’s, and possible UBTI tax issues for IRA holders.

Sounds great right? But, there’s another problem, which SA contributor Trapping Value did a good job of explaining in his recent article about AMZA.

It’s about AMZA’s dividend coverage, or lack of it. The following info is from AMZA’s most recent financial statement, for year ending 10/31/17. It shows that their dividend coverage was only 60% for the last 2 fiscal years:

Here’s a quarterly breakdown, which shows the coverage increasing slightly, but only up to 62% in the most recent fiscal quarter:

(Source: Virtus site)

As the statements show, the fund made ~54% of its income on distributions from its underlying holdings, with the remaining income from writing and selling options. Looking at the funds underlying LP buys/shorts and its options sales and purchases shows a rather complex operation, to say the least, but one item stood out to us – its large position in the United States Oil ETF, (USO), and in the United States Natural Gas ETF, (UNG).

As of 10/31/17, AMZA had these positions in USO and UNG:

(Source: Virtus site)

That made us wonder if there was a correlation in price between AMZA and USO and/or UNG. It seems that AMZA and USO correlated fairly closely, especially in mid-2016 to mid -2017. This makes sense, USO is used as a proxy for the price of US oil. If oil prices crash, as they did in 2015, it eventually affects midstream companies, (especially those which have a lower % of fee-based contracts). (AMZA is the light purple line, and USO is the thicker magenta line.)

In October 2017, however, the AMZA/USO correlation fell apart, when USO headed north, and AMZA headed south, after its 10/3/17 ex-dividend date.

This made us curious, so we took a look at AMZA’s short positions. As it turns out, they had a minor short position in USO, as of 4/30/17.

(The right column is the $ value of the position, and the left column is the shorted share count):

(Source: Virtus site)

But sometime between then and 10/31/17, they entered into a much larger short position on USO. The right column is the $ value – their short position went from $5.5M as of 4/30/17, to $43.5M. as of 10/31/17.

(Source: Virtus site)

During this period, USO went from $10.19, on 4/30/17, to $10.93, as of 10/31/17, a ~7% move upward. This wasn’t a huge move, but it may explain part of the decoupling of AMZA and USO until late November 2017, when USO kept moving higher, and AMZA kept dropping. AMZA’s management was also long USO calls, which would’ve helped to mitigate losses on the short positions.

The other factor in this was also post ex-dividend trading – AMZA’s shares often tend to fall after its ex-dividend dates.

Given this trend, it makes you wonder if taxable account short term traders would be better off buying and selling AMZA in between its distribution dates, and avoid the quarterly distributions. That may sound counterintuitive, but those valleys and peaks sure look interesting, in hindsight.

As usual, though, the problem is figuring out when to buy, and not catch a falling knife, as buyers found out in 2015, when oil crashed, AMZA went south with it.

Holdings:

Energy Transfer Partners LP (ETP) still heads up the list – in fact its now over 20% of the fund’s holdings, as of 1/5/18. We covered ETP’s recent rejuvenation in one of our recent articles.

ETP’s GP, Energy Transfer Equity LP (ETE), is also #5 in the top 10 holdings. Management cut the distribution in half in 2017, which improved the distribution coverage.

Also on the list are Williams Partners LP (WPZ), Buckeye Partners LP (BPL), the venerable Enterprise Products Partners LP (EPD), MPLX LP (MPLX), Enbridge Energy Partners LP (EEP), EnLink Midstream LP (ENLK), Andeavor Logistics LP (ANDX), and ONEOK Inc., which replaced EQT Midstream Partners LP (EQT) in the top 10, as of 10/31/17:

As you may have heard, MLP’s are finding favor once again in the market, partially due to a more favorable tax rule – shareholders of pass-through entities, such as Energy MLPs, may now deduct 23% of the attributable income, before being subject to any taxation.

In addition, the new tax bill contains a bonus depreciation provision that allows all companies to immediately write off the full costs of capital improvements, instead of depreciating the new asset over time.

Couple the tax breaks with better oil prices, and you get a more upbeat attitude toward midstream MLP’s, which has played out in the past month. AMZA’s top 10 holdings are up anywhere from 5% to nearly 12% over the past month. Even with this recent resurgence, however, they’re mostly showing negative performance over the past year, excepting WPZ, EPD, and MPLX:

And there’s still a wide disparity between most of these LP’s unit prices and analysts’ average target prices – ETP, for example, is still 24% below its target price of $24.70, even though is has risen 11.7% in the past month:

These top 10 holdings range in yield from 5.35% to 12.05%, with an unweighted average of 7.47%. Their DCF/Distribution coverage factors run from a low of .82x for ETE, up to 1.40x for OKE, with an average of 1.11x:

Valuations:

EEP and ETP have the lowest Price/DCF, at 7.08 and 8.08 respectively. At the other end of the spectrum, ETE has an outlier 18.61 Price/DCF valuation. ETP and MPLX have by far the lowest Price/Book, at .80 and 1.38.

We took a look at various EPS projections for these LP’s. Although EPS isn’t the most meaningful metric for LP’s, (due to non-cash depreciation adn amortization charges knocking down net income), we wanted to get a general sense of growth projections for this group.

Yes, that 1750% growth figure is ridiculous – (we haven’t been smoking wacky tobacky) – it’s only that high because ENLK is projected to swing from a -$.02 loss to a $.33 gain). At any rate, you can see that there’s a lot of growth expected from these companies in 2018, with an average of over 25% for the group.

Financials:

WPZ has the lowest leverage in the group, at 3.46x for Net Debt/EBITDA, and.72 for Debt/Equity.OKE has the best ROE and ROI, with ANDX, EPD, and BPL also showing strong figures. EPD wins the ROA race, followed by BPL, and ANDX, while ANDX and EEP have the highest Operating Margins.

NAV:

AMZA’s NAV went from $25.00 at inception, down to $10.63, as of 10/31/16, and further declined to $8.37, as of 10/31/17. It was of $8.5125, as of 1/4/17.

(Source: Virtus site)

Summary:

So, what to do? With all of this good news about MLP’s, you’d think that AMZA could get some support from the market in 2018, which should support its NAV. This remains to be seen, and the declining NAV, and poor distribution coverage are big concerns.

We like the concept of the fund – it does solve some problems for IRA holders, giving them very high yield exposure to the MLP universe, without K-1 and UBTI hassles. Normally, we’d be long term holders in this type of investment, in an IRA, where the ROC wouldn’t bite us if we chose to sell. But, we wonder how long the fund will continue to pay $.52/quarter, which continues to decrease its NAV.

If they do cut the distribution at all, how will the market react? There are probably investors with IRA’s who were lucky enough to have bought it for under $7.00 in early ’16 – they may be approaching a breakeven below $4.00, so they could weather a further decline in price.

For now we’ve chickened out, and sold our AMZA shares, and we’ve opted for investing directly in some of the underlying LP’s, such as ETP, which is up 6% in the 2 weeks since we wrote about it.

Alternative Ideas:

Although it doesn’t yield 24%, this covered call trade for ETP is one way to generate a higher yield. It’s on our Covered Calls Table, along with over 30 other trades.

ETP’s March $20.00 call is $1.26 out of the money, with enough headroom for potential price gains, if it gets assigned. The Static Yield is 5.4% over this ~10-week period, or 26.10% annualized. The breakeven is $17.78.

If you want to play it even more conservatively, here’s a March put-selling trade that pays $.85, and gives you a lower breakeven of $17.15. You can see more details in our Cash Secured Puts Table.

A note of clarification – We offer 2 very different investing services – our new Seeking Alpha Marketplace site, Hidden Dividend Stocks Plus, focuses on undercovered/undervalued high yield income vehicles from US and foreign markets.

Our independent legacy site, DoubleDividendStocks.com, offers options selling strategies in tandem with high yield stocks.

All tables furnished by DoubleDividendStocks, unless otherwise noted.

Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

Disclosure: I am/we are long ETP, MPLX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Google Spent Years Studying Effective Teams. This Single Quality Contributed Most to Their Success

The best companies are made up of great teams. You see, even a company full of A-players won’t succeed if those individuals don’t have the ability to work well together.

That’s why not too long ago, Google set out on a quest to figure out what makes a team successful. They code-named the study “Project Aristotle,” a tribute to the philosopher’s famous quote, “the whole is greater than the sum of its parts.”

To define “effectiveness,” the team decided on assessment criteria that measured both qualitative and quantitative data. To do this, they analyzed dozens of teams and interviewed hundreds of executives, team leads and team members.  

The researchers then evaluated team effectiveness in four different ways:

1. Executive evaluation of the team

2. Team leader evaluation of the team

3. Team member evaluation of the team

4. Sales performance against quarterly quota

So, what did they find?

Google published some of its findings here, along with the following insightful statement:

The researchers found that what really mattered was less about who is on the team, and more about how the team worked together. 

What Mattered Most

So what was the most important factor contributing to a team’s effectiveness?

It was psychological safety.

Simply put, psychological safety refers to an individual’s perception of taking a risk, and the response his or her teammates will have to taking that risk.

Google describes it this way:

“In a team with high psychological safety, teammates feel safe to take risks around their team members. They feel confident that no one on the team will embarrass or punish anyone else for admitting a mistake, asking a question, or offering a new idea.”

In other words, great teams thrive on trust.

This may appear to be a simple concept, but building trust between team members is no easy task. For example, a team of just five persons brings along varying viewpoints, working styles and ideas about how to get a job done.

In my forthcoming book, EQ, Applied: The Real-World Guide to Emotional IntelligenceI analyze fascinating research and real stories of some of the most successful teams in the world. 

Here’s a glimpse at some of the actions that can help you build trust on your teams:

Be authentic.

Authenticity creates trust. We’re drawn to those who “keep it real,” who realize that they aren’t perfect, but are willing to show those imperfections because they know everyone else has them, too.

Authenticity doesn’t mean sharing everything about yourself, to everyone, all of the time. It does mean saying what you mean, meaning what you say, and sticking to your values and principles above all else.

Set the example.

Words can only build trust if they are backed up by actions.

That’s why it’s so important to practice what you preach and set the example: you can preach respect and integrity all you want; it won’t mean a thing when you curse out a member of your team.

Be helpful.

One of the quickest ways to gain someone’s trust is to help them.

Think about your favorite boss. Where they graduated from, what kind of degree they have, even their previous accomplishments–none of this is relevant to your relationship. But how about the time they were willing to take out of their busy schedule to listen, help out, or get down in the trenches and work alongside you?

Trust is about the long game. Help wherever and whenever you can.

Disagree and commit.

As Amazon CEO Jeff Bezos explains, to “disagree and commit” doesn’t mean ‘thinking your team is wrong and missing the point,’ which will prevent you from offering true support. Rather, it’s a genuine, sincere commitment to go the team’s way, even if you disagree.

Of course, before you reach that stage, you should be able to explain your position, and the team should reasonably weigh your concerns.

But if you decide to disagree and commit, you’re all in. No sabotaging the project–directly or indirectly. By trusting your team’s gut, your people gain confidence, and you give them room to experiment and grow.

Be humble.

Being humble doesn’t mean that you lack self-confidence, or that you never stand up for your own opinions or principles. It does mean recognizing that you don’t know everything–and that you’re willing to learn from others.

It also means being willing to say those two most difficult words when needed: I’m sorry.

Be transparent.

There’s nothing worse than the feeling that leaders don’t care about keeping you in the loop, or even worse, that they’re keeping secrets.

Make sure your vision, intentions, and methods are clear to everyone on your team–and that they have access to the information they need to do their best work.

Commend sincerely and specifically.

When you commend and praise others, you satisfy a basic human need. As your colleagues notice that you appreciate their efforts, they’re naturally motivated to do more. The more specific, the better: Tell them what you appreciate, and why.

And remember, everyone deserves commendation for something. By learning to identify, recognize, and praise those talents, you bring out the best in them.

Two Major Shareholders Push Apple to Study Harmful Effects of Smartphone Addiction in Children

Two big shareholders of Apple (aapl) are concerned that the entrancing qualities of the iPhone have fostered a public health crisis that could hurt children—and the company as well.

In a letter to the smartphone maker dated Jan. 6, activist investor Jana Partners LLC and the California State Teachers’ Retirement System urged Apple to create ways for parents to restrict children’s access to their mobile phones. They also want the company to study the effects of heavy usage on mental health.

“There is a growing body of evidence that, for at least some of the most frequent young users, this may be having unintentional negative consequences,” according to the letter from the investors, who combined own about $2 billion in Apple shares. The “growing societal unease” is “at some point is likely to impact even Apple.”

“Addressing this issue now will enhance long-term value for all shareholders,” the letter said.

An Apple spokesman declined to comment on the letter, which was reported earlier by the Wall Street Journal.

Parental Controls

It’s problem most companies would kill to have: Young people liking a product too much. But as smartphones become ubiquitous, government leaders and Silicon Valley alike have wrestled for ways to limit their inherent intrusiveness.

France, for instance, has moved to ban the use of smartphones in its primary and middle schools. Meanwhile, Android co-founder Andy Rubin is seeking to apply artificial intelligence to phones so that they perform relatively routine tasks without needing to be physically handled.

Apple already offers some parental controls, such as the Ask to Buy feature, which requires parental approval to buy goods and services. Restrictions can also be placed on access to some apps, content and data usage.

The activist pressure is the latest in a series of challenges for the tech giant. Last week, Cupertino, California-based Apple said that all of its Mac computers and iOS devices, which include both the iPhones and iPads, faced security vulnerabilities due to flawed chips made by Intel (intc). At the tail end of 2017, the company apologized to customers for software changes that resulted in older versions of its iPhones running slower than newly introduced editions.