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☕ The dividend player that’s just doubled free cash flow

Feb 15, 2024

Good morning! 👋  

We've reached that point in the earnings season when there's officially everything and nothing to do. 

Many investors struggle because it's very easy to get knocked off track. 

Including me every once in a while. 

Over the years, I've learned a few tricks, though. 

  • Stay focused on things that are decidedly positive, rather than risk getting dragged into the morass of negativity that seems to surround our world lately; profits are always the currency of success. 
  • Make it a point to hunt for breakthrough news or developments – things that are exciting!  
  • Ruthlessly cull negative news sources and people from your rolodex because they can interfere with investment decision-making. And your life. 

Investing in optimism isn't just a catch phrase I came up with. 

The power of positive helps put you on the path to profits and can keep you there for long periods of time even when others lose their way. And the data bears that out. 

Here’s my playbook. 

1 –  Apple’s AI – here it comes! 

I told you in my January 2024 outlook that this would be the year that we hear Apple and AI in the same sentence. Just a few weeks later CEO Tim Cook said he "didn't want to spill the beans" but I think he's gonna. 

In June. 

At the worldwide developers conference. 

Some of the things I’m expecting include a more natural, engaging and intuitive Siri. She who shall not be named in our house – Alexa – won't be happy. 

I think we’re also going to see newly integrated AI/iPhones which, of course, will kick off an upgrade cycle of epic proportions. Then all of that, in turn, will feed into computers, tablets and more.  

Apple purchased 32 AI startups last year, more than any other tech company on record according to 9to5Mac and Statista. (Read) 

Totally matches up to my research. 

$275 a share this year. 

2 – CableTV’s last gasp is an engraved invitation for innovators 

Cable TV distributors are trying desperately to remain relevant. 

News flash. 

Consumers don’t want it. 

Disney, Warner Brothers Discovery, and Fox teamed up to provide a so-called skinny sports bundle recently because they know that there are hundreds of millions of fed up sports fans who don’t want cable TV programming and hundreds of million more TV watchers who don’t want sports. 

Predictably, TV distributors are upset because they rake in billions by forcing people to pay for bundles of both to get one or the other. Sadly, America being what it is, I expect a raft of lawsuits. 🤦‍♂️ 

Imagine the opening this creates for a company like Apple. Or the big three cloud providers and the security companies that’ll need to protect, move and support all that. 


3 – Japan slides into recession but... 

Japan just lost its spot as the world's third largest economy to Germany as the country slipped into recession once more. (Read) 

This one’s tough. 

I’ve spent more than 30 years of my life closely involved with the country, as a husband, a father, a son and resident at our home in Kyoto. I’ve done a ton of business there over the years. Still do. 

Japan can recover but it’s got to tackle three material deficiencies: mobility, a shift away from legacy driven, top-heavy managers, and a lack of young fresh, innovative thinkers. 

Meanwhile, the Japanese market continues to trade within 2% of highs last seen in 1989 (Read) 

Japan plans to unveil a series of corporate and market reforms including restructuring capital as a way to attract foreign investment capital. The government is also doing everything it can to re-orient notoriously stingy Japanese savers to become investors. 

While I prefer specific companies, this is one of the few instances where a broadly based ETF could be worth a punt. 

MyPOV: It is absolutely possible to be an economic bear and a market bull at the same time. Just pick your bets carefully.  

4 – Free cash flow has doubled 

Comedian Rodney Dangerfield’s tag line, “don’t get no respect” applies. 

To Microsoft. 

Team Nadella isn’t thought of as a dividend player, but it should be. 

At least to my way of thinking. 

MSFT has grown its dividend 10.86% a year over the past decade while offering 19 years of consecutive annual increases. Free cash flow has more than doubled over the past 5. 

Sign me up... for more. 

5 – Ford CEO Jim Farley finally got the memo 

I’ve railed on critics who don’t understand Elon Musk’s relentless obsession with margins, observing the real focus is on China’s looming entry into global EV markets. 

That narrative is finally catching on. 

Apparently, Ford CEO Jim Farley’s gotten the message. 

He said yesterday that Ford is reworking its EV strategy to compete with the Chinese onslaught and would consider working with rivals to boost competitiveness. 

Is it too little, too late? 

No idea but this is a mind shift that could make Ford worth another look. 

The UAW is gonna pitch a fit if he pivots, btw. 

Keith’s Investing Tip: I make a big deal out of the need to pay attention to CEOs when it comes to investing because those at the top really do set the pace. A situation like this one could pay off if Farley isn’t hamstrung by legacy thinkers (Japan’s problem) and bloated balance sheets and workers who do not understand that 100% of nothing isn’t worth anything if Detroit’s big three go under.  

Bottom Line  

The markets are great at making you uncomfortable in the short-term if you’re in ‘em, and the best in the world at making you uncomfortable in the longer-term if you’re not.  

Just sayin' 

As always, let’s MAKE it a great day – you got this! 

Keith 😊

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