SAMSUNG RATCHETS UP THE COMPETITION WITH APPLE

Apple (AAPL) has had a significant advantage in the smartphone market for the past few years.  They have roughly 400 stores dedicated to selling their products to consumers, including the iPhone, whereas other smartphone makers have been forced to rely upon the wireless carriers to retail their phones.  However, this is all about to change and Apple shareholders should take special note.

Samsung (SSNGY) recently announced a new partnership with Best Buy (BBY).  This month Samsung will begin to open dedicated mini-stores, The Samsung Experience Shop™, within more than 1,400 Best Buy locations.  At the Samsung Experience Shops, consumers can experience Samsung’s full range of mobile products including smartphones, tablets, laptops, connected cameras and accessories, all in one location. The shops enable consumers to interact with and buy Samsung’s latest mobile products and experience how the devices connect together to enrich their lives.

Select Best Buy stores will have Samsung Smart Service™, which includes dedicated Samsung Experience Consultants™ and Best Buy blue shirt sales associates to assist customers with purchasing and activating mobile products on the carrier of their choice, understanding their device and supporting them throughout the lifecycle of their product. The specially trained Samsung Experience Consultants will assist with product demonstrations, basic product services, Samsung account set up, warranty registration and post purchase support.

“Samsung has been delivering the latest innovation across the consumer electronics category for some time,” said Dale Sohn, president of Samsung Telecommunications America. “With the Samsung Experience Shops, we are ensuring consumers get the most of that innovation by learning how to leverage their mobile devices across our ecosystem of consumer electronics. Consumers will have one place to not only explore and learn about our full portfolio of mobile products, but also the support of a Samsung expert to help with selecting and servicing them. This will truly be a unique mobile shopping experience.”

This partnership represents a win-win situation for both companies as Samsung will end up with more domestic retail locations than Apple currently has and Best Buy, who has been plagued with profitability issues, finds a new market to service.  “We look forward to showcasing Samsung products in the Samsung Experience Shop in all Best Buy and Best Buy Mobile locations. This is part of our Renew Blue transformation strategy – working closely with vendor partners to innovate and drive value, while also updating our stores to focus on growing and profitable categories,” said Shawn Score, head of U.S. Retail for Best Buy. “Our promise to our customers is simple: we’re committed to providing the best value, service and selection. Our partnership with Samsung on the Samsung Experience Shop is another way we’re delivering on that promise.”

This will present Apple with a significant challenge, one that Apple shareholders should watch carefully.

MORE LAYOFFS COMING TO DISNEY

Earlier this week The Walt Disney Company (DIS) shut down the video game company Lucas Arts, laying off 150 employees.  Last September, Disney cut about 200 people at its Disney Interactive video game, as the company moved away from console games to focus on online and mobile entertainment.  An additional 100 staffers have been laid off in two cuts since.  A year prior, the company laid off a reported 200 employees from its interactive unit.  Now they intend to lay off a number of additional workers in the coming weeks, according to Reuters.  Cuts to both Disney's film studio and consumer products division could come as early as two weeks.  Employees from animation and marketing and home video are expected to be laid off as well.

The studio job cuts will center on the marketing and home video units and include a small number from the animation wing, said the sources, who spoke on condition of anonymity because the plans had not been made public. Staff reductions at the consumer products unit will largely result from attrition, another person said.  

It's currently unknown how many reductions will occur, but the layoffs are reported to be a cause of an internal audit from CEO Bob Iger who wants to cut costs.  In February, the company revealed lower first quarter results, attributing them in part to " rising costs of acquiring TV sports rights for its ESPN division ," something Iger previously predicted would occur at the end of 2012.  Disney, headquartered in Burbank, California, started an internal cost-cutting review late last year to identify cutbacks in jobs it no longer needs because of improvements in technology, one of the people said.  It is also looking at redundant operations that could be eliminated following a string of major acquisitions over the past few years, said the person.  

The studio is now heavily relying on brands Pixar, Marvel, and, now Lucasfilm to release films.  Marvel has six films set to release now through 2015, Pixar just announced a highly-anticipated sequel to "Finding Nemo," and the new "Star Wars" trilogy is set to begin in another two years.  Work on future "Star Wars" related games will most likely come from its own troubled game segment, Interactive, which is hoping for a massive success when its new gaming initiative, Infinity, launches later this summer.

Disney’s stock continues to hit all-time highs reaching $53.53 in January and $57.76 last month.

Sequestration Resistant Investments

Are you concerned about how sequestration will affect your portfolio?  Are you looking for companies in which to invest that aren’t likely to be affected?  Look no further than the utility industry.  Why?  Utility companies tend to have highly stable revenues and above average dividend payouts which makes them very attractive to investors during an uncertain economy.

With that in mind, Paul Zimbardo has compiled this list of six utility companies set to declare dividends this week.  Please view his original article to see how he came up with these companies, and remember to always perform your own research before purchasing any stock.

Pepco Holdings, Inc. (POM): 5.26% Yield; Ex-Dividend 3/7
Geography: Northeast United States (Maryland and Washington DC)
Customers: 800,000

Financial Performance and Metrics: Source - (Finviz.com)

• Forward P/E: 16.69
• Book Value: $19.40
• Price/Book: 1.05
• Debt/Equity: 1.22
• Revenue Growth/(Contraction) (QoQ): (10.44%)
• EPS Growth/(Contraction) (YoY): 85.39%
• Payout Ratio: 92.8%
• Dividend History: $0.27 per share

PPL Corporation (PPL): 4.77% Yield; Ex-Dividend 3/6
Geography: United Kingdom and Eastern United States (Pennsylvania, Kentucky, Virginia, and Tennessee)
Customers: 10 million (7.8M in the United Kingdom)

Financial Performance and Metrics:

• Forward P/E: 14.20
• Book Value: $18.01
• Price/Book: 1.71
• Debt/Equity: 1.92
• Revenue Growth/(Contraction) (QoQ): (23.61%)
• EPS Growth/(Contraction) (YoY): (2.41%)
• Payout Ratio: 54.82%
• Dividend History: $.3675 per share

UIL Holdings Corp (UIL): 4.39% Yield; Ex-Dividend 3/7
Geography: Northeast United States (Connecticut and Massachusetts)
Customers: 700,000

Financial Performance and Metrics:

• Forward P/E: 16.26
• Book Value: $21.90
• Price/Book: 1.80
• Debt/Equity: 1.63
• Revenue Growth/(Contraction) (QoQ): 0.74%
• EPS Growth (YoY): 28.80%
• Payout Ratio: 91.27%
• Dividend History: $.42 per share

Public Service Enterprise Group Inc. (PEG): 4.38% Yield; Ex-Dividend 3/6
Geography: Northeast United States (New Jersey)
Customers: 4 million

Financial Performance and Metrics:

• Forward P/E: 14.10
• Book Value: $21.36
• Price/Book: 1.54
• Debt/Equity: N/A
• Revenue Growth/(Contraction) (QoQ): (8.73%)
• EPS Growth/(Contraction) (YoY): (9.4%)
• Payout Ratio: N/A
• Dividend History: $.36 per share

Westar Energy Inc (WR): 4.31% Yield; Ex-Dividend 3/7
Geography: Central United States (Kansas)
Customers: 700,000

Financial Performance and Metrics:

• Forward P/E: 15.46
• Book Value: $22.84
• Price/Book: 1.38
• Debt/Equity: 1.14
• Revenue Growth/(Contraction) (QoQ): 2.6%
• EPS Growth/(Contraction) (YoY): 7.29%
• Payout Ratio: 67.59%
• Dividend History: $.34 per share

SCANA Corporation (SCG): 4.14% Yield; Ex-Dividend 3/7
Geography: Southern United States (The Carolinas and Georgia)
Customers: 1 million

Financial Performance and Metrics:

• Forward P/E: 14.26
• Book Value: $31.14
• Price/Book: 1.58
• Debt/Equity: N/A
• Revenue Growth/(Contraction) (QoQ): 8.4%
• EPS Growth/(Contraction) (YoY): 6%
• Payout Ratio: N/A
• Dividend History: $.5075 per share

What Defense Investors Should Know About Sequestration

It’s on the tip of practically every tongue in America right now.  Sequestration, the across-the-board government spending cuts outlined in The Budget Control Act of 2011 in order to offset U.S. debt ceiling increases.  Under the terms of the act the 2013 defense budget is to be reduced by $54.7 billion.  While that’s certainly a considerable sum, it’s not as bad as it sounds when you look at the larger picture.   

The initial defense budget for 2013 is $728 billion.  Therefore, sequestration should reduce the defense budget to $673.3 billion, or approximately the same amount as in 2007.  That’s still a sizable amount of money that defense contractors will be receiving.  The five largest defense contractors, Lockheed Martin (LMT), Boeing (BA), Northrop Grumman (NOC), General Dynamics (GD), and Raytheon (RTN), have had a combined sales of approximately $160 billion each year for the past four years.  They will certainly be affected and there are sure to be some bumps in their balance sheets but they aren’t likely to be very serious.

On top of that, these companies aren’t exactly small.  These defense contractors are powerhouse companies, capable of weathering the proverbial storm in revenue fluctuations.  Defense companies aren’t generally considered big movers on Wall-Street.  They are typically slow and steady, which is part of why they are attractive to investors.  

Another reason investors are drawn to defense contractors is because of the dividend payouts.  Dividends are paid from company profits, the money that is left over after paying expenses and taxes.  So, in theory if a contractor experiences a drop in profits as a result of the spending cuts their dividend payout might be affected, but it’s likely to be minimal, if at all.  Most defense companies pay dividends at a low ratio, no more than 50%.  That means their current dividend payments are likely to be sustainable, even if they take a hit to their profitability.

The last thing to be aware of is the process through which defense companies are paid.  It can literally take years for a company to be awarded a contract, have funding approved, and receive payment.  Sequestration doesn’t affect the money that has already been approved.  Therefore the full impact on defense contractors likely won’t be felt for a few years.

What does all of this mean to investors?  If you currently own stock in a defense contractor you most likely have nothing to worry about.  If you don’t currently own defense stock, now might be a good time to visit the idea since many skittish investors have sold their shares lately, driving the prices down.