MLPs

I was looking at picking up SDT to put in an IRA account, but when I went to the trade page, my brokerage displayed a warning that SDT is an MLP (Master Limited Partnership), which may have tax consequences for my account:

Investments in publicly traded MLPs involve risks and considerations that may differ from investments in common stock.

Tax complexity risk: Master Limited Partnerships (MLPs) are generally considered passthrough entities for tax purposes and have special tax considerations. Pass-through entities may generate unrelated business taxable income (UBTI) that may have undesirable tax consequences for retirement accounts and other tax-exempt investors. If you hold MLP units, you are generally treated as a partner for tax purposes and will be issued a Schedule K-1 (Form 1065) rather than a Form 1099 form for use in filling out your tax return. A K-1 lists the partner's share of income, deductions, credits, and other tax items. If the MLP has operations in multiple states, you may need to file a separate tax return in each state.

An MLP that is treated as a corporation in the United States rather than a pass-through entity for federal income tax purposes would be obligated to pay federal income tax on its income at the corporate tax rate. In this case, the amount of cash available for distribution by the MLP would be reduced and part or all of the distributions made could be taxed entirely as dividend income. In this case a Form 1099 would be furnished rather than a Schedule K-1. Please see the MLP’s website, SEC filings, or most recent shareholder report for further details about tax treatment of your investments.

A search turned up a page on the National Association of Publicly Traded Partnership's site regarding MLPs and retirement accounts which has some useful information about UBIT (Unrelated Business Income Tax).  BusinessWire also has information on SDT, including a link to their tax information page.

DEW (ETF) Components

Someone told me that I should look into an ETF called DEW, as I have an interest in securities that pay a high dividend.  This is WisdomTree's global equity income fund.  The annualized yield is only 3.7%, with an expense ratio of 0.58%.  They list all the components of the fund, so theoretically one could pick out a few promising ones and mimic the fund with lower overhead.  It's good for mining a few ideas, anyway.

Link Dump, 2012.07.23

Since I found out that Firefox really sux the CPU cycles--although I don't know if that's due to Ajax or not--I need to clear some tabs.  The problem is, I usually forget that I cleared them, and never get back to them.  But I suppose if it didn't come up again, that's ok.

What your defensive gun says about you (When the Balloon Goes Up) - amusing...and startlingly insightful
Basic Gunshot Wound Kit (guns, cars, & tech) - could save your life
CJ GLS [Wikipedia][site] - a Korean shipping company that I was looking into as an alternative to the Greek ones
Hanjin Shipping [site] - another Korean shipping company
What is wrong with the world? (Write Science) - scientists (and engineers) need to learn to communicate better and teach laymen the importance of their work
The M1 Garand for Homeland Defense (some gun forum) - of course I'd rather have an M14, but they're way more expensive...
The Poor Man's Guide to Survival Gear (Alt-Market) - married men are economically poor

High-Yield Energy Stocks

A while ago I was looking for energy stocks paying out big dividends, and came across a couple sites [1] [2] that listed a few.  This was before I found out how to search Google Finance for dividend yield.  Still, every once in a while these sorts of lists are interesting to go through.

Babolat

The wife was asking me if Babolat was a public company, so I looked into it.  The official site doesn't really say, and other search results turned up responses that it's a privately-held company.

Except when I put "Babolat" into Google Finance, a Japanese company called Descente turned up.  The company profile was from Reuters, and states that Descente makes Babolat products.  The Descente website has almost nothing on Babolat in English, except one line in the history, but the Japanese page has mention of the French brand started in 1875.

So the question is whether or not to invest in Descente.  The French company likely retains the brand rights, and could switch manufacturers should they see fit.  Plus, it's hard to analyze financials of overseas companies that don't have the same accounting practices that the U.S. has.  But nothing ventured, nothing gained, right?

Paper Metal Investments

So I'm looking for securities tied to gold/silver for two reasons: 1) for convenient trading to play gold vs. silver ratios, and 2) to invest in gold/silver with retirement dollars, since I have more cash there to invest.

There are a number of ETFs, including GLD, SGOL, AGOL, and SIVR.  The downsides include a large ratio of shares to physical holdings and gains taxable at the higher collectible rate rather than long-term capital gains.

In my reading online another option came up: Sprott's trusts PHYS and PSLV, which offer physical holdings in gold and silver with convertibility to metal and potential tax benefits.  I'll have to check out the prospectus.

Addition: Regarding how the IRS views ETFs in IRAs, apparently there are two private-letter rulings that state that gold/silver ETF shares in an IRA aren't collectibles for tax purposes.

The Oracle's Picks

WSJ ran an article on Warren Buffet's latest investment advice from the shareholder's meeting.

Previously I wanted to buy a share or two of the class B stock so I could go to the event in Omaha.  Then I found out in 2008 that Buffet is a Democrat.  And also after the B stock split, I sort of lost interest.

Anyway, his favorites: KO (thinking the dividend will double), SNY (cheap relative to what BH paid previously), KFT (depressed due to the takeover of Cadbury), JNJ (cheap stock, fair dividend), WMT (not interested in China-Mart, though), BRK.B (currently 1.3x book versus the 1.6 historical average), and WFC (not interested since they're anti-gun).

Contrarian Stocks

WSJ had an article a couple weeks back about how often the stocks that Wall Street likes at the start of the year aren't the ones that turn out at the end of the year to have performed well during the year.  The list:

The ones they like:

• Thermo Fisher Scientific
• Apple
• Agilent Technologies
• Compuware
• Halliburton
• Express Sprints
• EQT
• Celgene
• Google
• R.R. Donnelly & Sons

The ones they didn't like:

• AIG
• Apartment Investment & Management
• Brown-Forman
• Diamond Offshore Drilling
• Ameren
• Eli Lilly
• Nicor
• Berkshire Hathaway
• Cincinnati Financial
• Sears Holdings

Might be worth a look—if it's not too late.

DuPont Analysis

Via a Motley Fool article, I read about the DuPont identity, a formula that describes the elements of return on equity (ROE):

ROE = ( net profit / sales ) x ( sales / assets ) x ( assets / equity )

Put another way, the rate of return to stockholders is the profit margin times asset turnover times leverage, which makes intuitive sense.