Thursday, October 9, 2008

Mark Cuban: "I'm Going Long Right Now"

In his post yesterday on Wall Street Pit, Cuban mentioned he was starting to go long on some dividend paying stocks while continuing to hedge himself by holding puts on Dow Diamonds (AMEX: DIA). Here are a few excerpts:

On the macro view

When I look at the credit markets. The Fed and Treasury and even international agencies are signalling that they will be the lender of the first and last resort. We see short term treasuries trading as if traders are starting to get comfortable with credit and liquidity. I think that although banks dont fully trust lending to each other yet, they are working to put together the scenarios under which they will trade. They are gearing up.

I have no idea what the economy will do other than the fact that it wont be good. How bad it will get, I dont know. But I can look at a company, discount what the projections are, then discount them some more, and come up with what I think is a fair price.

On the importance of dividends:

What is a fair price to me? Well I start with the Dividend first. No dividend, no buy.


My first stomping grounds are MLPs. They have been getting killed. KILLED. They build pipelines, ships, whatever, and they do contracts to provide service via those assets. The assets are very long term, and the cash flows are very consistent. I am putting together a big porfolio that will pay me more than 10pct yield. The nice thing about 10pct yield, is that its 10pct yield. As long as I watch them and make sure nothing changes in their business to impact that yield (and hopefully it improves and they increase the payout), then I dont have to mark to market on a daily basis. I just get paid.

On the importance of dividends some more

I’m also looking at stocks in industries that I know very well that yield 6pct or more. Dividends that I think are safe in companies that I think are very strong. This wont be a big part of my portfolio. Just a tasting.

Why? Because there are some good companies, in good businesses where I think the dividend is safe, and 6pct , plust hopefully future dividend increases is a good thing. Notice I didnt say a word about the price going up. It doesnt matter if the price goes up. It matters if the dividend goes up. The best stock to buy is the one you never have to sell. It just pays you forever. The concept that you own your share of the discounted cash flow of a company is the biggest lie ever sold by brokers in the history of financial markets. You dont own shit. The CEOs, you know the ones that pay themselves, but dont manage to pay dividends, they control and effectively own those future cash flows. So dont kid yourself. Buy stocks that pay dividends and get paid. Even then there is the risk they can go to zero. So always be aware.

On why you should be skeptical of anyone's advice, including his:

All that said. The stock market can humble me or anyone in a nano second. It could go a lot lower. I DO NOT SEE IT GOING DRAMATICALLY HIGHER. NO CHANCE IT GETS BACK TO 11k anytime soon.

But, Do not take advice from me. In fact, do not take advice from anyone. If your advisor was so smart, they wouldnt be giving you advice on what to buy. They would be sitting on their yacht, being taken to port, to hop on their helicopter, to go to the airport, to jump on their GV, to go to their house on an island you have never heard of. Not sitting in an office, on the phone talking to you about to go nuclear over the market ass.

Unless you know a company and industry as well as anyone, PUT YOUR MONEY IN A CD.

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