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The death of Fairfax Media has been greatly exaggeated

Just as it looked like the ASX was headed for its tenth winning day out of the past eleven, weak Chinese manufacturing data has sent the market, and the Aussie dollar into a rather sharp decline.


Source: The Age

Oh well… you can’t win them all.

On the bright side, a lower dollar is good for business, and what’s good for business is good for the stock market.

In offshore news, the Dow Jones fell 0.6%, after the US Federal Reserve’s meeting minutes showed the central bank is getting ready to change their stance on interest rates.

Tell me something new…

Locally, it’s full steam ahead for reporting season.  Early winners today include Fairfax Media (ASX: FXJ) which reported its first increase in underlying earnings before interest, tax depreciation and amortisation (EBITDA) since June 2010, and a 48% jump in net profit. Shares in Fairfax soared as much as 27% higher in trading this morning.

Even better, the stock is up 114%  since Motley Fool Share Advisor stock-picker Scott Phillips, in an article in The Sydney Morning Herald in October 2012, said…  “Fairfax Media isn’t a lay down misere for investors, but a risk-tolerant investor… could do worse than taking a closer look.”  Indeed, they could have done A LOT worse.

I’m in the wrong business

Facebook (Nasdaq: FB) has announced a deal to buy WhatsApp, a popular social messaging app with an estimated 450 million monthly users, for a whopping US$19 billion. That’s not exactly small change for Facebook, which is currently valued at around US$170 billion.  Facebook boss Mark Zuckerberg said in a statement…  “WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable.”

Facebook paid $1 billion to buy Instagram in 2012, and offered $3 billion to buy Snapchat last year, but was turned down.  According to Bloomberg, the WhatsApp purchase would be the biggest Internet deal since Time Warner’s $124 billion merger with AOL in 2001. In case you don’t know how that one ended, the answer is VERY BADLY.

Motley Fool General Manager Bruce Jackson owns shares in Facebook. He’s had a fantastic run, his average buying price being $25 versus a current share price of $68.

Asked to describe how he viewed the deal, he rated it as a…

In other news, the developers of the addictive Candy Crush puzzle game are hoping to raise a mouth watering half a billion US dollars in a stock market listing.  I’m definitely in the wrong business.  If you don’t hear from me in the next week, I’ll be off trying to develop an app I can sell to one of the major tech companies.  I’m not greedy, just a couple of million will do thanks.

Unfortunately, statistics suggest its unlikely that I’d be successful.  In 2012, mobile analytics firm Adeven estimated that two thirds or more than 400,000 apps on Apple’s iTunes App Store, had NEVER been downloaded, let alone used.  Oh well, looks like I’m stuck with having to continue getting rich slowly…  Investing in quality companies including those paying juicy, fully franked dividends…

Boring, huh?

Dividends, dividends everywhere

Speaking of dividends…

Even iron ore miner, Fortescue Metals Group (ASX: FMG) has jumped on the dividend bandwagon, paying out a fully franked 10 cents this half, and analysts expect the company to pay out a further 10 cents in the next half.  Chairman Andrew “Twiggy” Forrest, the company’s founder and largest shareholder, will reap an estimated $103 million in dividends just this half.

Fortescue has announced that it wants to hit a consistent dividend payout ratio of between 30 and 40% of earnings, but will have to pay down a big chunk of its several billion in debt before it reaches that target.  As long as the iron ore price stays reasonably high, Fortescue has every chance of paying out regular fully franked dividends.

But if not….

It wasn’t that long ago, in September 2012, after the iron ore price slumped to just US$86 a tonne, when Fortescue was forced to sack more than 1,000 workers, cut back production targets and capital expenditure, sell off a power station and go cap in hand to its bankers to renegotiate its more than US$8 billion in debt.

It’s a funny old game sometimes…

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Mike King does not have a position in any companies mentioned above.

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