Artificial Intelligence: The Clever Ways Video Games Are Used To Train AIs

, Opinions expressed by Forbes Contributors are their own.

Who says you can’t get smart playing video games? Although the idea of spending hours playing video games isn’t usually recommended for humans to increase their intelligence, the realistic 3-D graphics and environments of many video games just might make video games the perfect learning tool for artificial intelligence.

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The data problem

AI algorithms get smarter and learn to perform tasks by being fed enormous amounts of data. When you’re Facebook, this doesn’t present a huge obstacle. Facebook creates huge data sets daily and also has the financial capability to close any gaps. There are millions of photographs on Facebook that are already labeled which then helps its AI algorithm know who to tag on future images. But aside from huge data-generating companies, the majority of companies don’t acquire the volumes of data required to properly train AI algorithms.

In addition, humans just don’t have the time and patience to spend teaching AI algorithms EVERYTHING they need to know. But video games have patience and time in abundance.

Assassin’s Creed inspires computer scientist to use video games to train AI

When Adrien Gaidon, a computer scientist at Xerox Research Center Europe, saw the trailer for the video game Assassin’s Creed he was fooled into thinking it was a trailer for a movie because of its realistic look. When he realized it was actually computer generated imagery (CGI), he thought if he could be fooled into thinking video games were real, perhaps AI algorithms could be too.

Gaidon and his team used Unity, a widely used game development engine for 3-D video games, to create scenes to help train deep-learning algorithms. Not only did they create synthetic environments, but they imported a real scene into the virtual world. This allows them to compare the effectiveness of training algorithms with virtual environments against those trained by real images. His testing continues.

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Don't Let The General Electric Noise Distract You From The Bigger Picture

Calling a spade a spade, all the suggestions that General Electric (GE), could, and probably should, cut its dividend aren’t off base. The company’s a train wreck right now. On a mathematical/GAAP basis, it can’t justifiably afford to maintain its current payout, which is only half of what it was a year ago.

Equally obvious is activist investor Nelson Peltz’s recent suggestion that GE is seriously considering a significant breakup. Nobody really doubted that’s at least one of the things new CEO John Flannery had in mind when in January he said all options were on the table. (Observers weren’t thrilled with the idea then, but have warmed to it now, but that’s a different story.)

And, if we’re being honest, nobody was truly shocked when Flannery said last month that the company’s energy division wasn’t on the road to recovery yet; most investors know there’s no quick fix to what really ails General Electric.

So why all the wild swings to news that really isn’t news? Because the market doesn’t “get” GE right here, and right now. It’s little more than an instrument of speculation, which is anything but normal for the iconic blue chip.

The good news is, the unusual situation the company – the stock – is in actually sets up an opportunity for long-term investors that can look past the headlines d’jour.

Perspective

It’s maddening how overused the Benjamin Graham axiom “In the short run, the market is a voting machine but in the long run it is a weighing machine” is used, so it’s with great trepidation I invoke it now.

On the other hand, if the shoe fits and the cliché applies… well, you get it. GE shares remain mired in hysteria, and that’s preventing long-term-minded investors from seeing what’s plausibly in store one year from now, let alone three years from now. In the end though, where GE is likely to be three years from now is in better shape than the market’s giving it current credit for.

Analysts think so anyway. Take a look.

Source: Thomson Reuters/image made by author

But cash flow? Yeah, that’s a hang-up, though not as much as one might fear. A closer look at General Electric’s books clarifies that on an operational basis, GE is cash flow positive. It’s just not cash flow positive enough right now to service its pension and debt obligations and also make meaningful, much-needed investments in growth that will supply more cash flow in the foreseeable future.

Maybe that’s in the cards sooner than we’re being led to believe though.

Yes, the power division is a liability. There’s at least a path to profitability in the arena though. Flannery explained during the first quarter call:

“First, we continue to have leading technology, deep domain, digital solutions and broad and deep customer relationships. We continue to be viewed as a go to provider in our industry and we are fighting for every opportunity in the market.

On the cost side, in an industry that clearly has excess capacity, we are aggressively moving to right size our footprint and base cost. We took out $800 million of structural cost in 2017 and an additional $350 million in the first quarter. We are on track to exceed our $1 billion target for 2018 and headcount and sites are coming down….

…We are driving out cost and addressing the quality issues we had last year. The team has introduced a new sales force compensation program specifically aimed at driving transactional services and margins. We have a new leadership team in our supply chain and they are reinvigorating the use of lean and Six Sigma to drive better execution. The H cycle time is down 20%. Ultimately our goal is to cut this another 50% or more…

… we are also exiting non-core assets as we simplify the business.”

OK, it’s not sexy, but it was never going to be. It’s a multi-year project, and a long-term project that becomes increasingly viable each day crude oil prices linger above $60 per barrel. Corporations aren’t fully opening their wallets until they know capital expenditures on GE’s power wares make sense.

In the meantime, aviation and healthcare are still performing well, and growing. The IATA forecasts that air traffic demand will double over the course of the coming 20 years, and the need for healthcare equipment is never going away even if that market is ever-changing. The Centers for Medicare & Medicaid Services reckoned that healthcare spending would grow 5.5% per year through 2026, largely driven by the 10,000 baby boomers that are retiring every day.

Meanwhile, the decision to shed its locomotive business is a big step towards the streamlining of the company that will ultimately unlock the value Flannery and Peltz (among others) have been talking about for a while.

Baby steps.

Green Shoots from GE Stock

To that end, some bulls are occasionally peeking their heads out in the meantime, planting seeds for a few green shots from the stock.

This is where things get interesting, and tricky. All of the technical recovery efforts made thus far have been up-ended. Even the best technical rebound we’ve seen in months – the one from last month – was largely wiped away. Take a closer, second look at the chart though. The tumbles are hurting less and less, and the rallies are making more and more progress.

Source: TradeStation

It’s still a fits-and-starts process, but the tide is turning.

It’s also turning more than you might guess with that second glance. The rising Chaikin line (bottom) says there’s a good amount of volume behind the recovery effort. Those bulls aren’t terribly vocal, but they’re putting their money where their mouth isn’t.

It’s largely a matter of greater confidence that will get – and keep – the stock back on track.

That confidence will be built on someone else being willing to stick their neck out, by the way. Moreover, that confidence will be built on the heels of certainty that the company is indeed going to unlock value by selling pieces of itself. Again though, that’s a multi-year process. The market is slowly starting to digest this reality, which old-school GE shareholders never had to chew on in the past.

Patience

It’s still more of a trade than an investment, to be clear. But, it’s one of those trades that could slowly morph into an investment… that rarest kind of stock picks.

Fanning those would-be-bullish flames even more than getting better income out of the company’s revenue-bearing assets will be, as was noted, more apparent progress on the breakup front. As Stifel analyst Robert McCarthy recently put it, GE is only rated a hold “absent a more material, dynamic breakup.”

That stance puts Peltz’s comments from late last week back in the spotlight, reminding investors that Flannery wasn’t just blowing smoke a few months ago when he alluded to the same. It’s coming, even if investors can’t fully see it yet, and even if they can’t fully appreciate the fullness of the prospect. Melius Research estimated late last month, when General Electric shares were priced at $13.28, that such a price “likely undervalues the assets by 25 percent or more” were the company broken into marketable pieces. With a current price of still less than $14, the bulk of Melius’ upside is in front of the stock.

It’s also possible that even Melius’ outlook underestimates how well GE’s aviation and healthcare arms could perform.

As for a target, Melius effectively says a post-breakup value would make GE stock worth around $16.60, at least. The chart wrestled with the $17.35, as support, and resistance, late last year and early this year. The figure is still within Melius’ “or more” range.

The toughest part of such a trade? Sticking with it even when the headlines are terrifying. They’re taking smaller and smaller bites out of the stock, as investors understand the situation better and better. It’s a process though, and GE shares aren’t fully out of perception-purgatory just yet. They’re getting closer though, and may be worth the risk of getting into before it fully happens.

The risk profile plunges dramatically if-and-when GE shares hurdle the converged 20-day and 50-day moving average lines at $14.39.

If you’re looking for stock picks that are less speculative and better-founded investments, take a test drive to The Well-Rounded Investor service. You’ll get top-down sector analysis and bottom-up market analysis that identifies the market’s best bets… names you may have never found on your own.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GE over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

AT&T: The 6% Yield Window Is Closing

Without doubt AT&T (T) has been generating substantial income for dividend investors. Equally indisputable is the fact that the development of the stock price has been consistently and greatly lagging the overall market. More importantly, with AT&T trading 15% below its 52-week high investors, in the worst case scenario, would currently require around three full years of dividends to just compensate for the capital loss.

The number one rule in investing is always to at least preserve capital and while a 6% yield looks good on paper it does not help if your principal declines almost three times more.

Chart

T data by YCharts

I have been caught on the wrong foot with AT&T as well as I quickly grew it into my largest portfolio position, both in terms of income and capital, as I focused too strongly on the former. It’s mind games here. With AT&T paying such a high yield you can easily get double and triple-digit income per quarter with relatively little capital which in turn motivates you to invest even more. What is largely neglected at this stage is that as the yield increases and reaches the illustrious 6% barrier this is also means that the markets place higher risk into the stock.

However, despite all the capital losses I have incurred (but not realized) so far, the stock’s current yield could still be a great long-term opportunity provided the outlook is not as bad as expected. Now that the Time Warner (TWX) trial is approaching its end (outcome remains as uncertain as always) and the proposed Sprint (S) and T-Mobile (TMUS) deal also receiving regulatory scrutiny, this 6% yield window is closing with the stock now trading below 6% for the first time in almost two months. Let’s review the investment case for a dividend investor.

What is going on at AT&T?

Source: AT&T Investor Relations

The stock is currently trading at a lackluster 7 times earnings implying almost no growth whatsoever as the company finds itself right in the middle of a complex and challenging business setup.

The outcome of the Time Warner trial, which is expected to close this week on Tuesday, has been lingering over the stock and the company like a Damocles sword with investors fearing the excessive post-merger debt load of AT&T in a hawkish interest rate environment but equally expecting that AT&T needs some sort of vertical integration in order to compete with one of its fastest growing competitors Netflix (NFLX). Regardless of the outcome investors react as if AT&T will lose either way. Also, if the trial does not get approved AT&T will have spent hundreds of millions on lawyers, bankers and penalty statements and even worse it will cast a big shadow of doubt across the entire M&A sector in a Trump-led U.S. administration.

It is highly subjective to speculate on the stock’s reaction to whatever decision is being taken but given Time Warner’s booming business and vertical integration opportunities I am certainly rooting for the DoJ to approve this deal. Everything else, not only for AT&T but in general for the M&A landscape, should be rather detrimental. AT&T is not building a monopoly here but simply complementing its very own chain of distribution with very useful content.

Speaking in terms of Time Warner, the company is really rocking. Revenues are up 9% in the fourth quarter and EPS came in at $1.60. That strong revenue growth was driven by all segments with Turner up by 22%, HBO up by 13.3% and Warner Bros. growing 10.8%. This has been of the strongest quarters for Time Warner and bodes extremely well for AT&T should the acquisition get approved.

In fact, despite the seemingly high acquisition price of $85B, Time Warner could be worth much more given that despite that impressive growth it is only valued at 14 times sales. On top of that Time Warner also generated strong FCF of $4.4B.

It will probably be painful to watch the court’s decision and investor’s reaction to the verdict but it should help the stock thereafter, possibly after some sort of algo-driven panic sell-off, as uncertainty decreases and the focus returning to fundamentals.

Speaking of fundamentals the first quarter of 2018 was a big disappointment with revenue missing by a whopping $1.27B. Following the completion of the costly DirecTV deal AT&T has grown its top line by more than $30B over the last 8 years but organically growth has been virtually flat. In terms of profitability AT&T has been able to post the obligatory $0.01 to $0.03 EPS increases which helped raise its dividend by $0.04 per share. However, cord-cutting has been a major issue for the company. Its customer base is growing strongly every quarter but so far this growth has come at the expense of cannibalizing customers with a higher customer lifetime value. In Q1 187,000 in the higher-margin linear video business were lost whereas AT&T added 312,000 in the OTT video segment yet overall its margin still declined by roughly 1pp Y/Y or around $1B in sales.

You don’t have to be an expert to recognize this setup is losing money right now but whether it is still a “LOSE” or rather a “WIN” over the long-term is a completely different question. In an earlier earnings call from last year management stated the following on that:

Our wireless customers are really valuable in the extension of their life through the lowering of their churn, and the ability to get entire families or entire groups of phones is really important to us. And so we strongly believe that that is value-accretive to the total operations of the total organization, and we monitor it on a very regular basis.

Source: AT&T Earnings Call Transcript – Q3/2017

What could be even more value-accretive is how millions and millions of connected cars may lead to higher sales.

So we have millions and millions of connected cars out there, over 10 million connected cars out there. So we built this platform, and those are down in our Internet of Things in our connected device category.

But now what we’re finding is that 65% of the people who drive cars aren’t our wireless customers, so we’re finding a real opportunity to connect tens of thousands of those, almost 100,000 this quarter, with a prepaid offering to the connected car. And when they do that, they will pay us. It’s not a $4 or $5, it’s a $15 or $20 connection. And so it not only gives us a really great revenue opportunity and high margin, and that’s a lot better than a resale opportunity at a much lower, but it’s also an opportunity to show them what we can do and then potentially get the rest of their wireless business or get the rest of their video business.

Source: AT&T Earnings Call Transcript – Q3/2017

This is a tremendous opportunity that so far I believe has been more or less completely overlooked by the market which gets easily caught up on sequential and Y/Y comparisons. While that might be important for traders, for long-term investors, it is just noise to be ignored.

An Income Strategy Session

Now that the stock is trading at a 5.9% yield as of its close, long-term oriented investors should really welcome that opportunity to add to their position. In essence, if you are a long-term investor, this is exactly the kind of market reaction you would like to see. It allows you to lower your cost basis while the business is making the necessary transformation steps towards the future. The day-to-day noise with heavily followed stocks like AT&T is tough to ignore, and it may be one of the most difficult challenges to have the conviction to hold and add to your position in these times.

To help cope with these unrealized losses, investors should take a step back and concentrate on the bigger picture. Long-term investors know how powerful dividend reinvesting really is, but in the heat of the moment, it is only natural to temporarily blend this out. If we project the 5-year returns with reinvested dividends of an initial $5,000 investment in AT&T at $33.83, we end up with the following metrics:

  • Initial investment: $5,000 @5.9% yield assuming 2% dividend growth, 15% tax rate, quarterly reinvestment, 0% stock price appreciation, purchases of partial shares
  • Investment value after 10 years: $12,243 or an almost 144% gain with the respective yearly net dividends depicted below, thereof $3,624 in net dividends and $3,619 worth of additional stock from reinvested dividends.

After 5 years the net YoC has already risen to above 6% and after 10 years it has almost reached 10%. This is a very conservative scenario as it does not factor in any stock price appreciation and only minimal dividend growth. In that scenario CAGR would only be 10.5% and is basically a worst-case scenario given that it is unlikely that T’s stock price will remain flat over the next 10 years. And even if it does it is a great way to accumulate reliable and substantial income for long-term oriented dividend investors.

Assuming the stock appreciates by 5% every year over the next ten years with all other parameters being unchanged we would end up with the following metrics:

  • Investment value after 10 years: $15,899 or an almost 218% gain with the respective yearly net dividends depicted below. The total returns breaks down into $3,457 in net dividends received, $4,298 worth of additional stock from reinvested dividends and $3,145 worth of stock appreciation on initial investment. Naturally, as the stock prices rises the yield declines and as such quarterly reinvestment of dividends yields lower net YoC compared to the upper scenario. However, capital appreciation vastly overcompensates this effect.

If you want to easily run these calculations on your own, I’d be happy if you try out this Excel-based long-term dividend projection calculator.

Investor Takeaway

I am still bullish on the stock but as mentioned in a previous article have become a little bit more cautious as well as both the outcome of the Time Warner trial and AT&T’s ambitious 2018 FCF guidance have potential to further weaken the stock.

Still, over the long-run, as the two calculations above show, the prospects are very promising provided investors remain patient and not get overly obsessed about short-term fluctuations. You will probably not get rich with AT&T anymore but you can build up a growing stream of reliable and substantial income over time. Starting with an almost 6% yield appears to be a good opportunity to start and continue this journey.

For investors having been invested into the stock in the mid-to-high 30s patience is required even more but first one has to make up one’s mind as to what one expects from this investment. If you are expecting market-like or even market-beating returns in this environment you should definitely look elsewhere. If you treat the stock as one pillar of your portfolio targeted to generate reliable income this is the highest-yielding Blue Chip stock in America and based on market cap alone probably also around the world.

The 6% yield window of opportunity could close any time and if it does you may have to wait a very long time to get that opportunity again.

What do you think about AT&T and its prospects? Are you investing more on recent price weakness, holding your position or selling out and moving on to other investments?

If you enjoyed this article, the only favor I ask for is to click the “Follow” button next to my name at the top of this article. This allows me to develop my readership so that I can offer my opinion and experiences to interested readers who may not have received them otherwise. Happy investing.

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Disclosure: I am/we are long T, TWX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

How to React to a Really Bad Handshaker

We keep getting handshakes wrong. 

So while I wrote separately about the most important rules to keep in mind when you’re shaking hands, you’re only one half of the handshaking equation. By definition, there’s another person involved.

And to paraphrase Jean-Paul Sartre, Hell is other handshakers. Especially bad handshakers.  

Fotunately, we can categorize most of the world’s leading handshake missteps, and help you put together a reaction plan long before your hands meet. Here’s what to do when you’re on the receiving end of a bad handshake.

1. What to do when someone tries to crush your hand with a handshake.

We’ll address this obvious one first: the guy (it’s always a guy) who wants to crush your hand while shaking it in a pathetic attempt to express dominance.

By the way, this is never done by mistake, although the “hard handshaker” will sometimes profess that he’s just that strong and can’t control himself. That is always a lie, and you should remember that the person who says it cannot be trusted.

Anyway, you have three options:

  1. Do nothing. He’s the pathetic one; let him think his gesture means something.
  2. Crush back. You can do this if you think you can win, although keep in mind you’re sinking to their level. You can also grip the trangressor’s handshake hand with your free left hand to add some extra power. If that feels like cheating, just remember the other guy started it, so anything goes.
  3. Call him out verbally, preferably with a humor-infused put-down. For example, “Wow, what a handshake, you must spend hours alone in your bedroom working on it!”

I’m big on number 3, as it completely undermines the hard handshaker’s M.O. Almost regardless of what happens next, he’s lost the alpha advantage he sought.

2. What to do when your handshake/hug radar is not aligned.

It happens: you go to shake hands; the other person goes in for the friendly hug. Or you’re the hugger and they’re the handshaker. You have to go with what’s natural, but in general, if they want to hug, give ’em a little hug. The fact that you make the second effort to get the gesture right will mean something.

That said, big exception here: If there is any chance that going in for the hug will make either of you feel uncomfortable–especially if the words “sexual harassment” enter into your psyche in any way–stick with the handshake. It’s always better to be remembered as the awkwardly formal guy than to remind someone of a creepy distant uncle.

3. What to do when they pull back or make you stretch to meet them.

This is either another one of those handshake power games, or it’s a matter of obliviousness. Usually, a handshake isn’t worth the contortions. You can beg off, or joke about it–pantomiming like you’re actually shaking hands while pointing out that it would be logistically ridiculous to climb over four people and reach over to shake hands.

Sometimes however, you just have to stretch and reach and do it. I’m thinking of the first time I met my girlfriend’s father, for example. 

4. What to do when the handshake lasts too long.

Pumping is optional in handshakes, but if you do, there’s a firm three pump limit. Anything past that, and you’d better be gripping hands while holding a giant oversized check and posing for a camera. If the other person doesn’t stop shaking hands after three up-and-down motions–five at the absolute tops–it’s up to you to gently release your grip and pull back.

5.  What to do when they shake hands limply.

Nothing really to be done here. Maybe they just don’t have a firm grip; maybe there’s a reason you know nothing about. Just reciprocate with a politely firm grip of your own and get out quickly.

6. What to do when they shake hands while ignoring you.

This is a tough one. To describe the situation further, I’m thinking of the times when someone starts to shake your hand, but in mid-shake turns his or her attention to someone else without letting go. It’s either a show of dominance, or a sign of a person who is at best case distracted, or at worse case, an egotist. 

The good news here is that you hold all the cards. If this is a person you really want to talk with, you literally have them by the hand; they cannot walk away without pulling back.

If it’s someone you aren’t willing to play this game with, just let go as if the handshake never happened. Think of it as a bad relationship that took only a few seconds, and move on with your life.

7. What to do when they have wet or dirty hands.

You can try to beg off–maybe by saying something like, “Sorry for not shaking hands; my hands are wet.” Even if your hands are as dry as a James Bond martini, the other person can’t really call you out on this little white lie without bringing attention to the state of his or her hands.

Or, you can just shake hands anyway, and wash your hands or use a little hand sanitizer afterward. I know a guy who once went for a job interview, and used the men’s room while waiting, where he saw another guy use the facilities but not wash his hands. Minutes later, he met the person who’d be interviewing him: You guessed it: “Mr. Didn’t Wash His Hands.”

What are you going to do in that situation? If you want the job, I guess you shake hands.

Like our guide to how to shake hands like a human being, we can’t cover every situation here. But honestly, handling the overly-hard handshakers alone makes this worth it. Bottom line: Lead by example, it’s not that hard. Just shake hands like a regular human being.

'Game Of Thrones' Season One 4K Blu-ray Review: Stark Difference

The Show

While one or two later series (with bigger budgets) of Game Of Thrones top season one for spectacle and story sophistication, there’s something about Season one’s rawness, introductory brutality, and world-building cleverness that still makes it my personal favorite season to date. Especially as it’s also the only season where we get to spend serious time with Ned Stark, who provides a constant tragic heart to all the mayhem that no other season can boast.

Photo: Game Of Thrones Season 1, HBO

Who’s a pretty dragon, then?

It’s interesting looking back at it now, too, to remember afresh just how groundbreaking it was in 2011 in terms of how far it was prepared to go to ensure that seriously unpleasant stuff happens to the most pleasant people.

In fact, I’d say the 4K Blu-ray release has arrived after just the right time to make revisiting the opening series feel completely fresh again.

One last thing I had to admire as I revisited the series for this review is just how quickly and effectively it establishes the memorable tone that will endure throughout Game Of Thrones’ subsequent six series. By which I mean there are two beheadings in the first 15 minutes.

Release details

Studio: HBO

What you get: Four region-free 4K Blu-ray discs, digital download code

Extra Features: Audio commentary tracks on many episodes by various cast and crew members; ‘Making of’ documentary; Creating the show open featurette; Creating the Dothraki language; 15 character profiles; From the book to the screen; The Knights Watch; Cast auditions; Animated history and lore interactive feature; Anatomy of an episode feature

Best soundtrack option: Dolby Atmos

Video options: HDR10, Dolby Vision

Key kit used for this test: Oppo UDP-203 4K Blu-ray player, Samsung QN65Q9FN TV, Panasonic UB900 4K Blu-ray player, LG OLED77C8 TV

Picture Quality

My very first experience of Game Of Thrones was watching Season One on HD Blu-ray. So I feel reasonably well qualified to say that the step up in picture quality delivered by this 4K Blu-ray release goes way further than I’d imagined possible.

Photo: Game Of Thrones Season 1, HBO

There will be beheadings.

Making this particularly surprising is the fact that aside from a few bits in the pilot apparently being shot on 35mm film, so far as I know the first season of Game Of Thrones was only shot at 1080p. So what we’re seeing on these 4K Blu-ray discs must just be 4K upscales. But I can only report what I see, which is that the picture routinely looks higher in resolution than the HD Blu-ray.

All those outdoor shots of rugged landscapes and dour stone walls look stunningly real and tangible versus the HD Blu-ray, and the extra resolution enhances the sense of depth and scale in these shots too.

Close up work if anything looks even more startlingly full of detail and sharpness. Be it in the pores, blemishes and freckles of the actors’ faces; the rich luster of all the manly leathery coats; the sheen of horses; or the hairs of the series’ endless collection of beards, pony tails and fur collars. It’s honestly like seeing the show again for the first time.

At which point I should say that while the increase in apparent detail is remarkable, the application of HDR to the picture has an even bigger impact.

Photo: Game Of Thrones Season 1, HBO

Jon Snow in, well, snow.

While it’s not the most aggressive HDR upgrade I’ve ever seen, it’s definitely one of the most effective and sensitive. Black levels have been taken down to gorgeously rich, inky levels without shadow detail being crushed, while contrasting bright highlights – candles, reflections on metal and skin tones, beams of sunlight – have been given a beautiful boost in brightness and intensity.

Daylight exteriors look much more life like too – and again this enhancement is delivered sensitively enough to stop the image from looking unnaturally stretched or making dark foreground objects look like empty silhouettes.

Colors have been enriched too, but usually only to the extent that they look more natural; more like they would, in other words, if hit in the real world by the sort of increased amounts of light the HDR regrade has introduced.

Put all these HDR and color-expanding strengths together and you get pictures that often take on an almost painterly beauty – no matter how harrowing their content might be.

Photo: Game Of Thrones Season 1, HBO

Ned Stark gives the first season a heart not consistently found in later series.

This is especially true for anyone able to watch the show in Dolby Vision, which does a lovely job of adding even more dynamism to the show’s many high-contrast shots, while also delivering a more controlled and consistent look to colors – especially skin tones during dark interior sequences.

The picture isn’t quite perfect. A few mid-dark scenes suddenly look a bit grainy for no particularly obvious reason. Also, the occasional exceptionally bright exterior, such as the sequence where Joffrey is bitten by Arya Stark’s direwolf, can look a touch strained, and/or suffer with some very slight color banding in skin tones. Some of the very brightest parts of the picture can look a little bleached of detail, too.

For the most part, though, the picture quality of the Game Of Thrones Season One 4K Blu-ray release is good enough to give you all the excuse you need to start watching this epic show again from the start ahead of the final season hitting our screens later this year.

Sound quality

Although the 4K Blu-ray defaults to a Dolby 5.1 mix, if you head into the Audio menu you can switch to a new Dolby Atmos mix for every episode. And for the most part I strongly recommend that you do this, as these Atmos mixes you a much more full blooded sound stage than the 5.1 originals. Bass extends much deeper, and the sense of height and ambience is clearly increased.

Photo: Game Of Thrones Season 1, HBO

The Starks in simpler times.

That said, while it sounds excellent for a seven-year-old TV show, maybe because of the original tracks they had to work with in putting the Atmos mix together, it’s not exactly a reference grade effort.

Voices sound a little clinical, so that they sometimes sound slightly dislocated from the rest of the mix. The densest parts of the soundtrack – including the opening title track – can sound a little soupy, too. Also, the rear channels aren’t used as much as they might have been for adding ambient effects.

At least when the rears are actually used in anger, though, the effect steering is precise, and can deliver genuinely dramatic effects – such as the way the cawing crow that arrives on Bran’s window in episode three shifts position from the front speaker to the rear right surround as the camera changes its point of view.

Extra features

The extras on this 4K Blu-ray release are the same as those delivered with the previous HD Blu-ray release except that, sadly, they don’t include any ‘in-episode guides’. These let you watch each episode on the HD Blu-ray with a menu down the side offering supplemental information, and I definitely missed having them on the 4K Blu-ray.

Photo: Game Of Thrones Season 1, HBO

Daenerys and her new people.

And before you start thinking you can just watch these in-episode features on the HD Blu-rays, if you didn’t notice earlier in the release details section, you don’t actually get the HD Blu-rays of Season One in the 4K BD package.

The highlight of the features you DO get is the series of commentary tracks delivered by a variety of different cast and crew members. The idea of using people from different aspects of the production for each commentary is a masterstroke, ensuring that each one feels fresh and gives another perspective on the production and story.

The 30-minute ‘making of’ feature is pleasingly substantial too, and while other featurettes – covering such stuff as the creation of the Dothraki language, the opening credits sequence and the process of adapting such a huge story for the screen – are much briefer, they still add up to an informative set of goodies overall.

Photo: Game Of Thrones Season 1, HBO

Game Of Thrones Season One 4K Blu-ray box art.

While the in-episode guides may have gone, there is still one strong interactive feature on the final disc that lets you explore the history, lore, Houses and geography of Westeros.

Verdict

I honestly hadn’t expected much from this 4K Blu-ray release of Game Of Thrones’ opening season. It wasn’t shot in 4K, after all, and previous experience of this season via broadcast and Blu-ray hadn’t exactly blown me away on the picture quality front.

Somehow, though, the remaster work has delivered transformative results, making the whole show look so fresh you feel like you’re watching it again for the first time. Or at least you would if so much of the show wasn’t so damn unforgettable.

If you enjoyed this review, you might also like these:

‘Red Sparrow’ 4K Blu-ray Review: Dead Parrot

‘Black Panther’ 4K Blu-ray Review: Nice Picture, Shame About The Bass

‘Die Hard’ 4K Blu-ray Review: Yippe-Ki-4K!

‘Saving Private Ryan’ 4K Blu-ray Review: God Of War

Tempted to Drop a Project That Isn't Working? Here's a Quick Way to Know Whether You Should Give Up or Push Through

Have you ever hit a wall in a project and wonder if you should push harder or give up? How do you know if you are facing inner resistance or seeing a sign that you should shift gears and change direction? There may be times when you give up too soon and change strategies before you had given a project a chance to work. The easy guide to the right decision is to gauge your passion about the project.

In established companies, giving up on a project could mean costs burned with printing of unusable marketing materials, loss of time and money in training staff in a new program, advertising dollars and more. Some CEO’s find it almost easier to justify moving forward than abandoning the plan just for the chance to get the investment back. If it fails, the loss can be made up from other divisions and not make or break a company.

Smaller companies face bigger risks when testing new strategies. We do most of our marketing online which makes it is easy to shift gears and test new strategies without much loss of investment. The problem is that it can be too easy to jump ship at the first sign of failure. Many entrepreneurs get caught up in the shiny object syndrome and move from strategy to strategy too quickly without measuring or understanding the results.

In a new start-up, it can be difficult to predict the future and avoid bad mistakes. A fool-proof measurement is looking at the amount of passion you have for the project. When you really believe in a project you will do whatever it takes to make it work. You will use your mind to focus, you won’t give up on a small setback and keep pushing through. The passion will motivate you to overcome the obstacles.

If you don’t have the drive and feel ready to give up at the first sign of resistance, you are not emotionally invested enough to see the project succeed. If you are driven by money alone, you may not feel connected to your personal passion and lack enough energy to break through challenges.

One time we had a project that hit some roadblocks and the program was not selling. We were at a crossroads on whether we should drop it or keep trying to make it work. We checked in and realized that were not too enthusiastic about it to take the extra steps toward getting the sales. When we shifted to something that we were excited about creating, success seemed to follow us effortlessly. Even when small hiccups occurred, they did not stop us and the new project exceeded our expectations.

Most projects worth pursuing have a passionate motivator. Ask yourself if the project is going to help move the company forward in a big way or something that would be challenging and meaningful to test out.

The key question to ask yourself is “If I put myself all in this and it still did not work, would I still be glad I tried?”

Just having a passion toward something does not guarantee a good result. Sometimes the best projects are the ones that you know may fail but there is something driving you to move toward it even if it seems impossible. These passion projects always lead to something more and many times take you to new, unexpected opportunities.

Entrepreneurs, especially in start-ups do a lot more testing than more established companies. You have to face a lot of unknowns and have little data or history to back up decisions. When you don’t have the numbers to measure the risk, you have to rely on measuring your passion. Even if your passionate project does not bear immediate fruit, you will gain more information and data by going all the way that will help you with your next big idea.

The Essential Life Lesson We Can Learn From Anthony Bourdain and 'Parts Unknown'

Anthony Bourdain is dead at 61, of an apparent suicide, while in France filming the next episode of Parts Unknown. Bourdain was already a TV star and bestselling author when he launched his latest series, but it won accolades, and award after award for the fascinating way it brought unknown and possibly scary places, from the Congo River in Africa to Antarctica to the broken-down neighborhoods of Detroit. 

Bourdain once described the show as asking different people around the world some very simple questions: “What makes you happy? What do you eat? What do you like to cook?” Finding the answers to those questions resulted in an equally simple message: Don’t be afraid. Just because a place is remote and completely unlike anyplace you know, just because the people there look different and have different beliefs and everyday lives from you, just because someplace or someone is completely unfamiliar–don’t be afraid. Instead, be curious. Learn more. Take a bite.

To my husband, for whom Bourdain was a beloved figure, who usually leaves Parts Unknown streaming on Netflix from one episode to the next as he prepares meals for us, this fearlessness was Bourdain’s biggest gift to us all. “If I was going to go to Ecuador or someplace I wouldn’t be as afraid because of him,” he says. 

And indeed, from the book that launched him into stardom right through Parts Unknown, fearlessness was the one thing you could always count on from Bourdain. When he flipped over an ATV and had it roll over him during an episode of No Reservations, or when he went to Lebanon but brought along the wound-stopping product Quick Clot at the insistence of the U.S. military, he was perhaps annoyed or embarrassed, but–at least outwardly–he was never afraid.

Look at any image of Bourdain you can find. He’s nearly always standing or sitting square to the camera, looking it (and you) right in the eye, chin up, his expression a combination of an ironic smile and a challenge. The shot that you always see, again and again, in every one of his shows is Tony walking, through some burned-out war zone or lavishly wealthy neighborhood, ambling confidently along, unhurried but unhesitating, shoulders back. The man had incredibly good posture. If anything ever intimidated him, most of us will never know what it was.

That’s the other lesson from the life and untimely death of Anthony Bourdain. However much we may think we know a public figure, however authentic and truly himself he may seem in front of the camera or on the page, and however much we may love him, we can’t ever truly know what’s going on in someone else’s mind, let alone someone we have never actually met. His friends mostly report that he seemed happier than he had in a long time.

But his fellow globe-trotting TV chef and close friend Andrew Zimmern also shared a truth that many successful people know: Having your ambitions fulfilled does not necessarily lead to happiness and relaxation. It usually leads to even longer hours and greater exhaustion as you work at the thing you love, running in place to stay fresh, stay relevant, and keep getting better–and Bourdain did all those things.

Zimmern says that when he and Bourdain met up, they would talk about “wanting to get off this crazy roller coaster, but at the same time knowing that this was our work,” he told The New York Times. “The world has lost a brilliant human being and I’ve lost one of the few people I could talk to about some of this stuff.” Apparently there was a darker side to Bourdain and to the life he lived. It’s an odd coincidence that Bourdain was found dead three days after designer Kate Spade took her own life, also by hanging, and two days after the Centers for Disease Control released a report showing that suicide rates in American have increased throughout this century

Please don’t be part of this growing epidemic! If you feel you need help or just want to talk about the topic, call the National Suicide Prevention Lifeline, at 1-800-273-8255. 

CNN is collecting memories about Bourdain from anyone who cares to share them (you can do so here) and posting many of the responses on its site. Scroll through and read how many people say he inspired them to take a chance–quit a job they hated to travel the world, or write a book, or both. That’s the man’s best legacy and the best way to remember and honor him: by doing something you’ve been afraid to do or going somewhere you’ve been afraid to go, going somewhere you’ve been afraid to go–even if it’s just an ethnic neighborhood in your own home town.

The network is airing a tribute to Anthony Bourdain at 10 pm Eastern tonight and a series of his favorite Parts Unknown episodes through the weekend. Here’s the schedule:

3 Hiring Principles for Building an Award-Winning Company

As we all know, great talent is both hard to find and really expensive. You can’t compete with Google, Apple, or Facebook on compensation.

So, how do you build a powerful team of talented people who share the same values and passion as you? How do you compete with everyone else who can clearly outbid you?

Last year, I met Rajesh Padinjaremadam at a conference. He’s the co-founder and CEO of RapidValue Solutions, an IT services company that’s garnered some impressive accolades (including a couple Gartner awards) since being founded in 2008.

His company has 450-plus employees now, which is impressive: To grow a services company to that size, you have to inherently know something about hiring and training talent. After all, you don’t have a product to sell. You’re selling your team.

Padinjaremadam’s motto: “We have a simple internal rule: Don’t let your job title define what you can’t do.”

As you can tell, I’ve been thinking about how the best companies of hire and train talent, and wanted to get Padinjaremadam’s thoughts–so I called him up. Here are the three lessons I learned from our conversation:

1. The best employees are passionate–not necessarily experienced.

Hiring candidates based solely on their experience almost always ends badly, according to Padinjaremadam. “The candidates that didn’t have the strongest resume or the most number of years of experience, but were deemed to be a cultural fit, almost always turned out to be an invaluable asset in the long term,” he says.

I’m not a big fan of resumes, and that’s exactly why. Your resume only shows an objective professional history. It doesn’t allow you to show what you’re truly capable of.

Instead, I always recommend being active on LinkedIn. It’s one of the few platforms where you can professionally show without looking like you’re showing off. Plus, it’s the first place many employers do their due diligence.

Padinjaremadam recommends trying to get a better feel for their attitude in the interview. The more positive their attitude, the more likely they will succeed in their environment. 

2. The best employees take risks and fail often.

I think every founder needs to embrace failure and make it a known part of the company’s culture. You should make a point of regularly taking on challenges that run the risk of failing, and encourage your employees to take those leaps without hesitation.

Padinjaremadam agrees. Instead of reprimanding mistakes, we encourage our team to learn from them and move on,” he says. “We wanted our team to take risks. This is the only reason we continue to grow.”

At an old job, I remember distinctly one of my old managers telling me, “We don’t fail here. Failure is not allowed.” I almost couldn’t believe my ears. Instead, I took a risk and started a new initiative–and the small failures we suffered along the way eventually led us to better learning and success.

Don’t be like my old manager and try to instill fear of failure.

3. The best leaders get out of the way of their teams.

Padinjaremadam recommends that every team member be able to step out of their comfort zone. Just because your job description says one thing doesn’t mean you can’t do something else.

“My job as a leader is to let them step up and get out of their way,” he explains. “If you can’t get out of their way, they will never step up.”

When it comes to stepping up, I can’t think of a better example than Amazon, which started as a book company and created an entirely new industry by offering cloud computing services. If Amazon’s leadership team didn’t empower its staffers to step outside their job descriptions, I guarantee Amazon would have faded as a mediocre book company.

If you’re building a company, stop using resumes and job experience as your hiring method. Get to know your candidate’s passions and let them take risks without you reprimanding them if they fail. If you hire the best, they will help your company grow.

North Korea Uses Microsoft and Apple Technology for Cyberattacks, Researchers Say

North Korea has been cited by several governments and organizations for its hacking activities. Now, a new study of network data shows much of the technology North Korea employs for hacking comes from the U.S.

Despite trade sanctions, North Korea’s government has found a way to obtain products from Apple, Microsoft, and Korea-based Samsung to carry out cyberattacks around the world, researchers at cybersecurity intelligence company Recorded Future revealed on Wednesday. The company found that North Korea is using Windows 10, Apple’s iPhone X, and Samsung’s Galaxy S8 Plus, among other technologies, to conduct operations. However, most of the technology North Korea is using is older. For instance, Recorded Future found an iPhone 4S and Windows 7, among other products, still in use.

North Korea has been isolated from the rest of the world for decades. During that time, the country’s economy has suffered and the U.S., among others, has imposed sanctions that limit a company’s ability to export to and sell in North Korea.

To circumvent those sanctions, according to Recorded Future, North Korea has engaged in a variety of activities to obtain access to U.S. and Korean technologies.

In its report, Recorded Future said that North Korea has created fake addresses and names to sidestep sanctions — and also used shell companies and aliases outside of its borders to obtain equipment and bring it back. North Koreans living in countries where equipment from Apple, Microsoft, and Samsung can be obtained legally also play a role in the effort, according to the report.

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“Technology resellers, North Koreans abroad, and the Kim regime’s extensive criminal networks all facilitate the transfer of American technology for daily use by one of the world’s most repressive governments,” Recorded Future wrote in its report.

In other cases, however, North Korea has obtained equipment legally. Since 2002, in fact, the U.S. has exported nearly $484,000 in computers and electronics to North Korea.

But, since that’s hardly enough for all of the ruling party, hacking efforts, and “elites” in the country who need the technology, North Korea has employed the other schemes, Recorded Future said.

The data sheds some light on the secretive country and could explain to some degree how it’s been able to pull off some major cyberattacks. North Korea’s hackers have previously been linked to the 2017 WannaCry ransomware attack that affected computers around the world. North Korea was also accused of hacking Sony in 2014.

“Unless there’s a globally unified effort to impose comprehensive sanctions on the DPRK, and multilateral cooperation to ensure that these sanctions cannot be thwarted by a web of shell companies,” Recorded Future wrote, “North Korea will be able to continue its cyberwarfare operations unabated with the aid of Western technology.”

Adversity Is Bitter, But Its Uses May Be Sweet

I first recommended shares in CorEnergy (CORR) in January 2015 and I even titled my article, My REIT Underdog Pick For 2015, and then in November 2015, I wrote another article explaining that CORR was My Worst REIT Pick For 2015. I keep riding the bull hoping that CORR would eventually bounce back, and boy did it bounce.

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Over a year ago, I wrote an article titled, Could CORR Soar, Again?, in which I explained that:

“CorEnergy demonstrated success on both pillars of our thesis, suffering no economic changes to either lease…2016 proved to be a year of validation for CorEnergy and for the real estate investment trust structure as a way for investors to access the benefits of the infrastructure asset class.”

At the time I wrote the article (May 2017), I decided to upgrade CORR from a HOLD to a BUY and increased my target price to $31.00 per share. Since that time, CORR shares have increased by ~7% (closing at $36.17).

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Given the strong growth potential for “dedicated infrastructure” assets — mostly pipelines and storage assets — CORR offers a compelling value proposition driven by stable, high-cash-generating business models in the midstream that provide very desirable investment characteristics.

CORR owns assets that are critical to upstream counter-parties, that are located in desirable fields that are integral to their overall operations. CORR has proven that the revenue stream is reliable, even in periods of distress, as long as the assets are critical to the upstream operators. Having come out of the energy crisis with its strategy validated, CORR has become a battle-tested REIT that is now better prepared to scale into a safer investment platform. As Benjamin Graham famously said:

“Adversity is bitter, but its uses may be sweet. Our loss was great, but in the end we could count great compensations.”

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Photo Credit

What Are The Risks?

CORR is a guinea pig of sorts – the Kansas City-based REIT is the first Infrastructure REIT so there is somewhat of an acceptance risk. Although I now cover a number of other infrastructure companies like Hannon Armstrong (NYSE:HASI), Landmark Infrastructure (NASDAQ:LMRK), and InfraREIT (NYSE:HIFR), CORR is a unique player in the energy space. In other words, many investors don’t really understand what the company does and there are certainly no true peers to compare.

However, there’s also an opportunity: CORR can build a foothold – as the premier partner of choice in energy infrastructure sale/leaseback transactions. Instead of competing for deals in the open market, CORR can source off-market deals and essentially be the “go to” landlord of choice.

Because the leases are net lease structured (tenants pay for taxes, insurance, and maintenance), the only way the company would lose revenue is if the tenant defaulted under its lease contract. However, if one of its properties fails for whatever reason, it would have an enormous impact on earnings and dividends.

As a measure to combat these risks, CORR is continuing to grow in size such that it can mitigate tenant concentration.

CORR owns mission-critical assets and lease payments are “operating” expenses, not “financing” expenses. It’s important to note that in bankruptcy, real property operating leases are subject to special provisions.

Operating leases have priority in payment and bankruptcy. The CORR revenue stream, therefore, is resilient and protected even during bankruptcy. Therefore, the stock price moved with commodity prices in this cycle, while revenues and AFFO did not, demonstrating the benefit of CORR’s business model for investors seeking infrastructure assets in their portfolio.

The Portfolio

With commodity prices seeming to have firmed up, energy companies want to get back to production stability and growth, making them hungry for lower-cost capital. CORR can provide a source of funds from something that already exists on their balance sheet. They can sell relatively low-returning, critical assets and then redeploy those dollars into higher-return opportunities, thereby enhancing the value of their enterprise.

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Grand Isle: The GIGS includes 153 miles of undersea pipeline that transports oil and water from six Energy XXI fields and one field operated by Exxon Mobil (NYSE:XOM) in the Gulf of Mexico. The 16-acre terminal includes four storage tanks, a saltwater disposal facility with three injection wells, and associated pipelines, land, buildings and facilities. At the time of acquisition, the GIGS system transports approximately 60,000 barrels/day (18,000 oil and 42,000 water) and has a total capacity of 120,000 barrels/day.

The Grand Isle Gathering System is CorEnergy’s largest asset and is leased to Energy XXI Gulf Coast (NASDAQ:EGC) (continues to serve production from the Gulf of Mexico). Energy XXI announced that they will continue as a standalone company following their strategic analysis by Morgan Stanley, and they recently released their 2018 capital budget.

They anticipate drilling six new wells in 2018, which is the most robust drilling plan for that company in the last four years. Drilling will be focused in the West Delta and South Timbalier fields, both of which are located in what Energy XXI deems its core properties and each field is partially served by CorEnergy’s Liquids Gathering System in the Gulf of Mexico.

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Grand Isle Photo

The Pinedale Liquids Gathering System (LGS) consists of more than 150 miles of pipeline, with 107 receipt points and four central storage facilities located in the Pinedale Anticline in Wyoming. The system was acquired in 2012 and leased to a subsidiary of Ultra Petroleum (NASDAQ:UPL) (guaranteed by the parent company) under a triple-net participating lease with a 15-year initial term.

Ultra Petroleum has had much success in the Pinedale field this past year, particularly with its horizontal drilling test announced recently. In 2017, CorEnergy received approximately $0.5 million of participating rents from UPL based on higher levels of production.

Given CorEnergy’s conviction in the reserve profile of this field and demonstrated level of utilization, the company purchased a minority equity interest in the Pinedale LGS, which was previously held by CORR’s partner for initial capital of $32.9 million. Pru also was going to remain involved in the asset and provided CORR with $41 million of asset level debt, which was utilized for the equity buyout.

CorEnergy has been evaluating the purchase of the remaining interest in the Pinedale LGS as if it were a new asset, subject to the same level of diligence, processes and procedures as any other unrelated asset.

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Pinedale Photo

Acquired in January 2014, the Portland Terminal Facility is a 39-acre rail and marine transloading terminal on the Willamette River in Portland, Oregon. The site has 84 tanks with a total storage capacity of approximately 1.5 million barrels and is capable of receiving, storing and delivering crude oil and refined petroleum products. The property is leased to Arc Terminals (guaranteed by Arc Logistics) under a triple-net lease with a 15-year initial term.

At the Portland Terminal, Zenith Energy (OTC:CANIF) completed its acquisition of Arc Logistics in December. This provided Zenith with options including an option to buy the terminal from CorEnergy, which remains live through the end of the lease as well as early termination options at the 5th and 10th anniversary of the lease.

In January, CorEnergy agreed to extend that first notification period from February 1 to August 1 due to the recent fee of the acquisition by Zenith and the ongoing discussions with their new management team around long-term plans for the terminal. CorEnergy believes the Portland Terminal’s strategic location at the Pacific Northwest as well as the versatility of that terminal make it a valuable asset, and CORR is not anticipating that Zenith will exercise their termination option.

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Portland Terminal Photo

Omega Pipeline Company owns and operates a natural gas distribution system primarily serving the U.S. Army’s Fort Leonard Wood in south-Central Missouri. In addition, Omega provides natural gas marketing services to several customers in the surrounding area. Omega has a long-term contract with the Department of Defense. CorEnergy provides REIT-qualifying intercompany mortgage financing to MoWood, a taxable REIT subsidiary of CorEnergy that owns Omega, secured by the 70-mile pipeline system.

Also with regard to the Omega Pipeline, CorEnergy received a private letter ruling from the IRS which enabled the company to designate the income from its contract with Ford Leonard Wood as REIT qualifying income. CORR subsequently converted Omega into a REIT subsidiary from a taxable REIT subsidiary. As the energy infrastructure real estate world continues to take shape, this PLR helps to solidify CorEnergy’s position as a pioneer in this front.

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Omega Pipeline Photo

The MoGas Pipeline System is an approximately 263-mile interstate natural gas pipeline system which originates in northeast Missouri and extends into Western Illinois and Central Missouri. The pipeline maintains receipt points with Mississippi River Transmission Corporation in Eastern St. Louis and with Panhandle Eastern Pipe Line Company and Rockies Express Pipeline on the northern end of the system.

With regard to the MoGas Pipeline, CORR continues to look at options available to offset the impact of the upcoming decline in rates and the new Spire contract, which is effective in November of this year. CORR anticipates filing a rate case in the second quarter of 2018.

Despite the upcoming decrease in rates charged to Spire for usage of CORR’s MoGas pipeline, CORR expects the decreased revenues to be adequately mitigated by the accretion from the increased ownership interest in the Pinedale LGS, the results of deferred rate case for MoGas, and growth from existing contracts through CPI based escalators as well as participating rents.

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MoGas Photo

The Balance Sheet

CORR’s capital structure remains largely unchanged from year-end, with total debt to total capitalization ratio at the low-end of the target range at 25%. Also, there remains some capacity to issue additional preferred shares as the company is under its target of 33% preferred to total equity.

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CORR has around $142 million of availability at quarter-end, as the company continues to prudently manage its utilization, considering the status of the borrowing base assets and potential uses for growth. CORR has access to diversified pools of capital, using its existing financial tools as well as potential for co-investors and project level debt.

In a recent interview, CORR’s CEO, David Schulte, said:

“We expect to transact on one or two acquisitions per year. Although we didn’t acquire a new third-party asset in 2017, we feel we have gotten back on stable footing after the recent energy crisis. We had five significant investigations of assets, one of which is still ongoing. The others were at various stages of due diligence or documentation, but we decided to not proceed due to our strict underwriting criteria.”

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He went on to say that “the $50 million-$250 million size range is suitable for our capacity to transact by ourselves. If it’s much smaller, the documentation and process may not be worth it. For larger transactions, we have developed many promising relationships with well-known infrastructure investors who have expressed interest in co-investing with CorEnergy”

CORR has broad access to capital and appeal to investors that have low risk, long-term horizons for their investment capital. As Schulte explained:

“Investors that buy utilities and REITs generally want to sleep at night. They don’t need high growth, but they want limited risk. We acquire critical assets that have long-duration, contracted cash flows that will enable our investors to have peace of mind, while we selectively provide much-needed capital to energy companies as they return to growth.”

Its Uses May Be Sweet…

As viewed below, CORR’s diluted net income, NAREIT FFO and FFO adjusted for securities are higher sequentially, largely due to the increased income tax expense back in the fourth quarter associated with the impacts of tax reform.

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Each of these earnings metrics displayed, including AFFO, was impacted in the first quarter by adoption of the new revenue recognition accounting standard.

While the majority of CORR’s revenue was not impacted under the new guidance, revenue from MoGas’ long-term contract with Spire, which has the downward revision in rates starting in November of this year, is required to be recorded ratably over the contract’s 13-year term on a straight line basis. Previously, CORR had recognized revenue from this contract as it was invoiced.

As a result, the AFFO coverage ratio to dividends for the quarter declined to 1.35x, which after adjusting for the prior target coverage ratio of 1.5x for the nearly $1 million impact of the straight line revenue change, it is approximately in line. Also, CORR recently declared its 11th consecutive $0.75 common dividend for Q1-18.

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Although CORR does not have the diversification of the peers, we like the company’s conservative capitalization strategy, and modest payout ratio (also CORR continues to receive participating rents, which contribute to increase the dividend coverage). While CORR has capacity to grow the dividend, the company recognizes the dividend is already attractive, as viewed below:

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Over the last few years, we have learned a lot about CORR and the company’s ability to manage and control risk. While we were skeptical of the REIT during the energy cycle, we remain bullish in regard to the company’s business model and specifically the diligence in sourcing critical mission assets.

In 2018, CORR expects to generate $61.4 million of rental income and that could jump about 25% by 2021. FAST Graphs estimates similar growth potential, as viewed below:

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Keep in mind, this estimate is just an analyst scorecard and there are only 4 analysts referenced in the estimate, but the potential for growth cannot be underestimated. Fellow Seeking Alpha writer, Kevin Cavanagh, has a 12-month price target pegged at $40.00. I’m going to be a tad more aggressive based on the estimates above and forecast the company to hit $40 year-end.

The primary catalyst is tax reform, as I believe we will continue to see growth in corporate spending and CORR’s sale/leaseback platform is perfectly aligned for companies to lease back the critical real estate to generate higher ROE. While the retail REIT market is continuing to understand the implications for a dark Sears or Toys-r-Us store, there is little doubt that CORR’s assets are critical and the potential for vacancies is extremely low. Besides, I like to see a company that can weather a storm and is battle-tested. “Adversity Is Bitter, But Its Uses May Be Sweet”.

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All Strong Buy picks can be viewed in my Marketplace service (The Intelligent REIT Investor).

Note: Brad Thomas is a Wall Street writer, and that means he is not always right with his predictions or recommendations. That also applies to his grammar. Please excuse any typos, and be assured that he will do his best to correct any errors, if they are overlooked.

Finally, this article is free, and the sole purpose for writing it is to assist with research, while also providing a forum for second-level thinking. If you have not followed him, please take five seconds and click his name above (top of the page).

Source: F.A.S.T. Graphs and CORR Investor Presentation.

Other REITs mentioned: (AMT), (CCI), (HASI), (LMRK), and (UNIT).

Disclosure: I am/we are long ACC, AVB, BHR, BRX, BXMT, CCI, CHCT, CIO, CLDT, CONE, CORR, CTRE, CUBE, DEA, DLR, DOC, EPR, EXR, FRT, GEO, GMRE, GPT, HASI, HT, HTA, INN, IRET, IRM, JCAP, KIM, KRG, LADR, LAND, LMRK, LTC, MNR, NNN, NXRT, O, OFC, OHI, OUT, PEB, PEI, PK, PSB, PTTTS, QTS, REG, RHP, ROIC, SBRA, SKT, SPG, STAG, STOR, TCO, TRTX, UBA, UMH, UNIT, VER, VNO, VNQ, VTR, WPC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.