Friday, December 19, 2014

Financial Thought of the Day December 19, 2014: When Emotional Stay Out of Your Brokerage Account

If you are feeling panicky due to some macroeconomic headline or a temporary setback in one of your companies—stay away from your brokerage account. Don’t even log in. If possible don’t even be on a computer that day. At some point you will most likely regret panic selling your shares.

Thursday, December 18, 2014

Wednesday, December 17, 2014

Financial Thought of the Day December 17, 2014: Stocks on Sale…Still Yet

Again, the stock market has seen the decline in price of the stocks of many quality companies. Take delight and pick up some shares on the cheap instead of panicking. 

Go to stockdissector.com

Tuesday, December 16, 2014

Financial Thought of the Day December 16, 2014: Money Provides Options

Money can’t always buy happiness but it sure can provide options and mobility. Stockdissector

Monday, December 15, 2014

Financial Thought of the Day December 15, 2014: Perils of Long-Term Debt

I always look for companies with long-term debt to equity ratios of 50% or less. Long-term debt creates interest which chokes out profitability and cash flow. Lower profitability growth can translate into lower stock price growth over the long-term. Back to Stockdissector.com

Friday, December 12, 2014

Financial Thought of the Day December 12, 2014: Patience in Investing

Patience is a virtue in long-term investing. While it’s tested during volatile times it certainly pays over the long-term. If you start buying and selling at a whim then you rack up transaction costs and brokerage commissions that eat into your returns.

Thursday, December 11, 2014

Financial Thought of the Day December 11, 2014: Contentment

Being thankful for what you have is the key to lowering greed. When you lower your greed factor it becomes easier to live within your means. When that happens it becomes easier to save and invest.

Wednesday, December 10, 2014

Financial Thought of the Day December 10, 2014: Free Cash Flow Vs. Earnings

An investor with a business oriented mentality will look at free cash flow which is representative of the actual cash a company generates. You can’t pay the bills with paper profits.

Tuesday, December 9, 2014

Financial Thought of the Day December 9, 2014: When Stock Markets Go On Sale

As of this writing, the stock market is declining. Long-term investors don’t panic but hold on to their shares and if they have the capital to commit and find companies that are truly cheaper, go in and buy more shares.

Monday, December 8, 2014

Financial Thought of The Day December 8, 2014: Dividend Paying Companies are the Gifts that Keep on Giving

Dividend paying companies, the ones that pay out a prudent amount of their free cash flow in dividends, represent gifts that keep on giving. Reinvesting those dividends helps the compounding power over time. Companies that boosts their dividends regularly enhances that compounding power even more.

Sunday, December 7, 2014

Financial Thought of the Day December 5, 2014: Invest and Forget About It

Once you make the decision to invest in a company. Put it away and forget about it. There will be a lot of ups and downs but over the long-term a good business that sits behind high barriers to entry will add wealth to its shareholders.

Financial Thought of the Day December 4, 2014: Adjust Your Expenses

If you find yourself making less money then you may want to adjust your expenses as well.

Wednesday, December 3, 2014

Financial Thought of the Day December 3, 2014: The 10% Method

One way you can easily save money is by setting aside 10% of your paycheck before spending anything.

Tuesday, December 2, 2014

Financial Thought of the Day December 2, 2014: Earnings Power

Earnings Power is the ability of a company to generate and grow its earnings. High barriers to entry such as a distribution infrastructure, land infrastructure, and a unique product serve to improve this earnings power.

Monday, December 1, 2014

Financial Thought of the Day December 1, 2014: Security Analysis, WWIII, and the Business Owner’s Perspective

Talking about finding a gem—My wife and I was traveling the South Carolina countryside near the Georgia border when we discovered a used bookstore along the side of the road. While looking around, lo and behold in the furthest most difficult to reach corner of the store at the edge of the business section, sat an original copy of the third edition of Security Analysis written by investing legends Ben Graham and David Dodd with the help of utility analyst Charles Tatham, Jr. The book was published in 1951 and provides invaluable insights on how to analyze stocks and bonds, how to weigh them in the context of macro-economics, employing the margin of safety, buying stocks below intrinsic value and thinking rationally about publicly traded companies as a whole.

I gladly paid the $3 for the book feeling a little guilty about depriving someone else of invaluable knowledge. In the preface to the third edition I found this interesting paragraph that is reflective of the mood of the time but some of which can actually be applied to modern investment thinking:

“This preface is being written when the possibility of a third world war weighs heavily on all our minds. We need say only a word about this unhappy subject in relation to our present work. The effect of such a war upon ourselves and our institutions is incalculable. But in the field of security analysis we need consider only its bearing on the choice between various securities and between securities and (paper) money. It seems sufficient to observe that since war and inflation are inseparable, paper money and securities payable in specific amounts of paper money would seem to offer less financial or basic protection than soundly chosen common stocks, representing ownership of tangible, productive property.”

Here’s what I take away:

While a World War would mostly likely drive many companies into bankruptcies depriving investors of their rights to underlying assets it’s important for investors to think of a share of stock as a partial ownership of a business that produces free cash flow for the investor regardless of the denomination. Also, ownership of a business can mean potential profit regardless of the ruling government (as long as its business friendly) and currency denomination. This is how I interpret it.