Delight can turn into disappointment real quick in the stock
market.
Thursday, July 14, 2016
Wednesday, July 13, 2016
Risking Assets Just to Get a Return at All
Once upon a time if you wanted to get a risk free return on
your investment, you put cash in a savings account. If you wanted a superior
return, you risked at least part of your cash in the stock, bond, and/or commodities
market for a shot at superior returns.
Now, in this low to negative interest rate environment, you
get almost no risk free return or even have to PAY to keep your savings safe.
You need to risk at least part of your cash just for the potential of a return
at all.
Tuesday, July 12, 2016
Beware of Bubbles
Record low interest rates translate into stock bubbles as
investors seek a decent return on their investment. This means that some
companies will trade at excessive valuations even though fundamentals may be
stagnant or eroding. Do your research before investing and make sure that
valuations aren’t too excessive. Also, it may pay to keep some cash on hand to
invest during any potential corrections.
Friday, July 8, 2016
Doing nothing….
Sometimes the best course of action for long-term investors
is to do nothing. Especially if stock prices are fueled by a bubble brought on
by low interest rates.
Thursday, July 7, 2016
Acquisitions Can Be Depressing for Long-Term Investors
Long-term investors should lament the acquisition of any of
their rock solid publicly traded business. That means they will no longer be
able to participate in any potential profits in that business. They essentially
sell that right for some cash that will need redeployed in some profitable manner.
Wednesday, July 6, 2016
Make Sure a Dividend is Solid
When a company’s stock pays an enticing dividend yield,
always make sure that it’s supported by free cash flow. Dividends not supported
by free cash flow would need to come from external financing such as a stock
sale or debt financing. This could prove detrimental to your publicly traded
businesses over the long-term. I prefer to see companies pay out less than 50%
of their free cash flow and retain the rest for other purposes.
Monday, June 27, 2016
Hunting Time for the Value Investor
Global volatility in the stock market means that long-term
business oriented investors should go looking for solid publicly traded
businesses selling on the cheap.
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