Investiv Daily

  • 08 May
    Buffett: Do As I Say, Not As I Do

    Buffett: Do As I Say, Not As I Do

    We’ll continue today with my summary of Berkshire’s annual meeting, and the most important things an investor should remember and learn from Warren Buffett and Charlie Munger.

    If You Want A Formula, You Should Go Back To School

    On a question seeking a mathematical explanation of how to pick stocks, Munger said that investing cannot be put into a formula because they are always wrong. As always, investing is about commons sense.

    For Munger, Costco at a PE of 12 was simply extremely cheap even if the price to book was around 3. This leads to another interesting topic about asset light businesses.




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  • 07 May
    What You Can Learn From Berkshire’s Annual Shareholder Meeting

    What You Can Learn From Berkshire’s Annual Shareholder Meeting

    This past Saturday, the Woodstock for capitalists was on as Warren Buffett and Charlie Munger held their annual shareholder conference.

    If you want to succeed in investing and reach your financial goals, this conference and the insights from it are all you need to listen to in order to learn about investing, what’s going on, and what to do about it.

    In today’s article, I’ll summarize what the key points to take out are and also save you the 6-hour watch.



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  • 04 May
    Here’s Why You Should Take A Look At Disney (NYSE: DIS)

    Here’s Why You Should Take A Look At Disney (NYSE: DIS)

    • We all know about Disney, but is it a good investment? I’ll explain how to approach investing in the company.
    • I’ll first describe the company and touch on the Fox acquisition.
    • DIS is a great example of what Amazon or Netflix once were.



    Introduction

    The Walt Disney Company (NYSE: DIS) is an intriguing stock. It boasts a PE ratio of just 14.19, a dividend yield of 1.69%, it has a strong brand, and the stock hasn’t gone anywhere in the past 3 years.

    Figure 1: DIS in the past 3 years. Source: CNN Money.

    Let’s see whether the 3 year underperformance is due to some structural issues or if it’s a great opportunity to buy a wonderful business at a fair price, the kind of business you want to hold forever.

    Before getting started, let me just mention that DIS was one of Buffett’s biggest mistakes. Buffett invested in DIS in 1966 when the company was valued at just $80 million when he knew that it cost more just to build a few themes in the park, and pre-tax profits were $21 million. He invested $5 million and sold a year later for a 20% profit. The mistake comes from the fact that the $5 million invested back than would now be worth more than $5 billion not counting the dividends over time. So, even Buffett has made the mistake of selling great brands bought on the cheap.

    Let’s see if DIS will do the same for current investors over the next 50 years.

    Disney – The Company

    I always like companies that have multiple separate segments because that always makes it tough to analyze for others and thus creates opportunities especially if there are segments that might explode in the future. We all know that Wall Street focuses on the next few quarters and not so much on the future and value.

    Disney’s segments are Media, Parks, Studio Entertainment, and Consumer Products with Interactive media. The media network makes the most revenue, but the parks are the most profitable.

    Figure 2: DIS’s 2018 full year results. Source: DIS.



    So, if you were wondering why DIS’s stock has underperformed lately, above lies the answer. Revenue declined 1% and profits declined 6% year-over-year. The situation improved in the last quarter as revenue increased 4% and operating profit 1%, and we will see this coming Tuesday whether the trend will continue as DIS reports earnings.

    However, let’s look critically at what is there. The Media segment with ESPN is in a tough spot as the media business is changing altogether. Parks and resorts are good businesses but cyclical in nature, so one has to keep that in mind. Studio revenues depend mostly on Star Wars and other releases, while consumer products are also flat. But the key lies in the unseen as whatever can be properly estimated is baked into the price already.

    We have to ask ourselves whether DIS’s direct to consumer products in combination with the FOX acquisition will lead to some growth in the future or not.

    DIS will acquire 21st Century Fox’s film and television studios, its cable entertainment networks, and international TV businesses. This will give it enough firepower to battle Netflix and Amazon. Further, the $52 billion acquisition is an all stock acquisition that doesn’t leverage the company but does dilute shareholders. Nevertheless, you never know what will come out of this in the long term, but I think it does have potential as there must be more service providers out there and DIS is a familiar name. DIS will also spend $20 billion on buybacks to lower the dilution hit.

    The acquisition has been done at 11 times EBITDA which isn’t high in this market, and the expected savings of $2 billion should improve the acquisition metrics.

    The key is that DIS now has a much bigger reach and can really push its direct to consumer business ahead and drive into the next 100 years.

    Figure 3: DIS’s acquisition plan. Source: DIS.



    What Kind Of An Investment Is Disney?

    Now, you look at DIS and you see the famous brands, global parks, and resorts that attract many visitors, and movies that bring people to cinemas, but the stock price isn’t going anywhere and the valuation looks cheap.

    There are two things that can happen. DIS can continue to see its Media empire shrink, the Fox acquisition might not work out as planned and just dilute earnings which wouldn’t be a good thing at these already low valuations.

    The second scenario is one where DIS becomes a competing powerhouse with Netflix and Amazon on direct to customer services and get a far higher valuation, especially when the business becomes profitable. Given the stability of the other parts of the business, and their cash flows, DIS might be in a much better position to actually scale its content and monetize it. DIS’s current market cap is $150 billion, but if there will be big growth coming from streaming services, I wouldn’t be surprised to see the stock double on improved earnings, growth, and valuations. If there comes more hype, you can also see it triple in the next few years.

    So, the upside potential over the next few years is huge and the downside isn’t that big. Let’s say that if the streaming business struggles and there is a recession, what you can expect is to see the stock drop 50% when I’m sure there will be others (read, Buffett) waiting to buy the company altogether.

    The key component when investing in DIS is psychological. Can you invest in the unknown and if it doesn’t work out, fine, while you’ll win the lottery if it does? The problem is that nobody knows how long one will have to wait and that’s something difficult to sell to Wall Street. Buy and forget investors should really take a look at DIS now.



    By Sven Carlin Disney Investiv Daily
  • 04 May
    Doing This One Thing Can Help You Save $1 Million

    Doing This One Thing Can Help You Save $1 Million

    One of the things that strongly impact a life but is rarely discussed is buying a car.

    We are bombarded with car commercials, and it seems so important to regularly buy a new car. So, as I think personal finance is a step above and more important than actual stock picking, today I’ll share with you my strategy regarding cars which has been extremely helpful during my life and has enabled me to do so many wonderful things.

    Let me show you how anyone can save a million by buying 5-year old cars instead of new cars. 




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  • 03 May
    Buffett Thinks You Can Turn $400 Into $400,000, But Here’s The Reality

    Buffett Thinks You Can Turn $400 Into $400,000, But Here’s The Reality

    Buffett recently gave an interview where he discussed how if he would have invested the first $114.75 he made in 1942 in the S&P 500 and reinvested the dividends, he would now have $400,000.

    That’s a nice way to sell the stock market to people, but I really disagree with Buffett and with what he’s selling. Today, I’ll discuss reality.




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  • 02 May
    Read This Before Investing In The Next Hot IPO

    Read This Before Investing In The Next Hot IPO

    Today, I’ll continue on with my review of Graham’s The Intelligent Investor with a discussion of the sixth chapter of the book.

    Chapter 6 of The Intelligent Investor discusses:

    • Junk bonds
    • Foreign bonds
    • New stock issues – IPOs



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  • 01 May
    Investors Beware: There Are A Few Big Red Flags For This Canadian Cannabis Company

    Investors Beware: There Are A Few Big Red Flags For This Canadian Cannabis Company

    • My view on Aurora Cannabis.

    Introduction

    As my article on Canopy Growth spurred so much interest, even though the bulls might not have liked it, I’m happy to hear that nothing I said was wrong and that I only omitted the international growth story from my analysis.

    My take is that in the long term, you can have as much growth as you want but shareholders might not see much benefit as the business model isn’t rewarding to them. Given the interest, I decided to dig into some other marijuana stocks to see whether I’ll find something better. Let’s start with Aurora Cannabis (TSX: ABC).




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    By Sven Carlin Investiv Daily Marijuana
  • 30 Apr
    Is This The Perfect Portfolio?

    Is This The Perfect Portfolio?

    • We’ll discuss how Robert Shiller predicted the stock market bubble in the 1990s and how it resembles the current situation.
    • We’ll also discuss the perfect portfolio.



    Introduction

    I recently listened to an interview with Nobel Prize winner Robert J. Shiller on the topic of finding the perfect portfolio. It’s a very interesting subject, so I’ll summarize the interview and discuss the key concepts.

    Before we dig deeper, let me first describe a few interesting interview intros. Shiller didn’t get the Nobel Prize for nothing as he correctly identified that stocks were in a bubble in the 1990s, and that real estate was in a bubble in the 2000s. More →

  • 27 Apr
    Is Kraft Heinz A Bargain Or A Falling Knife?

    Is Kraft Heinz A Bargain Or A Falling Knife?

    The Kraft Heinz Company (NASDAQ: KHC) is one of Warren Buffett’s strongholds and as we often discuss Buffett here, it’s appropriate that we also discuss his holdings.

    KHC is especially interesting now that it’s 40% cheaper than it was a year ago.



    Today, we are going to discuss:

    • What happened to KHC.
    • Is it an opportunity or trap?
    • Packaged foods trends.
    • What can we expect on the business side of returns?
    • Berkshire buying Kraft for $40 billion.
    • How to invest in KHC – Strategy.

    More →

  • 27 Apr
    Check The Holdings Of Your ETFs – It Just Might Be A SCAM

    Check The Holdings Of Your ETFs – It Just Might Be A SCAM

    • There are now almost more ETFs than stocks.
    • Many new ETFs have a fancy name, but no relation to the actual trend they are supposed to profit from.
    • We’ll discuss the new autonomous driving and electric vehicle ETF – DRIV!



    Introduction

    Yesterday, I came across a new ETF on autonomous drive and electric vehicles. As I’m interested in the sector, I decided to give it a look and what I found is shocking.

    I would like to take this opportunity to address an extremely important issue: given the mania surrounding ETFs, as they are perhaps the most popular investment products out there, I want to shed some light on the industry to show that not all ETFs are equal and you should really check an ETF before you invest in any such investment vehicle.

    Before I dig into specific ETFs, let me just give an intro on the industry. More →

    By Sven Carlin ETFs Investiv Daily
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