Stocks

  • 06 Apr
    Read This Before Investing In The Next “Cool” Company

    Read This Before Investing In The Next “Cool” Company

    • The investment thesis behind investing in cool businesses is based on stellar growth. As no business can grow forever, sentiment often changes and stock prices plunge.
    • We’ll discuss, Tesla, Nike, Lululemon, Whole Foods, Under Armour, GoPro, Fitbit, and Microsoft to find the best way to invest in such businesses, because many of them are great businesses.
    • In the end, it all boils down to earnings. If you’re a long-term investor, focus on the business and its long-term health.

    Introduction

    I’m a value investor and as one, I always try to invest with a margin of safety. However, sometimes I get carried away and invest in companies that don’t really meet my investing criteria.

    The last investing mistake I made—where I invested in something because it was a cool brand, my wife loved shopping there, and it was growing fast—that perfectly relates to the topic of this article, was Whole Foods Market (NASDAQ: WFM). More →

  • 05 Apr
    Healthcare Is The Only Sector Where Investing Now Isn’t That Bad Of An Idea

    Healthcare Is The Only Sector Where Investing Now Isn’t That Bad Of An Idea

    • Fundamentals and the long-term demographic trend show that the healthcare sector is undervalued.
    • As it’s a recession-proof sector, largely diversified investors should be overweight healthcare and seize the current halt in price growth.
    • We’ll discuss the top ten healthcare stocks and show that there is something for everybody to invest in: dividends, stability, low valuation, high valuation, growth, takeovers, etc.

    Introduction

    Yesterday’s article focused on how baby boomers will put downward pressure on stocks in the next 15 years. Today we’ll discuss a way to make money on the same trend. More →

  • 08 Mar
    Inflation Has Arrived – Here’s What That Could Mean For Markets

    Inflation Has Arrived – Here’s What That Could Mean For Markets

    • After 7 years of enjoying interest rates close to zero, the party is over.
    • There are several scenarios that can develop, but the long-term outcome is clear.
    • In the short term, higher interest rates should increase demand for the dollar and U.S. assets, so we could see a higher S&P 500 in combination with higher interest rates.

    Introduction

    For the past year I have been writing about how things are bound to change when inflation finally arrives. Well, inflation has arrived and it’s quickly going higher which means that we’ll have to start talking in nominal and real returns, the FED will be forced to take action no matter the economic environment, and it will have significant repercussions on the economy and markets.

    Usually when I’ve written about inflation, it was about something that will happen somewhere in the future. Now that inflation is finally here, I’ll discuss what will happen in the short term. More →

  • 07 Mar
    The Superinvestors Of Graham And Doddsville – Is Buffett A Hypocrite?

    The Superinvestors Of Graham And Doddsville – Is Buffett A Hypocrite?

    • According to Warren Buffet in 1984, investing and beating the market is simple: just use value investing and a margin of safety.
    • For this market, value investing is irrelevant. However if things change, value investing will become essential.
    • Spoiler alert: What I’ve written in this article you will either immediately like or totally disregard. Unfortunately, the latter will have a negative impact on your wealth.

    Introduction

    One short, 15-page article holds more investing insight than all the content published by the media in a year. It’s Warren Buffett’s article The Superinvestors of Graham and Doddsville.

    As the article was written in 1984, it gives you the real, non-political and unconstrained Buffett. Today’s Buffet is a hypocrite because he is forced to say index funds are a good investment even though stocks are at valuations he would never approve of. He has become so big that anything opposite to positive statements would lead to a possible market meltdown. Plus, don’t be confused by the fact that he recently bought $12 billion of stocks, as he bought into extremely cheap sectors, you can read more about that here.

    Today, I’ll summarize Buffett’s article and put it into today’s context. More →

  • 06 Mar
    The Market Is Euphoric – It’s Time To Get Rid Of Your Overvalued Stocks

    The Market Is Euphoric – It’s Time To Get Rid Of Your Overvalued Stocks

    • Market timing is tricky because if you missed the best 40 days in the last 20 years, your annual returns quickly turn from positive 8.19% to negative -1.96%.
    • But the fact remains that we are looking at a euphoric market with shaky economic foundations.
    • You don’t have to get out of the market. Getting out of overvalued stocks should suffice.

    Introduction

    With every new high reached by the DOW or the S&P 500, the market gets riskier. However, I don’t want to be another analyst that just predicts doom and gloom so today I want to discuss the best risk reward allocation and what an investor can do in these exciting but risky times. More →

  • 16 Feb
    How Much Will You Lose In The Next Bear Market?

    How Much Will You Lose In The Next Bear Market?

    • The current stock market will, on average, deliver returns of 4% per year for the next 15 years. However, the risks don’t justify the returns.
    • All investors owning an S&P 500 or similar portfolio should know that they run the risk of a 50% temporary decline.
    • Various sectors and countries offer much higher returns for the same inherent volatility.

    Introduction

    What’s equally important to how much you expect to make from your investments if things go well is the question of how much volatility you can take if things go wrong. Today’s article is more of a reminder that there are two sides to each investment, the return side and the risk side.

    I’ll elaborate on techniques that will help you assess your future returns and risks. We’ll start with the fun part, the returns, and finish with the necessary part, the risks. More →

  • 14 Feb
    A Look At The Crazy World Of Chinese Stocks

    A Look At The Crazy World Of Chinese Stocks

    • It isn’t unusual that a Chinese stock loses 75% to 90% of its IPO value after a year or two.
    • Delisting, lack of transparency, obscure companies, fraud, buyouts at large discounts, and fears around the economy are some reasons for such performance.
    • You should require at least 50% per year from Chinese stocks with minimum risk. Such opportunities can be found.

    Introduction

    Chinese stocks are, to say it in one simple word, crazy. And apart from crazy, looking at Chinese stocks that are trading on the NYSE seems like walking through a graveyard.

    Companies like China Xiniya Fashion Limited (NYSE: XNY), China Zenix Auto International (NYSE: ZX), ChinaCache International (NASDAQ: CCIH), or Kingtone Wirelessinfo Solution Holding Ltd (NASDAQ: KONE) all seized the craziness going on in 2011 around China and listed themselves on American markets. The results for initial investors were disastrous. More →

  • 03 Feb
    Debunking Rebalancing Myths

    Debunking Rebalancing Myths

    • The standard 60% stocks, 40% bonds allocation is extremely dangerous as bonds and stocks move together more often than not.
    • If something is overvalued, it doesn’t mean you should immediately invest in something that looks undervalued as it might just be less overvalued. If you think as a business owner  would, it’s easy to know whether an asset is over or under valued.
    • Yearly rebalancing has the same effect as quarterly rebalancing, therefore it’s more time effective.

    The Usual Stocks, Bonds 60/40 Rebalancing

    I hate when I see fixed rules in how a person should approach a portfolio, and find the 60/40 rule—that says you should hold 60% of your portfolio in stocks and 40% in bonds—the dumbest of all because there is no causality between stock and bond prices.

    The investing 101 theory says that stocks do well in economic booms while bonds do well in recessions. However, the correlation between stocks and bonds has been very variegated in the past. More →

  • 26 Jan
    The Only Way To Beat The Market In The Next 10 Years

    The Only Way To Beat The Market In The Next 10 Years

    • Investment performance has to be assessed through a complete economic cycle in order to reach the highest possible long term value.
    • In this century, stocks have performed poorly from peak economic cycle to peak economic cycle.
    • Analyzing fundamental risk against the recent performance of the S&P 500 shows us that those who are long the S&P are practically accepting long term negative returns for momentum created short term positive returns.

    Introduction

    Recently, we analyzed Seth Klarman’s amazing performance and investing rationale. There were some pretty difficult things to digest, like the fact that he underperformed the S&P 500 by 50% in the late 1990s.

    But this leads us to some very interesting questions: Do we properly measure investment success? Is the investment manager that invested in internet stocks in the period from 1996 to 1999 a good manager? Similarly, is the manager that created wonderful returns in the last 7 years by being long U.S. stocks a good manager? More →

  • 16 Jan
    Gruesome Industries For Trading, Not Investing

    Gruesome Industries For Trading, Not Investing

    • Even if the industry has wonderful growth numbers, profitability might remain out of reach.
    • We’ll define and describe the industries long term investors should avoid.

    Introduction

    Most of you are familiar with Warren Buffet’s comment on the airline industry in his 2007 letter to shareholders:

    “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”

    Now, most connect the above statement only to the airline industry. However, in a deflationary environment where our youngsters expect lots of things for free—think WhatsApp—and extremely low interest rates, there will be more industries where shareholder wealth creation will be difficult to achieve.

    In today’s article, we’ll define and analyze some of these industries. More →

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