Epipens, the epinephrine injections that provide relief to those with severe allergies that include the possibility of anaphylactic shock, had recently become politicized. The major drug manufacturer Mylan had purchased the intellectual property and distribution systems for Epipen in 2007 and subsequently raised the price for a two-pack from $99 on the date of acquisition to $608 this past May. This price increase occurred close in time to Martin Shkreli’s decision to raise the price of Daraprim tablets (used to treat protozoal infections) from $13.50 to $750 per tablet.
The stock price history of Amazon stock is truly an amazing sight to behold. Shares of AMZN, which traded at $42 as recently as 2008, have compounded at an eye-popping 43% annualized over the past nine years to turn every $10,000 invested into $190,000. Jeff Bezos has followed Warren Buffett’s advice and filled Amazon’s pre-existing moat with alligators, piranhas, and spiked fences awaiting on the other side. Heck, they’re even securing patents for Star Wars-type processing centers that hover above the atmosphere.
Some of my friends do the tsk-tsk lament when politicians are not sufficiently wonkish with their policy proposals. I recommend against the pearl-clutching routine because I point out to them that people with graduate degrees are only 5% of the U.S. population and are not the intended audience for most stump speeches. When I want sophistication and nuance, I look to the legislation being offered, and usually, it’s there.
It is an important life skill to recognize that not every bit of information that you encounter is intended with *you* specifically in mind as the beneficiary. At best, this imbues you with the virtue of humility. At a minimum, it will you make you a more savvy processor of information.
I want to address one of the more insightful questions that I have received about oil stock investing. It generally goes like this: Does the non-renewable nature of petro-carbons pose a significant risk to the long-term survival of oil majors like ExxonMobil, Chevron, Royal Dutch Shell, BP, Total SA, and ConocoPhillips?
This is a smart risk to consider. If you own an asset, and if you reinvest into it over the course of your lifetime, you should be fixated on the risk of whether there will be something leftover for you at the end of your compounding period. In the past, I have lamented the path of Wachovia investors who receive large chunks of dividend income in the 1980s, 1990s, and early 2000s only to find it all collapse from $40 to $2 in the fall of 2008. All your years of compounding and delaying gratification didn’t mean squat because you ended up multiplying the final figure by a near zero number.
Between 2007 and 2009, approximately 34% of American stocks that pay dividends quarterly cut their payout at some point during the recession. The part I find worthy of examination? The fact that 56% of stocks that paid monthly dividends ended up cutting their payout during the recession. The same corporations that suggested you should invest in them for their cash flows had a disproportionately higher likelihood of slashing their payouts than the regular American companies that made no special promises about the future of their dividends.