Since Warren Buffett announced his purchase of Exxon Mobil stock on behalf of Berkshire Hathaway, the price of the stock has gone up substantially in a two-month period for a company worth over $400 billion. Buffett paid about $90 per share. Since mid-November, the price has flirted with the $100 mark, currently at $99.52 as of the time of this writing. With a 10% or so pop in such a short time, I have heard from investors who have been dollar cost averaging into shares of Exxon and are now considering halting them.
I can’t tell you what to do, but here’s how I would think about it: Exxon Mobil is a beast. It gushes profits. When oil prices collapse, it still makes $15-20 billion in a year. When they are high or normal, the company can bring in over $35 billion in profits in a year. It has operations … Read the rest of this article!
For those of you who have been reading this site for a while (God Bless you!), you know that it is no secret that the cash payouts of high-quality firms contribute a large, hidden part of total stock returns that is not readily apparent when you look at a stock chart and limit your thinking solely to the terms of a company’s stock price.
But something especially incredibly happens when you combine a holy trinity of wealth creation: high current dividends, plus a high dividend growth rate, and then mix it with the decision to reinvest the cash into even more shares. Finding companies with high current dividends and high future dividend growth rates is rare, but why should extreme wealth creation be all over the place? That would defeat the art of investing, and take the fun out of it.
One such company that has, over the … Read the rest of this article!
I was recently studying the various Kinder Morgan energy companies as potential investments, and I got sidetracked into studying the life of Richard Kinder himself. He’s a pretty interesting dude—he was supposed to take over at Enron in 1996, but he got jilted by Kenneth Lay and went and started his own energy firm with Bill Morgan instead. The energy assets that Richard Kinder used to build his empire came out of Enron itself—when the Enron Board decided to get out of the old pipeline business and focus instead on the trading of energy assets, they sold $40 million worth of pipeline assets to Richard Kinder. He was able to use these assets to build a billion-dollar empire, as Kinder now owns more than $7 billion worth of KMI and owns token positions in the other publicly traded members of the Kinder Morgan family.
But what caught my attention is … Read the rest of this article!
Since I began writing finance articles in 2011, a few opinions of mine have received outsized criticism. Anything relating to gold or tobacco, and anything relating to BP’s merits as an investment after the oil spill.
My view was, and remains, that BP stock has been disproportionately lambasted as a long-term investment after the oil spill due to its dividend cut, high litigation costs, and stagnant stock price over what was an oil spill that occurred over a decade ago.
Amidst BP’s criticism is the fact that it is an enormous company that sells $304 billion worth of energy-related products per year. It is massive. It earns annual profits equal to half the market capitalization of Hershey each year. Thinking about that–if all Hershey stock were available for sale at the current price every day for the next two years, BP would be able to purchase the company outright with … Read the rest of this article!
On page 175 of Janet Lowe’s book, Damn Right! Behind The Scenes With Berkshire Hathaway Billionaire Charlie Munger, Ms. Lowe quotes Charlie as saying:
“People underrate the importance of a few simple big ideas. And I think to the extent that Berkshire Hathaway is a didactic enterprise teaching the right systems of thought, the chief lesson is that a few big ideas really work. I think these filters of ours have worked pretty well—because they are so simple.”
It’s Christmas time, and that’s as good a reason as any to engage in big-picture contemplative thinking about life. For a moment, let’s break down everything we do with our life into decision trees (Christmas tree edition).
Most of us, even we aren’t particularly materialistic about cars, houses, or clothing, recognize the use of money for the experiences that they are capable of creating. Super Bowl tickets. Hikes across Europe. Chilling … Read the rest of this article!