The Public Investment of Saudi Arabia’s Ambitious Global Investment Strategy

With everything going on in 2020, it can be easy to ignore one of the biggest storylines that has been somewhat quietly developing–namely, the Public Investment of Saudi Arabia has been aggressively buying up large ownership stakes in many American and British corporations. 

Specifically, in 2020, Saudi Arabia’s investment arm has made the following acquisitions: $828 million in BP stock, $714 million in Boeing stock, $523 million in Facebook stock, $522 million in Citigroup, $514 million in Marriott stock, $496 million in Walt Disney, $491 million in Cisco, $484 million in Royal Dutch Shell stock, $481 million in Suncor Energy stock, $416 million in Live Entertainment, $408 in Canadian Natural Resources stock, and a hodgepodge collection of sub-$100 million investments in Berkshire Hathaway, Qualcomm, Pfizer, IBM, Starbucks, ADP, and Union Pacific. In addition, the Saudi Investment Fund purchased Newcastle United (you know you’re in strong financial shape when a professional … Read the rest of this article!

Stock Market Irrationality in a Bull Market

A reason why index funds that track things like the S&P 500 have become popular in recent years is that each investor is shielded from seeing the volatility of individual components that can promote irrational selling. If someone owned Visa and Chevron outright over the past year, he might discount the excellent performance of Visa and fret over the fluctuation in Chevron that took the price of the stock from over $130 to under $70 at some point in the past few months. And yet, if someone owned an S&P 500 that contained Chevron, they would never actually see the Chevron stock individually swing in stock price because its performance would get blended in with hundreds of other companies. It’s all irrational, yet Dalbar studies show that the typical investor churns over individual stocks at almost triple the rate of S&P 500 index funds.

There are circumstances, however, when it … Read the rest of this article!

My Ten Best Investments – 2020 Edition

In 2014, I published “My Ten Largest Investments” which discussed, you guessed it, my ten largest investments and the basis for why I made the investment. To this date, it is the best selling ebook or piece of intellectual property that I have ever created.

I have always prepared on a follow-up to it, but I did not do so because the holdings were largely the same over time. That is the thing about long-term, buy-and-hold investing. It is inherently boring, stable, and repetitive without much turnover. There is not much to say other than, “Yep, here comes another Coca-Cola dividend, even as the world is falling apart, because people are still consuming beverages and Coca-Cola supplies 3.5% of the total amount of liquid consumed on planet Earth per day.”

But 2020 has brought about some real changes in the form of additions to the portfolio. I entered … Read the rest of this article!

Two Ways To Find An Undervalued Stock

The word “undervalued” is one of the most commonly used, yet often undefined, words in investment discussions. The general principle of searching for undervalued stocks is straightforward enough: People that buy undervalued stocks want to find a company that is worth more than the current price of the stock indicates. But the tactics for making this identification differ among the thousands of men and women that dedicate sizable chunks of their life energy to this pursuit.

Charlie Munger said that we all have an obligation to destroy at least one deeply held conviction per year. When I first started studying large-cap stocks, I believed that a stock was undervalued if it traded at a P/E ratio below its historical range. I knew it didn’t apply to fast growing or small firms, but I figured that if Smucker usually trades at 23x earnings and an opportunity arises to buy at 18x … Read the rest of this article!

The Japan ETF (EWJ) vs. Aflac Stock

Since 2009, the United States stock market has outperformed the stock markets of most other countries, and you have not heard as much investment commentary touting the value of international diversification. I think much of the debate is silly, as the kinds of companies that make up the S&P 500 generate a substantial chunk of their profit outside the United States. Coca-Cola may be considered the most Americana of companies, but it makes 80% of its profits outside the United States.

You want 3% of your portfolio in Mexican stocks? Well, Coca-Cola makes 3% of profits in Mexico. Problem solved.

I do understand, however, that people may want to own investments that are focused primarily on a single country so they often turn to the popular index funds of the companies that they are choosing. My argument is that, rather than owning the index fund that represents the economic output … Read the rest of this article!