The terms of Philip Morris International’s spinoff from Altria in 2008 made it a company with characteristics that are, to my knowledge, unmatched by any other large-cap stock. And it is that Philip Morris International is a company that sells essentially the same cigarette brands that Altria sells to investors in the United States, except 0% of Philip Morris International’s revenues are generated by selling cigarettes to American investors. It’s all overseas money, except Philip Morris International keeps its headquarters on Park Avenue in New York and reports all of its profits, volumes, and balance sheet considerations in numbers that are converted to U.S. dollars.
This has two implications for those who study … Read the rest of this article!
One of the Warren Buffett quotes that gets repeated time and time again is that it’s better to buy a wonderful company at a fair price than a fair company at a wonderful price. It’s a useful piece of wisdom, but often gets used by investors to justify whatever it is they want to buy at a moment (using the adage as mere lip service to valuation). Buying Hershey at $109, Brown-Forman at $90, Colgate-Palmolive at $69, or Realty Income at $52 is NOT an example of buying a wonderful company at a fair price. Those are examples of buying excellent companies at 15-25% premiums to what they are worth.
I’m not saying … Read the rest of this article!
From the end of 1998 until the summer of 2008, ExxonMobil reported annual earnings per share growth of 21%. Chevron reported earnings per share growth of 26%. When oil prices rose substantially, the profits of the two American supermajors grew at a pace we typically associate with a tech startup—not a stodgy oil company that is supposed to be all about the dividends and moderate profit growth. And of course, both Exxon and Chevron were delightful investments over this time frame. Exxon returned 14% annually from the start of 1998 until the peak of oil prices in 2008, and Chevron returned 12.5% over that same time frame.
But here is what I find … Read the rest of this article!
In the field of finance and behavioral counseling, there is an oft-repeated hypothetical presented to professionals in the industry that call for them to recognize that people have different priorities when it comes to reaching goals. Often called the “Rich Grandparent”, “Rich Uncle”, “Rich Aunt” or merely “Rich Relative” hypothetical, the problem goes like this:
Your rich relative dies and leaves a will making you one of several beneficiaries—the gift you are set to receive is $20,000 in cash. However, a will contest has been filed by other relatives not mentioned in the will and the case is due for trial in two years. If the will contest is successful, you will get … Read the rest of this article!
If I had to make a list of the obstacles that can prevent people from successfully applying some of the sound investing principles found in Benjamin Graham’s early writing, one of the spots would be reserved for lack of patience—stocks that are unpopular can sometimes remain unpopular and underpriced for a long period of time, and it can become tempting to sell a stock simply because the price of the company isn’t moving forward as fast as you’d like (by the way, a lack of patience can also be a problem with companies that move upwards too fast—Exxon Mobil turned $100,000 into $1,800,000 over the past twenty-five years, and I’m sure a quick … Read the rest of this article!