Imperfect Substitutions For Success And Prosperity

Someone that attended my high school is currently the manager of a McDonald’s franchise in St. Louis. Among other things, he brought up the fact that his compensation and opportunities for advancement are tied to the speed at which orders are filled. There is a screen that appears for the McDonald’s workers to see after a customer places an order, and a McDonald’s worker presses a button to signal that the order is completed. This is how the company manages efficiency. The logic is that customers served within three minutes of placing their order will be happier and more likely to return than if the order takes six minutes.

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Recognizing A Bad Stock Before It Burns You

With the price of oil coming down to the $40 to $50 range, some companies that have fuel charges as a major expense are reporting profits that are higher than usual. You are seeing that with Carnival Cruise Lines which are seeing profits grow from $1.39 in 2013 to an expected $2.40 in 2015. The price of the stock has increased from $31 in 2013 to $47 at the end of today’s close. You do not want to hitch your family’s fortune onto the back of companies like this.

The reason why I say that is because Carnival carries high debt, has an indistinguishable moat, normally operates with high fixed operating costs, and is highly susceptible to high oil and gas prices. There is no need to ever buy a company that lives and dies according to a reverse cyclical relationship with the energy sector (i.e. when the cost of oil goes down, Carnival’s profits go up and vice versa).

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