Comparison Is The Thief of Joy

That’s a Teddy Roosevelt quote. One thing that can drive even the best absolutely crazy is the concept of perpetually escalating expectations. It was so bad that Warren Buffett even contemplated early retirement because the track record of his early days had become more of a curse than a blessing. Never having a down year, beating the Dow Jones by ten percentage points annually, and the growing hype in Omaha started to choke him.

In his last partnership letter dated May 29, 1969, he mentioned that he considered stock market values generally frothy, but also spent time discussing the notion that he didn’t want to be chasing the “investment rabbit” for the rest of his life. He was circumspect in saying that his own past successes had forged their own chains; his early successes were so extreme that the Shakespearean fall awaited and he would spent the last fifty years … Read the rest of this article!

Why Four Sectors Of The Economy Create A Disproportionate Share Of Fortunes

If you could sell $100,000 worth of fruit at a grocery store and make $60,000 in profit or sell $100,000 worth of refrigerators at a local retail store and make $60,000 in profit, which would you prefer? The right answer to that question depends on one unknown variable: time. The quicker you can get your hands on that $60,000 in profit, the more valuable the business. If you are selling fruit in a major city center like Chicago or Los Angeles, you might be able to sell that in a month. The velocity of money is important because the sooner you get your hands on that $60,000, the quicker you can redeploy it into new investments that will also pay you money. That is compounding.

That is why this site has such an affinity for the Colgate-Palmolives, Nestles, and Hersheys of the world. The companies have brands that permit them … Read the rest of this article!

Finding The Trend Wave With A Blue-Chip Stock

In 1972, a shareholder of Kimberly Clark collected $0.06 over the course of the year for 1 share of KMB stock. In 2015, such a shareholder would have collected $3.52 per share. Adjusted for inflation, Kimberly-Clark paid the equivalent of $0.27 per share in 1972 dividends. That means you are looking at an actual thirteen-fold increase in the real purchasing power of Kimberly-Clark dividends without taking into account the wealth created by capital gains and dividend reinvestment over the past 43 years.

It has compounded at 14.2% annually since 1972. It’s been of those stocks true to the Benjamin Franklin adage that compounding is the stone that turns all lead into gold. A $10,000 KMB investment in 1972 would be $4,500,000 today, giving you $13,000 per month in dividends. It redefines the holy grail of long-term dividend investment: instead of aiming to collect more in annual dividends than the initial … Read the rest of this article!

Always Be Growing

During the 1980s and 1990s resurgence of book when Barnes & Noble and Border’s would deliver record profits on behalf of shareholders, the company was successfully implementing a “high fixed cost and then everything flows to profit” business model (this is in contrast to a business model when you make roughly the same profit whether you sell 1,000 or 100,000 widgets).

This kind of business model comes with one particular risk: You must sell X number of goods to to avoid losing money. In the case of Barnes & Noble, the first $1.5 billion in 1998 went towards paying expenses–the required payments to content publishes, employees, high rents to operate the large stores, and so on. If you sell $1 billion worth of books that year, too bad–you’re going to lose $500 million. If you sell $3 billion, then great–your costs might only go up to $1.55 billion to account … Read the rest of this article!

When Doing The Right Thing Doesn’t Pay Off

Some of the most outstanding businesses in the world have cut some corners in recent years. Pepsi has kept the size of Doritos bags the same, but has cut the amount of chips in each bag by a noticeable amount. Hershey has reduced the size of its candy bars, and has also reduced the amount of actual milk chocolate put into each bar. And Irene Rosenfeld, the CEO at Mondelez, is reducing the brand equity of Cadbury Eggs by removing all dairy milk from the product and reducing the serving count from six to five.

Amidst all of this is the quirkiest large company in America: Tootsie Roll. The Gordon family has controlled 45% of the company’s voting stock for most of the corporation’s history, with the recent husband-wife duo running the company since 1962. Ellen Gordon inherited the business from her father, and she appointed her husband CEO in … Read the rest of this article!