When I was a kid, I visited the Lake of the Ozarks in Missouri with my dad. It was around 2001 or 2002, and we were walking through a parkland path that would lead you to great views overlooking the lake. There was very modest lakefront construction at the time, and large tracts of idle area. At some point, my dad said to me, “Timmy, come back here in ten to fifteen years, and this will all be built out.”
My dad was right. When I visited the area again earlier this summer, I saw that there was property construction as far as the eye could see–in fact, I couldn’t find any extended … Read the rest of this article!
So there’s been a few companies where it took me a while to figure out, “Holy cow, this company is a printing press. It has a license to print money and is growing fast.” These come-to-growth moments have been loosely as follows: I came to appreciate Disney in 2013, Visa in 2014, Nike in 2015, and now, in 2016, Sherwin-Williams has really been the business that has come onto my radar after years of neglect.
The stock rarely goes on sale, and I imagine that many people buying it outside of the 2008-2009 period felt like they were paying a higher price than they’re comfortable with. But Sherwin-Williams has such an extended record … Read the rest of this article!
Bayer’s $62 billion all-cash offer for Monsanto was publicly disclosed earlier today. My five thoughts on the proposed transaction, in no particular order:
Point #1: Monsanto’s growth has come entirely from buybacks of late.
In 2012, Monsanto made profits of just a hair under $2 billion. In 2016, Monsanto is on pace to make a little bit over $2 billion. Specifically, the change is from $1.997 billion to $2.0250 billion, for a cumulative growth rate of 1.40%. And yet, Monsanto has covered up some of this core business stagnation by taking on enormous sums of debt in recent years to retire shares and boost the earnings per share.
Back in 2012, Monsanto had … Read the rest of this article!
I’ve been covering stocks for five years, and there are very few excellent long-term businesses that I have neglected to mention at least once. After noting how Cisco investors need to make peace with a management team that feeds at the trough due to the detriment of shareholders, I want to talk about a company that is very good at keeping compensation reasonable while also delivering exceptional value to shareholders: Sherwin-Williams (SHW).
Even though Sherwin Williams has been raising its dividend for 38 years, and sells paints and automotive coatings that are well known to consumers, you rarely hear it mentioned in discussions of ideal long-term investments. I suspect this is because the … Read the rest of this article!
There are two types of non-beginner mistakes that I try to warn against. The first is that people shouldn’t generate a cash-generating asset simply because it has experienced a change in the business cycle that demanded a dividend cut, particularly if the business deals in commodities (see Conoco’s fall to $31 shortly after its dividend cut compared to the current price of $43 for an example). The other mistake involves ignoring companies with truly superior balance sheets–the Berkshire Hathaways, Googles, Microsofts, Johnson & Johnsons, and Ciscos of the investment world that are much stronger and have the capacity to quickly increase their earnings power in ways that a cursory P/E analysis do not … Read the rest of this article!