Learning From Lottery Winners That Go Bankrupt

One of the most important academic insights into human nature can be found in this 2009 research paper published in the Vanderbilt Law and Economics Journal titled “The Ticket To Easy Street: The Financial Consequences of Winning The Lottery.” This research essay tracked down the winners of the Florida Lotto and Fantasy Five (another Florida lottery) and cross-referenced those winners with bankruptcy filings over the subsequent twenty years. It found that lottery winners were over 5x as likely as the typical individual to file for bankruptcy over twenty-year period. 

An author of the study, Mark Hoekstra, added this commentary about his research findings: “The fact that winning a large sum of … Read the rest of this article!

What Shrewd Investors Know About Disney’s Buyback


One of the advantages that comes with the turf of buying and holding a particular stock for a long period of time is that you hopefully become familiar with it in a way that someone taking a cursory look at the stock may not notice.

For instance, it is well known in the investor community that Disney typically spends four times as much money repurchasing stock as it does paying out dividends. This fact, coupled with the Disney Board’s decision to pay out the dividend annually, can partially explain why income investors looking for retirement income avoid the stock altogether. There aren’t a whole lot of people in the world who can look … Read the rest of this article!

Amazon’s Cash Flows Remain Nearly Impossible To Value For Investment Purposes


Over the course of the January-October snapshot of this year, shares of Amazon have tumbled 30% (recently settling into a range in the $280s, below its recent high of over $400 per share). Two of you have written to ask me whether this is an opportunity purchase a growth stock investment at a value price.

My answer? This is a situation that firmly belongs in the “too hard” pile, an idea borrowed from Charlie Munger. One of the things that is an important with investing—among other things—is to figure out your circle of competence and stick to making decisions there. I can look at the extent of BP’s oil reserves, take a look … Read the rest of this article!

Corporate America’s Concentration of $2 Trillion In Cash

When financial data is released pertaining to the financial health of corporate America, it will often be said that “corporate America is awash with almost $2 trillion in cash.” That statement is true, but it is important to realize that there is nothing like an even distribution of this cash wealth. 

In fact, over $1 trillion in corporate America’s cash is held in the following companies: Apple, Microsoft, Berkshire Hathaway, JP Morgan, Wells Fargo, Cisco, Alphabet, Oracle, Amgen, Gilead Sciences, General Electric, Qualcomm, Coca-Cola, PepsiCo, Facebook, Procter & Gamble, Intel, Amazon, Bristol-Myers Squibb, Caterpillar, Franklin Resources, Visa, Celgene, Nike, Wal-Mart, and Adobe. 

For the past ten to fifteen years, the cash and debt … Read the rest of this article!

Kraft’s Appeal And Drawbacks As A Permanent Investment Holding


For the past couple of days, we have discussed the ways in which IBM can prove to be a superior investment going forward, despite the narrative that’s become familiar to many—the technology service firm has been having trouble growing its revenues. Because of IBM’s low 25% dividend payout ratio, and its extensive commitment to repurchasing stock that is currently in the 10x earnings range, you can easily way a way IBM can prove to be a lucrative long-term investment even while its revenues stagnate.

Now, I want to talk about another excellent company where the opposite is true—revenues are having trouble growing, and it tells you something about the current state of Kraft’s … Read the rest of this article!