The Synchrony Spinoff From General Electric

Amazing that an entire marketing department at General Electric found it wise to combine the words sin + crony in launching the Synchrony Financial, the former private credit card label arm of General Electric that has been gradually working its way towards becoming a standalone company (I can’t, for the life of me, figure out why General Electric decided to structure this deal as a share swap rather than an outright spinoff, especially when you take into consideration GE’s betrayal of historical expectations when profits collapsed and the dividend got cut in 2009 which is something General Electric had not done since 1938).

Normally, a straight forward spinoff is most enjoyable for shareholders because they feel like they are getting a “free” business and they get the full autonomy to decide whatever they want to do with the shares. When Conoco shed Phillips 66, you got to own both Conoco … Read the rest of this article!

The Wisdom Of Building A Very Large Coca-Cola Position Right Now

Every now and then, I come across some slight spin on an investing truth that I already think I know that makes me see everything in a new light all over again, afresh. Take something like reinvested dividends. I’ve known for about, oh I don’t know, five years now, that the reinvestment of dividends at low prices is one of the reasons why compounding works so well, and has historically had an outsized effect on the returns of companies like Exxon, Chevron, Altria, and Philip Morris International because the dividend payments mixed with attractive valuations give you total returns in excess of what you would otherwise calculate by examining a company’s growth rate and adding the dividend yield.

What I failed to appreciate is that the reinvestment of dividends, provided they are on an upward long-term trajectory, can also provide you with additional compounding benefits while the performance itself is Read the rest of this article!

Chevron Stock Through A Boom And Bust Cycle

There are certain cyclical companies—ExxonMobil, Chevron, Emerson Electric immediately come to mind—that have storied records of growing their dividends year after year that make them interesting case studies independent of most other large-cap industrials and energy companies with cyclical business models. The rising dividend is such an important distinguishing characteristic for those few cyclical companies of Chevron’s caliber because it turns uncertainty into your friend—you have a rising dividend that puts more money into even more shares as they fall 15%, 25%, 50%, or whatever.

When I study Chevron’s history, I am reminded of the Tom Lewis quote that the stock market resembles a man walking a yo-yo up the stairs where people get too distracted by the yo-yo’s movements and ignore the far more important matter of the man walking up the stairs. The spirit of that analogy certainly applies to Chevron, which hit a high price of $135.10 … Read the rest of this article!

How Do You Get A Kid Interested In Investing?

Dear Tim,

[first part redacted] how am I supposed to get my kids interested in stocks and investing generally? They just don’t care…. –Scott

Ah yes, the timeless question! Once you’ve motivated yourself to do something good, how do you get the ones you love to see the same light you’ve seen?

First off, let’s identify the obstacles: Some of it is going to be genetic. We’ve all heard the story about that legendary marshmallow test performed on two year-olds in which the ones that could delay gratification for two marshmallows later ended up demonstrating more socially desirable characteristics later in life. The article “Workers Who Neglect Their Retirement Neglect Their Health, Too” emphasizes the point that cultivating delayed gratification habits has far-reaching consequences in life, beyond just financial.

So really, when you say: “How do I get my kids interested in investing”, you are really saying, “How … Read the rest of this article!

Want To Rebalance A Portfolio? Use Cash, Cash, Cash

I was talking with a college finance professor last week and I asked him what he thought was his best idea for portfolio management that isn’t widely accepted or encouraged as part of conventional wisdom. He told me this: “Only rebalance using cash, be it from investments or the new money you have available from your job.”

He said he learned that by forty years old when he saw the stocks he sold in his thirties to rebalance kept going up and raising dividends. You know the C.S. Lewis quote about how we are never entitled to know the answer to the question “what might have been”? Well, stock market investing is the one area of life the great Christian writer didn’t take into account. If you sell Coca-Cola at $35 per share when its quarterly dividend is $0.305, you will be there in 2019 when the stock price is … Read the rest of this article!