When I read investment message boards, I can tell that investors are about to make bad investment decisions when they abandon traditional measurements of value and instead suspend disbelief by focusing on esoteric business metric. This is nothing especially out of the ordinary–there are always areas of the economy vulnerable to either excessive greed or excessive fear that temporarily persuade intelligent, hard-working men to depart with their money on a whim.
Those thoughts come to my mind when I read articles touting investments in Tesla Motors. There are many things to like about Tesla the company. The Roadster and Model S recapture some of that sexiness in American car design by harking back to the era when Americans actually based part of their identity on the cars they drove.
It is impressive that Tesla has been able to commercially produce an EPA-compliant electric vehicle that can travel 236 miles on … Read the rest of this article!
Three days ago, Ebby Halliday died in her sleep at the tender age of 104. With her fame largely limited to the Dallas area, Halliday succeeded in growing a real estate company that she founded by herself–generating $2,500 in first month sales in 1945–into a regional empire that employed 1,700 people and generated $6.5 billion in annual sales. I found some great snippets of her life that can give you a picture of what she meant to the Texas business community.
When a customer or acquaintance would inquire “Does so-and-so work for you?”, Halliday would nod her head affirmatively while gently correcting to say, “Yes, she works with me.”
We’ve all seen the corporate trend towards referring to the employees as “family” or other endearing terms. This move often backfires–or at least rings hollow–as the employer actions fall short of the expectations created by the affectionate terminology.
Right now, shares of Kraft-Heinz trade at $71 per share. The dividend yield sits at 3%. For a food conglomerate that has spent the past fifteen years growing revenues at 3%, you might ordinarily expect to generate 8% long-term returns according to the following assumptions: (1) you pay fair value for the company, (2) the 3% annual revenue growth translates into 5% earnings per share growth, and (3) you collect the dividends as cash rather than choose to reinvest.
What makes Kraft-Heinz especially intriguing right now is that second element: how revenue growth translates into earnings growth.
Peter Brabeck-Lemanthe, the Chairman of Nestle, provided a telling a quote on how the 3G management team is quite different from ordinary corporate management: “3G and Warren Buffett have pulverized the food industry market, particularly in America with serial acquisitions. 3G’s partners are known in our industry for ruthless cost-cutting and have already … Read the rest of this article!
Thirty years ago today, Michael Jackson purchased the Beatles catalog from an Australian billionaire for $47.5 million plus a personal appearance. Before that, he had been close friends with Paul McCartney and learned about the concept of purchasing song copyrights when McCartney showed him his song portfolio that was generating income for him each month.
The Beatles catalog is one of the remaining crown jewels of the remaining Michael Jackson estate, with some estimating its value to be over $1 billion against the $500 million in debt and tax liabilities being held against the estate. The only song Michael Jackson didn’t own? Penny Lane, because the Australian billionaire Robert Holmes Court retained that song for himself because he named his daughter after it.
It is an instructive case on how compounding works that Michael Jackson has grown richer through death–the tax liabilities and debt have compounded, yes, but the lucrative … Read the rest of this article!
There are a couple companies that I’ve never written about that I regularly receive requests to cover–Caterpillar is one of them. To a lot of people, it seems like the perfect dividend growth stock. The company has a nice moat selling earthmoving equipment, as the fixed costs are so high that it is difficult for new companies to enter the field. Also, it tends to benefit from technological advancements because it can make more sophisticated equipments that tempts the customer base to buy the latest and greatest human-sized gadget.
The dividend has been excellent the past fifteen years–it has grown from $0.64 in 1999 to $3.08 this year. Other than paying out $0.70 in both 2001 and 2002, the dividend payment increased every year (perhaps most importantly during The Great Recession, when the 2008 payment of $1.62 was hiked to $1.68 in 2009). And since the early 1990s, the company … Read the rest of this article!