For some of you reading this, it is no secret that the big drug stores have been a great way to make lots of money over the second half of the 20th century through today. During the past thirty years, Walgreens stock–now officially called Walgreens Boots Alliance with the ticker symbol WBA–has compounded at almost 16% so that a $25,000 investment in 1985 would be worth $2.1 million today.
It makes intuitive sense why drug companies have been such successful investments. There are strong drug networks selling products that people need to pick up in person rather than through the mail. There are basic consumer items that get purchased as well that add to the shopping cart total. The founder of Walgreens was so shrewd about getting the location right that he created the enduring cultural mandate to only set up shop at street corners so the locations will be … Read the rest of this article!
In 1999, IBM sold $82.5 billion worth of tech stuff around the world. This year, it is going to sell $82.5 billion worth of tech stuff around the world. The revenue peaked to $101 billion in 2011, and has come down rapidly as cheap cloud storage solutions have found a place in the heart of corporate America over hardware with ongoing maintenance courtesy of IBM.
And yet, the profits generated over that time period has increased by quite a lot over this sixteen-year time period. IBM made $6 billion in net profits back in 1999, and it makes over $14 billion in net profit now. The earnings per share growth has been much better over the past sixteen years, climbing from $3.72 in 1999 to $14.25 now. It’s hard to ask for much more than an investment that quadruples earnings over a sixteen-year stretch.
At the most recent annual meeting, … Read the rest of this article!
As I look at the top five hundred or so companies in the world based on size, there are only four or five dozen I can find that could be classified as undervalued at the present moment. And once you remove cyclical companies–particularly the energy stocks–then the list of companies gets even thinner. This isn’t a tragedy, as it only takes one attractive opportunity at a time to put money to use, but it does speak to the homework and research necessary to find companies on sale these days.
One such candidate for consideration is Diageo (DEO), a London company developing deep roots in the emerging markets that became publicly traded in 1886 under the name Arthur Guinness Son & Company. This beer company seems to be a living, breathing example of the great Charlie Munger quote, “It’s obvious that if a company generates high returns on capital and reinvests … Read the rest of this article!
The fall in the price of Kinder Morgan’s stock has caught my attention. The former MLP, which has delivered returns of near 20% annually since CEO and Chairman Richard D. Kinder purchased hard assets from Enron two decades, has seen its share price come under stress. The reasons for the decline have been fundamental, psychological, and political.
The general trend from $44 per share towards $29 per share has been due to legitimate concerns about the business.
First, the bad news:
It is true that Kinder Morgan has seen 12% declines in revenues in the past year, as the price of transporting oil, chemicals, and other commodities has come down a bit alongside the decline in the prices of commodities themselves (because oil that makes sense to ship at $70 per barrel doesn’t make sense to ship at $50 per barrel.)
Kinder Morgan does not pass Benjamin Graham’s balance … Read the rest of this article!
Alphabet stock, the artist formerly known as Google, shot up $50 per share to close above the $700 mark to imply a market capitalization of $450 billion. The reason for apparent investor jubilation is that Alphabet reported 13% growth in revenue over the past twelve months when it disclosed quarterly earnings on October 22nd. That growth is very impressive for a company of Alphabet’s size–it generated revenues of $66 billion last year, and this year’s figure should be in the $74-$77 billion range.
The current profits of $15.8 billion are way, way ahead of the $1.51 billion that Alphabet reported in profits ten years ago. It deserves credit for being the most dominant tech company during this time alongside Apple. It’s hard to create a moat in the online world where the barriers of factories and physical real estate are not present, but Alphabet has succeeded in doing so.
But … Read the rest of this article!