If some people choose not to invest in a particular master limited partnership because the underlying energy holding contains too much debt, I don’t blame them. That is sound investment analysis! If others don’t invest in an MLP because they invest through IRA accounts and they do not want to deal with the specialty rules that exist for IRAs that generate more than $1,000 in unrelated business tax income (UBTI), I understand and agree. And if some people just plain don’t understand this class of investments, that’s a fantastic reason to avoid MLP investments (sticking to your circle of competence and not straying is a properly well-regarded Warren Buffett quip, so long as it isn’t a crutch to stop learning).
But the dumbest reason I have heard for avoiding the MLP sector is the fear of dealing with the K-1 statement, usually described in hush hush terms as though it … Read the rest of this article!
When I read the biographies of America’s most famous self-made men and titans of industry, there is one character trait that seems to always be a common denominator that they all share: an unrelenting focus to make something great, and from there, an ability to monetize that passion into obscene wealth. John Rockefeller was no exception. When asked by a journalist to articulate the purpose of his life, Rockefeller answered, “God put me here to make money.”
When he created the Standard Oil trust at just thirty-one years of age, he had one mission regarding the fragmented oil industry in the United States: combine everything under the Standard Oil umbrella. To accomplish this goal, Rockefeller did one of two things: he either gobbled up his competitors in exchange for some freshly issued Standard Oil stock, or he would be willing to sustain a temporary loss to himself to drive his … Read the rest of this article!
Quick. Take a look at your portfolio. Pretend that someone just told you that the stock market was going to close until January 1st, 2023. If you knew that you could not sell any of your current holdings for the next ten years, how many of them would you keep?
I was recently reading an old Wall Street Journal article that examined the fact that the fluctuations in net worth among the most affluent 1% of Americans has increased substantially over the past generation. The conventional wisdom on the matter is that we have experienced an unprecedented era of rapid technological innovation, and these changes in technology have threatened the stability of most business sources. That’s part of the story.
Another part of the equation is the fact that access to the capital markets are easier today than they have ever been. Let’s explore the implications of this.… Read the rest of this article!
We dividend investors have one tool in our arsenal that makes the world of a difference over time: every time a company chooses to return some of its cash to shareholders in the form of a dividend, the price of the stock can fall a little bit, and investors can still tread water. The price of the stock can fall by a lot, and the investors will not lose as much money as you might think. Or, the price of the stock may rise by quite a bit, and the dividend may boost your total returns by a greater amount than what you can see by merely looking at a stock chart.
This is something that I have been experiencing in real life with my investment in BP stock. The price of the stock has pretty much gone nowhere, but given my purchase price of around $40 per share, I … Read the rest of this article!
“Don’t fight the tape” is one of those old Wall Street adages that shows up in different permutations and derivations when you read financial commentary. Humphrey Neill once said “Don’t follow the crowd, learn the tape!” Ace Greenburg once advised investors to sell any stock that goes down five days in a row. Yale Hirsch told investors to buy their stocks on Monday and sell them on Friday. Heck, even one of my investing heroes Benjamin Graham once said something along these lines when he advised to “never buy a stock right immediately after a substantial rise or sell after a substantial fall.”
There is a fundamental problem with all of these pieces of advice that should be apparent to anyone with a long-term business owner’s mentality in their approach to stockpicking: none of these quotes have anything to do with valuation. They speak solely in terms of price performance, … Read the rest of this article!