In his 1993 letter to shareholders of Berkshire Hathaway, Warren Buffett provided an interesting historical aside about Coca-Cola’s long-term performance:
“Let me add a lesson from history: Coke went public in 1919 at $40 per share. By the end of 1920, the market, coldly re-evaluating Coke’s future prospects, had battered the stock down by more than 50%, to $19.50. At year-end 1993, that single share, with dividends reinvested, was worth more than $2.1 million. As Ben Graham said, ‘In the short-run, the market is a voting machine—reflecting a voter-registration test that requires only money, not intelligence or emotional stability—but in the long-run, the market is a weighing machine.”
For those of you who are curious, that share is now worth either slightly below $10 million or slightly above $10 million depending on the latest market fluctuations.
What I picked up from Buffett when I first came across this passage is … Read the rest of this article!
From 1911 through 1991, American tech stocks delivered returns of 8.3% annualized, almost two percentage points below what a general basket of large-cap American stocks produced over the same time frame. And much of that was driven by IBM. If IBM were removed from this historical measuring period, the tech stocks would have only produced 5.2%.
Why? Because of the immense wipeout risk. Unlike a candy bar manufactured by Mars, Inc. or Hershey, which can be slightly tweaked and repackage and sold for profit over and over again, the typical life cycle of a technology company has been that (1) a new product is introduced; (2) it saturates a market, creating an avalanche of wealth within a few short years; and (3) the product is replaced by the better mousetrap, leaving sales of the former product to wither due to obsolescence as bankruptcy or some sort of dulitive event occurs.… Read the rest of this article!
This is a random fact about my blog writing—I keep Elmore Leonard’s “Ten Tricks For Good Writing” handy with me whenever I work my way through a post I want to add to my website. Leonard, the author of Get Shorty and Rum Punch, gives these ten pieces of advice for writing a book:
1. Never open a book with weather.
2. Avoid prologues.
3. Never use a verb other than ‘said’ to carry dialogue.
4. Never use an adverb to modify the verb ‘said’, I admonish you gravely.
5. Keep your exclamation points under control. You are allowed no more than two or three per 100,000 words of prose.
6. Never use the words ‘suddenly’ or ‘all hell broke loose.’
7. Use regional dialect, patois, sparingly.
8. Avoid detailed descriptions of characters.
9. Don’t go into great detail describing places and things.
10. Try to leave out the
… Read the rest of this article!
When you draft a will, you have to name an executor/personal representative for your will, or else the State will choose one for you (a process that will likely cost attorney fees and a few months of time). The executor’s duty is to marshal all of your assets upon your death, pay your outstanding obligations as required by law, and then make a distribution of the remaining proceeds consistent with your instructions in the will.
Very little online guidance is available to provide assistance for choosing the right executor to serve for you.
Some factors that you should consider when making your choice:
#1. Likelihood of Actually Serving: Ideally, you want to choose someone as your executor who is younger than you. If you choose one of your peers to serve as an executor, he may die before you. In that event, you may have to go through the … Read the rest of this article!
I view investing in the stock market under the following terms: (1) about 75% of one’s investments should be dedicated to owning shares in the most dominant business holdings in the entire world, and the bulk of the wealth should come from the “sitting” as earnings per share growth marches onward and dividends get paid out for reinvested into additional shares that can also participate in the earnings per share growth and pay out dividends of their own, and (2) about 25% of one’s investments should be directed towards the purchase of undervalued securities that are selling for less than they are worth, and can deliver more rapid capital appreciation that is usually the result of earnings growth interacting with P/E expansion.
The best part of buy-and-hold investing, or Category #1 investing, is that you do the hard work amassing capital and researching the dominant business, and then you get … Read the rest of this article!