Brunswick Corporation’s Ill-Advised Spinoff of Life Fitness Brands

Brunswick has one of the greatest legacies in the history of American business. How many companies out there have track records dating back to before the Civil War, as Brunswick does with its inception back in 1845?

The obvious downside with a business like Brunswick is that a majority of its product sales are cyclical. Manufacturing and boats are great, except during a recession. That can be tolerable, as the average years and good years can provide high enough profits to roll the muck that is encountered during the down years.

My fear is that, upon seeing the announcement that Brunswick is spinning off its fitness business, which includes the brands Life Fitness, Hammer Strength, and Cybex, Brunswick is forgetting about the importance of diversification that is necessary to weather the inevitable recessions.

Most analysts seem to approve of the 2019 scheduled spinoff of the fitness business, saying things like: Read the rest of this article!

How Bad Are Mutual Fund Fees?

When investing, there are three to keep in mind that can erode the purchasing power of each dollar that we have:

(1) The first one is inflation. If inflation runs at 4.0% annually, that means it will take $1.04 in 2014 to buy what cost you $1.00 in 2013.

(2) The second thing is taxes. If you own 1,000 shares of ExxonMobil in a taxable account, you will receive $2,520 in annual dividends. But, if you are in the 15% tax bracket, you will have to send $378 to Uncle Sam, effectively giving you $2,142 in oil well money from Exxon that you can use to spend as you please.

(3) The third way that you can lose money is by paying mutual fund fees. If you have $100,000 in an account that charges a 1% annual expense fee, you are paying someone else $83 per month in perpetuity to … Read the rest of this article!

Why Russell 2000 Stocks Outperform The World

Many of you who have long followed the financial markets are aware of why the conventional wisdom says that “stocks tend to return 10% per year on average.” This data point comes from the well-renowned Ibottson & Associates study that found large-cap American stocks delivered returns of 10% from 1926 through 2012.

Arguably, the results of this study buried the lead, as it also indicated that a basket of American small-cap stocks, now represented by the Russell 2000 Index, delivered returns of approximately 12.2% over the same time frame.

Over an entire lifetime, that extra percentage point or two makes a difference. The large-cap American stocks, which involves compounding at a 10% rate for 86 years, turns $10,000 into $52 million. The small-cap American stocks, under identical circumstances but compounding at a rate of 12.2%, produces an end result near $300 million. Obviously, the plan isn’t to wait 86 years Read the rest of this article!

Amazon’s Other Competitive Advantages

Generally speaking, when investors analyze Amazon, they focus on its ruthless distribution capabilities (i.e. fast shipping and processing of orders throughout every point in the sales chain) and its ability to compete on cost with the Big Box retailers. These are certainly parts of Amazon’s business success, but there is other, much more rarely discussed factors that contribute to the story as well.

With Amazon falling in price from over $2,000 per share last month to $1,642 today, increased attention has been devoted to studying Amazon’s competitive advantages, evaluating their sustainability, and figuring out what the future holds for this business that has captivated and re-oriented the global marketplace over the past two decades.

To access my analysis on Amazon, you can become a subscriber at Patreon by clicking here.

 

Originally posted 2018-10-27 11:59:16.

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Colgate-Palmolive Stock: An Essential Core Holding In Your Portfolio

colgate

You gotta love America—in this country, can you get rich by buying blocks of stock in a dish soap and toothpaste manufacturer, hold it for a long time and go about your life, reinvest the dividends, and get rich.

Check out this image of what would have happened if you bought $10,000 worth of Colgate-Palmolive stock twenty years ago, checked the reinvest button on your brokerage account (err…instructed your broker to reinvest the dividends back then), and let the wealth compound over time:

colgate2

How is it that a company as seemingly boring as a dishsoap and toothpaste manufacturer is able to turn every $1 you invested in 1993 into $15 in 2013 just by executing a buy-and-hold strategy?

The key to blue-chip investing is this: when you are dealing with a high-quality company, there are rarely any material setbacks in profits. In the case of Colgate-Palmolive, the profits have increased … Read the rest of this article!