Many of you may have seen that Whiting Petroleum recently announced its bankruptcy, which is significant news to me that I consider worthy of a quick case study.
For those of you who are unfamiliar, Whiting Petroleum is one of the largest Exploration & Production (E&P) corporations in the oil sector (ConocoPhillips is the largest). E&P companies, often called “upstream oil producers”, do exactly what comes to mind when you picture oil being driven from the ground. Other sectors of the “oil economy” are midstream, which involves the transportation, storage, and marketing of oil, as well as downstream, which involves the conversion of oil-products into gasoline and jet fuel.
When the price of … Read the rest of this article!
Between 2011 and 2015, Procter & Gamble raised its dividend from $1.97 per share to $2.65 per share. During these four years, each share of P&G that got purchased at $60 in 2011 paid out $11.50 in cumulative dividends if you forward count the September and December payments. At an average reinvestment price of $68.23 over the past four years, and assuming the final two payments get reinvested at the current market prices, an investor would have created 0.168 shares of Procter & Gamble over the past four years just by making a singular decision in 2011 and checking off the reinvest box.
I mention this because the past four years have been … Read the rest of this article!
Every now and then, a reader will want to know what kind of formula can be easily plugged in to figure out what stocks to buy. I can think of useful approximations to get the process started. If a newbie investor only considers companies that have been raising dividends for 20+ years with earnings per share growth of at least 5% annually over the past ten and then selectively removes the financial and tech companies from the list, he will put together a pretty darn good portfolio. It’s not a perfect test—companies like Dr. Pepper and Hershey would be great lifelong holds even though they don’t have the dividend history due to buyouts … Read the rest of this article!
In 1988, the private equity firm of Kohlberg Kravis Roberts was on the prowl to take over a company after making hundreds of millions of post-tax dollars quickly from the leveraged buyout of Reynolds Tobacco. It wanted to buy The Kroger Company, a large American grocer that looked small enough to be taken over by activist investors. Because KKR wanted to oust the then-existing management at Kroger, the management team sought a creative strategy to keep out KKR so that they could keep their jobs. At the time, KKR did not engage in the golden-parachute strategy of paying off executives handsomely to relinquish control of the company and go away.
In one of … Read the rest of this article!
Many of you are familiar with the statistic that 40% of Americans could not withstand an unexpected expense of $1,000 or more without incurring a deep level of financial hardship. What people have not realized, and are perhaps realizing now, is that over the past thirty years the leading corporations (and even much smaller ones) have put themselves in nearly the same position.
Back in 1990, the median American corporation in the S&P 500 had enough cash to sustain itself for approximately 14 months and credit lines for another 9 months in the event that revenues turned to zero. If the world fell apart for a particular business, industry, or the economy as … Read the rest of this article!