In the most recent article that I published on Patron, I covered the stock that I believe is the most likely to be the Coca-Cola of the next generation. When I describe something as the next Coca-Cola, I mean a company that shares the attributes that made Coca-Cola such a magnificent investment over the past several decades and stands the highest probability of delivering returns reminiscent of what Coca-Cola achieved during the 1980s and 1990s.
Here is something I recently learned while reading Wal-Mart’s financial statements that I thought I would share with you: Over ¾ of Wal-Mart’s inventory gets sold before The Wal-Mart Corporation even has to pay for it. Three-quarters. 75%. Wal-Mart’s profit conversion cycle is one of the most crazily impressive business statistics I have ever seen in my life.
Is it any surprise that the company has grown cash flow per share every year for the past seventeen years, from $0.99 per share in 1996 to $7.50 in 2012?
Originally posted 2013-07-01 20:18:43.
At about 2:30 in the afternoon, today, July 1st, I took a look at my Seeking Alpha screen of the stocks that I follow and noticed that every single company I follow is up 1% or 2%:
Personally, I get ticked off seeing prices rise like this. If you are a net buyer of stocks (and that is the key term), then you should not be happy seeing these price increases because these companies are becoming less and less attractive. For every dollar of profit and dividends that ConocoPhillips generates, you have to pay 1.37% more today than you did on Friday. Today, you have to pay 1.82% more for each dollar of profits and dividends that Emerson Electric generates than you did on Friday. Sure, if you are planning to sell those companies, this is good news. But if you are planning to buy stocks, you should hate this crap because it means stocks are getting more expensive, and represent lower risk-adjusted returns going forward than they did on Friday.
Originally posted 2013-07-01 14:33:35.
When you acquire a specialized skill of value, people will pay more for your services. As famed management writer Peter Drucker once said, “The economic and social gravity of America will increasingly accommodate the knowledge worker class”. This has been, and is, especially true in the medical community where the price that wealthy Americans are willing to pay for healthcare in favor of themselves, their spouses, and children knows almost no bounds.
Even into the late 1990s, the advantage of affluence meant that you might have gotten the hospital room all to your yourself, some better food, and the likelihood that you would get a good doctor because wealthy people tend to live in wealthy areas and top-tier doctors tend to congregate at such hospitals.
I have recently been working my way through Howard Schilit’s book “Financial Shenanigans” which teaches intermediate investors the skills to identify companies possibly engaging in accounting behavior that would make Enron executives blush.
One of the things that Howard Schilit pointed out in his very informative work is the fact that companies cannot fake a dividend. Taking that logic one step further, they really cannot fake a growing dividend.
This makes sense at an intuitive. Imagine you are a slimeball executive trying to swindle thousands of hardworking, honest, decent shareholders out of their money by siphoning off funds from the company or overstating profits. By definition, these management teams that are engaging in fraud are overstating profits (either by artificially claiming the profits are higher so that the stock price will go up, or by stealing from the company to fund a lavish lifestyle). In either case, you want to keep the real profits you are generating in the company coffers for as long as you can. Paying out a dividend is the enemy of financial fraud because it involves letting go of cash that you do not have.
Originally posted 2013-07-01 06:28:03.