When Dividends Are Used As A Don’t Look Behind The Curtain Technique

This week, I’ve been working my way through Forrest McDonald’s 1962 book Insull about Samuel Insull, the man who worked as secretary and financial manager under Thomas Edison but also was associated with large wealth destruction that resulted from centralizing electricity—one of his famous techniques was helping companies create large amounts of new issuances in stock to bring new shareholders, saying “if everybody owns the company, nobody owns the company.”

His lack of concern about regulated monopolistic powers meant that he frequently gave advice on how corporate management teams could avoid being hassled by shareholders, and he recommended annual but modest dividend increases and the issuance of new debt or bonds to fund … Read the rest of this article!

Seth Klarman And The Myth Of Wall Street

When Seth Klarman first began value investing for the Baupost Group, he encountered the frequent Wall Street wisdom that value investing would be dead in a short period of time because (1) the rise of computer trading mixed with (2) a significant influx of new investment professionals would lead to a perfectly efficient market where all new information would be instantly known and accurately priced into the stock.

One of the character traits that makes Seth Klarman such a remarkable investor is that he has an uncanny ability to recognize the situations in which news about a company is instantly known but not necessarily accurately priced into the value of the stock. There … Read the rest of this article!

Uber Stock: Why I Won’t Buy It

L.J. Henderson, the famed physician, chemist, biologist, sociologist, and philosopher, spent time studying Hippocrates among his many endeavors. He was quite taken with Hippocrates’ fixation on experience and common sense, and offered his own analysis of the Hippocratic Method as follows:

“The first element of that method is hard, persistent, intelligent, responsible, unremitting labor in the sick-room, not in the library; the complete adaptation of the doctor to his task, an adaptation that is far from being merely intellectual. The second element of that method is accurate observation of things and events; selection, guided by judgment born of familiarity and experience, of the salient and the recurrent phenomena, and their classification and methodological … Read the rest of this article!

“Feeding The Beast” Investing

All my talk about oil stocks here on the site bring in lots of oil stock investors from the search engines, who woulda thought?

In the past couple of days, I had been talking to a reader that decided to make BP and Royal Dutch Shell the starter positions in her stock portfolio by putting $400 per month into each Royal Dutch Shell and BP since 2011. I didn’t inquire into the specifics, but a very rough calculation that takes into account the capital appreciation of those companies could indicate that she is sitting on about $40,000 worth of stock in the two oil giants that is generating around $1,800 in current income, … Read the rest of this article!

A Peak Inside Apple Stock’s Balance Sheet

Because I don’t know approximately what the future of phones will hold, I cannot comment intelligently on the long-term future of Apple into 2024 and beyond. However, I can comment on what the U.S. tax system and Apple’s new commitment to financial engineering (through stock buybacks) have done to the company’s balance sheet.

One of the very many peculiarities of our tax system is that companies domiciled in the United States have to pay a repatriation tax to bring money generated outside the U.S. back to American coffers. If a corporation files a form indicating that the money will be kept permanently overseas, then there is no tax. If the money is bought … Read the rest of this article!