The Peculiarity of Socially Responsible Investing

The Ave Maria Catholic Values Fund, which trades under the symbol AVEMX, is the best example of a socially responsible fund I have encountered. It has been a long-term owner of Lowe’s, which accounts for almost 4% of the overall portfolio, and Lowe’s has dragged the overall performance of the portfolio upward by delivering 17% annual returns over the course of its inclusion in the Ave Maria Funds.

The problem? It hasn’t been enough to keep the pace of a traditional benchmark like the collection of stocks in the S&P 500. In the past year, the S&P 500 has been up 7.4% while Ave Maria has been down 3%. In the past three years, Ave Maria is up 10.3% annually while the S&P 500 has advanced 17.3%. Over the past five years, Ave Maria is up 12% per year while the S&P 500 is up 17% per year, and the … Read the rest of this article!

The Expected S&P 500 Returns 2015-2025

A great quote from Leon Cooperman, the founder of the hedge fund Omega Advisors: “I am very knowledgeable and cognizant of what the S&P 500 represents; in 2015, it is an index of 500 companies, on average they are growing about five percent a year, and they yield about two percent, and they trade a little under three times their book value. They have got 35 or 36 percent of debt in their capital structure, and for those financial statistics you pay on average about 18x this year’s earnings. So, as a value investor, I look for either more growth, a lower multiple, or more asset value possibly mixed with more income yield. I want some combination that says Buy Me. My team and I spend all day long, seven days a week, 24/7 trying to look for things that are mispriced in the market.”

The S&P 500 is up … Read the rest of this article!

Rethinking Apple

Between 2003 and 2010, Blackberry saw its profits climb from $0.10 per share to $8.28 per share. The stock, which traded around $10 in 2003, hit a high of $148 in the summer of 2008. In a five-year time period, Blackberry was able to turn every dollar into $14.80. It only required a bit over $67,000 in 2003 to become a Blackberry (then, known as Research in Motion) millionaire five years later.

Today, Blackberry trades around $10 per share. It is as if the past twelve years never happened. The company paid no dividend. And, worst of all, you saw a mini-fortune come and go before your very eyes. This year, Blackberry is expected to lose about five cents per share for a company-wide loss of $26 million this year. That’s actually a significant improvement from the $700 million loss Blackberry experienced in 2013. Both figures are far cries from … Read the rest of this article!

Warren Buffett Buys Precision Castparts

When Warren Buffett makes an acquisition on behalf of Berkshire Hathaway, it immediately triggers a hindsight bias reaction that makes you think–oh yes, it was so obvious, how did I not see that coming? The latest news report, covered by the Wall Street Journal, indicates that Warren Buffett is expected to complete the purchase of Precision Castparts for somewhere in the neighborhood of $37 billion.

Some of the commentary about the deal conveyed befuddlement as to why Buffett would be interested in a stock that fell from $275 per share in 2014 to $190 in 2015, and subsequently indicated that Buffett is paying too much by valuing the company in the range of $230 per share. As you can already guess, I regard that commentary as typically short-sighted and ignorant of Precision Castparts’ unusually strong balance sheet and unusually strong earnings per share growth for an industrial.

I always wonder–what … Read the rest of this article!

When A Company Has No Brand Power

There are three dozen companies that spend over $1 billion per year on advertising. If you are a sports fan, you might assume that Anheuser-Busch is the largest advertiser in the world, though it actually comes in the $21 spot with an advertising budget of $1.5 billion. The giants in the industry have been AT&T, Comcast, Verizon, and General Motors, with budgets between $2.5 billion and $3 billion. The true giant in the sphere is actually Procter & Gamble, mostly because it has a diverse constellation of brands that need constant brand equity upkeep, and P&G spends $5 billion per year raising product awareness for customers. It spends over $2 billion per year on TV ads.

There is a lot to learn from studying advertising budgets, as you can learn a lot about effectiveness when you see American Express spend 4x as much advertising to consumers as Visa does, yet … Read the rest of this article!