The Long Term Investor

SO.....lets talk about collecting....in my case ART.

Although to be clear....we do collect other categories.....antiques and a number of categories that we own a single or a couple of items that are the.......BEST of the BEST.....but only an item or two.....so not really a collection.

We have made eight to ten art purchases this year....5-6 paintings and 3-4 pieces of sculpture. Our area is American Impressionistic paintings, Western paintings and sculpture, Early Texas paintings. These areas also lap over into Illustration Art at bit.

What I am seeing in the regional and national auctions in our area of collecting emphasis is STILL a strong markets. BUT....it is ALL ABOUT QUALITY. That is the KEY to collecting.....QUALITY.

We are not in this league of collecting....but this is a nice little article:

The art market is in a correction as big spenders fade

https://www.cnbc.com/2024/10/24/art-market-correction.html

(BOLD is my opinion OR what I consider important content)

"Key Points

• There are more likely sellers than buyers in the global art marke1, according to The Art Basel and UBS Survey of Global Collecting.
• The art market is going through a generational shift that’s created a mismatch between supply and demand.
• Dealers say the diverging paths of the various generations has led to an oversupply of seven- and eight-figure Impressionist and Abstract works.

The global art market is poised for its second straight year of declines, as demand for the top trophy works wanes and a new generation of buyers favors lower-priced pieces, according to a new survey.

Auction sales in the first six months at Christie’s, Sotheby’s, Phillips and Bonhams fell 26% from 2023 and 36% from the market peak in 2021, according to The Art Basel and UBS Survey of Global Collecting. The number of wealthy collectors surveyed who plan to purchase art in the next year fell to 43% from over half in 2023. At the same time, the number who plan to sell increased to 55% — meaning there are more likely sellers than buyers in the market.

“For the biggest spenders, there has been a moderating in their spending or slowing of their pace,” said Paul Donovan, chief economist of UBS Global Wealth Management. “They’re taking a more considered approach.”

As the art world prepares for the big auctions in New York in November and Art Basel Miami Beach in December, dealers, galleries and auctioneers are hoping for a post-election rebound.

There are some bright spots. The vast majority (91%) of wealthy collectors were “optimistic” about the global art market’s performance over the next six months, up from 77% at the end of 2023, the survey said. That’s a larger share than were optimistic about the stock market, at 88%. Only 3% of high-net-worth collectors are pessimistic about the art market’s short-term future.

The median spending on art by wealthy collectors remains stable at around $50,000 a year, according to the survey. Over three-quarters of wealthy collectors surveyed had purchased a painting in both 2023 and the first half of 2024.

Yet a broad array of measures — from buyer interest to online sales — point to another year of declines or, at best, flat sales. Dealers and auction experts say geopolitical concerns (especially in the Middle East and Ukraine) along with economic weakness in Europe and China are draining buyer confidence. Higher interest rates also raised the opportunity cost of buying art, since wealthy collectors could earn an easy 5% or more from cash and Treasuries.

Just as in the classic-car market, the art market is going through a generational shift that’s created a mismatch between supply and demand. Older collectors are downsizing their collection by selling off pricey but not masterpiece-level works. Younger collectors, mainly Gen Xers and millennials, are coming into the market to replace them, but they’re buying more affordable, more modern work from galleries and art shows.

“2024 suggests that rather than creating a supply-driven boom in value as they may have done in other years, trends towards greater selling will likely primarily affect sales volumes, with collectors tending to sell from the bottom of their collections, deaccessioning more but lower-value works, and advisors reportedly focused on ‘streamlining client collections’ with the disposal of more unwanted or insignificant artworks rather than trying to capture price appreciation,” the UBS report said.

Dealers say the diverging paths of the various generations has led to an oversupply of seven- and eight-figure Impressionist and Abstract works. According to the survey, the high end of the art market, or works priced at $10 million or more, was the strongest before 2022. Now, it’s the weakest.

“Gen X, and to a lesser extent the younger generations, they’re not necessarily going to be going out and buying the most expensive artworks,” Donovan said. “They’re more engaged but they also have potentially more budget constraints. The people who have traditionally been buying the higher-price art are slowing their purchase of those artists.”

Gen Xers, in fact, have quickly become the most important generation for collectibles. According to the UBS survey, Gen X respondents had the highest average spending in 2023 — at about $578,000 — and their lead continued in 2024, at more than a third higher than millennials and more than twice those of Boomers and Gen Z respondents.

Overall, wealthy collectors are reducing their exposure to art. While art’s role as an “asset” is hotly debated, the report said the average allocation to art was 15% in 2024, down from 22% of their portfolios in 2021. Granted, some of the decline may be due to the increased value of stocks and other assets in their portfolios. Yet the drop suggests many collectors have paused their buying.

The super-wealthy have the highest exposure to art. Those worth $50 million or more have an average of 25% of their assets in art, down from 29% last year. Millionaires worth less than $5 million have about 12%.

Collectors who have been active in the market for decades have built up large collections, that will either have to be sold, passed on to family or bequeathed to museums or nonprofits. The average number of works owned by wealthy collectors worldwide is 44, according to the survey. Gen Z collectors have an average of 33 works, while collectors who have been buying for more than 20 years had an average of 110 works.

When asked about their biggest concerns for the art market, the largest number (52%) cited “barriers to the free movement of art internationally.” The second largest concern was the “rise of legal issues in the art trade,” such as restitution cases, fakes and forgeries, as well as “ethical considerations concerning artists,” such as how they are compensated and promoted. “Art market fluctuations” ranked fourth.

The Great Wealth transfer, which could see tens of trillions of dollars in wealth passed from older generations to younger generations, could also usher in a Great Art transfer. Fully 91% of wealthy collectors had works in their collections that were inherited or gifted through a will or other bequest, according to the survey.

Despite the expectation that families will sell the works they inherit, 72% of those surveyed kept at least some of their inherited art. Those who do sell inherited art were more likely to cite a lack of display space or taxes as the reasons, rather than taste.

“There has always been an assumption that as art moves down a generation, the younger generation has different tastes,” Donovan said. “But to assume that this leads to the wholesale breakup of the collections or selling is wrong. Art is something which stimulates the emotions and there may be an association with certain pieces of art with your parents.”"

MY COMMENT

Much of this article is talking about the ULTRA RICH and their art collecting. NOT.....where we fit into the process.

BUT....at all levels......art and collectables go up and down. Just like any ASSET. I do obviously consider art and collectables an ASSET. BUT.....that does not mean it should be an....."investment". Although....if we liquidated our entire house full of personal property....we would be well ahead of our "cost" for what we own.

On the other hand if that money had been invested for the long term in stocks or funds in the fashion that I invest....it would be worth significantly MORE.

Just like stock investing there are similar concepts:

1. You have to educate yourself and do your due diligence and research.

2. You have to buy top QUALITY....the BEST you can afford.

3. You have to know the market and trends.

4. You have to buy for the long term to smooth out all the shorter term volatility and fads.

5. You have to ignore all the fads and fake, phony, made up collectables and art. You have to avoid fakes and fraud. There is a life long process of learning and educating yourself.

 

BUMMER.....house hunters.

Mortgage rates climb north of 6.5% for first time since August

https://finance.yahoo.com/news/mort...65-for-first-time-since-august-034858178.html

 

Good news....but pretty OBVIOUS. Of course this is just to year end 2024.

Where we go after 2024 will significantly depend on the election results and the impact on TAXES.....
GOVERNMENT REGULATION of business....SPENDING....etc, etc, etc.

New data shows US economy on track to grow at 'encouragingly solid pace'

https://finance.yahoo.com/news/new-...ow-at-encouragingly-solid-pace-162105757.html

MY COMMENT

Although as usual.....the stock market is NOT the economy.....and....vice versa. Of course the two do float around in the same general universe and once in a while....touch....each other.

 

A light day in the markets today. BUT....still a low/medium gain for me in my stocks. I also beat the SP500 today by 0.12%.

Moving on to FRIDAY and the end of the market week. BOOM.

 

I like this little article.

Unlocking Stock Market Success: Why You Should Embrace the Skew

https://blogs.cfainstitute.org/inve...rket-success-why-you-should-embrace-the-skew/

(BOLD is my opinion OR what I consider important content)

"When we talk about stock returns, most people assume that individual stocks should yield positive returns. That’s because the stock market has historically outperformed other asset classes like bonds. But surprisingly, the median monthly return for a large sample of individual stocks is — drumroll, please – zero. That’s right. A study conducted by Henric Bessembinder and published in the Financial Analysts Journal in April 2023 found that on a monthly basis, individual stocks generate returns centered around zero. In fact, this paints a “half-full, half-empty” scenario. Half the stocks produce positive returns, while the other half have negative returns.

As an investor or advisor, how do you and your clients react to this? If this zero-median return statistic were the only way to look at stock performance, it would be hard to justify investing in stocks at all. Convincing clients to invest in equities would be an uphill battle, especially if they’re seeking short-term gains.

Volatility

In fact, there are many ways to evaluate stock returns beyond just focusing on median monthly performance. One common approach is to measure stock returns in terms of volatility. Volatility refers to how much a stock’s price fluctuates, and it’s often measured using standard deviation. On average, the annual standard deviation for stock returns is about 50%, which means that the price of an individual stock can swing wildly throughout the year. If we apply the 95% confidence interval often used in statistics, this implies that an individual stock’s return could vary by roughly +/- 100% in a given year. This is huge. Essentially, an individual stock could double or lose all its value within 12 months.

This level of uncertainty can make stocks seem daunting, especially for those looking for stability. The idea that individual stocks are a “half-full, half-empty” proposition monthly, and are even more volatile annually, can scare away potential investors. But it’s important to remember that stocks are primarily intended to be long-term investments.

The short-term ups and downs, while nerve-wracking, are part of the journey toward long-term wealth creation.

So, what happens when we shift our focus to long-term individual stock returns? Shouldn’t we expect more consistency over time? Bessembinder also looked at long-term stock performance, and the findings weren’t exactly comforting. Over the long run, 55% of US stocks underperformed US Treasury Bill returns, meaning that more than half of individual stocks did worse than the safest government-backed investments. Perhaps even more alarming is the fact that the most common outcome for individual stocks was a 100% loss — complete failure. These findings suggest that investing in individual stocks is a high-risk endeavor, even when taking a long-term approach.

Typically, when investors and financial analysts assess stock performance, they focus on two key statistical measures: central value (such as the mean or median return) and volatility (as measured by standard deviation). This traditional method of analysis often leads to a negative or at least discouraging narrative about investing in individual stocks.

If returns are largely zero in the short term, highly volatile in the medium term, and risky in the long term, why would anyone invest in stocks?

The answer, as history shows, is that despite these challenges, stocks have significantly outperformed other asset classes like bonds and cash over extended periods. But to truly understand why, we need to look beyond the typical first two parameters used in analyzing stock returns.

The Third Parameter for Assessing Stock Performance: Positive Skew

While traditional analysis focuses heavily on the first two parameters — central value and volatility — it misses a crucial component of stock returns: positive skew. Positive skew is the third parameter of stock return distribution, and it’s key to explaining why stocks have historically outperformed other investments. If we only focus on central value and volatility, we are essentially assuming that stock returns follow a normal distribution, similar to a bell curve. This assumption works well for many natural phenomena, but it doesn’t apply to stock returns.

Why not? Because stock returns are not governed by natural laws; they are driven by the actions of human beings, who are often irrational and driven by emotions. Unlike natural events that follow predictable patterns, stock prices are the result of complex human behaviors — fear, greed, speculation, optimism, and panic. This emotional backdrop means that stock prices can shoot up dramatically when crowds get carried away but can only drop to a limit of -100% (when a stock loses all its value). This is what creates a positive skew in stock returns.

In simple terms, while the downside for any stock is capped at a 100% loss, the upside is theoretically unlimited. An investor might lose all their money on one stock, but another stock could skyrocket, gaining 200%, 500%, or even more.

It is this asymmetry in returns –the fact that the gains can far exceed the losses — that generates positive skew.

This skew, combined with the magic of multi-period compounding, explains much of the long-term value of investing in stocks.

Learn to Tolerate Tail Events

If you examine stock return distributions, you’ll notice that the long-term value from investing in the market comes primarily from tail events. These are the rare but extreme outcomes that occur at both ends of the distribution. The long, positive tail is what produces the outsized returns that more than make up for the smaller, frequent losses. For stocks to have generated the high returns we’ve seen historically, the large positive tail events must have outweighed the large negative ones.

The more positively skewed the return distribution, the higher the long-term returns.

This might sound counterintuitive at first, especially when traditional portfolio management strategies focus on eliminating volatility. Portfolio construction discussions often center around how to smooth out the ride by reducing exposure to extreme events, both positive and negative.

The goal is to create a more-predictable and less-volatile return stream, which can feel safer for investors. However, in avoiding those unnerving tail events, investors eliminate both the big losses and the big gains. This reduces positive skew and, as a result, dramatically reduces overall returns.

The Hidden Cost of Managed Equity

A typical “Managed Equity” strategy eliminates all stock losses (no returns less than zero) while capping upside returns. For example, a well-known investment company offers a managed S&P 500 fund that avoids all annual losses while limiting returns to less than 7%. Since it is virtually impossible to predict daily returns, this return feat is accomplished by simply holding a zero cost S&P 500 options collar. Over the last 40+ years, when the S&P 500 generated more than 11% annually, this strategy would have yielded a meager 4% annual return.

In other words, avoiding emotional tail events means you miss out on the very returns that are the major drivers of long-term wealth creation. Investors who focus too much on smoothing returns end up with more consistent but dramatically lower returns over time.

To truly benefit from stock investing, it’s necessary to embrace both the emotions and the rewards that come with positive skew. This means learning to live with tail events. They may be uncomfortable when they occur, but they are an integral part of long-term success in the stock market.

The most successful investors recognize this and accept that volatility and tail events that are simply unavoidable are crucial for achieving high returns. By learning to appreciate positive skew and its associated tail events, investors can unlock the full potential of stock market gains.

Learn to love, not fear the skew."

MY COMMENT

A different way to look at stocks and returns. BUT....probably true. In other words......no risk no return.....or....no guts, no glory.

I believe there is another SIGNIFICANT factor....earnings and stock fundamentals. of course in the context of the discussion above these events are what generates or leads to....."tail events".

In any event....yet again....more confirmation of LONG TERM INVESTING.

 

A HAPPY open for stocks, markets and investors today. The JOY is palpable.

Stock market today: Stocks climb as Treasury yields ease, but weekly losses loom

https://finance.yahoo.com/news/live...ds-ease-but-weekly-losses-loom-133121694.html

(BOLD is my opinion OR what I consider important content)

"US stocks rose on Friday morning as Treasury yields tipped lower, but markets were still on track for weekly losses with earnings season well underway.

The S&P 500 (^GSPC) gained roughly 0.5%, after the benchmark snapped a three-day losing streak. The Dow Jones Industrial Average (^DJI) added 0.4%, while the tech-heavy Nasdaq Composite (^IXIC) put on around 0.6%.

Stocks are reviving somewhat as a pullback in US bond yields lifted some recent pressure on risk appetite. The benchmark 10-year yield (^TNX) slipped to around 4.18%, easing back from a three-month high above 4.25% hit midweek.

But the Dow and S&P 500 still look poised for downbeat weeks after taking a hard knock from that surge, amid worries the Federal Reserve will go slow on interest-rate cuts.

Investors are now starting to brace for potential disruption on the horizon: The November US jobs report due next Friday, and the tight presidential election a week later.

Meanwhile, the spate of earnings is easing as the week draws to a close, with Colgate-Palmolive (CL) the highlight.

At the same time, Tesla's (TSLA) earning surprise has laid the ground for five other "Magnificent Seven" megacaps reporting next week: Google parent Alphabet (GOOG, GOOGL), Meta (META), Microsoft (MSFT), Apple (AAPL), and Amazon (AMZN).

Elsewhere in corporates, Capri (CPRI) stock cratered after a judge blocked the parent of Michael Kors from merging with Coach owner Tapestry (TPR)."

MY COMMENT

Seems like a more POSITIVE open today than we have seen recently. I will take it.

 

WOW........BIG WOW.....next week is going to be an EPIC week for the markets:

"Five other "Magnificent Seven" megacaps reporting next week: Google parent Alphabet (GOOG, GOOGL), Meta (META), Microsoft (MSFT), Apple (AAPL), and Amazon"

I cant remember if this has happened before......all five of the BIG CAP monster stocks reporting in a single week. We already have TSLA. So after next week the only one we will be waiting for is...... NVDA......which will report way after the others.

NVDA will report on November 20.......although, I see a few sites saying November 19.

The late NVDA earnings and their total dominance in investing today always reminds me of this quote;

"One ring to rule them all, one ring to find them, One ring to bring them all, and in the darkness bind them; In the Land of Mordor where the shadows lie."

Lets hope that AI is not being described in the last part of this little quote......."and in the darkness bind them; In the Land of Mordor where the shadows lie".

NAW......I am not fearful of progress or superstitious. There is nothing INHERENTLY bad about AI......any issues will come from its HUMAN users.

 

OK......I cant ask for a better open today.....eight of my nine stocks are UP and only one is down....HD.

 

Looks like the ECONOMISTS are jumping on the bandwagon.

LOL....the only problem is they are UNIFORMLY wrong in their predictions and opinions.

Economists Boost US Growth, Spending Forecasts Into Early 2025

https://finance.yahoo.com/news/economists-boost-us-growth-spending-130000464.html

(BOLD is my opinion OR what I consider important content)

"(Bloomberg) -- Economists nudged up quarterly US economic growth projections through early next year on more sanguine views of consumer demand and maintained views that limited inflation will keep the Federal Reserve on a path toward lower borrowing costs.

The slight upward adjustments in gross domestic product from the third quarter of 2024 through the first quarter of 2025 indicate average growth of around 2% over the period, according to the latest Bloomberg monthly survey of economists.

While the pace of economic growth in 2025 is projected to be slower relative to this year, forecasters trimmed their year-ahead recession odds to 25%. That’s the lowest reading since March 2022, and suggests the Fed will be successful in containing inflation with limited damage to the economy.

The US central bank’s preferred price gauges are seen holding close to its 2% target, allowing officials to gradually ease monetary policy and help keep the labor market from deteriorating. Economists surveyed by Bloomberg expect monthly payroll growth to average 125,000 next year — down from a monthly average of 200,000 so far this year. They see the unemployment rate averaging 4.3%, up from 4.1% currently.

“We still see the Fed lowering interest rates in November and December and in 2025 since we still see inflation in a downward channel,” said Kathy Bostjancic, chief economist at Nationwide Mutual Insurance Co.

In addition to rate cuts in November and December, economists see Fed policymakers lowering borrowing costs by another 1.25 percentage points next year.

The Bloomberg survey also pointed to consumer resilience. While household spending is still expected to moderate on a quarterly basis through the first quarter, economists boosted their estimates for growth in outlays relative to the previous survey. They were also a bit more upbeat about business investment at the start of 2025 as Washington’s political landscape becomes clearer.

“A clean result with a smooth political transition to the new president will provide clarity and help support sentiment, and in a lower interest-rate environment, it could improve economic prospects,” said James Knightley, chief international economist at ING."

MY COMMENT

Of course the economy is not the stock markets. BUT....a good economy is not a bad thing for stocks.

Notice I said...."good"....economy, NOT "great". People are still going to have a hard time next year. It will be a continuation of the EXTREMELY SKEWED economy.....with high end consumers and earners thriving and most other people having a difficult time.

 

As to the above......we are seeing a very dangerous HOLLOWING OUT of the middle class. We are seeing a society where the HUGE middle class of the Baby Boom era is slowly evaporating.

I see it as a very negative event for society and the country to move toward a two tier economy......the ELITE UPPER CLASS......and the lower/lower middle class.

We are nowhere close....but where we are heading reminds me of what is seen in many third world countries.

It will be very interesting to see if this trend ESCALATES over the next 15-25 years and becomes the norm in the USA.

The other alternative is that we will hit bottom and than see a turn-around and a BOOMING increase in the middle class.

 

A few minutes ago from the TV business show in the background I heard that the NASDAQ just hit a new.....ALL TIME HIGH.

YIPPEE-KI-YEA................SHOW ME THE MONEY.

 

I was very happy to see the TSLA earnings report. NO....I am not a shareholder. BUT....I celebrate and cheer on Elon Musk.

The DEMONIZATION of Elon Musk has gotten way out of hand. It is obvious that he is being targeted by the usual CANCEL CULTURE for his views and beliefs.

His personal life, companies, and reputation are now under constant regulatory, legal, and personal attacks. I dont even have to say it.....it is OBVIOUS why this is happening.

We are simply LUCKY to have him here in the USA. He is the GREATEST innovator and business person of the century.

He is THE ENTIRE USA space program. Without him we.....as a country....would still be paying Russia to get us into space.

His internet system.....StarLink.....is turned to every time there is a disaster and he steps up and makes it available. He is bringing the internet to the world.

He is the GUTS of the EV business.

Even "X".......is STILL one of the dominant social media companies and over time will make a nice come-back as advertising slowly comes back on board after being driven away by the usual cancel-culture......A-holes. I find it amazing....although not surprising....that he is able to run this company with about 70-80% LESS workers.

Not to mention his research and advances in ROBOTICS......NEURAL IMPLANTS.......and other AI tech.

NO....you dont have to agree with his personal opinions or politics. BUT.....he deserves respect and recognition for what he has done and continues to do for the USA and for the world. We are "SUPPOSEDLY" a DEMOCRACY....where people are free to believe and think as they choose. (BIG....emphasis on the word....."supposedly")

WELL DONE......ELON.

 

I am having a very STRONG day today in my nine stocks and my account as a whole. PLTR.....+3.06%....and....NVDA....+2.29%....are my largest gainers today. I STILL have a single stock in the RED....HD.

AND next week......BIG WOW....for me when it comes to earnings. Five of nine of my stocks report next week:

GOOGL October 29
MSFT October 29
CMG October 29
AMZN October 31
AAPL October 31

I CANT WAIT.......IT WILL BE A FUN WEEK.

 

The rest of my earnings are as follows:

PLTR November 4
HD November 12
NVDA November 20
COST December 12

EPIC FUN

 

COME ON markets.....lets hang in there.....just 20 more minutes.

 

Well I survived the slow afternoon FADE into the close today. I ended the day with a strong-medium gain. In the day earlier I had a BIG gain going. I ended with seven of nine stocks GREEN......my RED today.....COST and HD. I also managed to beat the SP500 by o.61% and end the week with a GAIN.

I think the ONLY day I was in the RED this week was on Wednesday.

 

The week that was.

DOW year to date +11.66%
DOW five days (-2.56%)

SP500 year to date +22.46%
SP500 five days (-0.85%)

NASDAQ 100 year to date +23.03%
NASDAQ 100 five days +0.38%

NASDAQ year to date +25.41%
NASDAQ five days +0.34%

RUSSELL year to date +9.70%
RUSSELL five days (-2.96%)

For the week I ended with a YTD gain in my entire account of......+62.53%. Last Friday My account was at.......+61.78%. So all in all a good week when some of the big averages were down and I managed to get a nice little GAIN.

We now move on the the BIG EARNINGS WEEK......the last week of October.....and....the first market day of November next Friday.

It is very, very faint.....but it seems like I can slightly hear the sound of JINGLE BELLS way off in the distance.....a Santa Rally? Or I am simply hallucinating.

 

The mark of a GREAT company.

Chipotle's secret to growth: How it invests in workers

https://finance.yahoo.com/news/chipotles-secret-to-growth-how-it-invests-in-workers-193621668.html

(BOLD is my opinion OR what I consider important content)

"Chipotle (CMG) is showing how looking out for employees can be a key competitive advantage.

Take the Armendariz sisters — Lily, 45, Rosario, 40, and Elsa, 43 — who have worked a combined 57 years at the fast-casual restaurant chain and now earn nearly $1 million a year collectively.

Lily, a regional vice president for the Southwest, was the first to start her career with Chipotle in 1999 and now oversees $1 billion in sales. Rosario and Elsa have climbed the ranks to field leader in North Houston, Texas, and El Paso, Texas, respectively.

All three started as crew members in restaurants. "We come from very modest background in our family," Lily told Yahoo Finance. "We are very self-sufficient right now, working for Chipotle."

As consumers increasingly seek value and experience, attracting and retaining top talent is key to providing good service. "Restaurants with ... the highest rates [of turnover] perform the poorest and the ones with the lowest turnover rates perform the best," BTIG analyst Peter Saleh told Yahoo Finance.

The leisure and hospitality sector has a quit rate of 3.3%, above the national average of 1.9%, due to its lower pay, according to the US Chamber of Commerce. It took years for the sector to recover from labor shortage post-COVID; in September, staffing levels at fast-casual and fast food chains were up 4% compared to pre-pandemic.

Chipotle competes by creating a clear career roadmap, including a short path from food preparer to restaurant manager. Under former CEO Brian Niccol (who started as Starbucks (SBUX) CEO in September), it sweetened the pot by offering perks like tuition reimbursement, quarterly bonuses, and stock options.

"How the organization is showing up for them personally to ensure their personal, financial, mental and overall health from a well-being perspective is critical to the organization's long-term success," former COO Scott Boatwright told Yahoo Finance shortly before Chipotle named him interim CEO.

A career ladder that sets up a family affair

The sisters' family grew up on a farm in Mexico and immigrated to El Paso, Texas, in 1991. Their parents left everything behind to pursue a "better life" for their three daughters, Elsa Armendariz said. For years, their father took care of horses while their mother cleaned houses Monday through Saturday.

Today, the sisters enjoy benefits like a company car, gas cards, and coveted stock options.

"The stock options are definitely life-changing for somebody who doesn't have a college degree," Lily Armendariz said. They provided financial support for both of her sons to go to college, and between the three sisters, the benefit allowed their parents to retire "very young."

According to Chipotle, 90% of those who took restaurant management roles and 87% who became field leaders last year were internal talent. Three of its 10 regional vice presidents (RVPs) started as crew members.

It typically takes a crew member approximately 13.5 years to become an RVP. To become a field leader like Elsa and Rosario Armendariz, the average time needed is roughly 8.5 years.

For reference, America's biggest employer, Walmart (WMT), has starting wages of up to $39,000 per year. 75% of its store, club, or supply chain managers got their start as hourly workers. Its benefits include medical coverage, a 401(k) match, and an associate stock purchase plan match.

Last February, the retailer conducted a 3-for-1 stock split to make its shares more affordable. CEO Doug McMillon said he wants all employees to be a part of Walmart's story, writing in a statement, "As Sam [Walton] said, 'We’re all in this together. That’s the secret.'"

Meanwhile, Starbucks (SBUX) was one of the first to introduce full-time health benefits for eligible full-and part-time employees in 1988. Other offers include a 401(k) match, stock equity, and an online bachelor's degree program at Arizona State University.

Investing in employees pays off, as backfilling positions can be a costly and intensive endeavor. According to a Cornell University report, the cost of turnover in hospitality is $5,864 per job, based on costs ranging from pre-departure, recruiting, selection, orientation training, and productivity loss.

It could also become a vicious cycle if a company needs to "constantly" replace and train people, as existing employees are strained and company culture is damaged, said David Rice, senior editor of HR-focused publication People Managing People.

Boatwright, whom many Wall Street pros like Bernstein analyst Danilo Gargiulo think will be named CEO permanently, joined as COO in 2017. Prior to that, during a 10-year stint at Arby's, he doubled down on updating training models to boost efficiency.

"We are a high-growth organization, both from same-restaurant sales as well as new-restaurant development, and we need purpose-driven, passionate people for us to hit our long-term goals," he told Yahoo Finance, calling the Armendariz sisters "a prime example."

Retaining talent has paid dividends for Chipotle.

Its revenue grew from $4.9 billion in 2019 to $9.9 billion in 2023. Per Bloomberg consensus estimates, Chipotle is expected to end 2024 with $11.3 billion in revenue and adjusted earnings per share of $1.10, compared to $0.90 in fiscal 2023 and $0.18 in 2018.

This year, the chain plans to open 285 to 315 new locations. As of the latest quarter, there were 3,530, up from 2,491 just five years ago. Long term, Chipotle plans to operate 7,000 restaurants in North America.

Its stock has shot up 250% in the past five years, and 32% in 2023 alone, compared to S&P 500's 22% gain.

The company has gotten "really sharp around hiring and onboarding," Boatwright said.

Its brisk pace of expansion also helps drive the leadership wheel. New openings create management roles that employees from other store locations may move into.

"If they didn't have that growth, it would be a lot harder because people would ... get to a certain level and there's nowhere else to go," Saleh pointed out.

Tony Bridwell, who serves as chief talent officer for the Encompass Group, said providing a clear path for employees is key to developing good culture and performance.

"One of the most powerful stories that can be told behind the scenes is that I put a process or system in place to develop you, to provide you a clear path forward, to show that we care," Bridwell said, "The psychology behind that is ... if I feel as if I belong, then I am more likely to be engaged."

He added that developing people internally is "not a major lift." If done right, employees may recruit themselves as it becomes a family affair.

Lily's youngest son works as a kitchen leader at Chipotle, and Elsa's son also works at a restaurant.

"His first solids ... [were] rice and beans from Chipotle ... They want to eat it all the time, so might as well work there," Elsa said."

MY COMMENT

The above is a perfect ROAD MAP for any business. This is GREAT leadership from the top down. This is GREAT company culture. It is exactly what I want to see in this sort of company when I own the stock.

I did the same in my business back in the day. Over my 20+ years in business I basically kept ALL my core employees for the entire time. When I needed to hire......my employees were given priority for their family members and church members.

Starting in the early 1980's I also began.......job sharing.....to allow two employees to share a single full time job. It helped me to keep GREAT people on board as they dealt with kids, school, etc, etc.

The article above and what it reflects.....is perhaps the GREATEST REASON to hold CMG stock. A very strong OMEN for the future.