The Long Term Investor

Discussion in 'Investing' started by WXYZ, Oct 2, 2018.

  1. WXYZ

    WXYZ Well-Known Member

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    I see that at least one company is taking care of their investors. COSTCO.....NVIDIA....WTF....where are you guys.

    Here’s what Walmart’s 3-for-1 stock split means for investors
    Walmart stock traded near its all-time high ahead of the company's first stock split since 1999.

    https://finance.yahoo.com/news/here...tock-split-means-for-investors-185433546.html

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

    "Walmart (WMT) investors are gearing up for a stock split.


    For the 12th time in 50 years, Walmart will conduct a stock split in an effort to make shares more affordable for its employees. Walmart last carried out a 2-for-1 stock split on April 20, 1999. This time, it will be the company's first 3-for-1 stock split.

    Here's how it will work: Shares issued in the stock split will be payable after market close on Friday for investors who own shares of the retailer "at the close of business" on Thursday, Feb. 22. On Monday, Feb. 26, at market open, Walmart will begin trading on a post-split basis.

    This split will increase the number of shares of Walmart's outstanding common stock to approximately 8.1 billion from 2.7 billion shares before the split. Although the stock will trade at a lower price, it won't change the underlying value of existing investments in the company.

    In a note to clients, CFRA analyst Arun Sundaram explained that the action is "purely cosmetic" with no "impact to fundamentals." However, he noted, stock splits "are perceived as a shareholder-friendly move and a sign of confidence."

    Why Walmart chose to issue stock now

    Walmart CEO Doug McMillon said the timing of the stock split made sense given Walmart's growth future plans, which it announced at its last annual meeting.

    Sundaram pointed to other recent announcements from the company, like a pay increase for store managers from $117,000 per year to $128,000 per year, with bonuses of up to 200% of base salary. Walmart also announced a $9 billion dollar investment to modernize stores, which he said "should help drive traffic and volume growth ... and help offset waning average ticket growth."

    Paying homage to founder Sam Walton, McMillon said he wants all employees to feel a part of Walmart's story, writing in a statement, "As Sam said, 'We’re all in this together. That’s the secret.'"

    Babson College director Laurie Krigman said there are three reasons why the company would decide on a stock split.

    First, it signals "confidence" in the future of the company. Second, it brings the stock price down to the "preferred trading range." The third reason is liquidity, where "more shares are trading, even though it's the same dollar amount that's trading," Krigman said.

    "It just kind of made sense to do a stock split," Jefferies analyst Corey Tarlowe said to Yahoo Finance. "And this way, it just becomes a little bit more accessible for further employees, and it's all about value and affordability, which is really core to their their culture."

    What it means for Walmart stock

    As of late, Walmart stock has gotten a lot of buzz. Shares of the retailer closed at a record high on Tuesday following the company's earnings report and stock split announcement. The stock continued to gain on Friday and was on track to surpass Tuesday's high.

    Some see the stock split as a positive catalyst since more retail investors are able to afford the lower-priced stock post-split.

    "We view [the stock split] as incrementally positive to WMT's growth and multiple expansion prospects," Tarlowe said.

    However, it hasn't always played out that way. Since 1975, Walmart stock has seen positive returns in the three months following a stock split six out of nine times.

    And overall, the record is pretty mixed. For instance, Walmart saw a 73% return in the three months after its July 1982 stock split. But shares of Walmart declined by 20% in the three months after the 2-for-1 split in February 1993.

    In the end, Krigman offered a warning to potential investors: Be sure you understand the fundamentals and how the company is performing first.

    "It really doesn't mean anything," Krigman said about the stock split. "It's an accounting gimmick."

    Krigman reminded investors who own shares that, after the split, they "are economically in exactly the same position."

    MY COMMENT

    If stock splits really are neutral events....than why not split COST and NVDA. Your stocks are at all time highs and the high price is an entry barrier to small investors.

    My personal experience......I have rarely seen a stock split that I did not like. Shareholders deserve to be rewarded with higher share balances and a lower more attractive share price. Of course the ELITE INVESTORS dont care. But.....the little retail investors....the silent majority guts of the markets.....love stock splits.

    IT has been a long time since I looked at WMT. Some time I will have to take a look at the company. I need one or two more BIG CAP consumer stocks to balance out my big tech giants. Although I have no plans to add anything right now.
     
    #18981 WXYZ, Feb 23, 2024
    Last edited: Feb 23, 2024
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  2. WXYZ

    WXYZ Well-Known Member

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    The profit takers are out in force....mid-morning form. As I half expected in earlier posts......they have now driven many of my stocks into the red at this moment. I have a micro-mini loss right now.
     
    #18982 WXYZ, Feb 23, 2024
    Last edited: Feb 23, 2024
  3. TireSmoke

    TireSmoke Active Member

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    I'm glad everyone had a good day yesterday. I believe yesterday was my first ever 1 day 6 figure return as well as hitting a new ATH. I treated my self by going to my shop after work and doing an oil change on my daily instead of working on a customer car! We have had some crazy market events in the last 5 years that really brake in a new investor. With the covid drop being the most violent and the 2022 being the 'will it ever stop going down!' year. I believe Q4 2018 was the same way. Every time you hit a new ATH after surviving one of those downturns in another notch in your belt that makes the next one a little easier. I give W a ton of credit for retiring at such a young age and surviving the 2 biggest market downturns since the great depression. What a wonderful person to get all this FREE teaching from!
     
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  4. gtrudeau88

    gtrudeau88 Well-Known Member

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    The little rally at the end pushed me to a new high and I'm up 15.67% YTD. S&P only up 6.69% or so.

    G
     
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  5. WXYZ

    WXYZ Well-Known Member

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    TOO bad that NVDA faded to a small gain by the close. I still ended the day with a TINY gain. And...I beat the SP500 by 0.04% today. I ended the day with four stocks in the GREEN....COST, NVDA, AMZN, and HD.
     
  6. WXYZ

    WXYZ Well-Known Member

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    Here is the CRAZY week that was.

    DOW year to date +3.76%
    DOW five days +0.98%

    SP500 year to date +7.29%
    SP500 five days +1.15%

    NASDAQ 100 year to date +8.49%
    NASDAQ 1000 five days +0.46%

    NASDAQ year to date +8.34%
    NASDAQ five days +0.54%

    RUSSELL year to date +3.89%
    RUSSELL five days (-1.62%)

    A very good week for me. Last week I was at +14.24% year to date for my entire portfolio. This week I am at +18.52% year to date for my entire portfolio. I am at yet another all time high today.
     
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  7. WXYZ

    WXYZ Well-Known Member

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    A good little article to end the week.

    Creating Generational Wealth

    https://awealthofcommonsense.com/2024/02/creating-generational-wealth/

    BOLD is my opinion OR what I consider important content)

    "A reader asks:

    I am 73, my wife is 58 and I have a 15 year old son. We own a small farm and house in Iowa. We also own three properties in Spain where we spend most of the year. We have no debt and are sitting on 2 million in cash, most of it is short term bills. I deal in vintage guitars and will keep doing it as long as I can. We have a great life and are careful with our spending. I would like to have a plan to create generational wealth. Is this possible? Any suggestions?

    I love this question because it shows there is no single path to wealth-building.

    There are two ways to answer this question.

    The first is the financial answer. That involves things like financial planning, estate planning, tax planning, investment management, wills, trusts, etc.

    That’s the boring stuff because you can hire experts to help you protect your money. It’s also the easy part of the equation. Plenty of firms can help with the wealth management side of things.

    The hard part is the psychological and emotional answer. Generational wealth can screw up the next generation if you’re not careful.

    My favorite example of generational wealth gone wrong is the Vanderbilt family.

    When Cornelius Vanderbilt died in the late-1800s he was one of the wealthiest men ever to walk the planet. Vanderbilt was a shrewd businessman who understood money could corrupt. Before he passed, Vanderbilt advised his oldest son Billy, “Any fool can make a fortune but it takes a man of brains to hold onto it after it is made.”

    The Vanderbilt heirs didn’t take his advice to heart.

    I wrote about what happened in Don’t Fall For It:

    Just six years after his father had passed away, Billy more than doubled his inheritance through some shrewd business deals and was now sitting on $194 million. Yet even after Billy doubled the family’s money in short order, within 30 years of the death of his father, there wasn’t a single heir or member of the Vanderbilt family who was among the richest people in America. Vanderbilt provided the initial gift to the university that bears his name in Nashville, TN. When 120 members of the family gathered at that university in 1973, not a single one of them was a millionaire.

    The first rule of generational wealth is do no harm. The Vanderbilts did a lot of harm to their money, mainly through frivolous spending and terrible investments. They blew through one of the largest family fortunes in history on opulent mansions, yachts and lavish parties.

    Although I guess they did give us The Biltmore as a tourist attraction.

    Warren Buffett once said, “Give your kids enough so they can do anything but not so much that they’ll do nothing.” It’s a tricky situation, so I think you have to approach this from the perspective of teaching your kids the right values, regardless of how much money they’re going to receive.

    Generational wealth isn’t just about passing along a bunch of money to your heirs. Obviously, that’s part of it, but so much more goes into it.

    You also have to teach the next generation to make good decisions with money. They need to understand how to spend it, preserve it, and invest it. You have to instill in the next generation a framework for making wise decisions.

    It can be difficult to instill the right values when it comes to money if your kids grow up with wealth.

    You have to teach them how to be grateful. You have to teach them how to be generous. You have to make sure they don’t grow up spoiled or entitled. And you have to help them understand of the value of money.

    True generational wealth requires educating the next generation and providing them the right perspective so they don’t screw it all up.

    This question proves there are many ways to build generational wealth. But there are only a few ways to screw it up:

    • Trusting the wrong person or organization with your money.
    • Having unrealistic return expectations.
    • Using an imprudent amount of leverage.
    • Taking on more risk than you need to.
    • Investing in things you don’t understand.
    • Assuming there is a Holy Grail when it comes to investing.
    • Excessive levels of spending.
    Envy is more expensive than gratitude so prudent risk management and spending are probably the most important components here. It’s hard to preserve or grow you wealth if you make poor investment decisions and spend more than you earn on those investments.

    Building wealth is hard but preserving it can be even harder if your kids don’t understand the value of money.

    Raising your children to be good people who make wise decisions is more important than how much money you leave them."

    MY COMMENT

    SO TRUE....a good lesson for ALL of us to take to heart. My kids are now old enough that I know they have learned what they need to know to be good, successful people, money managers, and parents. As to their kids it is too early to know....but they seem to be on the right path....so far.
     
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  8. WXYZ

    WXYZ Well-Known Member

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    HAVE A GREAT WEEKEND EVERYONE....LOOKS LIKE WE MADE SOME MONEY THIS WEEK.
     
  9. gtrudeau88

    gtrudeau88 Well-Known Member

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  10. WXYZ

    WXYZ Well-Known Member

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    Another winning week.....Zukodany must be getting really tired of all this winning.

    Stock market today: S&P 500, Dow hit fresh records as Wall Street ends Nvidia-fueled rally week

    https://finance.yahoo.com/news/stoc...-ends-nvidia-fueled-rally-week-123711842.html

    ........."The S&P 500 (^GSPC) rose just above the flatline, notching a new closing high, while the Dow Jones Industrial Average (^DJI) increased 0.2%, or about 60 points, claiming a fresh record of its own. The Nasdaq Composite (^IXIC) headed in the opposite direction, finishing down 0.3% after a blockbuster week."

    ......"the chances of a US interest rate cut are coming back into view for the market. A parade of Federal Reserve officials underlined that cuts are coming, but not soon — though they differed on just when the shift might start."

    "A solid fourth quarter earnings season is winding down, with more than one-third of reports so far beating estimates........"

    MY COMMENT

    It will be so nice to start a relatively normal week next week now that we are past the INSANITY of the NVDA earnings watch and report.
     
  11. WXYZ

    WXYZ Well-Known Member

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  12. WXYZ

    WXYZ Well-Known Member

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    The main thing is that I use the SAME source every week....so it will stay relative from week to week and year to year.

    I have no idea why the difference. If you discover why post it for us.....but I will keep using the same source to be consistent.

    For the posting that I do of my daily account return versus the SP500.....I get the data from Schwab so I am using the same source where my account is located.

    For how my total account is doing year to date that I post each Friday. I calculate the percentage gain on my account in Schwab.....for year to date.....after the close on Friday.....and compare it to the post from the prior week on here.
     
    #18992 WXYZ, Feb 23, 2024
    Last edited: Feb 23, 2024
  13. WXYZ

    WXYZ Well-Known Member

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    Do you have an Auto business TireSmoke?
     
  14. WXYZ

    WXYZ Well-Known Member

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    Speaking of WALMART earlier.

    Time to Buy Walmart's Stock as 3-1 Split Approaches?

    https://finance.yahoo.com/news/time-buy-walmarts-stock-3-200500724.html

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

    "Walmart’s WMT stock may be on many investors' minds as its three-to-one stock split is set to take effect on Monday, February, 26. As part of Walmart’s ongoing review of optimal trading and spread levels, WMT shares should open at around $59 next week with the current price at $177 a share.

    With over 400,000 associates participating in Walmart’s stock purchase plan, the company has desired to make shares more affordable with other retail investors certainly enthused as well. With that being said, let’s check Walmart’s recent price performance and see if its stock will be a bargain after reporting Q4 results this week.


    Recent Price Performance

    Walmart’s stock is already up +12% year to date to top the S&P 500’s +6% and omnichannel peer Target’s TGT +7% while also edging the Zacks Retail-Supermarkets’ +10%. Over the last year, WMT shares have now risen +24% which has largely outperformed Target’s -9% and also topped its Zacks Subindustry’s +21% while slightly trailing the benchmark.

    [​IMG]
    Zacks Investment Research

    Image Source: Zacks Investment Research

    Favorable Q4 Results Driven by E-commerce Sales

    Reporting its Q4 results on Tuesday, Walmart’s report was favorable for the broader retail industry as Wall Street and many economists await Target's earnings in early March. Coming off of the busy holiday shopping season, earnings of $1.80 per share beat the Zacks Consensus of $1.65 a share by 9%. Fourth quarter earnings rose 5% year over year with Q4 sales of $173.38 billion rising 5% as well and topping estimates of $170.63 billion by over 1%.

    [​IMG]
    Zacks Investment Research

    Image Source: Zacks Investment Research

    Walmart’s strong quarter was attributed to its expanding e-commerce business which saw 23% sales growth during Q4 helping the company achieve over $100 billion in online sales for the year. Overall, Walmart’s total sales grew 6% in its fiscal 2024 to $648.1 billion. Annual earnings also increased 6% to $6.65 per share.

    [​IMG]
    Zacks Investment Research

    Image Source: Zacks Investment Research

    EPS & Outlook Overview

    Walmart’s EPS will naturally decrease or be diluted with the number of shares outstanding increasing after its stock split. However, in this situation, it is important to remember that the total earnings or net income of a company remains unchanged just as revenue or sales wouldn’t be affected.

    Walmart is expected to post 3% growth on its top line in its current FY25 with FY26 sales projected to rise another 4% to $698.5 billion based on Zacks estimates. Annual earnings are forecasted to be up 5% in FY25 to $7.02 per share which would translate into $2.34 a share post-split. Plus, Walmart is projected to post 9% EPS growth in FY26.

    [​IMG]
    Zacks Investment Research

    Image Source: Zacks Investment Research

    Takeaway

    At the moment Walmart’s stock currently lands a Zacks Rank #3 (Hold) following a sizzling start to the year. Part of Walmart’s YTD rally has been attributed to investors piling into its stock with the notion it would move higher before the split. Although Walmart’s expanding e-commerce business and long-term prospects remain attractive there could be better buying opportunities even after its stock split as this does not always translate to shares of a company moving higher immediately afterward."

    MY COMMENT

    If I was considering this stock....the above looks ok, especially the increase in eCommerce and advertising revenue. BUT.....their five year gain....+79.27%...fair. The five year gain of the SP500....+81.50%....even better.

    One factor I would take into account is the customer base that shops in Walmart. I see that customer base expanding significantly over the next 5-15 years looking at the demographics of the country and where we are headed. They dont seem to have any real rival in their business space.

    Target caters to a very different level of customer.....and....they have been shooting themselves in the foot lately...being down by.....(-9.27%) over the last year. They do show a very nice gain of +107% over the last five years......but.....their recent performance is dismal. They have alienated a good percentage of their potential customer base. they report in March.

    With either of these companies you have to ask yourself...would I just be better off putting the money into the SP500.....for much broader exposure and a potential boost from the big cap tech names that are included.
     
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  15. WXYZ

    WXYZ Well-Known Member

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    This is the one company that I know and owned....that reminds me of what we are now seeing with NVDA. For MSFT....the glory years.....for me....lasted from 1990 to 2002;

    "Microsoft's history of stock splits
    Here are the dates and split ratios for Microsoft's stock splits during its history as a publicly traded company:



    Date of Split

    Split Ratio

    Sept. 18, 1987
    2 for 1

    April 12, 1990
    2 for 1

    June 26, 1991
    3 for 2

    June 12, 1992
    3 for 2

    May 20, 1994
    2 for 1

    Dec. 6, 1996
    2 for 1

    Feb. 20, 1998
    2 for 1

    March 26, 1999
    2 for 1

    Feb. 14, 2003
    2 for 1

    "Data source: Microsoft investor relations.

    When you combine all the splits that Microsoft has done since going public, you can see that despite its relatively modest share price, investors who were smart enough to get in on the ground floor have done quite well. For every share that a shareholder owned prior to Microsoft's first split, you would own 288 shares -- assuming that you've never made any sales along the way."


    https://www.fool.com/investing/2016/07/05/microsofts-stock-split-history.aspx

    "By 1993, Windows had become the most widely used GUI operating system in the world.[10] Fortune Magazine named Microsoft as the "1993 Most Innovative Company Operating in the U.S."

    "When Microsoft launched several versions of Microsoft Windows in the 1990s, they had captured over 90% market share of the world's personal computers."


    https://en.wikipedia.org/wiki/History_of_Microsoft

    "By 1993, Windows 3.0 and its subsequent versions were selling at a rate of one million copies per month, and nearly 90% of the world’s PCs ran on a Microsoft operating system."

    https://www.britannica.com/topic/Microsoft-Corporation

    MSFT stock returns (rounded off):

    1990 73%
    1991 122%
    1992 15.11%
    1993 (-6%)
    1994 52%
    1995 44%
    1996 89%
    1997 57%
    1998 115%
    1999 69%
    2000 (-63%)
    2001 53%
    2002 (-22%)

    I sold in 2002, after that time

    2003 6%
    2004 (-3%)
    2005 (-3%)
    2006 15%
    2007 20%
    2008 (-47%)
    2009 57%
    2010 (-9%)
    2011 ( -7%)

    https://www.1stock1.com/1stock1_215.htm

    MY COMMENT

    After 2011 the company got back on track and became the company it is today. In the context of the era when the above gains were happening they were MASSIVE.

    These splits and comments reflect the MASSIVE growth of MSFT over that 12 years.

    Does some of the above seem familiar?

    BUT.....things move very fast now compared to the old-days. I have no idea how long the current wave will last for NVDA. It may be over a year from now.......it may last another 10 years. MY...."GUESS"......and......"FEEL".....is close to10 years......"IF".....the founder and current management stick with the company for that length of time. OK....if we discount that for the SPEED of the current era.....reduce it to 5 years.
     
    #18995 WXYZ, Feb 24, 2024
    Last edited: Feb 24, 2024
  16. WXYZ

    WXYZ Well-Known Member

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  17. WXYZ

    WXYZ Well-Known Member

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    From the BUFFETT letter above:

    ".....Charlie, in 1965, promptly advised me: “Warren, forget about ever buying another company like Berkshire. But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale.” With much back-sliding I subsequently followed his instruction."

    "..... At Berkshire, we have a more limited target: investors who trust Berkshire with their savings without any expectation of resale (resembling in attitude people who save in order to buy a farm or rental property rather than people who prefer using their excess funds to purchase lottery tickets or “hot” stocks)."

    MY COMMENT

    I like the two comments above. The first one sums up what I would call.....MODERN VALUE INVESTING. The focus is not so much on finding a good business at a great (cheap) prices. Rather the focus is on finding GREAT, ICONIC companies that can be bought at a "FAIR" price. This is exactly what I try to do with my BIG CAP ICONIC company focus. I dont have to get in at the bottom or at some cheap price or on the ground floor. I am content to get in at a fair price at the point where the company is starting to achieve greatness.

    I also like the LONG TERM focus referenced in the second quote. Ride the wave....hold those ICONIC companies for the long term. IGNORE the thrill of the chase.....for the lottery win or the HOT stock. This means that there will be times that you have to simply hold through bear markets, nasty corrections, and all sorts of unexpected times.

    BUT....all of this assumes that you have the ability and common sense to choose rational and realistic investments that can stand the test of time.
     
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  18. Smokie

    Smokie Well-Known Member

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    There is a lot to be learned from Warren and his late partner Charlie. They have stood the test of time, as mentioned.

    I always found the shareholder letters a great read over the years. Very witty and yet, at the same time basic, common sense. It is not the big hoopla and fireworks of todays investment world. Another line from it below.....

    "America has been a terrific country for investors. All they have needed to do is sit quietly, listening to no one."
     
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  19. WXYZ

    WXYZ Well-Known Member

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    As usual if I find any sort of rational long term investing article I will put it up on here over talking about the ridiculous short term "stuff" that most every one obsesses over.

    Survey Finds There Is No Utopia. Markets Agree.
    In markets and life, perfect doesn’t exist.

    https://www.fisherinvestments.com/e...survey-finds-there-is-no-utopia-markets-agree

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

    For pretty much all of history, humans have decried society’s shortcomings. Its failures. Its lack of perfection or utopia. This is the origin of many economic, political and sociological visions. And, perhaps unsurprisingly, it is the root of quite a few investing problems. Let me walk you through this from a few different angles.

    My inspiration today is an op-ed leading The New York Times Opinion page Wednesday, “Many Americans Believe the Economy Is Rigged.” Two researchers reported the results of an American Academy of Arts and Sciences focus group survey of everyday Americans’ perceptions. Their finding, which wouldn’t even be breaking news in 1917 or the Gilded Age, never mind now: People “believe the rich and powerful have designed the economy to benefit themselves and have left others with too little or nothing at all.” They can’t reconcile amorphous things like solid GDP growth with their daily experience of rising rent and food prices. They disdain politicians from both parties campaigning as pretend champions of the working classes, then spending their time in office “awash in partisan squabbles over things that have little effect on their lives. Many believe that politicians are looking out for their political party, not the American people.”

    F
    ar be it from me to suggest everyone should feel rosy about the economy. And you may see flickers of recognition here. I do. And I could easily segue into a discourse on how these are all the fruits of our economic system’s distortions of capitalism, with too much government intervention limiting the supply of housing and health care while demand runs away unchecked. I could harp on some people’s simultaneous real estate hoarding and NIMBYism and rail about my opinion of health insurance as privatized socialism and a cabal of middlemen. But I won’t. Why? I would be committing the same basic fallacy the op-ed does, which is that perfect exists and utopia is possible to reach—something the entire arc of human history since the Garden of Eden disproves.

    The desire for utopia is deeply engrained in the human psyche. It plagues communists and ultra free-market libertarians alike. Every one of us is sure beyond a doubt that if our economic worldview were implemented perfectly, there would be no privation, no poverty, no food insecurity—just happiness and perpetually rising living standards for all. Society disagrees on how but thinks the end is there, at the end of the tunnel, if only greed/politicians/fat cats/other pantomime villains weren’t mucking it all up. But because we all disagree and everyone is imperfect and wrong about something, the system will always be a mishmash of competing worldviews and interests executed by flawed human beings, which means there will be winners and losers—and people who have vested interests in perpetuating these divisions.

    Therefore, the trick for us as investors isn’t to sit around navel-gazing about how to make the system better, but rather to see it clear-eyed for what it is and act accordingly. Such as: Do we like that inflation is taking a while to simmer back down to average? Heck no! But are some sectors and industries benefiting more in this environment than others? Wellll, yes, so instead of throwing our toys out of the pram, better to identify the winners and losers and let our findings guide how we invest. Furthermore, for stocks, how that reality compares to expectations is what really matters. So if negativity over inflation is pervasive while it cools—as has been the case over the past year-plus—that is bullish. You can apply both of these concepts to so many of today’s financial annoyances, from high interest rates to volatile oil and gas prices and beyond.

    That is one angle. But another struck me during last month’s Australian Open, which had a lot of commercials I couldn’t fast forward. Many were from financial companies (not us!) showing friendly looking investors who just wanted simple things like steady returns, guaranteed income and no downside. And, lo, to my surprise, the actors playing brokers said they had the perfect solution! Which was clearly a pitch for deferred annuities—an idea that itself offers a vision of the impossible: simultaneous capital preservation and equity-like growth. Financial utopia!

    But in this messy world, it is impossible. To achieve any rate of return, you must take risk. That is just life—there are always, always tradeoffs. Stocks offer the highest long-term returns of all major asset classes, and if you sample long rolling time horizons, those returns tend to be less variable than the competition. But in shorter periods, they often swing hard in both directions, meaning that to give yourself a chance of landing those long-term returns, you must accept the risk and high likelihood of some temporary declines. Securities that swing less in the short term, by contrast, have lower long-term returns. Cash swings least but has the lowest return, and once you factor in inflation it is basically a long-term money loser.

    So if you are investing in the real world, it isn’t about finding utopia, but rather finding the mix of long-term returns and short-term volatility that matches your personal situation—your goals (meaning, the purpose for your money), needs (e.g., the amount you need to withdraw for retirement living expenses), time horizon (the length of time your money must work for you), comfort with volatility and other relevant factors. But in my experience, the vast majority of folks need some growth, which means the vast majority of folks will be exposed to temporary declines in their portfolio’s value.

    There are dangers in not seeing this correctly and instead maintaining the belief that you can target capital preservation and growth at the same time. An obvious one is being vulnerable to Ponzi schemes. Bernie Madoff, for one, peddled steady-eddy, equity-like returns with zero downside. The failure to see this as too good to be true set many people up for a terrible surprise. Or, you could get trapped in expensive, illiquid products that play on the desire for capital preservation and growth while burying the truth of their inherent drawbacks in dense prospectuses. Having a clear view of how markets work—that there is and cannot be a utopia—is the antidote to both traps.

    So recognize and accept that the world isn’t perfect and won’t ever be. Human history is sine waves, not a hockey stick—ups and downs, always. Politicians, business owners and you—yes, you!—will always be self-interested. But there is still wealth to be built in stocks for those who are willing to take the risk and accept setbacks in the short term. Messy and flawed, maybe, but eminently useful."

    MY COMMENT

    Rationality....common sense......a realistic view of the world......living in REALITY. Those are the key to any investing especially long term investing. Of course....even with mistakes and allowing personal bias to enter....long term investing if very forgiving.

    Learning to let your biases and emotions go is a big part of being a successful investor.
     
  20. WXYZ

    WXYZ Well-Known Member

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    To continue with the above and ignore the markets today.

    Warren Buffett on Charlie Munger, Realistic Investment Expectations, and the Stocks He Won’t Sell
    Key takeaways from Warren Buffett’s 2023 letter to Berkshire Hathaway’s shareholders.

    https://www.morningstar.com/stocks/...c-investment-expectations-stocks-he-wont-sell

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

    "Berkshire Hathaway BRK.A BRK.B chairman Warren Buffett released his annual letter to shareholders, along with the company’s 2023 earnings, on Feb. 24.

    This is Buffett’s first shareholder letter since the death of longtime investment partner Charlie Munger in late November 2023.

    As in prior years, Buffett’s 2023 shareholder letter is less about “what’s new” and more about offering investors useful reminders about how to invest successfully—expressed in Buffett’s unique, folksy way. Yet there are some notable comments in this year’s letter about whether Berkshire will pay a dividend, who Buffett’s successor will be, and which stocks Buffett expects to be long-term holdings.

    Warren Buffett on Charlie Munger: ‘The Architect’

    In a separate note to readers before the shareholder letter begins, Buffett pays tribute to Munger. Long credited for pivoting Buffett (and subsequently Berkshire) toward quality companies, Buffett calls Munger the “architect” of present Berkshire, with Buffett acting as the “general contractor” who carried out Munger’s vision.

    According to Buffett, Munger told him in 1965:

    “Warren, forget about ever buying another company like Berkshire. But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale.”


    Buffett on How to Invest

    Plenty of ink has been spilled from the pens of the financial press about how to invest like Warren Buffett. But there’s nothing like hearing an annual reminder from the Oracle of Omaha himself about how to build a portfolio to last. Such reminders are especially useful in today’s market climate.

    Observes Buffett:

    “Though the stock market is massively larger than it was in our early days, today’s active participants are neither more emotionally stable nor better taught than when I was in school. For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young. The casino now resides in many homes and daily tempts the occupants.”

    Buffett’s new letter reiterates some of the things that have made Berkshire so successful over time, including:

    1. Have a clarity of purpose when investing.
    2. Focus on quality investments—or in Buffett’s words, “wonderful businesses.”
    3. Favor companies run by good managers.
    4. Hold on for the long term, as “patience pays.”
    5. Practice “fiscal conservatism.”

    Warren Buffett Won’t Sell These Stocks

    Buffett talked in last year’s letter about two stocks “that leave us comfortable” and that he expects Berkshire Hathaway to own indefinitely: Coca-Cola KO and American Express AXP. And not surprisingly, Berkshire maintained its positions in these stocks in 2023. “When you find a truly wonderful business, stick with it,” he writes this year. “Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable.”

    This year, Buffett highlights two other “Rip Van Winkle” investments he expects Berkshire to own indefinitely, both of which the firm added to in 2023.

    The first Buffett stock for the long term is Occidental Petroleum OXY. Berkshire owned 27.8% of the company’s stock at the end of 2023 and also owns warrants that will allow Berkshire to increase its stake if it so chooses at a fixed price. As Buffett has stated before, Berkshire has no interest in owning Occidental outright. Rather, Berkshire likes the company’s vast oil and gas holdings in the United States and its leadership in carbon-capture initiatives.

    The second investment Buffett expects Berkshire to own indefinitely is the firm’s stake in five large Japanese financial conglomerates—Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. Berkshire now owns about 9% of each company, says Buffett, and has pledged not to take its ownership stakes above 9.9%. The managers of these companies run their firms like the team runs Berkshire, following what Buffett calls “shareholder-friendly policies that are much superior to those customarily practiced in the U.S.” To that end, these firms repurchase shares when the price is right, retain cash flow to build their businesses, and pay their executives reasonably rather than excessively. Lastly, Buffett suggests that Berkshire’s investments in these five Japanese firms “may lead to opportunities for us to partner around the world.”

    Can Berkshire Hathaway Outperform?

    Buffett’s latest letter also addresses—in some cases, subtly—some frequently asked questions about Berkshire Hathaway.

    One of those questions is: At its current size, can Berkshire Hathaway possibly outperform at the rate that it did in the past?

    Buffett admits:

    There remains only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others. Some we can value; some we can’t. And, if we can, they have to be attractively priced. Outside the U.S., there are essentially no candidates that are meaningful options for capital deployment at Berkshire. All in all, we have no possibility of eye-popping performance.”

    What should investors expect from Berkshire? That it’ll do slightly better than the average company
    , says Buffett.





    How and When Will Berkshire Hathaway Invest Its Cash Pile?

    Another common question about Berkshire is when it will invest its sizable cash hoard.

    Buffett acknowledges that Berkshire holds cash and Treasury bills “far in excess of what conventional wisdom deems necessary.” Part of the reason for the significant cash pile is, of course, because there aren’t enough attractively priced opportunities among the types of businesses that Berkshire likes.

    Other factors are at play, though, too. Berkshire practices what Buffett calls “extreme fiscal conservatism;” Buffett compares the sizable cash position to “an insurance policy on a fortress-like building thought to be fireproof.” Buffett plans to safeguard the savings that have been entrusted to Berkshire and not expose those savings to any permanent loss of capital. Cash naturally plays an important role in that strategy.

    But the cash stockpile also ties into a theme that isn’t talked about quite as much: Berkshire’s goal to be an asset to the United States when financial fires need extinguishing, as they did in 2008-09 when Berkshire invested in Goldman Sachs GS during the global financial crisis or, a few years later, when Berkshire “saved” Bank of America BAC. Given this mindset, it’s hard to imagine a time when cash will not be king at Berkshire.

    Will Berkshire Hathaway Pay a Dividend?

    Related to the cash question is whether Berkshire will begin to return some of that cash to shareholders in the form of dividends.

    Buffett gives no indication that a dividend is forthcoming, but he doesn’t close the door entirely on the idea
    , stating, “Berkshire does not currently pay dividends, and its share repurchases are 100% discretionary.”

    Morningstar strategist Greggory Warren, who covers Berkshire Hathaway, thinks it is unlikely that Berkshire will pay a dividend while Buffett is still calling the shots. Says Morningstar’s Warren:

    “He doesn’t like to give away something and not get something in return. And I think the other thing is that I think he still wants to leave that as a tool for the next guys. Because they’re going to have to have something to sort of placate longer-term investors to convince them to continue to stay with the firm, while they figure out how best to handle capital allocation over the long run.”

    Who Will Succeed Warren Buffett?

    Berkshire followers have long assumed that Greg Abel, who manages Berkshire’s noninsurance operations, is Buffett’s heir apparent. Buffett all but confirmed that thinking, noting in this year’s shareholder letter that Abel “in all aspects is ready to be CEO of Berkshire tomorrow.”"

    MY COMMENT

    As usual this confirms for the infinite time.......how simple investing is. The rules for success NEVER change. Unfortunately....people never change either. It is extremely difficult....bordering on impossible....for people to do something simply.

    We make everything complex. We have to crank in all sorts of formulas, rules, guidelines, data, etc, etc, etc. We can never give up the search for some technical golden omen for investing success. Meanwhile the simple key to success is right in front of us. Simply pick good solid investments and hold them for the long term Quit trying to win the lottery.
     
    rg7803 likes this.

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