Rational investing for financial independence
Stock picking is difficult because only a small minority of the stocks contribute to the majority of the gains. It’s skewed to only a few outliers. It’s as simple as that. Let’s look at some facts: Most stocks don’t beat Treasury Bills: Hendrik Bessembinder became pretty “famous” for his study published in 2017 called Do Stocks Outperform Treasury Bills? The
Continue readingSome weeks ago I published an article looking at the worst month in the stock market: September. Today, 29th of September, as September is coming to an end, and we’re about to enter the best season being invested in stocks: October to the end of April. Let’s look at two portfolios: One invested from the close of September to the
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Managements often mouth that paying a dividend is doing something for shareholders. It is precisely the opposite. Instead they are saying, “Sorry, we can’t do anything with it; see what you can do. Good luck!” –Briar Dividend investors often claim that a dividend rewards shareholders. It’s kind of of “money for nothing”. But most of these investors forget that a
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In Street Name Your capital is at risk when you are investing in equity markets, but I assume very few consider the broker as a potential risk. But the fact is that your capital might be at risk if the broker goes bankrupt. Not only your cash deposit, but also your shareholdings. How is this possible? I believe most investors
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The company: Based in Stockholm, Sweden, and listed on the Stockholm Exchange with the ticker SWMA, Swedish Match is a company that makes snuff, snus, chewing tobacco, cigars, matches and lighters. It was originally a matchstick company (merged with tobacco producer in 1992 under the Procordia Group), thus the name, but has over the years evolved into a tobacco company,
Continue readingTerry Smith, the CEO/CIO of Fundsmith, writes an interesting annual report that is well worth reading. He goes one step further than most money managers by delving into a range wide of subjects, usually with the intelligent British humor. The letters are not so long, but for my own personal reference I like to quote what I consider the most
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Costco (COST) is a US retailer, and a pretty unique company because of these reasons: A simple business model where members pay a membership fee upfront. Items sold have only a tiny profit margin. Thus, the main income is from the membership fee. Costco receives a “float” when the members pay in advance. This is like a perpetual interest free
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Introduction and summary: I have invested in Estateguru since 2016 and this article shares my thoughts and experiences as a lender/investor. In a previous post I expressed my concerns over crowdfunding and the inherent risks associated with the platforms. Before you continue reading I would recommend reading the article to get a better understanding of why I believe crowdfunding might
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Yesterday, the 3rd of September 2020, witnessed a pretty big drop in the stock market with Nasdaq leading the decline with a drop of 5.07%. Out of interest I looked at the performance of September going back to 1970, using S&P 500 (not including dividends). The chart below shows the performance from the close of August until close of September
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Introduction and summary: Alcohol has for thousands of years been a vital part of human culture (whether you like it or not). Whisky though, a result of distillation, was discovered by monks as late as 1100-1300. Whisky as an investment has attracted interest over the last decade, presumably because it has proven to be a good investment since the GFC
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Before you continue reading I want to emphasize that the portfolio below is no recommendation to buy or sell the mentioned securities. I’m no investment advisor. Please do your own due diligence. (Two other portfolios are in the pipeline: The international dividend portfolio and the “compounding” portfolio.) Below you find my picks for a “skin in the game” portfolio, companies
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The models that dominate all human decision-making today are duly heavy on simplistic logic, and light on magic – a spreadsheet leaves no room for miracles. But what if this approach is wrong? What if, in our quest to recreate the certainty of the laws of physics, we are now too eager to impose the same consistency and certainty in
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Tail risk is a form of portfolio risk that arises when the possibility that an investment will move more than three standard deviations from the mean is greater than what is shown by a normal distribution. Tail risks include events that have a small probability of occurring, and occur at both ends of a normal distribution curve. –Investopedia Tail-risk, the
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Terry Smith, the CEO/CIO of Fundsmith, writes an interesting annual report that is well worth reading. He goes one step further than most money managers by delving into a range wide of subjects, usually with the intelligent British humor. The letters are not so long, but for my own personal reference I like to quote what I consider the most
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I have written numerous articles about dividends and compounding. To sum up, in order to create the biggest amount of wealth, you would want to invest in a company that has high returns on capital and opportunities to redeploy the earnings into the business at the same returns or close to same returns (I have provided relevant links at the
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This week I came across this blogpost by Nick Maggiulli. The blogpost is based on the “All Weather Portfolio” developed by Ray Dalio and his firm Bridgewater Associates, one of the biggest hedgefunds in the world. Dalio’s firm has spent a considerable time to develop a portfolio that does well both in times of inflation and deflation. Because most current
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Introduction and summary: This is what makes Kone, a Finnish elevator company, a potentially good investment: The industry is close to an oligopoly – just four major global players: Otis, Schindler, Kone and ThyssenKrupp (in this rank based on sales). (About 15 years ago all companies were fined for price cooperation.) I believe the four players are unlikely to underbid
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Some months ago I wrote an article about the historical performance of so-called “sin-stocks”. Tobacco companies have performed the best in the US, and alcohol stocks in the UK. In this article I briefly argue for the reasons why and why they most likely continue to outperform. High margins and cashflows: Margins are very high. For example, 27% of the
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Gjensidige, for non-native speakers an unpronounceable name, is a quality Norwegian insurer. I’ve been long since the IPO in 2010, and below I briefly bring forward some arguments why I still own the stock (and why intend keeping it). Historical performance – boring is good: Gjensidige has delivered significant alpha since the IPO in late 2010: CAGR of 18%. What
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2010-2020 produced better returns than the historical averages: From the start of 2010 until today, 27th of July 2020, S&P 500 returned 250% (dividends reinvested), which is a CAGR of 13.3% annually. Pretty impressive! Is it realistic to expect the same or at least close to 13%? Typical after a decade of strong returns, optimists dominate the more prudent and
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I don’t think you should ever invest for income. It is a mistake…….. You shouldn’t just invest for dividends, you should invest in businesses that reinvest their profits to achieve a future growth rate…..However, I realise that for many investors, the idea of realising part of their capital to provide income is anathema. – Terry Smith, CIO of Fundsmith. I’m
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Altria is a legendary tobacco company which was split in two in 2008 when Philip Morris became the international part of the cigarette business while Altria distributes cigarettes only in the US. In 2019 the companies tried to merge (again) but it was postponed. Tobacco stocks have been the best performers over the last 100 years. I have previously written
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I currently reread Victor Niederhoffer’s The Eduction of A Speculator. I regard this book as one of the best I have ever read. It’s not an easy read, but it completely changed my mindset for the better 20 years ago. What makes this a good book? Because it explains the foundation and principles for successful speculation. Chapter 7 is called
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Before you continue reading I want to emphasize that the portfolio below is no recommendation to buy or sell the mentioned securities. I’m no investment advisor. Please do your own due diligence. (Several other portfolios are in the pipeline: The international dividend portfolio, the “skin in the game” portfolio and the “compounding” portfolio.) Below you find my picks for a
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This article contains some brief notes on Admiral Plc, an UK insurance company listed on London Stock Exchange with the tickercode ADM. It’s included in FTSE-100. The business: Admiral was formed in 1990 with Henry Engelhardt as the main founder. It was listed/floated in 2004 with a valuation of 700 million GBP. Today’s market cap is 6.9 billion GBP. Engelhardt
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