December 18, 2014

Investing Articles

How to Give Shares of Stock as a Christmas Gift

Liquidity Discounts IRS

I am sometimes asked how to buy shares of stock as a Christmas gift for someone, often a younger family member such as a child, grandchild, niece, nephew, godson, goddaughter, or, in a handful of cases, retired parents who could use the additional passive income.  It can be a wonderful idea that teaches a lot of important life financial lessons, such as the power of compounding and the joy of dividends, checks regularly arriving in the mail throughout the year; a constant reinforcement of the b … [Read more...]

Watching Oil Decline 45% Has Made Me Excited

Exxon Mobil 2013 Annual Report

The global benchmark for crude has collapsed an astounding 45% since the summer, with no sign that it will abate anytime soon.  Historically, this is nothing.  To see what a real oil crash looks like, you should read old news articles, magazine essays, and biographies to get some context.  I remember $10 a barrel oil back in the 1990's during my sophomore year of high school, with everyone on television and in print talking about it.  This was around the time I was obsessed with studying the gild … [Read more...]

Here’s an Astounding Stock Market Fact You Probably Haven’t Heard

Facebook Valuation

Imagine that I raise $225 billion.  I create a new business called Kennon Super Company, Inc.  We then go out and buy seven other companies using that money, paying the current market capitalization of the public stock.  A flurry of paperwork follows and, by the time it is all settled, this is what our business looks like: Kennon Super Company, Inc.  Clorox at a price tag of $12.87 billion generating $558 million in after-tax profits Hershey at a price tag of $22 billion generating $820 … [Read more...]

Foreign Currency and Your International Investments

CME Building Wikipedia

One of the more interesting problems you'll face as you amass more capital is how to approach the issue of foreign currency income, either in the form of dividends, interest, rents, or capital gains.  You can solve this problem by reminding yourself that, ultimately, money exists to be used - either by yourself, your heirs, or the charity of your choosing - so the question really comes down to, "How can a person extract the most utility out of his income when it arrives in a fiat not native to th … [Read more...]

Investing in The Hershey Company Has Made Generations of Investors Rich

Hershey Icon for Investment Post

As we approach the end of 2014, I'm looking back on the year.  One of the major changes from an investing perspective what a modification Aaron and I made in the investment policy manual.  That doesn't happen often.  We added a handful of companies to the list of permanent business; those companies we consider so exceptional that we buy them with no intention of ever selling.  The Hershey Company was one of those firms. One of the biggest mistakes of my investing life, and a lesson that took m … [Read more...]

I’m Building a Ghost Ship Portfolio for Someone; A Sort of Index Fund on Steroids

Ghost Ship Passive Investment Portfolio

I'm putting together a retirement portfolio for several people I know.  One of them is proving to be a fun intellectual exercise.  Essentially, the mandate calls for me creating a ghost ship of a portfolio that, once it has set sail, will drift almost untouched for the next 30+ years when it will be gifted to the children at the end of the life expectancy of the owner.  Beginning in 7 to 10 years, the owner will start taking 3% to 4% distributions to augment an otherwise secure retirement.  The p … [Read more...]

November Is for Buying More Nestlé Shares

Nestle Dividend History and Trendline 1982 to 2013

It's been a long time since I've talked really about Nestlé SA other than mentioning it in passing last week.  It's on my mind because this morning, I had my parents acquire some more in their personal portfolios, which I intend for them to hold for the remainder of their lives (which should be at least another 30 years, God willing, as they are both in their early-to-mid 50's).  It's not much, just a bit of cash that had built up and needed to be put to use, but it adds to the collection of ow … [Read more...]

For the Second Time This Year, I Added More Shares of McDonald’s to the KRIP

McDonalds National Labor Relations Board

After writing about buying British stocks for the KRIP, particularly Diageo, I thought I should mention that I picked up some more McDonald's shares for that particular portfolio as part of the same set of trades.  The hamburger giant reported a much bigger than expected 30% plunge in earnings as a result of maelstrom of woes that has engulfed the restaurants.  Management had to set aside a big chunk of money for a one-time tax ruling in a foreign country.  Russia is retaliating against the Unite … [Read more...]

The KRIP Has Gone British

Diageo plc Shares KRIP

I've spent the past week reviewing, analyzing, and modestly adjusting the household portfolios (including the KRIP portfolio), as well as the investments under my control for friends and family.  I ended up executing several rounds of buy orders using fresh cash deposits, dividends that had piled up over the past quarter, and sales of positions that had grown to be too large and needed a haircut for risk management and valuation reasons.  My parents, my in-laws, my siblings, Aaron and I ... eve … [Read more...]

Most Dividends Now Come in the Form of Stock Buy Backs

Share Repurchases More Popular Than Cash Dividends

The Economist has a piece called Share Buy-Backs: The Repurchase Revolution.  To help you understand how popular stock repurchase programs have become over the past few decades, and how they have elbowed out traditional dividends as the preferred mechanism to return cash to owners, consider: The companies in the S&P 500 index bought $500 billion of their own shares in 2013, close to the high reached in the bubble year of 2007, and eating up 33 cents of every dollar of cashflow. The greatest … [Read more...]