Kennon-Green & Co. Global Asset Management and Value Investing

Joshua Kennon and Aaron Green at Corona del Mar State Beach on October 6, 2018

After Several Months, We Finally Made a Point to Go Stand in the Ocean

Despite living in Southern California for several months, and being only a short distance from the beach, Aaron and I had not, yet, taken the time to go stand in the ocean. It’s not that we didn’t want to make time for recreation – we very much did.  Rather, we figured it would be better to devote ourselves to getting everything spun-up on the West Coast as quickly as possible, doing as much of the heavy lifting as we could handle upfront so it could be done and behind us.  To make this happen, we turned our productivity into a game of sorts, challenging ourselves to hit certain achievements by specific deadlines.  Tracking our days in a spreadsheet comes in particularly handy.

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Armstrong's Garden Centers Newport Beach - Monarch Butterfly Closeup

Visiting Armstrong’s Garden Center in Newport Beach

After writing about the incredible Roger’s Gardens in Corona del Mar, I thought it was only fair to point out that Aaron and I also enjoy a place called Armstrong’s Garden Center in Newport Beach.  The business can trace its roots to 1889 and holds a storied place in the history of the global rose industry (and you know we love our roses!).  A few months ago, we stopped in and spotted a Monarch Butterfly hanging out on some flowers.  We took a video …

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Roger's Gardens Newport Beach - Bouquets for Sale

Roger’s Gardens in Corona del Mar Is One of My Favorite Places

In Corona del Mar, California there is a place called Roger’s Gardens.  It is one of the coolest businesses I’ve ever seen and within moments of walking through the entrance, Aaron and I knew it was going to be somewhere we spent a lot of time.  In addition to a covered open-air seating full-service restaurant, it is a multi-acre garden, nursery, and retail experience.  You can eat with friends and family, then design your landscaping, pick out themed Christmas wrapping paper, decorate your home, browse baby gifts, buy water fountains, purchase trees, browse planters and urns, and much more – including designing outdoor furniture!  During a few of our trips, we’ve taken pictures and I thought those of you who love gardening and plants as much as we do would appreciate them.

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Joshua and Aaron Reading Setup in the Morning

The Biggest Advantage You Can Give Yourself In Life Is Reading

It is not an exaggeration to say that most of my life and career has been spent reading, writing, and thinking.  In many cases, I turned around and taught others a synthesized version of what I absorbed, putting my own spin on it.  My favorite place in the world during childhood was the public library and even now, I am typing this post surrounded by enormous bookcases overflowing with volumes on everything from trust fund structures to biographies of oil and banking titans.  Reading allows me to satisfy a nearly insatiable curiosity about the world.  More than any other behavior, it has been responsible for my success.

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Aaron Birthday Cake Scone Recipe

Italian Pasta, Birthday Cake Scones … We Are Breaking in the Kitchen in Newport Beach

While there is still a lot to get done, much of which will take months as remaining items are crossed off checklists on weekends and during evenings when we have a bit of personal time – hanging pictures, organizing the closets, ordering window treatments, filling in the last few pieces of furniture – our place in Newport Beach is coming along nicely.  After returning from Missouri, where we had been for several weeks in order to continue our planned personal and professional relocation from the state, we finally stocked the kitchen and broke in the appliances beyond our usual breakfasts by cooking one our favorite recipes, the Marcella Hazan tomato sauce with onion and butter over penne, which I first wrote about more than five years ago.

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ChanChan Chicken Tenders - Small - From Chan Chan Food House in Irvine

We Had Lunch at Chan Chan Food House in Irvine, California

Today, we were in Newport Beach knocking some things off our task list.  We haven’t had a chance to really explore anything in the surrounding area, nor do we expect to until at least a couple of months after we’ve completed the move as we need to execute it with speed and precision, but we did figure that we could take our lunch break to check out one of the local Korean restaurants.  We settled on a place called Chan Chan Food House in nearby Irvine, California.  We didn’t know what to expect but the food looked delicious and the reviews were good.

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The Sum of Small Things A Theory of the Aspirational Class by Elizabeth Currid-Halkett Joshua Kennon Notes

The Sum of Small Things: A Theory of the Aspirational Class

Elizabeth Currid-Halkett, the James Irvine Chair in Urban and Regional Planning and a professor of public policy at the University of Southern California, recently published a book called, “The Sum of Small Things: A Theory of the Aspirational Class”. It looks at how affluent and upper class individuals and families are now engaging in a different type of consumption that effectively strengthens their own advantages, making upward mobility more difficult for those who don’t understand the codes or values of the group.

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Looking at Office Space in Southern California

It’s been roughly seven months since I’ve been present or active on the site in any meaningful sense.  There are largely two reasons for this. Firstly, as you can probably imagine, nearly every waking moment of our lives has been consumed by the launch of our global asset management firm, Kennon-Green & Co. This included spending a couple of weeks in Southern California looking for office space.

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Tower Bridge in London

The United Kingdom Exits the European Union

I’ve avoided speaking about the Brexit situation because I ultimately believe that it is not my place to tell British citizens how their country should be run even though I am a stakeholder in their success. While there are what I could consider extraordinarily high probabilities that the decision to leave the European Union will lead to lower GDP, the fact remains that GDP isn’t everything. Money, and the economy, exists to serve a civilization.

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What is a Franchise Investment

What Is a Franchise?

The word “franchise” is used to describe an arrangement in which one business, the franchisor, allows another business, the franchisee, to use its name, trademarks, trade secrets, intellectual property, branding, operating systems, and internal support resources in a specific geographic area, sometimes with an exclusivity provision that guarantees no other franchises will be granted within a specific buffer zone so the franchisees aren’t cannibalizing sales from each other, in exchange for some sort of payment.

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50-Year Maturity Sovereign Bonds in Euros

The Folly of Investing in 50-and-100-Year Bonds

Benjamin Graham once wisely observed that more money has been lost by investors “reaching for yield” than stolen at the barrel-end of a gun.  During periods of anemic interest rates on fixed-income securities, bank deposits, and cash equivalents, a combination of impatience, action bias, and desperation causes savers to do what they would otherwise consider extraordinarily foolish.  

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Portfolio Weightings and Construction

Pay Attention to the Weightings of Your Individual Holdings When Constructing a Portfolio

One of the things that worries me from a risk management perspective is investors who don’t know what they own or their actual, real portfolio weightings. Sometimes, I’ll hear new investors say, “I own stocks” or “I own mutual funds” but neither is an answer. Those aren’t the relevant details. The real question: “In which enterprises, on what terms, and at what price has the money been invested, laid out, and exchanged?”. Much of everything else is a smokescreen serving to obfuscate reality. It’s risk-adjusted reward we’re after; reward measured in after-tax, net-of-inflation real purchasing power.

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How Joe Campbell Found Himself $106,445.56 In Debt to His Broker in a Matter of Minutes Because He Didn’t Understand the Risks of Shorting Stock

One of the major themes running through my body of work, both on this site and at Investing for Beginners, can be summed up in the statement, “Know your risks”. I hammer it home all the time; “risk-adjusted return”, talk about remote-probability events, explaining how much of wealth building is learning to “tilt probabilities in [your] favor”, admonishment to never invest in something you don’t fully understand and couldn’t explain to a Kindergartener in a couple of sentences. Consider this real-life tragedy a morality tale that can help you protect your own family.

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Homemade Rum Raisin Ice Cream with Cinnamon and Vanilla

Homemade Rum Raisin Ice Cream

I’m not sure what it was but a few nights ago, I had an overwhelming urge to begin planning our meals for the next two months, a big part of which I wanted to feature older recipes that don’t get their due. This autumn and winter, we’re going to cook like it’s 1700 – 1950; Shepard’s pie, German Christmas cakes, Yorkshire pudding, perhaps an Apple Dowdy from Colonial America. I want to go back and make things that get most of their flavor profile extracted from a handful of key ingredients; fruits, nuts, meats, liqueurs, or spices. Rum raisin ice cream was on that list.

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Gender and Age of Joshua Kennon Demographics

Blog Demographics 2015 Edition: If Life Were a Game, You Would Be Champions

It’s time for our annual review of the blog community demographics! Actually, I hadn’t realized it since we’re busy launching the global asset management firm but a few of you sent me messages asking where it was so I wanted to take some time out to get the latest numbers up for you. The short version: Continuing the usual trend of winning, it will likely surprise no one that, since last year, you’ve managed to grow a bit older, mostly richer, and better educated. When people talk about the top of the socioeconomic bell curve, they are speaking about many of you. This community is extraordinary.

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Cash Flow Management - The Two Levers Philosophy by Joshua Kennon

Revisiting the Two Levers Philosophy of Cash Flow Management

One of the major lessons I’ve tried to teach is that building your net worth comes down to two levers: Cash in and cash out. That’s it. That is the entirety of the game when you peer past the distractions and gaze into the heart of the mathematical reality. From a financial perspective, every action you take for your career or business ultimately only matters in so much as it someday serves to exert force on one of those levers so that more cash is flowing in than is flowing out, leaving a surplus. It sounds so simple but when you see things through the focus of this particular lens, you can more quickly identify the actions that are likely to have an outsized effect, both for good or bad, on net worth.

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Stuffed Pepper Recipe with White Rice, Olive Oil, Roasted Onions, Ground Beef, Garlic, Diced Tomatoes, Monterey Jack Cheese, Black Pepper, and Fresh Parsley

While I picked up some shares of Johnson & Johnson stock for one of our personal accounts today and worked on the launch of the global asset management business, Aaron decided to make a stuffed pepper recipe he told me last night he wanted to try. I’m so glad he did because they are incredible. You need to make them yourself.

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Oil Tanker Oil Stocks

Let’s Talk About Investing in Oil Stocks and the Oil Majors

I’ve received a significant number of requests over the past few months asking that I discuss what is happening with oil, natural gas, pipeline, and refining companies; to explain how I look at the situation and the sorts of things Aaron and I discuss when we’re allocating our own capital or the capital of those who have entrusted their assets to us. It’s a big topic with a lot of niche considerations but I want to take some time today to address the oil majors; the handful of mega-capitalization behemoths such as ExxonMobil, Chevron, Royal Dutch Shell, Total, ConocoPhillips / Phillips 66, and BP.

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Caleb and Tara White Coat Ceremony Featured

Attending My Brother’s White Coat Ceremony for Medical School

My brother’s white coat ceremony for medical school was this past Saturday! We went to cheer him on as he was assigned to his docent, with the internal medicine experience up first. (Though he’s part of the class of 2019, I think he’s graduating in 2018 because of however his particular academic experience and credit history happened to coalesce. I’m not entirely clear on how the mechanics work. Whatever it is, it won’t be long before we’re calling him “Dr. Kennon”.)

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Noxzema Moisturizing Cleansing Cream

The Rise and Fall of Noxzema: A Business Tale

On a recent late-night restocking run to the store, Aaron and I were walking down an aisle when we suddenly spotted something that, outside of a handful of enclaves, has been missing in action or relegated to back corners for decades: A product called Noxzema.  For almost three-quarters of a century, the stuff was ubiquitous, found in nearly every home and an absolute must-have on any shopping trip taken by nearly any American family.  The business story behind the Noxema fortune is a fascinating one.

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Cecil the Black Maned Lion Killed by Walter Palmer

Financial and Life Lessons We Can Learn from Dr. Walter Palmer’s Cecil the Black Maned Lion Debacle

I’ve been thinking about the story that has captivated the country over the past two days – how, if various news reports are to be believed, Dr. Walter J. Palmer of Eden Prairie, Minnesota, owner of a practice called River Bluff Dental in Bloomington, Minnesota, and two of his guides poached the beloved Cecil the Lion from a national park in Zimbabwe, luring him from the sanctuary where he was protected, injuring him with an arrow before tracking him for two days, shooting him, beheading him, skinning him, and leaving the body behind with plans to mount the trophy in his office.

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American Flag Marriage Equality Obergefell Supreme Court

Freedom of Speech in the United States of America

I’ve been thinking a lot about freedom of speech, and the first amendment in general, lately. Between the uproar over the Confederate Battle Flag, an unprecedented user and moderator revolt at Reddit after the decision to shut down certain groups (the CEO, whom many blame for the ugly affair, wrote an op-ed piece in The Washington Post), a very vocal minority of Americans upset about the Supreme Court granting equality to gay Americans in the Obergefell v. Hodges decision, and world-class comedians such as Jerry Seinfeld and Chris Rock publicly airing their concern about the sanitation of humor for fear of offending people, talk shows, newspapers, radio programs, books, and blogs have all been discussing the limits of personal expression to which an American is entitled under our constitution.

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Portfolio of Stocks and Bonds

1,821,745 Households in the United States Have Investment Portfolios Worth $3,000,000 or More

You may already know the Census Bureau data shows there are 115,610,216 households in the United States and, that, as per the Federal Reserve data, roughly 1 out of every 5 of these households earns $100,000 or more per year; that 1 out of every 25 of them has a net worth of $1,000,000 or more. What about substantial wealth excluding houses, cars, furniture, jewelry … actual investment portfolios stuffed with cash, stocks, bonds, mutual funds, real estate investment trusts, master limited partnerships, tax-lien certificates, or any of the other numerous securities one can own to compound capital?

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Joshua and Aaron Colgate-Palmolive Toothpaste

Colgate-Palmolive: A Real World Examination of the Limitations of the P/E Ratio

Back in 2011, I did a 20-year case study of Colgate-Palmolive. Global events have conspired in such a way that it can now serve as a perfect illustration of a valuation conundrum: While not cheap, Colgate-Palmolive is significantly cheaper for a long-term owner than the price-to-earnings ratio alone would have you believe. In fact, despite having what appears to be a 26.54 p/e ratio, it’s slightly undervalued to its private market value could you get your hands on the entire empire. It’s a rare thing to be able to talk about a gem like this under conditions such as these so I’m not going to let the opportunity pass. Dust off your powdered wigs, take out your walking cane, and travel back with me to post-Revolutionary America.

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Obergefell v Hodges Supreme Court Ruling Marriage Equailty Victory

Marriage Equality Declared a Fundamental, Constitutional Right: My Personal Reaction to Obergefell v. Hodges

Marriage Equality Declared a Fundamental, Constitutional Right: My Personal Reaction to Obergefell v. Hodges It’s been almost a week since the Supreme Court handed down its decision in Obergefell v. Hodges declaring marriage equality a fundamental right under both the Due Process and Equal Protection clauses of the 14th Amendment to the United States Constitution. I’ve…

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The Great Boston Molasses Flood of 1919

Lessons from The Great Boston Molasses Flood of 1919

It is January 15th, 1919.  You’re in Boston, Massachusetts shortly before lunchtime.  Sitting at 529 Commercial Street is a three-year old tanker owned by the Purity Distilling Company, a subsidiary of United States Industrial Alcohol.  At 50 feet high, housed within the steel body of this five-story behemoth is 26,000,000 pounds of sticky, sweet molasses; one of the most popular sweeteners…

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Getting Closer to Thorne Miniature Room

The Thorne Miniatures at the Art Institute of Chicago Are Incredible

Narcissa Niblack Thorne was born in 1882.  She fell in love with her childhood sweetheart, James Ward, and they married.  He was the heir to the Montgomery Ward fortune, one of the biggest in the world at the time thanks to a chain of department stores that were once as ubiquitous as Target or J.C. Penney.  A graduate of art school, the Chicago socialite wasn’t content to sit around and make small talk all of her life.  She began designing and orchestrating these incredible one-foot-to-one-inch scale historical replicas of different architectural, interior design, and furniture styles throughout history to serve as models of how homes and spaces had changed over the years.  She was meticulous and insisted upon accuracy (e.g., the wood, down to the grain direction, of the tiny furniture had to be made in exactly the same way as the model piece upon which it was based.)

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Data Driven Decisions Can Help End Negative Feedback Loops

Data-Based Decisions Are the First Step to Escaping Negative Feedback Loops

Shortly after Blue Fairy gives life to the eponymous wooden puppet in the 1940 classic animated film Pinocchio, she instructs him that he must, “Always let [his] conscience be [his] guide”.  Were she a rationalist, she might have added an important addendum: “And make decisions based upon objective, high-quality, third-party-recorded data to remove your own bias as much as possible…

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The Poisoned Watermelon

The Poisoned Watermelon

There is an old joke that goes something like this… Not so long ago there was a watermelon farmer.  In June, during peak watermelon season, he began to notice that someone was stealing his fruit.  Slowly, but steadily, melons would disappear, along with it his profits. He tried everything until one particularly fine morning, he had an idea.…

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Nestle Dividend Day 2015 Nescafe

We Are Approaching the Nestlé ADR Dividend Date!

Now that the dividend has been paid on the Swiss shares (April 22nd), the stockholder meeting concluded (April 16th), and Citibank is working with the Swiss Tax Authorities to distribute all of those beautiful Swiss Francs shipped over from Vevey to the United States for holders of the ADR to receive their U.S. dollar equivalent payouts later this month on May 29th when the process has completed (can you believe it’s already been a year since the last time we had this conversation?), I wanted to write about Nestlé.

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Obesity and Waist-to-Hip Ratio

Female Porn Stars, Waist-to-Hip Ratios, Gay Neurological Patterns, Morbid Obesity, Fat Shaming, and Poop Sticks

I’m going to regret that title tomorrow.  I know it. Two of the books I’ve been meaning to delve into sometime this year are about evolutionary biology; how the incentives that lead to reproductive and social success (which itself is a facilitator of reproductive success) shape everything from our government institutions to the popularity of…

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Using Words to Your Advantage in Life and Business

Using Words to Your Advantage in Life and Business

Words and phrases are interesting things.  Each represents a package of ideas and associations, instantly unwrapped the moment we encounter them.  If I say, “She stood in a cold, dark, damp basement on a winter day, with only a bit of gray, overcast sky visible through small windows around the perimeter; the rhythm of ice rain hitting…

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Joshua Kennon Mail Bag Questions

Mail Bag: Should Homeschooling Be Illegal Like In Germany or a Constitutional Right Like in Italy?

Image Credit: Oleksiy Mark/Shutterstock Hmm … Joshua, Countries such as Germany and Spain make homeschooling illegal, putting the kids before the parents. Other countries, such as Italy, consider it a fundamental right and guarantee it in the constitution, putting the parents before the kids. Which do you think is right? Iya This is one of…

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President Obama Foreign Tax Increase Proposal

About That Proposed One-Time $280 Billion Tax on Foreign Corporate Profits …

President Obama’s administration has announced that he wants to impose a one-time tax levy of up to 14% on the $2 trillion in foreign profits American companies have built up and not repatriated in exchange for making repatriation on future foreign profits that were subject to at least a 19% tax rate tax-free, encouraging domestic…

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Center for Science in the Public Interest

The New York Times Shows What 2,000 Calories Looks Like: The Mental Models of Math Estimation

The average healthy adult should eat roughly 2,000 calories per day to maintain a recommended weight.  In the United States, all else equal, the average male, at 5’8″, should weigh between 140 pounds and 172 pounds.  The average female, at 5’4″, should weigh between 114 pounds and 151 pounds. In study after study, the typical person underestimates…

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JP Morgan Benefits of Saving Early

The Power of Compounding, Student Loan Debt, Communism, and Stealth Wealth

A friend of mine, a nuclear engineer, once explained that he doesn’t bother to contribute to forums or message boards when the topic of nuclear energy is brought up anymore because people are irrational about it, interested in their own confirmation bias rather than learning or having an honest discussion.  Almost everyone I know working in…

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Il Lazzarone Pizza St Joseph Missouri

You Should Try the Wood-Fired Italian Neapolitan Pizza at Il Lazzarone

We met up with friends at a new wood-fired Italian Neapolitan pizza restaurant that opened 45 minutes north of Kansas City called Il Lazzarone.  This is the same group with which we regularly try new restaurants, though I’ve been terrible about posting them all over the years.  We sat inside for hours talking about everything from economics, rental…

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Case Study: Read a Group of Stockholders Realize In Real Time They’ve Lost Their Entire Life Savings When GT Advanced Technologies Declares Bankruptcy

Are you in the mood for a case study resource for your own investment policy manual?  If so, brace yourself because this one is heartbreaking.  You can learn a lot from it, and save your own family a great deal of tragedy, but it’s going to involve surveying the ruins of the lives of others…

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Blog Demographics 2014 Edition: You Are Richer, Better Educated, and Have More Kids

Like the residents of Lake Wobegon, another year of better data analytics and audience growth has cemented what we’ve already known: As a group, you’re way above average.  You are considerably richer and better educated the average person in the United States, more likely to identify as politically independent, more likely to have children, and skew…

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Mental Model by Joshua Kennon

Mental Model: Intergenerational Transmission and What It Has to Do With Adrian Peterson Beating His Child

Mental Model: Intergenerational Transmission and What It Has to Do With Adrian Peterson Beating His Child A huge percentage of the people in this community are fans of the mental model concept – ideas, like tools, that can be used to analyze, study, and understand both why and how something is happening – made popular by Charles…

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Park Avenue Millionaire

Lewis David Zagor Leaves Behind an $18,000,000 Secret Fortune Amassed from Investing in Stocks and Mutual Funds

It’s no secret that most wealth in the United States is so-called stealth wealth.  We now live in a country where roughly 1 in 5 families earns six-figures a year or more, which most people wouldn’t believe, and for those who put aside money, something like 80%+ of millionaires hide their net worth from friends and…

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Joshua and Aaron Cheese Plate Closeup

Slow-Roasted Vegetables, French Onion Soup, Fresh Bread, Aged White Cheddar, and Plum Cheesecake

Slow-Roasted Vegetables, French Onion Soup, Fresh Bread, Aged White Cheddar, and Plum Cheesecake We spent the day at home working on a project we need to get done for the one of the businesses.  As usual, we’re big believers in concurrent time management so we used the opportunity to test slow cook recipes and soups because they…

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Aga Cooker 1

The AGA Cooker – How a Blind Nobel Prize Winning Physicist Created One of the World’s Greatest Stoves

In 1912, one of Sweden’s greatest inventors, physicist Gustaf Dalén, was blinded during an accident involving pressure containment for his gas accumulators.  He had created a device for use in unmanned lighthouses.  This device lit itself at night and extinguished in the morning, improving marine safety, thereby saving countless lives and immeasurable property.  Despite the setback of…

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Bob Jones University Public Domain Photograph

Read the Amazing, Fantastical, Autocratic Bob Jones University Student Handbook

I mentioned the infamous Bob Jones University student handbook in an earlier post after explaining it was the school from which one of the extremist authors I was reading as part of a self-imposed cultural studies program graduated back in 1950.  It was the university that famously insisted God didn’t want blacks intermingling with whites and refused…

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