Kennon-Green & Co. Global Asset Management, Wealth Management, Investment Advisory, and Value Investing

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If You Are Sitting on a Huge Pile of Cash, There Is Only One Place to Park It (and It Is Not In a Bank)

For the past day, I’ve been thinking about a 65 year old man named John Demetriou.  He was from Cyprus, but moved to Australia, where he spent 35 years working “days, nights and weekends in Sydney markets selling jewellery and imitation jewellery” according to The Sydney Morning Herald. Wanting to be in his home country, and…

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An Academic Example of Cash Flow Differing from Reported Earnings - McDonald's Corporation

A Quick Cash Flow Statement Lesson – A Look at How McDonald’s Real Payout Ratio Is 110%, Not 54% As First Appears

McDonald’s is one of those businesses that I love.  The last time we talked about it was when I wrote the 25 Year Investment Case Study of McDonald’s, and showed how you could have turned $100,000 into anywhere between $1,839,033 and $5,547,089 depending on how you handled dividend reinvestment and the Chipotle split-off back in 2006, and the sorely lacking media coverage of McDonald’s results in February.  No matter which way you look at it, despite periods of overvaluation and undervaluation, alternating with the underlying performance and the emotional moods of shareholders, McDonald’s has been a fantastic company.  It makes its employees and shareholders a lot of money.  It gives society something it wants, whether that be a plain salad with side of fresh fruit and a non-sweetened iced tea or a double cheeseburger with french fries and a Coca-Cola.

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Kindle Paperwhite and Kindle Fire Next to Security Analysis on Bookshelf Joshua Kennon

The Decluttering and Minimalism Project Is Now Turning Toward My Personal Library

I am committed to this minimalism and de-cluttering project.  Since beginning this change, it has been wonderfully freeing.  If something hasn’t been used in the past twelve months, it is donated or discarded.  Everything has a place and the systems at home were changed so that the basic act of living, going through the day, takes care of keeping everything maintained without any extra work. Now that this phase of the pantry is done, I am turning my attention to the library.  

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C. Everett Koop

One of the Great Pragmatists of the 20th Century Has Died: C. Everett Koop Passes Away at 96

C. Everett Koop, former Surgeon General of the United States, has passed away.  He was 96 years old.  The devout, conservative, evangelical Christian born the grandchild of German immigrants was one of the great pragmatist of the past few generations, proving that a fact-based, rational approach to life can improve standard of living, reduce disease,…

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Book Recommendation: The Crash and Its Aftermath: A History of Securities Markets in the United States, 1929-1933 by Barrie A. Wigmore

In 1985, one of the greatest scholarly works ever penned on the Great Depression was published by Barrie A. Wigmore under the title The Crash and Its Aftermath: A History of Securities Markets in the United States, 1929-1933.  Using actual data from the period that took years to acquire, analyze, and interpret, Wigmore takes 751 pages…

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Railroad Stocks - Historical Analysis

Union Pacific: A Company That Looked Expensive But Was Undervalued

The developments on the income statement and balance sheet of Union Pacific between 2005 and 2013 are an excellent example of why it is important for you to analyze data yourself, and come to conclusions based on reasonable, rational, intelligently organized facts.  The willingness to take action when others do not agree with you, and to have your action backed up by solid evidence, can make the difference between being comfortable and ending up rich.  Two of the world’s wealthiest titans demonstrated this truth, not only when buying shares of Union Pacific, but other railroads, as well.

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Cream and Butter Sauce with Romano Cheese Chicken and Sun Dried Tomato Closeup

Our Favorite Recipe for Blacked Chicken with Sun Dried Tomatoes with Romano Cheese, Cream, and Butter Sauce Tossed Into Fettuccine Noodles

A couple of nights ago, we tried another recipe adapted from the famous Marcella Hazan Italian cookbook.  It involved a cream and butter sauce, and was one of the original versions of Fettuccine Alfredo recipes brought to the United States. [mainbodyad]In our case, we were experimenting with different flavors and combinations so we changed it…

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Running an Investment Case Study on Eastman Kodak Including the Bankruptcy

An Investment Case Study of Eastman Kodak: How the Bankruptcy of One of America’s Oldest Blue Chip Stocks Would Have Turned Out for Long-Term Investors

A Case Study of Eastman Kodak How the Bankruptcy of One of America’s Oldest Blue Chip Stocks Would Have Turned Out for Long-Term Investors One year ago, Kodak declared bankruptcy after more than 130 years in business as a leading blue chip firm that gushed profits for its owners.  I wrote Kodak’s demise at the…

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Morningstar Updates It Berkshire Hathaway Class B Intrinsic Value Estimate

Morningstar Is Getting Closer On Its Intrinsic Value Figure for Berkshire Hathaway

It’s been 1-2 years since we talked about the intrinsic value of Berkshire Hathaway.  The last time I publicly commented in any meaningful way was to say that I thought Morningstar was wrong in its model.  This put me in the interesting position that rarely happens: I thought intrinsic value was higher than the analysts who were publicly writing about it.  Normally, I’m the one exclaiming that the estimates and variables used were too rosy.

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Quincy Florida - The Town of Secret Coca-Cola Millionaires

How Quincy, Florida Became a Town of Secret Coca-Cola Millionaires

In the 1920s and 1930s, a banker named Pat Munroe in the small town of Quincy, Florida noticed that even during the depths of the Great Depression, otherwise impoverished people would spend their last nickel to buy a glass of Coca-Cola.  With good returns on capital, and a once-in-a-century valuation so low that the business was trading for less than the cash in the bank, “Mr. Pat”, as he was called, encouraged everyone he knew to buy an ownership stake in the firm.  He would even underwrite bank loans, backed by Coca-Cola stock, for his responsible depositors to encourage people to acquire equity.

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Did Leona Helmsley Have Narcissistic Personality Disorder? I have no idea. There can be little doubt that she displayed some traits that were narcissistic.

A Study In Paradox: Leona Helmsley Illustrates That Destructive Traits Such as Narcissism Can Sometimes Lead to Fantastic Life Results

This is the second in a three-part post on narcissism; the topic du jour for our mental model study. We’ve been talking about narcissism for the past few days and one interesting thread that comes up throughout history is that narcissism, despite being horribly destructive and disruptive, can work, in rare situations, in the favor…

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Jamaican Rum and Caramel Cooking Banana Slices

Gordon Ramsay’s Scotch Pancakes with Caramelized Bananas

The front page of Reddit yesterday had a Gordon Ramsay recipe for Scotch Pancakes with Caramelized Banana.  For my fellow Americans, that translates into a dessert made of buttermilk pancakes drizzled in caramelized bananas that had been flambéed in a dark Jamaican rum topped with vanilla bean ice cream.   [mainbodyad]Any time you combine fire with a drink made famous by…

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Two Loaves of Rosemary Garlic Lavender from Recipe with Olive Oil

Rosemary, Garlic, and Lavender No-Knead Bread Recipe

After working through several types of bread recipes,  I am going to share with you one of the more popular, easier dinner breads we’ve made.  It comes from an adaptation of a famous no-knead recipe published in The New York Times.  In our tests, it performed very well and requires almost no effort, a handful of ingredients, and can serve as a very easy introduction if you’ve never baked a loaf of bread in your life.  It should not be intimidating for you, even if you haven’t turned on an oven in years.

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America Forgot Many Valuable Lessons When It Moved from the Farms to the Cities

A few hours ago, I finished writing a piece about global investing through a Roth IRA, which was published to the About.com network.  It got into some of the complexities of foreign investing, including the differences between share classes domiciled in various markets and currency translations.  As I was thinking about whether there was anything…

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Why Are People Surprised That Savings Bonds Beat Stocks Over the Past 12+ Years?

I’ve noticed an array of articles exclaiming that savings bonds, including both the Series EE savings bonds and the Series I savings bonds, beat stocks over the past ten or fifteen years.  Nearly every time I make my way into one of these essays or news stories, I just shake my head because the surprise displayed by the men and women penning these pieces indicate a complete lack of competence.  Those of you who have any experience managing money or with history immediately know my objective: No asset class, per se, is sacrosanct.  What matters is the price you pay for the asset relative to how much underlying cash it generates.

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Warren Farrell University of Toronto Protest

The Warren Farrell Protest at the University of Toronto: An Example of How Not to Behave If You Want To Be Successful In Life

On this site, we strive to practice the philosophy of John Stuart Mill, who would eagerly read every side of an argument because he wanted to se that “no scattered particles of important truth are buried and lost in the ruins of exploded error”.  That means we each have a fundamental, moral duty to openly…

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Focus on Total Return When Managing Your Portfolio

Focus on Total Return to Manage Your Investments Better

In finance, there is a concept known as total return.  The goal of total return is simple: To tell you what the overall results were to you, the owner, during a time period you held an asset.  This includes any fluctuations in the liquidation value of the asset itself, profits produced by the asset and distributed to you as dividends, spin-offs from activity split off from the asset, etc.

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Mental Model by Joshua Kennon

Mental Model: Mere Exposure Effect or the Familiarity Principle

Mental Model: Mere Exposure Effect or the Familiarity Principle The mere exposure effect, also known as the familiarity principle, describes a phenomenon that causes humans to rate or feel positively about things to which they are frequently and consistently exposed, including other people.  All else equal, you will buy products, invest in stocks, frequent establishments,…

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Papa Johns Franchise

Peyton Manning Borrows the Jamal Mashburn and Ulysses Bridgeman, Jr Investing Playbook By Investing in Papa Johns Franchises

Feel good story for the day: Peyton Manning, the 36 year old legendary quarterback, bought 21 Papa John franchises in the Denver area a couple of weeks ago, according to Bloomberg.  It looks like he is borrowing from the Jamal Mashburn and Ulysses Bridgeman, Jr. playbook.  Those two former sports stars took their paychecks and, as…

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Example of Cartogram

Remember To Use Cartograms for Business, Political, and Socioeconomic Data Analysis

With less than 10 hours to go before the polls open for the 2012 Presidential election, I thought it would be a good time to remind you about the importance of using cartograms to study business, political, and socioeconomic data.  Cartograms should be a constant tool in your intellectual toolbox that you utilize to overcome…

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Net Worth and Income By Education Level

Household Income, Net Worth, and Unemployment Rates By Education Level

The most recent statistics on household income, net worth, and unemployment, sorted by education level, are really interesting.  Following our discussion about the splits that have emerged along geographic fault lines in the electoral body, I thought it would be important to highlight the economic differences and how enormous the income inequality is for the…

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Disney Buys Lucasfilms Darth Vader and Mickey Mouse

The Walt Disney Company Adds Lucasfilm To Its Stable of Investments for $4.5 Billion

As you probably know by now, The Walt Disney Company has acquired Lucasfilm Ltd. in a $4.5 billion deal.  The studio owns franchises such as Star Wars and Indiana Jones.  Half will be paid in cash and the other half will be paid in newly minted shares of the company, diluting the existing owners.  However, the terms are so favorable that, frankly, it looks like George Lucas took a much lower price than he could have gotten elsewhere solely to have Disney protect the brand, given the latter’s reputation and massive resources.  Not even including the cash that Lucasfilm itself produces, Disney could pay for the acquisition in less than 6.7 months using the money generated by its vast empire.

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Coca-Cola Pepsi and Dr Pepper Have 88 Percent Combined Market Share

You Can Get Rich With Just One or Two Big Ideas In Your Lifetime

I often get messages from some of you expressing a desire to invest but not wanting to sign up for a life buried in balance sheets or income statements.  The good news: In investing, you can do extremely well if you have a few good, big ideas in your lifetime.  You don’t have to become a master of everything.  You just need to understand what you are doing, focus on it with the persistence of a pit bull, and be patient during the periods when there is nothing attractive to do, content to sit on cash.  There is no need to master every industry, or spend your evenings pouring over the disclosure documents of a pharmaceutical giant to make money.  It isn’t necessary.

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How to Remain Detached from the Stock Market and Treat Your Investments Like Private Businesses Header

How to Remain Detached from the Stock Market and Treat Your Investments Like Private Businesses

How to Remain Detached from the Stock Market and Treat Your Investments Like Private Businesses When I was much younger, I kept seeing Benjamin Graham’s famous allegory called Mr. Market mentioned by great economists, investors, and financial historians.  I bought a copy of The Intelligent Investor to figure out why everyone was so enthralled with a book…

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Education and Affluence

New Study Finds The Ability to Delay Gratification Correlates with the Reliability of Adults in a Child’s Life

Whether or not a person is capable of waiting for rewards, and thus succeeding in things that require long-term planning such as investing, money management, completing higher education, and sticking with difficult projects for the promise of richer payouts, may not be due to willpower alone.  In a new study, researchers Celeste Kidd, Holly Palmeri,…

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Staying Inside and Playing Video Games During October

The Best Kind of October Afternoon: Reading Annual Reports By the Fireplace and Playing Video Games for Hours

Early morning, a giant package arrived from FedEx containing the historical annual reports of a company I’ve been studying for the past couple of weeks.  I’ve built positions in most of the accounts under my purview, including my household portfolios.  Even though I have read the financials in PDF format, I want to go back through the hardcopy, line-by-line, and make sure there is nothing I am missing.

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Pepper Turkey and Cranberry Panini with Smoked Gouda Cheese

I’ve Made the Perfect Fall Sandwich – Black Pepper Turkey Panini on Wheat Bread with Cranberry Chutney and Smoked Apple Gouda Cheese

The October panini study continues and I hit upon a huge winner today!  It is like autumn distilled into a sandwich.  It involves the same eight wheat bread I used yesterday in the blue cheese and plain turkey version, only the meat is a black pepper-edged smoked turkey, with slices of apple-smoked gouda cheese, mayonaise, cranberry chutney, arugula, and a drizzle of olive oil.  It would be perfect if you have a cup of spiced cider or apple slices on the side.  

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Starbucks IPO

A 20-Year Case Study of an Investment in the Starbucks IPO

I’ve done case studies in the past of slower growing, highly profitable businesses such as Clorox, Nestlé, Coca-Cola, Procter & Gamble, and Colgate-Palmolive among them.  We’ve also discussed case studies of some initial public offerings, such as an investment in Tiffany & Company twenty-five years ago.  I thought it might be interesting to look at another…

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Nestle Headquarters Stock Investors from Google Earth

A Case Study of Nestlé SA Shareholder Returns With and Without Dividends Reinvested

Personally, my household owns shares of Nestlé SA, the Swiss-based chocolate, water, coffee, condensed milk, packaged food, and nutrition giant.  I’ve never been able to get as much of it as I want due to valuation1, but whenever the stock is within striking distance of my conservatively estimated calculation of intrinsic value, I write a…

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Gold Coins and Gold Bullion Investments

Investing In Productive Assets Always Beats Gold and Gold Always Beats Fiat Currency In the Long-Run

It is a fairly regular occurrence for me to get messages from individuals who advocate a portfolio consisting entirely, or almost entirely, of gold, held for the long-term.  They usually follow the same pattern, are from the same demographic, and come through the contact form.  This morning, there was a comment left about gold and I decided…

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Acqua di Parma Fragrances and Colognes

Acqua di Parma Is a Good Case Study of Reviving an Old Brand to Create a Story that Resonates with Consumers

After the Guerlain fragrance purchases earlier, I ended up buying several new bottles of Acqua di Parma, including the Colonia, Colonia Intensa, and Blu Mediterraneo Bergamotto di Calabria in the Italy Pavilion of Epcot at Walt Disney World.  Again, I realized that most of the people who were in the store with me probably didn’t…

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Guerlain Is Another Example of a Successful Family Business Lasting 150+ Years Before Being Sold

If Creed is the king of French perfume houses, Geurlain is the Queen.  It is one of the oldest perfume companies in the world, and for 166 years between 1828 and 1994, the business was in the hands of the Guerlain family.   In Walt Disney World’s Epcot French pavilion, I visited the Guerlain store, which…

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Plain Tonga Toast from Kona Kafe Polynesian Resort Walt Disney World

The Disney Tonga Toast at the Polynesian Resort’s Kona Cafe Made Me Realize I Need to Learn Several Fruit Confit Recipes

Several people had told me about the supposedly legendary Disney Tonga Toast at the Kona Cafe in the Polynesian Resort at Walt Disney World.  It is like a loaf of French toast, stuffed with bananas, sugar, and cinnamon, then accented with maple syrup and a strawberry confit.  Trying it, I will say it was delicious,…

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Annual Walt Disney World Vacation in Orlando Florida 2012

I Am in Orlando, Florida for the 2012 Annual Walt Disney World Vacation

From September 2nd through September 9th, I will be attending my family and friends’ annual Walt Disney World vacation in Orlando, Florida.  This time around, our group included eleven people and we all stayed at the Animal Kingdom Deluxe Resort and Villa.  Personally, I prefer The Grand Floridian of all the on-site properties because of the transportation access…

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Hammond Candies Factory Tour Making Candy Canes

Behind the Scenes Hammond’s Candies Factory Tour in Denver

Later today, my grandmother is meeting up with her nephew (his grandmother was my great-grandmother), but before that happens, we are scheduled for the Hammond’s Candies Factory tour in Denver.  Hammond’s is one of the biggest old-fashioned hard candy manufacturers on the planet.  Personally, I’m not really much of a hard candy guy – I’d…

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1924 Income Tax Payers

The Top 14 Federal Income Tax Payers of 1924

In Wealth and Democracy: A Political History of the American Rich, Kevin Phillips looks at the biggest Federal income tax payers shortly after the income tax was introduced.   Taxpayer Taxes in 1924 Dollars Taxes in 2012 Dollars John D. Rockefeller (oil) $6,278,000 $84,249,292 Henry Ford (autos) $2,609,000 $35,012,170 Edsel Ford (autos) $2,158,000 $28,959,856 Andrew Mellon…

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