As a follow-up on my last post which you can read here, I wanted to discuss the important difference between a company and a stock when investing. The old adage of “invest in what you know and buy” is very general and only goes so far. I would also say that it’s not nearly as…
Watch out for Accounting Gimmicks
It was announced yesterday that Microsoft is buying LinkedIn for $26.2 billion. A lot of people are questioning the deal but I think Andrew Ross Sorkin hit the nail on the head regarding LinkedIn’s decision to sell – to get out of the accounting hole they were digging with massive amounts of stock based compensation and…
Why Investing in Food Makes Sense for Retirees
I’ve been thinking a lot lately about the types of investments that offer the best risk adjusted returns in this environment. One of the toughest things to evaluate today, and perhaps the most important when investing in stocks, is the sustainability of a company’s business model, cash flows and profits. Technology continues to change things…
Say Hello to Your New “Synthetic” Corporate Bonds
Investors have been “starved” for yield for years now and unfortunately interest rates aren’t going up anytime soon. When looking at individual bonds, investors get to choose between high quality bonds at paltry yields or junk-rated bonds that look attractive but come with a slew of bad risks that often aren’t understood or appropriate for…
Which is More Important: A Great Business Model or Good Management?
The answer is management, plain and simple. When you invest in the stock of a company, you entrust management to be the steward of your capital and to make smart, value enhancing business decisions. It doesn’t matter how great a product is or what competitive advantages a company may have, if management makes poor decisions…
Creative Destruction
Creative Destruction is effect of technological innovation, when something new kills the older incumbent. We’ve gone from horse and buggy to railroads to cars, etc. A new innovation dramatically changes, if not outright kills, the old way of doing things. It’s constantly occurring but usually happens so slowly that we don’t notice it unless we…
Earnings Updates
Once again, I’ve been very pleased with the earnings and outlook reported by the majority of the companies we own. A few of our core holdings held their conference calls this morning so I wanted to provide a quick update. CF Industries (CF) & Terra Nitrogen (TNH) CF is our largest “Growth” holding and TNH…
Chart(s) of the Week: Demographics, Health Trends & the Economy
Here are some recent charts from Bloomberg on demographics and health trends. Following the demographics of various countries is one of the best ways to get a sense of long-term trends. The first shows the number of children under age 5 vs people age 65 and above. For the first time ever, seniors are about…