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Archives for January 2017

Portfolio Strategy: When Good Companies Make for Poor Investments

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Good companies don’t always make good investments. If you are a regular reader of this site you know we have written that often. Coca-Cola is a great business, but if you would have purchased it at year-end 1999, ten years later you would have been looking at an average annual return of about 2%. Over the course of that ten-year period, Coke had an average return on capital of about 21% and its earnings tripled. Why did the stock of one of the world’s great companies perform so poorly despite the impressive financial performance? The 45X earnings that investors paid to buy Coke shares … [Read more...]

Can a New Border Tax Protect America’s Place In the World?

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The Wall Street Journal outlines President Trump’s plan for reducing the trade deficit and boldly slashing income tax rates: The Trump administration took a step toward a House Republican tax plan Thursday when it tentatively endorsed a proposal to tax U.S. imports and exempt exports from taxation, an idea known as “border adjustment.” House Republicans are banking on the idea to help pay for deep cuts in corporate and individual income-tax rates. “This president is looking at a very bold tax reform approach,” Rep. Kevin Brady (R., Texas) told Fox News. “Our competitors are already … [Read more...]

A Father and Son Team for the Ages

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Here’s an excellent article in today’s Boston Globe about the unique bond between the New England Patriot’s coach Bill Belichick and his late father Steve, a legendary coach at the U.S. Naval Academy. ANNAPOLIS, Md. — The seemingly inexplicable roots of an unparalleled football mind become a bit less unfathomable on the third floor of Ricketts Hall at the Naval Academy. There, in a lounge by the reception area for Navy’s football program that is filled with mementos of a storied history, shelves of books protected by locked glass doors line two walls on either side of large flat-screen … [Read more...]

Brokers Happy to Avoid Looming New Rules

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UBS and other brokers are cheering the idea that the Trump administration may delay or rescind new rules that would have forced the banks to act as fiduciaries for the retirement accounts of their clients. Big brokerages are in the businesses of distributing securities, not advising clients on what's best for them. If you are allowing a non-fiduciary to guide your investments, you should understand that they have no legal obligation to have your best interests in mind. If you want conflict-of-interest free guidance, find an advisor such as Richard C. Young & Co., Ltd. that, by law, must … [Read more...]

Is this the White Knight for America’s Dying Malls?

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American malls have been bruised and battered by online retailers. The big-box department stores that were once of the anchor of the American shopping mall look like they are on their way out. Here, MarketWatch reports on a new concept that may replace department stores as the anchors of malls. As department stores struggle, a new type of tenant may take their place: food halls. “Food will be an anchor tenant for many major real-estate developments in this country,” said Damian Mogavero, a culinary industry insider who spoke to MarketWatch ahead of the publication of his book “The … [Read more...]

China’s Latest Attempt to Prevent a Pummeling of the Yuan

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China is the world’s second largest economy and a vital player on the global stage. An economic recession or financial crash in China would be felt around the world. Investors not paying at least some attention to China are not properly managing risk in today’s globalized financial markets. At Young Research, we have been following the slow, bubbly capital exodus from China. China’s foreign currency reserves are down over $1 Trillion over the last 17 months. Last year after allowing the yuan to depreciate to almost 7 per dollar, China put the brakes on further depreciation. That was paid … [Read more...]

What Dow 20,000 Means for Nasdaq Investors

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Investors pay a lot of money to sound good at cocktail parties. Owning growth companies, often found in the NASDAQ Index, sounds exciting, cutting edge, and like a can’t miss investment. But good ideas often make for terrible investments, whereas good “values” make for great ones. That’s why you should always consider the value you’re getting for any stock you purchase. An easy way to do that is to evaluate a stock's dividend and dividend increases over an extended amount of time. A simple comparison of how this dividend-centric approach has worked over the last 17 1/2 years is to compare … [Read more...]

Wait Till You Read What GE and the Celtics Are Up To

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GE will be partnering with the Boston Celtics to provide a full suite of analytical and technological support to the team. BOSTON, January 25, 2017 — The Boston Celtics and GE today announced a multi-year partnership in which the world’s leading digital industrial company will become the team’s exclusive Data and Analytics Partner. GE, which moved its global headquarters to Boston in 2016, will receive a number of marketing assets, including the first jersey patch partnership in the team’s history, beginning in the 2017-18 season. A key component of the relationship will center around GE’s … [Read more...]

There Will Be 100 Million EVs In the World by 2035

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The complete energy forecast is laid out here by BP: The energy transition underway is the main story in this year's Outlook. Energy demand is expected to increase by around 30% by 2035 as global prosperity rises, and we are seeing the shift in the fuel mix continuing towards lower carbon fuels, with renewables the fastest growing source of energy at 7.1% a year. Gas is the fastest growing fossil fuel at 1.6% a year, while oil’s growth will continue at 0.7% a year, although its pace of growth is expected to slow gradually. Coal’s annual growth declines sharply down to 0.2% a year compared … [Read more...]

What Dow 20,000 Means to Me

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Yesterday, the Dow hit 20,000 for the first time. I remember vividly when the index hit 10,000 back in 1999 (Chart 1 below). Dow 20,000 took 17 1/2 years—a 4.2% compounded annual return, not including dividends. And that’s the key—not including dividends. Because for those of us that have been dividend-centric investors, the road from 10,000 to 20,000 has been a whole lot smoother. In fact, while the index has returned 101% from March 29, 1999 when it first hit 10,000 in price terms, when dividends are included, the total return becomes 205% (Chart 2 below). In other words, more than half of … [Read more...]