History shows us that longterm investment in capital markets leads to excellent gains. With that in mind an inumerable amount of vehicles have arisen to help people to get a piece of the pie. With the increase in retirement accounts over the past quarter century there is more and more money being managed by the "professionals". The way this money gets into their grasps disgusts me.
If you have a retirement account through your work you have probably noticed that there is quite a discrepancy between the number of investment options available when you open the finance section as compared to the investment options offered by your company. In my 403b at work I have less than 2 dozen funds from which I can choose to place my retirement funds.* If it weren't for the company match I would forgo the whole thing. Contrary to popular belief I do not believe that tax savings is the do all end all for my future.
I currently have all my 403b in two funds. I have the majority of that money in the Vanguard 500 index fund (very different than an actively managed fund) and the rest is in an international fund for the sheer sake of diversification, though I may liquidate that fund in time.
At least my account offers the Vanguard fund otherwise I'd be throwing darts. I don't have the faintest idea how to evaluate a mutual fund. Mutual funds own hundreds to thousands of individual stocks. They all have their stated goals, but in the end it all boils down to maximizing profits while maintaining principle. How do I compare one to another? Each fund touts (or hides as it were) it's return over the past 1, 5, 10, and 15 years for those who have been around that long, but they all seem to be written on paper with the watermark: "Past performance does not guarantee future results". Why would I put so much money into a fund that is managed by a person or persons whose methods of investment are foreign to me. If I want to invest in a man I'll be putting my money in Berkshire (in fact I do have a significant portion of my non-tax-deferred account in Berkshire).
For the time being I will stick with my Vanguard non-managed retirement account and put the rest of my money in my Zecco account where I can buy Nike and Harley (currently trading at 5 times earnings) as I please after evaluating the balance sheet, earnings and current price. I may even read up on the CEO and majority stock owners if it fits in my schedule.
*I do have a personal choice options that apparently allows me to buy stocks and funds not offered in my plan, but as of this writing I have not been able to talk with anyone who can elaborate on the fees and procedures to do so.
Tuesday, March 24, 2009
Friday, March 6, 2009
The case for K-Swiss
K-Swiss is a shoe/apparel company that originally made only tennis shoes. They have recently begun to branch out to other types athletic shoes and as a result of the current market buying the stock is almost like stealing.
K-Swiss doesn't have the brand appeal of Nike for sure, but it does have a loyal costumer base. They make a good quality product and thus far have been able to maintain a good profit margin and increase earnings fairly regularly. That alone does not make the stock a good buy, but without it I would be hesitant to purchase even considering the numbers that follow.
K-Swiss has current assets of $334 million of which $209 million is in cash. Current liabilities total $53 million. They have almost no long term debt. That in itself is enough to get me somewhat excited about the company. Because of their debt to equity ratio they are well positioned to weather the storm of our current economy. Looking at last quarters numbers it is apparent that they used quite a bit of cash to do just that. Like many other companies they lost money in the last quarter.
K-Swiss has 34.86 million shares outstanding. Assets minus current liabilities equals $281 million. Cash minus current liabilities equals $156 million. Those numbers divided by shares outstanding gives you $8.06, and $4.48 per share in assets or cash alone respectively. So when you buy a share of K-Swiss you are buying between $4 and $8 of cash depending on how confident you are in the companie's ability to liquidate current inventory and collect on accounts receivable. That's nothing special until you realize that K-Swiss closed at $7.09 per share yesterday. Now the whole picture becomes a bit more clear. At the worst you are paying $2.61 per share (7.09-4.48) for a company that had increased earnings at a rate of 26% per year for the 8 years previous to 2007 (the earnings have decreased for the past two years, but the company hasn't shown a loss until this past quarter). In 2006 K-Swiss had earnings of $2.17 per share and I have no reason to believe that they won't get back there when the economy turns around. If I believe that K-Swiss could easily liquidate their inventory and collect on their accounts payable in the amount shown on the balance sheet then I actually make $0.97 per share (7.09-8.06) as soon as I purchase the stock and the actual business is just icing on the cake.
Could K-Swiss bottom out and go under? Are their numbers cooked like Enron? The answers to these questions could be yes which is why the decision to buy isn't quite as straight forward as I described in the last paragraph, but for me it's a no brainer (though the next little while could make me sick if I watch the ticker each day).
K-Swiss doesn't have the brand appeal of Nike for sure, but it does have a loyal costumer base. They make a good quality product and thus far have been able to maintain a good profit margin and increase earnings fairly regularly. That alone does not make the stock a good buy, but without it I would be hesitant to purchase even considering the numbers that follow.
K-Swiss has current assets of $334 million of which $209 million is in cash. Current liabilities total $53 million. They have almost no long term debt. That in itself is enough to get me somewhat excited about the company. Because of their debt to equity ratio they are well positioned to weather the storm of our current economy. Looking at last quarters numbers it is apparent that they used quite a bit of cash to do just that. Like many other companies they lost money in the last quarter.
K-Swiss has 34.86 million shares outstanding. Assets minus current liabilities equals $281 million. Cash minus current liabilities equals $156 million. Those numbers divided by shares outstanding gives you $8.06, and $4.48 per share in assets or cash alone respectively. So when you buy a share of K-Swiss you are buying between $4 and $8 of cash depending on how confident you are in the companie's ability to liquidate current inventory and collect on accounts receivable. That's nothing special until you realize that K-Swiss closed at $7.09 per share yesterday. Now the whole picture becomes a bit more clear. At the worst you are paying $2.61 per share (7.09-4.48) for a company that had increased earnings at a rate of 26% per year for the 8 years previous to 2007 (the earnings have decreased for the past two years, but the company hasn't shown a loss until this past quarter). In 2006 K-Swiss had earnings of $2.17 per share and I have no reason to believe that they won't get back there when the economy turns around. If I believe that K-Swiss could easily liquidate their inventory and collect on their accounts payable in the amount shown on the balance sheet then I actually make $0.97 per share (7.09-8.06) as soon as I purchase the stock and the actual business is just icing on the cake.
Could K-Swiss bottom out and go under? Are their numbers cooked like Enron? The answers to these questions could be yes which is why the decision to buy isn't quite as straight forward as I described in the last paragraph, but for me it's a no brainer (though the next little while could make me sick if I watch the ticker each day).
Wednesday, March 4, 2009
What to do with this recession?
Like most people I have strong emotions concerning investments. At times those emotions get in the way of sound financial decisions, but lately I have noticed that I am wired a bit differently than others I have spoken with.
Anyone who knows me or has read previous posts may have noticed that I am not exactly fearful of the current market. I have even been known to sound jubilant from time to time over the past 8 months. Much of that comes from the fact that the only significant money I have in the market has been invested in the past 8 months. I might feel differently had I owned bank stock that was worth $250,000 just 18 months ago and is now down to $25,000. I do have a little over $1,000 of that same stock that I have watched fall from $10,000. It is also true that I have a well-paying job in a very secure field. With those things in mind it isn't too hard to see why I don't get down when I see the Dow fall to record lows each day.
Many people have cut back on their purchases with the dwindling economy. I think a lot of sacrifice has been made across the board and I am no exception to that, but my thinking on the matter is different. I have not cut back because I have to (I have more income now than at any previous time in my life) but because I want to. I recently got a sizeable tax rebate (thank you Mr President) and initially I thought about using that money to buy a truck. I have always wanted a truck and they are selling for cheap now. I didn't buy a truck I put all that money in stocks (Microsoft, Berkshire, Apple, Nike and Wells Fargo). I still want a truck but when the market is as low as it is now I just can't afford to pass up these opportunities.
Eventually we will come out of this recession. When we do there will be a lot of Americans that are very scared of the stock market. I hope we get back to some basic values of thrift and saving as a nation and get rid of some of our debt. Whether or not that happens, now is the time to position yourself for the future. There has never been a time in my life that has presented more opportunities for those with some money to invest. As I've said before I don't know if the market has hit a bottom or when it will, but I do believe that enormous gains will be made by those who are investing for the long term today, however, if you can't handle watching another 50% drop in money you invest today you might want to close your eyes.
Anyone who knows me or has read previous posts may have noticed that I am not exactly fearful of the current market. I have even been known to sound jubilant from time to time over the past 8 months. Much of that comes from the fact that the only significant money I have in the market has been invested in the past 8 months. I might feel differently had I owned bank stock that was worth $250,000 just 18 months ago and is now down to $25,000. I do have a little over $1,000 of that same stock that I have watched fall from $10,000. It is also true that I have a well-paying job in a very secure field. With those things in mind it isn't too hard to see why I don't get down when I see the Dow fall to record lows each day.
Many people have cut back on their purchases with the dwindling economy. I think a lot of sacrifice has been made across the board and I am no exception to that, but my thinking on the matter is different. I have not cut back because I have to (I have more income now than at any previous time in my life) but because I want to. I recently got a sizeable tax rebate (thank you Mr President) and initially I thought about using that money to buy a truck. I have always wanted a truck and they are selling for cheap now. I didn't buy a truck I put all that money in stocks (Microsoft, Berkshire, Apple, Nike and Wells Fargo). I still want a truck but when the market is as low as it is now I just can't afford to pass up these opportunities.
Eventually we will come out of this recession. When we do there will be a lot of Americans that are very scared of the stock market. I hope we get back to some basic values of thrift and saving as a nation and get rid of some of our debt. Whether or not that happens, now is the time to position yourself for the future. There has never been a time in my life that has presented more opportunities for those with some money to invest. As I've said before I don't know if the market has hit a bottom or when it will, but I do believe that enormous gains will be made by those who are investing for the long term today, however, if you can't handle watching another 50% drop in money you invest today you might want to close your eyes.
Tuesday, January 27, 2009
Invest now!
I've written about my enthusiasm in our current economy before, but never have I had such a desire to put my money in the market. There are deals all over the board. Hundreds of good solid companies are being slammed by the market and they are selling at record levels. The return on the companies is going to be through the roof 10, 20 and 30 years from now.
If you don't like dabbling in individual stock put your money in an index fund, but do it now. Unless you are trying to get out from under credit card debt you should be putting any available money you can into the market. The S&P 500 peaked out just under 1600 in 2007. It currently sits at 850. I'm not saying it won't fall further. I can't predict the bottom and if anyone says they can you need to steer clear of that person.
If you were in the market for a 50 inch LCD that was $1600 and got slashed to $850 would you wait to see if it goes lower? I wouldn't. I would buy the thing and enjoy the Super Bowl on Sunday (speaking of which the best time to buy a TV is the week following the Super Bowl because of all the discounts).
If you believe that American business is out of luck and we are going to falter as a country and as an economy then by all means buy some land, build a cabin, dig a well and go be happy, but if you are like me and feel that the economy will rebound sometime and things will be business as usual in the next 10 years then get some money in the market.
Personally I think Microsoft is a great buy right now. The announced layoffs hammered the price of the stock, but that just shows me that the company is in the business of making money. Harsh as it may sound I'm not looking for a feel-good company to put my money in. I want a company that can make the right decisions when it needs to. Microsoft is suffering because the public isn't buying new computers or new software, but do you think that will last? The economy will rebound and I'm betting that when it does a lot of people will be upgrading their computers. When that time comes Microsoft will shoot up again. That's a boat I want to be on.
I also think there are some good banks out there that are going to come out of this recession like champs. The banking industry is getting hammered and because of it some very good businesses are selling for cheap. Check out Wells Fargo.
If you don't like dabbling in individual stock put your money in an index fund, but do it now. Unless you are trying to get out from under credit card debt you should be putting any available money you can into the market. The S&P 500 peaked out just under 1600 in 2007. It currently sits at 850. I'm not saying it won't fall further. I can't predict the bottom and if anyone says they can you need to steer clear of that person.
If you were in the market for a 50 inch LCD that was $1600 and got slashed to $850 would you wait to see if it goes lower? I wouldn't. I would buy the thing and enjoy the Super Bowl on Sunday (speaking of which the best time to buy a TV is the week following the Super Bowl because of all the discounts).
If you believe that American business is out of luck and we are going to falter as a country and as an economy then by all means buy some land, build a cabin, dig a well and go be happy, but if you are like me and feel that the economy will rebound sometime and things will be business as usual in the next 10 years then get some money in the market.
Personally I think Microsoft is a great buy right now. The announced layoffs hammered the price of the stock, but that just shows me that the company is in the business of making money. Harsh as it may sound I'm not looking for a feel-good company to put my money in. I want a company that can make the right decisions when it needs to. Microsoft is suffering because the public isn't buying new computers or new software, but do you think that will last? The economy will rebound and I'm betting that when it does a lot of people will be upgrading their computers. When that time comes Microsoft will shoot up again. That's a boat I want to be on.
I also think there are some good banks out there that are going to come out of this recession like champs. The banking industry is getting hammered and because of it some very good businesses are selling for cheap. Check out Wells Fargo.
Sunday, January 18, 2009
Inauguration: A sign of things to come?
As we are now in the midst of the worst economic downtrun of my lifetime many are looking to the highest office in the land to make the policy changes to bring us out of this recession. Yet as we begin this historic term we are asked to swallow an inauguration party with a bill of $140 million.
I'm not about to say this isn't a moment that should be celebrated. Barack Obama being sworn in is a wonderful moment for all Americans not just African Americans. Maybe we need this party as Americans. Maybe we need to splurge for a weekend during these hard times. Maybe it's important to let your hair down every once in a while. Or maybe our president elect should have said "hey we've got to tighten our belts as a country" and start with his own party.
I, for one, hope this is just a splurge for a momentous occasion and not a sign of fiscal irresponsibility for this administration, an administration for which I voted and fully support. Washington resembles Hollywood more and more each day and I believe this blatant disregard for taxpayer funds is just another example of the disconnect between the powers that be and the powers that make them be.
Not even president yet and the man has already disappointed me.
I'm not about to say this isn't a moment that should be celebrated. Barack Obama being sworn in is a wonderful moment for all Americans not just African Americans. Maybe we need this party as Americans. Maybe we need to splurge for a weekend during these hard times. Maybe it's important to let your hair down every once in a while. Or maybe our president elect should have said "hey we've got to tighten our belts as a country" and start with his own party.
I, for one, hope this is just a splurge for a momentous occasion and not a sign of fiscal irresponsibility for this administration, an administration for which I voted and fully support. Washington resembles Hollywood more and more each day and I believe this blatant disregard for taxpayer funds is just another example of the disconnect between the powers that be and the powers that make them be.
Not even president yet and the man has already disappointed me.
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