Investment management
The investment journey
In the last 12 months our family’s retirement savings yielded a total return of 25.07%. This included the return on stocks, bonds and a cash savings account in toto combined. This compares with the total return on the S&P 500 of 15.88% and the total return of 25.86% on the S&P/TSX COMPOSITE INDEX (our main Canadian index). This brings the 52 year (since end 1972) total compounded return on our retirement savings to 13.3%, compared with the total compounded return, with dividends reinvested, over the same period on the S&P 500, of 10.85%. We rebalanced back to a roughly 50/50 U.S./Canada stock split in April after the U.S. side got to about 66% through outperformance. To do this we added two new Canadian stocks in April, just after “Liberation Day” and several months of tariff growling, when the market offered up wonderful companies at prices well below fair value. They were Bombardier Recreational Products (DOO) and Shopify (SHOP). See my post How I invest my money
We are off in Europe. The pic was taken today in the Mecklenburg Lake District north of Berlin. I won’t be doing much new writing in the next couple of months. Not to worry. There’s lots to read.
Check out this curated list of great posts to read.
Try picking one or two from the lists below as you have time.
The Age of Intangibles
The single greatest misapprehension I’ve seen by common stock investors in recent years, including many professional money managers, is to misunderstand the impact of company investment in intangibles of lasting value.
The world has changed. The biggest shift in the world of business in the last forty years has been the swing in company capital investment away from tangible assets and towards intangible assets. This has had a major impact on metrics such as earnings, price/earnings, book value of equity, ROC, ROE, CAPE and several others.
In writing this I want to make clear that valuations still matter. In fact, they are critical at a time when old rules of thumb like P/E and ROIC are breaking down. The answer involves discounted cash flow (DCF) and Warren Buffett’s owner earnings.
Here are some posts that address the issue:
Value investing in the age of the Magnificent Seven, networks, intangibles, AI and all that
The emergence of a new model of capitalism
Stock valuation in an age of intangible assets
Financial strength – the debt equity ratio has serious shortcomings
How the stock market works
I differ with Cliff Asness about Risk Adjusted Returns
The investment process
How Warren Buffett was influenced by Philip Fisher
Dynamic asset allocation and the Equity Risk Premium
Common stock investing basics – true investing
So called value stocks typically have low ratios because of limited corporate opportunities. Investing in these stocks is not true investing as described by Warren Buffett.
The under-performance of value stocks explained
True investing is neither growth nor value
A common misperception about stocks
The majority of publicly traded U.S. stocks underperform Treasury bills. But that doesn’t mean you have to identify the next Magnificent Seven. The vast majority of wealth creation comes from a reasonably sized cohort of successful companies.
Tapping into the wealth created by stock market investing
Finding the right company to invest in
The tenets of companies Buffett invests in
Banks’ reported returns on tangible common equity are a con game
Making sense of free cash flow numbers
Buffett’s concept of economic goodwill vs accounting goodwill
We want great companies at bargain prices – Valuing the companies
The dangers and benefits of using Discounted Cash Flow analysis reports
The problem with analysts’ target prices
How to deal with uncertainty
Investment decision making in face of uncertainty
The stock market is closer to the Madness of Crowds than the Wisdom of Crowds
Does Wisdom of Crowds apply to earnings estimates, price targets, value estimates and stock prices?
The best performance is produced by a person and not by a committee
Buying and selling common stocks
In some ways the art of buying is easier than the art of selling. But both have to be done right.
Buying tactics for common stocks
19 Cardinal rules on selling stocks
Charts can lie through their teeth.
I would estimate that more than half of all charts we see in news, commentators and analysts’ reports about stocks and finance are fundamentally flawed and potentially seriously misleading.
Chart distortions that drive me crazy
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You can reach me by email at rodney@investingmotherlode.com
I’m also on Twitter @rodneylksmith
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Check out the Tags Index on the right side of the Home page that goes from ‘accounting goodwill’ to ‘wisdom of crowds’. This will give readers access to a host of useful topics.
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