Thursday, February 26, 2015

Top 5 Lifestyle Habits that make me a better investor

Good day dear readers,

First of all-- I want to quickly apologize for the hiatus on the blog. I've been working a whole lot lately (which is amazing) but I also don't want to neglect this space which I enjoy so very much. To my defense, I've also been researching and preparing tons of content for the blog. So, just know that being here sharing my knowledge as well as learning from other fellow investors is a very important part of my life. 

Today I'd like to take some time away from discussing specific stocks to talking about some habits I've been developing over the past several months which I feel have helped me tremendously. Not only in helping me feel great about myself (inside and out) but I feel they've also had a positive impact on how I approach investing and all the work that goes behind making an investment decision.

Here I share with you my Top Five Habits which I feel help me be a better investor:




1. Waking up early: Up until about six month ago, I never considered myself a morning person. I dreaded the idea of getting out of bed and would be so incredibly upset in the mornings. That has completely changed. Part of it probably has to do with the fact that I am doing what I love for a living. Hence, I wake up to my passion and not to a job that I dread commuting to. What an incredible feeling. 

Whether or not you are working on your "passion" waking up bright and early provides a clear mind as well as extra time to prepare ourselves for the day. I like to drink my coffee in peace and quiet and eat breakfast while reading the paper and then making a list of things I'd like to accomplish throughout the course of the day. Early for me is getting out of bed around 6:00 am or so (on most days). However, pick a time that works best for you. You may be thinking 'who has time for that'?! But if you make an effort to set aside 20-30 minutes for yourself each morning, you wont regret it. Just trust me and give it a try.

2. Reading & Listening- A lot: Ever since graduate school ended my business books have been replaced with more business books but this time I am reading more things of interest. I recall being a huge 'fiction' reader when I was a teenager but that has changed drastically as I am now constantly reading books about investing (obviously), self development, entrepreneurship, and motivational books. Not to mention I got myself a subscription to the Wall Street Journal which started back in January and I've been reading that as well (full review coming soon). 

Besides reading, I've also continued my 'habit' of listening to investing podcasts, which is something i've been doing for the last few years. If you follow me on Twitter, you may know my absolute favorite investing podcast which I listen to daily is Market Foolery. I also came across another one of their shows recently which is called Motley Fool Money. I feel that the shows do such an incredible job of explaining what is going on in the stock market in a simple/straight forward way without any 'fancy' and unnecessary terminology. They get straight to the point while keeping it entertaining. I have yet to find any other investing podcasts similar to the ones I listen to but if you have any recommendations, I would love to hear them (email me!).

Full disclosure: I interned at the Motley Fool this past summer but I have been listening to the podcast for nearly 3-4 years (way before I had the privilege of working there).

With all my reading and listening I feel like I am learning so much and absorbing so much information. Knowing about various topics allows me to analyze companies better and understand their mechanics- which in turn helps me in making better decisions of whether or not an industry or a particular product has potential for growth and whether is a 'buy', 'sell', or 'hold' as we say in the investing world. 

3. Working out & Eating Healthy: Let me let you in a little secret- besides the stock market another huge passion of mine is leading a healthy lifestyle. Dont get me wrong, I have a sweet tooth that needs to be watched and controlled and I have been known to sometimes spend too much time on the couch flipping through channels. 

However, over time I've come to understand the significance of keeping my body fit and how it has a tremendously positive effect in other aspects of my life. I have a routine that has been working excellent for me which consists of doing my cardio workouts in the morning hours and strength training in the evenings. I also make a conscious effort to drink tons of water and green tea throughout the day as well as make sure I am consuming nutritious, healthy {yet, delicious} meals and snacks. 

This approach has allowed me to have tons of more energy and a more clear and focused mind. When I was a teenager, I used to see working out and eating healthy as simply a way to 'look good'. Time has made me understand that the benefits of said habits go well above and beyond the physical. It is all connected ladies and gents. I encourage you to do the same. When you feel better, you do better. 

4. Continuous learning: Learning is an ongoing process, specially as an investor in a continuously changing world. Besides tons of reading (as noted above), I have been watching DVDs, online tutorials, enrolling myself in online courses about finance, and the list goes on. My two main goals for the years (when it comes to investing education) are to teach myself how to make money with options and to learn technical analysis. Not sure if both goals will be accomplished but I am putting action behind my objectives. If I can master at least one of the two I'll be a happy camper. It takes time and I am aware of it but I love learning and expanding my mind. So, more than a burden (as some people may see it) I see it as a joy, on a personal level. 

5. Keeping a positive attitude: The power of positive thinking goes beyond just being an optimist; it affects so many parts of our lives. I have a mentality of progress and growth and this is something that I apply to my investments as well. Every time my stocks go up in value I think to myself "I'm rich". While this may be a stretch of the imagination at the moment it still feels good to say it. As the saying goes: 'fake it till you make it'. And that's exactly what I am doing. I also make a conscious effort to remain positive and optimistic in other aspects of my life. Nothing is ever perfect but if we can find the silver lining in most things, it makes for a better quality of life. As cliche as this may sound: focusing on the positive has a far higher return on investment than focusing on the negative. And I truly believe this applies across the board for everyone out there reading this. 

Thanks for reading! 


Would love to hear about YOUR own personal lifestyle habits that make you a better investor, or simply a better person. Also, if you have any recommendations for podcasts, please share! Email me or comment below.

Cheers to profits,

Mabel

Saturday, February 7, 2015

Radio Shack: The End of an Era {how bankruptcies have shaped how I approach investing}

Although I've never been a shareholder of this company and much less a frequent customer by any means, it made me sad to hear that Radio Shack is filling bankruptcy. I then started to ask myself why I cared so much. Well, the main reasons is probably that I have very fond memories of visiting this store with my dad a whole lot when I was growing up. 



Growing up in the 1990s; Radio Shack was "the place to go" for cool gadgets, cables, house phones, electronics, random artifacts, pretty much anything up and coming could probably be found at this place. I remember my dad loved it. Places like Best Buy or Amazon were far in the future (or maybe not so popular or known) during the time when Radio Shack was "hot".

Something I have learned during the course of my life, specially as a business student in undergrad and graduate school is this:

The world of business is fierce and has no mercy. 
If companies cannot keep up they will get run over.
If your product is making money, no one cares about stealing ideas and running with them.

If you were born in the 80s, like I was (or long before) you probably witnessed many other great companies get disrupted, go bankrupt and/or become completely irrelevant at the blink of an eye. Blockbuster and Kodak are just two companies that come to mind-- companies that were once MAJOR within their industries, at the top of their game. I would conclude that a very small number of people saw the end of these companies coming. Sure, there are visionaries in this world that have the amazing capability of seeing disruptions in particular industries long before they even happen. However, many of us are often surprised and caught off guard. At least it feels that way. 

Now, with the Radio Shack situation, we cant say we didn't see this coming. As a matter of fact, they did try (maybe not hard enough?) to fight the fierce, aggressive, and merciless competition that comes with eCommerce. Perhaps had they not tried at all, Radio Shack would have been long gone several years ago. 

Is interesting to think that not too long ago going to a radio shack used to be the first thing that would pop in to peoples minds when thinking of purchasing electronics or components for any kind of project. Those days are long gone and the company has become an afterthought. Places like Walmart, Best buy, Amazon, or even local pharmacies (which seem to sell everything now-a-days) have taken the forefront in peoples minds when making those type of purchases. As the saying goes:



When I first started investing (about 7 years ago) and people would ask me how I choose the companies I invest in--- I would say that, as a long term investor, I would make most of my decisions by buying companies that had been around for "generations" and I didn't see going bankrupt anytime soon or never. I soon realized this strategy can be a little dangerous and is in fact flawed. Obviously, I have grown tremendously as an investor and the amount of years a company has been around is no longer a determining factor. 

Sure, I still follow that mentality in a way. However, today I am extra careful with this process. For instance, even if the company has been around for generations, one of the main factors I look in to is the industry in which that company operates and how said industry is evolving. If I see any signs of disruption or fierce competition of any kind, that's a red flag for me to dig deeper. 

For example, when I think of McDonald's (MCD), for instance, a company where I've own shares on and off for about 7 years; it makes me wonder whether they will be able to keep up with the disruption in this new generation of "health conscious" people. I believe their brand is still solid and strong and they are in fact part of the 'American trademark'. For instance, if you were to ask people around the world to name "american food" one of the first things that would come out of peoples mouths would be "hamburger" or "McDonald's". But, for how much longer? Maybe for another 20-30 years? Maybe another 10 years? Just something to think about.

Radio Shack was around for 94 years, Lehman brother was around for 165 years, Kodak build an incredible reputation for over 100 years before they became irrelevant due to competition and disruption by the digital world. Blockbuster led what felt like a monopoly in video entertainment for over 20 years. Crazy to think about how irrelevant those companies are today, if they still exist at all. See what I mean?


And that's all folks. 

Tell me, what other brands come to mind when you think of companies that were once leaders and are irrelevant today? What are your thoughts on the Radio Shack Bankrupcy?

As always, thank you for reading and cheers to profits!

Mabel

Wednesday, February 4, 2015

Disney's stock price hits over $100 per share {and why I am not surprised}

Hello dear readers,

As earning season continues, I am keeping an eye on the reported performance of the companies in my portfolio. Feels like yesterday when I shared the earnings commentary for Disney's performance during fiscal year 2014 (back in November). If you missed it, check out this post.

Another whole quarter has come full circle since then. Disney reported their performance for first quarter 2015, yesterday afternoon after market closed. I wasn't able to listen to the live earnings call but I did read the press release and transcript of said call.



Here are some of the highlights.

Financials Summary

Solid percentage increases were reported in virtually every metric when compared to the same quarter last year. On a consolidated basis--
  • Revenue increased 9% year over year from 12.3 billion reported in first fiscal quarter 2014 to 13.3 billion for this quarter.
  • Net income boosted 17% going from 1.8 billion to 2.1 billion
  • Cash from operations increased an outstanding 53% from 1.2 billion to 1.8 billion
  • Segment operating income was up 17% from a little over 3 billion to 3.5 billion
  • Free cash flow increased 55% from 554 million to 857 million
*The full report breaks down earnings in to each individual segment and corresponding metrics. If you wish to read further in to this, check it out here.

The Magic of 'Frozen'

The word 'frozen' was repeated only nine times during the earnings call. I was actually surprised and was expecting the word to come up more often considering the impact this movie has had on the bottom line of Disney, specially for this past quarter. 

As per Disney's CFO Jay Rasulo: 
"Revenue at Disney consumer products rose 22%...and operating income surged 46%...reflecting growth in both, licensed merchandise and sales at the company's retail stores..."Frozen" dolls, toys and other products were the largest driver of that growth"

Frozen was deemed the #1 toy brand for the year 2014, as per study from market research firm NPD group. The blockbuster hit, released in November 2013, earned almost $1.3 Billion at the box office internationally. Source 

Here are some of the 'frozen' references made throughout the earnings call:

"Higher operating income was due to an increase in home entertainment results, higher revenue share with the Consumer Products segment due to the performance of Frozen merchandise and higher TV/SVOD distribution results driven by more titles available internationally."

"The increase in operating income at Merchandise Licensing was due to the performance of merchandise based on Frozen and, to a lesser extent, Disney Channel properties, Mickey and Minnie, Spider-Man and Avengers."

"At our Retail business, higher operating income for the quarter was due to comparable store sales growth and higher online sales in all regions driven by sales of Frozen merchandise."

"Improved operating results were due to an increase at our mobile games business driven by the success of Tsum Tsum and Frozen Free Fall..."

Income was down in one single segment

While ESPN continues to be a solid leader within the world of sports-fanatics; cable operating income was down 2% thanks in part to rising sports rights prices. This is something I would keep watching in future earnings calls. Apparently having the right to broadcast popular sports show is expensive and Disney doesn't get any discounts for the privilege of offering this service to its viewers. Ever wondered how athletes are able to sign contracts for millions and millions of dollars? well, then can thank ESPN in part for that. 

Why I am not surprised at Disney's success and why I see this getting better

Disney is unique. There is nothing like it. Sure, you can compare it to other "entertainment" power  houses but it is my honest believe that this company is on a league of its own and they have been able to keep this up for generations. While some major corporations have been completely disrupted and destroyed by the fast-pace world of technology advancements- it seems that the management at Disney has done a phenomenal work keeping up. Remember this company has been around for over 90 years!

Strategic use of Technology. Just recently, Disney launched launched a devise called "MyMagic+"-- the technology was designed for their theme park visitors and consists of a wireless wristband meant to help customers plan their visit around the park more efficiently, as well as ease the process of making purchases within the park. You can read more about this innovation here. 

New state of the art theme park coming soon. As you may have also heard, Disney is opening a brand new, state of the art, theme park in Shangai, China scheduled to open doors in the the Spring of 2016.

Star Wars. After the acquisition of The Star Wars franchise, the first movie production is set to come out in December of this year. It will be interesting to see how this acquisition will benefit Disney's bottom line and how they will further monetize the brand. As per CEO Bob IgerThe new Star Wars film, which opens in December, would start “a new era of exceptional Star Wars storytelling that will be an opportunity for growth across all of our businesses.” Source

New exciting characters. Just five days ago, Disney announced plans for introduction of the first Latina princess, Elena, set to make its exciting debut next year on the Disney Junior animated show "Sophia the First". I feel this was way overdue considering the fast-growing Latino population in this country. There appears to be a lot of excitement around this new development. This new addition can represent a strong source of additional revenue for the already successful repertoire of Disney characters.

...and so much more. If I continue listing all of Disney's sources of income and why I feel they will continue being successful it will take me a while to finish this post.

So, that's all folks.

Tell me, What are your thoughts on Disney's brand and the company as a whole? How do you see Disney transforming in the next 10, 20 years? 

Thank you for reading and cheers to profits.

Mabel