Rule #1 Finance Blog
how to invest
My publisher, Crown/Random House, just sent me the first magazine
review of Rule #1. Publisher’s Weekly is the book industry magazine.
They publish weekly as you might have guessed and they review about 140
of the 5000 books published that week — so getting reviewed at all is good.
Out of the 140 they review, they give a red star to 10 books
that they think are good books. This helps the book buyers — the
Barnes & Nobles, Amazon.com, Waldenbooks, Costco etc. determine what to stock up on.
Rule #1 was favored not only with a very nice review but also with a red star.
Here’s the review:
For amateur investors who admire the incredible returns produced by
Benjamin Graham-Warren Buffett-style value investing but can’t figure
out how to replicate these billionaires’ methods at home, Town’s
investment guide is manna from heaven.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
I got this email from Kellie on January 25. Read on. My response follows.
As a construction guy, I get Nucor. They make steel. Steel reinforced concrete has become the backbone of construction. Most agree we have another 8 year run on total construction growth.
Nucor is a "good to great" company. After burying Bethleham Steel, they continue to dominate their industry by being the lowest cost steel producer in the US. As a farm kid, it's understandable why they locate plants in rural areas and utilize farm people in production.
The numbers: EPS= 8.20, PE=9.2, Historical PE=28.86, Target Price from Investor toolbox= $277.43 (based on analists projection of between 16 and 17% growth and using hist. PE of 28.86.)
It looks to me that big money has started coming in this week. I see Nucor as a wonderful company that has been in an industry that has been ignored lately. Are things beginning to change?
Kirk
Here's what I said:
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
ALLOCATING YOUR INVESTMENT FUNDS
Michael from New Jersey has just started the Success PhD investing program, and he had some questions about my recommendations for allocating investing funds. Here's Phil Town answered him:
Hi Michael,
My personal allocation of assets outside my house varies with opportunities. I see investing pretty much through the lens of Rule # 1 – which is 'Don't Lose Money' via 'Buying a wonderful business at an attractive price'. I don't much care whether the business I'm looking at is real estate, a private business, a venture capital deal or a public business. I see it all through the same lens, Rule # 1. So should you, I think.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
HOMEWORK/4M COMPANY: COGNIZANT TECHNOLOGY (CTSH)
Dave Thomas is a realtor who is doing a little diversification of all that real estate money he's been making. His pick is Cognizant Technology. CTSH does outsourced Information Technology solutions. They just blasted through the tech downturn in 2001. If anything it accelerated their business. What that could mean is that the worse the economy the more business they pick up. Pretty cool.
The reason I'm writing about them now is because I've been getting a number of emails from people like Dave who have seen the potential of CTSH as a Rule #1 business. I will now confess that I've had this one on the side for some time, think the business is wonderful and that it's available at an attractive price. So let's get this beauty out of the closet and show it the light of day.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
Here’s a new homework submitted by a reader who needed some help with the Big Five Numbers and Moat. Read on:
Hi Phil,
I bought this stock CLZR for my
son, Shane, because a client at Bellagio suggested it. This was before
I met you. Okay, now I know it was gambling! But, it’s going up. I
bought it at 9.37 and it’s over 14 now. I own 55 shares. So now I’m
backtracking and putting it to your test, so here goes:
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
WFMI AS AN EXAMPLE OF BRAND MOAT
Thanks for your viewpoint [re: WFMI’s high prices harming its ability to establish a moat against Trader Joe’s, Wild Oats, and other organics grocers], and I have to say, points well taken —
but, in my humble opinion, mistaken. Here’s why: WFMI is in
the brand business, not the price business. So as long as the lines are
long, they would be nuts to start dropping prices — unless they can keep
their margins high by using their growing buying power to lower their
costs. Which is, of course, is what they are going to do as they
get bigger.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
I've been mentoring Major Clay Edens about getting him the money he needs to retire comfortably in a few years. His goal is to buy a 42' boat and travel the Caribbean islands. He's started doing his homework by practicing the 4M's and taking a look at my WFMI posts. But he still had a few questions about identifying a wonderful company. Read on to learn where WFMI is today, and how I as a Rule #1 investor interpret its position. For those of you who need visuals, there are charts and graphs with this post.
Phil,
As you will see with some of my figures I did have some trouble, but I am hoping that based on your experience and familiarity with WFMI, you will be able to quickly identify them. I used your Blog to try and build a YUMMMY report with enough detail to show myself I had the ability, I was confused as to where to find the information for the MOAT, and doing the calculations for the MOS.
Clayton
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
People ask me a lot of questions about retirement funds and packages. Here's a letter from S____.
[Edited for length.]
Most of my parents' retirement acccount is invested in BP (British Petroleum) stock. Either 50% or 100% of the portfolio. My father has 3 years to retirement – even though he'd like to retire now.
As you may be aware, BP is the only individual stock they are allowed to invest their retirement in at this date. That's how 401k's, etc. work.
One of the reasons I wanted to buy the program you offered is to make sure they can better determine when to buy and sell to maximize the growth. The last thing I want to see is for something unforseen to come up with BP stock and them lose a chunk of their portfolio due to a drop in the price.
Is there a fee a could pay you to watch this stock for my parents and educate them on what factors are effecting their stock and whether it's likely to go up or down drastically so that they can continue to maximize their 401k versus taking a potential hit?
Kind Regards,
S____
I think the deal is that her father works for BP and is sort of forced to buy BP stock for his retirement 401(k), and it's the only stock he has. She thinks he's 100% invested in just BP for his retirement (or maybe 50%) and she is worried.
S____, a student, is interested in finding someone who can advise her parents directly about what to do. I'm flattered but I don't do advice or OPM investing simply because frankly, it's usually a huge pain to advise people or invest their money. They call you. Ughhh. Those phone calls can interfere with golf, fishing, snowboarding, hunting and travel. I'm learning to tango. I don't have time for phone calls.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
HOW TO READ A QUARTERLY CONFERENCE CALL (PART FIVE)
Here’s the fifth and final installment on how to interpret a company’s Quarterly Conference Call. In this case, the company is WFMI (Whole Foods).
I will now turn to our growth goals for fiscal year 2006 and beyond. Please refer to our press release for more detailed guidance information.
In fiscal 2005 we produced very strong operating results which exceeded our own expectations and our initial guidance. The strength and consistency of our top-line growth along with the number and quality of the stores in our development pipeline have given us the confidence to raise our 2010 growth goal from $10 billion in sales to $12 billion.
Whoa Nellie! He’s raising the company goal to $12 bil. Up 20% from where he was last year. When he announced this goal a couple of years ago, he was going to have to grow at about 22% a year to get there. Which is where I got my 22% growth rate. But he’s expecting to do even better. Good news for our MOS.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
HOW TO READ A QUARTERLY CONFERENCE CALL (PART FOUR)
More analysis on WFMI’s Quarterly Conference Call… Picking up from where we left off yesterday…
We currently operate eight stores within the 60,000 to 80,000 square-foot range, with an additional 21 stores of that size in development, five of which are relocations. We are confident about the potential future returns of these larger stores, as we believe they appeal to a broader customer base, take longer to reach maximum capacity, and are less vulnerable to competition as they create a higher barrier to entry.
John is saying that WFMI is digging a wider MOAT. The brand is becoming harder to compete with.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.