Investing - The Basics

[winston]

Take This 30-Second Quiz Before Buying Your Next Stock

By Dr. David Eifrig

You have to give more than you get if you want to succeed…

From my first job as a dishwasher, to my career on Wall Street, to my career as an eye surgeon, and now to writing these daily briefs… I've applied this rule. I strive to treat everyone as my customer.

But it's increasingly rare to find this attitude in today's age of entitlement.

Instead, people of all ages demand things for nothing. Employees on the job for just a few months expect the same perks and privileges of those who've been working there for years.

For example, I was just talking to a friend in the biotech deal-making space who was dealing with managing a young associate… During a conference-call negotiation, the youngster suddenly spoke up and said that he'd really appreciate it if his boss could take over for him on the call because he wanted to leave early for the day to pack for a ski trip that weekend.

(Guess who didn't have a job when he got back from his ski trip?)

But this kind of mindset extends all the way up the corporate ladder… If a business cannot deliver an experience that meets the customers' expectations and creates loyalty, it's bound to fail. The customer will take his or her money elsewhere.

That's why for more than a decade, I've used a simple quiz to guide my investments.

This quiz has helped my Retirement Trader subscribers close 277 out of 298 series of trades with profits… And it has allowed my Retirement Millionaire subscribers to safely make consistent, annual double-digit gains in regular stocks.

This quiz takes less than 30 seconds to complete. And if you start using it, you could drastically improve your investing results.

All you have to do to take the quiz is ask, "Does the company I'm investing in enjoy tremendous customer loyalty?"

If the answer is no, chances are good that you should pass on the stock.

But if the answer is yes, chances are good that you've found a safe, long-term stock investment… one you can hold for years and compound wealth with at 10%-15% per year.

Take Coca-Cola (KO), for example. Coke enjoys customer loyalty because its products taste good. They are consistent. They are everywhere. And for less than a dollar, a customer can enjoy a brief bit of pleasure. Since 1995, Coke's shareholders are up more than 250%, including dividends.

Other great consumer brands like chocolate-maker Hershey (HSY) and fast-food juggernaut McDonald's (MCD) enjoy this loyalty as well.

These are familiar examples of "retail" loyalty. But there's another little-known type of loyalty… This form of loyalty comes down to "switching costs" for larger companies.

You see, when a company is considering moving its business from one service provider to another, it must consider the costs.

Take Microsoft (MSFT), for example. If your 500-employee office is used to using Windows and Office software, it's going to be difficult for your company to ever switch to new software.

If your company is going to switch 401(k) providers or payroll managers, there's going to be a big cost. If it's going to switch the phone system it uses on thousands of phones, there's a big cost. A company might think another service provider would be better, but it won't ever switch from its current provider because the "switching costs" are too high.

This means consistent sales and insulation from competition.

No matter what form it comes in, loyalty ensures a constant and unrelenting demand for products. That keeps profit margins high and sales growth strong. It also helps insulate a company from competition – a crucial attribute for a long-term investment.

Remember… in the "survival of the fittest" world of capitalism, a business must get every possible bit of insulation from upstart competitors. Otherwise, it will eventually fail and leave its shareholders empty-handed.

Owning great dividend-paying businesses is the key to long-term stock market success. These companies get you on the road to compounding. These businesses are almost always identified by their extreme customer loyalty. And this loyalty ensures big profit margins, steady sales growth, and extreme resistance to competition.

Plus, these businesses allow you to sleep well at night. These are the sorts of companies I look for in my investment advisory services.

And all it takes to recognize them is a 30-second quiz.

Source: Retirement Millionaire Daily

[winston]

These 10 Principles Will Help You Beat the Market

By Arjun Chan

Source: Guru Focus

http://www.thetradingreport.com/2016/04 ... he-market/

[winston]

10 Extraordinary Traits

Source: GuruFocus

http://www.thetradingreport.com/2016/04 ... ry-traits/

[winston]

How to Invest Like a 12-Year-Old

By Alexander Green

Source: Investment U

http://dailytradealert.com/2016/05/08/h ... -year-old/

[winston]

Top 10 Investing Apps

By Chris Gilbert

Source: GuruFocus

http://www.thetradingreport.com/2016/05 ... ting-apps/

[winston]

5 things rich people do with money — that you should be doing

Source: Market Watch

http://www.marketwatch.com/story/5-thin ... yptr=yahoo

[winston]

The High-Tech Guide to Millennial Finances

Manage your finances, trade stocks and even pay down student debt the millennial way

By Tom Taulli

Source: Investor Place

http://investorplace.com/2016/05/millen ... 0emgJF96M8

[winston]

Six Steps to Maximize Your Income Investments

By Amy Calistri

Source: The Daily Paycheck

http://dailytradealert.com/2016/06/04/s ... vestments/

[winston]

6 Rules I Follow When Making Any Investment

By Simon Black

Source: Sovereign Man

http://www.thetradingreport.com/2016/06 ... nvestment/

[winston]

The Five Traits of Stocks That Outperform the Market

By Chris Mayer


At Blue Nile (NILE), you could buy a 1.08-carat, ideal-cut diamond with G color and VSI clarity mounted in a platinum band for about $8,948.

At Tiffany (TIF), the same ring would cost you $13,900.

That's $4,952 more... just to have it in a Tiffany blue box.

It shows you the power of a brand. It's Tiffany's moat. Competitors can sell the same diamond, but they can't put it in a Tiffany blue box. This fact helps drive stock returns, too.

Blue Nile's stock is down about 24% since it went public in 2004. That's more than a decade of no return for investors.

By contrast, Tiffany's total return (including dividends) is up 45-fold since it began trading in 1987. That's even after its recent beating.

Tiffany has a moat. Blue Nile does not. (The above example comes from Pat Dorsey's The Little Book That Builds Wealth.)

So, what's a moat?

A moat is what protects your business from its competitors. It allows you to do things your competitors can't do – like charge $5,000 for a blue box. It's also the engine behind some mega stock winners.

See Starbucks (SBUX). When it began back in the 1970s, a cup of coffee was about $0.50. Starbucks got people to pay a couple of dollars for their coffee by playing up the coffee's quality.

It also brought McDonald's-like quality control to coffee to ensure a cup of Starbucks coffee tasted the same everywhere. This was a big innovation at the time. And it has made the Starbucks brand the powerhouse it is today.

I remember reading about how some of the venture capitalists who looked at Starbucks early turned it down. They couldn't imagine people paying so much for a cup of coffee...

But as you know, the stock has been a monster winner, up more than 18,000% since its initial public offering in 1992. And it's up more than tenfold since 2008...

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That's the power of a great moat.

So, how do you recognize a company with moat? Here are five examples:

1) A strong brand. Tiffany has a moat, as we saw. People pay up just to get that blue box, even though what's in the box might cost less somewhere else. Starbucks is a great brand. It inspires loyalty and ensures recurring customers. That's a moat.

2) It costs a lot to switch. Comcast (CMCSA) is a good example here. Once you have your e-mail and cable tied up with Comcast, it's a pain to switch.

Banks can have this kind of moat, too. There isn't much of a competitive advantage that one bank can have over any other. They all have the same products. And with the Internet, branch locations aren't important.

Yet when you look at the numbers, people tend to stay at their banks for six to seven years. That's because it's a pain in the neck to change banks. As economists say, "switching costs" are high. That's a moat.

3) Network effects. Microsoft (MSFT) had a great networking moat for years. Everybody else used its operating system... so you wanted to, too. The more people used Microsoft's operating system, the more it enjoyed network effects.

There are lots of network moats today. Think of Facebook (FB), Twitter (TWTR), or YouTube. It's very hard for competitors to replicate these businesses, to crack the network moat. It's like trying to sell the first telephone.

4) Cheaper than everybody else. If you are the low-cost guy, like Wal-Mart (WMT), you have a moat. Wal-Mart destroyed many higher-priced retailers.

Interactive Brokers (IBKR) is another example. Its prices are much lower than every other discount broker. That partly explains why it's growing twice as fast as its competitors.

5) Size. Absolute bigness can be an advantage if it keeps competitors out. Imagine what it would take to try to replicate the research capabilities of Intel (INTC) or the purchasing power of Wal-Mart.

Relative size can also be a moat. If you're the dominant insurer of small taxi fleets, as Atlas Financial (AFH) is, then you have a moat. Competitors are unlikely to invest the time and energy necessary to compete in a niche market.

Here are two lesser-known stocks that meet that hurdle. They have great moats and winning track records. Both are on my watch list:

• American Tower (AMT) owns cellphone towers and leases them out to carriers. Its gross profit margin last year was an astounding 73%. It's a great business. Once it has a tower in place, it's tough for a competitor to justify putting up another one in the vicinity. And every "tenant" AMT adds to an existing tower is almost pure profit.

• Liberty Global (LBTYA) is the largest cable operator in Europe with 53.2 million subscribers. (Think of it as Europe's Comcast.) It's basically a monopoly. It has a great moat, which translates into rich profit margins. And John Malone, the celebrated 74-year-old cable wizard, controls it. You couldn't ask for a savvier man at the helm.
Both of these stocks are likely long-term winners thanks to deep and wide moats.

Source: Bonner Private Portfolio