It's good to be back again on this platform. I'm not writing as much these days simply because I've been busy attempting alternative ways of making income. About two months ago, my wife, Jessica and I spent a great chunk of our time looking online for land to develop into custom homes, apartments, etc. My father-in-law has over 25 years of experience doing this and he agreed to mentor us on all aspects of this business.
So we spent considerable time online looking for great parcels to buy in Riverside county. We drove to selected lots. Some were in Lake Elsinore, while others were in Murrieta. At one point, we even made an offer on a parcel that was perfect for an 8-unit apartment complex that would've have brought in outstanding cash flow. Then came the pop; our bubble was popped by the insane and ridiculous fees the cities of Riverside county are imposing on all land developers. We learned from city officials, who asked we keep this to ourselves...though it is no secret...that development is being stalled intentionally. This is why anyone looking to buy land in west Riverside county has inventory galore to choose from. It would've taken $14K to get us all licensed and permitted in Lake Elsinore! Well that's just too much to spend before even scratching the dirt. So we moved onto something else.
This past Tuesday, Jessica and I joined a webinar on selling on Amazon. We both have been quite interested in this for some time. In fact, I've mentioned on this blog that having your own e-commerce site or selling on Amazon is a great way to bring in additional income in this day and age. Two guys were hosting, Austin Hilton and Jeremy Sandow of "Simple Product Profits."
Having been on several webinars before, including one hosted by Ramit Sethi of "I Will Teach You To Be Rich," I knew how it would play out. The hosts would give us some golden nuggets into how they make tons of money on their platform, tell us all we could do the same, and then hook everyone into an urgent decision to buy their course for a reduced price. Ramit's price tag a year ago was too steep for me. My wife and I, again, have been looking for a way to enter into a new arena without paying for an expensive course that would leave us too short to start-up.
I was pleasantly surprised by Austin and Jeremy's course cost segment. The price for their Platinum Membership was a mere $497. It included access to the 7 step-by-step learning modules, the Facebook Mastermind group, monthly members only webinars, twice monthly live coaching workshops, and a done for you Amazon sales page. Now that is value! Since both Jessica and I are into this content, and want to successfully launch our own FBA (Fulfilled By Amazon) business, we committed to the purchase. We're really paying about $250 each since we can do it together...a bargain!
Okay, now onto what we have experienced thus far. Jessica and I have systematically gone through two modules. What we like about each module is that the videos within them are full of specific information. Jeremy and Austin hold nothing back. The tips they share have already sped us at least two to three months ahead of schedule. I also like that they include a "checklist" of things to do before moving onto the next module. This keeps you focused, and allows you to digest all of the material shared in the module by putting it to practice.
I have bashed "opportunities" on this blog before, but the Simple Product Profits is not going to be one of them! Of course results will vary for each individual.
I will be sharing our progress in future posts. If you are interested in e-commerce (which is only getting more and more of the retail pie...outcompeting brick and mortar), a great place to start is with a webinar by the Simple Product Profits guys, Austin and Jeremy. Here is their FB page: Simple Product Profits.
Welcome back, amigos! Before I start with this installment, I'd like to share my condolences with the people of Belgium, and especially with the relatives of each victim of this horrific attack.
Okay now, have you heard of the expression, "Trying to catch a falling knife?" It means to explain the act of making a timely stock purchase of a company whose shares have been pummeled by some unexpected event. Imagine actually trying to catch a falling knife. If you grab it at the wrong time, as the sharp blade is still within your grasp, you will get cut! However, if you grab it at the handle, all will be well.
The phrase is synonymous with risk and danger. As in...stay the hell away from trying to do this! I am in agreement with the outstanding money manager of Oaktree Capital, Howard Marks, who believes falling knives are great opportunities for the "second-level thinking" investor.
Chipotle Mexican Grill (CMG)--$471.76, is one stock that exemplifies opportunity in the sharpest of ways. The once loved stock has been defecated by investors, literally. Norovirus, E. Coli, cover-up allegations, inept handling of the situation, and on...had investors looking for the exit in droves earlier in the year, dropping the price to as low as $399 from a high of $758. The effect? Making the stock cheaper with a better entry point.
The contrarian in me sees Chipotle recovering from the bad publicity, loss of customers, etc. Will it be overnight? Of course not! But by the time you know it, it will be too late. You will have missed the run-up. Investing in stocks is about doing what others aren't doing. Chipotle will undoubtedly miss earnings and top line come April. I think that is already factored in by investors, and if there is any upbeat reporting by its CEO, Steve Ells, the stock will rally. By upbeat, I mean Ells saying things are better and ahead of schedule, same store sales, e.g., getting closer to pre-crisis levels.
The bear case. The bear case for Chipotle includes geo political events that would impact the market as a whole. A false bull, meaning we are really in bear market territory and the past month has been a typical bear market rally, i.e., we are heading for a major crash. Litigation that could result in costly settlements. Otherwise, Chipotle looks like a knife that has stopped falling, uncrowded, and the perfect anti-fear play. Start a position tomorrow if you have cash...that's my take!
Thanks for reading! See you next time.
Barron's magazine did a great job of psyching everyone up this past weekend. It all started with the title on the front cover: "Will Value Beat Growth?" The two strategies, growth versus value, should be like the yin and yang, complimentary forces, of equity investing. Instead, they're more like the feuding schools in an old Kung fu movie where the pupils battle each other to decide whose Master and style is the best.
For the past nine years, "growth stocks have done far better than value stocks," so says the Barron's mag subtitle. I'm sure they have the data to prove that stocks with higher PE multiples have outperformed those with lower PE multiples. As a value investor, I have not forsaken Master (Ben) Graham, and indeed, did not alter my investment philosophy to catch this trend. I've made money in stocks the past four years in a row trading stocks, sticking with value plays. I could've probably made more chasing growth around, but you cannot be something you are not. And this is an important point for beginning stock market investors: You cannot be successful as a stock market investor trying to be Bruce Lee (the pioneer of mixed martial arts). Become most familiar first with one strategy, e.g., growth or value, then expand into others, e.g., growth at a reasonable value.
With Barron's latest, I suspect most investors will plow back in to the shares of companies whose PE ratios are under 20. The articles in the issue made mention of many possibilities. Some of my personal favorites included Ford (F), Ashland (ASH), and Pfizer (PFE). In the exchange traded fund category, two that perked my interest were Vanguard's, VTV, and Guggenheim's, RPV, with the latter having a lower PE focus, 12 versus 15.
There is cause for concern, however. The message is clear. Steering clear of growth is a bearish call on the future prospects of many companies. Is there no more fast paced earning's growth to squeeze out of the likes of Amazon, Netflix, and Facebook? Indeed, it is a bearish call on the American and world economies!
Value does best when there is a healthy mix of growth too. The consensus is that companies have bolstered earnings the past year buying their own shares, as opposed to growing their shares organically. You look across the pond and see Draghi now having the ECB pay banks if they loan out their money! An incentive that may prove as useless as his other gimmicks, negative interest rates, e.g. China continues to liquidate their holdings in US Treasuries to bolster the yuan. Chinese investors are transferring their wealth from securities to American real estate.
Where does all this leave us? I see a lot of scraping the bottom of the barrel happening the rest of this year and possibly even next. Even if you can find a handful of excellent value plays, and have the conviction to buy, will the market have the impetus to reward investors within a reasonable time frame? You may just have to sit on a position like a true buy-and-hold, dollar-cost-average, value investor, and this may not be what you expected to do. That's why I would rather you not follow the herd into value stocks, and instead, look for the needles in the haystack if growth is your thing.
Thanks for reading! See you next time.
