“210 people were shot in America on the first day of 2017,” reads a headline on news website Vox.
Baltimore did its part…
Shortly after midnight in Ellicott City [a Baltimore suburb], Maryland, a 15-year-old boy broke into the house of a 16-year-old girl and shot her and her 52-year-old mother, killing the girl and injuring the mother.
The victims had just returned home from a New Year’s party with relatives.
Unreported in the national statistics, one of our Baltimore offices was robbed on New Year’s Day… and an employee was held at gunpoint within 100 feet of our front door.
Between the Feast of Saint Sylvester (December 31) and the Feast of the Epiphany (today), we try to take time out from our normal routine for meditation, prayer, and heavy drinking.
While the holdup men and stockbrokers return to their labors, we try to think more deeply about what we are doing and where we are going.
“Try to imagine your own funeral,” says a colleague. “Then think about what you want people to say about you.”
We’re not sure what we want people to say, but we know what we don’t want them to say: that he was gunned down on his way to work.
This has been a grim and lonely week. The first week of January is always difficult. Residual memories from Christmas and the New Year celebrations fade like the bright lights of Chicago… as the train heads out onto the vast, empty prairie of a new year.
Journalists are back at their laptops. Deep State apparatchiks are back at their desks. So are Congress and the federal bureaucracy. No one’s life, wealth, or dignity is safe.
And now, The Wall Street Journal reports that Donald Trump is not only trying to bully U.S. companies, but foreigners, too. No kidding. Toyota is a Japanese automaker. Trump thinks he should have a say in where it builds its next factory.
Debt is at or near new highs in every category – household, corporate, and government. Worldwide, debt is up 79% since 2007.
The bubble has gotten a lot bigger. It will likely blow up before this year is rung out.
But our thoughts this week have mostly focused on our private world.
It is bad enough trying to imagine our own funeral. (We can think of a few other people we’d rather see in the box.)
It is worse trying to think about what we are doing and why we are doing it… while we are still alive.
“What is the point?” is the question that kept coming up. We never found a good answer.
Some people have a “bucket list” of things they want to do before they die. If we had a list, getting shot dead would not be on it. But we don’t like the bucket idea. It sounds like a resume on an application to the graveyard.
“Oh… I see you’ve been to the Grand Canyon. Okay… you can come in,” says the Grim Reaper.
“We’d rather stay out, thank you. Catch you next time.”
But even if we’re all bound for the same boneyard, a bucket list presumes you have nothing better to do than check a few empty boxes along the way: go somewhere, do something, get it over with.
After that trip is over, the car doors are opened, and you are dragged off to the hole. Your life is over; there’s nothing left on your list.
If, on the other hand, you deliberately put items on your list that you can’t achieve, it is merely a “wish list” – like a wine you’ve been meaning to try or a movie you intended to see. You can make that kind of list anytime.
“He who has the most toys wins” is another popular desiderata.
But wins what? This is the great advantage that the poor enjoy in life. They can imagine that having more toys will bring them happiness and love.
The rich man has no such illusions. He already has all the toys he wants. He knows that whatever pleasure they confer, it is fleeting… and ultimately pointless.
As to love, forget it. All he got for his millions was a Russian bride… who ran off with the pool boy.
The truly rich, meanwhile, sneer at the parvenus, with their shiny new cars and new mega mansions.
Besides, you can no longer impress anyone with an expensive house; everybody’s got one. The Wall Street Journal reports that builders have added so much luxury housing to the market, prices are beginning to slip.
The really rich take their pleasure in pretense. They live modestly, pretending to be above material concerns. Or they pretend to be good by donating generously to global warming or Syrian orphans.
The money usually goes into the pockets of zombies and cronies, turns poor people into dependent parasites, and – using more wealth than they produce – makes the world a poorer place.
Still, the rich can’t help themselves. They endow museums and build art collections… They donate millions to keep Haitians off the streets of Miami.
But in the end… who really cares? You descended into the Grand Canyon, swam the Hellespont, won a Nobel Prize?
Who cares if you have a mansion… or even if you were right about the stock market crash? And you… who have probably never even changed a tire in your whole life… how do you know where Toyota should build its next plant?
In the end, you must stand face to face with your creator. No matter what factories you have misplaced, honors you have won, or old ladies you have helped cross the streets…
…He will probably laugh at you.
BY Chris Mayer, Editor, Chris Mayer’s Focus
(ORIGINALLY PUBLISHED SEPTEMBER 2016)
Editor’s Note: Chris Mayer is one of Bill’s star analysts.
Bill even invested $5 million from his own family trust into following Chris’ stock picks.
There are two factors that almost every “100 bagger” stock has in common.
A couple of years ago, I published a study of 100 baggers – stocks that returned 100-to-1 – over a 50-year span. And the importance of these “twin engines” turned up again and again.
The best way to show you how the twin engines work is with an example…
Let’s say we have a stock that earns $1 per share and trades for 20x company earnings. That would make the stock $20.
Now, five years later, earnings have tripled to $3 per share.
If the stock still trades for 20x earnings, then you’ll have tripled your money, as the stock would trade for $60 per share.
That’s a nice result. And it shows you the power of the first engine: earnings growth.
But the second engine I look for is a low multiple on those earnings.
Let’s say you find a similar stock trading for just 10x earnings. The stock is $10 and earns $1 per share.
Now, five years later, earnings have tripled to $3 per share.
But, the cat is out of the bag. The market has come to appreciate the power of its business model, and the stock trades for 20x earnings.
Now the stock is $60, as in the prior example… and you’re up sixfold.
But it can work against you if you don’t have both engines working.
Say you pay 50x earnings for a stock and earnings triple over five years. If the price-earnings ratio falls to 15x, you lose money. Think about that: You could own a stock where earnings tripled… and lose money if that’s the only engine running.
Understanding the twin engine concept is one thing, but finding stocks that have them is another. It is not easy to find them, but these stocks do exist.
In 1982, Aflac was a small insurance company with $585 million in sales. Twenty years later, sales were up to $10.2 billion. That’s a 17-fold increase. Earnings per share did better – and went from 4 cents to $1.30. But the stock was up 100-fold.
Well, the market valued earnings at just 10x in 1982. But 10 years later, people thought much better of the stock. It traded for almost 30x earnings. The twin engines again.
Gillette is another example. The safety razor company grew its sales 11% per year. Earnings grew 15% per year. But it took more than these numbers to make it a 100 bagger. At the start of its run in the late 1960s, the stock traded for just 10x earnings. By 1995, it traded for nearly 30x earnings. The stock returned more than $300 for every $1 invested.
Perhaps the most extreme example of the twin engines at work is the MTY Food Group…
The fast food franchisor’s stock went up 100x from 2003 to 2013. That’s just 10 years. Sales went up 7.8x. Earnings went up 12.4x. But the stock was up 100x… because in 2003, you could’ve bought the stock for 3.5x earnings. And in 2013, it traded for 26x earnings. (A tip of the cap to Chip Maloney at the MicroCapClub for the example.)
That’s the power of the twin engines. Focus on finding stocks that have both the ability to grow… and the potential for a higher revaluation.
The table below has five stocks with low price-to-earnings ratios compared to their estimated earnings growth rates for the next five years:
Of these five stocks, I particularly like Atlas Financial (AFH), which insures small fleets of taxis. This is an old recommendation of mine, which we bought around $6 per share. Today, at $17, it’s still a compelling bargain with lots of room to grow. The management team, led by CEO Scott Wollney, is excellent. And they have “skin in the game” – they own 12.5% of the stock.
Another one I like is Air Lease (AL), which leases aircraft to airlines. The company will double the size of its fleet over the next five years. It also has the strongest management team in the business, led by Chairman Steven Udvar-Hazy, who invented the aircraft-leasing industry. Management also owns 10% of the company.
But each of the five companies I listed has the “twin engines” I look for in an investment. I recommend checking them out…
P.S. Yesterday, I hosted a masterclass for my newest investment advisory, Chris Mayer’s Focus. It’s designed to help you build a concentrated portfolio of small-cap stocks with “twin engines” – along with a few other traits – that could make them huge stock market winners. I’m talking about investing in the next Apple, the next Starbucks, or the next Wal-Mart – long before Wall Street is paying any attention to these companies.
This new project is very close to the way I personally invest… And I’ll take you deep behind the scenes of every recommendation I make. To learn how you can sign on for an incredible discount, click here.
When You Should Never Sell… And Other Lessons From One of the Greatest Minds in Investing
The investing expert who beat Warren Buffett’s Berkshire Hathaway shares the most important advice he learned from studying history’s greatest investors.
12 Books to Read This Year if You Want to Be Rich
To help make 2017 a prosperous year, here are 12 personal-finance books for your reading list – one for each month – from century-old classics to hot new releases.
U.S. Taxpayers May End Up Paying for Trump’s Wall
Breaking his main campaign promise, President-elect Donald Trump may ask Congress for American tax dollars to pay for his border wall with Mexico…
Bill’s view that the best trade deal President-elect Trump can make is a free-trade deal continues to irk some Diary readers…
Mr. Bonner, you are truly a gifted writer, but that doesn’t make you right.
Cheap foreign-made products afforded Americans a better standard of living? True. America no longer has the smog, acid rain, or working conditions they have in China? Ditto.
But one day, if mankind should be so terminally unfortunate, a nuclear detonation over Baltimore, St. Louis, or Cresco, Iowa, will have no philosophical talking points. Such weapons will be built with manpower, knowledge, and technology that was funded by selling bags of dog food, chewing gum, and cheap, plastic flotsam to the illiterate of America.
“But it was so cheap,” she said. “Who would have imagined,” he’ll say. Even a dirt farmer knows it’s not prudent to crap in your own mess kit. Because every one of those fake and worthless green pieces of fiat currency will ultimately be used against the very natives who so foolishly exchanged their beads for what only a moment earlier seemed like such a good idea.
– Jim M.
Meanwhile, Bill’s report on spending the holidays with his family on their farm in southern Maryland has stirred similar memories…
When I was a kid on the farm in Missouri, we used to prune the apple trees in February and use the prunings to smoke the hams and bacon we had put down to cure between Christmas and New Year. Waste not, want not – we were frugal. I must say, I have always enjoyed your astute observations and sharp wit.
– Ken R.
Back in the 1970s, I lived in Alabama for a year or so in my bumming-around-playing-music days, and a man decided he needed to burn a pile of rubbish.
He prepared the pile carefully, then poured gasoline on it. What he didn’t know was that, if there is no wind, the fumes gather. And when he lit the match, he was engulfed in flame.
It was like the three lads in Babylon in the fiery furnace. Only he didn’t have Jesus Christ there with him to make the flames and heat of no effect. I’m thankful you were blown clear, unlike the man in Alabama.
– Richard S.
Yesterday, Chris Mayer hosted a masterclass to reveal his tips for identifying “the next Starbucks,” “the next Apple,” and “the next Wal-Mart” years in advance of anyone on Wall Street.
Hundreds of your fellow Diary readers have already signed up for his advisory Focus… and they’ve already received Chris’ first recommendation.
To learn more about what’s waiting for you if you decide to give Focus a try, watch Chris Mayer’s masterclass here.