Finding great companies that will outperform the market is tough. Warren Buffett has been consistently outperforming the market by purchasing great quality businesses at a fair price and holding them for long periods of time. After researching numerous companies, I believe Cal-Maine Foods (NASDAQ:CALM) is a business that is currently valued at a discounted price and is poised to rebound from its recent pullback going forward. My two previous articles have documented how DNP Select Income Fund (NYSE:DNP) and Johnson & Johnson (NYSE:JNJ) have been consistently outperforming the S&P500 over a long period of time. You can read more about DNP here and JNJhere. From those articles, I believe they are safe investment for young and new investors with long investment horizon. Now looking at Cal-Maine Foods, I believe this company falls in with Warren Buffett’s strategy of buying a wonderful business at a fair price, rather than a fair company at a wonderful price. This article will provide evidences and justifications as to why CALM is a company that should belong on your buy watch list and how the recent pullback in its share price could be an opportunity to buy a great quality business at a cheap and fair price.
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As a new young investor, I find myself constantly reviewing many different stocks and comparing their performance against the S&P 500 index. In my last article, I researched DNP Select Income Fund (NYSE:DNP) and found that it had outperform the S&P 500 index in the last 29 years since it was founded. My analysis of DNP Select Income Fund can be found here. Every investor are looking for the next investment that will provide them a decent return in the future. The true is that very few companies outperform the market over a long period of time. An example of this was shown in the looking back at the Nifty Fifty stocks that were once deemed a solid buy and hold growth stocks back in 1960 – 1970. The lesson learned I took from the Nifty Fifty stocks was that even if a company is a large corporation and has a long performance track record, there are no guarantee it will continue to outperform the market much less be in business the next fifty years. For this reason, the number of companies that outperform the stock market in the long run are very little.Johnson & Johnson (NYSE:JNJ) is one of those companies that has consistently outperform the market in any given economic condition. This article will provide evidences that show Johnson & Johnson has been outperforming the S&P500 since 1944 and why this stock need to be in everyone’s portfolio.
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In the search for better stock performance from my own personal portfolio, I decided to research more into this income fund. The reason for my interest was due to a colleague of mine at work who recently recommended me a fund called DNP Select Income Fund (NYSE:DNP). His investment thesis into DNP was due to the fund providing monthly income at a very little cost. He liked the fund so much that he invested bi-weekly through his 401k plan. This sparked my interest in researching this fund and see if it could be a better investment than an investment in the Vanguard S&P 500 ETF (NYSEARCA:VOO).
DNP Select Income Fund
To make an assessment of the two funds, I went on Schwab website to research about DNP and VOO in more depth. According to Schwab, DNP Select Income Fund is a close-ended investment company that focuses investing in various sectors within the utilities space, while providing long-term growth of income. This fund has been around since January 1987. Below is a summary of the fund information.
Source: Charles Schwab & Co., Inc
From the Fund Profile, DNP Select Income Fund’s total holdings currently stand at 118. The top 10 holdings within this fund are made up of mostly energy companies and the top holdings take up 39.6% of the entire total assets. DNP top 10 holdings can be found in the figure below.
Source: Charles Schwab & Co., Inc
DNP is also actively managed to follow the U.S Utilities indexes. Since it is actively managed, the net expense ratio is higher than those of passively managed funds such as the Vanguard S&P 500 Index Fund ETF. The key information from DNP’s fund profile I found was the annual report net expense ratio which was 1.03%. This will be a key information to use to assess the overall performance against other funds. The second information I found from researching DNP was the performance track record for the last 10 years. Below is the fund’s overall performance growth since 2006 with a $10,000 initial investment.
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The U. S stock market has been on fire these past few weeks even after the results of the Brexit and the continuation of the slow growth seen in the global markets. While it was great for all investors who had their investment in the stock market, from a contrarian point of view, the recent rise in the stock market was concerning. Every investors’ goal should be to make money in the stock market. That is why we invest in the first place, but is now the right now to jump into U.S stock market? This article will provide justification and rationale on why average investor should not buy into the market at these levels.
First, we look at the growth rate of companies within the U.S. Below showed the U.S GDP Growth Rate for the past 10 years according to Trading Economics.
What this showed was that the growth of the U.S has been steady at around 6% to -2% growth rate for the past 6 years. The only time the U.S growth rate was below -2% was in 2009. While many great financial gurus out there preach that you cannot time the stock market, Warren Buffett has said repeatedly that an investor should not be jumping into the stock market unless it looks attractive. He said, “the stock market is a no-called-strike game. You don’t have to swing at everything – you can wait for your pitch”. At current market levels, the S&P500(SPY) is positive 4.21% since beginning of the year while the Dow Jones Industrial Average (DIA) is positive 4.14% for the year. Plain and simple, this is not a buyer market, it’s a seller market. Now sure, there are bargain out there such as Wells Fargo (WFC), Warren Buffett’s favorite holding, but we do not know the true impact of Brexit will have on Wells Fargo profitability and operation. It’s selling at a discount for a reason. Now, long term investor can look at this as an investment opportunity and look to buy Wells Fargo. But for average investor who do not have time follow each individual companies and want to invest safely in an U.S stock market index fund, the yearly performance and the U.S recent growth rate trend showed that now is not a time to buy. In hindsight, the time to buy was during 2008 when GPD dropped to -6% but many investor did not see that during that time. What we can do is to be at least better educated and prepared for when the next opportunity is presented to us.
Stock market rebounded Tuesday from the recent pullback due to the Brexit’s votes. Take a look at these 20 stocks for buying opportunities when volatility cause stocks to be mis-priced.
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Source: NY Times
While everyone was reacting to the Britain decision to exit the European Union onThursday night, I took the opportunity to take advantage of the recent pullback in the stock market. Two index fund I had my eyes on was the iShares Core S&P Total U.S Stock Market (ITOT) and the iShares Core S&P 500 ETF index (IVV).
Why are these two index funds are a Buy over the rest of the other great index funds out there?
Here are my three main reasons:
- Low fees
- Brexit effects
The main reason why I considered iShares Core S&P total U.S stock market and the Core S&P 500 was because of the low fees each one of these index fund offered. The iShares Core total U.S Stock Market has only an fee of 0.03% while the Core S&P 500 only has 0.07% as stated in its prospectus. That means for every $1000 dollars invested, you would only pay 30 cents per year for ITOT and 70 cents per year for IVV. Continue reading
If you are looking to invest passively and earn income without much effort, consider these 5 Schwab Mutual Funds. Each one of these mutual funds can help you diversified your portfolio while keeping your cost down.
Source: Charles Schwab
To read more about these mutual funds here.
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As of recent years after graduating from college, I have been looking to supplement my income due to the high cost of living in California. I have heard of many great success stories of how people were able to gain extra income on the side through doing what they loved or what their hobbies were. In looking for ways to make a little extra money, I tried to sell my unused items around the house but when all the unused items were sold, I was again in the position where I started from. I remembered my old fitness friend would encouraged me to go to the gym by saying “you have to start somewhere to get to where you want to be.” Remembering his words, I decided to look into stocks more seriously. I have always been interested in the stock market since I read the book, “The Neatest Little Guide to Stock Market Investing” by Jason Kelly. It was a really good book for all starting investor as it documented major key areas new investor should be aware of before jumping into investing in the stock market.
In search of the next great investment, I found myself looking at Nike (NYSE:NKE) as possible investment. I haven’t considered Nike as a realistic investment earlier in my investing career due to a lack of capital. However, now that I have a little capital, it time to take a closer look at Nike and why it is a great company to Buy. My investment thesis on why Nike is a buy goes back to when I was in the 2nd grade and I owned my first Michael Jordan’s Jersey. At the time, I did not know much about Nike or what the company did. All I knew was basketball and Michael Jordan was a great player. As I grew up, I owned various shoes from Adidas to Vans. The first time I thought Nike was a great company was when I was camping out at Finishline in 2006 for a new pair of Jordan’s with my friend. To see the great heights people went through for Jordan was astonishing. It showed that Jordan Brand was strong that hundred of people were willing to wait in a long line to buy a pair. Flash forward to today and again, I looked at Nike as a company that does not plan to slow down or give market shares to any competitors. Why was it considered it a great company? Here was my perspectives as a consumer.