Companies Die

Companies, just like human beings, follow a life-cycle. When boiled down to a rudimentary level, we can think of companies going through the phases of being born, growing through periods of childhood and adolescence, maturity after reaching adulthood and finally death.
A look at history
I recently looked up the oldest companies in the world. The oldest company on record is Kongo Gumi, a Japanese construction company that was founded in 578 CE  (that’s over 14 centuries ago!). The company was absorbed by a larger construction corporation (Takamatsu Corporation) just seven years ago after staying in the family for 40 generations!! The name, Kongo Gumi, however, survives as a subsidiary  of this construction group. Interestingly, a majority of the oldest surviving companies are Japanese – and 89.4% of all companies with more than 100 years of history are businesses employ fewer than 300 people.
The Dutch East India Company, or Verenigde Oostindische Compagnie, was one of the largest companies in the world founded in 1602. This was the first company in the world to trade shares in a public exchange, which eventually led to the creation of Amsterdam Stock Exchange. The company eventually went bankrupt in 1800. 
The first company to trade on the New York Stock Exchange in 1792 was The Bank of New York, founded in 1784 and still exists and publicly trades today. The company merged with Mellon Corp in 2007 and is now called The Bank of New York Mellon Corp (BK).
Dividends
The first ever dividend paid in the US was by a company called Citigroup (C), founded in 1812 and paid its first dividend in 1813. Unfortunately, Citigroup has lost its dividend paying streak and the title for the longest consecutive dividend paying streak goes to York Water (YORW), which has been paying dividends since 1816 (a 198-year streak!).
The oldest consecutive dividend paying company in Canada is Bank of Montreal (BMO), which has paid dividends since 1829, with The Bank of Nova Scotia (BNS) a close second that started paying dividends in 1832.
Companies die
The banking sector was hot and lucrative business in the 19th century and still continues to be. However, investors should be vigilant and monitor their investments while staying invested – as large corporations with a long history can go bankrupt and dissolve. The recent financial crisis provides us with plenty of examples of such events: 
  • Bear Stearns (1923-2008) was a global investment bank and securities trading and brokerage firm, which was absorbed by JPMorgan Chase (JPM).
  • Lehman Brothers (1850-2008) was the fourth largest investment bank in the US that went bankrupt in 2008.
  • Wachovia (1879-2008) was the fourth largest bank holding by total assets in the US, was absorbed by Wells Fargo (WFC).
  • Washington Mutual (1889-2008) was the largest savings and loan association in US that collapsed in 2008.

Stay Vigilant
Companies go through a life cycle of birth, growth, sustained maturity and death. Even if a company has had a great history and performed well in the past, investors should always stay vigilant on the future outlook and consider if the business model of a company is sustainable. The old adage buy and hold forever really should say buy and closely monitor. The new global economy, current environment and the connected world has made it easier than ever to start a new company. Whether a company will survive and thrive is a whole other story.
Disclosure: Long BNS, WFC. My full list of holdings can be found here.

Chatter Around the World – 39

Chatter Around the World is a weekly link update of economics, investing, dividends and personal finance articles that have caught my eye. In these weekly updates, I also capture my blog updates and news related to my holdings.

 

New Blog Posts

Let dive into the links that caught my attention this week.

Updates from My Portfolio Holdings

General Reads

Dividend Reads

Dividend Stock Analysis


< All Previous Weekly Links

Have a wonderful weekend.

Investing Lessons I’ve Learned

The following post is written by Bryan, the founder and blogger at IncomeSurfer.com
Hello! I am Bryan, the founder of IncomeSurfer.com. On Income Surfer you will read about techniques and strategies to live a fulfilling and balanced life, both financially and relationally. I offer a monthly newsletter that includes changes in my family’s portfolio, assets we are looking at buying/selling, and interesting articles that give a historical perspective to the capital markets. You will also read articles about my family’s quest for balance, our travels, and how we have changed our lives to be more fulfilling. My business partner and I currently have three outstanding valuation tools under development. Income Surfer is also on Twitter, @IncomeSurf.
My wife calls me a helper. I like to help people. Stranded motorists, confused neighbors, the homeless in our community. I genuinely enjoy helping people. I believe I’m paying it forward, because so many people helped my family build our life. With that in mind, below are 10 investing lessons I’ve learned. I hope some of you can benefit from my successes, failures, and general ideas. 
Investment fees: You get what you don’t pay for- I know I’ve spent a lot of time writing (my most recent article) about how fund expenses and fees are detrimental to your investment returns. Worse yet, costs compound just like returns. In fact a 2.5% fee deducted from an 8% investment return, would reduce the theoretical portfolio return by 50%….over a 40 year time horizon. While a 2.5% fee sounds expensive, many investors pay even more. Suggestion: Know your expenses and minimize them where possible
No one cares about your money like you- This may come across as common sense, but many investors need to be reminded from time to time. It is far easier for an investor to be lazy and blindly follow the suggestions of a broker or financial planner, than it is to ask questions and put in the time to learn what is going on. “That’s what I pay them for” you might say, but the fact remains that your hard earned money is on the line. Ultimately you are responsible for your money, and your lifestyle would suffer if something went terribly wrong in your portfolio. Suggestion: (If you use a financial professional) Ask lots questions and put in enough time so that you are comfortable with: 1. Your investment professional, and 2. The investment approach and allocation you settled on.
By the time your investment thesis has been embraced by the news media, it’s too late-How many times have a family member or friend told you about their new “can’t miss” investment idea……which in your mind has been a well established theme for months or years? This has happened to me more times than I can count, and it usually ends very badly for those last to the party. The fact of the matter is that most retail investors have horrible timing. Whether it was rental housing in 2006, Chinese stocks in 2007, or internet stocks in 1999, the top was near. While there isn’t a hard and fast way to recognize that an investment theme has gotten frothy, some easy clues can be found in the news media. When national magazines and television shows are full of features of investors who “hit it big” with a given asset, or the financial projections where a given asset class will grow forever……recognize that the end is near. Whether the result of competition, speculation, or “irrational exuberance”, such booms always end. Suggestion: Don’t invest in something when everyone you know is already invested in it. More times than not, you’ve missed the boat.
Best values are often found in out of favor assets- As I mentioned in my article a few weeks ago, I often find my most compelling investment ideas in “out of favor” sectors or companies. While not always the case, these groups of shunned and beguiled companies are a great place to search for investments. As I documented in the free March Newsletter, I began to invest in emerging market stocks again during the late January/early February sell off. At that point, most emerging market index returns had been negative for the 6 month, 1 year, and 3 year time periods. Investors had largely given up on the “emerging markets story”. Suggestion: When you’re looking for new investment ideas, take a cautious look at the worst performing or least liked investments. 
Time is your friend- I can’t stress this lesson enough to young people. Many of my best investments, were my earliest investments. Within our dividend growth portfolio, it is incredible how much the quarterly dividends have grown since the investments were originally made. This is an example of giving companies time to grow their profits and dividends. Suggestion: Begin investing in your financial future as soon as you are reasonably ready.
There are as many investment styles as there are investors- Each person’s personality and investment style are different. One of my best friends is a stock trader….and a very good trader. In fact, his portfolio did better than mine from 2008 to 2011. He used leverage and had fantastic returns over those years. I began to wonder if I was doing something wrong, because my results lagged his, and I was still investing how I had in the mid 1990s. I have always made a few swing trades per year, but I began to think about making more and riskier trades. Fortunately, I realized that his returns weren’t taking anything away from my returns……and that my fundamental value style was better suited to me. Ironically, after increasing his money 5 fold in three years….he quit stock trading all together. He found it to stressful, so perhaps it wasn’t suited to him either. Suggestion: Utilize the investment approach that fits YOUR goals and needs.
You can trade junk (if you must), but only buy quality assets- Keeping with our discussion of trading, I believe it’s fundamentally important to only buy quality assets. I ONLY buy assets that I can see owning for the next 10 plus years. Anything else, isn’t worth my time or investment capital. The fact of the matter is that I’m not good short term market timer, but if I can old quality assets for longer periods of time…..I don’t have to be as precise in timing my purchases. Suggestion: Be sure to differentiate between mediocre and quality assets. Only buy the quality assets.
Save Early, Save Often- This goes back to my discussion above about time being our friend. The sooner you start saving, the more you can save, and the more time you can give your investments to perform. It’s a simple mathematical exercise to demonstrate why a 25 year old needs to put away dramatically less money (per year) than a 45 year old, in order to achieve the same result years later. If you don’t save money, then you won’t have any money to invest. Do yourself a favor and start early. Suggestion: Begin saving in an automatic and consistent way, as soon as you are able.
Get better investment returns by knowing and understanding yourself- I wrote a whole article on this point, last month. I feel it is essential to understand your strengths and weaknesses, and do your best to capitalize on your strengths and minimize your weaknesses. Many investors are impulsive and emotional, for example. I’m certain that those investors would benefit from employing a dollar cost averaging approach to investing. That way they are not tempted to buy (or sell willy-nilly), and instead stick to a program. Suggestion: Take some time to understand yourself, especially your strengths and weaknesses.
Follow YOUR plan- This is my most important suggestion. It has elements of each of the lessons listed above, but is wrapped in a comprehensive shell. It’s fine to reanalyze your plan every couple years to be sure it’s working out as planned, but something may be wrong if you change your strategy that often. The number one thing you shouldn’t do is change your plan every year to reflect the approach that made the most money the prior year. As silly as it sounds, I know several people that chase returns in this way. Surprise, surprise, their portfolio dramatically underperforms the indices. Suggestion: Once you develop your plan, be very slow to deviate from it.
What have I missed? What lessons would you like to share?


Quarterly Update – Q1 2014

Welcome to my quarterly update for Q1 2014. This is part of  a new series where I track my progress on a quarterly basis. I present three parts in this series: (i) Investment Update, (ii) Passive Income Update and (iii) Blog Update.

1. Investment Update

I purchased the following equities during Q1 2014.
In addition, I continued investing in the funds with monthly contributions in the following.
  • Claymore S&P US Dividend Growers ETF (CUD.TO)
  • CI Signature High Income (mutual fund)
  • CI Global Health Sciences (mutual fund)
  • iShares Canadian Financial Monthly Income Fund (FIE.A.TO)
  • Scotia Canadian Balanced Fund (mutual fund)

2. Passive Income Update

My passive income for the quarter was $1,322.47. To reach my 2014 goal of $4,000 in passive income, I need to earn $1,000 per quarter and it appears that I am right on track!
    Year
Q1

(Jan-Mar)

 Q2 

 (Apr – Jun) 

Q3

(Jul – Sep)

Q4

(Oct – Dec)

2013 $383.65 $516.32 $718.33 $1,063.97
2014 $1,322.47

After a record of passing $1,000 per quarter in Q4 2013, I was able to repeat the feat in Q1 2014 and improve that number by 24.29%. To put things into perspective, I am already at the half-way mark of my total passive income from last year (a total of $2,682). See my progress here.

Most of the my passive income comes from my investments in dividend paying companies, but part of the growth in passive income also came thanks to what I call other sources of passive income, which includes cash back rewards credit card, advertising revenue from this blog, interest on cash and writing premium articles for Seeking Alpha. As you can see from the chart below, my other category has jumped significantly. For Q1 2014, my other passive income totaled $426.17. I look forward to investing proceeds of these sources into stocks and funds to compound my growth.

 

3. Blog Update

Pageviews
The blog traffic has increased by leaps and bounds over the course of Q1 2014. The three months in the quarter saw the following figures:

  1. Jan 2014: Total pageviews = 20,000. Unique visitors = 4095
  2. Feb 2014: Total pageviews = 13,252. Unique visitors = 2380
  3. Mar 2014: Total pageviews = 16,410. Unique visitors = 2995

Going forward, as a short term goal – I will be aiming for a consistent traffic of higher than 20,000 pageviews per month.

Yakezie
In February, I joined the Yakezie challenge. This is a self-regulating challenge that blog user set to reach a higher rank in the Alexa ranking system. When I signed up, my blog’s global rank was 565,407. My goal is get into the top 200,000 in six months since I signed up (deadline is Aug 11, 2014). My current rank is 507,468 – so Roadmap2Retire has climbed  57,939 ranks in 48 days.

Facebook
Roadmap2Retire is now on Facebook. If you haven’t Liked the page yet, make sure you Like Roadmap2Retire and never miss a post.
That’s all folks! Thanks for reading. Be sure to leave a comment at the bottom – I love to hear from the readers on your thoughts and opinions.

Chatter Around the World – 38

Chatter Around the World is a weekly link update of economics, investing, dividends and personal finance articles that have caught my eye. In these weekly updates, I also capture my blog updates and news related to my holdings.

New Blog Posts

Let dive into the links that caught my attention this week.

Updates from My Portfolio Holdings

General Reads

Dividend Reads

Dividend Stock Analysis

March Updates


< All Previous Weekly Links

Have a wonderful weekend.

Image Source: The most important export good from every state – I didnt realize that Airplanes was the most important good from so many states (some surprising ones for me such as California and other southern states like AR, KS, KY etc)