Tag Archives: NYSE:KO

Do Quality Shares Lead to Lower Returns for Your Portfolio?

Managing your own stock portfolio is not easy. One of the many important decisions is choosing between quality and returns. Is there a cost in investing in high-quality shares? Could buying them lead to lower returns?

There’s no simple answer. However, your rate of return on a stock depends largely on the valuation you paid and the growth rate of the company. Besides, there are other considerations outside of aiming for high returns.

Let’s explore the answers with examples, including Microsoft Corporation (NASDAQ:MSFT), The Coca-Cola Co (NYSE:KO).

Quality companies tend to trade at premiums

Some say you can get quality and returns too. The rationale being that when you buy quality companies, their steadily rising earnings will lead to steadily rising share prices. However, if you overpay for them, the expected returns will likely be unsatisfactory. Read More

5 Ways to Save and Earn More from Investing Early

Everyone knows the earlier you invest, the more you save. But there’s so much more to it. I’ll also let you in on a little secret about quality companies. Of course, it’s not a complete discussion about investing early if I don’t illustrate the essential concept of compounding…

saving, investing, and compounding

Source: ccPixs.com

The earlier you invest, the more you save

You may think that it is a no brainer that the earlier you invest, the more you save. But actually, there are two aspects to it.

All of you already know that if you start saving $1,000 every year, that in 10 years, you’ll have saved $10,000. If you start saving five years later, in 10 years, you’ll only have $5,000.

The second aspect is that, the earlier you invest those amounts, the sooner your money starts to work for you. And that’s where compounding comes in. I’ll talk more about compounding in the last point.

In essence, if your end goal is to accumulate $5,000,000 of assets, the earlier you start investing, the less money you need to draw out from your own pocket.

However, the bottom line is that you never lose money, which is one of the 5 Important Investing Concepts.

To reduce the chance of losing money, buy quality, stable companies at reasonable valuations. What’s value? Ben Reynolds wrote a great article about Value + Growth + Dividends = Dividend Growth Investing that explains about value and other goodies.

Quality companies become more valuable over time

Quality, stable companies become more profitable and valuable over time. Given the time-value of money, the earlier you invest in a great company, the cheaper it is.

In the 10-year period of August 31 2006 to 2016 Stella-Jones Inc.’s (TSX:SJ) total returns were 814% or an annualized rate of return of 24.8%. $10,000 invested on August 31, 2006 would have grown to $91,407.

Of course, the hard part is identifying great companies early. Stella-Jones have only paid a growing dividend for 11 years. Given that some dividend-growth investors don’t invest in a dividend-growth stock until it has at least a five-year dividend-growth streak, an investor might have bought Stella-Jones six years ago.

Even so, from August 31, 2010 to 2016, a $10,000 investment in Stella-Jones would have grown to $83,933 for a total return of 539% or an annualized rate of return of 36.2%.

So, don’t shrug off a great company just because you missed the first parts of its growth. If it’s really the quality company that it is, it should continue to deliver.

Identifying the right companies for your portfolio is an essential step but don’t forget to check their valuations to ensure they’re not too expensive. If you overpay for even the greatest company, your returns will suffer.

Is Stella-Jones a good investment today? Check out my recent growth stock analysis on Stella-Jones to find out. Read More

What Does Pokemon GO Have To Do With Investing?

Nintendo Co., Ltd appreciated more than 100% in July after the launch of Pokemon GO. A month later the shares have already declined 27% from the peak.

Pokemon GO logo

Speculating is not investing

It’s great if you got in on the action before Pokemon GO was launched, but after the launch and the stock already went up, it’s too late to jump in.

To add to that, no one knows how long people will continue playing Pokemon GO. Actually, Pokemon GO already lost some users as the hype dies down a bit.

If investors are buying Nintendo just because of Pokemon GO, it’s purely speculation and not investing, unless they believe in the future of Nintendo as a company.

Besides, it’s not like Nintendo owns the Pokemon game. Check out Quora for the relationship between Nintendo, Niantic, and the Pokemon company and find out who benefits from the game.

In fact, I was surprised by the answer that Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG)(NASDAQ:GOOGL) get a share of the pie. I think both of these tech giants are better investments than Nintendo, especially Apple, which trades at about 12.9 times earnings and yields 2.1% at about US$108 per share.

Gotta catch ‘em all?

In the Pokemon world, one of Ash’s goal was to catch all the pokemon. Not for investing, though. You better not try to catch ‘em all. Read More