How I love Warren Buffett! One of my bucket list items is to go to the Annual Shareholders Meeting in Omaha, the four day Buffett bacchanalia. I am working on a book on Buffett and won’t tell you much more but the more I read about his idiosyncrisies, investing mistakes, and personal history the more I like him, not admire him, but deep down like him.

I wrote this piece on Buffett’s biggest investing blunders only to find myself even more charmed by his candor and humor. Jon Hamm, watch out!

http://www.dailyfinance.com/2014/03/26/warren-buffett-biggest-blunders-investing-tips/

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How The Stock Market Saved My Life

When I first started in stocks I did not know the difference between a bull and bear market; that’s how naive I was. But I girded my loins (whatever that means!) and opened a trading account.
My first buys were very tentative. I literally felt sick to my stomach as I hit the buy button.
I bought some big market cap names (market cap is the share price multiplied by shares outstanding). I was lucky enough that my first buys were during a market dip. At that time it was the “Asian contagion” and worries over China. These were pressuring the overall market.
These funks are as frequent as bad moods in a teenager. If you look at the market historically it could be considered a teenager: rapid growth over the last 30 years, still feeling its oats or what the Street calls “animal spirits”, ups and downs.
Soon enough, I had stock market profits. Within six months I had a 30% gain in my portfolio. I read more every day, principally Investor’s Business Daily, and watched CNBC obsessively.
Within a year I owned 30 different stocks. I was making enough for us to live on as long as we lived frugally.
Most importantly, this new interest sparked a greater curiosity in the world outside my little milieu. I noticed what people ate, what they wore. When taking the occasional Saturday errand drive the stock tickers of various businesses I passed would flash in my mind much like when clues light up on Psych or the BBC’s The New Sherlock Holmes .
I would wake up no later than an hour before the market opened, 9:30 am, and scan the headlines on Yahoo! Finance while glancing at CNBC or Bloomberg. When the bell rang for the commencing of trading, I would always say out loud in my superstitious ritual,”And they’re off!”. I had a purpose to get up in the morning and stretch my mind.
Trading small speculative positions was my life. While the majority of my portfolio were companies that offered a yield, the big money I was making came from small caps(just over $200 million in market value), not penny stocks, no, never, penny stocks.
The work didn’t end on weekends, or holidays, either. Those were times to drill down on my respective positions and check out promising additions.
After a few years of trading and reading and studying I started writing articles for The Motley Fool on stocks and investing. I loved it, writing as an investor for other investors taught me more in eighteen months than six years of investing.
Why should you care what I think? I am not a hedge fund owner nor do I pretend to have a degree in finance. I do think a motivated investor can make money, I know she can. At the very least by frugal living and prudent investing you can start amassing pots of money.
I made mistakes you can avoid.
Oh, yes, I made mistakes. Mistakes that, looking back, were such boners that I can barely think of them without cringing. I want you to know about the boners and the blessed trades, both.
The understandable desire not to publicly reveal a failure is one of the drawbacks of how-to investing books. I won’t even say this is a how-to or even a how not to. Draw your own conclusions but after writing approximately 500,000 words, the equivalent of five, count’em, five novels I know I can teach you some basics.
Stay tuned.

Super Bowl Profit Stocks

Dip, pizza, chips, wings, and soda are mainstays of any Super Bowl party. During the biggest sporting event of the year, 27 billion calories worth of potato chips, 8.2 million pounds of tortilla chips, and 41 million bowls of guacamole are expected to be served. 

Americans are expected to spend an estimated $50 million-plus to fuel game day gluttony. While spectators chow down on Super Bowl Sunday, revenues for these three companies will be fattening up.

 Game day without guacamole? Unthinkable.

More than 100 million pounds of avocado are expected to be devoured over the Super Bowl weekend, according to the Hass Avocado Board. That number is a 32% increase over last year. With only 8 million pounds of avocados enjoyed in 2000 for the big game, that’s a twelve-fold increase.

Calavo Growers, CVGW, a small-cap avocado, papaya, and tomato distributor, is on a huge growth trajectory thanks to the ever-growing popularity of salsa and avocados. It is trading near 52-week highs, up 35% over the past year. 

Calavo markets for 1,600 growers in California and has alliances or joint ventures with growers in Chile, Mexico, and New Zealand. The company doesn’t elicit much coverage, either in the press or by analysts. That’s a shame because it is outperforming better known competitor Fresh Del Monte Produce.

The amazing growth of avocados’ popularity has allowed Calavo to increase its dividend by 225% since 2002. The yield is now 2.20%.

Speaking of guacamole, how can you possibly watch football without chips to scoop it up with?

Tostitos, Doritos, Fritos, and the sofa-staining Cheetos are mainstay game day fare. And don’t forget the twelve-packs of Pepsi or Mountain Dew.

These are just some of the 22 flagship brands each earning $1 billion annually for PepsiCo. PEP (Fun fact: Those coolers of Gatorade poured over the victorious coach… also a brand owned by PepsiCo.) Do your guests have more sophisticated tastes? How about some hummus instead? PepsiCo owns Sabra hummus, too.

In fact, half of PepsiCo revenues come from food, not beverages.  That diversification is what makes PepsiCo a more alluring investment than rival Coca-Cola, which is more exposed to the declining trend in soda consumption as carbonated soft drinks are being supplanted by teas, waters, juices, and energy drinks.

Moaning on the sofa the day after the Big Game, shareholders can at least be comforted that PepsiCo will be fattening their wallet not only with share price appreciation (14.7% over the past year) but also dividends and buybacks. PepsiCo has returned more than $53 billion in the last decade with buybacks and dividends. PepsiCo has also increased that dividend for 41 consecutive years. It now yields 2.70%.

 

 While players on the field will experience intense pressure on game day, so too will Domino’s Pizza DPZ.

Super Bowl Sunday is the most important day of the year for mid-cap Domino’s. The company expects to sell 11 million pizzas slices and 3 million wings, adding up to 80% more  sales than an average Sunday.  Deliveries will tote up an estimated 4 million miles for Domino’s.

This year, the company says it “expects to see a 30 percent increase in digital orders over a typical Sunday.” Domino’s owns a third of digital pizza sales, adding up to $3 billion annually. Digital is critical to Domino’s and its ordering apps are represented on 95% of smartphones. You can even order Domino’s over your Ford Sync AppLink on your way to the party. 

Domino’s stock has surged since the company reinvented its recipe from scratch in 2010, replacing 85% of its menu with new products. The move has been a win for investors and pizza lovers: The stock is up 57% over the last year alone. Plus, Domino’s smoked rival Pizza Hut (owned by Yum! Brands,) in a Huffington Post pizza deathmatch, scoring 72% of votes in that match last fall.

Domino’s dividend yields 1.10%, but at a trailing earnings multiple of 30.91 is expensive compared to PepsiCo’s 19.22 and Calavo’s 26.54.

 Come game day, take a look at your Super Bowl Sunday spread. Is your snack table dominated by products from these three companies? Perhaps you should clear a place for them in your portfolio, too. That way if your team doesn’t win the big game, at least the consolation prize comes with some upside potential. 

How Student Loan Debt is Everybody’s Problem

It’s no secret that student loan debt makes it harder for young people to get ahead. It turns out that their burden is even worse than we thought — and, in fact, it’s bad for anyone with a financial interest in real estate.

 Since 2003 the numbers of students taking on debt has climbed from 25% to 43%. The graduating class of 2012 is looking at an average $29,400 in debt, up from $26,600 for the class of 2011.

Those debts are keeping young people from buying homes, cars, and even has couples delaying marriage and having children.  In fact, for the first time in decades young people without student loan debt are buying more cars and houses than those with student debt. 

According to an April Federal Reserve Bank of New York study, “As a result of tighter underwriting standards, higher delinquency rates, and lower credit scores, consumers with educational debt may have more limited access to housing and auto debt and, as a result, more limited options in the housing and vehicle markets, despite their comparatively high earning potential.”

 

But why should you worry? Unless you just graduated from college, chances are you don’t have a $30,000 IOU looming. Well, unfortunately the plight of Generation Debt has consequences for all of us, especially investors. Economists are concerned that an entire generation of renters has been born. This is a disturbing trend for the housing market, with the National Association of Home Builders going so far as to say that it is dampening demand for new homes.  

 We’re already seeing the damage that this negative trend wreaks on homebuilders with the most exposure to starter homes, especially in suburban and exurban areas. Those homebuilders are KB Home (NYSE: KBH  )  and Beazer Homes (NYSE: BZH  ) .

Beazer Homes recently reported its first profitable six-month period since 2006. It also revealed that most of its new land spending, 70%, was concentrated in the Mid-Atlantic, California, Florida, and Texas.  Still, this homebuilder has almost no presence near some of the best job markets for Millennials: Austin, Denver, San Francisco, and Seattle.

KB Home is off considerably from its 52 week high of $25.14. The company does, however, have some exposure to these Millennial hubs, with communities in Denver, the Bay Area and Austin. It is a slightly better proposition than Beazer with a 0.60% yield and a forward earnings multiple of 13.29, but both builders have a high short interest of over 35%.

So, what about when these Millennials pay off their debts and become more established? Surely homeownership is in the cards someday, right?

It’s complicated. Once upon a time the white picket fence was the dream, but now it’s being cast as a prison. Todd M. Schoenberger, Founder of LandColt Capital LP, penned a controversial article for CNBC explaining why homeownership is for suckers. He cited rising mortgage and property tax rates and increasing costs of home maintenance should be deterrents to new buyers.

Millennials agree and have a sneaking suspicion that homeownership is a “sucker’s paradise” after growing up with long memories of family job losses or money troubles.

What’s bad news for home builders and real estate agents needn’t be bad news for investors.

Playing to a generation of renters is the strength of AvalonBay Communities (NYSE: AVB  ) , a REIT owning 164 multifamily (apartment) communities located near metropolitan hubs.  Avalon Bay also benefits from some other Millennial trends: their exodus into urban centers where the jobs and public transportation are, tighter credit requirements for all homebuyers, and a reluctance to buy a home in an uncertain and rapidly changing job market. The stock is on sale now thanks to their latest earnings release, which revealed apartment rent revenue in the D.C. area had declined, mostly thanks to government cuts.

However, as CEO Timothy Naughton noted on the third quarter earnings call, their prime demographic of ages 21-35 continues to provide a tailwind with ~5 million individuals turning 20 in 2013. He added that housing supply in job hubs has been constrained and that, “Witten [Advisors] is projecting that 7 of the 8 outperforming markets in the 2013, ’16 timeframe will be in AVB’s footprint.”

CFO Sean Breslin pointed to its Pacific Northwest and Bay Area properties, all of which are doing well and are expected to continue to do so thanks to the growth of tech jobs in the area. Breslin also reported that rent revenue was rising in NYC and New Jersey as those areas continue to be job destinations for ambitious Millennials.

 For the foreseeable future the trend is much better for rental apartment housing, especially in the job hubs where AvalonBay has rental communities. Student loan debt will continue to spiral higher and adversely affect the influx of new homebuyers for years to come, as will a tight job market. With AvalonBay’s stock at lows due to only one flat market, now is a good time to check in.

Mom and Pop Investing

After over 500 articles for The Motley Fool I think there are some basic, safe stocks for the mom and pop investor. Especially the mom investor.
Behavioral economists have proven that women are better long-term investors than men. They take fewer risks, trade less, and sell losers faster. Still, a majority of women are intimidated by the stock market, and younger women are the most afraid of all.

A recent Fidelity survey found that women are more likely to defer investing decisions to their spouse or boyfriend. The most surprising finding was that Gen Y and Gen X women rate themselves as less financially capable than Boomers or retired women.

There are theories floating around as to why younger women are spooked by investing. Chief among these are recent memories of the financial crisis or the aggressively masculine tack that financial services and the financial press take. That said, women should invest for their own peace of mind and security.

Start young
According to Learn Vest, one in four women now earn more than their partners and outlive these partners by five years on average. These younger women have the advantage if they start investing now thanks to the magic of compound interest. One of the best way to take advantage of compound interest over the long term is by investing in quality stocks that pay dividends. Put simply, a dividend is a taxable payment to shareholders given out as a percentage of a company’s earnings — known as the “yield” — and usually paid out once per quarter. Over the last 80 years, 44% of stock market returns are attributable to dividends. By reinvesting dividend payments back into their shareholdings, investors can achieve stunning portfolio growth over time.

Even better, by investing in Dividend Aristocrats — a rarefied group of only 50 companies that have consistently raised their dividend annually for 25 years or more — new investors can sleep at night. Dividend Aristocrats are also inherently less risky, as they have proven business models and are usually committed to keeping and growing their dividends.

Because one size does not fit all, here are three Dividend Aristocrats to consider. All three are large caps with market capitalizations of $10 billion or more, making them relatively safe and stable performers. Market cap refers to the total dollar value of a company, which is the number of issued shares multiplied by the share price.

Not just good on paper
Kimberly-Clark (NYSE: KMB) is a global maker of personal paper products. You know Kimberly-Clark’s products: Kleenex, Scott paper towels, Cottonelle bath tissue, various feminine products, and Huggies diapers. Four of the company’s brands generate $1 billion-plus in revenue annually.

It offers a respectable 3.1% dividend yield and has a low beta of 0.12. Beta is a measurement of a stock’s volatility — i.e., how much the stock’s price will fluctuate in relation to the broader market. Kimberly-Clark’s beta of less than one means the stock’s price is relatively stable and not particularly sensitive to the market’s ups and downs. Another shareholder-friendly benefit is that Kimberly-Clark is buying back its own shares to the tune of $1.2 billion in 2013, thereby making each share more valuable.

Kimberly-Clark surprised Wall Street when it reported a 7% rise in adjusted earnings per share for the third quarter. This was thanks to cost-cutting initiatives and double-digit international sales growth. The company also raised its outlook to reflect expectations of 8% to 10% year-on-year earnings-per-share growth.

International and emerging-market growth is the company’s key performance driver. International sales account for 39% of the company’s business, so it was encouraging that Chinese diaper sales, for example, were up 45%.

Protect your portfolio with this insurer
You’ve certainly seen the commercials starring the Aflac (NYSE: AFL ) duck. The insurance company’s stock is trading at multiyear highs, but it still has a price-to-earnings ratio of 10.1, which suggests that the stock is not in fact overpriced. Simply put, the price-to-earnings ratio, or P/E, equals share price divided by annual earnings. For example, if a company costs $10 a share and earns $2 per share per year, it has a P/E of five. Put another way, investors are paying $5 for every dollar the company earns.

The supplemental life and health insurer has an impressive net profit margin of 12.5% — net profit margin being the percentage of sales a company ultimately keeps after costs.

Aflac does bigger business in Japan (accounting for 75% of pre-tax earnings) than in the U.S. In fact, it is Japan’s leading life and supplemental insurer. However, fear of a sluggish Japanese economy has kept the stock price in check. That represents the bearish argument — i.e., the argument against investing in the company.

Not to worry: The company has more growth opportunities domestically, with 55 million Americans working for small businesses. Aflac already covers 50 million people globally. Supplemental insurance is also a more profitable line of insurance, as far fewer claims are filed — just more than 33% of premiums for Aflac compared to 75% for other kinds of insurance. Further, the stock offers a respectable dividend yield of 2.2%. That is the bullish (i.e., pro) case for Aflac.

Big money in health care
Medtronic (NYSE: MDT) is the largest medical-device maker globally, operating in 140 countries, with a P/E of 15.2 and a 1.9% yield. It has raised its dividend for 35 years and has bought back 14% of its shares over the last five years. This shows both conviction and a dedication to shareholder-friendliness.

Its stock is trading near a 52-week high thanks to FDA approval of the company’s history-making artificial pancreas following additional FDA-approved indications of its Complete endovascular stent. The company also innovates therapies for cardiovascular care, diabetes, neurosurgery, orthopedics, and much more.

Of the three companies featured here, this Aristocrat has the highest net profit margin, at 22.7%. The company is also committed to returning 50% of that free cash flow to shareholders through dividends or share buybacks.

Start investing now
The sooner you start investing, the sooner you start making money. Younger women in particular have the advantage of time. By investing in Dividend Aristocrats, you will grow your confidence in your financial acumen. Hopefully, we can soon call it financial acuwomen as women empower themselves.