Compounding Snowballs

Six months ago I posted my all time favorite story about Aunt Ginny . I ended that post with one question I would like to revisit, why do I invest? This question took me awhile to answer. I came up with a few main reasons that I invest and why others should. 1. The Investing Lifestyle The main reason I invest is that of the lifestyle. I’m not talking about fancy caviar or a nice house in the Caribbean. The stereotype of an investor is usually summed up to that. I like to think quite the opposite. With all the amazing investors I have met over the years, they are all three things, humble, frugal and nerdy. They would much rather buy more shares of Starbucks than flaunt their money. Investing changes your mindset and impression of money. The investors that I know are analytical and have a good sense of humor. Mistakes will be made, so it’s good to have a sense of humor and to learn from the mistakes. For those of you who are reading my blog and have yet to start investing ...

We commonly compare two similar companies, but what if we were to look at two polar opposites? Tiffany (TIF) and Dollar Tree (DLTR). Tiffany is a high-end jewelry company. They sell jewelry anywhere from $25 to $200,000. Now, Dollar Tree, that’s a different story. All their products are a dollar or less, selling anything from socks to pencils. Both companies are reasonably profitable, with margins over 25%. These companies sell to different consumers, and they are both targeting two different sides of the market. Dollar Tree is trying to offer cheaply priced products for their customers and easy to reach with 13,600 stores in the U.S. and 226 stores in Canada. They are trying to expand in Canada to have 1,000 stores in total. This may be a problem, Dollarama is a large competitor in Canada. Dollarama already has over 1,000 stores developed in Canada. If Dollar Tree was to be successful enough and get past this competitor that would not be the end of their troubles. They bought the...

Three years ago I posted on The Motley Fool about two toy companies, Mattel (MAT) and Hasbro (HAS). The post was called Invest Like a Girl, an American Girl . I compared those two to see which was a better stock to buy at the time. In the end, I came to the conclusion that Mattel was. It had a higher dividend, higher ROE, and higher margins, and lower debt and a lower P/E ratio. Those numbers would an obvious buying point right there, but looking at those two competitors now, investors would come to a much different conclusion. Since then, Mattel lost a deal with Disney concerning the production of their Disney princess dolls. That meant large sums of money that Mattel could have earned was earned by Hasbro. Lucky for Hasbro, a new movie, Frozen just came out. The popularity of earlier princesses along with the new found love for Elsa, Anna and Olaf made Hasbro’s sales skyrocket. Along with that, Hasbro had the long held contract with Star Wars to produce their toys. With Episod...

I apologize for not posting recently, my school has been hectic. Recently, I have been learning about one very interesting concept, competitive advantage. Competitive advantage is a way to identify which company has the advantage over the other, pretty simple. This concept is very, very important in investing, it helps separate good stocks from bad ones. A company’s competitive advantage is often called a moat. This is an analogy. The castle, in this analogy, is the business itself and the moat is the competitive advantage of the company. The moat protects the castle from outside attackers, or in this case, other competing businesses. The moat is a way investors identify the advantage one business has over the other. In this post, I will be talking about the different types of moats and how that can be beneficial to an investor. According to Morningstar, there are five different types of moats, Intangible Assets, Customer Switching Cost, Cost Advantage, Network Effect, and ...