One Month Hiatus

It has been a little over one month since our last blog post. I wish I could say we were busy working on world peace or helping feed the poor, but we weren’t. Instead we were just caught up living a typical, albeit obnoxiously busy life. Far too busy for my liking, that’s for sure. Personally, I lost a little over a week getting over a flu bug and corresponding sinus infection. I only missed a few days of work, but I sure didn’t get much done outside of work. We also have had a couple rounds of company, and of course our very busy toddler always keeps us on our toes.

Work (my day job) has also been very busy. I hired two new field guys and a new project manager. I also was directed to fire someone on my team. So much for not being able to fire government employees. Apparently, if you really annoy and piss off your boss’s boss……you will get fired. The downside is that my group will be two people down again. The upside is that I should be able to hire a better candidate, who will be more self reliant. Time will tell.

Additionally, I’ve become involved in two real estate deals. One, has an 80% probability of happening and my broker and I will be paid a commission for putting the deal together. The other I was asked to partner on, but I think I will decline because I don’t entirely know/trust the other partner. This one has a lower probability of going through, but I should be able to negotiate a very nice commission if it does. So, all things considered February has been a pretty good month so far.

The best news for stock investors like ourselves is that our investments have continued working for us.  Even when while we have other things to address.  In the last month we’ve received dividends from numerous companies including: General Electric (GE), Kraft (KRFT), Procter & Gamble (PG), and McDonalds (MCD). Better yet, some of our best investments including Visa (V) and National Western Life Insurance (NWLI), have produced solid returns as they have continued to grow both revenue and profits. Unfortunately, Mattel (MAT) has continued to struggle as a company…….and it’s stock has been hammered. I still feel that the most recent 10% of price decline is an over reaction, based on a 6% decline in gross sales and the mess at the west coast ports. Time will tell, but at $25, we’re a buyer again.

I have also been pleased to see the yield on US Treasuries climb slightly and the price of bond proxy investments (like REITs and Utilities) decline accordingly. In my opinion all three groups are still grossly overpriced, but this is a step in the right direction. We also continue to think that emerging market economies and agriculture will be the next broad themes in which we invest. We have identified another small US based insurance company which, if our research pans out, will be our next “Cigar Butt Investment”. We’ll keep you all in the loop.

Disclosure:

We own GE, KRFT, PG, V, NWLI, and MCD. This update is for informational purposes only and should not be considered a recommendation for anyone to buy, sell, or hold any equities. I am not a financial professional. Please do your own research and seek the advice of a licensed professional before investing.

Two New Purchases

A week ago I wrote our 2014 Review, along with the opportunities I see for 2015. Less than a week later we’ve purchased two of the securities from our watch list. This week we purchased 200 shares of DBA (an agricultural commodities ETF) at $24.12. As I mentioned last week, I have had satisfactory results with this same trade each of the last few three years. The difference currently is that the US dollar is rapidly appreciating against most other global currencies….which will prove a headwind. Our portfolio focuses on undervalued companies with fantastic brands, and this is the only “hedge” type investment I make. The investment community is not anticipating any trouble (if price is any indication) with cash crops and livestock in 2015, but farming is a fickle business. A little too much rain here……not enough there…..some sort of transportation troubles…..and the price of the commodities climbs rapidly. Besides, it’s not like the global population is declining or remaining static. With so little concern priced in, I think it’s a reasonable bet for us to make.

Now for the investment I’m REALLY excited about. This week we purchased 20 shares of National Western Life Insurance (NWLI) at $237 per share. You may be wondering why I’m so excited about our recent purchase?! There simply aren’t many companies that meet ALL of the criteria to be a long term holding. The facts that excite me most, include:

  1. The company has zero debt, plenty of cash, and trades at less than 60% of book value, but…..

  2. this isn’t a shrinking business who is just gasping for life. Book value has grown 9 of the last 10 years.

  3. Insiders own over 34% of the outstanding shares

  4. The price to earnings multiple is between 7.6 and 8 (depending on the source)

  5. Double digit profit margins appear steady, as does the high single digit ROE metrics

This investment won’t be a home run tomorrow, but it looks a great company we can use to compound our capital for years to come. I added a few graphs below to illustrate the company’s track record. We are hoping to ultimately invest three or four times as much money in this company, but time will tell if Mr. Market gives us a good chance!

 NWLI Policy Graph

NWLI Book

The graphics above are from the 2013 annual report featured on https://www.nationalwesternlife.com.

Disclosure: We own shares of DBA and NWLI. Please do your own research before investing, because this post is for entertainment purposes only…..and not a recommendation to buy, sell or hold any investment. I am not a licensed financial professional, please seek the advice of one before investing.

Which investments have excited you recently?

2014 Review and 2015 Opportunities

Well 2014 is officially in the record books. While our portfolio kept pace with the S&P 500 through much of the year, and led nicely throughout the fall, the year end rally helped the S&P outperform our portfolio for 2014. This is the second year in a row that the S&P outperformed, which is discouraging, but so it goes…….

Family

On the family front, 2014 was a great year. We welcomed our first child back in the spring. I went back to traditional employment in May, so my wife could stay home with the Little Man. We have adjusted our lives to focus on intentional living, which might as well have been our motto in 2014. We chose to live simply and intentionally in order to focus on our priorities. Some examples include my wife working just a few hours a week outside our home, in order to spend her time with our son. J took a nearby government job so I could spend as much time as possible on my family and passions. Staying in our starter house because it is inexpensive, local and convenient……(although we may move in the coming year). Finally, although we would like to buy a boat or RV…..we decided against it…….because we realized we just don’t have that many weekends we can get away. We’ll stick to tent camping and canoeing/kayaking when the mood strikes us. Finally, we closed out 2014 with a trip to visit our family in the Midwest. Continue reading