Every year, a trip to the Doctor’s to receive a physical is done, fortunately besides doing a number of tests, the results have been a good checkup. The things that were done right whether by accident or design, the Doctor encourages me to keep doing them.That is helpful advise because it means with a few adjustments here and there, the likelihood of doing them in the future is very high. Unlike my dentist who wishes flossing would be done more. Somehow that is just not in my daily routine, even though steps have been made to make it easier.

Similar to a physical checkup, it is a good time with year end and the beginning to file taxes to do a financial check up. If you have debt – pay it down till you are either comfortable with it or the debt is paid off. Think of the debt similar to investing, what is the rate of return? for example some credit cards carry an interest rate of 19% so your return is – 19% if you make payments. If your investments make greater than 19%, then it is offset. If the debt is not offset, either the investments have to be raised or debts has to be lowered and in 99.9% of cases, the lowering of debt is the easiest method.

Linking to dividend paying stocks – it is good time to look at your investments. You picked them for a reason, at the time the reason was good. Similar to months of the year, the reasons change. There are good dividend paying companies which are relatively consistent in their returns year over year. Those types of investments would be the ones to gravitate towards. Being positive on a year to year basis increases your total return and that is a good thing.

There are more questions than answers, till the next time – to raising questions

The other day, an university sent a supplement in the mail, it was designed to raise its profile and act as funding vehicle. The university is located to the west of the city the writer lives in and I have been to it a couple of times in the past, once to see where it was. The reason it is noted to the west, when I typically leave the city, 95% of the time I go east towards the sea, which means the familiarity with those institutions is higher. Looking through the supplement, leads me to believe the services, programs and people are of the same high quality as the eastern institutions but still the car typically drives east.

Linking to dividend paying stocks, we all have biases and it is ok. We have biases in where we live, in the stores we choose to spend our money at, and the way we live. It makes us who we are. The trick is recognize the biases, and every once in a while see what you are missing because of them. The writer remembers when Wal-mart came into the market area, some people said they would never shop there, others looked at the consistently higher number of cars in the parking lot and bought the stock. They both saw the same thing and both were correct.

There are more questions than answers, till the next time – to raising questions

The industrial revolution was started with the manufacturer of cloth to be sold around the world. It meant the price of clothing went down, most of us know that, but have you ever been into a textile shop? The writer was in such a shop which was filled with thousands of different types of cloth or textiles. From the conversation the shop owner was having with customers, I could tell the owner knew where all the different cloths were and equally important what he did not have. From an observation point of view, it was very interesting.

Linking to dividend producing stocks – each of us knows something more than others, either from where we receive our money, our interests, but something. Similar to looking at all the different types of cloth in the textiles shop, there are many stocks that could be invested in, when you start with dividend paying stocks the field is quickly narrowed. It is the opinion of this blog it is important to narrow the field to companies that make profits to pay the dividend. By starting with these companies, the result will be to ensure what you know most about, you can continue to do.

There are more questions than answers, till the next time – to raising questions

The writer was scanning the weekend newspapers and saw an article by Rob Carrick (rcarrick@globeandmail.com) called Got two minutes? You could beat the market.

His idea is to narrow the field to dividend paying stocks and then ask what would happen if you invested equal amount of money in the two largest companies measured by market capitalization in the following sectors – energy, materials, industrials, consumer discretionary, consumer staples, health care, financial, information technology, telecommunications, utilities? Market capitalization is the number of shares outstanding times the market price and is usually included in the charts listed in the financial section.

According to Moringstar who helped Mr. Carrick in the Canadian markets, the results are the portfolio beats the broader index. If 2012 the results were a total return of 8.9% versus indexing of exchange of 7.2%.

The issue is the risk versus the return. If you can lower the risk and receive better returns, then it is an idea worth considering. By investing in the largest market capitalization companies, unless a disaster happens to the company (and it does happen see BP), generally the largest market capitalization companies will be reasonably stable over the year. If the companies are stable your risk is lowered. The measure to only include companies which pay a dividend means your total return will be higher.

You can do this strategy for any stock market around the world and will achieve similar results. How much money do you need to implement? In an ideal world, which most of us do not live in is $100,000. In the real world, where most of us do live in, start with the industry group(s) you know best, or the company’s that have a higher barrier to competiton and add to it. Over time, your portfolio will grow and soon you will have shares in the index subgroups. Sometimes in the investing world, we think we need to have a pulse on the market and know more, the two minute strategy is along the lines of keeping it simple and not losing your money. Gather all the information you need but look for relatively easy methods to determine what is good and when you should exit or sell some of your holdings.

There are more questions than answers, till the next time – to raising questions

In scanning through various newspapers and magazines (most on line), an interesting idea can forth by David Berman (dberman@globeandmail.com). Mr. Berman states one method to profit from the US housing market upturn is to buy Ford. Most investors are regular people who do not spend hours reading annual reports, but do all the things that are necessary to make an economy work. This means their days are doing other things, but everyone has an idea. In this case, Ford builds the type of trucks that contractors want to own and has a dominant share in the market. If you are in North America and go by a construction site, what type of truck do you see?  If you see a number of F series pick-up truck by Ford, then you go to the next step.

The second step is to look at the financials of Ford, because Ford is a large company, how much money does Ford make from the trucks and how important is this market to their financial results? In this case, Ford and GM have 93% of the pick-up truck market, the companies generate as much as $10,000 profit per truck, and for Ford the F-series is responsible about 90% of Ford’s profits. The theory is valid.

The final step is to determine when to buy the shares, is it a good time? Yesterday, Ford announced an increase in dividend to 10 cents a quarter to yield 2.9%.

The reason the writer likes the Ford story is everyone has ideas and buys things in the marketplace. Some of the things you buy are good investments, some of them are small parts of very large companies, that is when you have to do steps 2 and 3. The easiest place to start is what you do or observe on a regular basis..

There are more questions than answers, till the next time – to raising questions.

John Del Vecchio and Tom Jacobs have written a book called What’s Behind the Numbers published by McGraw Hill companies 2013. Mr. Del Vecchio helps run the Ranger Equity Bear (a $260 million fund) and Mr. Jacobs is a value oriented investor believes you can make money by avoiding companies likely to become losers.

Blackstar Funds studied the performance of all the shares traded on major stock exchanges from 1983 to 2007. Some made money as the market rose 900%, however , 39% of all those stocks produced a negative total return; 20% lost at least 75% of their value; and 64% performed below the average index fund.

The above means 25% of the stocks on the stock exchanges produced most of the gains. The big question is how do you ensure your money is in the 25% rather than the 75%?  The authors believe checking companies to see if they are stretching the generally accepted accounting rules is the best way. If you paid your bills on time, generally you would likely pay x amount of days after you received the bill. If money is tighter the x days would begin to stretch. The same thing with companies – they would want to show the economy has not changed the outlook for the company. One useful tool to check is day sales outstanding. This is a comparison number, how long does it take to get paid by customers; how long does it take to pay its bills? If you see the numbers are getting longer, you know something is not stable. Then after more research you will reach a decision. There is great deal more information in the book, but the premise is always how do you narrow the list of potential stocks to be in the 25%.

Linking to dividend paying stocks – the premise is more stock investments, half the battle is picking companies that do not lose your money, one of the best methods is to start with dividend paying companies. Most companies on the stock exchange do not pay dividends (paying dividends helps narrow the field) and if you also add companies that have paid for a number of years and the dividend has increased over that time, you will continue to narrow the field. If you stick to these types of companies you will be better off in the long run.

There are more questions than answers, till the next time – to raising questions.

Over the holidays, the writer read the book, The Google Way by Bernard Girard, no starch press, San Francisco, 2009. In the book, Mr. Girard looks at the management system to see how Google is run and then you can then link it to either your company or companies you follow. Could they or should they be more like Google?

Google is one of the best search engines in the world, and the company has kept the philosophy of putting users first, the rest will follow. Google has been trying to do this and as long as it keeps trying, people will continue to use it as a search engine. The last two posts looked at how Google is managed, given that Google is very successful, there are things to learn and pieces of the puzzle that need to be put together.

Google is a very analytical company, it measures and analyzes everything. As a company created by computer scientists trained in the discipline of math, Google clearly sees metrics as highly important. Nothing moves forward that is not backed up by data or can not be proven is prevalent with Google.In addition, with the peer review focus, Google has a decentralized approach to sharing information and ensuring it is distributed broadly within the company.

Every company that develops in size will have some flow chart problems in organizing their staff, Google has developed an flow chart that looks like a rosette or star polygon. Everyone in the company has a relationship to everyone else, which implies an ability to communicate with everyone. This ability to communicate can be done through internal blogs, small meetings (meetings greater than the ability for 2 pizzas to feed are too big).

Google does a number of things really well, the cost of ad sales is low, the search engine is great, many of its applications are wonderful. Google continues to define given the great information on the web how does a phrase or word come higher up in the search (allowing for most of us not to scroll through 10 pages to find what we are looking for) However, having wonderful applications does not necessarily translate into greater and greater revenues, so Google does have its problems to solve.

There are more questions than answers, till the next time to raising questions

Over the holidays, the writer read the book, The Google Way by Bernard Girard, no starch press, San Francisco, 2009. In the book, Mr. Girard looks at the management system to see how Google is run and if you can then link it to either your company or companies you follow. Could they or should they be more like Google?

Similar to every company, Google tries to recruit the best, however the process to recruit at Google is time consuming. The basic two part process is degrees and academic qualifications are used to evaluate personal qualities such as chosen career path, rigor in reasoning and autonomy. An equally important part of the process is the second part – the candidate must convince his or her future peers that he or she can solve the problems encountered in the everyday work environment. This involves a number of interviews with potential peers. Many in Google are part of the HR team. Once hired, Google wants to retain the workers and besides the great perks, one of their best methods is the 20% rule. The rule is the employee can devote up to 20% of their work time to projects of their own choosing. Peer assessment is involved with the evaluation of the 20% projects. The benefits include doing something you want to that is related to what Google does; increased peer recognition and new products such as Google Suggest, AdSense for Content, and Orkut have come out of this arrangement.

Google was started from a university setting, which means peer review is very important to the dna of google. One example of a reason why peer review works well is  programmers submit projects to other programmers who know the difference between what is good and great. In order to submit their project, they show the code.

Innovation in every company is a goal, but Google is one of the few companies to continually release non perfect software. Most companies send out the expected final copy, Google releases non perfect or beta copies with the understanding and expectations, it will receive feedback on better fixes from the world of first adopters and people hoping to work at Google. One of the reasons Google can release non perfect software is most of its products are non dependent on each other. The enhancements enrich the program rather than having users to relearn the application.The company also sponsors a best code competition – the first winner’s idea resulted in what became Google Local.

There are more questions than answers, till the next time to raising questions

Over the holidays, the writer read the book, The Google Way by Bernard Girard, no starch press, San Francisco, 2009. In the book, Mr.Girard examines the management system of Google to see how it is run and if you can link it to either your company or companies you follow. Could they be like Google?

Google has one of the best search engines in the world and makes money from advertising, although the front page has no advertising.

Part of the reason why Google is a successful is the company is patterned after university professor management system. Google started in an university (Stanford), maintains good relations with the scientific community and tries to solve its problems with a combination of programming theory involving solving math problems and network sociology. When Google started it was blessed with an environment for innovation. Studies show the more serial entrepreneurs that are located within an area, the more successful companies will exist. The area around San Francisco is teaming with successful start ups. In California, the absence of non compete clauses allowed for job mobility so  ideas and people moved between companies to exploit ideas. At the time Google started, the IT business was not patenting every procedure. This lead everyone using the the same system, only made better – Windows copied Macintosh which copied Xerox Star’s windowed interface.

The Google economic model is to offer free search and then get paid from the advertising. Advertisers pay a fee each time someone clicks a link to their website. Also advertisers bid on keywords or phrases – ads that are clicked more often, using the same keywords tend to appear higher on the search page. In addition, Google sells adwords – the ads on the side of the page which look like classified ads. These ads are called informative ads and you either click on them or you do not. To place an ad, the process is automated which reduces the cost of sales.

There will be more parts in the coming posts for Google continues to be profitable and a growing influence.

There are more questions than answers, till the next time to raising questions