If you are a value investor, one of the many things you try to do is to value the business and if the shares are trading less than the entire business, and the company does not have a problem, you would buy the shares and wait until the market agreed with you.

If you are the owner of a small or medium sized business looking to sell, similar to using staging to sell a home, in a recent article Tracey McVicar of CAI Capital Partners wrote tips how to increase the amount you are offered for your business.

Improve Your Cash-Flow Margin

In order to generate $5 million in cash flow, the following are equal a $500 million revenue at 1% margin or a $33 million at 15% margin. They both equal $5 million cash flow. Which company would you rather own? Which one has more potential? Likely the $33 million company.

Owners also have to think about how much capital investment is required to sustain their business. A good rule of thumb is no more than 20% of EBITDA (earnings before interest, depreciation, and amortization) on capital maintenance.

Reduce Customer Concentation

As a small company, you sign an agreement with a big box retailer, quickly they become 40% of your business. Is this good? it is long term? If they want it for less next year, what happens? It is good to keep your customer base diversified.

Pursue Level One Growth Opportunities

This is your basic organic growth. Can you and do you want to do more? All things equal a bigger business is worth more money if you sell.

Strong Management, Professional Processes

As the owner, you do many things, but who backs you up. What happens if you could not be at the business for a couple of months? What teams are in place? Do they have the skill sets to know the numbers, not just estimates? If you watch Shark Tank, the investors are about if you know the numbers not its about?

Emphasize Recurring Revenue

Who does not like money coming in on a regular basis? Companies that sign multiyear contracts with customers are more attractive to the buyer.

Identify Level Two Growth Opportunities

These are opportunities that are outside the founders or owner’s comfort zone. Often times founders do not want to use debt. If you did what opportunities could you move to – complementary or new?

Linking to dividend paying stocks, the companies whose shares you are buying are large organizations they should have all the above and years of experience doing all the above. As an investor, you should be able to see all of the above for they are basic to staying in business for many years. The number of zeros change, the principles do not.

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

All of us get use to what we consider to be normal. In the auto industry, the big auto plants of Detroit was the engine of growth for the economy built on the internal combustion engine. As as young person you or someone you know learnt about the engine and considered it to be normal. The world is changing and by 2030, the world will see more electric vehicles on the road. It will be normal.

The major difference with electric vehicles is they require less parts and less people to build, which means those industries are going to change over the next decade. How they change and the communities where the auto parts are located will be considerable political words spoken.

In an article by Jack Ewing of the New York Times News Service, Mr. Ewing examines the Oehringen, Germany region which has many auto parts plants. All of the world, the auto parts are made and then sent to the auto assembly plants where they are put together. This combination has proven to be successful and profitable for both auto parts companies and the autos we purchase at the dealership. As some point by 2030, they will be a drastic decline in auto parts as electric vehicles take a larger share of the market, partly driven by government incentives and concerns about green house gas.

Linking to dividend paying stocks, all industries change as government policies change. Companies that easily made profits, their margins decrease and that is an important metric for investors. As the profit margin decreases, how does the company make money? For your investments, what are the profit margins of the company when you bought your shares and what is now? It is important to keep this important metric, so you can look for alternatives.

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

In mid January, the US housing data was released and it was very good news – the numbers are increasing. In an article by Lucia Mutikani of Reuters, US housing starts jumped 16.9% in December to a seasonally adjusted annual rate of 1.608 million units the highest level since December 2006.

New housing has a ripple effect in the economy, if you buy a house you need to furnish the house. You will need a vehicle to get to the home and you have a regular income to be able to finance the home. All of that is good news for the economy in general. The housing market accounts for 3.1% of the economy but filters through the greater economy with spinoffs.

Although in the northeast, we experience snow on the ground or frozen earth which means the expected January numbers will be, there are many parts of the country where houses can be built.

Economists polled by Reuters had forecast housing starts to be at a pace of 1.375 million units in December. Realtors estimate housing starts and completion rates need to be in the range of 1.5 million to 1.6 million units to plug the inventory gap.

Housing starts include single family housing and multi family housing (5 units or more) and both were up in numbers.

Linking to dividend paying stocks, the housing market is a good indicator of how the economy is doing and when it is up, that is a good thing in general. Similar to all national numbers, you then have to decide where are the housing starts happening and where are they not. A number of years ago, the writer read the City of Detroit had not issued on building permit, changes happen and the City of Detroit is issuing permits now but took a long time to change. Macro numbers are just that macro numbers, you will need to do homework before you invest, sometimes you do need to think locally.

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

Every once in a while, the US rattles its sword against Iran for a wide variety of reasons. The problem for the US is Iran primary export is oil and other countries need the oil.

In an article by Bozorgmehr Sharadein and Ahmad Ghaddar of Reuters, Iran is selling its oil to its neighbors – Iraq and Syria by offering discounts, which defy US sanctions.

Exports of gas oil, a refined product used in heating, power generation and transport surged to 95,00 barrels a day in the 4th quarter of 2019, more than 80% higher than the previous quarter and nearly 4 times higher than the first quarter, data from consultancy FGE showed.

The oil is either goes by ship or truck to Iraq, Afghanistan, Pakistan and Syria. Unlike crude oil where the ultimate buyer is a refinery, products such as gas oil, which is refined in Iran, can find their way to thousands of industrial or residential buyers.

US Sanctions have an effect on business, it makes it harder but not impossible. Creativity plays a role.

Linking to dividend paying stocks, in all markets there are government policy which is both helpful or offers greater challenges. Since US Sanctions can not put people in jail, just put holds on US assets, other alternatives can be used. There is no rule which says all transactions have to be made in US dollars for there are alternatives. Similarly in your investing, it is better to stay within the rules and you will likely achieve old age.

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

In Mid January, Morgan Stanley reported its results and the street liked what they saw and heard. In an article by Abhishek Manikandan and Elizabeth Dilts Marshall of Reuters, Morgan Stanley set the bar for expense controls, returns on equity and wealth management profits for the next 2 plus years.

Overall, Morgan Stanley’s profit jumped 46% to $2.09 billion or $1.30 a share up from $1.36 billion or 80 cents a share from a year earlier.

The bank’s net revenue rose 27% to $10.9 billion.

CEO James Gorman has changed the bank to a more diversified one, including a number of years ago buying Smith Barney in order to be in the wealth management business. In an interview on CNBC, Mr. Gorman noted if someone has $30,000 they should be buying ETFs; if someone has $30 million then different strategies are needed. Morgan Stanley has a trillion in assets with clients who have at least $30 million plus.

The result of the above is Morgan Stanley’s wealth business generates about 3 times as much daily revenue as it did 5 years ago.

The metric of cost to revenue at Morgan is an efficiency ratio of 70 to 72% with the ideal to be less than 70%. In 2019, Morgan Stanley’s was 73%.

Morgan Stanley’s goal for Return on Equity (ROE) is 13% to 15% through 2022, and over 15% after 2022. In 2019 the goal was 10 to 13% and ROE came in at 11.7%.

Mr. Gorman wants the wealth unit to generate a pretax profit margin of 28 to 30% over the next few years, which is up from the projected 26 to 28% and 2019 was 27.2%.

Linking to dividend paying stocks, it is hard not to like Morgan Stanley as it changes from a Wall Street trading bank to Wealth Management Trading Bank because of the recurring revenues from the wealth side. Those recurring revenues help ensure every year the bank is going to be profitable and can easily pay dividends and likely increase them. Music to your ears.

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

The largest asset manager in the world is BlackRock with $7.43 trillion dollars under administration. The fastest rising funds are ETFs and in the 4th quarter of 2019, the company brought in $128.84 billion in new money, most of it went to ETFs. In an article by Saqib Iqbal Ahmed of Reuters, Chief Executive Officer Larry Fink said, BlackRock was winning more of our client’s share of the wallet.

BlackRock’s iShares branded ETFs took in $75.2 billion of new money up from $41.5 billion in the prior quarter talking the new inflow for the year of $183 billion.

The 4th quarter net income increase to $1.3 billion or $8.29 a share, up from $927 million or $5.78 a share a year earlier.

In the annual letter, Larry Fink forecast a fundamental reshaping of finance and said companies must act or face anger from investors over how unsustainable business practices may curb their future wealth. Relative to Mr. Fink’s concerns is the three biggest ETFs or Index Funds may have a great deal of say or not, in regards to the shares they vote during annual meetings.

Linking to dividend paying stocks, one of the reasons you invest is to increase you wealth or assets under administration. It is worth noting how the public has some investments in Index funds. They play a significant role in investing, it is hope your portfolio also includes index funds.

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

For a wide number of reasons, females have been traditionally paid less than males, but as we are in the information economy when it is your brains that makes the difference, companies are slowly beginning to adjust the on going problem. In an article by C Nivedita and Imani Moise of Reuters, Citigroup said its female staff make on average 27% less than males when factors such as title and location are taken into account.

Citigroup is the only bank which discloses its global metrics and as opposed to a new law in England which all companies have to disclose to English authorities.

Citigroup is looking to have at least 40% of its female staff with roles of assistant vp to managing director by the end of 2021.

Linking to dividend paying stocks, companies earning profits do some very good things in the marketplace where the public uses their products and services. The same companies do not often lead on the human scale, unless they are forced to. Presidents can stay all employees are important, but are they paid as they are? There is no easy answer expect for it you expect the “best” talent then changes need to be made, to keep the “best” talent.

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

If you think about Governments around the world, when they need to raise money, they often turn to Goldman Sachs, because they do a very good job. If you raise money for governments, large institutions are not far behind and how the company is doing is a measure how corporate America is doing.

In an article by Anirban Sen and Elizabeth Dilts Marshall of Reuters, Goldman reported for the quarter but expenses were up so profit expectations were missed. In 2017, Goldman said it wanted to increase its revenue by $5 billion every year. Most people know if you want to increase revenues, often expenses increase but not necessary profitability. Goldman has spent more on compensation, technology, occupancy costs and professional fees and its operating expenses went up 42% or for every dollar of revenue it produced in 2019, the company spent 68 cents, up from 64 cents the previous year. This management of Goldman is going to cut expenses.

3 out of 4 Goldman’s business units reported better quarterly results. Global markets which houses the trading businesses was up $3.5 billion in revenue or up 33%.

Investment banking was down 6% or $2.1 billion. Private banking was up. In 2018 Goldman made $2.3 billion or $6.04 a share, in 2019 the corresponding numbers were $1.7 billion or $4.69 a share. Analysts were expecting $5.47 a share.

Linking to dividend paying stocks, for a company similar to Goldman the only concern is how much profit they will make, not will they make a profit. All markets are competitive, but each company will have its market reach to ensure they make a profit. If the company is consistently making profits, as a investor all you have to decide is are they meeting your expectations. If the company is coming to do well and easily paying its dividend, then you can hold on your shares as you do your research if you were to sell what would be the better alternative? Nothing, do nothing.

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

If you live in the northeast or almost anywhere this year, you might wonder about the cost of heating your home? or will gas prices go up?

In an article by John Kemp of Reuters, the expectations by those in the oil and gas industry is the price of oil to be in the range of $65 to $70 a barrel.

Every year, Reuters conducts a survey of energy professionals. The survey went to 9.000 people and 950 responded between January 8 and 11. The people were from oil and gas industry directly, banking, energy consultants, hedge funds and physical commodity trading.

Fewer than 5% thought the price would average more than $100 and 16% thought the price would less than $50.

Since November of 2017, Brent prices have closed between $60 and $75 a barrel on 74% of all trading days.

Linking to dividend paying stocks, if the survey is reasonably accurate despite many concerns in the world, the price of crude should be about what it is today. That means it is easier to plan and there will be fewer adjustments in your daily life. It is not that great if you were loading up on energy companies, for you would want the survey to go higher. Companies can still make profits with the consistent energy prices.

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