Have you ever been in a small town and wonder what do people do here, it must be boring. Those of us who live in the bigger cities believe there is excitement around us (although we may or may not be involved in it all the time) and the large cities are a host of opportunities. We often bring our this sense to our investment style, who does not want to own Facebook, Google, Microsoft, Apple and Telsa?  And there is nothing wrong with doing so, except when you look back at the shares which year over year have produced excellent returns, you come across a name such as Balchem Corp, Mueller Industries and Crane Co. It is rare these companies made the headlines but what they do is year over year produce excellent market returns. John Reese’s column on February 10 highlights the companies. A boring name plus a boring business is guaranteed to keep the professional investors away until the good news compels them to buy in and send the stock price higher. If a company with terrific earnings and strong balance sheet also dull things, it gives you the time to purchase at a discount and when it becomes overpriced you can sell at a healthy profit.
Balchem Corp is a company that makes flavorings, fumigating gases and nutritional additives for animal field. Since 1985 shares have returned more than 26% annually.

Crane trades for 12.6 times trailing 12 month earnings and has grown at 31% long term. Peter Lynch used the P/E divided by its growth ratio to find bargain priced growth stocks.

Mueller Industries makes plumbing, HVAC, and industrial products and is high on the charts if you price/sales ratio favoured by Kenneth Fisher.

Linking to dividend paying stocks, boring can be profitable. Start with a company making profits, if it can do make money through the economic cycles and your portfolio may not show the headline stocks but in terms of assets under administration, they keep rising and for you that is a good thing.

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

 

 

 

 

 

 

Anyone who has seen images of Venice or been there knows there is something special about the city in Italy. Whether it is the canals, the sea, the San Marco Plaza where people have come to for generations, you know there is something special. A wonderfully written book called Venice – Pure City authored by Peter Ackroyd published by Chatto & Windus. London 2009. Mr. Ackroyd captures the essence of the city starting from the sea and islands to the building materials to governance to merchants to consumerism to where the city is today. There are reasons why the city is special. Venice above all was a trading city it existed for and by merchants. In the market place everyone can to buy and sell and sought profit. The system of trade defined the social and cultural systems of the city; it subsumed them. Fashion and innovation became the key concepts.

The city started with the salt production and the controlling of the production and thus the price of salt. It evolved into trade over long distances; the more the possible risk, the more the possible benefit. In 1500’s there were more than 3,300 ships going around the known trading routes of the Mediterranean Sea bringing back spices to silks to anything else for the ships were owned by the City of Venice and rented out to the highest bidder. The important aspect was the east (where the goods went) did not know the price of the west and vice versa the only people who knew the margins where Venetian merchants. From the 14th to the 18th centuries Venice became the city of luxury goods. We all need some staple goods, but we desire more and the more is luxury goods. Venice possessed no natural resources and the only method of maintaining its supremacy was in the creation of more various and more rarefied items. The early trade fairs were in Venice and luxury items is the stepmother of fashion. (On You Tube saw a profile of Dubai and there was a connection to where Venice was in its heyday.) From the fortunes made in trading came money spent on art which lead to better luxury goods. Eventually Venice turned away from the international world of trade and became more provincial which lead to its decline of influence. Part of the reason was Venice refuse to compromise of the quality of its luxury goods, its competitors had no such scruples. Other countries and industries became more flexible or open and Venice influenced declined. Venice is still special it just trades on something else – itself.

Linking to dividend paying stocks, the growth and continuing to be in the forefront of customer preferences is hard. People change, industries change, countries change but as investor you want to know how the company is staying in front of its customers. In Venice’s time the merchants could exploit the spread because no one knew the spreads on prices, now days people have a reasonable idea and will seek alternatives. When you see company’s paying dividends for over 25 years and can continue as long as you see their ability to retain margins they are keepers for you can learn from them.

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

 

 

 

Many people have seen the CSI franchise TV series and sometimes we can be better for it. One book which adds to the segment is called Bodies We’ve Buried – inside the National Forensic Academy, the World’s Top CSI School by Jarrett Hallcox and Amy Welch published by Berkley Books, NY, 2006. In the book we readers go through the process where law enforcement personnel go to get training in CSI work. The first thing in school is going back to the fundamentals of what you should and should not do upon coming to a crime scene. The authors have 8 steps otherwise there are wonderful defence lawyers who will tear the work down. The steps are:

1. Approach the scene
2. Secure and protect the scene
3. Conduct a preliminary scene
4. Photograph the scene
5. Sketch a diagram of the scene
6. Perform a detailed search for evidence
7. Collect the evidence
8. Conduct the final survey.

 

1. Approach the scene – to look for other hazards, no days you may not know what you are getting into so go safe.
2. Secure and protect the scene – the golden rule is not to move anything, so ensure no one goes in and out without authorization.
3. Conduct a preliminary scene – basically observe the scene because potential evidence is destroyed within the first few minutes. Take your time, begin to see what has happened or likely happened. The more detail you note the better it is because by the time the trial happens many other files will have crossed your desk.
4. Photograph the scene – at the school you learn how to photograph. Taking more is much better than taking less.
5. Sketch a diagram of the scene – the sketch will help you show relationships of size and distance between different objects.
6. Perform a detailed search for evidence – this is a search from top to bottom and everything in between. There are 3 things that really make a case: evidence, evidence, and more evidence. The theory of transfer is no one can enter a location without bringing in or depositing some sort of evidence or no one can leave without taking some sort of evidence with them.
7. Collect the evidence – what is collected is physical evidence. This can take a lot of time, but if you do not do it can lead to not guilty.
8. Conduct the final survey – there are two rules to remember 1) physical evidence can never be over documented and 2) there is one chance to perform the job properly so work till it is completed.

The book goes into how to do all the above.

Linking to dividend paying stocks, similar to CSI investigators you should also invest through basic fundamentals and if that takes extra time so be it. Although everyone would love capital gains as soon as possible, when investing in dividend stocks you are looking for long term capital appreciation. If it takes extra time, it takes extra time. If you are being rushed why?

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

 

In every city’s history there is a great something – bigger than before and hopefully nothing has ever matched it. In Chicago, it was the fire; in other cities it is the flood or the earthquakes. People flocked to cities for better opportunities and when many come because the rural area or their previous homes were under attack, cities grow up fast and usually faster than urban infrastructure allows people to be safe. Many of us take for granted the fire hydrants, the sewer system, the water filteration system, the lighting until things go wrong and they do not work. Then we wonder why the city fathers did not put them in or why they are not working properly. In London, UK a PBS series in 2014 focused on the great fire of 1666. Thousands of homes burnt and there was reasons in the background why the authorities did little.

In part where the fire started was the slums (they can be cleared out); there was disease there (in cleans the area up); in part was an ineffective King who lived on the other side on the fire and was not worried until the fire threatened him and his living style; in part the city was not meeting its payments (the cupboard was bare) and there was little desire to pay compensation to stop the fire. Add to the mix England had recently changed from a Catholic country to a Protestant one and people saw threats behind every action including setting of the fire. At the end of the 4 days of the fire destroying half of London, the King actually became effective.

Linking to dividend paying stocks, there are always reasons not to do something. It is less expensive, there are few threats, there is always something or some technology. The trick is to invest in companies who actually seem to know what they are doing and doing it well. In England, while the fire burned the King was useless, until such time as he went to the area being harmed and ordered things to be done. Is the company president worried in the glass tower or is he/she ensuring the company is doing what it should be doing?

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

 

 

 

Until WWI, it was common practice for the winning country to loot the treasury and take items of value back to their home country. If you check the major museums for example the Louvre in France received many of its treasurers from Napoleon’s successful wars in Italy. Other museums have similar stories. At present, we expect the museum either to buy or receive donations from its patrons. In WW II, besides the desire for Germany to conquer Europe, underneath the effort was to kill or eliminate Jewish Europe. Similar to all campaigns, it started small with a few inconveniences and then ramped up to forcing remaining Jews to have no contact with the rest of the citizens of the country through the use of ghettos and sending people on a one way ticket to a camp (where many were killed by gas or hunger or disease or being broken or slave labour or….) The more important aspect of the Nazi campaign was how did non German countries react. The book Pack of Thieves by Richard Z. Chesnoff published by Doubleday, NY,1999 outlines countries did not offer much fight and for most part the citizens did not seem to mind. There was only a handful which fought or tried to help.

If you look around, people accumulate things and some have wealth but most are getting by for they have hope either their children will do better or maybe they will win the lottery. For the wealthiest percentage, the Nazi’s targeted their homes and possessions and had a deliberate policy of taking all their possessions. Some of the possessions which could be sold, were sold to help pay for the cost of the military. The Nazi’s were good bureaucrats who ensured everything was written down, to be sent to the storage facilities to eventually be allocated. The policy was very effective across Europe.

The issue which the book examines is when the war was over, the Germans had surrendered, the military machine was shut down, what happened? It turns out although there was many records of taking possessions, because receipts were not given very few people returned anything. Home and apartments were not given back; insurance companies did not want to pay; governments did not want to offer any considerations particularly financial; it was if people and their institutions said they did it under distress, but we are glad we did it, so start your life somewhere else. In some cases in Poland, Jews had lived in the community for 900 years and there was little humanitarian concern after the war.

Linking to dividend paying stocks, companies and their people make mistakes (it is why every company has a lawyer or lawyers), however how they react to the mistakes is often a defining moment for shareholders. There are always two methods – delay and hope it goes away or be proactive. There are plenty of examples of both and generally we believe governments and insurance companies like the delay feature. How should the company react and how does the myth when it does act properly goes into play is how we see the company is doing.

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

Spain is bringing in riches from its colonies in Central and South America according to Robert Goodwin in his book Spain – The Centre of the World 1519 -1682 published by Bloomsbury Press, London,2015, what does Spain do? The Habsburg’s were Catholic and soon the Spanish side of the family became the dominate in both armies and church affairs. As well as the many palaces, churches and universities which lead to patrons of art which lead to a thriving arts and culture scene in Spain. Two of the well known artists are painter El Greco and novelist Miguel Cervantes who wrote Don Quixote.

Returning to banking, banking was in its infancy in the early 1500’s. Banking was primarily for travellers, merchants and governments who needed to send money over long distances. The money was made on its spread on the interest rate and lending out the client’s deposit while the bill of exchange was in transit. Banking was relatively simple and the bankers travelled between the great fairs of Europe.

The gold and silver that flooded into Spain was a massive stimulus to trade in Europe and also brought inflation because all the economies of Europe were now interconnected. This changed the focus of the banking industry and international merchant banking was born.

The Spanish crown borrowed in two basic ways. The foundation stone of sovereign debt was juros -a range of government bonds securitized in one way or another with a guaranteed rate of interest over the life of the loan. The interest was typically linked to a source of income ie a sales tax. The other way was called asientos- floating debt agreed on an ad hoc basis to fund some particular project or campaign on which the interest rate was higher and the term of the loan shorter.

The Genoese bankers innovation was to create a secondary market for Spanish sovereign debt by selling shares in the juros to a range of investors. This worked well until 1570 when Spain was trying to figure out its obligations and realized it was short of money. Much of the lending was tied to resources coming from Mexico and Peru and it was beginning to slow down, but the Hapsburg empire with its armies, catholic protection, the infrastructure projects in Spain were expensive. Fortunately for Spain, innovation in silver mining by Bartolome de Medina known as the patio process increased the yields from the mines of silver. The silver production increased and Spain was saved for another 50 years.

Linking to dividend paying stocks, the themes really never go away, Spain was awash in riches and spent the money to be the center of the universe. The commodity production slowed down and Spain was in trouble. The resources are still coming but there was an imbalance between revenues and expenses. This is the reason why management matters.

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

 

 

 

 

There is a verse known around the world- in 1492 Columbus sailed the ocean blue and discovered the new world. In reality, people had been to America before, however most had not subsequently conquered the country. The next voyages after Columbus, particularly Cortes brought back Aztec gold and soon Spain was the richest country in the world. One of the many books about Spain is one by Robert Goodwin published by Bloomsbury Press, London, 2015. In the book, he focuses says Spain the Center of the World from 1519 to 1682.

The setting of 1492 is Spain has changed hands from the Moors (Muslim) to Habsburg (Catholic) and while being a good country Spain was not the center of the Habsburg empire. When Columbus came along, the wealthiest people were paying high prices for spices and they were looking for alternatives. The Portguese, the Dutch and the Italians were dominating the spice trades and the high profits. Columbus was sent across the seas to bring back spices. He brought back some as well as stories about gold, by the early 1500’s the conquistadors had used force, disease and in-fighting to wrestle control of the Atzec empire to bring riches to Spain. The first voyage included a large gold disc with a design of a beast in its center surrounded by foliage motifs weighing 3,800 pesos de oro(the Atzec’s worshiped the sun and the moon); a large silver disc which weighed 48 silver marks; two necklaces of gold and precious stones, one which has 8 woven threads set with 232 red gems (rubies) and 173 green stones with 26 gold bells hanging from the border.  Upon seeing the riches the new King said we must have colonies and soon all of Central and South America were claimed by the Habsburg empire. In time, the city of Seville where gold and silver and other items were landed would be the center of world trade for a century and half.

Linking to dividend paying stocks, how the company started and what practices it did to accumulate its position is not the most important thing it determining whether to buy a company’s shares or not. In the case of Spain, its wealth came from Central and South America but to manage the wealth which was to keep Spain as the dominant country for almost 200 years is to be celebrated. Management matters particularly when it relates to monarchies and their successors.

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

 

Most stock market investors will do a combination of three things: manage some of your own money, have someone else manage some of your money; and use indexes. Depending on your results, you will be either happy or make adjustments. If you go into a company which manages money often times there will be a chart on the wall which shows over the years, the stock market is a good investment as the chart rises. The question for you is why? The answer is very simple – the index changes every 6 months and discards the losers and adds new winners. If the losers make money again, they can come back in. At this point in time, there are many index funds to choose from. A starting point would be the S&P 500 Dividend Aristocrat fund. This fund is composed of companies in the S&P 500 whose companies with 25 consecutive years of dividend increases. In David Milstead’s  column of Hobnobbing with Dividend Aristocrats he explains how the fund works. He also recommends looking at the S&P High Yield Dividend Aristocrats fund which is from the S&P Composite 1500 companies which have increased their dividends for 20 years in a row. The companies joining the 20 year list are: Donaldson Co (filtration and auto parts); IBM; Lancaster Colony (food company); Lincoln Electric Holdings (welding supplies); New Jersey Resources (gas company); NextEra Energy; Polaris Industries (snowmobiles); RenaissanceRe Holdings (reinsurance) and RLI (insurance).

Linking to dividend paying stocks- it is easier to find good stable companies with a good return and low risk to owning and the S&P Aristocrat funds help make it easy. These are companies that are doing well and have paid dividends for over 20 years. It is relatively easy to see what companies are on the list and that will give you ideas where to put your money. If a company pays dividends it has to be profitable and if it has been paying dividends for over 20 years, in your research you can see how it is able to retain market share and increase prices over the years. If they can still do it, it is worth buying either through your shares or through the index.

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

 

Imagine a time shortly after people have discovered the earth is not really the center of the universe, but the earth revolves around the sun. For generations people have looked up at the stars and navigated around the world and imagined what was up there. Did people’s souls go there? Add a government and clergy who really did not want to change their beliefs of the world, it is quite the mix. If you are interested in the story, then the book The Queen’s Conjurer – The Science and Magic of Dr. John Dee, Advisor to Queen Elizabeth 1 by Benjamin Woolley published by Henry Holt and Co, NY, 2001 is worth reading. Dr. Dee was one of those really bright people who in the 1500’s was looking into the stars and using the instruments of the day was almost perfect to what the instruments we use. This was also the time Europeans were writing and exploring the lands to the east or North and South America for they were looking for alternatives routes to China and Asia where the spice trade brought high markups or good profits. On the maps of the day, North and South America were not explored so people believed there were methods to go around them – the Arctic (they would find out it is cold and the water freezes. They should have known for it was not too long ago that trade between London and St. Petersburg, Russia had started). Mr. Dee was in contact with the map makers of the day, had a position advising the Queen and was interested in the stars and mystic world.

Linking to dividend paying stocks, there is little magic to know but the compounding interest is great magic to work with when you buy shares – the combination of dividends plus capital gain is quite a sight to take advantage of and been seen. The search for alternatives is the reason why dividend buyers pay attention to the market place, not for the new concepts, but the ideas that can bear fruits as they catch on and change the marketplace. The learning is the how it can help or additions, not necessarily the new. If you buy and hold, keep paying attention to the alternatives.

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