The economies of the world have taken a battering and many scaled down to survive, but the times are changing to back to normal and growth should be on your mind. Partly because the weather is changing and the wonderful season of spring is near when plants make their dramatic growth spurts to get through the sunny months of summer. In terms of business According to a Les Mack on the Inc website (you can watch the video) all business are either in the growth or decline stage. The goal of every business is to sell to a profitable, sustainable market.

Step 1 – start a business for a very specific thing in a profitable, sustainable market. If you do this you have a business, if not it is a hobby. This is the reason why 80% of new businesses fail, they do not have a profitable sustainable business.

Step 2 is fun. You have found the profitable, sustainable business and you sell more. The answer to everything is to sell more and it is relatively easy. At this stage the person who had the vision to start the business and the employees (operators to get it done) are in synch. They can handle the problems and enjoy working together.

Stage 3 is white water.  The business is becoming complex and layers of management develop because the business is becoming complex. The improvisation of the past does not cut it anymore because systems and processes are needed to operate the business. It should be noted visionaries tend not to like systems; processors do not like improv.

Stage 4 is predictable success. The growth of the company means the company needs to hire another senior manager who will predictably not know the visionary but will be great with systems. This will cause conflict between the visionary and the earlier people who may not have the title but have the relationship between each other to solve problems.  There are two possible pathways at this stage – scale up or do not scale up. Scale up means to go regional or national in scope. Not to scale up means to stay more local, each has its plus and minus points or there is no right answer.

Stage 5 is treadmill. This means as the company goes further more systems and processing is done.

Stage 6 is the big rut. The company drifts for a long time because it has lost the ability to self diagnosis.

Stage 7 is the death rattle. Eventually the company goes out of business and its assets are sold off.

Linking to dividend paying stocks, most of the time the companies are in the stage 4 area because they have a profitable sustainable market which allows the company to generate cash flow to pay back the investors. Start ups are about stage one companies, mature companies must pay attention to start ups because the visionaries see market opportunities everywhere. Mature companies are very good at protecting their turf which is good for dividend holders and that is why mature companies buy start ups – they are not very good at start ups because of the processes and systems in place or bureaucracy to run the company smoothly. One of the things you should look for in your company is what companies have they bought.

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

Although the rules were different, than they are now, it is interesting to note Mr. Carnegie’s investment strategies which were outlined in the book Andrew Carnegie by David Nasaw, Penguin Press, New York, 2006

Only invest in companies you have investigated yourself

Only invest in companies which you have insider knowledge

Only invest in companies that sell goods or services for which demand is growing

Never invest as an individual but as a group with trusted associates who together will own a controlling or dominant interest in the company.

The above can be easily translated into before investing do your homework or investing takes time. You have many biases and interests, stick to those areas for not only will you be informed, you will stay informed and be able to answer why this company? Investing in growing companies is sometimes easier than companies that need to be turned around. Investing with a group whether it is a formal mutual fund, semi-formal one, but people you know and can banter ideas around with.

When Mr. Carnegie merged his steel company into US Steel, he was very wealthy and his aim in life was to give the money away. He decided to invest in libraries, partly because when he was young there was very few and he enjoyed reading. He gave money to his home town – where he spent time as a youth, and where the steel plants were in Pittsburgh as well as to national interests. He often gave money as seed money, with the expectation the trustees would operate and grow the funds. Many teachers in the US have a pension in the TIAA CREF fund, Mr. Carnegie seeded this pension fund. As well as a number of other Carnegie Endowments for peace, science and music.

Linking to dividend paying stocks, the dividends can be used for reinvesting into more investments, some can be used for expenses and some can be used to give back to your community to reflect your interests. To give back, it is highly useful to be able to count on income or dividends every year. When Mr. Carnegie was giving money away at $15 to 20 million a year, he was also earning a similar amount so he had a lifetime of giving money away.

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

At the turn of last century, Andrew Carnegie was the richest man in the US with the bulk of his fortune coming from Carnegie Steel which was merged into US Steel. You may also know his name through the free library buildings he gave. Mr. Carnegie originally worked for a railway and was able to be a position where he was included in insider purchases. When the railway boom was on, the method to make the greatest amount of money was first the the railway bonds were sold. Second, the insiders had the contract to build the railway in which the money raised included a significant portion for the insiders. Third, when the railway was finished, most of the time the railway bonds decreased in value as there was little traffic. Eventually the lines were consolidated and then money was to be made for monopolies were set up. As an insider, Mr. Carnegie moved from being involved in the railway to being a supplier for the railway. First he was involved with an oil company, then a supplier of iron rails. It was in this phase which he learned about steel making and soon had the best steel plant in the US to make steel rails; for the railway companies changed to steel rails as they are durable. When the boom of railway building slowing down, Mr. Carnegie moved to plate steel and uses for ship building, bridge building and eventually automobiles. The merger into US Steel was worth today’s $ 150 billion.

Mr. Carnegie’s first investment was in oil wells in Pennsylvania and discover the wonders of receiving a dividend payment. He was hooked on capitalism and receiving dividends..

Although the rules were different, than they are now, it is interesting to note Mr. Carnegie’s investment strategies which were outlined in the book Andrew Carnegie by David Nasaw, Penguin Press, New York, 2006

Only invest in companies you have investigated yourself

Only invest in companies which you have insider knowledge

Only invest in companies that sell goods or services for which demand is growing

Never invest as an individual but as a group with trusted associates who together will own a controlling or dominant interest in the company.

The rules of investing have changed and insider information is used for short term gains, however investing in long term, means you have to continuing be aware of the industry although there are simple measures such as asking is the dividend safe? will it continue to be paid? Rather than insider information, one should say informed which means keeping abreast of the trends and developments in the company.

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

As the season turns to spring, one of the many things you will begin to see is more people enjoying beer. With the warmer weather, the beer companies are gearing up to have their best ads to stimulate beer consumers to buy their particular brand of beer. From the outsider point of view, there are only a few brands with a national reach and  likely. at the end of the year the percentages of market share will be about the same as they are before the season, but things change. Sometimes ads become the ads of the summer adopted in the culture and drive sales of brands higher. If you work in the consumer goods strategy, there are not many books written about every type of consumer goods, but there are books written about beer and the selling of it. One such book that found its way into a library is read called Lager Heads by Paul Brent,  HarperCollins, Toronto, 2004. This book is about the Canadian market where two beer companies have most of the market share and the book gives a history of two companies trying to read the market, using the best creative minds available (ad agencies), and fighting to ensure the market share they have is the one they continue to have in order to reap the profits.

Linking to dividend paying stocks, consumer companies which pay a dividend are in competition but the competition tends to be among 3 or 4 companies with two of them seemingly having the upper hand. As you own the shares, you can watch the ads to see if they motivate you or do you believe the ads motivate the target market? In the case of beer companies the age between minimum drinking age to 25 is the heaviest users and the ads tend to be aimed at them.

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

In the Globe and Mail on Wednesday, March 5 John Heinzl (jheinzl@globeandmail.com) wrote a wonderful article about Coca-Cola on reasons why the stock is a keeper for the long run. For any stock which you own or are looking to buy it is worthy of looking at the following reasons why Coca-Cola has long term value.

1. The dividend keeps rising – Coke has raised its dividend for 52 years.  Their past history is to payout 55% of earnings from their healthy cash flow.

2. It is well diversified company – Coke earns money in every country and 82% of its operating profit comes from outside North America.  Coke has something that every company would love – 17 brands with sales of over $ 1 billion. Those brands include: Coca-Cola, Diet Coke, Coca-Cola Zero, PowerAde, Sprite, Minute Maid and Fanta. This means incredible advantage in distribution, marketing and ensuring the competition is not too powerful in the shelf space of any store.

3. Results were better than they seemed – if you compare 2003 when Coke had net income of $4.35 billion to 2013 of $8.58 billion it is doing something better.

4. The stock is fairly priced. – Coke trades around its historical average of 19 times price to earnings.

5.  The company is not standing still – Coke is spending $400 million on marketing this year, it is continuing to test new products, new lines and when one is successful a global market rollout can easily be done.

Linking to dividend paying stocks, Coke is wonderful about paying a dividend and every year the dividend increases. The article is added because of the reasons Mr. Heinzl gives. As you do your homework on the stocks that you wish to buy – go through the 5 reasons – does it pay a dividend and how long? what is the outlook for the company and its strategic advantages? how are the financial results? is the stock fairly priced? was is the company doing to ensure that results continue into the future?

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

The cutting of trees for pulp and paper and other uses is a multi-billion dollar business and any area with seemingly lots of trees has economic activity related to cutting the trees down. If you think back in terms of when your part of the country was settled, part of the job in settling the  was to remove trees to build a home and cultivate lands to grow food. As time goes on the use of the chainsaw and now machines cut the trees as efficiently as possible. There are very good reasons to use the machines, however the downside was the ability to cut more trees than needed to grow so in 30 years plus the trees can be cut again. Beyond the Beauty Strip by Mitch Lansky, Old Bridge Press, Camden East, Ontario 1993 looked at what was happening in the state of Maine. The state of Maine has a very active forestry industry and many are doing the very best they can.

As a government the State of Maine leans to the forestry companies for their interests in keeping the plants running and the goodwill to ensure that while 90% of Maine is forestry, there remains a healthy forestry industry for years to come. Mr. Lansky argues very effectively, the practices of the forestry companies in Maine, at least up to 1993 leave a lot to be desired. Many attributes offered by the forest companies are not as good as they seem to be. n fact many attributes seem not to help anyone but the forest companies for the short run. When people live in an area, they are torn between what is great for industry and what is great about living in the region. Since their income is invariably linked back to the forestry companies the forestry companies have a great deal of leeway or goodwill behind their names and ability to sign cheques.

Linking to dividend paying stocks, many forest companies pay a dividend although their stock price fluctuates with the economy. Companies often site advantages of ensuring governments help them, some of the advantages are myths and those that will take a toll on earnings in the future. It is important to recognize what is a myth and what is reality and invest accordingly.

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

A few weeks ago a conversation was partly overheard, it went to the effect did you hear about Sue? Remind me who is Sue? She is the ex girlfriend of the James. No, I think she is the ex girlfriend of a friend of James. No, I am sure she dated James. I believe she is a friend of friend of and now they are no longer dating. Do I know her? I not sure? Then why do I care?

The above conversation, what little was heard, remindd me of the Abbott and Costello skit “Who is on first” The two comics were taking baseball, but that is about all they were communicating to each other. Each time one gave a valid reference point, the other side was gaining transaction of the unknown. When you are looking at the all the investment decisions one could make, it is hard to pick one. This could be well the  reason why Warren Buffett suggested you keep your investments as simple as possible.

Linking to dividend paying stocks, the evidence highly suggests to have a consistent return buy companies which pay a dividend because you will receive two possible earnings stream. One is the dividend, the other the capital gain. Over time companies that are profitable and can pay dividends. these company stocks will rise. Given the great amount of choices, if you start with dividends it means you are starting with making money as well the risk level to make money stays low.

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

Yesterday, Russia troops moved from across the border to parts of the Ukraine as the government and civil society was beginning to break down. Russia took a part of the country which gives it access to a year port and where its Navy is located. There were many reasons why it did what it did, including protecting the gas pipeline, however Ukraine being an independent country, they were not suppose to and thus there are potential international ramifications.

Linking to dividend paying stocks, if the stocks you own have operations around the world which is good as it helps to diversify the revenues of the company, invariably something will happen. This time it is one country operating in another country without their permission; other times it may be the weather; or it will be something else  – stuff happens. The key is for the stocks you own, either they have sufficient reserves to ride out the storm as things return to normal or have other operations which continue to generate the needed revenues. It is easier for being an owner or management if the company is well diversified and when things happen, the company can plan and execute resources to capitalize on competitors who do not have the same abilities.

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

Last evening was the biggest show in Hollywood for movies – the Academy Awards or the Oscars. Movies are part of the average person’s entertainment, education, enjoyment, recreation and billions are spent worldwide on them. Fortunately everyone has a story, often many stories, and more movies are made all the time. In some cities there are movie festivals every week on a different topic and that is wonderful, which means whatever your interest is, you can find movies. Often when you think of movies you think of Hollywood and the expensive movies to make and there is a need for those types of movies. At the Oscars, the stars of the movies were out, most did not buy their outfits, although some could afford them. Many jewelers and fashion designers offer the stars a chance to wear their outfits for the publicity it brings to the star or the other term is product placement. Some of the viewers could identify most of the stars, some only knew a few of them. Some viewers had seen all the movies, some a few of them and read about the rest. The people will the greatest knowledge will be those that have spent time or doing their homework in regards to the movies.

Linking to dividend paying stocks, the stock market would be all the movies made and released to the public, the dividend paying stocks would be the ones that make money. There is a difference between the two numbers, very likely the vast majority of movies made for release, the hope is break even or to find distributors in smaller markets which would allow the film to make money. When a movie makes money, it allows the director to make more movies. As an investor, it is hard business to know which movies will do well and which ones are still looking for a paying audience. On the stock market, it is easier, you start with those that have paid a dividend in the past and make your list from them. From that list you can bring the list down to the ones you believe are winners for the resources you wish to invest in.

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