IFB121: Analyzing the Growth of a Stock Pt. 1

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence crippling confusion and help you overcome emotions by looking at the numbers, your path to financial freedom starts now.

Dave:                                    00:35                     All right folks, we’ll walk up to Investing for Beginners podcast. This is episode 121 tonight. Andrew and I are going to talk about Benjamin Graham and growth. Andrew has been on a bit of a Ben Graham kick lately. He’s been writing some great blog posts about some of the stuff that he’s been discovered in the intelligent investor as well as security analysis, and we thought this would be a perfect time for us to talk a little bit about growth and Ben Graham, we teased this a little bit a few weeks ago and tonight is the night, so Andrew, why don’t you go ahead and start us off and we can have our little conversation.

Andrew:                              01:08                     Yeah, thanks, Dave. I think it’s always a good idea once you are established and you have a good base of knowledge when it comes to investing, and I think it’s good to reread stuff because now that you have a new context, you have a greater understanding. You can pick up things I didn’t pick up the first time. So you know, a few select books, whether that’s Benjamin Graham, obviously a huge, he’s an investing legend. Not only was he Warren Buffett’s mentor he taught Warren Buffett at Columbia. He also had his investment funds, and we return 17% per year. Quite a nicest performance. And I think it was over like 30 years. So not only was he a great teacher, but he also walked the walk and made some fantastic returns. And so his books his most popular one, the intelligent investor, that one’s probably one of the best selling investment books of all time.

Andrew:                              02:08                     That one’s recommended by many, many people. Security analysis is one of those that are literally like a textbook. I’m holding it in my hand right now, and it’s 700, almost 800 pages. They’re just reading it. Like I, I will admit, I haven’t read the entire thing through. There’s some stuff in there that’s outdated. There’s stuff on bonds which isn’t applicable. So, you know, it’s one of those like I kind of think of it like the Bible where I don’t even know pastors. I’ve read that all the way through. Right? But you pick different parts of it, and you try to learn the best you can and try to take the best parts. So while I think of security analysis, I think of that. And so I found a couple of things when I somehow I stumbled on this rabbit hole, and I found some things he talked about with growth that I never really noticed before.

Andrew:                              03:09                     And I think when people talk about Benjamin Graham, you know, when we’ve talked about Benjamin Graham, it’s always margin of safety, a lot of talk on the price, the valuation of a stock the price to book ratio, you know, buying stocks with more assets rather than less because asset values tend to fluctuate less than earnings, right? The fact that Mr. Market is irrational and the stock market can price things wildly different depending on how it feels at any given day. And that’s another concept popularized by Ben Graham. But you know, he did write some stuff about growth, and I don’t see it talked about much and I think it’s something that we can learn from. The thing with growth, and I think we got to tread carefully here, is there are so many different ways to talk about growth and to think about growth.

Andrew:                              04:09                     And there are so many easy ways to, in hindsight say that you have a better growth model than, than somebody else. I think you can look across the span of the stock market universe today, five years ago, ten years ago. And you can see that it’s obvious based on the house. Some stocks are priced so wildly different that everybody’s methods of calculating growth are a lot different. Which is what makes value investing nice is because there are a lot fewer discrepancies. I think if, if I look at a stock and if Dave looks at the stock, I think we can generally agree. If one looks undervalue, they’re not. And not just to Dave and me, but like throughout a lot of value investors, you’ll tend to see not a mirror image, but a similar grouping of stocks where it’s like, yeah, we can agree those are undervalued.

Andrew:                              05:06                     The growth thing is a completely different story, and you’ll see it as an example, the difference between Twitter and Facebook, right? Two of the biggest social media giants, I think, at least for my limited kind of anecdotal experience, I think Twitter’s maybe more popular among, I don’t know how you call it, the millennial demographic or the tech-savvy kind of younger demographic that still has a lot of money, right? I think Twitter is more popular than Facebook now, but Twitter used to be valued kind of like Facebook when they IPO. Then now it’s where there’s only out of 14 PE and Facebook’s like double that. So you know what happens. There’s just a lot of different opinions on growth because you’re buying a stock with no dividend that just recently IPO like or Facebook, you’re probably buying it for growth, and there’s a whole segment of the market that does that. And so that’s why there can be so many different opinions on growth. And why, I don’t want to say that my methods or Benjamin Graham’s methods or any other person’s methods are the best for evaluating growth. I think that’s something that constantly changes and something that you have written need to reevaluate time and time again. So not to be like Debbie Downer on it.

growth of a stock

Andrew:                              06:36                     You can buy a lot of undervalued stocks and have great returns. A lot of times with undervalued stocks, you’re getting growth, and the general stock market grows 10% a year over a very long period. I did a study last year. I think in the summer on my youtube channel about earnings growth and eps growth and how that looked for stocks over the very, very long-time period. And there was somewhere around six to 7%. And then I think if you add inflation, you get that last 10%. It was something like that. So like as an average, companies will grow, and when they, when when the industry is dying, it starts to become obvious, and you can see it in the financials. So I went in like bashed my head about growth and feel panicked about like, man, I don’t have the best model for evaluating growth cause it’s going to be different.

Andrew:                              07:32                     I mean the way Twitter or Facebook, they’re so widely adopted now, right? The way that they’re going to grow might be from a profitability standpoint. How are they going to monetize their platform better versus let’s say a company that’s starting with a regional product, let’s say it’s like a furniture store and, and they have maybe the west coast covered, but they don’t have stores on the east coast. And so their growth strategies are going to be domestic. They’re going to be aggressively opening stores and, and attracting customers. Whereas somebody like Facebook and Twitter might not be, and that’s going to change on that every day, every different industry. So these numbers are never going to be like a panacea. But I think from a big-picture kind of systematic viewpoint, and I think there’s a lot of benefits to be said about trying to make some, I guess takeaways from, from how companies have grown in the past.

Andrew:                              08:33                     I’ll look, continue to grow and stuff that we kind of constantly allude to. And maybe you can, can dive in-depth for it today. I guess before I jump in any further, is there anything you wanted to add or should I keep rolling and falling down this rabbit hole? I would keep going down a rabbit hole baby. Okay. All right. So before start spouting, just craziness. Let’s, let’s stick to some format. So first let’s talk about where it Graham, what Graham has said, what Ben Graham has said about growth. And I just picked out two quotes, which I find fascinating. Again, just buried, just nonchalantly in the text and I think that’s cool. So he’s talking about the section’s called longterm studies of income and balance sheet position. He says, quote, balance sheets and income statements for selected years spaced, say ten years apart.

Andrew:                              09:31                     We’ll do this job quite well for most purposes, especially when comparisons are to be made between two or more enterprises. So a couple of takeaways from that and something that I’ve tried to talk about and you’ll see if you subscribe to the leather in the archives. This is something I’ve talked about before. He touches briefly on this and the intelligent investor too; he says when he likes to look at growth or even price to earnings, he likes to look at seven to 10 years. The reasoning for that, you know, seven-year or ten year time period several reasons. You know, earnings fluctuate from year to year. There can also be cyclical natures of industries and stocks and businesses and then you know, you have the workings inside the market as competitors enter and leave. So you know anyone year at any one period can be skewed and not give you the big picture because of so many different factors.

Andrew:                              10:25                     So go looking over a longer period that won’t fix everything, but it can help kind of smooth some things out. And particularly I like how he mentions comparisons made to two or more enterprises. So in the book he, he has a great example and him, he does aside by the side of two companies. This was written, I think the first edition was something like 1933 or something, something in that period. So we’re talking about companies like a utility, public utility companies were big back then. Railroad companies were big back then. Not having the same kind of growth picture today as maybe back then, but you did a side by side on a couple of those, and he showed how when you’re looking at

Andrew:                              11:17                     The growth of let’s say earnings or let’s say book value, so look side by side that can help differentiate one competitor from the other. And I think it’s a good idea to, to compare it to like the s and p 500 too. This is something I’ve been chewing on lately. You can, you can compare, and you know, if you see out-performance or under-performance, you know, obviously you’d want to see our performance. You want to see like double-digit growth. But I think maybe if you’re looking at a stock and it’s at least kept up with the s and P for example; I’m, I’m looking at a stock right now. It’s one that’s in the portfolio. I’m considering adding it. It’s super beaten down.

Andrew:                              12:08                     The way Wall Street perceives it, kind of the general sentiment. That was the way I was thinking about that. The sentiment around it is negative. The trade war is causing people to feel very pessimistic about the future among other big developments and big competitors that have come in and taken a lot of market share. But in, in the periods since the great recession, the stock has kept up with the s and p 500 as far as our eps growth goes. And not only that, they have all, they’re also trading that crazy good valuation right now. So I’m talking about like an over 3% yield, a price-earnings ratio that I believe is single digits. It’s been a very volatile stock in the past couple months, which can also kind of make it a value investor, kind of lick his lips a little bit.

Andrew:                              13:02                     But it’s just very low, low, very low valuation. Plus, you know, maybe it’s not the best grower, but if it’s keeping up with the s and p, and it’s valued this low, you know what happens if not only the valuation catches up, but then maybe if they’re able to take a growth picture and, and do better than the market, now all of a sudden we might see gains not only from the difference in intrinsic value but also from, from business growth. So I think that can maybe be one example. You can make comparisons between two different companies, or you can compare it to the s and p, or you can compare it to let’s say the historicals and p. So maybe the s and p. We know, as I said, six to 7% would be a good metric for longterm apps.

Andrew:                              13:47                     So if I have a stock that maybe has 14% a year over ten years, I feel better about those. So I also did, as I was in this rabbit hole, I looked at some of the previous best picks of the leather. You know, why are they doing so well? Why are they doubling or are, you know, getting like 50% gains over a short period? And sure enough, many of them had good over a ten year, seven to 10 year time period. Really good earnings growth and book value per share growth as well compared to the s and p and also just on a relative absolute basis, you know, double-digit and good. So I don’t want to say it like that. That’s again, a perfect metric. I also have a couple of stocks in there where they also had double-digit earnings and, and book value growth and then they haven’t done as well.

Andrew:                              14:50                     So I tend to, when I look at growth, I want to see that growth. But I think it’s a fine balance that you have to make between all of the different factors. So you have growth, you have grown over a long period, growth over a short period, growth over maybe what’s projected for the industry or how you see the qualitative factors of it — kind of like going back to that other example. If a market’s saturated like Facebook or Twitter, maybe we feel good about it because there’s a lot of room for them to go into other ventures or maybe we don’t feel good because it’s going to be hard for them to kick up profits versus you know the furniture store example where it seems like it could be pretty easy for them to grow. Just all they have to do is expand the number of stores, you know.

Andrew:                              15:46                     But that’s not, that’s not like you have to take it on a case by case basis because there are so many different ways you could get growth globally domestically with a business model, with a, with a whole new business venture. So many different things. But I think it’s good to add that to your decision making of what’s the valuation on this, what’s the growth been in the past? Particularly don’t just look at year over year one, year time period like La, a lot of Wall Street likes to do, look at maybe a seven to 10 year time period and then also factor in the valuation and maybe some qualitative factors. And within all of that, I think you get a generally good idea of if you think this stock will grow in addition to maybe taking some profits from the difference in intrinsic value.

Dave:                                    16:42                     I like all that. That I think that’s interesting. I guess one thing that kind of popped into my head while you were talking about that, when you’re evaluating growth of a company when you’re working at the different businesses that you want to invest in, do you look at the cyclicality of the business or also would you look at the market cap size of the company versus a smaller cap company? I. E. Let’s say you’re looking at some of the dividend aristocrats, which are companies that have been around for a long time because they’d been paying a dividend for 25 years. So somebody like, let’s say, I’ll pick a company, Johnson and Johnson, for example, is their evaluation of growth different than Facebook’s would be?

Andrew:                              17:35                     I want to touch on the first part of your question first because I think that’s, that’s a key part I missed. And then what we’ll talk on the second. So something that Graham mentioned, which I forgot to say, he talks about when you’re looking this longterm growth because he said ten years apart, but like about right not, it doesn’t have to be an exact science. He talks about how there were other periods where he, I think it was like the Great Depression and then let’s look at the great depression and how companies came out of that versus how they were when they were in it. So he says, you know if the market as a whole kept earnings flat or saw a decrease in earnings, but the company you’re looking at kept earnings flat. So on an absolute basis, that doesn’t sound great.

Andrew:                              18:25                     Three or four years of, of no growth, no investor likes to hear that. But because of comparatively sick likely right, the economy was in a downtrend and so they kind of treaded water until the economy recovered. So from a cyclical basis, that’s where comparing to the s and p can be very useful. And then to his point too about comparing against two or more companies and then maybe in the same industry, different companies will be cyclical at different times. So depending on how commodities are going, the oil companies might be down when the rest of the market’s up or they might be up when the rest of Marc is down. Or a stock like Caterpillar, which you know, they’re, I think they’re, they’re very, if you see, I remember seeing this on the mad money episode years ago with Jim Cramer, he said Caterpillar is a good indicator for Kinda how economic growth is, is moving in like say the next three or six months because as their demand goes up, then it’s likely that there’s a lot of building going on.

Andrew:                              19:37                     Something like that. Don’t quote me on it. As I said, it’s like four years ago. But you know, there, there are examples of that throughout every different industry and every different company. And so it’s like, man, I don’t like the fact that this company only grew, let’s say 4% over the past three years. But you know, compared to competitors, it’s maybe 2% higher than the rest of them. And you know, maybe the industry is just in the downturn, and it’s a natural part of that industry. And so historically they’ve seen these swings. And so looking into the future it should be fine. And so maybe in one instance I’m disqualifying a company because they have less than s and p growth, but maybe in another instance, I’m saying it’s okay. And I liked the valuation. And so again, case by case basis. So I think that’s how you can kind of think of the cyclicality of it. Do you kind of think of cyclicality in a similar way or a different way when you look at stocks?

Dave:                                    20:36                     Yeah, I look at it that way. I look at the what’s going on in the particular industry as well as what’s going on in a particular market as far as on the market’s not the right word as far as the economy is going. Just as a general rule and try to think about how it relates to each other. So if you’re looking at, you know, if you’re trying to compare apples to apples and you’re looking at, you know, I’ll pick something, I’m familiar with them. If I’m looking at the banking industry and I’ll look at that as a general whole, and I’ll look at all the companies within that as their own, I guess separate entity or world. But then you also have to kind of take into consideration what’s going on in the rest of the United States or the rest of the world as far as the economies go. So, for example, if the economy is doing well and interest rates are rising, then that is going to be a boon for the banks.

Dave:                                    21:38                     Whereas if the economy is stagnant or as possibly sliding into a recession, then the rates are going to be going down. Which is not going to be good for banks in the long run. And same would apply with insurance companies depending on how they generate their money, whether it’s through revenues or whether it’s through investing. So it depends on how you’re analyzing the company. So I try to look at apples to apples and then compare that to other things. But you have to take into consideration the cyclicality of it, or you know, another aspect of that is thinking of retail. When you think of retail type businesses, whether it’s Amazon or anybody else that’s trying to compete against them, Walmart for example, they, they’re in the majority of their income is going to be earned and the holiday season, you know, they just, they see a huge spike in sales because of all the Christmas presents and you know, the LR, everybody’s celebrating and blah, blah, blah.

Dave:                                    22:39                     So that has a huge impact at that particular time of the year on those particular businesses. Whereas say the dog days of the summer, you just, you’re not going to see as much revenue growth from them at that period. But you still have to compare it to other businesses that are going through the same kind of thing. Because if you, if you extrapolate those businesses out and you look at it as a standalone entity and go, wow, that’s amazing. Look at that growth that you know at this time of the year, that’s awesome. But then maybe if you compare it to other peers in the same period, you go a, okay, well maybe that’s also great. So I think that’s one thing that you do have to do is try to be cognizant of what else is going on around that particular business and not think of it as just this is the, you know, Walmart’s really the only company I’m going to look at and I’m just going to compare Walmart to Walmart, which is you need to do that so that you can see how they’re doing themselves. But you also still have to compare it to other people and take that into whether it’s the S&P 500 whether it’s another competitor in their field or whether it’s the whole market economy. Now, do you have to be an expert in all three of those areas? I don’t think so, but you at least need to be aware of those so that you have something to compare it to cause growth in and of itself is not, you know, if Walmart is growing that’s great, but if nobody else is recognizing it then it’s not going to help you in the long run. Does that make sense?

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Andrew:                              24:24                     Yeah, it’s great, it’s a great point. I think something maybe we should have talked about in the beginning. It’s like if you’re as a disclaimer when you’re looking at growth, it depends on when you’re, what your start period is and what your end period is cause you can manipulate those periods and make the growth picture look a lot better or a lot worse. I liked the example you gave about the retail thing because to your point, Q four is, is huge for a lot of retailers. And if you’re comparing, let’s say from Q three, the Q4 like, wow, great growth. And again, you’re not, you don’t get the context of that, and you’re not really to your, to your point, you know, you said that already. You’re not because, because that period, maybe it’s better to look in this specific case. What did the Q for doing this year versus last year? And then again, like you said, comparing it to peers. So definitely when you’re looking at growth, be careful and make sure the start period and the end period makes sense.

Andrew:                              25:29                     Which is another reason why I like to use averages. So extending on what, what Graham said on ten-year growth, something I like to do is instead of picking one year and then it’s like, maybe I like this year, and I want to compare it to that year, I like to take averages. So if I average out two or three years, and then I compare that, let’s say you fast forward seven years and then you take a two or three year group and that, and then you run a growth calculation based on those, I think that can be very, very helpful and smoothing out some of the cyclical nature of it or even just the natural fluctuations that happen as you run the business. And I think that can be another tip that people can kind of take away when they’re looking at growth.

Andrew:                              26:17                     Let’s really think about the starting and the endpoint and make sure we’re not cherry-picking a time period to massage the numbers to make it looks like a good investment or not the, the second thing I wanted to talk about what you said Dave, and then we’ll move on to while you’re talking about large-cap, small-cap, when you mentioned, let’s say Walmart grow, but nobody recognized that the market didn’t recognize that over the long run it’s not going to help your performance. Taking the flip side of that too is growth is not a magic fix-all be all that. I think a lot of Wall Street tends to think it is and at least they vote with their dollars that way. So I love using the example of some of the tech companies in 1999 and if you look at where they were, 1999, you compare it to say ten years later, 2009 and then you can even go 15 years, 20 years.

Andrew:                              27:17                     A lot of those because they were trading at such high-value valuations, they didn’t see their stock price recover to those 1999 highs even though the business inside the business they saw, you know, maybe double-digit earnings growth or double-digit book value growth or both. Right? The business as a whole in every aspect grew, but the stock did not because if you bought near the hub near the top, near the high valuations were so expensive that you, a company would have needed superhero growth for those valuations to continue. So that’s why when we talk about, or I guess when I talk about that fine balance between the valuation, the growth picture and the qualitative, and then we’re not even talking about dividends, but when you start to think of the balance of all of those considerations around the stock, you always want to consider that you’re not paying too high evaluation because that can definitely happen and growth does not fix all problems.

Andrew:                              28:21                     I guess to your final question about a small-cap, large-cap, I think it does make sense, right? If a company like Take Amazon, for example, I don’t know what their market cap is now and if they hit 1 trillion there or not, but you know, a company like that, they’re not going to grow 10%. Right. How can you, how, I mean, I’m sorry. Yeah, they’re not going to 10 x from where they are now. How can I accompany, go from 1 trillion to 10 trillion while the US GDP is, is it like what, 25 trillion or something. Like there’s just no way that either the government will allow a business to get that big, that that makes up half the economy. That sounds like a monopoly to me. Or even that they can grow at that scale. Now obviously they could grow 10 x over a very long period, but also the GDP would have to grow and all of the sorts of things.

Andrew:                              29:16                     So as you get to the higher market cap numbers, yeah, there there’s, there becomes a ceiling to growth and that can affect how you’re trying to project growth into the future. That being said, I don’t think it’s a hard and fast rule. So when I think of a company and I’ll, I’ll give this company away because it’s already, it’s already returned so much from the leather portfolio that it’s, it’s, it’s so overvalued. Like it’s not going to be a strong buy anytime soon. But that Cisco, when I bought Cisco, they had great growth numbers. They are at 211 billion, and they still have great growth. So there are lots of other examples of that too where these huge market cap companies are either able to match the s and P or even outperform the s and p with growth even though there is such a massive size.

Andrew:                              30:10                     So yes and no, maybe a frustrating answer for some people to hear, but maybe overall, yeah, I would prefer a smaller cap because conceptually it makes more sense that they could grow an at a bigger rate. But you know, there are risks with that too. Right? A smaller company might see a big competitor come in and wipe them out because the big competitor has more resources at the same time. Some of the best stocks we’ve ever seen of all times started there that such small amounts. And so when they became huge forces in the economy, that’s why they’re, the growth for shareholders was just obscene. So yes, sir, yes and no. Kind of not black or white, maybe a little shade of gray. That’s how I would think about. And I guess it wouldn’t be as much of a factor as far as or as the market capitalization at rather than it’s probably affecting me with a bias somehow versus like actually being beneficial towards results.

Dave:                                    31:17                     Yeah, that makes sense. I like the explanation. I think that to me makes sense. So I would agree with what you’re saying. So I think that’s a, a good way to look at it. One other thing that I guess I wanted to throw at you. So we’re, we’re talking about earnings growth, and we’re talking about book growth. Is there anything else besides those two things that you consider when you’re thinking about growth or do you think about revenue growth, a dividend growth to do those enter the, the sphere of what you consider growth?

Andrew:                              31:50                     Yup. Perfect question. And you answered your question. So revenue growth, revenue growth is good obviously, and it’s a lot easier to grow your earnings when your revenue is also growing and then dividend growth. I think that’s, you know, with all my emphasis on drip, I think that’s Kinda obvious.

Andrew:                              32:13                     When you think of like some of the other metrics I look at like cash that can fluctuate from year to year and I don’t really consider that concerning if it’s not growing over time because you have to think cash is more like an emergency fund for these companies so that can kind of go where it wants. But yeah, you want to see a dividend growth along with the earnings growth and the book value growth. And I think it kind of leads to the last point of this. I wanted to say, and I think Benjamin Graham, again, I’m going to quote him from security analysis. He really puts this, I found it actually shocking to be honest, like with all his focus on, on, on the balance sheet and, and some of a lot of the other stuff he talks about this little sentence here and the fact that it’s just buried and, and he, he talks about it in the rest of the chapter and then he doesn’t, I don’t remember him talking about it in the intelligent investor.

Andrew:                              33:09                     And so, you know, it makes me question whether the statement still rings true for him or not, but I’m just going to read it. He says profitability ratios, the best gauge of the success of an enterprise is the percentage earned on its invested capital. So that’s quite a large claim. You know, return on invested capital. We’ve talked about if you go back in the archives, you look at like return on equity, I think that would be a good one to review if you want more insight on that. It’s, it’s, they’re all the same. They’re all calculating a very similar thing. Return on invested capital, return on equity. You’re looking at how efficient a company is with, with what they have. Right. And so he reinforces this back to that example where he’s looking at a side by side between the two companies.

Andrew:                              34:02                     He says, you know, he looks at the growth, and I believe the growth for both was the same. But then he also looked at the profitability ratios, and he found that from a profitability standpoint, one had like a doubling of the profit margin versus the other. So they were competitors in the same industry. One had twice, you know, it was like a 6% profit margin versus like a 3% profit margin. And so he, he said that like that higher profit margin for them being in the same industry is probably, probably means the businesses better cause, there’s gotta be a reason for it either. For one, they’re good at keeping costs low, which I think is a downside because I think any company can cut costs and so that wouldn’t be something that I would kind of hope for. But he says like maybe there’s something inside the business that just makes them more efficient as far as like maybe an intangible, they have a brand value that’s more valuable and they don’t have to spend as much on marketing in order to get some amount of profits, or you know, some pattern, or just there’s just some inherent advantage, competitive advantage within the business that makes this one better than another one.

Andrew:                              35:21                     And so he used that side-by-side example to show, again, going back to this growth is a balance of a lot of different factors that actually from a valuation standpoint, the company with the lower profit margin was an intrinsic value kind of deal. But the one with higher profit margins, like the difference in valuation wasn’t big enough for Graham with a wanted the cheaper one. And so he said how the more the slightly more expensive one had better profit margins, there was similar growth and I believe similar return on invested capital on them. But there was that one factor that, you know, a big difference, right? I think we’re talking about a doubling versus, you know, it’s not like this was 3.5% versus 3.3 it was a significant difference. And so he showed that as an example, looked forward and showed how this stock did a lot better than that stock.

Andrew:                              36:19                     And so I think that’s kind of a final thing we can think of. You know, you think of the longterm growth, you think of some of the other growth metrics, and then you want to also think about profitability, efficiency, and Yada Yada Yada. And I think I brushed over the revenue growth a little bit, but kind of going back to this profitability ratio, if you think of a profit margin if your revenue is not growing because the profit margin is just how much in profit did you make and how much in revenue did you have to have to bring in that profit? So I have five customers, they pay me 50 bucks, it costs me $10 to pay my employees. My profit was 40 bucks. That’s the profit margin between 40 and 50. So can you imagine trying to grow profits? If your revenue is going down, it’s going to be very hard.

Andrew:                              37:10                     And if your revenue continues to go down, that’s unsustainable. You can’t, you can’t get so efficient, and at a point you’re going to Max out the efficiency, and you’re going to have to increase that revenue again. So I think declining revenues is a red flag. I think. Not being able to raise the dividend, it’s a red flag. We’ve talked about negative earnings and high debt as being a red flag in the past. So I would avoid the red flags may be based on if you’re going to follow what Benjamin Graham says, maybe you focus on profitability, kind of efficiency ratios and like a very long ten year time period. Maybe something else that I said kind of catches your eye or maybe somebody that you read on in the future says something that makes sense to you with growth, you know, or maybe even with every stock you pick there’s going to be [inaudible].

Andrew:                              38:08                     That’s kind of what I hope there’s going to be a different growth story. The reasoning behind it. As long as you’re in that balance and from a whole picture kind of holistic perspective, things are generally good than I. I really think that growth becomes a complementary piece and the stuff that we normally talk about, margin of safety, emphasis on the safety, a long-term mindset, dollar-cost averaging, reinvesting your dividends, diversification, all those things I think are a bigger part of those are like the entree and then I think growth becomes kind of dessert. But you know, I think [inaudible] that being said, I think growth is necessary. So you want to consider it, but don’t get too stressed out about it. Don’t have so many ideas on it that you’re paralyzed because one stock didn’t have something from a growth perspective that you’d like to see.

Andrew:                              39:11                     No stock is going to have every single metric you want to look at perfectly. And so the, I think there’s some beauty in that, and that makes the stock market uncertain as it is. And then that can also create opportunities. So maybe keep all of that in mind, and hopefully you learn something about growth today.

Dave:                                    39:29                     All right folks, we’ll, that is going to wrap up our discussion on growth today. I hope you enjoyed it. Andrew’s dissertation to us about growth and all of his thoughts on that. I thought that was fantastic. I especially liked his last comment that he made about no stock that you’re going to find is going to have every perfect metric that you’re looking for. Try not to find everything perfect and have that paralyze you before you make an investment decision. Remember, you need to buy stocks to be in the stock market to make money. So without any further ado, going to go ahead and sign us off. You guys have a great weekend. Invest with a margin of safety, emphasis on the safety, and we’ll talk to y’all next week.

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