Learn the stock market in 7 easy steps. Get spreadsheets & eBook with your free subscription!

Let’s find YOUR path to financial freedom…

  • The median age in the U.S. is 36.8
  • The median income in the U.S. is $51,939
  • The average 401k match is $1 for $1 up to 6%

A 36.8 year old investing 10% of their $51,939 income with a $3,116.34 match:
With just average stock market returns of 10% would have $1,114,479.31 by retirement.

Join 15,000+ other readers who have learned how anyone, even beginners, can easily make this desire a reality. Download the free ebook: 7 Steps to Understanding the Stock Market.

Data that Reveals the Best Performing Growth Factors (Historically)

Not going to lie – the title of this article is so good that it almost seems like clickbait, am I right? Good news for you – it’s not!  I am going to continue through my book review of ‘What Works on Wallstreet’ and go through Chapter 19 to identify how to find the most important growth factors!

Previously, I have talked about Value Factors and their importance as well as how Multifactor models outperform the market and this will stay right on trend. 

I know, I know – this sounds extremely in depth and hard to comprehend, but it’s really not.  Not only does James O’Shaughnessy do a great job at making it easy to comprehend, I try to go even another step further to make it easily readable for all investors!

Well, enough of me talking about nonsense – let’s get to the meat and potatoes!

Previously I have written about O’Shaughnessy saying that a Price/Sales (P/S) under 1 is one of the most important factors when evaluating a potential stock but we’re going to add to that here. 

The first example that O’Shaughnessy compares is the following three stock groupings:

[continue reading…]

The Fully Paid Securities Lending Program: What it Is and the Risks

Have you ever heard of a Fully Paid Securities Lending Program before?  No?  I don’t blame you.  Up until recently, neither had I!  So, the benefit of you reading this is that you’re learning from me as I have recently learned this material so you’re getting a true, unfiltered opinion of mine on the matter! 

So, what exactly is a Fully Paid Securities Lending Program?  Essentially what you’re doing is you are lending your fully paid securities to a bank or institution and then they are then taking those securities and lends them to other clients or financial institutions. 

I know it might sound confusing, and trust me I was extremely confused at first, so let’s try to make it even a little bit simpler.  Below is a screenshot from the Schwab website that talks about the Fully Paid Security Lending Program:

[continue reading…]

13F Filings: The Easy Way to Find Awesome Investment Ideas from the Greats

There is a place on the internet where you can get a detailed portfolio snapshot of the world’s greatest investors, all regularly and for free. These documents are called a 13F filing, and they are found at SEC.gov.

Using the 13F filing is easy and free, so you can find what some companies your favorite investors or fund managers are buying or selling. The 13F is a fantastic source of investment ideas, and did I mention all for free?

We can use the 13F as a source of investment ideas as well as portfolio construction. Using these filings helps you see what kinds of concentrations our gurus are allocating, as well as what kind of prices they are purchasing their companies.

I have used these filings to help me find some great investment ideas from the likes of Monish Pabrai, Warren Buffett, Guy Spier, Charlie Munger, and many more.

In today’s article, we will discover how to find these 13F filings, in addition to how to use that information for your investment ideas; also, we will discover the power of cloning these investments.

What are 13F Filings?

What is a 13F filing, you ask? Well, according to Investopedia:

SEC Form 13F is a quarterly report that is filed by institutional investment managers with at least $100 million in equity assets under management. It discloses their U.S. equity holdings to the Securities and Exchange Commission (SEC) and provides insights into what the smart money is doing.”

[continue reading…]

IFB129: A Sip of Starbucks Balance Sheet

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:                                    00:36                     All right folks, welcome to the Investing for Beginners podcast. This is episode 129 tonight. Andrew and I are going to go back to the well, and we’re going to answer a listener’s question. We got a great one the other day, and Andrew thought this would be a great conversation for us to have with you guys, so I’m going to go ahead and read the question, and then Andrew will take the first stab at it. All right, so here we go. I have been practicing using the VTI Excel sheet and pick Starbucks since they are a large company that has been around for a while and doesn’t seem to be going anywhere. When I input their numbers into the spreadsheet, it put on a VTI of 1428 I see. They have more way abilities than assets. Their dividend has decreased from last year, and their shareholder equity seems to be in a negative. Yet when I read articles online, they say it as a good buy. How do you reconcile these articles with the data we are receiving through the VTI process. Thank you, and love all the content. Andrew, what are your thoughts on this?

Andrew:                              01:35                     Yeah, super good question. First off, and I think there’ll be a lot of fun to talk about Starbucks and take a deep dive into it. Just for kind of clarification for people who don’t know what the listener is talking about, we need to says VTI that stands for value trap indicator. It is a formula that I created and use on every stock I buy. And so basically it takes some of the financial numbers around the company and does some calculations and tells you generally whether it’s a good buy or not. So 1428, that’s a very high number in the range of VTI world. That’s definitely like in strong sell territory or at the very least, do not buy a territory. So I think you know it. It’s a great question and a great thing to think about. Because you have, you have on let, let’s start maybe with a disclaimer.

Andrew:                              02:36                     I love Starbucks myself. When I see a company like Starbucks, a brand like Starbucks, a cup of coffee in front of my desk, like Starbucks, everything about that makes me feel good, and it makes me want to be a part of that. And I think with a lot of the investments you’ll have, a lot of the stocks you buy and the businesses you want to have part ownership in, that’s like a great thing to have, and that’s a good piece and a good part of that. And then so it’s something you always strive for. However, at the same time when it comes to investing your hard-earned money, if you’re going to be smart, if you’re going to be conservative, if you’re going to try to take an approach that is maybe a little more boring by the little bit more heavy on facts, well then you’re going to have to kind of look at what is really going on behind the scenes and kind of think about, well, you know, appearances are just that appearances.

[continue reading…]

“Justified” Market Multiples Valuation – Is The Price Right?

Comparing price and enterprise multiples across investment alternatives is a good place to start when analyzing a company. Using the justified approach to calculating multiples can shed additional light on if the company’s market price can be “justified” based on fundamentals.

The justified method can also help investors and analysts break down the current multiple valuations being paid in the market by plugging different inputs/assumptions into the formulae and then using algebra to solve for the missing piece such as growth, ROE, discount rate, etc.

This article will discuss a few of the main justified multiples and use Walmart as an example to to see if its valuation can be “justified”.

Here is what the justified multiples valuation will imply:

[continue reading…]

The Best Car for Uber When Accounting for Expenses and Other Features

So, you’re like one of the 900,000 people (literally) that have decided to drive for Uber, so how do you know what the best car for uber is?  Well, that’s an easy answer – find the car with the best gas mileage, right? 

Well, I don’t disagree with the thought process, but being a frequent Uber user, I think there’s a lot more that goes into it…

So, what is important to the driver?

  • Gas Mileage – obviously
  • Purchase price of the car
  • Retention value of the car for when you want to sell
  • Safety Features
  • Overall Rating of the car

These are all great and seem pretty obvious, but what types of things are important to the rider that will help you accomplish a better rating?

  • Is the car spacious/comfortable?
  • Sleekness of the car
  • Is the car quiet?

Really, as an Uber rider, I don’t care too much about the car that I am riding in.  The few things that I really do expect is that the car is not crappy looking and that it is clean, doesn’t smell and is comfortable. 

Most of these things can be accomplished by a driver simply not being a slob, but the comfortability is very important, especially if I’m getting an Uber from the airport after a long flight.

So, in my eyes, I have really been able to narrow it down to three main cars that I think are best for being an Uber driver.  These three cars include a Subaru Impreza, a Toyota Corolla and a Honda Accord.  What makes these three cars the best?  Well, it’s quite simple really…

[continue reading…]

Templeton Growth Fund – But Is It Actually?

On a recent episode of the Investing for Beginners Podcast Andrew and Dave had a guest, Scott Chapman, join the show.  During the podcast, Scott talks about his book, Empower Your Investing, and goes in depth with how and why he decided to write the book.  Listening to the podcast really sparked my interest with John Templeton so I wanted to dig a little deeper into the Templeton Growth Fund.

The Templeton Growth Fund (TEPLX) was founded in November of 1954 and essentially tries to focus on finding large-cap stocks that are currently undervalued.  Sounds very similar to what we’re all trying to do, right? 

Unfortunately, that really is the end of the good news…

Since 1986, the returns for the fund have only average 2.65% while the S&P 500 has returned an annual average of 9.08%. 

My first thought was that there likely was simply a few bad years in there but that’s also not the case. Breaking it up into 5-year periods doesn’t make the data look any better as the S&P outperformed TEPLX every time except for once. 

And a large majority of those periods of outperformance were by an amount greater than 5%.

[continue reading…]

ETF & Index Weighting Schemes

With ETFs and passive investing continuing to grow in popularity, it is important for investors to understand the various index weighting schemes that our trusted ETFs are tracking.

etf index weighting

These differences in weighting schemes can expose investors to different risk and return potential so it is important to always check “under the hood” what type of index an ETF is using as its benchmark.

Let’s take a look at the four main weighting schemes below:

  1. Market Value-Weighted – This is the classic weighting style that many of the largest and most popular indices and ETFs are based on. The components of a market value-weighted index are weighted in proportion to each company’s market capitalization (remember that market capitalization = share price x number of shares outstanding) relative to the market capitalization of the whole index. As such, market value-weighted are also commonly referred to as capitalization-weighted indices.

Market value-weighted indices are akin to a weighted average where smaller valued companies represent a less significant portion of the index and larger valued companies represent a greater portion.

The S&P 500 and small-cap Russell 2000 would be popular examples of a market value-weighted index. The logic of the weighted average and its close approximation to changes in investor wealth, has led to the growth in the popularity of market value-weighted indicies ahead of the more old fashion price-weighted indices which will be discussed next.  

[continue reading…]

How Multifactor Models Can Produce Excess Returns in the Stock Market

If you recently read my post about the different value factors then you’re in the right place to take that knowledge and build on it with some multifactor model discussion from Chapter 16 of ‘What Works on Wall Street’, written by James O’Shaughnessy. 

If you haven’t yet read that article, then I highly recommend you start there because a lot of information in this post is going to build off of the foundation that was built previously.

In my previous post, I talked about finding some ways to identify undervalued stocks that are less popular than simply looking at Price/Earnings (P/E) and a high dividend yield, such as Price/Book (P/B), Price/Sales (P/S) and Price/Cash Flow (P/CF). 

If you can do this, you’re likely going to experience some great returns.  But, what if you potentially can combine a few of these different factors together to run a multifactor model that might find an even more prestigious group of stocks?  For instance, take a look at the example below that O’Shaughnessy describes in his book, ‘What Works on Wall Street’.

O’Shaughnessy decided to evaluate stocks that only have a P/E ratio below 20 (which is also what Benjamin Graham recommends) and then he looked for the best 1-year price appreciations in stock price. 

[continue reading…]

Ally Brokerage Basics: A Guide for Beginners

A common first step for any potential investor is to try to find out what brokerage is the best for them to open their account with. I personally believe that Ally is a fantastic option for someone to start their investing journey.

Andrew has talked on his podcast in the past about how he uses Ally for his brokerage account.  He said that the thing that initially attracted him to Ally was that they were one of the cheaper brokerage firms as they only charged $4.95/trade. 

While things have recently changed drastically with many brokerage firms going to $0 fees, including Ally, I still do think Ally has a really strong platform and is a great option when it comes time for you to decide on your preferred brokerage.

One of the things that I think sets Ally apart is their ability to be a “one stop shop” for your money. I use Ally for my high-yield savings account as it doesn’t carry any risk at all but I use Fidelity for my investing. 

The only reason that I use Fidelity is because that’s where my 401k with my employer is, but I’m questioning if it makes sense to leave it at Fidelity and maybe I should switch everything to Ally. 

When you first login, you will see the page below where they’re advertising their 1.7% interest High-Yield Savings Account – not too bad to put your emergency fund!

[continue reading…]