Podcast Summary
Learning Effective Communication Skills in Uncertain Markets: Despite market challenges, continue learning communication skills and stay informed about market trends for personal and professional growth. Historical data shows the stock market averages around 11% returns per year.
While the current economic climate may not be ideal for stock investors, with inflation and uncertain markets, it's essential to continue learning and improving communication skills for both personal and professional growth. The Think Fast, Talk Smart podcast, produced by the Stanford Graduate School of Business, offers valuable insights from experts on effective communication techniques. Despite the challenges in the market, long-term investors can look back at historical data and see that the stock market has averaged around 11% returns per year, even if not every year. So, keep learning and communicating effectively, and stay informed about the market trends.
Historically worst performing month for stocks is September, but other months have been positive: September is a historically weak month for stocks, but other months have consistently delivered positive returns. Current market conditions may offer opportunities to buy at lower prices, despite negative consensus. Housing markets in countries with high rates of exotic mortgages and low small cap to large/mid cap ratios may present additional opportunities.
Historically, September has been the worst performing month for the stock market, with an average return of -0.9% since 1980. However, if we look at the aggregate returns for all other months, they have all been positive. The next few months, from October through January, tend to be a good period for the market. Despite the current market conditions, it's important to remember that negative environments can present opportunities to buy at lower prices. We've seen this month bring two things: relatively low prices and a lack of cheery consensus. Another concern is the housing market, particularly in countries with high rates of exotic mortgages, such as Canada. Lastly, the ratio of small caps to large and mid caps is at a 50-year low, last seen during the tech bubble. This could indicate that small caps are being overlooked, potentially offering buying opportunities.
Small caps outperform large and mid caps in current economic climate: Historical trends show small caps outperforming large and mid caps, and Costco's expansion into healthcare could lead to increased long-term revenue growth
The current economic climate favors small caps over large and mid caps based on historical trends. Additionally, Costco's expansion into healthcare through partnerships like the one with Sesame could potentially lead to increased revenue in the long term, even if it doesn't contribute significantly in the near term. The healthcare sector is an important ancillary business for Costco, accounting for approximately 21% of total revenues in the most recent fiscal year. This expansion could help Costco capture a larger share of consumers' dollars by offering competitive pricing on healthcare services.
Costco's Growing Revenue and High-Quality Business: Costco's revenue grew by 16% in fiscal 2022, with the warehouse segment accounting for a larger share and the company's real estate assets adding significant value. Despite a premium price, Costco's growth and quality make it a compelling investment opportunity.
Costco is not only a strong revenue grower, but also a high-quality business worth investing in despite its premium price tag. In fiscal 2022, Costco's total revenue grew by 16%, with the warehouse segment accounting for a larger share at 20.9% of total revenue, representing a near 47% growth rate in that segment. Costco's busy stores and large carts full of unexpected purchases are evidence of its appeal to consumers. Additionally, the company's ownership of about 80-85% of its land and buildings adds significant value to its balance sheet, although it doesn't contribute to earnings or cash flows quarterly. As a result, Costco's valuation may be overstated, and the company could potentially unlock value through a sale-leaseback of its real estate assets. Overall, Costco's growth story and high-quality business make it a compelling investment opportunity, even if it comes with a premium price.
Understanding a company's value goes beyond earnings multiples: Costco's earnings don't tell the whole story - its growth potential and cash flow generation make it a potential cash flow engine and return capital to shareholders.
While traditional valuation ratios provide important insights into a company's earnings, they don't tell the whole story. Costco, for example, is more than just its earnings multiple. With significant growth potential and a business model that generates substantial cash flow, Costco could eventually become a major cash flow engine and return capital to shareholders. This perspective was discussed during an interview with Jim Gillies on Motley Fool Money. For those looking to improve their communication skills, the Think Fast, Talk Smart podcast is a valuable resource. Hosted by Stanford lecturer Matt Abraham, the podcast features experts sharing tips on various aspects of communication, from managing anxiety to being persuasive. Lastly, while The Motley Fool primarily focuses on individual stocks, exchange-traded funds (ETFs) can also be effective investment tools. Bill Mann and other Foolish investors shared their experiences using ETFs during a conversation with Alison Southwick and Robert Brokamp.
Gain exposure to various asset classes and markets with ETFs: ETFs allow investors to diversify their portfolios by gaining exposure to different asset classes and markets with the convenience and cost-effectiveness of mutual funds, while offering flexibility and pricing transparency throughout the trading day.
Exchange Traded Funds (ETFs) can be a valuable addition to any investor's portfolio, especially for those who want to diversify their holdings and spread out their risk. ETFs are essentially mutual funds that trade like individual stocks, allowing for more flexibility and pricing transparency throughout the trading day. Motley Fool analysts Kirsten Guerra and Jason Moser shared their perspectives on using ETFs in their investing strategies. For Guerra, ETFs serve as a way to gain exposure to asset classes she finds less interesting or less familiar, such as bonds or emerging markets equity. Moser, on the other hand, sees ETFs as useful tools for investing in industries or markets that are more complex or rapidly changing, like cybersecurity. The Nasdaq First Trust CTA Cybersecurity Index ETF (CIBR) is an example of an ETF that provides broad exposure to the cybersecurity market by investing in 35 different holdings. Overall, ETFs offer investors a convenient and cost-effective way to gain exposure to various asset classes and markets while mitigating risk.
Investing in ETFs: Access to Various Sectors with Ease: ETFs offer easy and cost-effective access to diverse investment opportunities, including sectors, hedging, and index-plus strategies. Passive and active ETFs differ in management style and tax efficiency.
Exchange-Traded Funds (ETFs) can be a smart choice for investors looking to gain exposure to various sectors without the need to fully understand them. With over 8,700 ETFs available on the US stock market, they offer a diverse range of investment opportunities. Some investors use them for hedging purposes or as part of a broader index-plus strategy. ETFs provide easy and cost-effective access to broad market exposure, making them a popular choice for those seeking advisor diversification. While ETFs and mutual funds share similarities, the decision between the two depends on factors like availability and tax efficiency. Passive ETFs, which follow an index, can be considered a more automated version of passive index funds. Active ETFs, where a manager makes investment decisions, are more similar to actively managed mutual funds. Currently, active ETFs are gaining popularity and, in some cases, outperforming passive ones.
ETFs: Diversification and Access to Markets: Focus on broad exposure to various instruments in ETFs, avoid timing the market or chasing niche themes, and remember investing always comes with risks.
ETFs, especially passive ones, are a great tool for diversification and accessing markets that might be difficult to invest in otherwise. The recent trend of pulling out of thematic or niche ETFs serves as a reminder that diversification is key, and trying to time the market or find the next hot investment can be risky. When it comes to ETFs, it's important to keep things simple and focus on gaining exposure to a broad range of instruments rather than trying to hit it big with a specific theme or niche. As for tying an ETF to a musical genre or artist, Weird Al Yankovic's trend-following approach makes him an interesting choice as a metaphor for a parity ETF that aims to mirror various market trends. However, it's essential to remember that investing in ETFs, or any financial instrument, always comes with risks and uncertainties.
Creative ETF Suggestions from Participants: Participants proposed imaginative ETFs like XMAS (Christmas music) and EATN (shorting restaurant stocks) reflecting their personal interests and experiences.
During this discussion, the participants expressed their creativity and personal interests when suggesting potential Exchange-Traded Funds (ETFs). Phil, a fan of Christmas music and Weird Al Yankovic, proposed an ETF named XMAS, with a market-weighted focus on new Christmas music and a heavy weighting towards Cher's upcoming album. Meanwhile, Ricky shared his experience of cutting back on eating out and suggested an ETF called EATN, which would short restaurant stocks with heavier weightings towards higher-end dining. These ideas showcase the fun and imaginative side of investing, as well as the potential for ETFs to represent various aspects of popular culture and personal experiences.
