Roundtable: What We're Thankful For
Nov 21st 2012 2:37PM
Updated Nov 21st 2012 3:48PM
In this holiday time of mass consumption, we're taking a little time out to give thanks. We asked some of our top analysts what they're thankful for (financially speaking, of course).
Morgan Housel: I dug up a headline from Thanksgiving four years ago, in 2008. "A financial crisis unmatched since the Great Depression," it read.
Someone who bought a basic index fund the day after that headline was published has since earned a 91% return. I'm thankful that, after what truly was the biggest upheaval since the Great Depression, smart investing still works.
Buy and hold still works, despite calls to the contrary. Being contrarian still works, as it always has. Buying cheap stocks still works, and it always will.
Tim Beyers: Want two words guaranteed to boil the blood of most long-term investors? Easy: short seller. What some see as evil I see as necessary. You can't have functioning markets without buyers and sellers.
Others will argue that shorting adds unnecessary and often extreme volatility to the stock market, which opens the door to manipulators. I think you could say the same about high-frequency trading. Neither practice is inherently evil. In the case of shorting, the right to bet against an overvalued name or apparent fraud forces scrutiny and adds intelligence to our anything-but-rational market.
Let's also be clear that short sellers don't always win. The more ill-prepared sometimes overbet against good businesses, suffering temporary financial setbacks. The inevitable bounceback becomes magnified in what's known as a "short squeeze," handsomely rewarding the patient longs who held as others panicked.
Today's investors in Tesla (NAS: TSLA) , which shows more than 60% of its shares sold short, and Netflix (NAS: NFLX) , which has seen more than 30% of its shares lent to short sellers, could benefit from squeezes shortly after the new year dawns.
Brian Orelli: I'm thankful that the presidential election is over because it removes an overhanging cloud of uncertainty about the fate of Obamacare. Ambiguity isn't a friend of investors because it makes it very hard to value companies. With its namesake still in office and a Democrat-controlled Senate, it appears the Affordable Care Act is here to stay.
The law isn't perfect by any means, but I think knowing what to expect outweighs the drain the law will have on health care companies. Many companies will face increased taxes and forced discounts on drugs, but the current path of escalating health care costs wasn't sustainable anyway. And the law will increase the companies' potential customers because more Americans will have health insurance, making up for some, if not all, of the lost profit.
Rich Smith: I'm thankful that I didn't let overblown worries about Apple's (NAS: AAPL) maps gaffe, and competition from new tablet offerings by Amazon (NAS: AMZN) and Samsung scare me away from recently buying a stock that's suddenly become cheap. At 12 times earnings ex-cash, a 22% growth rate and a near-2% dividend, I'm happy to have finally become an Apple owner.
Dan Caplinger: I'm thankful that low-cost exchange-traded funds have become so readily available. ETFs have opened up broad new swaths of the investment world that only big financial institutions had access to, and thanks to their index-driven investment strategies, ETFs have given us all a way to chop the pricey fees that most actively managed mutual funds charge. As minimal as savings of mere fractions of a percentage point may seem, the net result will be tens or even hundreds of thousands of dollars in extra money by the time many investors reach retirement.
Although ETF providers including BlackRock (NYS: BLK) , State Street (NYS: STT) , Vanguard, and Schwab (NYS: SCHW) unquestionably have profit motives as part of the reason they offer ETFs, they've nevertheless greatly reduced the amount of wasted fees that millions of investors have to pay. That's worth a toast this Turkey Day!
Travis Hoium: I'm not afraid to admit that I have a little tree hugger in me. It's what has drawn me to the energy industry and the wind and solar markets in particular. But that doesn't mean I'm not also a realist about the drivers of real change when it comes to the energy we use and how clean it is. We simply can't promote cleaner energy through market distortions like subsidies because it's not good for the long-term health of the economy or the renewable energy industry.
That's why this year I'm thankful that the U.S. is driving toward cleaner energy sources that are driven by economic factors, not government intervention.
First is a major shift to natural gas from coal as our main source of electricity. This year, natural gas has become more economically viable as a baseload source and that's why utilities are making the switch from coal to natural gas. Ironically, this hasn't been good for the investors of coal or natural gas, but it's good for the environment and so far it hasn't significantly affected electricity prices (which I covered here).
Then there's solar; the only renewable energy source that could truly make an impact on a global scale. Costs continue to fall rapidly and a kW-hr of solar electricity is now on par with the cost of electricity in many areas of the U.S. and around the world. Don't believe me? Check out this article where I cover feed-in tariffs in Germany that are lower than electricity prices, a new power purchase agreement in California at 10.4 cents/kW-hr (average retail price is 15.24 cents), and the 44% drop year over year in solar panel prices. These are great long-term trends for a cleaner energy future.
It's about time the cleanest energy sources finally become the most economical and for that I give thanks.
Anders Bylund: I'm thankful for living in this exciting age of technological progress. New inventions improve our daily lives at a staggering rate, and there's always something even cooler, better, and more amazing just around the corner.
Ten years ago, you'd be lucky to have a simple pager and a brick of a cell phone. Today, Apple and Google (NAS: GOOG) are putting supercomputers in our pockets.
And that's just one example of the incredible pace of innovation. We've got robotic surgery, instant access to endless digital entertainment, broadband networking on the go, and all kinds of incredible stuff that looked like total science fiction just a few years ago. It's all investable, and every morning I fully expect to have my mind blown again. Thank you, inventors.
Chuck Saletta: I'm thankful for companies that both pay and regularly increase their dividends. Owning a fairly diversified set of companies that do that generally provides a great source of both income and inflation-buffered income growth. There are still no guarantees in investing, but these characteristics are pretty good indicators that a company would be a good fit:
- Healthy balance sheet, as indicated by a debt-to-equity ratio below two.
- Reasonable valuation based on a discounted cash flow analysis.
- Decent dividend history, with an established multiyear trend of raising its dividends.
- Strong prospect of continuing to raise its dividend, as suggested by (1) a payout ratio below 2/3 of earnings, and (2) a competitive advantage with staying power.
A portfolio built on companies like that is not likely to set the world on fire. When the market does crazy things and the economy stays on the rocks for an extended period, however, those regularly growing dividends become easy to be thankful for.
Alyce Lomax: I'm thankful for the say-on-pay rules mandated by the Dodd-Frank Act. Giving investors non-binding votes on CEO compensation has galvanized shareholders and it's even beginning to spark positive change at some companies. This year, high-profile defeats of compensation policies at well-known companies like Citigroup (NYS: C) , Big Lots (NYS: BIG) , and Mylan (NAS: MYL) show that shareholders do care about outsized pay and they're willing to push back.
Meanwhile, of the 2011 say-on-pay defeats, companies that specifically worked to address shareholder concerns and change their compensation plans tended to garner more shareholder support this time around and pass their votes. In other words, shareholders great and small have found voice through their proxy votes, and corporate managements and boards are starting to listen and respond. Returning ownership culture to American public companies would be a great thing for investors -- and our economy -- in coming years. For now, I'm grateful and excited that the path's been set, and shareholders are recognizing their ownership roles in the companies whose stocks they hold.
Max Macaluso: I'm thankful for the many biotech and pharmaceutical companies that are developing drugs for unmet medical needs. Sometimes, as an investor, it's easy to lose perspective and think only about how clinical trial data will impact your investment's share price. Take Geron (NAS: GERN) , for instance, a company that's developing new cancer drugs. Its share price was cut in half back in September after two of its clinical trials for an experimental drug failed. It was certainly a bad day for investors, but it was even worse for patients hoping for a breakthrough.
Biotech stocks are usually the riskiest on the market because many facets of science remain a mystery, and these companies are pioneering new medicines that may or may not work. Be a responsible investor, keep your emotions in check, and limit your exposure to speculative stocks -- but also take a moment to thank the women and men working at the leading edge of science.
Let your fellow Fools know what you're thankful for in the comments section below.
The article Roundtable: What We're Thankful For originally appeared on Fool.com.This roundtable was compiled by Anand Chokkavelu, CFA, who owns shares of Apple and Citigroup and Citigroup warrants. The Motley Fool owns shares of Apple, Amazon.com, Citigroup Inc , Google, Netflix, and Tesla Motors. Motley Fool newsletter services recommend Apple, Amazon.com, BlackRock, Google, Netflix, Charles Schwab, and Tesla Motors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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