Yield on Cost Podcast

The 3 major investing lessons from watching a professional blackjack player lose over $230,000.

Inside the Edge Movie

The Intelligent Quality Investor is a great introductory book to the world of investing in high-quality companies. What to look for and how to evaluate them.

These are the 8 key lessons I pulled from the book.

How the behavioral bias, the Halo and Horns Effect, can harm our portfolios and what we can do to combat it.

Cheap DNA sequencing, increased computing power, powerful new gene editing tools, and AI are setting up the third wave of the biotechnology revolution. And it's coming for industrial production. Mckinsey estimates there are around 400 identifiable and scientifically feasible production processes that could be disrupted by biotechnology. This is around $2-4 trillion of economic activity. Thermo Fisher is the biotech picks and shovels company that will benefit from this new wave of innovation.

Full Write-up

Why Warren Buffett's quote about swinging at a fat pitch is his most misinterpreted quote, what he really meant when he said it, and how I find my fat pitch zone.

Why have luxury goods companies like Möet Hennessy Louis Vuitton and Hermes been long-term winning companies and stocks?  They create a barrier to entry to competitors through two methods.

The first is signaling. What do the products mean to you and what do you want their products to signal to the rest of the world.

The second is heritage. These brands have been around for a long time. If you want to tie yourself to these historical events and to have your goods mean something in the future then you want to own these older luxury brands instead of newer trendier brands.

Links

The long-term dividend history of the New York Times is atrocious. But when we zoom into the last few years something interesting emerges. A 3-year CAGR of 20% for its quarterly dividend. The growth corresponds with a business strategy shift at the New York Times.

Can The New York Times maintain this recent dividend growth and become a dividend growth stalwart as it transitions to a digital-first subscription company? I discuss what I like about this new business model and my 3 main risks.

Links

Decision finality is when you become more certain about a decision when you can't undo it. You're far more certain your horse will win after you place a bet on it than before. How does decision finality affects our investment process and how can we avoid it? Or prevent it from causing us to make a bigger mistake?

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We eat 350 slices of pizza per second in the U.S. A pizza delivery company that feeds our insatiable demand for pizza could be a great investment. We think so and that's why we own Domino's Pizza (DPZ) in our dividend growth strategy. In this episode, I break down the 4 main catalysts or the 4 main reasons we own Domino's Pizza. The major risks to our investment. And our estimate of fair value using a discounted cash flow model and a price implied expectations analysis.

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Bottleneck businesses is a framework coined and used by Akre Capital Management. The two exmaples they gave as bottleneck businesses are Mastercard (MA) and American Tower (AMT). Using this framework, I go through our portoflio and see what other companies could be bottleneck businesses. And I think Visa (V), Microsoft (MSFT), and Broadridge Financial Solutions (BR) would count as bottleneck businesses.

And then a brief update on recent trades involving Broadridge Financial.

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The recent trades we made so far n the AMM Dividend Growth strategy during the market correction.

• Why Disney & Yum are now sources of cash despite us still liking them
• Domino's Pizza becomes a full position
• Other trades involving Mastercard, Visa, and Starbucks

Links

We like companies with Trophy Assets, hard to replace assets that create high barriers to entry for competitors. Essex property's portfolio of west coast apartment complexes is a trophy asset. In this episode Glenn discusses

• The structural housing issues in California make Essex's properties valuable.
• The risks of Zoom Towns and WFH.
• And our estimate of fair value and if Essex is trading at a premium or a discount to our estimate.

Download the 50th Issue of the AMM Dividend Letter

You're afraid of flying and right before you have to get on a plane I ask you how likely is it that your plane will crash? What about stock market crashes? How likely is the market to crash over the next 6 months? If you're like most people you drastically overestimate the odds of a plane crash and a stock market crash. So, why do we do this? And what can we do about it?

AMM Books

Where would you rather live

A) in a town with a median income of $25,000 and you make $50,000?

B) in a town with a median income of $200,000 and you make $100,000?

Everything else is the same. Your job, job title, cost of living, etc.

AMM Books

Why we're trimming Intuit in some accounts. What we're planning on doing right now regarding Johnson & Johnson's spin-off plans. And what we think about American Tower's acquisition of CoreSire Realty.

Original Write-Ups

Does Visa's common stock pass the security test, the asset test, and the income test to count as 1042 Qualified Replacement Property (QRP)? And can it be included in an ESOP Rollover as part of a dividend growth portfolio?

A tough year for Visa's stock just got a little tougher. Amazon will stop accepting Visa branded credit cards in the UK. What does this mean for our position in Visa? Is its once unassailable business model now under attack? What type of future is the current stock price pricing in? Is the potential return worth the risk now?

The start of a new series. Does this company pass the asset and income test to count as 1042 Qualified Replacement Property (QRP)? And can it be included in an ESOP Rollover as part of a dividend growth portfolio? The first company is Apple. 

The average holding period for stocks continues to shrink hitting an all-time low in the summer of 2020. The cause was every major online brokerage going to zero commission fees and large amounts of people working from home with more time to trade stocks. We want to build rising income streams and grow the yield on our initial cost. In this episode, Glenn discusses why we want to do this and how we plan to.

When we panic we no longer think about the long-term. We make short-term emotional decisions that make us feel good immediately but can harm our long-term goals. Especially with investing. So how can we be like John Glenn who's heart rate barely broke 100 bpm before being launched into space on top of a converted ICBM missile? How can we create an environment that favors long-term thinking and reduces the chance we make a short-term emotion-based decision?

Adelphia, Worldcom, Enron all went bankrupt after entering stadium naming rights deals. Intuit just announced a stadium naming rights deal with the LA Clippers for their new arena. It will be called the Intuit Dome. Based on the Stadium Indicator we should now sell Intuit?

In this episode, Glenn looks at the behavioral bias that feeds this heuristic trading rule and what are the actual returns to publicly traded companies that do stadium naming right deals.

Humans are the smartest animals on this planet so do you think with that big brain of yours that you can beat a pigeon at investing? The answer and the two investing lessons from a light guessing game pitting humans against pigeons and rats.

When will Disney bring back its dividend after eliminating it because of the coronavirus shutdowns? Management finally gave us some clarification in its Q3 2021 earnings call.

The major trends that are driving Home Depot's future growth like gains in market share and demographic shifts. The risks to our investment. Are we in another housing bubble? And finally, our estimate of fair value based on an ROIC justified P/E ratio and a DCF model.

Download the Original Write-up

Why we recently trimmed Discover Financial Services (DFS) in the AMM Dividend Growth Strategy and a new risk that emerged from the increased stimulus and U.S. consumers with a lot of excess cash.

AMM Books

Breaking down our position in Northrop Grumman (NOC).

• Its emerging Nuclear Triad monopoly
• The immediate risks that we see
• And our estimate of fair value.

For brevity, dividend history and dividend safety will not be talked about in this episode but can be found in our original write-up that you can download below.

Download the Original Write-up

We're back! Glenn breaks down our position in Texas Pacific Land (TPL). 

• Its unusual history, corporate structure, and dividend
• The catalysts for future price appreciation and dividend growth.
• The main risks to our investment
• And a quick update on fair value after its recent strong price run

Download the Original Write-Up

Lead portfolio manager Glenn Busch breaks down our position in American Tower (AMT)

• The catalysts for future price appreciation and dividend growth
• American Tower's big option play
• The biggest risk to our investment
• Finally our estimate of fair value

Download Letter #46

Glenn breaks down why we sold the rest of our eBay (EBAY) position. The 2 main reasons why we sold our position in Charles Schwab (SCHW). Glenn then reviews our new positioning size rules or new positions and why we're doing this. Then he briefly introduces are two new positions in Domino's Pizza (DPZ) and Texas Pacific Land Trust (TPL). Finally, how we're handling Disney and its decision to forgo its yearend dividend.

Links

Pool Corp keeps popping up on our high-quality dividend growth screens so why don't we own it? Glenn breaks down how Pool Corp's builds a business moat with its distributor model, the catalysts and risks to Pool Corp's future growth, and why we think Pool Corp is too expensive right now.

Links

Broadridge Financial Services is an important company for the smooth functioning of financial markets. But it's probably a company you don't recognize. Broadridge is a company we've followed for a couple of years and then during the Coronavirus market panic it trade at a deep discount to our estimate of fair value so we bought it.

In this episode, Glenn breaks down the hidden monopoly that Broadridge has and the high switching costs and barriers to entries this creates. Glenn also highlights a couple of trends within the financial services industry that will drive Broadridge's future growth. Then Glenn covers the risks and our estimate of fair value using an economic profit model.

Download AMM Dividend Letter 45

Why we trimmed Apple for a second time this year. How the short-term exuberance in tech stocks and specifically Apple went too far too quickly. How that was reflected in Apple's current P/E ratio. Glenn breaks down what price or P/E ratio we would be willing to pay given Apple's expected earnings growth and its return on invested capital (ROIC). 

This episode is based on the client letter sent out Wednesday, September 2, 2020. You can download the original letter below.

Download Original Client Letter

Glenn discusses why eBay was added to the portfolio and why we are reclassifying it as a source of cash. Glenn also covers how this might change. Then Glenn updates his thoughts on Disney's ability to and desire to reinstate its dividend. What could go right with its theme parks and what could go wrong. How college football plays a part in Disney's dividend too.

Download our original eBay write-up

Sometimes you read a book that makes you rethink your investment philosophy and/or portfolio management style. The Art of Execution is that type of book. 

Glenn briefly breaks down the book about how some of the best European stock pickers handled losing positions and winning positions. How they were able to generate excess return even though picking winners was no better than 50/50. 

After reading the book how it has us rethinking initial starting positions and maximum position size rules for companies with strong and expanding business moats. Glenn finally discusses which companies in the portfolio now fall into the expanded maximum position size basket.

We used to own Hilton in our Dividend Growth Strategy. A big reason why we bought Hilton was because of what Marriott did. In this episode, Glenn will explore why we like both companies as asset-light high ROIC businesses. How they're both extending their business moat past just brand recognition. The new risks to their business models from the coronavirus and how it might shape business travel. And the old risk of Airbnb. Glenn breaks down what our estimates of fair value are for both companies and which company we prefer if/when they reinstate a dividend policy.

Original Hilton Letter

A brief update on Wells Fargo. It was already a source of cash but after the latest capital return guidelines put out by the Federal Reserve we decided to sell any remaining positions in Wells Fargo. And what does this mean for JP Morgan? The only bank in the portfolio now. At the end, Glenn covers what he is thinking about regarding Disney and their yearend dividend as coronavirus cases explode upward in California and Florida. 

Links

Digging into our archives, Glenn reviews our investment thesis in Microsoft (MSFT). A position since the start of the AMM Dividend Growth Strategy. Glenn discusses how our thesis changed as Microsoft's cloud computing and SaaS future came into better focus under Satya Nadella and updates the risks to our investment.

Download the Original Write Up

We moved Wells Fargo (WFC) to the category "Source of Cash". In this episode, Glenn Busch explains our main 2 reasons why we marked Wells Fargo as a source of cash even though it looks like it is about to turn the corner again.

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A deep dive into our position in Costco. How it's expanding its business moat with its low-cost scale advantage, its customer acquisition flywheel, and why this leads to growing ROIC. I'll also discuss the risks and our estimate of fair value based on a discounted cash flow model and an economic profit model.

Download AMM Dividend Letter Issue #44 (PDF)

Disney suspended their upcoming June Dividend. In part from the fallout of the coronavirus on their businesses and in part due to the optics of paying a dividend after furloughing 100,000 workers. So what does this mean for future dividend payments? Will Disney pay the end of year dividend? And how long the fallout from the coronavirus lasts determines if this is a recoverable calamity or a fundamental shift.

Contact Glenn

phone: (858) 755-0909

email: gbusch@amminvest.com

Show Notes

Microsoft is a long-term holding of our dividend growth strategy and Costco is a recent addition. So why did we trim both positions during this recent rally after the initial coronavirus sell-off? In this brief portfolio update episode, Glenn Busch discusses why our portfolio rules triggered these two trades.

Show Notes & Transcript

United Technologies (UTX) is a dividend aristocrat, a special situation, and the subject of our last podcast. So why did we sell it?

In this episode, Glenn discusses why we sold United Technologies in our concentrated dividend growth portfolio even though we still think there is value in the company and upcoming spin-offs.

Show notes and full transcript

United Technologies (UTX) is a dividend aristocrat and a special situation. The company will split into 3 separate companies and then the remaining aerospace company will merge with Raytheon (RTN) to form Raytheon Technologies. Glenn discusses why the upcoming spin-offs will unlock United Technologies true value and why United Technologies is a recent addition to the AMM Dividend Growth Strategy.

Show notes and full transcript

How are we managing our dividend growth portfolio and handling the risks from the Corona Virus (COVID-19)? Bob Iger suddenly steps down from Disney 14 months in on a 36 month extension as CEO. Glenn discusses potential reasons, Bob's legacy, and Disney's position in the future of media consumption. Lastly, Intuit buys Credit Karma for $7 billion and why it is so valuable to Intuit.

Show Notes & Transcript

Howard Marks shows us how good we are at predicting the past and not the future. And in this episode, Glenn discusses how AMM relies on its 5 core principles to invest in an uncertain future and avoid the trap of our recency bias and relying on our predictions about the future.

Show notes & full transcript

To start 2020 we're trimming a few positions like Apple, Visa, and MasterCard in the AMM Dividend Growth Strategy. In this episode, Glenn explains the portfolio rules that triggered the Visa and MasterCard trades. Then Glenn discusses the stretched valuation multiples and position size rules that triggered the Apple trade.  

Show notes & full transcript

Glenn discusses why we would avoid investing in Hennessy Advisors (HNNA) or out dividend growth strategy even though it has a high yield and high dividend growth. The goal is to help explain our investment philosophy and what we're looking for in a company to add to our concentrated dividend growth portfolio. 

Show notes & full transcript

In this portfolio update episode, Glenn Busch discusses eBay selling StubHub and the next asset sale and catalyst for realizing eBay's hidden value. Then Glenn goes into detail about Charles Schwab buying TD Ameritrade. How Schwab and TD shareholders will benefit from this deal. What this means for future dividend growth and share buybacks. The regulatory hurdles for the deal to close. 

Show notes & full transcript

As promised, in this episode Glenn discusses our second time investing in the dividend growth stalwart, Lockheed Martin (LMT). Glenn discusses why we sold Lockheed previously, Lockheed's recent dividend growth, how safe its dividend is, how the F-35 is the biggest driver for future growth, the risks to our investment in Lockheed Martin, and our estimate of fair value. 

Show notes and full transcript

Charles Schwab is facing two new developments that require an update episode. In this episode, I'll discuss the new higher interest rate cash accounts at competitors like Wealthfront. Then I'll discuss Schwab's big announcement to cut commission rates to 0% and its implications for Schwab and itas long-term plans.

Show Notes: