Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
How to Trade Binance Vanilla Options for the First Time on Bitcoin Crypto's - 2nd Aug 21
From vaccine inequality to economic apartheid - 2nd Aug 21
Stock Market Intermediate Top Reached - 2nd Aug 21
Gold at a Crossroads of Hawkish Fed and High Inflation - 2nd Aug 21
Bitcoin, Crypto Market Black Swans from Google to Obsolescence - 1st Aug 21
Gold Stocks Autumn Rally - 1st Aug 21
Earn Upto 6% Interest Rate on USD Cash Deposits with Binance Crypto Exchange USDC amd BUSD - 1st Aug 21
Vuze XR VR 3D Camera Takes Near 2 Minutes to Turn On, Buggy Firmware - 1st Aug 21
Sun EXPLODES! Goes SuperNova! Will Any planets Survive? Jupiter? Pluto? - 1st Aug 21
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
WEALTH INEQUALITY WASN'T BY HAPPENSTANCE! - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Learning This Simple Concept Could Make You Rich

InvestorEducation / Learning to Invest Jan 15, 2015 - 03:31 AM GMT

By: DailyWealth

InvestorEducation

Brett Aitken writes: There is a simple path to wealth...

It doesn't require much work. It doesn't require much knowledge. You don't have to be lucky, or even all that good.

You just have to learn one simple concept: capital efficiency.


It's one of our favorite strategies... Finding companies that generate massive amounts of cash without having to pour huge sums back into capital investment to keep the business going and growing.

They don't have to spend much money investing in their businesses because their primary asset is their well-established, good reputation.

If you love Hershey chocolate, you're not likely to switch brands. As long as Hershey delivers the same high-quality product at the same reasonable price, you'll stick with it. Hershey doesn't have to build lots of new plants or constantly create new products. It doesn't even have to spend a fortune on advertising. It has an installed, loyal, and ready base of buyers... and a large moat around its business, thanks to brand loyalty.

If you're prepared to hang on for the long haul, investing in capital-efficient companies with dominant brands is one of the simplest paths to great wealth.

Just ask legendary investor Warren Buffett...

This strategy has made Buffett one of the richest people on the planet.

For example, look at the huge stake that Buffett took in the iconic soda brand Coca-Cola back in 1988. At the time, he told shareholders...

We expect to hold these securities for a long time. In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.

Business magazine Forbes ranks Coke as the world's fourth-most valuable brand. Without taking away anything from the company's management, Coke is a simple business. It made soda 100 years ago. It makes soda today. And it will be making soda in another 100 years. Sure, packaging and marketing campaigns change. But not much (if anything) has changed about the company's core product, Coke.

It also gushes cash...

In 2013, Coca-Cola sold more than $46 billion in product. It operates on gross margins of around 60%, meaning it produced $28 billion in gross profits. And the thing we love most is it generated almost $8 billion in free cash flow. This is the amount of cash left after the company has paid out all operating and capital expenses. It's the number that doesn't lie.

As a result, between dividends and share repurchases, it sent roughly $8.5 billion back to shareholders... more than triple its $2.5 billion in capital expenditure. And the company has been treating shareholders this way for years.

This is a wonderful business. No other words can describe it. And it is dead easy to understand for investors.

Buffett spent about $1 billion on Coke shares in 1988 and 1989. By the end of 1989, the position was equal to 35% of Berkshire Hathaway's entire equity portfolio. Today, Berkshire's Coke position has grown to about a 9% stake in the company and has a market value of around $17 billion. And that doesn't count the massive dividends that Coca-Cola has paid to Berkshire over the years.

The concept is simple to understand.

We look for companies that consistently grow sales, generate huge chunks of free cash flow with high returns on assets, and reward shareholders by way of dividends and share buybacks.

Some growth companies may reinvest part, or all, of their excess cash into growing the business rather than returning it to shareholders. But the important point is that these companies gush free cash flow and don't require huge capital investments to maintain and grow the business.

For companies like Hershey (HSY), Microsoft (MSFT), or even video-game publisher Activision-Blizzard (ATVI) that can achieve that year in and year out, the compounding return for shareholders... and the stock... will be much higher than businesses with similar volumes in sales and profit that require heavy capital investments just to keep the lights on.

Understanding capital efficiency gives you an edge... You'll be way ahead of almost every investor you know. And if you learn how to buy capital-efficient businesses at the right prices, you will be well on your way to accumulating real wealth through your investments.

Regards,

Brett Aitken

P.S. Right now, there's an anomaly shaping up in the market that's allowing some investors to boost returns (with less risk) on capital-efficient businesses like the ones I mention above. To help you take advantage of this opportunity, Stansberry Research founder Porter Stansberry and I recorded a FREE online "workshop" explaining this special situation. The last few times we saw this sort of thing, you could have booked gains of 119%, 75%, and 83%. To be among the first to see the workshop and get all the details from Porter himself, let us know right here.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2013 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in