Investor Quote of the Week

Quote Meaning

If you made a sound investment by purchasing shares in a company that is fundamentally strong—characterized by high net income margins, little to no debt, a long track record, and a history of effectively handling past crises—be patient and wait for the investment to pay off.

Economic crises are normal and part of the general business cycle. Do not sell a solid investment if you do not need to.

Wait for the crisis to pass, and your sound investment has a high likelihood of yielding returns in the end.

Nugget of Wisdom

Start investing early.

If you are in your 20s and reading this, start investing now.

Most of us work paycheck-to-paycheck at a 9-5 job, but the good news is that we are often investing in retirement accounts before our earnings even hit our bank accounts after taxes.

Many countries have retirement schemes. These are IRAs in the US, MPFs in Hong Kong, and ISAs in the UK.

As long as you keep contributing to your retirement plan every month and remain employed, you have the chance to make your money work for you in the long run.

After maxing out retirement accounts, decide what to do with the surplus.

In this case, consider opening another brokerage account (I prefer Interactive Brokers) and investing in an exchange-traded fund (ETF) that tracks the general market, like the S&P 500 (e.g., SPY).

US equity markets tend to perform well over time because the country fosters very innovative companies.

Other equity markets do alright, but rarely have the same compounding power as the US.

While I can't predict the future, my 15 years of market experience have consistently supported this theory.

If you have consistently bought shares of the SPY ETF over long periods, you would be sitting on significant gains, especially today, as US equity markets are at one of the highest points in history.

Mistakes to Avoid

Stick to what you know.

Just because your friends think a specific biotech company will do well doesn’t mean you should invest in it.

Similarly, just because a crypto meme-coin is pumping doesn’t mean you should join in, and just because a stock dropped 90% doesn’t mean it’s time to buy it.

When investing in individual stocks:

• You need to know the company inside and out.

• Understand why they are in business and what allows them to earn high rates of return over a long period of time.

• Identify the company's protective "moat," which prevents competitors from entering the market and taking away their market share.

Some companies excel at this, like Google, Coca-Cola, Apple, and Nike.

Find companies with the business models you understand. Companies whose products you regularly use are a good place to start.

For example, I use Google frequently and spend a lot of time on YouTube.

I drink Coca-Cola regularly and buy Apple products.

I also buy Nike products because of their cool designs and superior quality compared to other competitors. Additionally, I use Adobe for graphic design.

Do this exercise and see what company names you come up with.

The worst thing you can do is start buying shares in businesses simply because everyone else is doing so.

For example, I don't understand biotech, so I'll never buy shares in a biotech company.

I also don't understand medical technology, so I stay away from those industries.

Avoid investing in any company that is too difficult to understand.

Stock of the Week

Colgate-Palmolive Co. (Ticker: CL)

Company Description

Colgate-Palmolive Co. engages in the manufacturing and distribution of consumer products. It operates through the Oral, Personal, and Home Care and Pet Nutrition segments. The Oral, Personal, and Home Care segment includes toothpaste, toothbrushes, mouthwash, bar and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and antiperspirants, skin health products, dishwashing detergents, fabric conditioners, household cleaners, and other similar items. The Pet Nutrition segment offers specialty pet nutrition products manufactured and marketed by Hill's Pet Nutrition. The company was founded by William Colgate in 1806 and is headquartered in New York, NY.

Profitability Metrics

5-year average EBIT margin: 22%

5-year average net-income margin: 13%

5-year average return on equity: 100%+

Growth Metrics

Revenue growth 5-year average (year-on-year): 4%

EBIT growth 5-year average (year-on-year): Flat

Got Questions?

Just reply to this email, and I'll get back to you!

I’d love to hear your questions or feedback.

Cheers,

Sam