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b5b6e23da35ebbd5e95ffd7daf3cb3f4 | https://www.investopedia.com/articles/investing/112415/buying-vanguard-mutual-funds-vs-etfs.asp | Vanguard Mutual Funds vs. Vanguard ETFs | Vanguard Mutual Funds vs. Vanguard ETFs
Vanguard Mutual Funds vs. Vanguard ETFs: An Overview
Vanguard, one of the world's largest asset management firms with more than $5.6 trillion in assets under management, has become a popular choice for investors thanks to its long list of low-cost mutual funds. The Vanguard Group has also added a full menu of exchange-traded funds (ETFs) to its lineup, making the company one of the leading providers for both investment products.
Most Vanguard index mutual funds have a corresponding ETF. Both products are similar in management style and returns, but there are differences that can make each product more appropriate to different investors. Vanguard's products also have expense ratio differences between mutual fund/ETF pairs that must be examined to make the best choice.
Key Takeaways Mutual funds and ETFs offered by Vanguard are similar in management style and returns, but there are differences that can make each product more appropriate to different investors.ETFs carry more flexibility; they trade like stocks and can be bought and sold throughout the day.Mutual fund shares price only once per day, at the end of the trading day, but may benefit from economies of scale.While Vanguard fees are low in many of its products, ETFs tend to be more tax-efficient.
Vanguard Mutual Funds
The mutual fund versus ETF debate for Vanguard products in part comes down to how much is being invested. Moreover, for many of its mutual funds, Vanguard offers up to three classes of shares, Investor Shares, Admiral Shares, and Institutional Shares, each class offering progressively lower expense ratios, and thus better performance, in return for higher minimum investments.
Investor Shares in most Vanguard mutual funds require a $3,000 minimum initial investment, but some allow a $1,000 opening investment. For lower-cost Admiral Shares, the typical minimums are $3,000 for index funds, $50,000 for actively-managed funds, and $100,000 for certain sector-specific index funds. Institutional Shares are designed for institutional investors, and typically have a $5 million minimum.
Some funds with high transaction costs may have redemption fees ranging from 0.25% to 1.00% of the transaction amount, to discourage short-term speculative trading. Apart from this exception, Vanguard does not charge front-end or back-end sales loads or commissions.
Vanguard ETFs
ETFs carry more flexibility; they trade like stocks and can be bought and sold throughout the day, in transaction amounts as little as one share. As of February 7, 2020, Vanguard offered 74 ETFs, with market prices per share ranging approximately from $43 to $307. In many cases, ETFs carry lower expense ratios than their mutual fund counterparts, but they must be traded in a brokerage account. ETF trades could come with brokerage commission fees.
When choosing between a mutual fund an an ETF, investors must consider a number of factors. One is whether the investor wants to pursue a buy-and-hold strategy or a trading strategy to help determine which product may be more advantageous. In general, ETFs may be more suitable than mutual funds for investors who seek lower minimum investment amounts and who want more control over transaction prices. However, investors who want to make regularly-scheduled automatic investments or withdrawals can do so with mutual funds, but not with ETFs.
Key Differences
The most significant difference between mutual funds and ETFs is the tradeability of shares. Mutual fund shares price only once per day, at the end of the trading day. Investors can place trade orders throughout the day, but the transaction is only completed at the end of the trading day.
The popular Vanguard 500 Index Fund and the Vanguard S&P 500 ETF provide good examples of the cost and trading differences that come with mutual funds and ETFs. Most mutual funds and ETFs in the Vanguard lineup follow a similar pattern.
Both ETFs and mutual funds are treated the same by the IRS in that investors pay capital gains taxes and taxes on dividend income. However, with generally fewer taxable events in ETFs, tax liability will typically be lower. ETF expense ratios are also typically lower than mutual fund fees. Although there are some options for mutual funds that don't require you to invest a lot of money at once, many mutual funds have higher initial investment requirements than ETFs.
The decision between a Vanguard mutual fund or a Vanguard ETF comes down to trading flexibility and the amount to be invested.
The Vanguard portfolio of investment choices as a whole is generally considered among the lowest cost and highest rated in the investment marketplace, and these products can make ideal choices for long- and short-term investors.
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b68fd9934e0a065293893e665265bc3a | https://www.investopedia.com/articles/investing/112514/top-sites-latest-stock-market-news.asp | Top Financial and Stock Market News Sites | Top Financial and Stock Market News Sites
Investors need the latest information in order to stay current with the markets. Although there are many sites to choose from when deciding where to get your news, some make more sense than others depending on the information you need.
News sites usually have their own content creators, or they are authorized to source and redistribute news by partnering with other news sources. Most of the financial news providers go with a mixed approach.
Below is a list of popular news websites for stock markets, economy, finance, and related business news.
MarketWatch News Viewer
The dedicated News Viewer section on MarketWatch portal provides easy access to news items with timestamps. Its auto-streaming feature ensures instant availability of any new item getting updated automatically.
Coverage includes global markets for stocks, commodities, forex, and other asset classes, including fundamental analysis and reporting of macroeconomic data at country level. A dedicated tab for “RealTime Headlines” is also available for streaming data.
Bloomberg Portal
One of the top market data providers, the news section on Bloomberg news portal offers news segregated into different categories. News can be selected from appropriate sections—asset class, region, industry, and general financial.
The available search feature by default shows all news items related to the particular stock queried for and lists the news results tagged with the date of publication with all available history. Historical information is quite useful in correlating the impacts of news items on stock performance.
Reuters
Another top market data provider, Reuters has broad coverage of stock-specific, sector-specific, and market-specific news on their web portal. Available content is similar to that of competitor Bloomberg. Similar search features resulting in historical news items, with an added auto-complete feature for stock names, are quite useful. The results page integrates existing price quotes with news items, giving a unified view to the user.
Investopedia
This site also covers news, but from an educational perspective. On the Markets section, you can view the coverage of key operational metrics for hundreds of companies and surround them with news and charts. Start your own Watchlist to track your favorite stocks.
Investing.com
This site is geared more toward active trading, as right on the homepage you can see futures contracts, commodity prices, ETFs, and forex prices. Many investors use this site to track up-to-date quotes across a variety of investments, and their news section seems impartial and in-depth.
The Wall Street Journal
WSJ is one of the top publications to be followed across the globe for business news. Apart from the usual news and price quotes with related details, WSJ provides easy access to email alerts based on available criteria.
The Financial Times
Another top publication for business news, FT provides comprehensive financial news with global coverage and categorized view.
However, the challenge with both WSJ and FT is that one gets only the headlines for free. Detailed news items usually require a paid subscription, which will also enable access to expert comments, editorials, and diversified content useful to desired traders.
CNBC
The homepage of CNBC contains up-to-date developments across the global markets. The dedicated news section has category-wise listing, which includes news for U.S. stocks, and region-wise listing for Asia and Europe.
News Aggregate Sites
Many sites work in a pure aggregator role, i.e., they collect news from multiple sources and publish it all in their news sections.
Google Finance: Backed by the robust search functionality, the results page integrates lots of information including news, price quotes, charts, related competitor companies, key ratios, earnings reports, and links to important information. However, the news items available may be delayed and not necessarily in real-time. Yahoo Finance: This has a similar news aggregator role with similar features and coverage for finance-related news. Seeking Alpha: Another commonly followed news aggregator site.
Most of the above-mentioned portals allow free access to information. Creating a personal login on these portals is optional, but comes with the added functionality of email news alerts to the user mailbox for the selected stocks.
The Bottom Line
Both free and paid access to business news is available for interested traders on online portals. However, trading based on the news is not for everyone—timely availability and quick action is needed to capitalize on the profit potential or to avoid losses. Along with available online sources, active traders pay close attention to other media—like live TV, Twitter, and newsletters to benefit from news-based trading. (For related reading, see "Top 8 Apps for Financial News")
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47c22c142c4eb1af368481865b8c114e | https://www.investopedia.com/articles/investing/112515/do-you-need-more-one-financial-advisor.asp | Do You Need More Than One Financial Advisor? | Do You Need More Than One Financial Advisor?
For years, the media and the financial industry have both urged consumers to choose a financial advisor and develop a plan to reach their financial goals. While this is certainly a good idea, some clients have taken this a step further by using more than one advisor to manage their money. In some cases, this can be another wise move, but not always.
The question of whether you need more than one advisor to achieve your financial goals will depend on several factors.
Key Takeaways The main reason to find more than one financial advisor is if your current financial advisor is not meeting all of your needs. Your additional financial advisor should fill in the gaps of your current financial advisor. A second or third financial advisor may not need to be an advisor at all, but just a specialist in the area you are seeking assistance. Choosing an additional investment advisor or money manager requires a different thought process than choosing a financial advisor. If you do choose to have more than one financial advisor, it is prudent to make them all aware of how the others are managing your money.
Are Multiple Heads Better Than One?
If you already have one financial advisor, then you obviously don’t need to find another if they are helping you to meet all of your objectives. But if your advisor is clearly deficient in one or more areas of financial management, such as estate planning, then you probably should start looking for another addition to your financial team.
In this case, you may want to simply find an estate planning attorney or bank trust officer as opposed to another financial advisor, but you need to make sure that all of your needs are being met.
A harder question to answer is whether you need to have more than one stockbroker or investment advisor. If you aren’t sure that you’re getting the best bang for your buck from your current money manager, then you may want to talk to someone else in order to get a second opinion.
A key factor here is the types of investments that your current manager is using; if you are now largely invested in low-cost index funds that are tanking because there is a bear market, then you’re probably not going to be much better off moving your portfolio to someone who will trade your money more actively because numerous academic studies show that the vast majority of active money managers ultimately lag the market indices over long periods of time.
If you do have multiple financial advisors, it's important to ensure that the cost of them is not outweighing the monetary benefits they are providing.
Therefore, if you decide to move some or all of your funds to another firm or manager, be sure to think through the reasons why you are doing so. If you feel that the second advisor’s investment philosophy is more realistic or can show that it could get you better results or the same results with less risk, then moving may be the right choice. But you should be able to concisely quantify the reasons why you are dissatisfied with your current advisor before you decide to go somewhere else.
Who's In Charge?
If you do end up using more than one advisor, it would be wise to have at least one of them know exactly what the others are doing so that you can effectively coordinate all of your finances.
For example, if you hire one advisor to give you a comprehensive financial plan and also use a stockbroker to manage your actual investments and a State Farm agent to cover all of your insurance needs, then your comprehensive advisor will need to know what you are doing with the others, as well as know your company retirement plan and your bank accounts.
The Bottom Line
Having more than one financial advisor may be necessary in many cases, particularly if your financial situation is complicated and requires several areas of expertise.
But it is important that all of your advisors or brokers are ultimately on the same page with you in order to ensure that they do not end up working against each other. In the end, you want to make sure all your needs are being met and you are receiving the best financial advice, whether that comes from one individual or more.
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4fb2db706847f0eb5ec5121e8377c338 | https://www.investopedia.com/articles/investing/112614/alibaba-ipo-why-list-us.asp | Alibaba IPO: Why List in the U.S.? | Alibaba IPO: Why List in the U.S.?
Alibaba (BABA), the marketplace founded in 1999, originally was characterized as China’s answer to Amazon (AMZN). Following its Initial Public Offering (IPO) on the New York Stock Exchange (NYSE) in September 2014, Alibaba has grown exponentially in both the products and services it offers and the companies it owns. This incredible growth also extended to the profits it could deliver to its shareholders.
But why would Alibaba or any foreign company choose to go public on a U.S. exchange rather than choosing one closer to home? While there may be numerous answers to this question, three possible motives stand out: control, reputation, and range of motion.
Control
Many believe that Alibaba's U.S. IPO allowed founder Jack Ma to maintain control of the company. Alibaba’s pre-IPO structure allowed Ma and co-founder Joseph Tsai to keep control of the company despite not owning a significant percentage of shares. Ma’s reported first choice of exchanges, Hong Kong, frowns on control methods not based on majority ownership.
The NYSE and the U.S. in general, however, allow companies to use share classes to maintain control of publicly traded companies. Even with foreign companies that plan to hold a majority of shares, the share class structure offers an opportunity to raise capital without giving away significant power to the new shareholders.
Reputation
There is an element of prestige in being an NYSE listed company, but there is also a very practical advantage. Companies trading publicly in the U.S. fall under the regulatory supervision of the SEC. Although this often means learning new processes and more paperwork for foreign companies making the leap, it pays off in the long run. The increased scrutiny and transparency SEC oversight provides is seen as a plus by investors, who subsequently have more trust when reading a company's financials and making their investments.
A company like Alibaba can use that trust to position itself even more clearly as Amazon's primary rival. The U.S. listing can make it easier for investors looking for exposure to online marketplaces to choose Alibaba’s growth story over Amazon’s.
Range of Motion
A U.S. listing also allows companies like Alibaba a bit more range of motion when it comes to mergers and acquisitions. Having U.S. dollar shares on a U.S. exchange can simplify any future acquisitions of U.S. businesses and can lessen the scrutiny these deals might face if a foreign listed company made an offer for a U.S. listed business.
The Bottom Line
While there may be many reasons Alibaba chose to list in the U.S., perhaps the most interesting thing about Alibaba’s IPO isn’t that it listed in the U.S., but that it's listed with the NYSE rather than the NASDAQ—a more traditional home for Internet companies. Some suggested that NASDAQ's mishandling of Facebook's IPO two years earlier made Alibaba skittish.
Either way, when foreign companies list on U.S. exchanges, money is generated for the exchanges and investment banks involved, making it a win not just for the foreign company, but for the U.S. as well.
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130fc45a36dd93e85c46af4889b8f30b | https://www.investopedia.com/articles/investing/112614/increasing-importance-reserve-bank-india.asp | The Increasing Importance of the Reserve Bank of India | The Increasing Importance of the Reserve Bank of India
The Reserve Bank of India (RBI) is the central bank for India. The RBI handles many functions, from handling monetary policy to issuing currency. India has reported some of the best gross domestic product (GDP) growth rates in the world. It is also known as one of the four most powerful emerging market countries, collectively part of BRIC nations, which include Brazil, Russia, India, and China.
The International Monetary Fund (IMF) and World Bank have highlighted India in several reports showing its high rate of growth. In April 2019, the World Bank projected India’s GDP growth would expand by 7.5% in 2020. Also in April 2019, the IMF showed an expected GDP growth rate of 7.3% for 2019 and 7.5% for 2020. Both projections have India with the highest expected GDP growth in the world over the next two years.
Key Takeaways Projections for India to have the highest GDP growth in 2019 to 2020 have placed a spotlight on the Reserve Bank of India (RBI), the central bank of the sub-continent. India has several unique challenges ahead that will require nimble navigation from the RBI. RBI's recent moves include cutting interest rates and banning dealings in cryptocurrencies, along with getting a new head, Shaktikanta Das.
India’s Growth
The above growth rates make the role of the Reserve Bank of India increasingly important as the country’s total GDP moves higher. India is a top 10 nation for GDP overall, but its numbers fall far behind the world’s superpowers in the U.S. and China.
GDP Growth and Nominal GDP.
India is expected to have a GDP of $2.935 trillion and $3.304 trillion in 2019 and 2020, respectively. This compares to expectations of $21.506 trillion and $22.336 trillion for the U.S. China’s expected GDP for the same time periods is $14.242 trillion and $15.678 trillion.
The RBI and Economy
As with all economies, the central bank plays a key role in managing and monitoring the monetary policies affecting both commercial and personal finance as well as the banking system. As GDP moves higher in the world rankings the RBI’s actions will become increasingly important.
In April 2019, the RBI made the monetary policy decision to lower its borrowing rate to 6%. The rate cut was the second for 2019 and is expected to help impact the borrowing rate across the credit market more substantially. Prior to April, credit rates in the country had remained relatively high, despite the central bank’s positioning, which has been limiting borrowing across the economy.
The central bank must also grapple with a slightly volatile inflation rate that is projected at 2.4% in 2019, 2.9% to 3% in the first half of 2020, and 3.5% to 3.8% in the second half of 2020.
The RBI also has control over certain decisions regarding the country’s currency. In 2016, it affected a demonetization of the currency, which removed Rs. 500 and Rs. 1000 notes from circulation, mainly in an effort to stop illegal activities. Post analysis of this decision shows some wins and losses. The demonetization of the specified currencies caused cash shortages and chaos while also requiring extra spending from the RBI for printing more money.
In 2018, the RBI banned the use of virtual currencies by the financial agencies and banks that it regulates.
One of the biggest advantages, however, was the increase in tax collection, which resulted from greater consumer reporting transparency.
In December 2018, Shaktikanta Das was appointed the new RBI governor. Das is a supporter of demonetization inline with the top government officials’ views. Das is also expected to better align with India’s government leadership and amicably support better access to credit.
The Bottom Line
As one of the fastest-growing emerging market countries in the world, India has several unique challenges ahead that will require nimble navigation from the RBI. Shaktikanta Das will be charged with guiding the monetary policy direction over the next three years for the country as it continues to take the spotlight for GDP growth.
India also has a diverse range of goods and services along with a rising inflation rate. With the Indian economy steadily accounting for a greater share of the global economy, it is expected that the RBI will gain greater attention from world leaders while also growing in stature as one of the world’s most-watched central banks.
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849fcde8f593a60a6c0d045ee1fccede | https://www.investopedia.com/articles/investing/112814/how-calculate-goodwill.asp | How to Calculate Goodwill | How to Calculate Goodwill
How To Calculate Goodwill
Goodwill is an intangible asset for a company. It comes in a variety of forms, including reputation, brand, domain names, intellectual property, and commercial secrets.
Assigning a numeric value on goodwill can be challenging. However, the need for determining goodwill often arises when one company buys another firm, a subsidiary of another firm, or some intangible aspect of that firm's business. Two different ways to calculate goodwill exist.
Key Takeaways Goodwill is an intangible asset, and it comes in a variety of forms, including reputation, brand, domain names, and intellectual property.The need for determining goodwill often arises when one company buys another firm.Goodwill is calculated as the difference between the amount of consideration transferred from acquirer to acquiree and net identifiable assets acquired.
Understanding Goodwill
The concept of goodwill in business affairs goes back at least a century. One of the first definitions of it appeared in Halsbury's Laws of England, a comprehensive encyclopedia that dates from 1907. The current Halsbury's (4th edition, Vol. 35), states that:
“The goodwill of a business is the whole advantage of the reputation and connection with customers together with the circumstances, whether of habit or otherwise, which tend to make that connection permanent. It represents in connection with any business or business product the value of the attraction to the customers which the name and reputation possess.”
In listing goodwill on financial statements today, accountants rely on the more prosaic and limited terms of the International Financial Reporting Standards (IFRS). IAS 38, "Intangible Assets," does not allow the recognizing of internally created goodwill (in-house-generated brands, mastheads, publishing titles, customer lists, and items similar in substance). The only accepted form of goodwill is the one that acquired externally, through business combinations, purchases or acquisitions.
For example, in 2010, Reuters reported that Facebook (FB) bought the domain name fb.com for $8.5 million from the American Farm Bureau Federation. A domain name's sole value is the name, or (in this case) the initials. So, the entire amount paid for it can be considered as goodwill and Facebook would have recognized it as such on its balance sheet. However, before the acquisition, the American Farm Bureau Federation could not recognize fb.com as goodwill on its balance sheet—goodwill has to spring from an external source, not an internal one, remember.
2:06 How To Calculate Goodwill
Calculating Goodwill
According to IFRS 3, "Business Combinations," goodwill is calculated as the difference between the amount of consideration transferred from acquirer to acquiree and net identifiable assets acquired. The general formula to calculate goodwill under IFRS is:
Goodwill=(C+NCI+FV)−NAwhere:C=Consideration transferredNCI=Amount of non-controlling interestFV=Fair value of previous equity interests\begin{aligned} &\text{Goodwill} = \left(C + NCI + FV\right) - NA\\ &\textbf{where:}\\ &C = \text{Consideration transferred}\\ &NCI = \text{Amount of non-controlling interest}\\ &FV = \text{Fair value of previous equity interests}\\ &NA = \text{Net identifiable assets} \end{aligned}Goodwill=(C+NCI+FV)−NAwhere:C=Consideration transferredNCI=Amount of non-controlling interestFV=Fair value of previous equity interests
Non-Controlling Interests in the Goodwill Calculation
The method to calculate goodwill is straightforward. Where the wrinkles occur comes in measuring one of the variables. As you see, the amount of non-controlling interest (NCI) plays a significant role in the goodwill-calculation formula. A non-controlling interest is a minority ownership position in a company whereby the position is not substantial enough to exercise control over the company.
Under IFRS 3, there are two methods for measuring non-controlling interest:
Fair value or full goodwill methodNon-controlling interest’s proportionate share of the acquiree’s net identifiable assets
As it happens, these two methods can yield different results.
Example: “A Inc.” acquires “B Inc.”, agreeing to pay $150 million (the consideration transferred) to obtain a 90% interest in B. The fair value of the non-controlling interest is $16 million. Let's also stipulate that the fair value of net identifiable assets to be acquired is $140 million and that no previous equity interests exist.
Using method 1 of measuring NCI, the amount of the goodwill is $26 million ($150m + $16m - $140m).
Under the second method of measuring the NCI, we take into account the 10% of B that A didn't acquire. As a result, the goodwill value is $24 million ($150m + [140m x 0.1] - $140m). Thus, there is a difference of $2 million between the amount of the goodwill calculated under the two methods.
Special Considerations
Although goodwill is the premium paid over the fair value of an entity during a transaction, goodwill's value cannot be sold or bought as an intangible asset in of itself.
Goodwill can be challenging to determine its price because it is composed of subjective values. Transactions involving goodwill may have a substantial amount of risk that the acquiring company could overvalue the goodwill in the acquisition and ultimately pay too much for the entity being acquired.
However, despite being intangible, goodwill is quantifiable and is a very important part of a company's valuation.
Disclosure: At the time of writing, the author did not have holdings in any of the companies mentioned in this article.
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8284cecf3b0c97440107416160de3dbc | https://www.investopedia.com/articles/investing/113015/why-it-important-follow-crude-oil-inventories.asp | The Effect of Crude Inventories on the Oil Economy | The Effect of Crude Inventories on the Oil Economy
Oil inventories provide insight into the balance of supply and demand in the oil market, and of course influence oil prices. The relationship between supply and demand is one of the fundamental concepts of economics, and it is no more clear than comparing how the ebb and flow of crude oil inventories affect the commodity market.
Key Takeaways Like most commodities, the more supply that exists, the lower its price in the market given the same level of demand. Excess oil supply is maintained in inventories, some of which are kept by governments to hold in reserve. When these amounts go up, prices tend to decline, and vice versa.
Oil Inventories and Prices
Crude oil prices are dynamic. While it may take time for prices of some products to balance as the market reacts to changes in supply and demand, in the case of oil, the price adjustments can be instantaneous. When oil inventories go up, traders may question the demand for oil at the current price and immediately sell their positions, causing a price retreat.
When oil inventories decline, traders can take this as a signal that demand is increasing, and they may buy back into the oil market, bidding up prices.
EIA Inventories
The U.S. Energy Information Administration (EIA) provides a weekly update on domestic inventories. The weekly inventory report shows how U.S. oil stocks, other than those in the strategic petroleum reserve, have changed in the prior week. This is a major market-driving data piece. Ahead of the inventories report, analysts issue projections on inventory adjustments. If the EIA's reading differs from analysts' estimates, oil prices can react dramatically. The EIA's weekly inventory report also updates total stockpile levels that can be compared to average stockpile readings from prior years.
Another crucial component of the EIA's inventory data is the number of oil stocks at the Cushing, Oklahoma, delivery hub. Oil is delivered from production areas across the United States, stored in Cushing, then transported to end refining markets. Inventory levels at Cushing reflect the pace at which the U.S. oil supply is moving from inland production areas to end refining markets. An inventory build-up indicates that more oil is being supplied than can be transported away for refining. West Texas Intermediate (WTI) crude oil prices, the major North American benchmark, are set in Cushing.
Supply Effect on the Economy
The oil market is unlikely to ever sit at equilibrium. Oil is a traded commodity, not just a good purchased for end use. Instead of reaching equilibrium, oil supply and demand change rapidly in unison with prices. An increase in supply suggests that sellers are willing to produce more oil at the current price than purchasers demand. In theory, to encourage demand, suppliers should reduce the price and see if more buyers come to market at the lower price point. When supply declines, it means there is ample interest from buyers at that price point. In this situation, there may be room for sellers to increase prices.
The Bottom Line
Oil inventories provide a crucial observation into one of the fundamentals of the overall market: the level of supply. Simply put, the level of supply influences prices. Oil prices can react immediately following the EIA's weekly inventory report if they differ greatly from analysts' expectations. Total stockpile levels are also crucial because weekly inventory adjustments are taken in the context of the overall stockpile level. If stockpiles are low and there is a huge weekly draw on inventories, prices could see a steep rise. If total stockpiles indicate a well-supplied market and weekly inventories continue to increase, oil prices could experience downside pressure.
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df6958b9805bfa3ff6218c8ac3accc91 | https://www.investopedia.com/articles/investing/120415/how-dividendpaying-etfs-work.asp | How Do ETF Dividends Work? | How Do ETF Dividends Work?
Although exchange-traded funds (ETFs) are primarily associated with index-tracking and growth investing, there are many that offer income by owning dividend-paying stocks. When they do, they collect the regular dividend payments and then distribute them to the ETF shareholders. These dividends can be distributed in two ways at the discretion of the fund's management: cash paid to the investors or reinvestments into the ETFs’ underlying investments.
The Timing of ETF Dividend Payments
Similar to an individual company's stock, an ETF sets an ex-dividend date, a record date, and a payment date. These dates determine who receives the dividend and when the dividend gets paid. The timing of these dividend payments are on a different schedule than those of the underlying stocks and vary depending on the ETF.
For example, the ex-dividend date for the popular SPDR S&P 500 ETF (SPY) is the third Friday of the final month of a fiscal quarter (March, June, September, and December). If that day happens to not be a business day, then the ex-dividend date falls on the prior business day. The record date comes two days prior to the ex-dividend date. At the end of each quarter, the SPDR S&P 500 ETF distributes the dividends.
Each ETF sets the timing for its dividend dates. These dates are listed in the fund's prospectus, which is publicly available to all investors. Just as like any company's shares, the price of an ETF often rises before the ex-dividend date—reflecting a flurry of buying activity—and falls afterward, as investors who own the fund before the ex-dividend date receive the dividend, and those buying afterward do not.
Dividends Paid in Cash
The SPDR S&P 500 ETF pays out dividends in cash. According to the fund’s prospectus, the SPDR S&P 500 ETF puts all dividends it receives from its underlying stock holdings into a non-interest-bearing account until it comes time to make a payout.At the end of the fiscal quarter, when dividends are due to be paid, the SPDR S&P 500 ETF pulls the dividends from the non-interest-bearing account and distributes them proportionally to the investors.
Some other ETFs may temporarily reinvest the dividends from the underlying stocks into the holdings of the fund until it comes time to make a cash dividend payment. Naturally, this creates a small amount of leverage in the fund, which can slightly improve its performance during bull markets and slightly harm its performance during bear markets.
Dividends Reinvested
ETF managers also may have the option of reinvesting their investors' dividends into the ETF rather than distributing them as cash. The payout to the shareholders can also be accomplished through reinvestment in the ETF’s underlying index on their behalf. Essentially it comes out to the same: If an ETF shareholder receives a 2% dividend reinvestment from an ETF, he may turn and sell those shares if he'd rather have the cash.
Sometimes these reinvestments can be seen as a benefit, as it does not cost the investor a trade fee to purchase the additional shares through the dividend reinvestment. However, each shareholder’s annual dividends are taxable in the year they are received, even if they are received via dividend reinvestment.
Taxes on Dividends in ETFs
ETFs are often viewed as a favorable alternative to mutual funds in terms of their ability to control the amount and timing of income tax to the investor. However, this is primarily due to how and when the taxable capital gains are captured in ETFs. It is important to understand that owning dividend-producing ETFs does not defer the income tax created by the dividends paid by an ETF during a tax year. The dividends that an ETF pays are taxable to the investor in essentially the same way as the dividends paid by a mutual fund are.
1:22 Alternative Income ETFs and Your Portfolio
Examples of Dividend-Paying ETFs
Here are five highly popular dividend-orientated ETFs.
SPDR S&P Dividend ETF
The SPDR S&P Dividend ETF (SDY) is the most extreme and exclusive of the dividend ETFs. It tracks the S&P High-Yield Dividend Aristocrats Index, which only includes those companies from the S&P Composite 1500 with at least 20 consecutive years of increasing dividends. Due to the long history of reliably paying these dividends, these companies are often considered to be less risky for investors seeking total return.
Vanguard Dividend Appreciation ETF
The Vanguard Dividend Appreciation ETF (VIG) tracks the NASDAQ U.S. Dividend Achievers Select Index, a market capitalization-weighted grouping of companies that have increased dividends for a minimum of 10 consecutive years. Its assets are invested domestically, and the portfolio includes many legendary rich-paying companies, such as Microsoft Corp. (MSFT) and Johnson & Johnson (JNJ).
iShares Select Dividend ETF
The iShares Select Dividend ETF (DVY) is the largest ETF to track a dividend-weighted index. Similar to VIG, this ETF is completely domestic, but it focuses on smaller companies. Roughly one-quarter of the 100 stocks in DVY's portfolio belongs to utility companies. Other major sectors represented include financials, cyclicals, non-cyclicals, and industrial stocks.
iShares Core High Dividend ETF
BlackRock's iShares Core High Dividend ETF (HDV) is younger and uses a smaller portfolio than the company's other notable high-yield option, DVY. This ETF tracks a Morningstar-constructed index of 75 U.S. stocks that are screened by dividend sustainability and earnings potential, which are two hallmarks of the Benjamin Graham and Warren Buffett school of fundamental analysis. In fact, Morningstar's sustainability ratings are driven by Buffett's concept of an "economic moat," around which a business insulates itself from rivals.
Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF (VYM) is characteristically low-cost and simple, similar to most other Vanguard offerings. It tracks the FTSE High Dividend Yield Index effectively and demonstrates outstanding tradability for all investor demographics. One particular quirk of the weighting method for VYM is its focus on future dividend forecasts (most high-dividend funds select stocks based on dividend history instead). This gives VYM a stronger technology tilt than most of its competitors.
Other Income-Oriented ETFs
In addition to these five funds, there are dividend-focused ETFs that employ different strategies to increase dividend yield. ETFs such as the iShares S&P U.S. Preferred Stock Index Fund (PFF) track a basket of preferred stocks from U.S. companies. The dividend yields on preferred stock ETFs should be substantially more than those of traditional common stock ETFs because preferred stocks behave more like bonds than equities and do not benefit from the appreciation of the company's stock price in the same manner.
Real estate investment trust ETFs such as the Vanguard REIT ETF (VNQ) track publicly traded equity real estate investment trusts (REITs). Due to the nature of REITs, the dividend yields tend to be higher than those of common stock ETFs.
There are also international equity ETFs, such as the Wisdom Tree Emerging Markets High Dividend Fund (DEM) or the First Trust DJ Global Select Dividend Index Fund (FGD), which track higher-than-normal dividend-paying companies domiciled outside of the United States.
The Bottom Line
Although ETFs are often known for tracking broad indexes, such as the S&P 500 or the Russell 2000, there are also many ETFs available that focus on dividend-paying stocks. Historically, dividends have accounted for somewhere near 40% of the total returns of the stock market, and a strong dividend payout history is one of the oldest and surest signs of corporate profitability.
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76daad49791c5541cac59cb43baf02d5 | https://www.investopedia.com/articles/investing/120615/emerging-markets-analyzing-russias-gdp.asp | Emerging Markets: The Parts of Russia's GDP | Emerging Markets: The Parts of Russia's GDP
Russia, the world’s largest country by landmass, returned to become an independent nation with the fall of the Soviet Union in 1991. Although it hasn't been an easy nut to crack or understand—mainly because of its economic past—the potential for returns has been dynamic. Investors who want to park their money may have considered emerging market economies like Brazil, India, China, and Russia. And they may have seen Russia as a possibility at one point. Before you put your money into Russia—or any investment, for that matter—it helps understanding how the country's economy has transformed from the centrally planned economy it once was to the market economy it transitioned into.
Key Takeaways Russia's GDP is primarily made up of three different sectors: The agriculture, industrial, and service sector. The agricultural sector, which includes forestry, hunting, fishing, farming, and livestock production, is small and makes up about 5% of GDP. Russia's industrial sector has remained more or less stable, averaging about 35% of GDP over the years. The service sector contributes almost 62% to Russia's GDP and employs more than 67% of the population.
Russia Then and Now
The initial transition period for Russia's economy was tough, as it inherited a devastated industrial and agricultural sector along with the fundamentals of a centrally planned economy. The regime introduced multiple reforms that made the economy more open, but a high concentration of wealth still continued.
Russia’s economic growth rate remained negative during most of the 1990s, before the start of the subsequent golden decade. That's when the nation's economy grew at an average rate of 7%. This stellar growth brought Russia to a level where it was recognized as a fast-growing economy. Although the economy did exceedingly well between 1999 and 2008, its growth was mostly driven by the boom in commodity prices, especially oil. The Russian economy got a jolt as oil prices dipped—triggered by the 2008-09 global financial crisis—exposing Russia’s dependence on oil. The economy gradually recovered as oil prices stabilized.
The Russian economy grew at a decent pace between 2010 and 2012, but structural issues started to emerge that caused a slowdown during 2013 when the economy grew by 1.3%. The year 2014 was hard for Russia, as it faced multiple issues including crashing oil prices, geopolitical pressures, and sanctions by the West. Its GDP dropped to 0.6%, the currency lost value, inflation spiked, and the stock market tumbled. Russia's economy suffered a recession between 2015 and 2017, ending 2016 with a 0.2% decrease in GDP. According to the World Bank, Russia's gross domestic product (GDP) is expected to grow by 1.8% in 2020, with more modest growth forecasted for 2021.
Russia's GDP Composition
Russia’s GDP is largely made up of three broad sectors: A small agricultural sector that contributes about 5% to GDP, followed by its industrial sector and service sector, which contribute 32% and 62%, respectively, according to the most recent World Bank data.
Agricultural Sector
Harsh weather and tough geographic conditions make cultivation of land arduous and restricted to a few small areas of the nation. This is one of the main reasons behind the minimal role of the agricultural sector in Russia’s economy in terms of its contribution to GDP. The agricultural sector is small—just under 5% of Russia’s GDP. But it provides employment to almost 6% of the population. The agrarian sector is characterized by the coexistence of both the formal sector, represented by large producers for commercial purposes, and the informal sector, where small landholders produce for self-sustenance. The sector includes forestry, hunting, and fishing, as well as cultivation of crops and livestock production.
Despite being a large exporter of certain food items, Russia is a net importer in agriculture and food. According to the World Bank, food also includes live animals, beverages and tobacco, animal and vegetable oils and fats, and oilseeds, oil nuts, and oil kernels. Other than the non-availability or shortage of certain food products domestically, a few factors explain Russia’s rising food imports. One is the higher inflation in Russia vis-à-vis its trading partners, which makes foreign imports more price competitive. The second reason is its sound economic progress, especially from 2000 to 2008. This boom period led to income growth, further pushing up consumer demand for food, which was met by imports.
In 2014, in response to the West's food embargoes, the Russian government banned certain food categories including dairy, meat, and produce from several countries including the United States and the European Union, which significantly dropped Russia's share of food imports. Its domestic food production increased by over 4.7% in 2018, with drink production increasing by 3% from the previous year.
Industrial Sector
The contribution of Russia’s industrial sector to its GDP has remained more or less stable, averaging about 35% over the years. The industrial sector comprises mining, manufacturing, construction, electricity, water, and gas and currently provides employment to around 27% of the Russian population. Russia has an array of natural resources, with a prominence of oil and natural gas, timber, deposits of tungsten, iron, diamonds, gold, platinum, tin, copper, and titanium.
Major industries in the Russian Federation have capitalized on its natural resources. One of the prominent industries is machine building, which suffered heavily after the disintegration of the Soviet Union as there was a severe shortage of capital. It re-emerged with time and is the leading provider of machinery and equipment to the other industries in the economy.
Next is the chemical and petrochemical industry which contributes about 1.5% to Russia’s GDP. According to an Ernst & Young Report, “A large number of products with higher added value (such as specialty composites and additives) are not produced in Russia. China and Europe, for example, produce about 25% and 20% of the world’s primary plastics respectively, while Russia produces only 2%.” Going by importance, the fuel and energy complex (FEC) is one of the most crucial for the Russian economy. It comprises the mining and production of energy resources, processing, delivery, and consumption of all types of energy. The FEC complex not only supports multiple sectors in the economy, but its products are also Russia's main exports.
The other competitive Russian industries include mining and metallurgy, aircraft building, aerospace production, weapons and military machinery manufacture, electric engineering, pulp-and-paper production, the automotive industry, transport, road, and agriculture machinery production.
Service Sector
The service sector's contribution to Russia’s GDP has increased over the years from 38% in 1991 to 57% in 2001. The service sector currently comprises almost 62% of the country's GDP and employs the most people in the country—more than 67% of the population. The important segments of the Russian service sector are financial services, communications, travel and tourism, advertising, marketing and sales, real estate, healthcare and social services, art and culture, IT services, wholesale, and retail trade and catering. It is often pointed out that as the crisis that accompanied the fall of the Soviet Union devastated agriculture and industry, it gave services a chance to pick up.
The Bottom Line
Russia needs to diversify its economy further to establish a more balanced economy that is less vulnerable. Focusing on its manufacturing and service sectors can help achieve more sustainable long-term growth. Although the GDP composition reflects the growing importance of services, it is oil exports that command most of its economy as it directly and indirectly affects everything else.
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4106b5e5295fa314e3a3e8e99a16dc1a | https://www.investopedia.com/articles/investing/120815/how-target-can-expand-internationally.asp | How Target Can Expand Internationally | How Target Can Expand Internationally
Go big, or go home. Most businesses seemingly live by this motto when they consider expanding internationally. But it's not always that simple.
In fact, it takes a lot of research, hard work, and growth at home before a retailer can take that "go big, or go home" step. After all, establishing a brand name and creating demand takes a lot of time. Take Walmart (WMT). The company has a huge presence in the United States—its home country—but it has also been able to successfully penetrate the global market. The retailer has more than 11,000 locations in 27 different countries, including Chile, Mexico, and Guatemala.
Since Walmart has been able to successfully penetrate the international market, it stands to reason that its competitors can do the same—competitors like Target (TGT). But how does a company like Target stand to compete in the international market? Learn more about the steps Target may need to take to grow beyond the U.S. border.
Key Takeaways Target already flirted with international expansion when it entered the Canadian market in 2013. The venture failed because Target opened too many locations in a short period of time. The company can attract international customers by opening up distribution and delivery channels for people who want to shop online. Opening small retail outlets in select international locations rather than multiple stores all at once may prove beneficial to a company like Target.
Target
Target is one of the largest retailers in the United States and is easily recognized by its signature red color, bullseye logo, and its mascot, Bullseye the dog. Headquartered in Minneapolis, Target has a long history dating back to the early 1900s. The first Target store, though, was opened in 1962, when consumers were first introduced to its discount retail model. As of the 2019 fiscal year, Target operates more than 1,800 locations across the United States and employs about 360,000 people.
The company continues to function as a discount retailer for clothing, housewares, small appliances, beauty, and toys. Target also expanded its offerings to include groceries to keep up with the likes of Walmart, which also has superstores across the country.
Target ranked in 39th place on the Fortune 500 list in 2019. The company reported revenue of $78 billion for the full-year ending Feb. 1, 2020, an increase of 3.7% from the previous year. According to Fortune, its 2019 financial earnings results demonstrated the fact that the company was well-equipped to handle competition from Walmart and Amazon.
Targeting the International Market
Target already flirted with international expansion when it entered the Canadian market in 2013. The decision was met with much fanfare from consumers after it was announced that the Canadian subsidiary—headquartered in Mississauga, Ontario, just outside Toronto—would acquire store leases for old Zellers stores from Hudson's Bay. By 2015, the company had more than 130 locations across Canada. But its entry north of the border proved to be ill-fated.
Target’s rapid expansion was criticized from the beginning, primarily because of its plan to open so many locations in a very short amount of time. Since exiting Canada in 2015, Target shifted its attention away from international expansion and toward other goals. How though, can Target profitably return to Canada and expand to other countries? There may be a few ways to get back into the global market.
Revamped Website and e-Commerce Strategy
A huge potential source of revenue for Target is its website. In 2015, Target committed a significant amount of capital to improve its e-commerce business. While the site is live and more or less worldwide, it is not what a consumer expects from one of the major retailers in the United States.
But Target needs more than just a website if it plans to improve its business by expanding internationally. Target needs to establish a network of warehouses and distribution centers in different countries. As it stands, a Canadian ordering from Target would have their items shipped from a Target distribution center in the U.S., subjecting the products to high shipping costs and import duties.
By establishing distribution centers—one in Canada, another in the United Kingdom, yet another in Japan—goods coming from international factories could bypass the U.S. and enter the destination country directly from wherever the good is manufactured. Not only is this cheaper for the consumer, but it's also faster—both in terms of shipping times and the time during which the item is held in inventory.
One of the Canadian customers’ biggest problems was empty store shelves. The same principle applies to international customers shopping online. Once distribution centers are in place, Target needs to tailor its website to each regional market and only display products available to those customers. By having a dedicated Target Canada website, for instance, Canadian shoppers can purchase whatever they see online and have it quickly and economically shipped from a Canadian warehouse without having to pay high duties.
Temporary Locations to Build Brand
Once Target’s e-commerce sites are fully functional and consumer-friendly, Target can physically expand into new markets. The retailer will need to work with either department store retail space or pop-up stores in various shopping centers. The key isn’t to open up as quickly as possible—as it already did in Canada in 2013—but to maintain the company's reputation.
As Target’s Canadian experiment proves, disillusioned customers are difficult to get back into the store. A small roving store in the U.K., for example, would introduce Target and its brands to the population. People already familiar with Target would flock to the temporary store to buy what they could in-person while those for whom Target is new would have the opportunity to see the brands and shop online.
By slowly providing good service and stocked shelves, demand for Target products can increase. The increased popularity of the store would be enough to have the retailer think about expanding further and opening permanent locations.
Slow Expansion With Physical Stores
Permanent stores would be next, but not anywhere near the scale that Target was going for in Canada. A return to Canada would need to see stores that resemble CityTarget or TargetExpress locations. This means they would need to be small, densely stocked, and in major urban centers.
In Canada, Target would be able to eventually expand to large suburban stores, but given the popularity of online shopping, operating as many locations as they had previously would be overkill.
In Europe and Asia, smaller stores are all that Target may be able to afford. Big-box retailing is much too expensive for Target in high-cost cities. Given that Target should have an excellent e-commerce website by the time it opens stores, a large part of its revenue can come from online sources coupled with delivery or via in-store pickup.
The company can set up a system in smaller stores in which customers can try on merchandise and order in-store to be delivered to their address. A system that is set up for this purpose could double as a way to ensure that customers who wish to purchase something are never turned away due to lack of inventory.
Providing alternative methods to get goods that double as a fail-safe for inventory control problems while using existing delivery infrastructure is an inexpensive add-on that all retailers should be doing.
The Bottom Line
An international Target is both possible and necessary for the retailer to grow anywhere near the size of its closest competitors. But how does it do this? The company needs to revamp its website to allow international shoppers to pay competitive prices. It can also expand into other countries by moving slowly and taking care to not damage its corporate reputation.
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ba222c5b25dad2becabc47a0b46ea8ef | https://www.investopedia.com/articles/investing/120815/top-5-restaurant-etfs-2016.asp | The Top 5 Restaurant ETFs for 2016 | The Top 5 Restaurant ETFs for 2016
The average American eats out 5.8 times a week. That translates to more than $2,600 spent per person annually. The restaurant industry continues to see the positive impact of this trend, with increased same-store sales growth and expansion. The restaurant segment is highly fragmented. Several sectors exist in the industry with quick service restaurants, fast casual, casual dining and fine dining. A shift to fast casual has put hard times in front of quick service, which remains a high revenue-driving sector with strong dividends in most cases. Fast casual still has a huge opportunity to scale across the country.
Investors have a lot of options when it comes to restaurant investments. Fast food giants are publicly traded, as are smaller growing brands that are taking on the fast casual market. Only one restaurant company appears in the Dow Jones Composite Average. When it comes to getting access to a basket of restaurant stocks, there is one pure play exchange-traded fund (ETF) and several others that have high percentages of holdings in the restaurant sector.
1. The Restaurant ETF
Investors looking for restaurant ETFs should begin with the Restaurant ETF, a new offering from the ETF Managers Group. The fund offers exposure to quick service restaurants, fast casual, casual dining and fine dining. The fund also covers restaurants of every size, with major players and up-and-coming brands currently moving beyond regional expansion.
The Restaurant ETF went public in October, investing in stocks with market capitalizations greater than $200 million and more than $1 million in annual turnover. In a bit of a twist, the fund is also equally weighted, giving equal exposure to all restaurants included. This gives investors a great opportunity to profit from all of the different sizes of restaurants and the different subsectors.
Top holdings in November 2015 included Chuy's Holdings, McDonald's and Starbucks. It also includes small growing restaurant brands, such as Kona Grill, Del Frisco's Restaurant Group and El Pollo Loco among its holdings. Newer public companies such as Noodles & Company, Zoes Kitchen, The Habit Burger, Shake Shack and Del Taco are also among the 50 restaurants represented by the fund.
As of November, the ETF had $2.5 million in assets under management (AUM). The fund rebalances semi-annually in June and December. The fund does have one of the pricier expense ratios at 0.75%, but it is the only pure play ETF on restaurants.
2. Invesco Dynamic Food & Beverage ETF
The Invesco Dynamic Food & Beverage ETF (NYSEARCA: PBJ) gives great exposure to food and drink manufacturers along with some exposure to restaurants. The ETF has 92% of its assets in consumer staples and 8% in consumer discretionary stocks.
This ETF has around $240 million in AUM and charges an expense ratio of 0.58%. This Invesco ETF shows a strong history of performance. Its one-year performance is a gain of 15%; over three years, the fund is up 21%.
The restaurant stocks included in this ETF are Starbucks and Papa John's. These two companies made up 5.4% and 2.2% of the ETF, respectively, as of November 2015. Starbucks was the largest holding of the entire ETF at the time. It’s also worth noting that Sysco, one of the top restaurant food suppliers, is a top 10 holding at 5%.
3. Consumer Discret Sel Sect SPDR ETF
The cheapest expense ratio for a restaurant-related ETF is the Consumer Discret Sel Sect SPDR ETF (NYSEARCA: XLY), a State Street offering. The fund has been around since 1998 and currently has $11.8 billion in AUM. Investors pay an expense rate of 0.14% to gain exposure to some of the largest consumer stocks that are publicly traded.
Among the restaurant holdings in this ETF are McDonald's, Starbucks, Yum Brands, Chipotle and the Darden Restaurant Group. McDonald's and Starbucks are top 10 holdings in the ETF, each representing around 4% of the total portfolio.
In the last year, the ETF is up over 20%. The fund has gained more than 23% in the last three years. Along with the exposure to several restaurants, the ETF holds stakes in top consumer brands such as Amazon.com, Disney and Home Depot.
4. Invesco Dynamic Leisure & Entertainment ETF
The Invesco Dynamic Leisure & Entertainment ETF (NYSEARCA: PEJ) holds a great basket of stocks across several industries. The fund has assets in airlines, travel, media, cruise, casino and restaurant companies. Investors pay an expense rate of 0.63% to gain exposure to 30 different stocks.
This ETF, started in 2005, has grown 14% over the last year and more than 21% in the last three years. Despite the fact that the holdings having an average market cap of $24.2 billion, the fund has great exposure across several different sizes. In fact, small-cap stocks make up the largest percentage at 46%, with large-cap stocks representing 36% of assets.
The key restaurant stocks in the fund are Starbucks, Dave & Buster's, Sonic, Jack in the Box, Darden Restaurants, the Cheesecake Factory, Denny's and Papa John's. Starbucks is the fund's second-largest holding, with 5.3% of assets. Airlines make up a large percentage of the fund, with 33% of assets as of November 2015.
5. Invesco S&P SmallCap Consumer Discretionary ETF
The Invesco S&P SmallCap Consumer Discretionary ETF (NYSEARCA: PSCD) invests in small-cap stocks, or those with market capitalizations generally below $2 billion. The fund has more than 90 holdings and charges a reasonable expense ratio of 0.29%. The average market capitalization of the holdings is $1.6 billion.
The restaurant and leisure sub-segment is the second-largest represented segment in this ETF, behind specialty retail. Over 21% of the fund is committed to restaurant and leisure stocks. Investors gain exposure to companies that include Texas Roadhouse, Papa John's, Sonic Restaurants, DineEquity, Popeye's Louisiana Kitchen, Red Robin Gourmet Burger, BJ's Restaurants, Bob Evans, Ruth's Hospitality Group, Biglari Holdings and Ruby Tuesday.
This fund hasn't performed as well as the others, with a one-year gain of 6% and a three-year gain of 17%. However, you do get good exposure to small-cap stocks, which have been the best-performing stocks over the long term. The investment in smaller restaurant stocks allows for gains from national expansion and scalability.
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d2757893e469100b5aaa52772bc09b12 | https://www.investopedia.com/articles/investing/120913/george-investing-soros-way.asp | By George: Investing The Soros Way | By George: Investing The Soros Way
“Markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected.” – George Soros.
To George Soros, the words listed above are no hyperbole. Drilling down and gathering critical investment information, and investing when others are divesting, is the calling card of George Soros, one of the most famous financiers of the past half-century. That said, don’t judge Soros on his investment acumen alone. He’s also proven to be a major power broker on the global political scene as well as a benevolent philanthropist.
To understand the “Soros Way” of investing, it helps first to know Soros the man, Soros the political force, and Soros the champion of the global lower class.
Who is George Soros?
There is no template for an investment legend like Soros, but you can start with the financier’s background as a child in Budapest, Hungary, where he was born on August 12, 1930. As a pre-teenager, Soros witnessed the atrocities of the Nazi regime, and survived to flee Eastern Europe in 1947, making his way to England to study at the London School of Economics. It was in London, after reading Karl Popper’s tome, "The Open Society and Its Enemies," where Soros first combined the concepts of science and politics. Soros never abandoned that concept, and relied on it again and again as he championed individual rights over the collective.
Soros applied science and free markets to his investment principles, starting with his first post-graduate job at F.M. Mayer, a New York City money management firm. Within 20 years, Soros had opened his first Wall Street enterprise, Soros Fund, which later was renamed to the Quantum Fund, where he was able to test his free market principles in the capital markets.
Soros turned an original seed funding of $12 million into $20 billion by the first decade of the 21st century. If you had invested $1,000 in Soros’ Quantum Fund in 1969, you would have earned $4 million by 2000 – at an annual growth rate of 30%.
1:34 Investing the George Soros Way
The “Soros Way”
Along the way, Soros founded the Open Society Foundations in 1984, a philanthropic organization that “builds vibrant and tolerant societies whose governments are accountable and open to the participation of all people,” according to the foundation’s website. With the OSF, Soros sought to “strengthen the rule of law; respect for human rights, minorities, and a diversity of opinions; democratically elected governments; and a civil society that helps keep government power in check.” George Soros has donated $8.5 billion to charity as of March 31, 2013 through his institution. (Soros' generosity still doesn't match up to two other powerful billionaire philanthropists - Bill Gates [$28 billion charitable giving] and Warren Buffet [$17.5 billion].)
Soros shaped his individual liberty and free market concepts after a decade of testing his investment principles in the global financial markets. That blend of free markets, human rights, and scientific inquiry found its way into Soros’ investment strategy – a strategy erected on the scientific method Soros studied at the London School of Economics, merged with his passion for social change.
Here are five key points on how George Soros invests his money:
The “reflexivity” theory – Soros uses reflexivity as the cornerstone of his investment strategy. It’s a unique method that values assets by relying on market feedback to gauge how the rest of the market is valuing assets. Soros uses reflexivity to predict market bubbles and other market opportunities.Applying the scientific method – Soros also bases his market moves on the scientific method – creating a strategy that tracks what will transpire in the financial markets, based on current market data. Invariably, Soros will test his theory with a smaller investment first, then broadens his investment if the theory proves positive.Physical cues – Soros also listens to his body when making investment decisions. A headache or a backache has proven enough for him to abandon an investment.Blending political acumen with investment acumen - On September 16, 1992, Soros famously bet heavily against the U.K. government’s decision to hike interest rates. That would set off a trigger effect, devaluing the British pound and sending stocks higher after that devaluation. That move earned Soros $1 billion, along with the famous moniker as “The Man Who Broke the Bank of England.” Effectively, Soros went short a position in the British Pound (worth $10 billion) and earned $1 billion as the British currency slid amid political and economic turmoil linked to a policy of higher interest rates.Consolidate . . . and reflect – Soros uses a handful of advisors to make big investment decisions. Once he confers with his team of analysts, making sure to review at least one contrary view to his strategy, Soros says he takes time “to read and reflect” before pulling the trigger.
Can Investors Learn the “Soros Way”?
Can regular folks invest like George Soros? It takes moxie and it takes confidence, two attributes that Soros has in abundance. Once he makes up his mind, Soros often goes “all in” on a position, holding the view that no investment position is too large - as long as it’s the correct position.
Perhaps the biggest takeaway from the Soros method is that you can’t be too bold once your mind is made up on a market move. One of Soros’s favorite maxims is “to be in the game, you have to endure the pain.” For regular investors, that means picking the right broker/advisor – and sticking with that broker/advisor – taking a “trial and error” approach to one’s portfolio decisions, and keeping emotion out of one’s investment picks.
It's also imperative to understand that, even for the greatest investors, not all investments will prove profitable. Soros has had both his good picks and his bad investments:
Best Investment:In 1992, George Soros wagered $10 billion against the currency policy of the Bank of England, and its underlying currency, the pound. Essentially, Soros' bet the pound would flounder in global currency markets. On September 16, 1992 - a day known as "Black Wednesday" among currency traders - the British pound cratered against the German mark and the U.S. dollar, earning Soros $1.2 billion in profits over the next few weeks - a bet that went down in history as the day George Soros broke the Bank of England.
Worst Investment:On March 14, 2008, George Soros purchased a huge chunk of Bear Stearns' stock, valued at $54 per share. Only days later, the fabled Wall Street investment firm was sold to J.P. Morgan at $2 per share. Soros was correct in his assessment that Bear Stearns was on the trading block. But he was dead wrong on the takeover value of the company, an expensive lesson he details in his book, “The New Paradigm for Financial Markets.”
The Bottom Line
It's not easy emulating the portfolio results of George Soros, but you can learn a great deal from the patience, discipline and research Soros demonstrates with his investment strategy. Researching investment ideas by taking into account both the economic and the political realities, sticking with your convictions and getting out when your gut tells you to are some of the ways Soros wins. (For related reading, see "How George Soros Got Rich")
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ba4afe72051f772dbee6e33bfd9a6619 | https://www.investopedia.com/articles/investing/120915/vanguard-sep-ira-account-right-you.asp | Is a Vanguard SEP IRA Account Right for You? | Is a Vanguard SEP IRA Account Right for You?
The Simplified Employee Pension IRA (SEP IRA) offered by the Vanguard Group is considered one of the best individual retirement account (IRA) products available. Though SEP IRAs are a popular retirement savings vehicle and are offered by many different financial institutions, the Vanguard SEP IRA offers a unique combination of affordability, diverse investment options, high-quality customer service, and ease of use.
If your business does not currently offer a retirement savings plan and you'd like an inexpensive option that allows you to contribute to the retirement savings of all your employees at your discretion, a Vanguard SEP IRA may be right for you.
What Is a SEP IRA?
A SEP IRA is a retirement savings plan offered by businesses to help their employees save for retirement, or they may be set up by the self-employed for their own benefit. Rather than being funded by employee salary deferrals, like a 401(k), a SEP IRA is funded solely with employer contributions made directly to individual retirement accounts (IRAs) held by employees.
Employees retain full ownership of their IRAs and may make after-tax contributions if their specific plan allows, but the employer is primarily responsible for contributing to each employee's account on their behalf.
Employer contributions are limited to $57,000 in 2020 and $58,000 in 2021, or 25% of employee compensation, whichever is lower. If employees are allowed to make contributions, the limit is $6,000 per year in both 2020 and 2021, or $7,000 each year for those aged 50 and older because of permitted catch-up contributions.
Contributions for the self-employed are limited to 20% of net income. Net compensation for self-employed individuals is generally the net profit from IRS Schedule C reduced by the deductible self-employment tax. The 2020 eligible compensation limit is $285,000, and in 2021, the eligible compensation limit is $290,000.
Employees must be allowed to participate if they're 21 or older and earn at least $600 in 2020 or $650 in 2021. Also, they must have worked for you in at least three of the past five years, though employers may set less restrictive eligibility rules. Contributions to a SEP IRA must be made by the employer's tax deadline (plus extensions).
Affordability
In general, SEP IRAs are one of the more affordable retirement benefit options for employers. Since IRAs are owned by employees individually, the administering institution does not have to manage plan assets, which greatly reduces operating expenses. This makes SEP IRAs especially attractive to small business owners who may not have the excess capital to maintain more administratively intense plans.
The Vanguard SEP IRA
The chief advantage of the SEP IRA offered by Vanguard is that it is relatively cheap compared to other SEP products. Vanguard is owned by the shareholders of its mutual funds, so it does not benefit the company to charge more in fees than is truly necessary. When the company makes money, its shareholders make money, whether they hold their investments in SEP IRAs or individual brokerage accounts.
Investment Options
Like other IRA products, Vanguard's SEP IRA allows participants to invest in a range of mutual funds, exchange-traded funds (ETFs), and individual stocks.
Vanguard mutual funds are, on average, about 82% cheaper than comparable funds offered elsewhere. They charge no load fees, no 12b-1 marketing fees, and no commissions.
A Vanguard one-person SEP IRA can invest in mutual funds and ETFs offered by Vanguard, as well as mutual funds and ETFs from other companies, individual stocks, certificates of deposit (CDs), and bonds. There is no minimum investment. A Vanguard SEP IRA for more than one person may include only Vanguard mutual funds, including Admiral Shares—low-cost index funds and actively managed funds that are limited to larger account balances ($3,000 for index funds, $50,000 for most actively managed funds, or $100,000 for certain sector-specific index funds).
Through an individual brokerage account within a SEP IRA, an account holder can purchase stocks, bonds, ETFs, and options contracts outside of the Vanguard portfolio. While these trades incur commission charges, the amount of the charge decreases as the size of the account grows.
Accounts with less than $10,000 may incur a $20 annual service charge per Vanguard mutual fund held in the account. Account-holders can circumvent this charge by signing up for electronic statements. Vanguard Personal Advisor Services is available for one-person SEP IRA holders, though it requires a $50,000 minimum investment.
Customer Service and Online Platform
The quality of service provided and the user-friendly online platform are two more reasons why Vanguard's SEP IRA and its other retirement savings products stand out from the crowd. Many people know they need to save for retirement, but they are not sure how to go about it or how to invest those savings. While no customer service system is foolproof, Vanguard seems to have a fairly good handle on what investors need.
Customer service representatives are available by phone and email. Vanguard's user-friendly website also has an extensive support center designed to help investors troubleshoot their own issues.
In addition to information about its products and the various investments available, the Vanguard site provides members with resources for planning their retirements and meeting their individual investment goals, including income calculators, expense spreadsheets, and tax filing information. The site provides a simple platform for plan-sponsoring employers to manage contributions and for employees to track the progress of their investments.
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a15eec2150d4275dba905bd1eb729837 | https://www.investopedia.com/articles/investing/121015/yield-vs-total-return-how-they-differ-and-how-use-them.asp | Yield vs. Total Return: What's the Difference? | Yield vs. Total Return: What's the Difference?
Yield vs. Total Return: An Overview
Those who have struggled to grow their money in the low interest rate environment over the past decade have mainly been retirees and others who invest for income. Money market interest continues to be virtually non-existent and yields on other traditional income vehicles, such as CDs, remain low. As these investors seek ways to meet their income needs, it is helpful for them to understand the concepts of both yield and total return.
Yield is defined as the income return on an investment, which is the interest or dividends received, expressed annually as a percentage based on the investment's cost, its current market value, or its face value. Total return refers to interest, capital gains, dividends, and distributions realized over a given period of time. Investors focused on yield are generally interested in income and less concerned with growth, such investments may include CDs and bonds. Investors more concerned with the total return will likely choose to focus on portfolio growth and related investments.
Yield
Yield is defined as the income return on investment. This refers to the interest or dividends received from a security and is usually expressed as an annual percentage based on the investment's cost, its current market value, or its face value.
By this definition, the yield would mainly be cash thrown off by the investment with no invasion of principal. In some cases, this may not be true. As an example, some closed-end funds (CEF) will actually use the return of the investor’s principal to keep their distributions at the desired level. Investors in CEFs should be aware of whether their fund is engaging in this practice and also what the possible implications are.
Investors focusing strictly on yield are typically looking to preserve the principal and allow that principal to generate income. Growth is often a secondary investing consideration. This is especially true of fixed-income vehicles such as CDs, bonds, and depository accounts.
Dividend-paying stocks have become a popular vehicle for their yields on corporate earnings, which in many cases are higher than a typical fixed-income investment.
Total Return
Total return includes interest, capital gains, dividends, and distributions realized over a given period of time. In other words, the total return on an investment or a portfolio includes both income and appreciation.
Total return investors typically focus on the growth in their portfolio over time. They will take distributions as needed from a combination of the income generated from the yield on various holdings and the price appreciation of certain securities. While total return investors do not want to see the overall value of their portfolio diminished, preservation of capital is not their main investment objective.
Special Considerations
The idea of being an income investor and living off of the yield from your investments with no erosion of principal is not always realistic. Some typically tame income-producing vehicles such as U.S. Treasurys have produced losses in certain years.
While individual holdings, mutual funds, or exchange-traded funds (ETFs) in regularly tame asset classes may continue to throw off cash based upon their yield, investors may find themselves worse off if the decline in value is greater than the income yield over time, defeating their capital preservation strategy.
Funds and ETFs in these asset classes can be valid investments, but those seeking yield should understand the risks involved. Again, the positive impact of a decent yield can be wiped out quickly in a steep market decline impacting these asset classes.
Many financial publications and advisors tout the benefits of investing in dividend-paying stocks. Further, they often recommend these stocks as a substitute for typical income-producing vehicles. While dividend-paying stocks have many benefits, investors need to understand that they are still stocks and are subject to the risks faced by investing in stocks. This also is true when investing in mutual funds and ETFs that invest in dividend-paying stocks.
High-yield bonds are another vehicle used by investors reaching for yield—also known as junk bonds. These are below-investment-grade bonds and many of the issuers are companies in trouble or at an elevated risk of getting into financial trouble. High-yield bonds are often purchased by individual investors through a mutual fund or ETF. This minimizes the risk of default as the impact of any one issue defaulting is spread among the fund’s holdings.
Depending upon the needs and situation of a given investor, a well-balanced portfolio can include both income-generating investments and those with the potential for price appreciation.
One major benefit of using a total return approach is the ability to spread your portfolio across a wider variety of asset classes that can actually reduce overall portfolio risk. This has several benefits for investors. It allows them to control where the income-producing components of their portfolio are held. For example, they can hold income-generating vehicles in tax-deferred accounts and those geared towards price appreciation in taxable accounts.
This approach also allows investors to determine which holdings they will tap for their cash flow needs. For example, after a period of solid market returns, it might make sense to take some long-term capital gains as part of the rebalancing process.
Investors should understand the key differences between yield and total return so their portfolios are constructed to meet income-generating needs while providing a level of growth for the future.
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562b8f9947991074ebd03ae921fed3db | https://www.investopedia.com/articles/investing/121415/why-you-should-never-short-stock.asp | Why You Should Never Short a Stock | Why You Should Never Short a Stock
If you've ever lost money on a stock, you've probably wondered if there's a way to make money when stocks fall. There is, and it's called short selling. Even though it seems to be the perfect strategy for capitalizing on declining stock prices, it comes with even more risk than buying stocks the traditional way.
Key Takeaways Shorting stocks is a way to profit from falling stock prices.A fundamental problem with short selling is the potential for unlimited losses.Shorting is typically done using margin and these margin loans come with interest charges, which you have pay for as long as the position is in place.With shorting, no matter how bad a company's prospects may be, there are several events that could cause a sudden reversal of fortunes.
How Shorting Works
The motivation behind short selling stocks is that the investor makes money when the stock price falls in value. This is the opposite of the "normal" process, in which the investor buys a stock with the idea that it will rise in price and be sold at a profit.
Another distinguishing feature of short selling is that the seller is selling a stock that they do not own. That is, they're selling a stock before they buy it. To do that, they must borrow the stock that they're selling from the investment broker. When they do, they sell the stock and wait until it (hopefully) falls in price.
At that time, they can purchase the stock for delivery, then close out the short position at a profit. You may be wondering what happens if the stock price rises and that's an important question. The seller can opt to hold a short position until the stock does fall in price, or they can close out the position at a loss.
Short Selling Risk vs. Reward
A fundamental problem with short selling is the potential for unlimited losses. When you buy a stock (go long), you can never lose more than your invested capital. Thus, your potential gain, in theory, has no limit.
For example, if you purchase a stock at $50, the most you can lose is $50. But if the stock rises, it can go to $100, $500, or even $1,000, which would give a hefty return on your investment. The dynamic is the exact opposite of a short sale.
If you short a stock at $50, the most you could ever make on the transaction is $50. But if the stock goes up to $100, you'll have to pay $100 to close out the position. There's no limit on how much money you could lose on a short sale. Should the price rise to $1,000, you’d have to pay $1,000 to close out a $50 investment position. This imbalance helps to explain why short selling isn't more popular than it is. Wise investors are aware of this possibility.
Time Works Against a Short Sale
There's no time limit on how long you can hold a short position on a stock. The problem, however, is that they are typically purchased using margin for at least part of the position. Those margin loans come with interest charges, and you will have to keep paying them for as long as you have your position in place.
The interest charged functions as something of a negative dividend, in that it represents a regular reduction in your equity in the position. If you're paying 5% per year in margin interest, and you hold the short position for five years, you'll lose 25% of your investment just from doing nothing. That stacks the deck against you. You won't be able to sit on a short position forever.
There's more news on the margin front, and it's both good and bad. If the stock that you sell short rises in price, the brokerage firm can implement a "margin call," which is a requirement for additional capital to maintain the required minimum investment. If you can't provide additional capital, the broker can close out the position, and you will incur a loss.
As bad as this sounds, it can function as something of a stop-loss provision. As we've already discussed, potential losses on a short sale are unlimited. A margin call effectively puts a limit on how much loss your position can sustain. The major negative on margin loans is that they enable you to leverage an investment position. While this works brilliantly to the upside, it simply multiplies your losses on the downside.
Brokerage firms typically allow you to margin up to 50% of the value of an investment position. A margin call will usually apply if your equity in the position drops below a certain percentage, generally 25%.
Factors That Can Hamper a Short Sale
No matter how bad a company's prospects may be, there are several events that could cause a sudden reversal of fortunes, and cause the stock price to rise. No matter how much research you do, or what expert opinion you obtain, any one of them could rear its ugly head at any time.
Should it happen while you hold a short position in the stock, you could lose your entire investment or even more. Examples of such situations are:
The general market could rise significantly, pulling up the price of your stock—despite the weak fundamentals of the companyThe company could be a takeover candidate—just the announcement of a merger or acquisition could cause the price of the stock to skyrocketThe company could announce the unexpected good newsA well-known investor could take a large position in the stock, on the opinion that it is undervaluedThe news could break about a major positive development in the company's industry that will cause the stock to rise in pricePolitical instability in a certain part of the world might suddenly make your short sale company more attractiveA change in legislation that affects the company or its industry in a positive way
These are just some examples of events that could unfold that could cause the price of the stock to rise, despite the fact that extensive research indicated that the company was a perfect candidate for a short sale.
The Bottom Line
Investing in stocks in the usual way is risky enough. Short selling should be left to very experienced investors, with large portfolios that can easily absorb sudden and unexpected losses.
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7523660c5984a58ea3afca938df6ebd8 | https://www.investopedia.com/articles/investing/121515/how-short-sellers-account-went-negative-106k.asp | How a Short Seller's Account Went to Negative $106K (KBIO, ETFC) | How a Short Seller's Account Went to Negative $106K (KBIO, ETFC)
How Did a Short Seller's Account Go to Negative $106K?
Joe Campbell, a 32-year-old small business owner from Gilbert, Ariz., liked to trade the stock market in his spare time. But in November of 2015, he got caught in a disastrous trade he will never forget.
The story of his devastating short position in KaloBios Pharmaceuticals Inc. (KBIO) spread like wildfire in the financial press, after he described on a crowdfunding website how his $37,000 account balance quickly turned to negative $106,000 on the heels of unexpected news.
Key Takeaways In November 2015, Joe Campbell, a 32-year-old small business owner, made some national human-interest news because of a disastrous trade he made. Mr. Campbell held an unhedged short position in KaloBios Pharmaceuticals Inc. overnight after the company received unexpected capital investment that caused the stock's price to rise as much as 800% overnight. His $37,000 account balance quickly turned to negative $106,000 on the heels of the unexpected news. Because of these losses, Mr. Campbell started a crowdfunding page that garnered mixed reviews and low returns but brought a lot of media attention to his situation.
Understanding How a Short Seller's Account Went to Negative $106K
Campbell’s trade was highly risky in at least three ways. First, it was a short trade without any hedge. With short sales, potential losses are theoretically infinite, because a stock price can continue to rise and rise. In the case of a long position, losses are limited because the price of a stock can only go to zero.
Second, his trade was in a very low-priced stock. Penny stocks and those priced very low often see high levels of volatility.
Finally, he held the position overnight when there is less liquidity and limited access to the market, making traders even more vulnerable to events such as unexpected news releases.
KaloBios in Trouble
KaloBios Pharmaceuticals, which developed antibody-based drugs to treat cancer, announced in a press release that it planned to wind down operations because of limited cash resources. The release also stated that it had engaged restructuring firm Brenner Group to assist with the liquidation of company assets.
The negative news attracted the attention of short-sellers eager to profit from a further decline in the value of the company’s stock.
The Short Trade
Campbell was among the short sellers hoping to profit from the company’s demise. On Nov. 18, he sold $33,000 in KBIO stock in his ETrade Financial Corp. (ETFC) account at an average price of about $2 a share. He then went into a work meeting, planning to hold the position overnight. He stated on his GoFundMe page: “I was holding KBIO short overnight for what I thought was a nice $2 fade coming.”
After the close of trading, KaloBios issued a press release announcing that “an investor group comprised of Martin Shkreli and associates together have acquired more than 50% of the outstanding shares of KaloBios, and that the company is in discussions with Mr. Shkreli regarding possible direction for the company to continue in operation.”
Shkreli, a hedge fund manager and entrepreneur, was the founder and chief executive officer of Turing Pharmaceuticals. He became infamous in 2015 after his company dramatically raised the price for a drug used to treat AIDS and cancer patients, and has since been sentenced to federal prison for securities fraud.
KaloBios' Stock Soars
KaloBios Pharmaceuticals' stock soared by as much as 800% in extended-hours trading on the news of Shkreli’s investment. When Campbell got out of his meeting, he received a message from a concerned friend who knew that he was short KBIO.
At first, he worried that he may have lost his entire account of $37,000. He quickly learned that the situation was even worse: The stock price had spiked to $16, and his account was now negative by over $100,000. After he called his online broker, his short position was covered at an average price of around $18.50, resulting in a negative balance of over $106,000.
The stock continued to rise and surged the following week, after Shkreli stated on Twitter (TWTR) that he wouldn’t sell any more stock to those looking to short sell it, stating: “I spoke with my counsel and advisers and decided to stop lending my $KBIO shares out until I better understand the advantages of doing so.”
Because Shkreli owned such a large proportion of the shares outstanding, his decision made it hard for the remaining short traders to exit their positions. The situation was reminiscent of the 2008 short squeeze in Volkswagen, when Porsche increased its stake in the company. Volkswagen’s stock price rocketed higher and short-sellers struggled to cover their positions because of the lack of supply in the stock.
Crowdfunding Campaign
Reacting to the devastating loss, Campbell quickly launched a GoFundMe campaign asking for help with his massive margin call.
He was at least partially conscious of risk, stating that the $37,000 in his account was capital that he could afford to lose. He made it clear on his GoFundMe page, however, that he had made the false assumption that there was a safeguard in place to prevent his account from going negative: “Never in my wildest dreams did I imagine that ETrade would NOT have some sort of stop or circuit breaker in place that would automatically cut a position if the account went to $0.”
He ended by saying: “My plan moving forward is to liquidate mine and wife's 401ks and try work out a payment plan with ETrade. What an expensive lesson that was. I hope my story helps someone else from the same.”
The page received a range of responses from sympathetic to harshly critical. However, he was able to raise over $5,300 through 151 donations before removing the campaign.
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9653f950c01b2e9ca8f8e9517a07b3df | https://www.investopedia.com/articles/investing/121615/top-3-intermediate-bond-etfs-2016-ief-biv-vcit.asp | The Top 3 Intermediate Bond ETFs for 2016 (IEF, BIV, VCIT) | The Top 3 Intermediate Bond ETFs for 2016 (IEF, BIV, VCIT)
Several profitable and popular intermediate bond exchange-traded funds (ETFs) are available to investors. Among these are the iShares 7-10 Year Treasury Bond ETF, the Intermediate-Term Bond ETF, the Intermediate-Term Corporate Bond Index Fund and the iShares Intermediate Credit Bond ETF.
An intermediate-term bond is a fixed-income security with a date of maturity or a date by which principal repayment must occur. In general, an intermediate-term bond will typically have a maturity date scheduled to occur within three to 10 years. The exact parameters for an intermediate-term bond are not written in stone and can be somewhat difficult to define. Some experts indicated that the term of these intermediate-term bonds could last as long as 15 years. The length of time, though not strictly determined, is important because it is the point at which a bond fully restores payment of the bond’s face value to the investor. During the duration of the bond, investors earn interest until the date of maturity.
Bonds are investments for the portfolios of fixed-income investors. Financial consulting firm Aon Hewitt indicates that intermediate-term bonds, often in the form of ETFs, are common investment elements in a 401(k). When market conditions are normal, and when the yield curve is positive, intermediate-term bonds generally offer higher yields than short-term bonds. An intermediate-term bond ETF provides an effective approach to investing in bonds that have been issued by a variety of governments and corporations.
iShares 7-10 Year Treasury Bond ETF
Issued by BlackRock in 2002, the iShares 7-10 Year Treasury Bond ETF (NYSEARCA: IEF) tracks the Barclays U.S. 7-10 Year Treasury Bond Index. This underlying index is market-weighted and composed of debt issued by the U.S. Treasury. To qualify for a spot in this fund’s basket, the total remaining years of maturity on each bond must equal a minimum of seven but be no greater than 10. All coupon strip Treasuries are excluded.
The weighted average maturity for this fund is 8.5 years. Because IEF has a longer average maturity, it has a longer duration play on the U.S. Intermediate Treasury segment. More than 90% of this fund’s assets are in the form of Treasury notes that expire between seven and 10 years from the current date. The yield to maturity of this fund is one of the highest in the fixed-income segment. This higher yield, however, brings with it a much greater sensitivity to changes in rates, specifically rates at the longer end of the yield curve. Thus, IEF is best suited to investors comfortable with a greater level of rate-fluctuation risk. IEF is among the easiest intermediate-bond ETFs to trade and holds great favor among investors because of the portfolio’s concentrated and narrow focus.
The expense ratio for this fund is approximately 0.15%. The current yield to maturity is 2.11%. The five-year annualized return for this fund is approximately 3.9%. IEF has more than $8 billion in total assets under management. Morningstar gives IEF an average rating for returns and a below-average rating for risk. At present, the entirety of this fund’s holdings is composed of U.S. Treasury bonds.
Intermediate-Term Bond ETF
Issued in 2007 by Vanguard, the Intermediate-Term Bond ETF (NYSEARCA: BIV) tracks the Barclays U.S. 5-10 Year Government/Credit Float Adjusted Index. This underlying index is market-weighted and is composed of all investment-grade fixed-income bonds with maturity dates at least five years but no more than 10 years from the present date. BIV has only one other competitor in the intermediate government and credit segment. It is much larger and much more liquid than its competitor, the iShares Intermediate Government/Credit Bond ETF (GVI). It also has much lower fees.
BIV distinguishes itself from GVI in two ways. First, at more than $40 million, BIV has a substantially larger daily trading volume. Second, this fund has a slightly different take on how it defines intermediate maturity. For this fund, bonds are considered for the intermediate bucket with a minimum maturity date of five years. This is different than the more traditional one- or three-year minimum. Thus, BIV has a longer average maturity and therefore, a longer effective duration period. Having a longer-dated portfolio culminates in increased interest-rate risk for the fund and a current yield to maturity of approximately 2.7%.
This fund has a total of more than $7.4 billion in assets under management. The expense ratio for this fund is low at 0.1%. The fund’s five-year annualized return is approximately 4.3%. Morningstar gives BIV a high-risk rating but also gives the fund an above-average rating on return performance. The largest portion of this ETF is composed of U.S. Treasury bonds.
Intermediate-Term Corporate Bond Index Fund
Issued by Vanguard in 2009, the Intermediate-Term Corporate Bond Index Fund (NYSEARCA: VCIT) tracks the Barclays U.S. 5-10 Year Corporate Bond Index. The fund’s underlying index is market-weighted and is composed of investment-grade fixed-rate corporate bonds that have minimum and maximum maturities of five and 10 years, respectively. VCIT defines intermediate corporate bonds as those with a maturity date within five to 10 years of the current date. Because of this, the fund has a significantly longer weighted average maturity than most of the other intermediate-term ETFs in the fixed-income corporate investment segment.
This fund also has a longer effective duration than the majority of these other funds. It does, however, have a yield to maturity that is one of the highest among those same funds. In terms of sector coverage, VCIT is notably market-like; the industrials sector holds more than 60% of asset allocation. In the segment, this fund has one of the lowest expense ratios and is among the most liquid. Thus, VCIT is well suited to investors looking for a balanced exposure to the investment-grade corporate bond space with a five- to 10-year maturity pocket.
This fund’s assets under management total more than $6 billion. At 0.12%, it has an incredibly low expense ratio. The current yield to maturity is 3.65%. This fund’s five-year annualized return is approximately 4.9%. Morningstar gives VCIT an above-average risk rating but also gives the fund an above-average rating for a return performance. Top holdings for this fund include JPMorgan Chase & Company, Bank of America Corporation and Verizon Communications.
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fa9175402c5c9d1acc72600472beb98a | https://www.investopedia.com/articles/investing/121714/how-does-alibaba-make-money-simple-guide.asp | How Alibaba Makes Money | How Alibaba Makes Money
Alibaba Group Holding Ltd. (BABA) is a holding company legally domiciled in the Cayman Islands but which conducts its e-commerce businesses through its Chinese subsidiaries and variable interest entities (VIEs). Its primary business is to offer a digital marketplace where consumers and merchants can connect and buy and sell from each other. Alibaba operates its business through four primary segments, led by its giant e-commerce operations.
Chief among its competitors are other established Chinese e-commerce and Internet companies, such as Tencent Holdings Ltd., as well as global and regional e-commerce companies, such as Amazon.com Inc. (AMZN). Since Alibaba also operates in the cloud-computing business and digital-media and digital-entertainment businesses, it competes with companies specializing in those markets as well.
Key Takeaways Alibaba provides digital marketplaces for merchants and consumers.Alibaba's largest business is its core e-commerce operations, but cloud computing is growing the fastest.Alibaba aims to be a leader in the development of the infrastructure of commerce.China's antitrust watchdog launched an investigation into Alibaba in late December 2020.
Alibaba's Financials
Alibaba files financial statements with the U.S. Securities and Exchange Commission (SEC) and does so in accordance with generally accepted accounting principles (GAAP). The company follows a reporting schedule where the end of its fiscal year (FY) occurs at the end of March. Alibaba also reports certain non-GAAP financial measures, such as adjusted earnings before interest, taxes, amortization, and depreciation (EBITDA), and adjusted EBITA, which refers to earnings before interest, taxes, and amortization. Although Alibaba's reporting currency is the Renminbi, the company provides conversions into U.S. dollars, which are used in this story.
The company's revenue rose 36.9% to $33.9 billion in Q3 FY 2021, which ended December 31, 2020. It was slightly above the 35.3% annual rate of growth posted for all of FY 2020, which ended March 31, 2020. Alibaba's net income rose 55.5% to $12.0 billion in Q3 FY 2021 compared to the same quarter a year ago. The company noted that the increase in net income was primarily due to an increase in the net gain from increases in the market prices of its equity investments in publicly-traded companies.
Alibaba’s Business Segments
Alibaba monetizes its services through four main business segments that it formally names as: core commerce, cloud computing, digital media and entertainment, and innovation initiatives and others. The company provides segment break downs of revenue and adjusted EBITA, the latter of which was reported as $9.4 billion for the company for Q3 FY 2021.
Core Commerce
Alibaba's core commerce segment is comprised of its various digital retail and wholesale marketplaces, as well as logistics and local consumer services. The company generates revenue from merchants through the sale of a variety of marketing services, membership fees, customer management services, product sales, commissions on transactions, and software service fees. The company generates revenue from local consumers through platform commissions and on-demand delivery service fees.
Core commerce is Alibaba's largest source of revenue at $30.0 billion, or about 88% of the company's total revenue, as of Q3 FY 2021. Revenue for the segment grew 38.2% compared to the same three-month period a year ago.
In terms of income measures, the core commerce segment represents nearly 100% of the company's adjusted EBITA, which grew 14.7% to $10.2 billion in Q3 FY 2021. Losses in two of Alibaba's other business segments partly account for the higher-reported figure in the core commerce segment than in adjusted EBITA for the company as a whole.
Cloud Computing
Alibaba Cloud provides enterprise customers with a complete suite of cloud services, including database, storage, management and application services, big data analytics, a machine-learning platform, and other services. The company's cloud computing segment generates revenue from enterprise customers based on the duration and specific usage of the services.
Cloud computing is Alibaba's second largest source of revenue at $2.5 billion, or about 7% of total revenue, as of Q3 FY 2021. The segment is also the company's fastest-growing source of revenue. Revenue grew 50.3% compared to the year-ago quarter. Alibaba reported adjusted EBITA of $3 million for its cloud computing segment in Q3 FY 2021, compared to a loss in adjusted EBITA in the year-ago quarter. It was the first time the segment achieved positive adjusted EBITA. The cloud computing segment makes up just a tiny fraction of overall adjusted EBITA.
Digital Media and Entertainment
Alibaba's digital media and entertainment segment exists as part of the company's strategy to capture revenue from consumption beyond its core commerce businesses. The segment generates revenue primarily from customer management services and membership subscription fees.
Digital media and entertainment is Alibaba's third largest source of revenue at $1.2 billion, or about 4% of total revenue, as of Q3 FY 2021. Revenue for the segment grew 0.6% compared to the same quarter a year ago. Alibaba reported a $213 million loss in adjusted EBITA in Q3 FY 2021.
Innovation Initiatives and Others
Alibaba's innovation initiatives and others segment aims to innovate and develop new services and products that can meet the needs of its customers. Past innovations include digital-navigation app Amap and network-communication app DingTalk. The segment generates revenue primarily through services fees and product sales to enterprise customers and consumers.
Innovation initiatives and others comprise the smallest share of Alibaba's revenue at $207 million, or less than 1% of total revenue, as of Q3 FY 2021. Revenue for the segment rose 9.5% compared to the same three-month period a year ago. Alibaba posted a $305 million loss in adjusted EBITA in Q3 FY 2021.
Alibaba's Recent Developments
Alibaba announced in late September 2019 its goal of reaching 1 billion annual active consumers in its China consumer business by the end of its 2024 FY, as part of its latest five-year plan. As of December 31, 2020, the company was still short of its goal by 221 million annual active consumers.
In late December 2020, China's market regulator, the State Administration for Market Regulation, said that it had launched an antitrust investigation into Alibaba. The antitrust watchdog noted that it was acting in response to reports that Alibaba was pressuring merchants that sell wares on its platforms not to sell on the platforms of its competitors.
On February 3, 2021, Chinese regulators came to an agreement on a restructuring plan that would turn Alibaba's financial technology affiliate Ant Group Co. into a financial holding company. That change would make the fintech firm subject to similar capital requirements faced by banks. The move comes after an attempted initial public offering (IPO) of Ant was halted by regulators in early November 2020, which was followed in late December 2020 by regulators issuing a statement that they would meet with Ant Group about implementing regulations and other rules.
How Alibaba Reports Diversity & Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Alibaba and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Alibaba releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Alibaba discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Alibaba breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
Alibaba Diversity & Inclusiveness Reporting Race Gender Ability Veteran Status Sexual Orientation Board of Directors ✔ C-Suite ✔ General Management Employees
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8d2a83130efac25b9844c567508a0797 | https://www.investopedia.com/articles/investing/121714/look-uwti-leveraged-oil-etn.asp | A Look At The UWTI Leveraged Oil ETN | A Look At The UWTI Leveraged Oil ETN
So you want to make money on an oil trade. The way the price of oil is moving at the moment, you'll have an opportunity to get in and out for massive profits. On the other hand, if you’re incorrect, your scheme could go up in flames.
Don’t you wish you knew which way oil was going to next? While nobody knows that answer for certain, you can greatly increase your odds of success by using logic. In this case, we’ll take a look at VelocityShares 3x Long Crude Oil ETN (UWTI).
The first thing you should know is that a leveraged exchange-traded note (ETN) uses financial derivatives and debt to amplify the returns of an underlying index. These are high-risk trades that should be seen as just that: trades. They should not be approached as investments. For instance, over the past three months, UWTI has depreciated 74.04%. Since the key to the game is capital preservation, this type of trade must be avoided. That said, during the same time frame, VelocityShares 3x Inverse Crude Oil ETN (DWTI), has appreciated 192.19%. If you’re going to jump in on either side of this trade, then you need to know the facts.
Unfortunately, the problem with trading ETN's and exchange-traded funds (ETF) (aside from fees) is that the market can remain irrational longer than you can stay solvent. In other words, even if you’re correct, logic might take a while to play out. Keep that in mind as we move forward. (For more, see: How Oil ETFs React to Falling Energy Prices.)
Speaking of logic, the primary reason for the drop in oil is global deflation. And there’s one thing investors and traders need to remember: You can’t stop deflation. You can offer a free money policy and come up with all types of creative ways to “keep the economy going,” but in the end, deflation will win. The Federal Reserve, as well as other powers, have no interest in seeing deflation rear its ugly head on their watches. Arguably, it’s about legacy, not what’s best for the country over the long haul. This all relates to the price of oil. Here’s why. (For more, see: What Determines Oil Prices.)
Deflationary Hints
It’s beginning to appear that Federal Reserve policy has created numerous bubbles. And just like all deflationary environments, the first area to show cracks is commodities. Global demand for oil has declined and supply has increased. That being the case, it wouldn’t take a Mensa member to figure out that the price of oil should continue its decline.
If the economy had to stand on its own two feet right now — without the help of the Federal Reserve — it would need a very sturdy cane to help it creep forward. If you have doubts about that, ask yourself the following question: “If the economy is truly healthy, why is an easy money policy still in place?”
Anyone who pays attention knows this, and if you’re reading this article, then you’re paying attention. But the vast majority of the public isn’t paying attention, instead going with the popular opinion that lower oil (and gasoline) prices relate to an election year. This is a ridiculous assessment with no historical accuracy. (For more, see: OPEC's Decision Sends Stocks Lower.)
Reduced Demand, Geopolitics
The ultimate point here is that reduced global demand has led to a deflationary environment. When demand is low, prices must move lower so consumers will continue to purchase products and services. The first hint of an upcoming deflationary environment is often in commodities, just as it was in late 2008. For example, in July 2008, crude oil traded at $145/barrel. On Dec. 23, 2008, it traded at $30.28/barrel. In early 2009, we were in a deflationary environment. This is bad news for oil in today’s world, and oil is likely to hit $30/barrel before it hits $100/barrel.
Another big hint is geopolitical tensions, which relates to a weakening global economy. Russia is a good example. These rising tensions are another sign that the global economy is weakening, not strengthening. Remember, everyone is happy when they’re making money.
Deflation is likely to spread in Europe first. Italy is already there. And the entire Eurozone saw annual inflation of just 0.3% in November — a five-year low. Oil will likely continue to go lower, which makes UWTI less attractive. (For more, see: Oil and Gas Industry Primer.)
The Good News
The one catch here related to deflation is that it’s a good thing, not a bad thing. Yes, it will be exceptionally painful for many years, but that’s the only way out. The only way to grow organically again is to pay off debts and for prices to come down so businesses can innovate more and real estate can become affordable for the average individual/family. This is how wealth will be created again in America … many years from now. (For more, see: The Upside of Deflation.)
The Bottom Line
If you’re going to initiate any position in UWTI, then it should be in and out on a dead cat bounce. But this is nearly impossible to time and extremely risky. There are much better trading and investing opportunities available at this time. Please do your own research prior to making any investment/trading decisions. (For more, see: The Dead Cat Bounce: A Bear in Bull's Clothing?)
Dan Moskowitz doesn't own shares of UWTI.
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825de750525fa606425589d20ed6ada3 | https://www.investopedia.com/articles/investing/121814/hong-kong-vs-china-understand-differences.asp | Hong Kong vs. Mainland China: Understanding the Differences | Hong Kong vs. Mainland China: Understanding the Differences
Hong Kong vs. Mainland China: An Overview
"The Hong Kong Special Administrative Region is an inalienable part of the People's Republic of China." – Article 1, Basic Law
"The National People's Congress authorizes the Hong Kong Special Administrative Region to exercise a high degree of autonomy and enjoy executive, legislative and independent judicial power, including that of final adjudication, in accordance with the provisions of this Law." – Article 2, Basic Law
Most people know Hong Kong as an international financial hub, business center, shopping paradise, and tourist destination. However, the region's identity crisis and resistance to Beijing's interference are at the heart of the civil unrest in the former British colony. Pro-democracy activists in Hong Kong would like the region to remain different from other Chinese cities. So is Hong Kong a de facto country or is it truly a part of China? As with many things in Hong Kong, the answer is not clear cut.
The relationship between Hong Kong and mainland China is far more complex than most people realize. It involves politics, economics, trade, laws, and, above all, the people. "Hongkongers," as they're known, who lived for years under the influence and ways of former ruler Great Britain, are wary about China’s intentions and indignant about the mainland’s meddling in its political affairs.
Mainland China and Hong Kong complement each other economically. However, their political differences remain entrenched. The century-long separation between the People's Republic of China and Hong Kong created gaps that cannot be easily bridged even if the two are officially one country. Before Hong Kong and mainland China can truly unify, they must overcome significant differences.
Key Takeaways Hong Kong exists as a Special Administrative Region controlled by The People's Republic of China and enjoys its own limited autonomy as defined by the Basic Law.The principle of “one country, two systems” allows for the coexistence of socialism and capitalism under “one country,” which is mainland China.The Hong Kong economy is characterized by low tax rates, free trade, and less government interference.The mainland Chinese stock markets are more conservative and restrictive.
Hong Kong
To understand the root of Hong Kong's separation from the mainland, one must go back to the Opium Wars between Great Britain and China (1839–1860). During these military and trade clashes, China was forced to cede Hong Kong Island and a part of Kowloon to Great Britain in perpetuity. In 1898, Britain negotiated a major land expansion of the Hong Kong colony and signed a 99-year lease with China. The lease ended in 1997, at which time Britain returned Hong Kong to China as a Special Administrative Region (SAR) called the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR).
Under the doctrine of "one country, two systems," China allowed the former colony to continue to govern itself and maintain many independent systems for a period of 50 years. The Basic Law defines the limited autonomy of Hong Kong. Owing to its colonial history, English is one of Hong Kong's official languages.
Mainland China
Officially known as the People's Republic of China, this East Asian country is the world's most populous, with a population of more than 1.4 billion people. China is governed by the Chinese Communist Party, which has jurisdiction over 22 provinces, five autonomous regions, four direct-controlled municipalities, and the SARs of both Hong Kong and Macau.
Mainland China has the second-largest economy in the world, at $14.3 trillion, after the United States, at $21.4 trillion. China built its economy on heavy industry development, ramping up the country's industrial and service output over the years. Of late, consumer demand has driven growth. However, after a tougher 2018, in which the nation was embroiled in a trade war with the United States, the Chinese economy grew at its slowest pace in 28 years.
Differences in Government
Perhaps the most significant difference between mainland China and Hong Kong is that the mainland is communist and controlled by a single party while Hong Kong has a limited democracy. Both share the President of China as their chief of state. However, each has its own head of government: The premier is the head of mainland China, while the chief executive is the head of the Hong Kong Special Administrative Region.
The chief executive is accountable to the Central People's Government. The term of the chief executive is for five years, and any person can serve for a maximum of two consecutive terms.
Despite the separation in systems and rights guaranteed by the Basic Law, the mainland Chinese government does assert itself in local Hong Kong politics. In 2014, the region witnessed mass-scale protests and demonstrations against mainland China’s proposed reforms for electing the Chief Executive. Protesters complained that only those candidates who aligned their interests with China would be allowed to run. The "Umbrella Protests," as they were known, failed to achieve any concessions from Beijing.
Hong Kong also has its own legal and judicial systems (including a proprietary police force), district organizations (with no political power), and public servants, broadly based on the British common law model. However, for land tenure and family matters, Hong Kong reverts to the Chinese customary law model.
In 2019, Hong Kongers protested against an extradition bill that would have allowed residents to be sent to mainland China. It was eventually suspended and withdrawn by the chief executive. Critics feared the bill would undermine the region's judicial system. Amnesty International said the bill—if passed—would have extended the power of the mainland authorities to target critics, human rights defenders, journalists, NGO workers, and anyone else in Hong Kong.
Military and Diplomacy
Hong Kong defers to mainland China in two primary areas: military defense and international relations. Hong Kong may not maintain its own military; the mainland manages the military defense of Hong Kong.
In international diplomacy, Hong Kong has no separate identity from mainland China. For example, Hong Kong has no independent representation in the United Nations Security Council, the United Nations Conference on Trade and Development, the Group of 77 at the United Nations, or the Group of 22 (G22). However, Hong Kong may attend events of select international organizations like the Asian Development Bank, the International Monetary Fund, the World Health Organization, and the United Nations World Tourism Organization, though as an associate member and not a member state. It can also participate in trade-related events and agreements under the name "Hong Kong, China."
The Hong Kong Special Administrative Region may not maintain any separate diplomatic ties with foreign countries. The Office of the Commissioner of the Ministry of Foreign Affairs of the People's Republic of China in the Hong Kong Special Administrative Region conducts all foreign affairs. Foreign countries may have consulate offices in Hong Kong, but locate their main Chinese embassies on the mainland. The citizens of Hong Kong carry a different passport from the citizens of mainland China. Both must obtain permission before visiting the other region. Even foreign tourists who visit Hong Kong must obtain a separate visa before entering China.
Differences in Taxes and Money
The principle of "one country, two systems" allows for the coexistence of socialism and capitalism under "one country," which is mainland China. This principle has given Hong Kong the freedom to continue with its free-enterprise system, rather than merging into the communistic structure in China. Hong Kong has independent finances and the People's Republic of China (PRC) does not interfere in its tax laws or levy any taxes on Hong Kong.
The region has its own policies related to money, finance, trade, customs, and foreign exchange. Hong Kong and mainland China even use different currencies. Hong Kong continues to use the Hong Kong dollar, which is pegged under the Linked Exchange Rate System to the U.S. dollar. The mainland uses the Chinese yuan as legal tender. Merchants in Hong Kong do not freely accept the yuan.
Differences in Economics
Hong Kong has the second freest and 35th largest economy in the world with a GDP of $366 billion in 2019. The economy of Hong Kong has witnessed a tremendous transition in the past decade as services took a lead in the region at a whopping 93.5% of GDP; the service sector includes services related to travel, trade, financial, and transportation. As manufacturing has shifted base to the mainland, its contribution to overall GDP has shrunk over the years (1.1%), while agriculture barely contributes to the GDP (0.1%), as Hong Kong is not rich in natural resources and depends on imports for food and raw materials. Construction contributes around 4.1%. Overall, the Hong Kong economy is characterized by low tax rates, free trade, and less government interference.
Hong Kong, which is regarded as the world's "freest economy," can also be tagged as a "service economy," as over 90% of the gross domestic product (GDP) is constituted by this sector.
The economy of mainland China is more dependent on manufacturing, although, in recent years, the service sector has started to pick up. However, the share of services in the GDP is much less than that of developed countries like the United States and Japan and also less than that of developing countries like Brazil and India. Agriculture constitutes around 8% of China's GDP, while it is negligible in Hong Kong's.
Hong Kong's GDP per capita is vastly higher than that of mainland China's, although the latter is rapidly climbing. China's GDP growth rate is over 6%, while Hong Kong's was 2% in 2018, the latest numbers available.
Differences in Stock Markets
The Hong Kong Stock Exchange has been the preferred destination choice for most Chinese companies looking to raise capital, as the mainland Chinese stock markets are more restrictive and have higher financial requirements. Hong Kong's stock market also attracts more overseas investors.
"Hong Kong has multiple advantages that are missing in China. First, a registration-based IPO system, which enables listing to be relatively faster and easier than in the mainland. Second, the absence of capital controls and greater international exposure, which allows Hong Kong to serve as an anchor point for global expansion. Third, a sound financial infrastructure, which mitigates operational costs. Fourth, an effective regulatory framework, which focuses on transparency and prudent minimum standards," wrote Tianlei Huang research analyst at the Peterson Institute for International Economics. "Neither Shanghai nor Shenzhen is likely to win this competition with Hong Kong, at least over the short term."
In mid-Nov. 2014, a program titled "Shanghai-Hong Kong Stock Connect" was launched, which established a cross-border channel for access to stock markets and investment. This arrangement allows investors in these regions to trade specified companies listed on each other’s stock exchange through their local securities firm. There was no direct access for individual investors in Hong Kong (or overseas) to Chinese stocks before this. In Dec. 2016, a similar "Shenzhen-Hong Kong Stock Connect" was launched.
As of the end of 2018, the Hong Kong Stock Exchange listed 1,146 mainland Chinese companies, nearly 50% of the total number on the exchange. In terms of market capitalization, these companies accounted for almost 68% of the stock market in Hong Kong. By the end of 2019, Hong Kong's stock market was the third-largest in Asia and fifth-largest in the world by market capitalization at $4.9 trillion.
Economic Interdependence
Even in times of twisted diplomatic relations, the economic ties have remained strong between the mainland and its SAR. Hong Kong and mainland China boost each other's economies, and the two have good economic relations with annual bilateral trade valued at over $544.8 billion in 2019.
Hong Kong in many respects is seen as a gateway to China for those who are interested in doing business on the mainland or accessing Chinese stocks or investments. As of Dec. 2018, 22 of the 152 licensed banks in Hong Kong were of Mainland interests.
Mainland China is Hong Kong's largest trading partner and its second-largest source of inward direct investment. The mainland's non-financial direct investment in Hong Kong was $70.05 billion in 2018, accounting for 58.1% of the total investment of $120.5 billion, according to the Ministry of Commerce of China. According to Hong Kong's Trade and Industry Department, mainland China is Hong Kong’s main destination for domestic exports (44.2%). It is also the biggest supplier of imports for Hong Kong (46.3%).
Hong Kong is a major supplier of entrepôt services to China. In 2018, the value of goods re-exported through Hong Kong from and to the Mainland was $467.6 billion and accounted for 89.1% of Hong Kong's total re-export trade value.
However, some argue Hong Kong's economic importance and relevance to China's growth story is rapidly falling.
Hong Kong vs. Mainland China FAQs
Is Hong Kong Separate from China?
Hong Kong is a special administrative region of China and is an "inalienable part" of the country. Due to its special status, Hong Kong is able to exercise a high degree of autonomy and enjoy executive, legislative, and independent judicial power.
Is Hong Kong a Part of China or Japan?
Hong Kong is a part of China.
When Did Hong Kong Separate from China?
Hong Kong was ceded by China after its loss to Great Britain during the Opium Wars, which lasted from 1839 to 1860. In 1997, Britain returned Hong Kong to China as a Special Administrative Region.
Is Hong Kong a Nationality?
No, people in Hong Kong are considered Chinese. Many of them speak Cantonese, a language originating from the city of Guangzhou (AKA Canton) and the surrounding area in the Guangdong Province.
Why Did Britain Give Back Hong Kong?
Britain gave Hong Kong back to China as a Special Administrative Region in 1997 after its 99-year lease on China ended. This lease started in 1898 when Britain negotiated a major land expansion of the Hong Kong colony.
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79fde757070d761b12dd336b3142774b | https://www.investopedia.com/articles/investing/121814/look-vanguards-sp-500-etf.asp | A Look At Vanguard's S&P 500 ETF | A Look At Vanguard's S&P 500 ETF
If you’re looking for a safe way to bet on continued stock market gains, while still limiting downside risk, then you might want to take a look at the Vanguard S&P 500 exchange traded fund (ETF) (VOO) index fund. VOO is a popular and reputable fund based on a major market index.
VOO invests in stocks in the S&P 500 Index. The S&P 500 represents 500 of the largest U.S. companies. The goal of the ETF is to track the returns of the S&P 500 Index. The S&P 500 Index’s return is considered a gauge of overall U.S. stock returns.
Key Takeaways VOO is a popular and reputable fund based on a major market index.VOO is a highly liquid fund with high daily trading volumes.The fund offers a 1.64% annual dividend yield and carries an expense ratio of just 0.03%.Investors with a low risk tolerance, shorter time horizon, or preference for income investments may want to consider VOO.
There are several reasons why the Vanguard S&P 500 ETF is appealing for investors. One, it’s made up of large-cap stocks. This is important because large-cap stocks are bigger ships to turn if the market goes south. In total, the fund has over $100 billion in assets under management (AUM) ($172 billion AUM as of November 17, 2020). Additionally, many investors and traders will rush to these names if there is a market correction. VOO is a highly liquid fund with high daily trading volumes. One of the other reasons that VOO is very appealing for investors is that it offers a 1.64% annual dividend yield and carries an expense ratio of just 0.03%.
VOO has been around since Sept. 7, 2010. Unlike many exchange-traded funds (ETF), it has appreciated 268.21% since its inception. It’s also up 9.69% year to date. You might be wondering what has attributed to such an impressive and consistent performance. The answer to that question is incredibly simple.
Vanguard S&P 500 ETF Largest Holdings
More than one-third of VOO's assets are allocated to the tech sector.
Apple Inc.: 6.4%Microsoft Corp.: 5.6%Amazon.com Inc.: 4.8%Alphabet Inc. 3.5%Facebook Inc. 2.3%
Sector Breakdown
For a broader idea of what you’re getting when you invest (or trade) in Vanguard S&P 500 ETF, below is a breakdown of its biggest holdings by sector:
Information Technology: 27.5%Healthcare: 14.10%Consumer Discretionary: 11.06%Communication Services: 11.10%Financials: 9.80%
Dangerous Theories
Think back to the real estate boom of the mid-2000s. At that time, there was a common theory as to why real estate prices would appreciate forever. That theory: “They’re not building more land.” This meant that supply would be limited, which would increase demand. Only a few people saw the real estate crash coming, which related to loose lending practices.
Now think about today’s similar theory with U.S. stocks: “It’s the only place to put your money right now.” An added incentive for many investors is that if everyone sees U.S. equities as the only place to put their money, it will continue to drive up the prices of those equities. Do you see what’s happening here? What these investors are failing to realize is that this is becoming a crowded trade.
Valuable Dollars
Fortunately, if you’re confused as to what might happen next, then allocating some capital to the relatively safe Vanguard S&P 500 ETF isn’t a bad idea, especially considering the yield. If you’re more conservative, or if you’re concerned about the possibility of deflation and where the stock market might be headed once reality catches up to it, then you might want to consider moving the majority of your capital to cash. That might sound boring and a strategy that lacks opportunity, but that’s a common misconception. If deflation takes place and prices for goods and services decline while you’re sitting in cash, then the value of your dollars increase substantially. Therefore, it's a strategy to at least consider.
The Bottom Line
The year 2020 has been volatile, yet positive, for stocks. While VOO may not be the best option for long-term returns, investors with a low risk tolerance, shorter time horizon, or preference for income investments may want to consider VOO.
Dan Moskowitz doesn't own shares of VOO.
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b5d9d71f10d9dc2f10c2efcd1381099d | https://www.investopedia.com/articles/investing/121815/6-top-finance-books-gift-christmas.asp | 7 Top Finance Books to Gift This Christmas | 7 Top Finance Books to Gift This Christmas
Not quite sure what to get someone for the holidays? How about giving the greatest gift of all, financial knowledge! It is truly a gift that keeps giving -- with interest. Below is a list of some of the top finance books available that would make a great present or stocking stuffer.
Key Takeaways When the holidays roll around, you may want to get your financially-savvy friends or relatives something that they could appreciate and relate to. What better, then, to stuff a stocking with than a book about markets and finances. Here we go over seven recommended finance books that make great gifts.
1. "Bad Blood: Secrets and Lies in a Silicon Valley Startup," by John Carreyrou
While not a how-to book for achieving personal wealth, this is high up on Amazon's best-seller list going into 2019. It documents the too-good-to-be-true rise and subsequent collapse of Theranos, the multibillion-dollar Silicon Valley biotech startup. In 2014, the founder and CEO of Theranos, Elizabeth Holmes, was considered the female Steve Jobs described as "a brilliant Stanford dropout whose startup 'unicorn' promised to revolutionize the medical industry with a machine that would make blood testing significantly faster and easier." The company, under Holmes' leadership, was valued at $9 billion at its peak. But that was all to be quickly eradicated when the technology did not work, and the lies and deceit were revealed.
2. "Rich Dad, Poor Dad," by Robert Kiyosaki
This book has been around for a while now, but it is quite possibly one of the best overviews on wealth building. It deals less with specific moneymaking strategies and more with the mindset that is necessary to achieve great wealth. Author, Robert Kiyosaki builds on his early life experience as a child of a well-educated, high-income but perpetually broke father, in comparison to the father of his best friend, who was poorly educated yet a multimillionaire.
Kiyosaki chronicles the differences in financial philosophy between his natural father and his wealthy model father, a.k.a., his rich dad. His poor dad worked for a living but never acquired a significant amount of wealth. His rich dad began accumulating money early in life and put it to work through income-producing investments. Over time, his rich dad multiplied his wealth many times while the poor dad remained a working individual for the rest of his life.
Kiyosaki followed the path of his rich dad and was able to retire comfortably at 47. The insights he shares in the book are priceless and well worth learning for anyone who aspires to be independently wealthy.
3. "The New Buffettology," by Mary Buffett and David Clark
The full title of the book is "The New Buffettology: The Proven Techniques for Investing Successfully in Changing Markets That Have Made Warren Buffett the World’s Most Famous Investor," and that captures the essence of this book. Some investment gurus have had flashes of genius for a few years, but Buffett’s investing career success spans decades, and his wisdom is timeless.
This book will show you how he has been able to build what he has, which is to create long-term wealth in the stock market through value investing. And in case you are wondering, author Mary Buffett is the former daughter-in-law of Warren Buffett.
4. "The Intelligent Investor," by Benjamin Graham
Amazon refers to this book at the "stock market bible." This is a classic investment guide that has proven the timelessness of the wisdom it offers. Originally published in 1949, the text focuses on developing long-term investment strategies and avoiding significant errors. This is the so-called philosophy of "value investing" populated by the author, Benjamin Graham.
The book provides a historical perspective on investing and a comparison with current market conditions thanks to the commentary added in the new version. Get it for the historian in your life who likes collecting silver dollars.
5. "The Millionaire Next Door," by Thomas Stanley and William Danko
This remarkable book gives you a top-down view of how people become millionaires, and how they stay that way. While the movie version of a millionaire is a fast-talking, hard-living man who dresses up like a bat at night, this book shows the more common American millionaire experience.
Warning: this book is likely to change your entire view of who millionaires are and how they got there.
Most are ordinary folks, who live surprisingly unremarkable lives. They are typically employed or self-employed in relatively ordinary businesses. The key to their success is living beneath their means, investing conservatively, and avoiding debt. It is not nearly as exciting as the TV version of the millionaire lifestyle, but it is the way that it often happens and is one of the strategies to becoming a millionaire.
6. "Unshakeable," by Tony Robbins
Robins is one of the rock stars of investing, with sold-out coaching classes, a store full of interactive lessons and many books, Robbins has turned smart investing into a religious experience. With his latest book, Robbins lays out for us how to become genius-level investors step by step. Referred to as a "playbook," Robbins promises that this publication contains everything needed to start investing and become a power player in no time.
This is an outstanding book to give to the beginner investors in your life as Robbins exciting style will convince them that sometimes investing can have life or death stakes, and we all know that is when it is the most fun.
7. "AgeProof," by Jean Chatzky, Michael F. Roizen, with Ted Spiker
This is a practical guide to achieving health both physically and financially because, according to Amazon's review, "All the money in the world doesn't mean a thing if we can't get out of bed. And the healthiest body in the world won't stay that way if we're frazzled with five figures worth of debt."
Jean Chatzky, a "TODAY Show" financial expert, and Dr. Michael Roizen, the Cleveland Clinic's chief wellness officer explain how using the same principles that apply to maintaining a healthy body also apply to an investment portfolio. For example, just as we balance calories and exercise so should we not spend more than we earn. The authors provide ways to change behaviors that can lead to a longer, healthier and financially stable life.
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807f637a7df4c75b5b56bc8b001c8e92 | https://www.investopedia.com/articles/investing/122215/5-allstar-fidelity-portfolio-managers.asp | 4 All-Star Fidelity Portfolio Managers | 4 All-Star Fidelity Portfolio Managers
Fidelity Management & Research is one of the largest, most recognizable mutual fund and brokerage providers in the United States. Edward Johnson founded the company in Boston in 1946, and today it is led by his granddaughter, chairman and chief executive officer Abigail Johnson. Fidelity services 32 million investors and 75 million customer accounts. A staggering $7.3 trillion in assets have been invested with Fidelity. It is also home to some of the most successful portfolio managers in the mutual fund business, including Peter Lynch, who oversaw the Magellan Fund between 1977 and 1990, earning a 29% annualized return and swelling the fund's assets from $18 million to a stunning $14 billion.
Here we look at four other managers who have made a mark at Fidelity.
Key Takeaways Joel Tillinghast manages the Fidelity Low-Priced Stock Fund, which has handily beat its benchmark during his tenure.Will Danoff, manager of the famed Fidelity Contrafund, has also outperformed his benchmark.Sonu Kalra leads the Fidelity Blue Chip Growth Fund, which has returned 17.01% over the past decade, better than its benchmark.
1. Joel Tillinghast
Joel Tillinghast joined Fidelity as an equities analyst in 1986, having previously worked at Bank of America, Drexel Burnham Lambert and Value Line Investment Survey. After phoning Peter Lynch to talk about a stock, a conversation that lasted for 1½ hours and covered a range of companies, Lynch reportedly told his assistant: "We have to hire that guy."
In 1989, Tillinghast was made portfolio manager of the Fidelity Low-Priced Stock Fund. The fund has $23 billion in assets and has returned an average of 12.52% annually since inception, compared with 8.78% for its benchmark, the Russell 2000. Tillinghast has also managed the Fidelity Series Intrinsic Opportunities Fund since its inception in 2012, though with less impressive results. The fund has $11.6 billion in assets and has returned 10.14% annually since inception, under-performing its benchmark the Russell 3000, which returned 12.7% over the same period of time.
Tillinghast describes his approach to the Fidelity Low-Priced Stock Fund as "value intrinsic." He believes in keeping a fund's turnover ratio low. The aforementioned funds have turnover ratios of 6% and 9%. His five principles of investing are: make decisions rationally, invest in what you know, work with honest and trustworthy managers, avoid businesses prone to obsolescence and financial ruin, and value stocks properly.
The $96.4 billion Fidelity Contrafund has returned 12.58% annually since it was founded in 1967.
2. Will Danoff
Will Danoff joined Fidelity as an equities analyst in 1986 after finishing an MBA at the Wharton School of the University of Pennsylvania. He served as portfolio assistant for the Magellan Fund in 1989 and 1990, during Peter Lynch's final years at the helm. In 1990, Fidelity gave Danoff responsibility for the Contrafund, which has traded since 1967.
The Fidelity Contrafund is a large-cap growth fund with $96.4 billion in assets. Over the past decade, the fund has returned an average of 14.73% annually, compared with 13.15% for the S&P 500. Danoff seeks companies whose value is not fully recognized by the markets, be it a growth stock or value stock or both. Danoff was a notable early investor in Facebook (FB). He began building a stake in 2011 and it was the fund's largest contributor to performance in 2019.
In 2013, Danoff brought pupil John Roth on board as co-manager of the Fidelity Advisor New Insights Fund, which Danoff also manages. To some, the move indicated Danoff had handpicked his successor to eventually manage the Contrafund.
$7.3 trillion The amount of customer assets managed by Fidelity.
3. Sonu Kalra
Sonu Kalra earned an MBA from the Wharton School of the University of Pennsylvania and joined Fidelity in 1998. He initially analyzed equities, covering media, entertainment, technology hardware, software, networking and internet stocks. He has managed a number of funds for Fidelity, including the Fidelity Select Technology Portfolio, the Fidelity Advisor Technology Fund, and the Fidelity VIP Technology Portfolio.
In 2009, Kalra assumed responsibility for the Fidelity Blue Chip Growth Fund, a large-cap blue-chip growth fund that has $26.3 billion in assets. Kalra looks to invest at least 80% of the fund's assets in blue chip companies with above average growth potential. These companies are typically found in the S&P 500 or the Dow Jones Industrial Average, and have a market capitalization of at least $1 billion. Over the past decade, the Fidelity Blue Chip Growth Fund has returned an average of 17.01% annually, compared with 16.07% for its benchmark, the Russell 1000 Growth index.
4. John Roth
John Roth joined Fidelity in 1999. In addition to co-managing the Fidelity Advisor New Insights Fund with Will Danoff, he is responsible for the $2.2 billion Fidelity New Millennium Fund and the $4 billion Fidelity Mid-Cap Stock Fund.
At the New Millennium Fund, Roth seeks to get in early on growth or value stocks that are positioned to take advantage of long-term changes in the marketplace. He does this by focusing on companies that stand to benefit from advances in technology, product innovation, economic shifts, demographic shifts and changes in social attitudes. The fund has returned 10.34% annually over the past decade, under-performing the S&P 500, which has returned 13.15%. The Fidelity Mid-Cap Stock Fund hasn't performed any better. It returned 9.92% over the past decade, compared with 10.45% for its benchmark, the S&P MidCap 400.
Roth is known within Fidelity's offices for his 2004 call to buy Google's initial public offering at $100 a share. The shares are up 28-fold since then.
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dc42f5762b209afbe82fecf8b0de3259 | https://www.investopedia.com/articles/investing/122215/spy-spdr-sp-500-trust-etf.asp | SPY: SPDR S&P 500 Trust ETF | SPY: SPDR S&P 500 Trust ETF
What Is the SPY ETF?
The SPDR S&P 500 Trust ETF, also known as the SPY ETF, is one of the most popular funds that aims to track the Standard & Poor's 500 Index, which comprises 500 large- and mid-cap U.S. stocks. These stocks are selected by a committee based on market size, liquidity, and industry. The S&P 500 serves as one of the main benchmarks of the U.S. equity market and indicates the financial health and stability of the economy.
Key Takeaways The SPDR S&P 500 ETF Trust, also known as the SPY ETF, is one of the most popular funds that aims to track the Standard & Poor's 500 Index, which comprises 500 large- and mid-cap U.S. stocks. Its top 10 holdings are heavily weighted in technology companies such as Apple, Microsoft, and Amazon—approximately one-quarter of the SPY ETF is invested in the technology sector. With a four-star Morningstar rating, the SPDR S&P 500 ETF Trust has generated an average annual return of just under 10% since inception.
Understanding the SPY ETF
The SPY is a well-diversified basket of assets, which allocates its fund into multiple sectors, such as 24.19% information technology, 13.82% healthcare, 13.55% financial services, 11.18% communication services, 9.04% industrials, 7.17% consumer defensive, 10.99% consumer cyclical, 2.86% utilities, and 2.52% real estate.
The SPDR S&P 500 ETF Trust allocates almost all of its funds into common stocks, which are included in the S&P 500 Index. Its current top 10 holdings are in the following companies:
SPY ETF's Top 10 Holdings (as of December 2020) Holding (Company) % SPY Portfolio Weight Apple Incorporated ( AAPL) 6.56% Microsoft Corporation ( MSFT) 5.39% Amazon.com Inc ( AMZN) 4.38% Facebook Inc - Class A ( FB) 2.10% Alphabet Inc A ( GOOGL) 1.67% Alphabet Inc Class C ( GOOG) 1.62% Tesla Inc. ( TSLA) 1.58% Berkshire Hathaway Inc - Class B ( BRK.B) 1.39% Johnson & Johnson ( JNJ) 1.29% JPMorgan Chase & Co ( JPM) 1.21% Source: etf.com/SPY
SPY Performance
With a four-star Morningstar rating, SPY's returns have beat the average return of other large blend funds in the past decade. The SPDR S&P 500 ETF Trust (SPY) has generated an average three-year return of 13.25% through December 2020. Based on trailing 10-year data, the fund generated average annual returns of 13.55%. Since the inception of the SPDR S&P 500 ETF Trust, the fund achieved average annual returns of 9.96%.
Characteristics
The SPDR S&P 500 ETF Trust is structured as a unit investment trust, which is a security that is designed to purchase a fixed portfolio of assets. SPY is listed on the New York Stock Exchange's Arca Exchange, and investors can trade this ETF on multiple platforms. The trustee of the SPDR S&P 500 ETF Trust is State Street Bank and Trust Company, and its distributor is ALPS Distributors Incorporated.
The fund has a gross expense ratio of 0.095%. While this ratio is low, it is not the lowest among other ETFs that track the S&P 500 Index. SPY's expense ratio is more than triple the Vanguard S&P 500 ETF's expense ratio of 0.03%. These fees do not include any broker fees or commissions.
SPY ETF FAQs
Does the SPY ETF Pay a Dividend?
Yes. As of December 2020, its 12-month yield is approximately 1.55%.
What Is the Difference Between an ETF and a SPDR?
An exchange-traded fund (ETF) is the broad name for a kind of security that aggregates or tracks multiple stocks within an index, industry, or another grouping. Meanwhile, SPDRs are a type of specific exchange-traded fund issued by State Street Global Advisors that tracks a specific index such as the S&P 500.
What Does SPDR Stand For?
SPDR stands for Standard & Poor's Depositary Receipt. SPDR ETFs have a fixed number of shares that are exchanged and traded like stocks on the open market.
Is the SPDR S&P 500 ETF a Good Investment?
Yes. The SPY ETF diversifies exposure to the U.S. equity market and is suitable for investors willing to take on a moderate level of risk.
The Bottom Line
The SPDR S&P 500 ETF Trust offers investors an efficient way to diversify their exposure to the U.S. equity market without having to invest in multiple stocks. Therefore, SPY is suitable for any investors who want to include U.S. equities in their portfolio while taking only a moderate level of risk.
That being said, since the SPDR S&P 500 ETF Trust tracks 500 large- and mid-cap stocks in the United States, it carries a multitude of risks, such as market risk, country risk, currency risk, economic risk, and interest rate risk. Investors should be aware of both world and U.S. economic data, which could affect the performance of the fund.
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62ba888e2fedd340e1bf6e2ecd185cb4 | https://www.investopedia.com/articles/investing/122315/equity-vs-debt-investments-real-estate-crowdfunding.asp | Equity vs. Debt Investments for Real Estate Crowdfunding | Equity vs. Debt Investments for Real Estate Crowdfunding
Equity vs. Debt Real Estate Investing: An Overview
Real estate crowdfunding has taken off since the passage of the Jumpstart Our Business Startups Act in 2012, and the market is expected to expand even further. In October 2015, the SEC issued its final ruling on Title III provisions of the JOBS Act, allowing non-accredited investors to participate in crowdfunded real estate deals alongside accredited investors.
Investing in real estate through a crowdfunding platform has certain advantages over REITs or direct ownership of property. One of those advantages is the ability to choose between debt and equity investments. Before taking the plunge into real estate crowdfunding, it's helpful to have an understanding of how the two differ and what the risks are. (For more on the basics of real estate crowdfunding, see: Real Estate and Crowdfunding: A New Path for Investors.)
Key Takeaways Real estate crowdfunding is an increasingly popular alternative to REITs and real estate ETFs for adding property to one's portfolio.Equity real estate investing earns a return through rental income paid by tenants or capital gains from selling the property.Debt real estate investing involves issuing loans or investing in mortgages (or mortgage-backed securities).
Equity Investment Basics
Most real estate crowdfunding deals involve equity investments. In this scenario, the investor is a shareholder in a specific property, and their stake is proportionate to the amount they have invested. Returns are realized in the form of a share of the rental income the property generates, less any service fees paid to the crowdfunding platform. Investors may also be paid out a share of any appreciation value if the property is sold.
Pros:
No cap on returns: Equity investments offer a broader horizon in terms of earning potential. It's possible to see annualized returns ranging from 18% to 25%. Since there's no cap, however, the sky is really the limit from an investor's perspective.Tax benefits: One perk of owning an investment property is being able to deduct certain expenses associated with its ownership, such as depreciation and the cost of repairs. With equity crowdfunding, deals are normally structured through an LLC, which is treated as a flow-through entity for tax purposes. That means investors can reap the benefits of the depreciation deduction without having to own property directly.Lower fees: Equity investments have the potential to be cheaper where fees are concerned. Rather than paying upfront fees and monthly service fees, investors may pay a single annual fee to maintain their position in the property. The fee is calculated as a percentage of the total amount invested and often runs between 1% and 2%.
Cons:
More risk: Equity crowdfunding may put more money in investors' pockets, but it means taking a bigger gamble. Investors are second in line when it comes to receiving a payback on their investment, and if the property fails to live up to its performance expectations, that can easily translate to a loss.Longer hold period: Equity investors are looking at a much longer time frame compared to debt investors. Hold times can stretch out over five or even ten years, which is an important consideration if you're interested in maintaining a high degree of liquidity in your portfolio.
How Debt Investments Work
When investing in real estate debt instruments, the investor is acting as a lender to the property owner or the deal sponsor. The loan is secured by the property itself and investors receive a fixed rate of return that's determined by the interest rate on the loan and how much they have invested. In a debt deal, the investor is at the bottom of the capital stack which means they have priority when it comes to claiming a payout from the property. (For more, see the tutorial: How to Make Money in Real Estate.)
Pros:
Shorter hold time: Debt investments are most often associated with development projects. As a result, they typically have a shorter holding period compared to equity investments. Depending on the nature of the deal, the hold time may last between six and 24 months. That's a plus for investors who aren't comfortable tying up assets for the long-term.Lower risk: Because of the way deals are structured; investors take on less risk with debt investments. The loan is secured by the property, which acts as an insurance policy against repayment of the loan. In the event the property owner or sponsor defaults, investors have the ability to recoup the loss of their investment through a foreclosure action.Steady income: Debt investments are more predictable in terms of the amount and frequency of return payouts. While every deal is different, it's not unusual for investors to earn yields ranging from 8% to 12% annually. These returns are typically paid on a monthly or quarterly basis.Capped returns: Debt investments entail less risk, but one major downside is the fact that returns are limited by the interest rate on the loan. Investors have to be clear about whether they're willing to sacrifice the potential to earn higher yields in exchange for a safer bet.Higher fees: While most real estate crowdfunding platforms don't charge investors anything to create an account and research debt investments, there's usually some type of fee involved to participate in a deal. The crowdfunding platform usually takes a percentage off the top before any interest is paid out, which can eat into your returns. There may also be a separate loan origination fee that's passed on to investors. (For more on real estate crowdfunding platforms, read: Top 5 Real Estate Crowdfunding Companies.)
Cons:
Lower potential returns: with lower risk comes lower expected return.Exposure to prepayment risk: mortgagees sometimes pay off their loans early, either with selling a home or through a refinance. Doing so can interrupt the cash flows associated with your debt investment and decrease the duration of your loan portfolio.
The Bottom Line
Crowdfunding is an attractive option for investors who want to invest in private real estate deals in a cost-effective way. The minimum investment with many platforms ranges from $5,000 to $10,000, which is a relatively small price to pay to gain access to this asset class. Both equity and debt investments have their good and bad sides, which savvy investors must take the time to weigh carefully. Understanding what you stand to gain versus what you're risking can help you decide whether one or both types of investments is a good fit for your portfolio.
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1550de6a801412081d6e5c014c1184bf | https://www.investopedia.com/articles/investing/122315/vti-vanguard-total-stock-market-etf.asp | VTI: Vanguard Total Stock Market ETF | VTI: Vanguard Total Stock Market ETF
The Vanguard Total Stock Market ETF (VTI) tracks the performance of the CRSP U.S. Total Market Index. The fund has returned 7.12% since its inception in 2001 (as of May 2020). The fund is a market capitalization-weighted index that measures the entire investable U.S. equity market. It includes small-, mid-, and large-cap companies. The fund is managed in a passive manner and uses an index-sampling strategy.
Key Takeaways The Vanguard Total Stock Market ETF is a well-diversified exchange-traded fund (ETF) that holds over 3,500 stocks. The ETF’s top sector is technology, with a 21.2% weighting, while Microsoft, Apple, and Amazon are its top three holdings, making up 12.6% of the ETF. It has a low expense ratio (0.03%) and tracks the broader stock market very closely (beta of 1), making it a low-cost way to get exposure to the U.S. equity market.
The fund has over 3,500 stocks in its portfolio, a massive amount for an ETF. The median market cap of the fund's holdings is $89.6 billion. The weighted average price-to-earnings (P/E) ratio for the portfolio is 20.9, with a price-to-book (P/B) ratio of 2.8. The P/E ratio takes the current market value of companies' shares divided by the earnings per share (EPS). The P/B ratio takes the share price divided by the total liabilities minus intangible assets and liabilities.
The technology sector has the highest weighting in the fund at 24.7%, followed by the financial sector with a weighting of 16.9%. The health care sector is in third with a weighting of 14.8%.
Microsoft (MSFT) is the largest holding with a 4.8% weighting, followed by Apple (AAPL) with a 4.1% weighting. Amazon.com (AMZN) is the third-largest holding with a weighting of 3.7%, while Alphabet (GOOG) is fourth with a 2.8% weighting. The top 10 holdings had a combined weighting of 22.9% (As of April 2020).
Characteristics
The Vanguard Total Stock Market ETF is an open-ended fund issued by Vanguard and advised by the Vanguard Equity Investment Group. The fund is a passive index fund and therefore has a remarkably low expense ratio of 0.03%. The fund has a very low turnover rate of 4.1%, meaning that there are limited transaction costs for changing the fund's holdings. The expense ratio does not include any commissions or brokerage fees. The low expense ratio is beneficial for long-term investors in the fund.
Shares are trading around $163 as of June 2020. The fund has an average daily volume of 2.6 million shares, indicating that there is a great deal of liquidity in the ETF. VTI shares trade on the New York Stock Exchange. Investors can buy shares with no commission through Vanguard Brokerage Services.
Suitability and Recommendations
VTI is an extremely diversified fund. Its large amount of holdings reflect the entire universe of investable U.S. securities. The fund has exposure to small-cap stocks which can be more volatile than mid- or large-cap holdings. The fund has a beta of 1 when compared to the larger market. The fund has exposure to systematic risk, which is the risk inherent in the entire market. A larger downturn in the U.S. economy or the world economy is likely to impact the value of the fund.
The fund has performed well recently following the larger bull run for equities. VTI has a one-year return of 11.46% with a five-year return of 9.17%. This ETF appears to be a solid security to hold in a growth portfolio since it reflects the larger universe of U.S. equities in a low-cost single fund. Investors need to include other assets that are not as correlated to the stock market so they can balance their portfolios. Pursuant to the tenets of modern portfolio theory, holding non-correlated assets can help to minimize portfolio risk.
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ab5fbcc3cf7f6947d3a486a298df0acb | https://www.investopedia.com/articles/investing/122715/vxus-vanguard-international-stock-etf.asp | VXUS: Vanguard International Stock ETF | VXUS: Vanguard International Stock ETF
As a newer entrant to the international exchange-traded fund (ETF) space, the Vanguard Total International Stock ETF (NASDAQ: VXUS) was launched in 2011. Since its inception, VXUS has earned investors an annualized return of 3.42% by tracking the performance of global company stocks listed on the FTSE Global All Cap ex U.S. Index. The target benchmark index follows large-, mid-, and small-cap equities of companies operating outside the United States.
The international equities held within VXUS provide investors with a unique opportunity to diversify a portfolio in both developed and emerging markets around the world. The stock movement of companies based overseas does not always have a direct correlation to domestic stock prices, providing investors an opportunity to take advantage of market movements that may differ from shifts in U.S. equity markets.
The Vanguard Total International Stock ETF invests at least 95% of all fund assets in an attempt to mimic the performance of the FTSE Global All Cap ex U.S. Index. VXUS is most heavily weighted in Europe, with 37.6% invested in the region, followed by 28.8% in the Pacific, 26.4% in emerging markets, and 6.2% in North America. Top holdings follow suit with the fund's target index, including Alibaba Group, Tencent Holdings, Taiwan Semiconductor Manufacturing Co., Nestlé, and Samsung Electronics.
VXUS Characteristics
VXUS is managed by the Vanguard Group, known widely for its expertise in providing investors access to low-cost ETFs. VXUS implements a passive management investment strategy that is based on a full replication approach, which assists in keeping the total expense ratio passed on to investors of 0.08% well below the sector average for comparable ETFs.
As with other ETFs and individual stocks, the Vanguard Total International Stock ETF can be bought and sold in the secondary market, with or without the help of a broker. While the expense ratio for VXUS is impressively low, other fees associated with trading including broker commissions vary depending on which platform the investor uses.
Suitability and Risk
VXUS is not an appropriate holding for every investor, as it carries with it more risk than other broadly focused funds that include additional asset classes or a combination of domestic and international equities. Investors adding VXUS to a portfolio are exposed to the risks inherent to international investing, including emerging country risk, political risk, market risk, and currency risk. Each of these factors can have a drastic effect on international stock holdings like those included in the VXUS company roster, which may result in the fund experiencing greater volatility than other ETFs.
As a small percentage of a comprehensive, diversified portfolio, VXUS is most appropriate for investors seeking growth over the long time horizon. Because of the high level of volatility that can be experienced in the international market, investors with a high tolerance for risk may find this ETF suitable as an international allocation. However, VXUS holds $371.7 billion in net assets and 7,486 stocks within the fund across a broad range of large-, mid-, and small-cap companies as of Dec. 2020, which helps reduce the total risk investors face when adding this ETF to a portfolio.
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30340e2fcfb3f0290d972d6b0f4d2c03 | https://www.investopedia.com/articles/investing/123015/3-economic-challenges-japan-faces-2016.asp | 3 Economic Challenges Facing Japan in 2021 | 3 Economic Challenges Facing Japan in 2021
Japan has experienced a period of deflation and low economic growth since its economic bubble burst in the early 1990s. The second Abe administration, which took office in 2012, used the three pillars of "Abenomics" to try to revive the economy. The three pillars are aggressive monetary policy, a flexible fiscal policy, and a strategy for growth. Despite these efforts, Japan still faces economic challenges.
Key Takeaways: Japan has experienced a period of deflation and low economic growth since its economic bubble burst in the early 1990s. The second Abe administration, which took office in 2012, has attempted to use aggressive monetary policy and a flexible fiscal policy as a strategy to revive economic growth. Despite these efforts, Japan still faces economic challenges exacerbated by the COVID-19 epidemic. The epidemic has affected Japanese manufacturing and has caused exports and tourism to dwindle.
Three structural challenges that Japan currently faces have been exacerbated by the COVID-19 epidemic, which is causing the worst recession since the end of the Second World War. This article examines three of Japan's immediate economic concerns: the pandemic, sales tax, and dwindling exports.
The Coronavirus Pandemic
Japan was preparing to host the 2020 Olympics, which would have been an economic boost, but then the Cornonavirus hit, and the decision was made to postpone the Olympics to the summer of 2021. As the coronavirus spread, Japan’s economy was on the brink of a recession because of a slump in Chinese demand for Japanese exports and reduced consumer spending.
While Japan has lifted the state of emergency in 39 out of its 47 prefectures, as of May 2020, the economic outlook remained gloomy. Reuters' analysts expected the country's economy to shrink 5.6% in the current fiscal year ending in March 2021.
A $1 trillion stimulus package was instituted by the Japanese government and, in April, the Bank of Japan expanded its stimulus measures for the second straight month. Prime Minister Shinzo Abe has continued to fund spending initiatives to mitigate the economic damage caused by the pandemic.
Sales Tax Hike
In addition to the pandemic, consumers in Japan were also subjected to a sales tax hike from 8% to 10% in October 2020. The government increased the sales tax to fund social welfare programs including pre-school education and to pay down the nation's massive public debt load.
Of course, higher sales taxes cause people to spend less. So, to mitigate the negative effects on spending, the government introduced measures, including rebates for certain purchases made using electronic payments. Consumers were eligible for a 5% rebate on purchases made using electronic payments at some smaller retailers, negating the 2% tax rise. The government also hoped that the rebates would encourage electronic payments and lessen the nation's reliance on cash.
Dwindling Exports
Japan has been experiencing less global demand for its exports. For example, electronic equipment and car parts. Japan relies heavily on exporting and many of its biggest brands, such as Toyota and Honda, have seen global sales slump. Global consumer demand has been severely impacted by coronavirus lockdowns worldwide.
Japanese manufacturers are falling behind because they rely on foreign demand. According to Deloitte Insights, exports and manufacturing production are highly correlated in Japan. "In May, manufactured goods exports fell 23.8% from a year earlier, while manufacturing production was down 25.9% over the same period," said Deloitte. Unfortunately, the pickup in global demand that Japanese manufacturers so desperately need seems unlikely any time soon.
Tourism is a large part of the Japanese economy, but this industry has also been hit hard as the pandemic keeps foreign visitors away.
The outlook for Japanese international trade is influenced by a wave of protectionism that risks lowering global trade volumes. There are also heightened geopolitical tensions that further threaten Japanese exports and foreign direct investments.
The Outlook for Japan
As is the case for most countries' economies, the global pandemic means that the outlook is bleak for the Japanese economy in the short term. There is also increasing tension between Japan and China over disputed islands in the East China Sea where the previous conflict over the islands resulted in anti-Japanese protests and boycotts.
However, despite tensions with China and the fact of being the first of the world's top three economies to officially fall into recession, the country actually appears to be doing better than other major economies.
Overall, Japan’s policymakers have provided ample fiscal and monetary stimulus to cushion the fall in demand and support the economy during the worst times of the pandemic. However, consumer spending will remain low as the risks from the pandemic linger. Manufacturers will continue to struggle with weak global demand, a strong currency, and geopolitical risks. Japan’s economy should improve from here, but growth is likely to be slow.
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dc54e43d8162086f7d2935d47160bb61 | https://www.investopedia.com/articles/managing-wealth/042216/medical-vs-financial-power-attorney-reasons-separate-them.asp | Financial vs. Medical Power of Attorney: What’s the Difference? | Financial vs. Medical Power of Attorney: What’s the Difference?
Financial vs. Medical Power of Attorney: An Overview
A medical power of attorney authorizes healthcare decisions to be made on your behalf by a designated individual, while a financial power of attorney allows for an authorized individual to oversee your finances if needed.
In general, a power of attorney is a document authorizing an individual to make decisions on behalf of another person. The person who gives the authority is called the principal, and the person who has the authority to act for the principal is called the agent, or the attorney-in-fact. You can designate both a financial power of attorney and a medical power of attorney in the event that you're unable to make those choices yourself.
A medical power of attorney and a financial power of attorney are typically created in separate legal documents. Both are known in legal terms as advance directives. Generally, the law addresses each type of advance directive separately, which limits their authority.
Choosing people you trust to hold your medical and financial powers of attorney gives you more control over your interests and ensures your wishes are followed. Knowing the differences between these two designations will help you decide whether you should appoint the same person to hold both of these directives for you. This article will explore the advance directives known as medical power of attorney and financial power of attorney: what they have in common and what important distinctions can be made between these two legal actions.
Key Takeaways A power of attorney allows one person to give legal authority to another person to act on their behalf. A financial power of attorney authorizes an individual to make financial decisions, while a medical power of attorney allows for someone to make medical decisions. In some cases, a financial power of attorney can be used for isolated, one-off situations where it is not convenient for you to be present. Financial and medical powers of attorney should be separate documents and can be designated to the same person or to two different individuals. Generally, both a financial power of attorney and a medical power of attorney must be signed before a notary public.
Financial Power of Attorney
A financial power of attorney permits someone you have designated (your agent, or attorney-in-fact) to oversee your finances. Typically, it is used so the person can step in and pay your bills or handle other financial or real estate matters. It can be a designation for a financial professional acting on your behalf, or you may use it to designate a trusted friend or family member to handle matters if or when you cannot physically or mentally do so yourself. In some cases it may also be used for isolated, one-off situations where it is not convenient for you to be present, such as a real estate closing in another city.
How a Financial Power of Attorney Works
A power of attorney can take effect as soon as you sign it, or upon the occurrence of a future event. If the power of attorney is effective immediately, it can be used even if you are not incapacitated. If its powers are "springing," they don't go into effect until a future event has occurred. The most common future event is the incapacity of the principal. Incapacity only occurs when the principal is certified by one or more physicians to be either mentally or physically unable to make decisions.
Incapacity can be due to such things as mental illness, Alzheimer’s disease, being in a coma, or being otherwise unable to communicate. If it never becomes necessary, your agent may never use a power of attorney. In many cases, a financial power of attorney may be designated to a professional as part of routine financial management.
Many states have an official financial power of attorney form. Many banks and brokerage firms also have their own power of attorney forms. If your financial concerns include buying or selling real property, or a title insurance company, the lender or closing agent may require the use of their specific form. So, it is possible you may end up with more than one financial power of attorney form.
Generally, a financial power of attorney must be signed before a notary public. Especially if the sale or purchase of real estate is involved, it may also need to be signed before witnesses. Depending on the state you live in, your agent may also be required to sign to accept the position of agent.
Once a power of attorney has been executed, the original document is given to your agent. The agent can then present it to any third party as evidence of their authority to act for you. For example, they could present it at the bank in order to withdraw money from your bank account or use it to sign papers for you at a real estate closing.
You are legally obligated to a third party who relies on the power of attorney in dealing with your agent.
How Do You Choose a Financial Power of Attorney?
In choosing a financial power of attorney, you will want to weigh whether the person is trustworthy and has enough financial acumen to handle the responsibilities. Thanks to online banking and electronic billing, the person doesn’t necessarily need to be nearby to ensure that your bills are paid promptly. There is no accepted way to amend a power of attorney. If you want to amend a financial power of attorney, the best option is to revoke the existing document and have a new one prepared.
Steps for Establishing a Financial Power of Attorney
Here is a basic outline for the process of establishing a financial power of attorney:
Evaluate if One Is Necessary: In some cases, a financial power of attorney is not necessary. For example, if an individual's income and assets are all in their spouse's name, a financial power of attorney may not be necessary. Likewise, if an individual has a living trust that appoints a person to act as a trustee, then a power of attorney may not be necessary. Identify an Agent: One adult will be named the agent in a power of attorney. An attorney, a faith leader, or a family counselor can all help facilitate this decision-making process. A key characteristic of someone who is able to carry out the responsibilities of a power of attorney is being willing to consider other people's viewpoints. Take a Look at the Forms: Certain states have forms that you are required to use, and your financial institution may have a power of attorney form that they prefer you use. Your bank can also serve as a resource for you as you put together a power of attorney. In certain instances, financial institutions may require that their format is used; it’s a good idea to check with any banks or brokers used by your family before crafting the document. Notarize the Power of Attorney: Once a power of attorney is written, it generally needs to be notarized. A verbal agreement is not recognized as a legal power of attorney, nor is a casually written letter or note. Once a power of attorney is written and notarized, keep a copy safely stored. Make sure the agent has a copy as well. Review the Document Periodically: Because it may be hard to predict when you will need a power of attorney, the document may be created decades before it will be used. For this reason, it is important to review the document periodically.
Example of a Financial Power of Attorney
Roberta is a college professor who is planning a year-long sabbatical in Spain. Since she will remain in the country for a year, she will not be able to execute her financial dealings in Chicago. She appoints her mother to act as her financial power of attorney for her property and investments. Her mother will write checks and sign important documentation related to her investments and property.
In order to create a power of attorney, the individual must be mentally competent. If your parent or other older adult relative becomes incapacitated, it will be too late to authorize power of attorney, and courts will likely need to get involved to appoint an individual to help manage the person's affairs.
Medical Power of Attorney
A medical power of attorney or healthcare proxy designates an individual to make medical decisions for you when you no longer have the capacity to do so. The person you choose to make health care decisions on your behalf when you cannot is referred to as your agent.
Any competent adult can be your agent, but it's important to keep in mind that some states enforce these exclusions: your physician or health care provider; an employee of your physician or health care provider (unless the employee is your relative); your residential health care provider (a nursing home, for example); an employee of your residential health care provider (unless the employee is your relative). If an individual has any of the aforementioned designations, they cannot act as your agent for the purposes of a medical power of attorney in some states.
This may be needed temporarily (if, for example, you're under anesthesia and surgery complications arise) or for navigating a longer-term health crisis. The medical power of attorney will only go into effect when you do not have the capacity to make decisions for yourself regarding medical treatment.
How a Medical POA Works
A medical power of attorney will focus only on health-related decisions and will be written according to the exact specifications of the individual making the directive. As such, a medical power of attorney can include provisions for a wide range of medical actions including personal care management, hiring a personal care assistant, deciding on a medical treatment, and making decisions on medical treatments overall.
The Commission on Law and Aging provides the public with a very basic medical power of attorney form that can be used in most states. Some websites also provide basic templates for medical power of attorney.
In most states, a medical power of attorney must be signed and notarized by a notary public before it is a binding legal document. You may also be required to have witnesses present when your medical power of attorney is signed. Neither a healthcare professional nor a lawyer is necessary to create a medical power of attorney.
You can revoke your medical power of attorney at any time. You can also complete a new medical power of attorney and designate a new agent.
How Do You Choose a Medical Power of Attorney?
Many people have strong feelings about the kind and degree of medical treatment they want. This is why it's important to think carefully about whom to appoint; the person you choose should be someone you can expect to make decisions similar to those you would make for yourself. This person should be over 18-years-old and be someone you trust with whom you can discuss your wishes frankly. You should ask the person you select if they feel able to take on the responsibility.
Keep in mind: this person may be making very difficult choices, including ones that may end life by ceasing medical care. Not every person is prepared for this responsibility. You will also want to consider whether the person is close by and can meet with your doctors should the need arise.
Usually, you appoint only one person as your medical power of attorney, though you can name alternates for situations when that person might not be available. You will also want to consider whether the person is close by and can meet with your doctors should the need arise.
Steps for Establishing a Medical Power of Attorney
Evaluate if One Is Necessary: In general, if you become incapacitated, doctors will do every type of medical intervention to keep you alive. If you want to have more control over the type (and the extent of) the treatment you receive, then you will need to create a medical power of attorney that designates someone with the legal authority to decide the issue for you. Consider Who You Should Choose as an Agent: You should choose someone whose judgment you trust, and someone you are confident can capably fill the role. A good agent will, most importantly, be assertive. There may be times that they need to carry out your will against the wishes of other family members. This person needs to be able to communicate effectively even when faced with resistance. Find Medical Power of Attorney Forms: There are many medical power of attorney form templates online. Most states should have forms that you can use on their Department of Human Services website. The American Bar Association also provides a form that is accepted in most states. Have the Form Notarized: A medical power of attorney needs to be notarized, which means that you will need to take the form to a notary and sign it in front of the notary. Notaries can be found in banks and at hospitals. Some states may also require you to have witnesses to the signing that attest that you appeared to be in sound mind and signed the document of your own free will. Distribute Copies of the Form: Many people may need access to your medical power of attorney form. These individuals may include your primary care physician and any specialist who treats you regularly; those designated as your medical power of attorneys; close family members or friends; your lawyer; the administrator of your assisted living facility; any hospital or medical clinic where you receive treatment.
Example of a Medical Power of Attorney
Sharon's mother's kidneys are failing. She wants to organize her medical and financial documents for her. A medical power of attorney is recommended for everyone, but especially those with a serious, progressive illness. However, it is important that Sharon's mother is well enough to understand what she is doing when she creates these documents. A medical power of attorney will communicate the treatment wishes of Sharon's mother in the face of a crisis. Sharon lives in Ohio, so she uses the form that is written into Ohio's state statutes. Because Sharon wants to address all the nuances of her mom's health and directives, she gets advice from an attorney after her mother's medical power of attorney is drafted.
What Are Some Other Terms for Medical Power of Attorney?
A medical power of attorney is also called a healthcare power of attorney (HCPA). This document is different than other legal documents related to end-of-life- healthcare decisions, such as an advance directive, living will, or a do-not-resuscitate (DNR) order.
An advance directive is a living will documenting one’s wishes for end-of-life medical treatment. (An advance directive is sometimes referred to simply as a living will.)
A do-not-resuscitate (DNR) order, also known as a do-not-attempt-resuscitation (DNAR) order, is written by a licensed physician in consultation with a patient or surrogate decision-maker. A DNR indicates whether or not the patient will receive cardiopulmonary resuscitation (CPR) in the setting of cardiac and/or respiratory arrest.
A medical power of attorney is different from a living will, which is a document that spells out what medical care you do and don't want in the event that you're unable to communicate those preferences for yourself.
Special Considerations
Should You Choose One Person or Two Different People?
It is possible for the medical power of attorney and financial power of attorney to be the same person. Many people do choose this route, appointing one person such as a spouse or adult child to both roles. However, medical and financial powers of attorney can be created and designated for a variety of different reasons. It may sometimes be preferable and more prudent to ask different people to take on these roles.
Selecting a different person for your financial power of attorney and your medical power of attorney may help you choose the best person for each job. If you do select different people for each role, you may want to consider how they might work together in your best interest, should the need arise. Discussing your wishes with them together and also one-on-one can help ensure your best interests.
Power of Attorney vs. Executor of a Will
Both a power of attorney and an executor of a will are persons that are legally appointed to help another person manage their finances and affairs when they are incapacitated. The difference is that a power of attorney manages someone's affairs while they are still alive, whereas an executor of a will manages someone's affairs after they've died.
Medical Power of Attorney FAQs
What Does a Medical Power of Attorney Allow You To Do?
A medical power of attorney is a legal document you use to name an agent and give them the authority to make medical decisions for you. An agent can decide the following for you:
Which doctors or facilities to work with What tests to run When or if you should have surgery What kinds of drug treatments are best for you (if any) Comfort and quality of life vs. doing everything possible to extend life How aggressively to treat brain damage or disease Whether to disconnect life support if you’re in a coma
Is There a Difference Between Power of Attorney and Medical Power of Attorney?
A power of attorney is a general legal term for a document that gives someone you trust the legal authority to act on your behalf. A medical power of attorney specifically gives the agent the authority to make decisions concerning the health care of the principal if the principal becomes unable to make those decisions for themselves.
How Do You Write a Medical Power of Attorney?
The basic requirements for what must be included in a medical power of attorney are similar throughout the country. However, some states require more evidence, such as the signatures of witnesses present during the execution of the document. It's important that you research your state's requirements. Many states have a standardized form that residents are encouraged to use. It will include all of the necessary language that makes the power of attorney designation effective.
Can a Doctor Override a Medical Power of Attorney?
No, a doctor cannot override a medical power of attorney. Your doctor is obligated to follow the direction of the person you designate as having medical power of attorney over you.
What Happens If You Don’t Have a Medical Power of Attorney?
The rules in every state are different. However, what usually happens is that the court steps in and appoints someone to take care of your medical decisions for you. This person will be called a conservator. In most cases, the court will appoint a close family member for this role.
The Bottom Line
A power of attorney allows you to make arrangements for your medical and financial decisions in the event you are incapacitated or otherwise incapable of doing so yourself. Creating a medical power of attorney and financial power of attorney is generally regarded as a smart part of every estate plan. As part of your estate planning, you may also consider creating a revocable living trust. A revocable living trust is a trust document that can be changed over time. This type of trust appoints a trustee to manage and administer the property of the grantor, and it can minimize estate taxes.
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27fb85e914c9f82af995de11267e21c7 | https://www.investopedia.com/articles/managing-wealth/042516/how-interestonly-mortgages-work.asp | How Do Interest-Only Mortgages Work? | How Do Interest-Only Mortgages Work?
If you want a monthly payment on your mortgage that’s lower than what you can get on a fixed-rate loan, you might be enticed by an interest-only mortgage. By not making principal payments for several years at the beginning of your loan term, you’ll have better monthly cash flow.
But what happens when the interest-only period is up? Who offers these loans? And when does it make sense to get one? Here is a short guide to this type of mortgage.
How Interest-Only Mortgages Are Structured
At its most basic, an interest-only mortgage is one where you only make interest payments for the first several years – typically five or ten – and once that period ends, you begin to pay both principal and interest. If you want to make principal payments during the interest-only period, you can, but that’s not a requirement of the loan.
You’ll usually see interest-only loans structured as 3/1, 5/1, 7/1 or 10/1 adjustable-rate mortgages (ARMs). Lenders say the 7/1 and 10/1 choices are most popular with borrowers. Generally, the interest-only period is equal to the fixed-rate period for adjustable-rate loans. That means if you have a 10/1 ARM, for instance, you would pay interest only for the first ten years.
On an interest-only ARM, after the introductory period ends, the interest rate will adjust once a year (that’s where the “1” comes from) based on a benchmark interest rate such as LIBOR plus a margin determined by the lender. The benchmark rate changes as the market changes, but the margin is predetermined at the time you take out the loan.
Rate caps limit Interest-rate changes. This is true of all ARMs, not just interest-only ARMs. The initial interest rate cap on 3/1 ARMs and 5/1 ARMS is usually two, says Casey Fleming, a loan officer with C2 Financial Corp in San Diego and author of "The Loan Guide: How to Get the Best Possible Mortgage." That means if your starting interest rate is three percent, then as the interest-only period ends in year four or year six, your new interest rate won’t be higher than five percent. On 7/1 ARMs and 10/1 ARMs, the initial rate cap is usually five.
After that, rate increases are usually limited to two percent per year, regardless of what the ARM’s introductory period was. Lifetime caps are almost always five percent above the loan’s starting interest rate, Fleming says. So if your starting rate is three percent, it might increase to five percent in year eight, seven percent in year nine and max out at eight percent in year ten.
Once the interest-only period ends, you’ll have to start repaying principal over the rest of the loan term — on a fully-amortized basis, in lender speak. Today’s interest-only loans do not have balloon payments; they typically aren’t even allowed under law, Fleming says. So if the full term of a 7/1 ARM is 30 years and the interest-only period is seven years, in year eight, your monthly payment will be recalculated based on two things: first, the new interest rate, and second, the repayment of principal over the remaining 23 years.
Fixed-Rate Interest-Only Loans
Fixed-rate interest-only mortgages are not as common. With a 30-year fixed-rate interest-only loan, you might pay interest only for ten years, then pay interest plus principal for the remaining 20 years. Assuming you put nothing toward the principal during those first ten years, your monthly payment would jump substantially in year 11, not only because you’d begin repaying principal, but because you’d be repaying principal over just 20 years instead of 30 years. Since you aren’t paying down principal during the interest-only period, when the rate resets, your new interest payment is based on the entire loan amount. A $100,000 loan with a 3.5 percent interest rate would cost just $291.67 per month during the first ten years, but $579.96 per month during the remaining 20 years (almost double).
Over 30 years, the $100,000 loan would cost you $174,190.80 — calculated as ($291.67 x 120 payments) + ($579.96 x 240 payments). If you’d taken out a 30-year fixed rate loan at the same 3.5 percent interest rate (as mentioned above), your total cost over 30 years would be $161,656.09. That’s $12,534.71 more in interest on the interest-only loan, and that additional interest cost is why you don’t want to keep an interest-only loan for its full term. Your actual interest expense will be less, however, if you take the mortgage interest tax deduction.
Are These Types of Loans Widely Available?
Since so many borrowers got in trouble with interest-only loans during the bubble years, banks are hesitant to offer the product today, says Yael Ishakis, vice president of FM Home Loans in Brooklyn, N.Y., and author of "The Complete Guide to Purchasing a Home."
Fleming says most are jumbo, variable-rate loans with a fixed period of five, seven or ten years. A jumbo loan is a type of non-conforming loan. Unlike conforming loans, non-comforming loans aren’t usually eligible to be sold to government-sponsored enterprises, Fannie Mae and Freddie Mac — the largest purchasers of conforming mortgages and a reason why conforming loans are so widely available.
When Fannie and Freddie buy loans from mortgage lenders, they make more money available for lenders to issue additional loans. Non-conforming loans like interest-only loans have a limited secondary mortgage market, so it’s harder to find an investor who wants to buy them. More lenders hang on to these loans and service them in-house, which means they have less money to make additional loans. Interest-only loans are therefore not as widely available. Even if an interest-only loan is not a jumbo loan, it is still considered non-conforming.
Because interest-only loans aren’t as widely available as, say, 30-year fixed-rate loans, “the best way to find a good interest-only lender is through a reputable broker with a good network, because it will take some serious shopping to find and compare offers,” Fleming says.
Comparing the Costs
“The rate increase for the interest-only feature varies by lender and by day, but figure that you will pay at least a 0.25 percent premium in the interest rate,” Fleming says.
Similarly, Whitney Fite, president of Angel Oak Home Loans in Atlanta, says the rate on an interest-only mortgage is roughly 0.125 to 0.375 percent higher than the rate for an amortizing fixed-rate loan or ARM, depending on the particulars.
Here’s how your monthly payments would look with a $100,000 interest-only loan compared with a fixed-rate loan or a fully amortizing ARM, each at a typical rate for that type of loan:
7-year, interest-only ARM, 3.125 percent: $260.42 monthly payment30-year fixed-rate conventional loan (not interest-only), 3.625 percent: $456.05 monthly payment 7-year, fully amortizing ARM (30-year amortization), 2.875 percent: $414.89 monthly payment
At these rates, in the short term, an interest-only ARM will cost you $195.63 less per month per $100,000 borrowed for the first seven years compared with a 30-year fixed-rate loan, and $154.47 less per month compared with a fully amortizing 7/1 ARM.
It’s impossible to calculate the actual lifetime cost of an adjustable-rate interest-only loan when you take it out because you can’t know in advance what the interest rate will reset to each year. There isn’t a way to ballpark the cost, either, Fleming says, though you can determine the lifetime interest rate cap and the floor from your contract. This would allow you to calculate the minimum and maximum lifetime cost and know that your actual cost would fall somewhere in between. “It would be a huge range though,” Fleming says.
The Bottom Line
Interest-only mortgages can be challenging to understand, and your payments will increase substantially once the interest-only period ends. If your interest-only loan is an ARM, your payments will increase even more if interest rates increase, which is a safe bet in today’s low-rate environment. These loans are best for sophisticated borrowers who fully understand how they work and what risks they’re taking.
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7e9733705f8ff1fd8009d2ccadb9debf | https://www.investopedia.com/articles/managing-wealth/042716/10-most-expensive-zip-codes-new-york-state.asp | The 10 Most Expensive ZIP Codes in New York State | The 10 Most Expensive ZIP Codes in New York State
Atherton, Calif., is the priciest ZIP code in the country, according to 2015 America’s Most Expensive ZIP Codes rankings from business magazine Forbes and housing-market-data provider Altos Research. To find the costliest areas, Altos analyzed listing prices for single-family homes and condos in 29,500 ZIP codes across the U.S. (covering 95% of the population) to calculate a median, rolling average for a 90-day period that ended Oct. 9, 2015. The 500 most expensive ZIP codes made the list.
Sagaponack Scores Second (and First)
Sagaponack, N.Y. — a village in the town of Southampton (yes, the Hamptons) — scored the second spot in the U.S. (and first in New York State). But it’s by no means the only Empire State ZIP code where the median home price is in the several million: New York City is home to three of the top five – and eight of the top 30 – most expensive ZIP codes in the U.S. Sagaponack just happens to be the priciest.
The median home price in Sagaponack is about $7.5 million. At that price buyers can expect to find homes in the 5,000 square-feet, five-bedroom/bath range, often with a fireplace, pool and a nice yard on about an acre of land. There is some inventory below $7 million, but most homes are well above $10 million. The most expensive home on the market today — listed at $54 million — is 10,000 square feet, with nine bedrooms, 10½ baths, floor-to-ceiling sliding glass walls, rooftop deck, tennis court and pool, all set on three acres with 300 feet of ocean frontage.
With a median home price of $7.5 million — and plenty of homes priced well above that — expect plenty of wealthy neighbors, including investor Ira Rennert (net worth: $3.6 billion); Goldman Sachs CEO Lloyd Blankfein (net worth: $1.1 billion); Coach Chairman and CEO Lew Frankfort (net worth: $170 million); current Democratic presidential front-runner Hillary Clinton and her husband, Bill, the former president (combined net worth: $111 million); and “The Tonight Show” host Jimmy Fallon (net worth: $25 million).
New York State’s Top 10
Here are New York State's top 10, in descending order, along with the towns — or New York City neighborhoods – in which you will find them, the median home price and the average number of days on the market (according to the Forbes list). The median household income is from Esri (the Environmental Systems Research Institute), a company that provides maps, data, and apps through geographic information systems).
11962 – Sagaponack
Median Price: $7,416,538
Average Days on Market: 111
Median Household Income: $108K
10012 – New York City [Greenwich Village & SoHo]
Median Price: $7,302,117
Average Days on Market: 130
Median Household Income: $89K
10013 – New York City [Lower West Village, Tribeca]
Median Price: $6,076,018
Average Days on Market: 219
Median Household Income: $84K
10065 – New York City [Upper East Side/60-69th St.]
Median Price: $4,406,262
Average Days on Market: 106
Median Household Income: $117K
11976 – Water Mill
Median Price: $4,221,615
Average Days on Market: 148
Median Household Income: $110K
11975 – Wainscott
Median Price: $4,148,077
Average Days on Market: 141
Median Household Income: $120K
11932 – Bridgehampton
Median Price: $3,992,269
Average Days on Market: 102
Median Household Income: $104K
10011 – New York City [Chelsea]
Median Price: $3,866,629
Average Days on Market: 91
Median Household Income: $98K
10014 – New York City [West Village]
Median Price: $3,727,269
Average Days on Market: 85
Median Household Income: $104K
10006 – New York City [Financial District/West]
Median Price: $3,644,231
Average Days on Market: 99
Median Household Income: $114K
The Bottom Line
New York state has a number of other affluent places to live, but these are the very priciest. Because New York City real estate is expensive, many people who work there are commuters, living a short distance (mileage-wise) from the city. You might be able to get a whole lot more house for your money by buying on the other side of the Hudson River in New Jersey or north of the city in Westchester or Connecticut.
Still, if you want to stay in the city and avoid the commute, you can find a wide range of prices — and different types of houses and apartments — depending on which ZIP code you’re after. (For more, see The Most Expensive Neighborhoods in Manhattan.) The Hamptons are a bit distant for a daily city commute but work for weekenders and those with less constricting work schedules.
Manhattan residents may be surprised to note that the posh ZIP code 10021 didn't even make the top 10 — nor did the fanciest neighborhood in gentrified Brooklyn. And when the dazzling skyscrapers on Billionaires Row (West 57th Street) are completed and filled, a new ZIP code will very likely push one of the places listed above off the list. New York City never stops changing.
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a3341c6d6f18ec1d66db5a60f3178c45 | https://www.investopedia.com/articles/managing-wealth/052516/8-irs-red-flags-private-family-foundations.asp | IRS Red Flags for Family Foundations | IRS Red Flags for Family Foundations
A family charitable foundation can provide unique benefits to both the charities it supports and family members who direct the foundation's activities. But private family foundations are subject to complex tax regulations, which if violated can result in steep tax penalties and even revocation of the foundation's tax-exempt status.
So, if you are interested in forming a family foundation, or already part of one, it is good to be aware of these Internal Revenue Service (IRS) rules. Below are some basics about family foundations along with some practices that may incur problems with the IRS.
Key Takeaways Establishing a family foundation can be a great way to up your philanthropy and reduce your taxes.Family foundations, however, can be abused for the latter purpose of sheltering taxes and so can come under increased scrutiny by the IRS.Understanding the rules and the potential red flags for running a family foundation can reduce your chances of an audit and keep your charitable giving above board.
Basics
The most common form of private family foundation is a nonprofit organization that is tax exempt under section 501(c)(3) of the IRS tax code. The foundation is established by an individual, family, or private business to support one or more charitable activities. The foundation is funded by its creator(s), who receive tax deductions for their contributions. These funds form the foundation’s endowment, which is invested in ways that will generate income to finance the foundation’s charities into the future. The foundation must distribute at least 5% of its assets toward its charitable endeavor.
Potential Benefits
The benefits of family foundations are greater than those of simple charitable cash gifts:
Because family members retain control of the foundation, there is sustained continuity of charitable giving.The foundation can receive tax-deductible contributions from third parties that can fund the program beyond the family’s own contributions.Managing the foundation can unite family members while instilling in them a spirit of community service.Having a family member act as administrator keeps management responsibilities within the family, and administrative costs low.The foundation creates a visible and lasting public legacy for the family.Establishing a family foundation is less expensive and requires a smaller endowment than many people would think.
Potential Stumbling Blocks
One of the greatest difficulties in managing a family foundation might be trying to unravel the complicated rules that the IRS imposes on them. These rules are meant to avert potential conflicts of interest that could arise when family members work together closely to manage their foundation’s asset-s. Not being aware of them could get you into deep trouble with the IRS, which has an entire section on its website devoted to private foundations. If you are interested in establishing a private family foundation, it’s also important to seek professional guidance—for example, from a tax lawyer who specializes in foundations.
IRS Red Flags for Family Foundations
The list below is not exhaustive but comprises some of the more common sticking points of section 501(c)(3) with regard to family foundations. View these topics as red flags if you’re involved in a foundation or thinking about creating one.
Understand the terms “self-dealing" and "disqualified persons":
Central to all of the regulations below is a concept that prohibits self-dealing between a foundation and its disqualified persons. Here is what you need to know about these terms: Although self-dealing can take many forms, it basically refers to an individual who benefits from a transaction. And although the IRS’s definition of a disqualified person is in itself complicated, it generally means anyone who is a substantial contributor to the foundation, plus the foundation’s managers, officers, and family members, plus any affiliated corporations and their family members.
Hiring family members/disqualified persons. A family foundation is permitted to employ family members and other disqualified persons. However, their roles must be deemed as necessary to the foundation’s purpose.Offering compensation. Pay for disqualified persons should be in line with comparable data for similar positions. If the IRS believes that you’re paying a disqualified person more than the going rate for a job, then that person would be penalized 25% of the excess monetary benefit that they received.Selling or leasing. The IRS does not permit sales or leases between foundations and their disqualified persons. For example, if a family member were to sell the foundation a piece of office equipment that is worth $10,000, but receives only $1,000 for it, then the IRS still would consider it an act of self-dealing. Likewise, if a disqualified person were to rent the foundation a car for only $100 per month when the actual price for renting the same car is $1,000 per month.Granting loans. Extending loans or credit either way between the foundation and a disqualified person are considered acts of self-dealing by the IRS, even if the loan or credit agreement is fully secured and made via fair-market terms.Providing facilities, goods, and services. The IRS does not allow these kinds of transactions between a foundation and its disqualified persons in exchange for pay. However, if these transactions are freely given, then they are allowed, as long as the disqualified person does not benefit.Traveling. Bringing disqualified persons on a trip for foundation business and having the foundation pay for their travel costs is generally an act of self-dealing. However, this doesn't include, for example, providing reasonable and necessary lodging and meals to a foundation manager.
In sum, a family foundation can be an excellent way to achieve long-term charitable objectives while enjoying the zeal of giving and creating a lasting legacy for your family. But if not done correctly, a family foundation can be an all-consuming, frustrating and costly enterprise. Perhaps it would be helpful to remember that once you have donated to a family foundation, it’s no longer your money—there are new rules of the game.
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b648e176d17ab325dfd97e75e18fd4a9 | https://www.investopedia.com/articles/managing-wealth/070716/how-serial-entrepreneurs-are-reshaping-wealth-creation.asp | How Serial Entrepreneurs Are Reshaping Wealth Creation | How Serial Entrepreneurs Are Reshaping Wealth Creation
Between innovations in tech and jobs initiatives, it’s become easier than ever for entrepreneurs to develop new companies.
Serial entrepreneurs are capitalizing on the opportunity afforded by the current economic environment to start companies, grow them to profitability and then sell them off and start the cycle over again. In the process they’re also putting a new spin on the way they create wealth and offering some valuable lessons for high-net-worth individuals who want to mimic their success. (See also: Serial Entrepreneurs Venture and Venture Again.)
What They’re Doing Differently
Common sense dictates that if you want to build a solid wealth base, you need to put money into the market. Investing in stocks, mutual funds, exchange-traded funds (ETFs) and real estate investment trusts (REITs) are all proven ways to generate returns beyond what a savings account or certificate of deposit (CD) could offer. Even bonds, which are among the safest investments, earn a spot in the portfolios of savvy investors who want to balance out risk. (See also: The Importance of Diversification.)
Rather than relying on market returns, however, serial entrepreneurs bank on the companies they’re building to create the wealth they desire. That doesn’t mean that they’re not investing in the stock market at all. They’re just not relying on it as the sole means of increasing the size of their asset base. So how do they do that?
Typical entrepreneurs develop a great idea that they use to launch a company, then dedicate their time to growing their venture to the desired level of success. Serial entrepreneurs, on the other hand, build up a company and then either hand over the reins to someone else while retaining ownership or sell it for a tidy profit. By doing this over and over, they’re putting themselves in control of their financial destiny rather than subjecting themselves to the whims of the market. (See also: Why, How, Where and When Entrepreneurs Make Money.)
What They Can Teach Investors
Starting a company isn’t something just anyone can do, but investors can apply some of the basic principles that serial entrepreneurs follow to their own wealth-creation strategy. If a higher net worth is one of your goals, here are some tips for adopting a serial-entrepreneur mindset:
Get Expert Advice – Running a business is difficult to do alone, as is growing wealth, particularly for high-net-worth entrepreneurs. According to the 2016 U.S. Trust Insights on Wealth and Worth Survey, 69% of business owners rely on multiple financial advisors to guide their business and personal decision-making when it comes to how they manage their money. If you’re committed to strengthening your wealth foundation, consulting a financial professional is an important part of the puzzle. Understand the Liquidity of Your Investments – Liquidity is a key element of any sound investing plan, so it’s crucial that you recognize how liquid or illiquid your investments are. In the U.S. Trust survey, more than half of entrepreneurs polled said they expected a major liquidity event in the next three years. Thirty-seven percent said they were working with their financial advisor to prepare for the tax implications of these events or had plans to do so. As an investor you should also be concerned with how things such as selling off stocks can affect your financial outlook. Have an Exit Strategy – A well-thought-out exit strategy is a must for any serious serial entrepreneur, and that rule also applies to your investments. Whether you’re a value investor or you prefer a buy-and-hold approach, you need to be clear on when it’s time to unload a particular stock or mutual fund. Without an exit plan in place, you could be setting yourself up for a loss if some of the securities in your portfolio begin to lose steam.
The Bottom Line
Serial entrepreneurship isn’t without its drawbacks. After all, the majority of new businesses fail. The same holds true for investing. It can often be hit or miss, but if you’re willing to look at your portfolio from a different angle, it may lead to a bigger payoff than expected.
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13f66ed49a466b08c67e2181be10a6f1 | https://www.investopedia.com/articles/managing-wealth/071816/financial-planning-professional-athletes-inside-look.asp | Financial Planning for Professional Athletes: An Inside Look | Financial Planning for Professional Athletes: An Inside Look
What Is the Best Financial Planning for Professional Athletes?
Financial planning is a must for professional athletes, who are famous for burning through their six-, seven- and even eight-figure salaries. Many pro athletes earn in a single year or a few years what the average worker may not see in a lifetime, but this can give a false sense of secruity. Pro athletes make the same mistakes that others often do—helping struggling friends and family members; buying too many toys, clothes, and restaurant meals; purchasing more house (or more houses) than they need; and not saving for the future. Some also fall behind on their taxes, divorce, and end up with expensive alimony and child-support obligations. A compounding factor is that athletes tend to be young when they suddenly find themselves with plenty of money.
Key Takeaways Pro athletes must stretch out high short-term earnings over a lifetime.Many athletes spend frivolously while young and at their peak both financially and career-wise, but this is a mistake that could leave them short in later years.Pro athletes should save for retirement, just like everyone else.Tax strategies, such as living in a no-tax state, can help athletes retain as much of their earnings as possible.
Here’s an inside look at what financial planners recommend for high-earning professional athletes who want to manage their income wisely and make it last beyond their playing years.
Understanding Financial Management for Professional Athletes
Pro athletes may receive a large paycheck, but that paycheck is only large for a few years or, at best, a decade or two, depending on what sport they play, their contract terms, how well they perform, and how injuries affect their career.
While professional athletes may earn high salaries during their career, their careers are often short-lived. Thus, they need to carefully plan for their future financial security when the money may not be rolling in quite so steadily.
Ryan Kwiatkowski earned a college education while playing Division I men’s volleyball and worked as a professional volleyball player for two years in Belgium after graduation. He now works as a financial advisor for the firm his parents founded and still run, Retirement Solutions in Naperville, Ill. Kwiatkowskie says that one of the worst mistakes high-earning professional athletes make is to immediately use their massive paycheck to buy a Lamborghini or a mansion.
Instead, Kwiatkowski recommends saving as much as possible from day one. "If you don’t see it, you won’t spend it, and you can still have a great lifestyle on a fraction of what you earned during a season," Kwiatkowski says. "If you jump into a lavish lifestyle as soon as you sign but get injured during your second game of the season and don’t have a guaranteed contract, what will you do?"
Kwiatkowski also notes out that athletes who are only paid during the season need a plan to make those paychecks last all year.
Minimizing Taxes
Tax strategies can help athletes keep as much of their earnings as possible, says certified public accountant Steven Goldstein, the partner in charge of the sports and entertainment practice of Grassi & Co., a public accounting firm in New York City. Goldstein says the following tax strategies can help:
Choosing a proper domicile. Does the team’s home state have tax advantages for high-income earners? If not, residing in a no-tax state like Florida, Texas, or Tennessee can mean significant tax savings.Mitigating the jock tax. This involves projecting the tax impact of playing in various states and paying tax to those states. Players have to pay withholding tax to the visiting state for road games, but they also receive a tax credit in their home state for taxes paid in other states. If their home state has a higher tax rate, players may owe more tax than they expected.Understanding the impact of taxes on signing bonuses. A player’s signing bonus is only allocated to their state of domicile. If that state does not levy income tax, it can mean huge tax savings.Allocating professional athlete tax deductions to earned wages vs. earned income from endorsements, appearance fees, and residuals. Certain deductions can be taken as itemized deductions or as business expense deductions. A certified public accountant (CPA) can help an athlete determine which method is most advantageous.
It is also important for athletes to claim all the tax deductions they are entitled to. These include business expenses such as agent’s fees, workout clothing, gym memberships, massages, nutritional supplements, athletic equipment, and more, according to Goldstein.
Tax planning for retirement is required. Retirement contribution limits to 401(k) and IRA accounts are so low relative to what many professional athletes earn each year that athletes must do the bulk of their investing for retirement in accounts that do not have the tax advantages of 401(k)s and IRAs. Choosing tax-efficient investments is essential.
Think Long Term
“What seems like a very high income may not be when it’s amortized over the time frame of a typical career,” says certified financial planner Derek Tharp, a fee-only financial advisor and founder of Conscious Capital. “This is particularly true given the high taxes experienced by individuals with income concentrated over a short time horizon.”
Paul Ferrigno, a certified financial planner with Ferrigno Financial in Washingtonville, N.Y., recommends that professional athletes prepare a goal-based financial plan. A goal-based plan encourages athletes to focus on what is important for their future life. Such a plan is a road map to ensure that early success does not lead to poor financial habits that are detrimental in the long run. “Creating the plan and monitoring their progress will help them obtain the financial freedom they want after their playing days are done,” Ferrigno says. “A financial plan can also serve as a road map to a second career since most players will be out of work by age 30, with much lower incomes on the horizon.”
Financial planner Lauryn Williams, a four-time Olympian and founder of Worth Winning, a fee-only, completely virtual, comprehensive financial planning firm focused on serving Millennials and professional athletes, suggests planning for two retirements. The first retirement is from pro sports, and the second retirement is from working altogether. “Not all athletes earn at a rate that will allow them to retire forever when their sports career is over,” she says. One strategy Williams recommends is setting aside money to gain time to figure out what an athlete wants to do next. “The transition is extremely emotional. You don’t want to have to jump into something to make a living while trying to get closure.”
Managing Relationships with Financial Advisors and Others
“Unfortunately, one of the biggest challenges for professional athletes is managing relationships with friends and family,” Tharp says. “Many athletes feel an obligation to give back to those who have helped them achieve success.” But this should be done in a responsible manner that does not interfere with the athlete’s own financial security. Tharp recommends quickly establishing boundaries with friends and family and involving third-party professionals to handle requests for money. If the athlete wants to assist others, it is best to do so with clear guidelines in place, such as determining a specific sum that will be deposited into the recipient’s bank account on the first of each month.
Tharp says determining which professionals to work with is tricky for young athletes – not only because of the complexities of their contracts, investments, insurance, estate planning and tax planning, but because they are bombarded by slick-talking salespeople. Such influences can make identifying knowledgeable advisors with their best interests at heart difficult. Tharp suggests looking for a fee-only professional such as a certified financial planner (CFP) who has experience working with other athletes and who always serves as a fiduciary. Tharp says pro athletes should be wary of would-be advisors who act too much like fans because these advisors will not be able to objectively consult with the athlete as a client.
Professional athletes must understand how an advisor is compensated and what their outside conflicts of interest might be, says fee-only financial advisor Carlos Dias Jr., a founder and managing partner at MVP Wealth Management Group that works with NFL, NBA, MLB, NHL, and MLS athletes and their agents. As a cautionary tale, Dias points to the example of Ash Narayan, a financial advisor who was approved to manage assets for NFL players but has recently been accused of cheating several clients and has had his assets frozen by the Securities and Exchange Commission.
“There has to be involvement on the part of the professional athlete to make sure their earnings are invested wisely and managed correctly,” Dias says. “I always say no one is more responsible or accountable for their own money except for themselves.”
Williams also says that it is important that professional athletes stay engaged with their money. “Athletes often think it is cool to say, "I have people that handle that stuff for me." However, according to Williams, athletes should expect their financial advisor to help them understand what they have.
Fast Fact Many professional athletes have a hard task ahead of them. Developing a wealth management strategy and planning for retirement when they are young and when a large proportion of their lifetime earnings will be received during a short time frame.
Special Considerations for Athletes
Professional athletes face some of the same financial challenges that the average person faces, for example, not saving and investing properly for retirement, being tempted to overspend, and wanting to help struggling friends and family. They also face the unique challenge of receiving a large percentage of their lifetime earnings over a short time frame, which requires special tax planning and wealth management strategies.
Understanding what the potential pitfalls are and knowing how to hire a trustworthy advisor can go a long way toward helping pro athletes turn a huge but short-term paycheck into a lifetime of financial stability.
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04609c61147f002524c7ea6a54692323 | https://www.investopedia.com/articles/managing-wealth/072516/why-you-should-front-load-your-529-plan.asp | Why You Should Front-Load Your 529 Plan | Why You Should Front-Load Your 529 Plan
If you can swing it financially, it makes sense to front-load your 529 plan, also known as a “qualified tuition plan” (QTP). The purpose of a 529 plan is to pay future education costs, typically for a child or grandchild. Before the passage of the Tax Cuts and Jobs Act of 2017 (TCJA), 529s could be used only for college costs. Now they can be used for private K-12 education costs as well.
Front-loading the plan allows earnings to be compounded on more money over a longer time period. In other words, the more you put in initially, the longer that money has to grow, and the greater the balance when the funds are used, especially if you are not going to need them until college.
529 Plan Contribution Rules
The total amount you can contribute to a single 529 plan is set by the state in which the plan is established. The lowest amount is $235,000, in Georgia and Mississippi, while the highest amount is California’s $529,000. Your contribution goes in after taxes, so there is no federal tax deduction. Some states, however, offer a deduction for a portion of your contribution.
Contributions grow tax-free and can be withdrawn tax-free as long as the money is used for qualified educational expenses. There can, however, be gift-tax consequences if you exceed the annual gift-tax limit, which is $15,000 per child or grandchild ($30,000 for spouses who give jointly).
Front-Load Your 529 Plan
You can get around that $15,000 limit via a special gifting feature per an Internal Revenue Service (IRS) rule that allows you to front-load a 529 plan for up to five years at one time with no gift-tax consequences.
Here’s how it works: Instead of contributing $15,000 per child per year, you contribute $75,000 per child in the first year and treat it as if you gave $15,000 per year for each of five consecutive years.If you and your spouse both contribute (and file jointly), the total amount can be as much as $150,000 for each five-year period.
As a result, the $75,000 would not be taxable ($150,000 for joint gifts), but gifts in excess of these amounts over the five-year period could be subject to federal taxes. Please consult a tax professional to determine whether front-loading makes sense for your specific tax situation.
The Value of Front-Loading
The advantage of front-loading becomes clear when you compare the savings outcome with regular annual contributions. Front-loading $75,000, for example, would compound to $180,496 at 5% over 18 years (compounded annually). If you contributed the same $75,000 over 18 years in annual installments of $4,167, the total would be just $133,117. That is $47,379 in lost earnings on your contribution.
The numbers are even larger if you and your spouse front-load $150,000 versus annual contributions of $8,333. In that case, the total with front-loading would be $360,993, while the total with installments would equal only $266,203, which means $94,790 in lost earnings over 18 years.
Cost of College
A realistic look at the future cost of college for your child or grandchild demonstrates why it is important to squeeze every dollar of earnings out of your 529 plan. By 2036, according to a 2018 report by CNBC, one year at a public university is expected to cost about $46,000, and the average one-year cost of a private school is expected to be about $75,750. Those costs translate to $184,000 for a four-year degree from a public school and $303,000 for four years at a private institution.
With the passage of the SECURE Act in 2019, 529 funds can also be used to pay student loans. Up to $10,000 of 529 funds can be used.
Can You Overfund a 529 Plan?
The numbers above may make it seem almost impossible to overfund a 529 plan, but it does happen. It’s an important consideration because, in order for funds to be withdrawn tax-free, the money can only be used for qualified educational expenses.
In that situation, the best choice is to use the excess funds for another family member or even yourself, if you want to go back to school. The fact that the money can now also be used for private K-12 educational expenses will make it easier to find recipients for excess funds if you have them. If another recipient is not an option, and the excess funds are withdrawn, a 10% penalty and taxes will be due.
However, the taxes and penalty are paid only on the earnings (not the original principal). This means that if the balance in your 529 account after all educational bills are paid is $5,000 and $1,000 of that amount comprises earnings, the penalty would be 10% of $1,000, or $100. Taxes would also be owed on the $1,000.
The Bottom Line
You have to be pretty affluent to afford the large amount needed to front-load a 529 education savings plan. Well-to-do grandparents are most often in that position. The ability to initiate a 529 plan, front-load it, and at the same time eliminate that amount from potential estate taxes can be a real benefit. It is also a very good use for a big bonus or an inheritance, should one come your way.
Ultimately, of course, the goal is to help pay for education for your children or grandchildren, so they will have the firm footing they need to pursue a meaningful life and career.
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d389d2430f7add70e2b608322787fc58 | https://www.investopedia.com/articles/managing-wealth/080216/donoradvised-funds-benefits-and-drawbacks.asp | Donor-Advised Funds: The Benefits and Drawbacks | Donor-Advised Funds: The Benefits and Drawbacks
The percentage of rich people in America has risen substantially over the past several years, and many of these individuals are turning to donor-advised funds (DAFs) to assist with their charitable efforts. At the end of 2019, according to the Credit Suisse Global Wealth Report, 18.6 million individuals with a net worth of $1 million or greater, excluding the value of their primary residence—lived in the United States.
According to a study by U.S. Trust and Indiana University, these high-net-worth people list philanthropy as their third most important priority. And there has been explosion in the use of DAFs, which are funds set up for charitable purposes that can facilitate large donations. But these funds have received a fair amount of criticism regarding how they work and the benefits that they provide to society.
Let's examine the nature and use of DAFs as well as their benefits and drawbacks. (For related reading, see: Characteristics of the Ultra Wealthy.)
How DAFs Work
Donor-advised funds are registered 501(c)3 organizations that are funded with cash, securities that have appreciated in value and/or other assets. All of the contributions are put into an account in the donor's name, which is held by a DAF sponsor and eventually donated to a charity of the donor’s choosing.
Donors are able to take a current tax deduction for contributions made to the fund; this is an important feature because it allows a donor to take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later. This incentivizes donors who need a tax deduction to make a donation now and then decide where the money will go at a later time when it’s convenient.
Unlike some charities, DAFs are very well-equipped to convert appreciated securities or other tangible assets into cash
The ability to do this can enable many folks to give a larger amount than they would otherwise; for example, a donor with 1,000 shares of Amazon.com Inc. with a very low-cost basis can hand this over to a DAF, and take an immediate deduction for the full value of the donation (subject to IRS limits).
If they wanted to do the same for a local homeless shelter, they would have to sell the stock and pay the capital gains tax on the sale.
Unexpected Beneficiaries
Despite their relative efficiency, DAFs have come under fire for the fact that they are not legally required to spend the money that they receive and can hold it for as long as they want.
Furthermore, the fine print in the agreements explicitly states that donors cede all legal control of their contributions to the DAF sponsor. Although the sponsors promise that donors will retain control, the fund has the final say in what happens to the money.
Key Takeaways The amount of contributions to DAFs is mushrooming, and the amount of disbursements has only grown by about half as much. One concern about DAFs is that the funds themselves make gains from the donations due to the fees charged to donor accounts. According to Fidelity and the National Philanthropic Trust, over 238,000 U.S. investors support charitable causes using DAFs.
There are disadvantages of using donor-advised funds. For example, one DAF sponsor that went bankrupt had all of its donations seized as collateral, leaving the donors without funds to give to the charity of their choice.
Another used contributions to provide its employees with a very generous compensation plan, host a golf tournament and pay the legal fees for a lawsuit from an irate donor.
In both instances, the courts upheld the sponsors’ right to use the donated funds as they saw fit.
Another complaint that has been levied at DAFs is that the funds profit from the donations they receive via the fees that they charge to donor accounts.
For example, Fidelity charges the greater of $100 or 0.6% for the first $500,000 of donations to its fund. It can also make additional money off of the charges that are assessed by the mutual funds that donors invest in. DAFs often carry many hidden fees that donors are unaware of in the same manner as 401(k) plans.
Critics, therefore, contend that the financial industry and its wealthy clients, rather than charities, are the true beneficiaries of DAFs. (For related reading, see: Top Tips for Maximizing Charitable Deductions.)
Strong Interest in Philanthropy
Nevertheless, DAFs have nearly doubled the amount of money that they have paid out since 2010. The National Philanthropic Trust reported in its 2019 Report that in "2018, philanthropists recommended grants to charities from their donor-advised funds totaling $23.42 billion."
Interestingly, only a fraction of advisors talk with their clients about charitable planning, and this represents a missed opportunity on a vitally important topic.
The Bottom Line
Donor-advised funds can provide donors with an immediate tax deduction for funds that may not actually be distributed to a charity until months or years later. While this time lag has been the source of criticism for these funds, their use has exploded in recent years among high-net-worth households in America.
Financial advisors need to understand how these funds work and know when they are appropriate to use with their clients in order to serve them effectively. (For more, see: The Most Overlooked Tax Deductions.)
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911ebcc6f3a716e84f75fe47ece69b73 | https://www.investopedia.com/articles/managing-wealth/080516/how-did-carl-icahn-get-rich.asp | How Did Carl Icahn Get Rich? | How Did Carl Icahn Get Rich?
Carl Icahn made his fortune as a corporate raider by buying large stakes and manipulating the targeted company's decisions to increase its shareholder value.
Most recently, on July 24, 2019, Icahn sent a letter critiquing Occidental Petroleum's management and board for issuing $10 billion of preferred stock to Berkshire Hathaway in late April. The stock carries an 8% dividend yield, and estimates suggest that Occidental could have issued preferred stock on the open market at a lower rate. Icahn, who holds a 4% stake in the company, is seeking to replace several directors.
As of August 27, 2019, the activist investor's net worth was estimated by Forbes at close to $17.5 billion. This is his story.
Key Takeaways Carl Icahn made his fortune through gaining controlling positions in companies and either forcing them to buy back their stocks at premium prices or manipulating company decisions to increase shareholder value. Icahn has actively impacted the leadership and management of many of his acquisitions, compelled them to change rules, forced some to break up, drove some into debt, and helped rebuild others. His main means of investing is publicly-traded Icahn Enterprises, although he also runs an investment fund comprised of his personal money and money that belongs to Icahn Enterprises.
The 1960s
Charles Icahn spun through a degree in philosophy at Princeton and three years of medical school before he turned to Wall Street and became a broker and options manager for two different companies. In 1968, Icahn established his own brokerage firm, named Icahn & Co, a holding company that dabbled in options trading and risk, or merger, arbitrage.
The 1980s
Corporate raiding, huge in the 1980s, tagged a certain notoriety. Raiders bought companies by acquiring large stakes in their corporations, achieved out-sized control, and used their shareholder rights to drastically manipulate the company's executive and leadership decisions. Raiders became hugely rich by increasing the value share of these companies through their interference.
Icahn rationalized his raiding by saying it profited ordinary stockholders. Sometimes, he merged raiding with greenmailing, where he threatened to take over companies such as Marshall Field and Phillips Petroleum. These firms repurchased their shares at a premium to remove the threat. In 1985, Icahn bought Transworld Airlines (TWA) at a profit of $469 million and, as chairman, turned the firm around from bankruptcy.
11 Carl Icahn was listed at #11 on the Forbes list of "Highest-Earning Hedge Fund Managers 2019."
The 1990s
By the mid-1980s and through the 1990s, Icahn had amassed controlling positions in various companies that included Nabisco, Texaco, Blockbuster, USX, Marvel Comics, Revlon, Fairmont Hotels, Time Warner, Herbalife, Netflix, and Motorola. Each time, the billionaire sought to acquire, break up or sell off parts of the company.
In 1991, Icahn sold TWA’s prized London routes to American Airlines for $445 million and forged an agreement with TWA, where Icahn could purchase any ticket through St. Louis for 55 cents on the dollar and resell at a discount. He plunged TWA into debt.
Forbes ranked Carl Icahn as #61 on their 2019 "Billionaires" list and #31 on its 2018 list of the "400 Wealthiest Americans."
The 2000s
In 2004, Icahn successfully engaged in a hostile battle with Mylan Laboratories to acquire a large portion of its stock. By 2007, the corporate raider owned swathes of companies that included American Railcar Industries, XO Communications, Philip Services, ACF Industries, and Icahn Enterprises, formerly known as American Real Estate Partners. The latter is a diversified holding company that invests in various industries. As a major shareholder of these companies and one who has a dominant say, Icahn has often attempted to controversially influence their decisions to increase shareholder value.
In 2008, Icahn sold his casino shares in Nevada for a profit of $1 billion. In that same year, he launched The Icahn Report, which promotes his views on markets, stocks, and politics. He also acquired 61 million shares in Talisman Energy and renovated the faltering company.
In 2014, the billionaire held a 9.4% stake in Family Dollar, which he sold off later that year for a $200 million profit.
In May of 2018, Icahn significantly cut his stake in multi-level marketing firm Herbalife Ltd., after having "won" a years-long battle against hedge fund manager William Ackman and his Pershing Square Capital, who bet $1 billion against the company in 2012, claiming it was an illegal pyramid scheme.
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35e812c24738d384c23cba0ba6fabb7d | https://www.investopedia.com/articles/markets-economy/062216/how-underground-economy-affects-gdp.asp | How the Underground Economy Affects GDP | How the Underground Economy Affects GDP
The underground economy refers to money earned from illicit activities like prostitution and the sale of illegal drugs. But it also broadly refers to any unreported income, such as undeclared tips or gambling winnings, or under-the-table payments made to laborers like house painters and construction workers, whose wages may go unreported to tax authorities. Unreported income paid to illegal aliens or migrant workers also contributes to the underground economy.
Key Takeaways The underground economy refers to money earned from illicit activities like prostitution and the sale of illegal drugs.Analysts estimate that underground economic transactions account for one-third of the total economy in developing countries and slightly more than 10% of the total economy in developed countries.Because underground economic transactions go unreported, they distort the accuracy of a nation's gross domestic product, which consequently may adversely affect a government's monetary policies.The underground economy also causes billions of dollars in lost taxes.
The Underground Economy and GDP
Due to its cloaked nature, it's difficult to gauge the true extent of the money that changes hands through the underground economy (sometimes referred to as the shadow economy). However, analysts estimate that underground economic transactions account for one-third of the total economy in developing countries and slightly more than 10% of the total economy in developed countries. But because these transactions go unreported, they distort the accuracy of key economic measurements, such as the gross domestic product (GDP), which is calculated by totaling the following four components:
Personal spendingBusiness spendingGovernment spendingNet exports
Notice how the aforementioned metrics fail to take consider any transactions that occur within the underground economic system. This is significant because a nation's less-than-accurate GDP figure can adversely affect government policies that are influenced by GDP numbers. For example, the U.S. Federal Reserve Bank relies on GDP figures set interest rates and create other monetary policies. If GDP numbers aren't technically accurate, such policy decisions can have a weaker impact, or negatively impact the economy.
Taxation is another major governmental concern related to the underground economy. A 2011 study determined that if all underground economic activities were legitimately taxed, it would generate $400 billion to $500 billion in annual revenue. That money could go a long way in rebuilding infrastructure, funding schools, and supporting other worthy causes.
Ways to Mainstream the Underground Economy
Fortunately, there are a number of steps governments can take reduce the effect that underground economic activity has on skewing GDP numbers. Reductions in personal income tax rates can encourage individuals to report income more accurately and completely. And then there's the tough love approach, where the installation of increased tax evasion penalties can discourage underreporting. Thirdly, a government may legalize certain underground economic activities, such as gambling and prostitution, as a way to legitimately tax the associated income, and increase revenue. Finally, governments can stimulate the creation of higher-paying legal jobs, which would theoretically shrink the underground economy.
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e2ac4b6fae6c114dc2c150999fcccb7e | https://www.investopedia.com/articles/markets-economy/081716/4-smart-529-plan-alternatives-consider.asp | 4 Smart 529 Plan Alternatives to Consider | 4 Smart 529 Plan Alternatives to Consider
Since their debut in 1996, 529 savings plans have been one of the best vehicles available for covering college costs. Congress expanded these plans to cover K–12 education in 2017 and to pay up to $10,000 in student loan debt in 2019. But as useful as they can be, 529 savings plans are not your only option for building a fund for your child's education. Below are four alternatives.
Key Takeaways Another type of 529, the prepaid tuition plan, could help cut future tuition costs. Custodial UGMA and UTMA accounts can be used for purposes other than education. Roth IRAs have tax advantages similar to 529 plans and they don't count as assets for financial aid purposes.
How 529 Savings Plans Work
A major reason for the popularity of 529 savings plans is their tax advantages. The money you contribute to your account grows tax-deferred, and withdrawals will be tax-free as long as they are used for qualified education expenses. That includes tuition, room and board, and fees. Many states also provide a tax deduction or credit for your contributions, especially if you live in that state and invest in one of its 529 plans. There are no federal deductions or credits for contributions.
An appealing feature of 529 savings plans is their relatively high contribution limits. There is no limit on how much you can contribute each year, although if you contribute more than $15,000 you can trigger federal gift taxes. (Note that it is permissible to front-load a 529 plan—and not incur gift taxes—by contributing five years of payments at once.)
Here are four alternatives to 529 savings plans, and how they compare:
Prepaid Tuition Plans
Technically another type of 529 plan, prepaid tuition plans work differently from the more common and familiar 529 savings plans. These plans allow you to pay for future tuition at current rates, which could mean significant cost savings down the road.
Some states do cap the total allowable balance in your account, but those limits are relatively generous—recently ranging from $235,000 to more than $500,000.
The primary drawback of prepaid tuition plans is that they generally apply only to certain community colleges, colleges, and universities, typically within a particular state. Also, unlike 529 savings plans—which can cover a wide range of expenses, including room and board—these plans generally are limited to tuition only.
What's more, few states currently offer prepaid tuition plans, while all 50 states and the District of Columbia have at least one 529 savings plan, and sometimes several.
However, if your state offers a prepaid tuition plan and you're reasonably certain that your child will be attending college there, this is an option worth considering.
Coverdell Education Savings Accounts
Before 529 savings plans were modified in 2017, Coverdell Education Savings Accounts (ESA) had a major advantage over them: Coverdells could be used to cover both college and pre-college costs.
For college savers, the potential advantage of a Coverdell ESA is that it can provide a wider array of investment options, such as individual stocks, than most 529 savings plans, which are typically limited to a menu of mutual funds.
Coverdell plans also have some significant drawbacks compared with 529 plans. The money you contribute won't get you any tax deduction or credit. Your contributions are limited to $2,000 a year, and your modified adjusted gross income can't exceed certain limits—$110,000 for single filers and $220,000 for married couples filing jointly, as of the 2020 tax year.
UGMA/UTMA Accounts
Custodial accounts established under the Uniform Gift to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) do not provide the tax benefits of a 529 plan, but they do allow account holders a great deal of discretion in where the money is invested and how it is eventually used.
While balances in these accounts are to be used for the benefit of the child, they are not specifically earmarked for college. That may make them especially useful for parents who are unsure if their child will actually go to college. Like the Coverdell, investment options for the UGMA/UTMA are virtually unlimited.
UGMA/UTMA accounts don't have the tax advantages of 529 plans. Contributions won't earn any tax deduction or credit, and the account's earnings are taxable.
They can also have a negative impact on financial aid eligibility. Because they are considered assets belonging to the child, up to 20% of their balance is counted in computing the Expected Family Contribution on the FAFSA. By contrast, 529 accounts are considered parental assets, and only up to 5.64% of their balance is counted.
If you're applying for federal college aid, you should know that the Free Application for Federal Student Aid (FAFSA) will be a simpler process starting July 2023 for the 2023-2024 academic year. The form has been trimmed from 108 questions to about three dozen.
Roth IRAs
Although primarily intended as a retirement savings vehicle, Roth IRAs can be used for college planning. You won't get any upfront tax deduction (unlike a traditional IRA), but your account will grow tax-deferred and your withdrawals will be tax-free no matter what you use them for, as long as you're age 59½ or older and have had a Roth IRA for at least five years. Otherwise, you'll have to pay taxes and generally a 10% penalty.
However, you can withdraw your Roth IRA contributions (but not the earnings) at any time and for any reason, tax-free.
As an added Roth benefit, the money you hold in retirement plans (unlike a 529 plan) isn't counted as an asset when you apply for financial aid through the FAFSA.
There are a couple of downsides to using a Roth IRA instead of a 529 savings plan. One is that your contributions are limited to just $6,000 a year, or $7,000 if you're 50 or older. Those are the limits for the 2020 and 2021 tax years. Still, if you have enough money to invest, there's no reason you couldn't fund both a 529 plan and a Roth IRA.
A further, and perhaps more important, downside of using a Roth IRA to pay for college is that you'll have less money for retirement when the day rolls around. And your child will have many more years to repay an education loan than you have to recoup your lost retirement savings.
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0994e3f996bb4e3cb7c07b80180f2667 | https://www.investopedia.com/articles/markets-economy/082316/3-reasons-banks-can-freeze-your-account.asp | 3 Reasons Banks Can Freeze Your Account | 3 Reasons Banks Can Freeze Your Account
It can be very alarming and frustrating—not to mention embarrassing—to get a notice saying that your bank account is frozen. It's even worse when you find out after trying to use your debit card at the grocery store or while trying to get cash for a night out with friends. Bank accounts are frozen for a number of different reasons, and each reason requires specific actions to unfreeze it. The following are the top three reasons why a bank account may be frozen.
Key Takeaways You can still receive deposits into frozen bank accounts, but withdrawals and transfers are not permitted.Banks may freeze bank accounts if they suspect illegal activity such as money laundering, terrorist financing, or writing bad checks.Creditors can seek judgment against you which can lead a bank to freeze your account.The government can request an account freeze for any unpaid taxes or student loans.Check with your bank or an attorney on how to lift the freeze.
What Is a Frozen Account?
It can be a nasty surprise to find out that your checking account is frozen. When a bank freezes your account, it means there may be something wrong with your account or that someone has a judgment against you to collect on an unpaid debt. An account freeze essentially means the bank suspends you from conducting certain transactions. You can still access your account, but there are limits to what you can do.
You can still monitor your account and can receive deposits including your paycheck. But the freeze stops any withdrawals or transfers from going through. So whatever is deposited into the account during this time stays put. This includes any preauthorized payments you may have scheduled to go through your checking account. So if you have a rent or mortgage payment, a car loan payment, or a monthly charge for your gym membership, there's a good chance they won't go through.
Preauthorized payments scheduled from your account will bounce when your account is frozen.
Suspicious or Illegal Activity
Banks have the authority and discretion to freeze accounts if they suspect account holders are conducting illegal activities. Banking regulations became stricter after events like the September 11 terrorist attacks in order to crack down on criminal enterprises that use financial institutions to conduct their business.
Banks routinely monitor accounts for suspicious activity like money laundering, where large sums of money generated from criminal activity are deposited into bank accounts and moved around to make them seem as though they are from a legitimate source. Suspected terrorist financing is also another reason why banks often freeze accounts.
Your bank may also freeze your account if you write and cash bad checks. You may it's okay to try to cash a check you've written even if you don't have enough money in your account. After all, it may take a few days for the check to clear, right? But the bank doesn't think so. Knowingly writing checks on an account that doesn't have enough money—and doing so regularly—is actually considered fraud.
In most cases, large and unusual deposits can flag your account, even if they're legitimate. So if you win big at the casino, you'll likely alert the bank when you try to deposit your windfall.
Additionally, if your bank flags suspicious behavior you're certain you weren't responsible for, you may have been a victim of identity theft. Some of the best credit monitoring services also offer benefits like identity theft insurance and useful tools to better protect your information.
Unpaid Debts Through Creditors
If you have any unpaid debts, your creditors can get the bank to freeze your account in order to satisfy your obligations. But they must first get approval from the courts before taking this action. They do this by getting a judgment against you. This is then sent to the bank and is kept on file.
For account holders who have their loan accounts at the same institution as their bank account, the lender can access your account(s) to pay the defaulted loans without filing a lawsuit or judgment. When you sign for the loan, you give the bank full access to your account—even in the event of default.
Unpaid Debts to the Government
Individuals who owe student loans or taxes to the government may also find their bank accounts frozen. The Internal Revenue Service (IRS) can issue a tax levy for any unpaid taxes. It cannot be lifted until the debt is paid in full.
The government can do a few different things for unpaid student loans including seizing your tax refund or garnishing a percentage of your paycheck each month. When your loan is in default, your federal loan lender may likely garnish wages and taxes without pursuing a judgment from the courts.
In the chance that your bank account is frozen because of debt collectors or suspicious activity, your bank account should not be wiped clean of funds. Depending on the state where you live, there are limits to what type of income can be taken from your account. For example, in some states, it is illegal for creditors to withdraw Social Security benefits, child support, workers' compensation, and more. However, you need to file a claim of exemption within 10 days after your account is frozen.
What an Account Freeze Means for You
As noted above, a frozen account means you won't have access to any of your money until the situation is resolved. This means you can't take out any money and scheduled payments won't go through. And because these payments will bounce, you'll probably incur a non-sufficient funds (NSF) charge. If you have money in your account, this will deplete your balance. If not, you'll dip into a negative balance putting you into an overdraft. In this case, you'll have to pay additional fees and interest to cover the temporary shortfall.
When a creditor seeks judgment against you, you can expect to take a hit on your credit report. In most cases, the judgment will stay on your credit file for seven years for unpaid debts.
If the bank suspects you've been using the account illegally for whatever reason, it could close your account completely. This means you'll be left without any money and anywhere to put your paychecks. There's a good chance you won't be able to do any business with that bank in the future and you'll have to find another bank. But that's just one outcome. If the bank reports your account activity to authorities, you could face fines and/or prosecution.
What You Should Do
You should receive notice before your account is frozen—either from the entity requesting the freeze or from the bank. In most cases, you'll receive a notice from both. Either way, make sure to contact your bank immediately if your account is frozen to see what steps need to be taken and to make sure there's no mistake. Remember that if you ignore a frozen bank account, you can make the problem worse, causing drops in your credit score and a build-up of bank fees.
If your account is frozen because of activity you know is legitimate, go to the bank with proof. If you can show that there's no reason for the freeze, the bank will probably release the suspension and grant you full access to the account again.
Once your account is frozen over unpaid debts, it is crucial to get the creditor's attorney’s information from your bank immediately. You need to have a better idea of what's going on with your account and work out a payment arrangement.
Consider consulting legal help. Consumer bankruptcy attorneys do not force you to pursue bankruptcy—rather, they help you understand the legal actions that creditors can take, as well as what your rights are in these situations. For debts owed to the government, there's very little you can do to get access to your account. And keep in mind, these debts don't go away even if you go bankrupt.
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998f47be6fed8136920eb30f3201f06c | https://www.investopedia.com/articles/markets-economy/082516/top-5-pesticide-companies-world-syt-dow.asp | The Biggest Pesticide Companies in the World | The Biggest Pesticide Companies in the World
After years of mergers and acquisitions (M&A) in the late 1990s and early 2000s, only six pesticide manufacturers represented over 76% of global sales by 2011. After even more recent merger activity, the dominant players in the global pesticide space further narrowed, to the four mega-companies below.
Key Takeaways By 2001, just six pesticide manufacturers commanded more than 76% of global pesticide sales. Due to continued merger deals, now just four companies currently dominate the pesticide sector: Syngenta, Bayer AG, DowDupont, and BASF.
Syngenta
Headquartered in Basel, Switzerland, Syngenta AG (NYSE: SYT), with a market capitalization of $40.9 billion as of May 2017, was formed through the merger of Novartis Agribusiness and Zeneca Agrochemicals in 2000. The company develops commercial herbicides, fungicides, and insecticides for a variety of crops, including corn, cereals, fruits, and vegetables. As one of the largest worlds pesticide producers, it commanded $12.65 billion in sales in 2017.
Two years prior, Syngenta rejected an acquisition offer from Monsanto Company (NYSE: MON) valued at $47 billion, claiming the offer was too low because internal estimates of the company's value were closer to $62 billion. However, in February 2016, Syngenta agreed to be purchased in cash for $43 billion by ChemChina.
Bayer AG
Based in Leverkusen, Germany, Bayer AG (OTC: BAYRY) develops and sells healthcare and agricultural products to markets around the world. The company's market cap as of October 26, 2018, was $70.34 billion. Its CropScience division produces genetically-modified seeds and pesticides for commercial and consumer use, with pesticide sales of €9.57 billion in 2017.
On May 19, 2016, Bayer executed a $62 billion buyout offer to Monsanto, based on its interest in Monsanto's seed business. Monsanto rejected the offer less than a week later, stating that the terms were incomplete and financially inadequate. In June 2018, Bayer finally absorbed Monsanto and retired the name.
DowDupont
Midland, Michigan-based The Dow Chemical Company (TDCC), and Wilmington, Delaware-based DuPont de Nemours and Company, agreed to a merger in December 2015. With a combined valued of approximately $120 billion, shareholders approved the merger in July 2016.
In 2017, the cumulative pesticide revenue of the company, renamed DowDupont, exceeded $14.34 billion. After the completion of the merger, the entity, now headquartered in Michigan, announced plans to silo its business into the following three areas:
An agricultural group to be called Dow A special sciences business to be called Dupont A material sciences company, to be called Corteva Agriscience
With thousands of products currently in the testing phase, the group shows no signs of stagnation, after this highly-publicized merger.
M&A activity in the pesticide space isn't restricted to the largest global players. Case in point: Rentokil Steritech, an American subsidiary of London-based Rentokil Initial plc, recently acquired Locust Grove, Georgia-based Active Pest Control, a $21 million operation.
BASF
Headquartered in Ludwigshafen am Rhein, Germany, BASF SE (BASFY), with a market cap of $60.98 billion, offers pesticides through its Agricultural Solutions division, one of five separate chemical segments in the company. Its pesticide products are primarily aimed at commercial users, with 2017 sales of €16.33 billion.
For several years, BASF was unique among the top pesticide companies, as the only firm not actively involved in M&A activities—either as an acquirer or as a target. This changed in April 2018, when BASF purchased from Bayer a major part of its seed business, for an astounding €7.6 billion. As of October 2018, BASF is the largest chemical producer in the world.
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7d2b6a70797c36999c1e56d0ecba2bdd | https://www.investopedia.com/articles/markets-economy/090516/10-countries-most-natural-resources.asp | 10 Countries With The Most Natural Resources | 10 Countries With The Most Natural Resources
Natural resources or commodities are the raw inputs used to manufacture and produce all of the products in the world. These resources are found in the earth including those extracted from the earth and those that have yet to be extracted. They grow naturally without any help from humans. Commodities are either renewable or nonrenewable. Renewable resources are those whose supply is infinite—such as solar power—while nonrenewable ones have a limited supply and can no longer be used once the supply is exhausted like fossil fuels.
Natural resources are found throughout the world and extracted for human use. Every product on the market is made using a commodity. As such, they are very valuable, providing income and revenue for governments and corporations. Here are the top 10 countries with the most natural resources and their total estimated value, according to World Atlas.
Key Takeaways Natural resources are valuable to the countries where they are found as they are extracted to produce goods and services. Mining is the primary industry for many of the countries on this list. Oil and gas make up a big portion of the natural resources on the top 10 list. Australia, Democratic Republic of Congo, Venezuela, the U.S., and Brazil are on the bottom of the list. The top five are China, Saudi Arabia, Canada, India, and Russia.
10. Australia
Australia earns $19.9 trillion U.S. dollars from mining, and it is number 10 on the list. Australia, which is about 80% the size of the United States, is known for its large reserves of coal, timber, copper, iron ore, nickel, oil shale, and rare earth metals and mining is the primary industry. Australia is also one of the leaders in uranium and gold mining. The country has the largest gold reserves in the world, supplying over 14% of the world's gold demand and 46% of the world's uranium demand. Australia is the top producer of opal and aluminum.
9. The Democratic Republic of Congo (DRC)
Mining is also the primary industry of the Democratic Republic of Congo (DRC). In 2009, the DRC had over $24 million in mineral deposits including the largest coltan reserve and huge amounts of cobalt. The DRC also has large copper, diamond, gold, tantalum, and tin reserves, along with over three million tons of lithium as estimated by the U.S. Geological Survey. According to the latest data, there were over 25 international mining firms in the DRC in 2011.
8. Venezuela
This South American country has an estimated $14.3 trillion worth of natural resources. It is the leading exporter of bauxite, coal, gold, iron ore, and oil. The country's oil reserves are greater than those of the United States, Canada, and Mexico combined. Venezuela is the third-largest producer of coal after Brazil and Colombia. It also has the eighth-largest reserves of natural gas accounting for 2.7% of the global supply. Venezuela also has the second-largest reserves of gold deposits.
7. The United States
Mining is one of the primary industries in the United States. In 2015, total metal and coal reserves in the country were estimated to be $109.6 billion. The United States is the leading producer of coal and has been for decades, and it accounts for just over 30% of global coal reserves and has huge amounts of timber. Total natural resources for the United States are approximately $45 trillion, almost 90% of which are timber and coal. Other resources include substantial copper, gold, oil, and natural gas deposits.
6. Brazil
Brazil has commodities worth $21.8 trillion including gold, iron, oil, and uranium. The mining industry focuses on bauxite, copper, gold, iron, and tin. Brazil has the largest gold and uranium deposits in the world and is the second-largest oil producer. However, timber is the country's most valuable natural resource, accounting for over 12.3% of the world's timber supplies.
There is a natural relationship between the economy and the world's natural resources—as the global economy grows, demand for commodities continues to rise.
5. Russia
Russia's total estimated natural resources are worth $75 trillion. The country has the biggest mining industry in the world producing mineral fuels, industrial minerals, and metals. Russia is a leading producer of aluminum, arsenic, cement, copper, magnesium metal, and compounds such as nitrogen, palladium, silicon, and vanadium. The nation is the second-largest exporter of rare earth minerals.
4. India
India's mining sector contributes 11% of the country's industrial gross domestic product (GDP) and 2.5% of total GDP. The mining and metal industry was worth over $106.4 billion in 2010. The nation's coal reserves are the fourth largest in the world. India's other natural resources include bauxite, chromite, diamonds, limestone, natural gas, petroleum, and titanium ore. India provides over 12% of global thorium, over 60% of global mica production, and is the leading producer of manganese ore.
3. Canada
The third country on the list is Canada. The vast country has an estimated $33.2 trillion worth of commodities and the third-largest oil deposits after Venezuela and Saudi Arabia. The commodities that the country owns include industrial minerals, such as gypsum, limestone, rock salt, and potash, as well as energy minerals, such as coal and uranium. Metals in Canada include copper, lead, nickel, and zinc, and precious metals like gold, platinum, and silver. Canada is the leading supplier of natural gas and phosphate and is the third-largest exporter of timber.
2: Saudi Arabia
Saudi Arabia is a small country in the Middle East and is slightly larger than Mexico. Saudi Arabia has about $34.4 trillion worth of natural resources—notably oil. The nation has been a leading exporter ever since oil was discovered in 1938. With 22.4% of the world's reserves, the country's economy depends heavily on its oil exports. It also has the fourth-largest natural gas reserves. Saudi Arabia's other natural resources include copper, feldspar, phosphate, silver, sulfur, tungsten, and zinc.
1: China
China tops the list for having the most natural resources estimated to be worth $23 trillion. Ninety percent of China's resources are coal and rare earth metals. However, timber is another major natural resource found in China. Other resources that China produces are antimony, coal, gold, graphite, lead, molybdenum, phosphates, tin, tungsten, vanadium, and zinc. China is the world's second-largest producer of bauxite, cobalt, copper, manganese, and silver. It also has chromium and gem diamond.
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28cb62747771892f56e32e602f03982b | https://www.investopedia.com/articles/markets-economy/090616/5-countries-own-most-us-debt.asp | 5 Countries That Own the Most U.S. Debt | 5 Countries That Own the Most U.S. Debt
The U.S. government issues Treasury securities to fund the deficit between the amount of money that it takes in through taxes and other sources, and the amount of money that it spends on defense, welfare programs, and the interest it pays on its current debt. As of the end of fiscal year 2019, the government's total debt is just over $22 trillion.
Roughly three-quarters of the government's debt is public debt, which includes Treasury securities.Japan is the largest foreign holder of public U.S. government debt, owning $1.266 trillion in debt as of April 2020.China ranks second in total U.S. debt owned by foreign countries, with the U.K., Ireland and Luxembourg rounding out the top five.
The debt is held in two categories: intragovernmental debt and public debt. Intragovernmental debt is debt owed to other federal agencies and makes up roughly a quarter of outstanding debt. This includes Social Security, military retirement funds, Medicare, and other retirement funds. The remainder is public debt, with foreign governments and investors holding approximately 30%. So which countries hold the most?
Japan
Japan is the largest holder of U.S. debt, with $1.266 trillion in Treasury holdings as of April 2020. This is the highest level of debt owned by Japan in several years, beating out China as the largest holder of U.S. debt.
The increase in Japan's holdings is its largest since 2013. The low and negative yield market in Japan makes holding U.S. debt more attractive. Japan now makes 18% of foreign-owned U.S. debt.
China
China gets a lot of attention for holding a big chunk of the U.S. government's debt and for good reason, given its rapidly expanding economy. China takes the second spot among foreign holders of U.S. debt with $1.07 trillion in Treasury holdings in April 2020, just behind Japan. China has trimmed its holdings and this is the lowest amount held in the last two years. It currently holds 15.5% of the foreign debt.
United Kingdom
The United Kingdom has increased its holdings in U.S. debt to an eight-year high in April 2020 to $368 billion. It has increased in rank as Brexit continues to weaken its economy. This is 6% of the total foreign debt.
Ireland
It would appear odd that Ireland is the fourth-largest holder of U.S. debt, particularly when comparing its economy to other European nations, such as Germany. However, a big factor in Ireland's place is the fact that many U.S. multinational companies, such as Alphabet/Google, set up shop there for more favorable taxes on foreign returns.
Dublin is a focal point for international fund management but also represents the European branches of U.S. technology and pharmaceutical companies. However, there has been a drop in Ireland's U.S. debt holdings, signaling a possible change in multinational attitudes as they move money back to the U.S. as rules on how foreign earnings are taxed change. Ireland holds $300 billion in U.S. debt, which is 4% of foreign debt.
Luxembourg
Luxembourg is the fifth-largest holder of U.S. debt among foreign countries while having the 72nd smallest economy by GDP. Luxembourg holds $267.8 billion in U.S. Treasuries, equal to about 3.8% of total foreign holdings.
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1c2253e29540184108301e5afdd93090 | https://www.investopedia.com/articles/markets-economy/090716/why-bank-bailins-will-be-new-bailouts.asp | Why Bank Bail-Ins Will Be the New Bailouts | Why Bank Bail-Ins Will Be the New Bailouts
The financial crisis of 2008 ushered in the term "too big to fail," which regulators and politicians used to describe the rationale for rescuing some of the country's largest financial institutions with taxpayer-funded bailouts. Heeding the public's displeasure over the use of their tax dollars in such a way, Congress passed the Dodd-Frank Wall Street Reform and Consumer Act of January 2010, which eliminated the option of bank bailouts but opened the door for bank bail-ins.
Difference Between Bank Bail-In and Bank Bailout
A bail-in and a bailout are both designed to prevent the complete collapse of a failing bank. The difference lies primarily in who bears the financial burden of rescuing the bank. With a bailout, the government injects capital into the banks to enable them to continue to operate. In the case of the bailout that occurred during the financial crisis, the government injected $700 billion into some of the biggest financial institutions in the country, including Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C) and American International Group (NYSE: AIG). The government doesn't have its own money, so it must use taxpayer funds in such cases. According to the U.S. Treasury Department, the banks have since repaid all of the money.
With a bank bail-in, the bank uses the money of its unsecured creditors, including depositors and bondholders, to restructure their capital so it can stay afloat. In effect, the bank is allowed to convert its debt into equity for the purpose of increasing its capital requirements. A bank can undergo a bail-in quickly through a resolution proceeding, which provides immediate relief to the bank. The obvious risk to bank depositors is the possibility of losing a portion of their deposits. However, depositors have the protection of the Federal Deposit Insurance Corporation (FDIC), insuring each bank account for up to $250,000. Banks are required to use only those deposits in excess of the $250,000 protection.
As unsecured creditors, depositors and bondholders are subordinated to derivative claims. Derivatives are the investments that banks make among each other, which are supposed to be used to hedge their portfolios. However, the 25 largest banks hold more than $247 trillion in derivatives, which poses a tremendous amount of risk to the financial system. To avoid a potential calamity, the Dodd-Frank Act gives preference to derivative claims.
Bail-Ins Become Statutory
The provision for bank bail-ins in the Dodd-Frank Act was largely mirrored after the cross-border framework and requirements set forth in Basel III International Reforms 2 for the banking system of the European Union. It creates statutory bail-ins, giving the Federal Reserve, the FDIC and the Securities and Exchange Commission (SEC) the authority to place bank holding companies and large non-bank holding companies in receivership under federal control. Since the principal objective of the provision is to protect the American taxpayers, banks that are too big to fail will no longer be bailed out by taxpayer dollars. Instead, they will be 'bailed in.'
Europe Experiments With Bail-Ins
Bank bail-ins have been used in Cyprus, which has been experiencing high debt and possible bank failures. The bail-in policy was instituted, forcing depositors with more than 100,000 euros to write off a portion of their holdings. Although the action prevented bank failures, it has led to unease among the financial markets in Europe over the possibility that these bail-ins may become more widespread. Investors are concerned that the increased risk to bondholders will drive yields higher and discourage bank deposits. With the banking systems in many European countries distressed by low or negative interest rates, more bank bail-ins are a strong possibility.
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3ec7cfc6a070842a02534477738967a9 | https://www.investopedia.com/articles/markets-economy/091316/3-ways-robots-affect-economy.asp | 3 Ways Robots Affect the Economy | 3 Ways Robots Affect the Economy
Robots are increasingly being used in every industry and are here to stay, and robotics usage has both positive and negative impacts on business and employees. The following are a variety of ways that robots affect the economy.
Key Takeaways Robots are taking your jobs! They have been encroaching in manufacturing work for decades and now making literal inroads into tasks like driving, logistics, and inventory management. While there may be a negative effect on some labor segments, robots and automation increase productivity, lower production costs, and can create new jobs in the tech sector.
The Rise of the Machines
Technology has played a role in making work more efficient for thousands of years, from simple farming tools to current-day assembly-line robots in factories. Robots are becoming present in more and more situations in business. They work right alongside human workers or completely replace them. For example, Amazon.com Inc. (NASDAQ: AMZN) uses a variety of robots in its warehouses to stock inventory, and retrieve and package items. Tesla Motors Inc. (NASDAQ: TSLA) boasts robotic and automated assembly lines for its electric cars and batteries. Robots are even being used in therapy sessions for children. While it is certainly true that robots are replacing jobs and are a significant threat to low-skilled workers and somewhat of a threat to middle-skilled workers, there are many positive effects that robots have on the economy.
Productivity Growth
Higher living standards can come about through higher wages, lower pricing of goods and services, and an overall greater variety of products and services. Labor productivity growth, as measured as output per hour, is what leads these things to occur. Growth results from one or a mixture of three things: increases in the quality of labor, increases in capital and total factory productivity (TFP), also known as multi-factor productivity.
Increases in the quality of labor come from more and better education and training of employees. Capital drives productivity growth via investments in machines, computers, robotics and other items that produce output. TFP, often cited as the most important source of productivity growth, comes from the synergies of labor and capital working together as efficiently as possible. As an example, keeping the education and productivity of the workforce constant, if the machines they use increase in productivity, the TFP still rises. Robots are unquestionably making the "machine" aspect of production facilities more efficient. Even if the human component of factories remains constant, increased efficiencies from robotics inevitably leads to more productivity growth.
Gross Domestic Product Growth
Not surprisingly, with increased productivity comes an increase in gross domestic product (GDP). In December 2018, a paper by Georg Graetz of Uppsala University and Guy Michaels of the London School of Economics titled "Robots at Work" studied the effects of robots in the economy. They looked at the United States and 16 other countries, and analyzed a variety of data for a 15-year period ending in 2007. Graetz and Michaels found that, on average, across the 17 countries, the increasing use of industrial robots over the time period raised the annual growth of GDP by 0.36%. They compared this substantial growth to the boosts in productivity that occurred at the turn of the 20th century from steam technology.
Job Creation
Many people fail to realize that robots are actually creating new, high-paying jobs that require skilled workers. While it is true that robots are replacing low-skilled workers and automating the tasks that they perform, robots and automation are requiring jobs that focus workers on higher-value work. For example, in manufacturing, robots can perform menial tasks such as raw materials sorting, transporting and stocking, while higher-skilled roles such as quality-related tasks, which humans are more suitable for, can be completed by higher-skilled workers.
While it is true that robots and automation are taking away entire categories of jobs across a multitude of industries, it has never been a better time for workers to get higher-skilled, higher-paying jobs as long as they become skilled and educated enough themselves to fill those roles.
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a49f2dfbc2ebc29fbfdbd64d8277430e | https://www.investopedia.com/articles/markets/010515/use-fibonacci-point-out-profitable-trades.asp | Fibonacci Techniques for Profitable Trading | Fibonacci Techniques for Profitable Trading
Fibonacci analysis can supercharge your market performance, but you'll need to master a few tricks of the trade to gain maximum benefit from this mathematical sequence that was uncovered in the Western world more than 800 years ago. Let's tackle the subject with a quick Fibonacci primer and then get down to business with two original strategies that tap directly into its hidden power.
Key Takeaways Fibonacci analysis uses the work of twelfth-century Italian mathematician Leonardo de Pisa (also called Fibonacci) to use a logical sequence of numbers to predict stock trends and price action.The Fibonacci Flush strategy identifies hidden support and resistance levels that an investor can use for entry, exit, and stop placement.The Parabola Pop strategy tracks breakouts above and below retracement levels to provide early entry points for major breakouts and breakdowns.
What Is a Fibonacci Analysis?
Twelfth-century monk and mathematician Leonardo de Pisa (later branded as Fibonacci) uncovered a logical sequence of numbers that appears throughout nature and in great works of art. Unknown to the great monk, these Fibonacci numbers fit perfectly into our modern financial markets because they describe—with great accuracy—complex relationships between individual waves within trends, as well as how far markets will pull back when they return to levels previously traded.
Fibonacci Numbers
Starting with 1+1, the Fibonacci sequence, of which the first number is 1, consists of numbers that are the sum of themselves and the number that precedes them. As a result, 1+1=2, 1+2=3, 2+3=5, 3+5=8, 5+8=13, 8+13=21, 13+21=34, and 21+34=55, which indicates that 1, 2, 3, 5, 8, 13, 21, 34, and 55 are all Fibonacci numbers. Subdividing these numerical strings uncovers repeating ratios that have become the basis for Fibonacci grid analysis in swing trading and other market disciplines.
The .386, .50, and .618 retracement levels form the basic structure of Fibonacci grids found in popular market software packages, with .214 and .786 levels coming into play during periods of higher volatility. The initial analysis technique is simple enough for market players at all levels to understand and master. Just place the grid over the ending points of a major high and low in an uptrend or downtrend and look for close alignment with key price turns.
Uptrends and Downtrends
Deeper market analysis requires greater effort because trends are harmonic phenomena, meaning they can subdivide into smaller and larger waves that show independent price direction. For example, a series of relative uptrends and downtrends will embed themselves within a one- or two-year uptrend in the S&P 500 or Dow Jones Industrials. We see this complexity most clearly when shifting higher, from daily to weekly charts, or lower, from daily to 60-minute or 15-minute charts.
The Fibonacci Flush Strategy
A single Fibonacci grid on a daily chart will improve results, but ratios come into sharper focus when examining two or more time frames. Swing traders taking the next step will find great value in daily and 60-minute charts, while market timers will benefit when they step back and combine daily and weekly charts. In both cases, alignment between key Fib levels in different time frames identifies hidden support and resistance that can be utilized for entry, exit, and stop placement.
For example, in the chart above, you'll see that Microsoft Corporation (MSFT) shares pounded out a deep low at $42.10 in Oct. 2014 and rallied in a vertical wave that ended at $50.05 a few weeks later. The subsequent pullback settled on the 38.2% retracement (.382) for four sessions and broke down into a mid-December gap that landed the price on the 61.8% (.618) Fibonacci retracement. That level marks a tradable low ahead of a sharp recovery that stalls at the 78.6% (.786) retracement.
Notice how other charting features interact with key Fibonacci levels. The sell-off into the 62% level also fills the October gap (red circle), while the subsequent bounce stalls near three November swing highs (blue line) aligned with the 78.6% retracement. This tells us that Fibonacci analysis works most effectively when combined with other technical forces in play, such as gaps, moving averages, and easily observed highs and lows.
Support and Resistance
Now let's zoom in and identify a Fibonacci technique you can use to find low-risk entries missed by less observant market players. Falling price sits on the 38% retracement for four sessions, sucking in a supply of capital looking for a reversal. The downward gap traps this crowd, which is shaken out at the same time the stock posts a volatile low at the 62% level. While it makes sense to buy at that support level, it's a risky strategy because the gap could easily kill the upside and force another breakdown.
Next comes the important part. The surge back above the 38% retracement reinstates support, triggering a Fibonacci Flush buy signal, predicting that positions taken near $47 will produce a reliable profit. At the same time, shaken-out shareholders are reluctant to buy back at this price because, as the expression goes, "once bitten, twice shy." This lowers interest in the trade while allowing new money to carry risk in a lower-volatility trade, and relying on a long observed tendency for support to hold after it is tested, broken, and then remounted.
The Parabola Pop Strategy
Referring to the chart above as an example, the 78.6% retracement level stands guard as the final harmonic barrier before an instrument completes a 100% price swing (higher or lower). This is valuable information because it tells us that a breakout above this level in an uptrend, or a breakdown in a downtrend, will extend all the way to the last swing high or low as a minimum target. Doing the math suggests a free ride for the last 21.6% of the rally or sell-off wave.
This Parabola Pop strategy works very well on longer time frames and can even provide early entry to major breakouts and breakdowns on widely held issues. As an example, look at Facebook, Inc. (FB) after it peaked at $72.59 in March 2014 and entered a correction that found support in the mid-$50s. The subsequent bounce reached the 78.6% retracement at $68.75 two months later and stalled out, yielding nearly three weeks of sideways action.
The stock rallied above harmonic resistance on July 21 (red line) and took off, completing the last 21.4% of the 100% price swing in just four sessions. In addition, the fourth day yielded a breakout above the March high, setting off a fresh set of buy signals that gave Fibonacci-focused shareholders many profitable options, including letting it ride, taking partial profits, or risking the balance on the new uptrend.
The Facebook breakout highlights a second advantage of the Parabola Pop strategy. Markets tend to go vertical into these 100% levels, as if a magnet is pulling on price action. This parabolic tendency can produce outstanding results over very short time periods. Of course, it isn't a given because anything can happen at any time in our modern markets, but even a slight tilt toward the vertical marks a definable edge over the competition.
Final Notes
The thrust from 78.6% into 100% marks a fractal tendency that appears in all time frames, from 15-minute through monthly charts, and can be traded effectively whether you're a scalper or market timer. However, intraday holding periods are more likely to face trade-killing whipsaws and shakeouts, while the size of the expected rally or sell-off is often too small to book a reliable profit, especially after the negative impact of transaction costs.
The Bottom Line
Viewing the trends of the market through the lenses of a Fibonacci grid enables investors to see larger patterns beyond immediate upturns and downturns and to pinpoint prospects for profits that may be just beyond the view of investors who are spooked out by a short-term view of the trends.
If used well, the tools of Fibonacci analysis equip an investor with the confidence and insights needed to withstand shakeouts prompted by drastic downturns and to take advantage of opportunities to profit from approaching vertical shifts. However, doing so requires a willingness to withstand the unnerving volatility that exists within compressed periods of time to see the market movements that a Fibonacci believer anticipates, based on math formulas that have stood the test of time.
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03a31ae9984c15ba3e467f55e4e8114d | https://www.investopedia.com/articles/markets/010816/3-early-warning-signs-you-can-use-exit-positions.asp | Early Warning Signs That Function as Exit Indicators for a Trade | Early Warning Signs That Function as Exit Indicators for a Trade
Profits in the financial markets require multiple skills that can locate appropriate risk vehicles, enter positions at the right time, and manage them with wisdom and a strong stomach before finally taking an exit when opportunity cost turns adverse. Many investors, market timers and traders can perform the first three tasks admirably but fail miserably when it comes time to exit positions.
Getting out at the right time isn't difficult, but it does require close observation of price action, looking for clues that may predict a large-scale reversal or trend change. This is an easier chore for short-term traders than long-term investors who have been programmed to open positions and walk away – holding firm through long cycles of buying and selling pressure. (For more, see: Exit Strategies: A Key Look.)
While buy-and-hold strategies work, adding exit timing mechanisms can yield greater profits because they address the long-developing shift from open outcry and specialist matching to algorithmic software code that seeks out price levels forcing most investors and traders to give up and exit positions. This predatory influence is likely to grow in coming years, making long-term strategies more untenable.
Failing rallies and major reversals often generate early warning signs that, if heeded, can produce much stronger returns than waiting until technicals and fundamentals line up, pointing to a change in conditions.
Key Takeaways The good news with most trades/positions is that they are liquid enough to exit when you see some of these warning signs. Trading psychology can be a good predictor of when to exit a trade. A good example is when there is an obvious trend reversal.High-volume days are usually quite volatile, and market movers have the ability to influence trades that may leave you "holding the bag," and it is therefore considered good practice to book profits before such days.
High-Volume Days
Keep track of the average daily volume over 50 to 60 sessions and watch for trading days that post three times that volume or higher. These events mark good news when they occur in the direction of the position—whether long or short—and warning signs when they oppose the position. This is especially true if the adverse swing breaks a notable support or resistance level.
Uptrends need consistent buying pressure that can be observed as accumulation through on-balance volume (OBV) or another classic volume indicator. Downtrends need consistent selling pressure that can be observed as distribution. High-volume sessions that oppose position direction undermine accumulation-distribution patterns, often signaling the start of a profit-taking phase in an uptrend or value buying in a downtrend.
Also, watch out for climax days that can stop trends dead in their tracks. These sessions print at least three to five times average daily volume in wide-range price bars that extend to new highs in an uptrend and new lows in a downtrend. Further, the climax bar shows up at the end of an extended price swing, well after relative strength indicators hit extremely overbought (uptrend) or oversold (downtrend) levels.
Failed Price Swings
Markets tend to trend just 15 percent to 20 percent of the time and are caught in trading ranges the other 80 percent to 85 percent of the time. Strong trends in both directions ease into trading ranges to consolidate recent price changes, to encourage profit-taking, and to lower volatility levels. This is all-natural and a part of healthy trend development. However, a trading range becomes a top or bottom when it exits the range in the opposite direction of the prior trend swing.
Price action generates an early warning sign for a trend change when a trading range gives way to a breakout or breakdown as expected, but then quickly reverses, with the price jumping back within range boundaries. These failed breakouts or breakdowns indicate that predatory algorithms are targeting investors in an uptrend and short-sellers in a downtrend.
The safest strategy is to exit after a failed breakout or breakdown, taking the profit or loss, and re-entering if price exceeds the high of the breakout or low of the breakdown. The re-entry makes sense because the recovery indicates that the failure has been overcome and that the underlying trend can resume. More often, the price will swing to the other side of the trading range after a failure and enter a sizable trend in the opposite direction. (See also: Trading Failed Breaks.)
Moving Average Crosses and Trend Changes
Short-term (20-day exponential moving average, or EMA), intermediate (50-day EMA) and long-term (200-day EMA) moving averages allow instant analysis simply by looking at relationships between the three lines. Danger rises for long positions when the short-term moving average descends through the long-term moving average and for short sales when the short-term ascends through the long-term.
Price action also waves a red flag when the intermediate moving average changes slope from higher to sideways on long positions and lower to sideways on short sales. Don't stick around and wait for the long-term moving average to change slope because a market can go dead for months when it flatlines—undermining opportunity-cost. It also raises the odds of a trend change. (For more, see: How to Use a Moving Average to Buy Stocks.)
The Bottom Line
It's easy to find positions that match your fundamental or technical criteria, but taking a timely exit requires great skill in our current fast-moving electronic market environment. Address this task by being vigilant for these three red flags that warn of an impending trend change or adverse conditions that can rob you of hard-earned profits. (For additional reading, check out: Simple and Effective Exit Trading Strategies.)
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c0806c734c306e593d773594e7a01779 | https://www.investopedia.com/articles/markets/011216/4-industries-robots-are-revolutionizing.asp | 4 Industries That Robots Are Revolutionizing | 4 Industries That Robots Are Revolutionizing
Robotics has revolutionized the world in two distinct phases. The first phase brought electric machines that could perform repetitive tasks, but that were otherwise useless. Robots such as these were used in car manufacturing and on assembly lines for similar products.
The second phase has started to create industrial robots that don't just perform simple tasks. They also absorb data and respond to new information so that they actively improve. While these robots are still predominantly seen in the automotive industry, it won't be long before they affect every type of industry.
Key Takeaways The healthcare industry has benefited from the introduction of surgical and telemedicine robots. Drones are revolutionizing some parts of the defense and public safety industries. The manufacturing industry has been using robots since the 1960s, but more intelligent manufacturing robots are dramatically increasing productivity. Reconnaissance and digging robots are improving the safety and efficiency of mining operations.
1. Healthcare Industry
The healthcare industry evolves rapidly in relation to incorporating the latest innovations and technological advances. Robotics has been a major player in the current evolution of this industry. For example, Intuitive Surgical’s da Vinci robots are surgical robots that are used by doctors and are considered the standard of care to perform minimally invasive prostatectomies. They can also help a doctor perform hysterectomies, lung surgeries, and other types of procedures.
An even less invasive robotic innovation that has changed the healthcare industry is from iRobot, a remote presence robot that allows outpatient specialists to interact with their patients. This robot allows doctors to administer a more personalized experience, even from a substantial distance. The demand for this sort of telemedicine has increased, especially during the coronavirus pandemic of 2020.
New applications for robotics are constantly spreading, so many of today's expensive technological breakthroughs are likely to become widely available to consumers during the next decade.
2. Defense and Public Safety Industries
When people think about robots revolutionizing an industry, they often think of the defense or public safety industry first. Due in large part to the development of uncrewed vehicles, the public has seen the defense industry completely change, becoming one that uses robots to conduct reconnaissance, battlefield support, and sentry duty.
Drones were so effective for the military that many businesses, including Amazon, wanted to use them for commercial purposes.
The public safety industry also benefited from these types of robots. Drones can now be first responders to car accidents or other types of accidents. For example, there are many companies that are developing uncrewed, remote-controlled flying drones that can provide real-time analysis and monitor potentially dangerous situations. These types of drones have applications for both military and public safety use.
Robots are also revolutionizing the way these two industries conduct surveillance.
3. The Manufacturing Industry
The modern manufacturing industry first started using programmable industrial robots as early as 1961. Back then, robots were automatic, doing repetitive and menial tasks that people found boring or dangerous. Since then, robots have evolved to the point where they are now more efficient than unskilled labor in the manufacturing industry.
For example, Australia's Drake Trailers has reported that it introduced a single welding robot into its production line and saw a 60% increase in productivity. Robots that are increasing productivity in the manufacturing industry are also becoming intelligent, sometimes working and learning alongside people to increase the number of manufacturing tasks that they can complete.
4. The Mining Industry
The mining industry, once reliant on human capital, is now predominantly reliant on technology and advanced robotics. These types of robots conduct reconnaissance and compile important information about the interior of a mine. This provides a safer work environment for the remaining human miners. For example, Stanley Innovation has an advanced custom robot that is placed on a Segway robotic mobility platform (RMP), allowing it to maneuver over hazardous terrain.
Additionally, the digging equipment itself has become extremely advanced in recent years. Currently, robot-operated drills can conduct drilling deep in the earth as well as offshore, allowing mining companies to dig deeper and in more treacherous conditions than if they had to rely on human operators.
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8dc42a89da7b8a119d11e954e8f13741 | https://www.investopedia.com/articles/markets/012216/worlds-top-10-semiconductor-companies-tsmintc.asp | 10 Biggest Semiconductor Companies | 10 Biggest Semiconductor Companies
Corporations and consumers globally use semiconductors—small conductors of electricity also known as semis or chips—in a millions of devices, including space vehicles, car computers, smartphones, medical equipment, appliances, and more. As electronic devices proliferate, companies that manufacture semiconductors continue to prosper. These companies tend to be driven by the goal of producing smaller, cheaper, and faster semiconductors to facilitate more streamlined, powerful, and affordable technology products. Semiconductors can be divided into four categories: microprocessors, memory chips, commodity integrated circuits, and complex "systems on a chip."
For investors looking to gain exposure to the semiconductor industry, there are many companies that produce these chips. While some of these companies are household names, many are relatively unknown. Semiconductors are hidden in phones, tablets, and computers. So many lesser-known business-to-business (B2B) companies are major suppliers of chips and other components. These suppliers, in turn, often sell these items to hardware companies that manufacture more recognizable, brand-name devices.
As a group, semiconductor companies play a major role in the development of new technology products and are seen by many investors as a key investment. The semiconductor industry and stocks in the sector tend to be highly cyclical.
Below are the 10 biggest semiconductor companies based on their 12-month trailing (TTM) revenue. This list is limited to companies which are publicly traded in the U.S. or Canada, either directly or through ADRs. Some foreign companies may report semiannually, and so may have longer lag times. All figures are current as of June 18, 2020 and all data is provided by YCharts.
Intel Corp. (INTC)
Revenue (TTM): $75.7 billion Net Income (TTM): $22.7 billion Market Cap: $256.1 billion 1-Year Trailing Total Return: 34.1% Exchange: Nasdaq
Intel is an integrated device manufacturer that designs and manufactures motherboard chipsets, network interface controllers, and integrated circuits. The company's initial products were memory chips, including the world's first metal oxide semiconductor. Today, Intel creates processors for a variety of computer and technology companies. In June 2020, analysts expect Apple Inc. (AAPL) to announce plans to discontinue a long-term partnership with Intel, with Apple preparing to produce its own chips in-house.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Revenue (TTM): $37.9 billion Net Income (TTM): $13.1 billion Market Cap: $293.5 billion 1-Year Trailing Total Return: 58.8% Exchange: New York Stock Exchange
Taiwan Semiconductor Manufacturing Co. is one of the world's largest dedicated independent pure-play semiconductor foundries. Pure-play foundries only fabricate integrated circuits and do not have any in-house design capabilities. Many semiconductor companies outsource the manufacturing of their components to Taiwan Semiconductor.
Qualcomm Inc. (QCOM)
Revenue (TTM): $24.7 billion Net Income (TTM): $4.0 billion Market Cap: $101.2 billion 1-Year Trailing Total Return: 34.2% Exchange: Nasdaq
Qualcomm is a global semiconductor and telecommunications company that designs and markets wireless communications products and services. Telecommunications companies worldwide use Qualcomm's patented CDMA (code division multiple access) technology, which has played an integral role in the development of wireless communications. Its Snapdragon chipsets are found in many mobile devices.
Broadcom Inc. (AVGO)
Revenue (TTM): $22.9 billion Net Income (TTM): $2.5 billion Market Cap: $126.1 billion 1-Year Trailing Total Return: 23.4% Exchange: Nasdaq
Broadcom manufactures digital and analog semiconductors and provides interfaces for computers' Bluetooth connectivity, routers, switches, processors, and fiber optics.
Micron Technology Inc. (MU)
Revenue (TTM): $19.6 billion Net Income (TTM): $2.3 billion Market Cap: $56.7 billion 1-Year Trailing Total Return: 57.1% Exchange: Nasdaq
Micron Technology markets semiconductor products on an international basis. Its products are used in computers, consumer electronics, automobiles, communications, and servers. It creates flash RAM products as well as rewritable disc storage solutions.
Texas Instruments Inc. (TXN)
Revenue (TTM): $14.1 billion Net Income (TTM): $5.0 billion Market Cap: $115.8 billion 1-Year Trailing Total Return: 21.8% Exchange: Nasdaq
Texas Instruments designs and fabricates semiconductors for manufacturers worldwide. The company is a major manufacturer of chips for mobile devices, digital signal processors, and analog semiconductors. It still manufactures the product it first became widely known for: calculators. Texas Instruments started as an oil and gas company in 1930, then focused on defense systems electronics in the 1940s. The company entered the semiconductor business in 1958 and now has tens of thousands of patents.
ASE Technology Holding Co. Ltd. (ASX)
Revenue (TTM): $13.7 billion Net Income (TTM): $0.6 billion Market Cap: $9.7 billion 1-Year Trailing Total Return: 30.9% Exchange: New York Stock Exchange
ASE Technology is a Taiwan-based holding company that provides semiconductor assembly, packaging, and testing services. The company was created by the combination of Advanced Semiconductor Engineering Inc. and Siliconware Precision Industries Co., Ltd.
NVIDIA Corp. (NVDA)
Revenue (TTM): $11.8 billion Net Income (TTM): $3.3 billion Market Cap: $227.2 billion 1-Year Trailing Total Return: 155.5% Exchange: Nasdaq
Nvidia is best known for its line of consumer and high-end video graphics cards found in computers of all shapes and sizes. These graphics processing units, or GPUs, are popular among computer gamers, digital artists, and those who work with computer-aided design. Beginning around 2017, the company also received a boost in business from cryptocurrency mining, where GPUs have been found to be more efficient at producing digital currencies than traditional technologies.
STMicroelectronics NV (STM)
Revenue (TTM): $9.7 billion Net Income (TTM): $0.9 billion Market Cap: $23.9 billion 1-Year Trailing Total Return: 74.5% Exchange: New York Stock Exchange
Swiss firm STMicroelectronics NV designs and manufactures semiconductor integrated circuits and discrete devices. Products created by this company have applications in a wide array of industries and sectors, including telecommunications, computer, industrial, and consumer electronics.
NXP Semiconductors NV (NXPI)
Revenue (TTM): $8.8 billion Net Income (TTM): $0.2 billion Market Cap: $32.6 billion 1-Year Trailing Total Return: 32.0% Exchange: Nasdaq
Based in the Netherlands, NXP Semiconductors NV provides semiconductors and related technology to companies in the businesses of in-car entertainment, mobile devices, security applications, and more. NXP products are also used in applications as wide-reaching as lighting, wireless infrastructure, computing, and identification.
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ccf6f0f23920bd02b34d99887a8654f2 | https://www.investopedia.com/articles/markets/012315/how-cvs-makes-its-money.asp | How CVS Makes its Money | How CVS Makes its Money
The demise of brick-and-mortar retail may be capturing the news, but despite the Amazon effect, some companies are still thriving. Even as Amazon's entry into the retail pharmacy business becomes real, CVS Health is not just looking to survive, but to grow. In May 2018, CVS made progress regarding its $69 billion acquisition of Aetna Inc., an American health insurance company. In June 2018, millions of dollars worth of shares were reportedly bought by companies such as Personal Resources Investment & Strategic Management Inc. with 23,629 shares, CapWealth Advisors LLC with 23,629 shares, and Sentry Investments Corp. with 153,800 shares—according to the latest SEC filings.
Shares of both CVS Health and Aetna rose on July 11, 2018, following a report that the Department of Justice will not challenge their merger. Bloomberg reported the news first, citing the trade publication Reorg Research.
On Aug. 8, 2018, CVS reported second quarter earnings with net revenues of $46.7 billion, up 2.2% from the same quarter last year.
Some History
CVS Health Corp (CVS) (originally Consumer Value Stores) can trace its lineage all the way back to 1922. The current incarnation of CVS would be unrecognizable to its founders. First a shoe company, then a general merchandiser, in the mid-1990s the corporation now known as CVS sold off all its units excluding the lucrative pharmacy operations. Shortly thereafter, it began acquiring rival chains—Eckerd, Osco, Sav-On, and Longs. Today CVS has over 9,800 retail locations, operating in 49 U.S. states, Washington D.C., Puerto Rico, and Brazil. The company employs 246,000 people.
For accounting purposes, CVS maintains four business divisions. In decreasing order of size, those are pharmacy, medical clinic, pharmacy benefit management, and specialty. While CVS revenue has stabilized over the last couple of years, it leveled off at $184.8 billion in 2017.
Prescriptions and More
CVS's pharmacy division is responsible for more than 67% of its revenue. The term “pharmacy” in this context is a little misleading, and this particular sector of the business should probably best be styled “retail.” It includes not only dispensing prescriptions and administering flu shots, but all the convenience/sundry sales normally associated with visits to the drugstore; everything from candy and cookies to “As Seen on TV” novelties like Snuggies and Slap Chops.
CVS’s medical clinic operations, branded “MinuteClinic,” include 1,100 retail clinics in 33 states. CVS entered this industry relatively late but has already become the market leader.
Benefits Management
Pharmacy benefit management is the part of CVS’s business that processes prescription claims. Known by the name Caremark, it is distinct from CVS’s pharmacy operations in that the former is a high-volume operator that deals directly with drug manufacturers, setting prices, handling mail orders, etc. In other words, all the intangible administrative stuff that seems to define advanced economies in the early 21st century.
Finally, CVS’s specialty department handles the high-end, complex, life-sustaining, and expensive drugs that operate on low volume but gigantic prices. For every 1,000 patients who need a commonplace Paxil or Xanax prescription, there are one or two who require a $6,000 vial of Soliris to stimulate the creation of red blood cells and keep themselves alive. Because such drugs are so rare, costly, and specialized, they necessitate a CVS department unto themselves. Subdivisions of CVS’s specialty business include Accordant, which offers an insurance-paid care program to patients who suffer from any of 17 specific serious conditions (e.g. hemophilia, cystic fibrosis); Coram, whose nurses will come to your house and infuse your veins to help treat hemophilia, chronic congestive heart failure, etc.; and Novologix, which makes and maintains claims software. Almost five million people a day patronize CVS stores, and Coram serves more than 45,000 patients every month.
CVS earns so much revenue from so many sources that it could remove a high-margin item like tobacco from its stores, a measure undertaken at least primarily for public relations, and suffer no lasting damage. Granted, idealism only goes so far before butting heads with pragmatism. The company has not announced any plans to stop selling beer and wine.
The Bottom Line
Americans allegedly love freedom and football, but the true national pastime is consuming pharmaceuticals. Everything from anxiety to restless legs syndrome now has a corresponding pill or injection to alleviate or eradicate the symptoms, and companies like CVS are at the forefront of getting those drugs to users. With the number of medical conditions being newly identified consistently outpacing those being eradicated, the amount of money spent on pharmaceuticals will likely increase—a development that should be resonant music to CVS shareholders.
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c019e7b4edbf4f83eeaa59a66edde79c | https://www.investopedia.com/articles/markets/012516/worlds-top-10-restaurant-companies-mcdsbux.asp | 10 Biggest Restaurant Companies | 10 Biggest Restaurant Companies
The top 10 restaurant companies in the world are primarily chain operations with a major international presence. Despite the discretionary nature of restaurant spending, some companies have positioned themselves to weather economic cycles by maintaining consistent, profitable growth over the long term. In many cases, the world's top restaurant companies by market capitalization are holding companies that control a variety of subsidiary chains.
These are the 10 biggest restaurant companies by 12-month trailing revenue. This list is limited to companies which are publicly traded in the U.S. or Canada, either directly or through ADRs. Some foreign companies may report semiannually, and so may have longer lag times. Data is courtesy of YCharts.com. All figures as of August 4, 2020.
Some of the stocks below are only traded over-the-counter (OTC) in the U.S., not on exchanges. Trading OTC stocks often carries higher trading costs than trading stocks on exchanges. This can lower or even outweigh potential returns.
#1 Starbucks Corp. (SBUX)
Revenue (TTM): $24.1 billionNet Income (TTM): $1.3 billionMarket Cap: $88.3 billion1-Year Trailing Total Return: -19.5%Exchange: NASDAQ
Starbucks is the world's dominant coffee shop-themed chain with more than 30,000 stores globally. It has both company-owned and licensed stores globally, and sells specialty beverages such as coffees and teas along with fresh food items. Starbucks also sells branded items outside of its stores, such as roasted whole bean and ground coffees, including Seattle's Best Coffee; Starbucks and Teavana-branded single-serve products; and ready-to-drink beverages such as Frappuccino.
#2 McDonald's Corp. (MCD)
Revenue (TTM): $19.3 billionNet Income (TTM): $4.8 billionMarket Cap: $144.6 billion1-Year Trailing Total Return: -7.1%Exchange: New York Stock Exchange
McDonald's is the world's largest fast-food restaurant chain and one of the best-known brand names. The company has more than 39,000 locations in about 100 countries. A pioneer in the fast food industry, the company has maintained consistent, moderate growth through affordable prices, speedy service, and by constantly expanding and refreshing its menu offerings.
#3 Yum China Holdings, Inc. (YUMC)
Revenue (TTM): $8.0 billionNet Income (TTM): $0.5 billionMarket Cap: $19.7 billion1-Year Trailing Total Return: 16.6%Exchange: New York Stock Exchange
Spun off by Yum! Brands in 2016, Yum China Holdings is a Fortune 500 company incorporated in the United States but headquartered in Shanghai. It operates thousands of restaurant locations across mainland China. Yum China also operates all-Chinese versions of Pizza Hut, Taco Bell, and KFC, as well as local chains.
#4 Darden Restaurants Inc. (DRI)
Revenue (TTM): $7.8 billionNet Income (TTM): -$0.1 millionMarket Cap: $9.7 billion1-Year Trailing Total Return: -37.0%Exchange: New York Stock Exchange
Darden Restaurants owns and operates a line of casual and fine dining restaurant chains including brands such as Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, Eddie V’s, and Yard House. The company was spun off from General Mills Inc. (GIS) in 1995.
#5 Autogrill SpA (ATGSF)
Revenue (TTM): $6.0 billionNet Income (TTM): $0.2 billionMarket Cap: $1.4 billion1-Year Trailing Total Return: -43.2%Exchange: OTC
Italy-based Autogrill operates in roughly 1,000 locations in 31 countries. Autogrill has a portfolio of about 300 brands, many of which operate in airports or along highways. Some of Autogrill's most popular brands include Spizzico, Grabandfly, and Ciao Ristorante.
#6 Chipotle Mexican Grill, Inc. (CMG)
Revenue (TTM): $5.6 billionNet Income (TTM): $0.3 billionMarket Cap: $32.1 billion1-Year Trailing Total Return: 44.8%Exchange: New York Stock Exchange
Chipotle Mexican Grill is one of most successful chains selling simple, fast-casual Mexican food, specializing in burritos, tacos, bowls, and similar dishes. The company operated 2,580 domestic locations and 39 international locations at the end of 2019 and has locations in the U.S., U.K., Canada, France, and Germany.
#7 Restaurant Brands International, Inc. (QSR)
Revenue (TTM): $5.6 billionNet Income (TTM): $0.7 billionMarket Cap: $16.9 billion1-Year Trailing Total Return: -24.4%Exchange: New York Stock Exchange
Restaurant Brands International is among the largest global quick-service restaurant chains in the world. It was established by the merger of Burger King and Canadian coffee chain Tim Hortons in 2014, valued at $12.5 billion. It purchased Popeyes Louisiana Kitchen in 2017. Restaurant Brands operates more than 27,000 restaurants in more than 100 countries and territories.
#8 Yum! Brands, Inc. (YUM)
Revenue (TTM): $5.5 billionNet Income (TTM): $1.0 billionMarket Cap: $27.4 billion1-Year Trailing Total Return: -21.2%Exchange: New York Stock Exchange
Yum! Brands is the largest quick-service restaurant company in the world, with more than 50,000 restaurants in 150 countries. The company is known for its franchise chains KFC, Pizza Hut, Taco Bell, and WingStreet. The majority of the company's locations are franchised by 2,000 partners. Yum! Brands was spun off from PepsiCo, Inc. (PEP) in 1997.
#9 Domino's Pizza, Inc. (DPZ)
Revenue (TTM): $3.7 billionNet Income (TTM): $0.4 billionMarket Cap: $15.2 billion1-Year Trailing Total Return: 59.6%Exchange: New York Stock Exchange
Domino's Pizza is the largest pizza company in the world, with more than 17,000 stores in 90 countries. Domino's offers a wide range of pizza products, such as traditional hand-tossed pizza, Brooklyn-style pizza, and pizza with crunchy, thick crusts. More than 94% of Domino's stores in the U.S. are franchise-owned.
#10 Bloomin' Brands, Inc. (BLMN)
Revenue (TTM): $3.6 billionNet Income (TTM): -$0.1 billionMarket Cap: $1.0 billion1-Year Trailing Total Return: -35.3%Exchange: NASDAQ
Bloomin' Brands is a restaurant holding company that owns chains including Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, and Fleming's Prime Steakhouse & Wine Bar. Bloomin' Brands has nearly 1,500 restaurants worldwide.
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a514689a9d1ebcfd002803aff4e6ac9b | https://www.investopedia.com/articles/markets/012716/analyzing-porters-five-forces-electronic-arts-ea.asp | Porter's Five Forces and Electronic Arts (EA) | Porter's Five Forces and Electronic Arts (EA)
What Are Porter's Five Forces?
The Porters Five Forces model shows investors which market forces pose the biggest threat to a company. The model examines external forces from both a horizontal and vertical competition perspective. Value investors use fundamental analysis, including Porters Five Forces, to determine if a stock has potential as an investment. Fundamental analyses examine the share price in conjunction with company earnings, the upward or downward trend of revenue and net income, debt level, cash flow, and other financial health metrics.
Key Takeaways: The Porters Five Forces model shows investors which external forces pose the biggest threat to a company. The model was developed in 1979 by Michael E. Porter, a Harvard Business School professor. The five forces model considers external forces from both a horizontal and vertical competition perspective. In the case of the video game producer Electronic Arts, industry competition is the biggest threat.
Understanding Porter's Five Forces
Thorough fundamental analysts evaluate more than the company itself. They look at the entire industry and identify external factors that affect the company. Even the most fundamentally sound companies face constant external threats, and how they respond to them plays a significant role in their continued success. The Porter's Five Forces model considers five common external forces and provides a framework through which investors can determine which of the forces pose the biggest threat to a company.
The Five Forces Model
Michael E. Porter, a Harvard Business School professor, developed the five forces model in 1979. He understood the value of analyzing external forces. Still, he felt the models available at the time, such as the strengths, weaknesses, opportunities and threats (SWOT) analysis, were insufficient and lacking in scope. He developed the model with the idea that it would probe specific external threats more deeply.
The five forces model considers external forces from both a horizontal and vertical competition perspective. Horizontal competition comes from rivals in the industry and substitute products from other industries. Vertical competition comes from the supply chain, and is manifested in the bargaining power of suppliers and buyers.
The model examines horizontal competition from the perspectives of industry competition, the threat of new entrants, the threat of substitute products, and vertical competition from suppliers and buyers.
We examine the video game producer Electronic Arts through the prism of Porter's Five Forces.
Electronic Arts: An Overview
Electronic Arts, Inc. (NASDAQ: EA) develops, markets, and distributes video games. The company was founded in 1982 and has its headquarters in Redwood City, Calif. Its most popular titles include "Madden NFL," "NCAA Football," "NBA Live," and "FIFA," all of which are published under the company's EA Sports label. Additionally, EA offers adventure games, such as "Mass Effect," "Dead Space," and "Army of Two."
The company is a dominant player in the video game industry and has huge brand name recognition among gamers. Its market capitalization in June 2020 stood at $37.7 billion. EA is fundamentally sound, with return on equity (ROE) at 21%, operating margin of 26%, low debt, and good cash flow. Its main competitors include Activision Blizzard, Ubisoft Entertainment, and Nintendo.
Industry Competition
Of Porter's five forces, industry competition represents the biggest threat to EA. Video game players do not tend to have high brand loyalty toward particular game manufacturers. Unlike car buyers, many of whom are exclusively Chevy people or Ford people, gamers simply want the best games and are not typically concerned with who makes them. A gamer who, for example, is all in on EA but shuns Activision is rare.
Unlike Coke or Nike, EA cannot rely on its brand name to give it an edge over competitors. The company must continue to develop the most cutting-edge video games and effectively market them to the gaming public. EA's Madden franchise, for instance, has been the gold standard for football games for two decades. Players choose the game because it is the most advanced football video game on the market, not because it is made by EA.
EA must continue to dominate the sports market while ramping up its adventure games, a market that Activision Blizzard currently dominates with offerings such as "Call of Duty" and "World of Warcraft."
Threat of New Entrants
The threat of new entrants is high in the multimedia and graphics software industry and particularly in the video game production segment. The segment's barriers to entry are low, with minimal government regulation and manageable costs. Programming video games does not require expensive or hard-to-find materials; more critical is the intellectual capacity to develop a new or innovative concept and bring it to life through effective programming and coding. One brilliant idea that leads to a blockbuster game is all it takes for a new company to catapult itself into the top echelon of video game producers.
Bargaining Power of Buyers
Buyers' bargaining power rounds out the external forces that pose the most serious threats to EA. Video games are highly discretionary purchases. Consumers can be selective about where they spend their money. Moreover, gamers tend to have a pack mentality when it comes to the games they purchase and play. Buyers hold a lot of sway over the industry, and one bad or disappointing offering that causes a revolt from the gaming community can devastate a company. The video game console manufacturer Sega learned this the hard way when its Dreamcast console was widely panned, leading to gamers taking their dollars elsewhere and ultimately decimating the brand.
Threat of Substitutes
A substitute is not a similar product from a competitor, such as a football video game made to compete with "Madden," but a product in a different niche that a consumer might choose in place of a company's offering. App-based games, which users can play on smartphones or tablets, represent the best example of a substitute for EA's products. The advantage of app-based games is that they are usually free or inexpensive. They almost always cost under $5, whereas a new EA game can cost $50 or more. However, smartphone and tablet games have not approached the point where the gaming experience is close to that of an EA game.
Bargaining Power of Suppliers
EA's suppliers provide physical products and materials, such as computer hardware and software, graphics cards, and network infrastructure, and intellectual property. Intellectual property includes video game content and software code. Because a wide array of ingredients make up an EA game, the company uses a wide array of suppliers. Suppliers of unique materials may possess a degree of bargaining power. However, the company's diversification among suppliers means that one or two suppliers raising prices represents only a small increase in the company's total cost of doing business.
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7811ebafef2026ea4663041ffa9e32b1 | https://www.investopedia.com/articles/markets/012716/etsy-how-its-fared-its-2015-ipo-etsy.asp | Etsy: How It's Fared Since Its 2015 IPO | Etsy: How It's Fared Since Its 2015 IPO
Etsy, Inc. (NASDAQ: ETSY) made its stock market debut on April 16, 2015 with an initial public offering (IPO) of $16 per share. While Etsy's share price nearly doubled to $31 in the first days of trading, the online retailer quickly entered a period of steady decline that continued into early 2016. After closing at a record low of $6.90 on February 8, 2016, Etsy stock has slowly worked its way back up to around $57 per share as of October 22, 2019.
Etsy's average daily volatility rose to 7.29% for the week of November 8, 2018, with help from several reports issued by Wall Street analysts. RBC Capital Markets rated Etsy at "Sector Perform" in a research note published on Wednesday, posting a price target of $52. Loop Capital gave the stock a "Buy" rating on Wednesday morning while setting a more ambitious price target of $57. Meanwhile, Morgan Stanley rated Etsy an "Equal-Weight" in an October 24, 2018 research note.
Etsy, which is valued at $6.9 billion at the time of writing, reported FY 2018 earnings of $604 million in revenue with a net profit of $77.5 million, or a net profit margin of just under 13%.
Key Takeaways Etsy is a peer-to-peer online platform where individuals can buy and sell crafts, handiwork, and found items. Unlike eBay or Amazon, the focus is on artisan, unique or bespoke items.The company IPO'd in 2015 and has risen more than 160% in value over the past four years.As of October 2019, the shares have risen from an IPO price of $24.90 to around $57 per share, where it now commands a market cap of just under $7 billion.
Company Overview
Etsy is a peer-to-peer (P2P) e-commerce website where users buy and sell handmade crafts, vintage items, art, and photography. The online marketplace works similarly to Amazon and eBay, only with an emphasis on unique items rather than mass-produced merchandise. The site launched in 1998 and grew steadily in its first decade, making its one-millionth sale in 2007. One year later in 2008, Etsy received $27 million in venture capital funding.
The company announced its IPO in March 2015 and officially went public on April 16 of the same year. After a brief initial surge, the stock began declining, and by mid-June, it had fallen below the IPO price of $16 per share, with analyst Matthew Frankel at The Motley Fool ranking Etsy as "the worst IPO of 2015." Etsy has faced competition from rival Amazon's handmade section that launched in 2015 but, despite all of these setbacks, has managed to hold its ground in the emerging e-commerce industry.
How a Day Three Investment Would Have Fared
One way to determine if you should have invested in a company early is to put yourself in the shoes of an investor who got in shortly after an IPO. On April 20, 2015, Etsy's third day of trading, the stock opened at $28.77 and closed at $24.90. Let's say you invested in 100 shares of Etsy toward the end of day three when shares were trading at $24.90. Those shares would have cost you $2,490 at the time — and over the next nine months, you would have watched (and maybe winced) as the value of those shares steadily declined.
On January 19, 2016, Etsy shares closed at a record low of just $6.65. At that time, your investment would have dropped 73.29% in value from $2,490 to $665. If you held onto that stock, however, you would have watched it slowly creep up in value over the next two years. The stock would exceed its March 2015 IPO price of $16 on August 11, 2017, when the company closed at $16.22, and would double that less than a year later with a share price of $32.34 on May 31, 2018.
On October 22, 2019, Etsy closed at $57.10 per share. At that price, your shares would be worth $5,710 a 161% gain on your initial investment of $2,490.
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ce73245869fe66d613f566534a62b126 | https://www.investopedia.com/articles/markets/012716/fitbit-inc-how-its-fared-its-2015-ipo-fit.asp | Fitbit: How It's Fared Since Its 2015 IPO | Fitbit: How It's Fared Since Its 2015 IPO
The Rise and Fall of Fitbit's Stock Price
Fitbit Inc. (FIT), a pioneering developer of wearable fitness-tracking devices, saw its share price jump nearly 50% on the day of its celebrated listing in June 2015. The share price nearly doubled from there in the following weeks, reaching $51.90. That marked the peak of a dizzying ascent and decline, which saw the price steadily sink in the following years, to below $3 just four years later—a drop of more than 90%.
The share price jumped in late 2019, when Google announced it would buy the company in a $2.1 billion deal.
Key Takeaways Fitbit's stock price jumped nearly 50% on the day it was listed, and nearly doubled from there in the following weeks, reaching $51.90. But Fitbit's share price would quickly reverse and begin a long, relentless slide that took it under $3 just four years later, as the company faced growing competition and its own internal struggles. Google struck a deal to buy Fitbit for $7.35 a share in November 2019.
Operating History
Fitbit began operations in 2007. As a first-mover in the wearables market, the Fitbit brand quickly became synonymous with fitness tracking. By 2012, Fitbit device sales had broken through the 1 million mark as momentum continued building across the market. In 2014, the year before its IPO, Fitbit captured 41% of the worldwide wearables market, with sales of more than $745 million and net income of nearly $132 million.
Lead-Up to the IPO
Fitbit sold 3.9 million devices during the first quarter of 2015, an increase of 129.4% over the same period in 2014. However, despite the furious growth in sales, Fitbit's market share fell by nearly one-fourth, from 44.7% in the first quarter of 2014 to 34.2% in 2015.
The IPO and After
Fitbit's IPO in June was met with excitement right out of the gate, given the company's competitive position and fast sales growth in a booming market. After rising nearly 50% during the opening day of trading, the stock continued trending up until second-quarter 2015 earnings were reported in August. Despite handily beating estimates, Fitbit's share price soon sank below $40. Concerns seemed to be linked to a decline in gross margins as the company struggled to pump out 4.4 million devices to a hungry market.
In November of that year, the company announced another round of strong earnings results, including a doubling of the number of device sales from a year earlier. But it also announced plans for a secondary offering of 7 million shares, just months after its IPO, as well as additional sales by existing shareholders, sending its share price tumbling by more than 8%. Although the secondary offering was eventually amended to 3 million shares, investors were worried about Fitbit's quick return to the markets for additional working capital.
Rising Competition
While Fitbit was a pioneer in wearables, it has faced a growing number of competitors from all directions in recent years, including low- and mid-priced fitness wearables from companies such as Jawbone and Xiaomi, as well as offerings in the middle- and high-end fitness segments from sports and technology giants such as Nike, Garmin, Microsoft, and Samsung.
In January 2016, Fitbit unveiled a new smartwatch product, called the Fitbit Blaze, to compete against the Apple Watch and other similar offerings. The Blaze was met with some skepticism from investors, and Fitbit's share price fell nearly 20% on the day. The hits kept coming. The same month, news emerged of a class-action lawsuit against Fitbit claiming the company's devices are inaccurate, particularly its heart rate monitor. in the monitoring of heart rate.
Google Comes Calling
Rumors of a deal between Google and Fitbit—and then news of the deal—sent Fitbit shares surging above $7 in late October and early November, but the price has come off of those highs as doubts have arisen about the fate of the deal. Fitbit would give Google an avenue to compete with Apple's smartwatch, as well as access to valuable data collected through the devices. But that data collection, though, is the focus of regulators in Europe and elsewhere, as are questions of fair competition, raising some doubts about whether the deal will go through.
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f9830c9c6f9cfbb815077a3760f64a29 | https://www.investopedia.com/articles/markets/020916/analyzing-porters-five-forces-jpmorgan-chase-jpm.asp | Analyzing Porter's Five Forces on JPMorgan | Analyzing Porter's Five Forces on JPMorgan
You're looking at investing in new stocks or adjusting your portfolio to keep up with the trends in the market. But there are so many different factors to consider. So how do you do it? There are a number of ways you can analyze companies and their stocks. One way to do so is through an analysis using Porter's Five Forces Model, a methodology that looks at external factors within a specific industry. Keep reading to see how these five forces apply to JPMorgan Chase, one of the world's leading financial institutions.
Key Takeaways Competition from within the financial industry is probably the strongest of Porter's Five Forces when analyzing JPMorgan Chase. Large groups of retail clients, major corporate clients, and high-net-worth individuals can have a big impact on JPMorgan's bottom line. The threat of substitute products—payment services and peer-to-peer lending—continues to threaten the financial industry. The bargaining power of suppliers and the threat of new entrants have minimal impact on the likes of JPMorgan.
Porter's Five Forces Model
Developed by Harvard Business School professor Michael Porter, the Five Forces Model is a business analysis tool that examines the relative strength of five primary market dynamics that govern competition within virtually any industry.
Porter's analysis considers the competition level among the leading companies in an industry, then considers four other factors that affect the industry and the success of companies within that industry:
The bargaining power of suppliers The bargaining power of consumers or clients The threat of new entrants into the industry The threat posed by substitute products
JPMorgan Chase: An Overview
JPMorgan Chase (JPM) is a major global bank holding and financial services company. It is a universal banking company that provides commercial, retail, and investment banking services. It is one of the four principal money center banks in the United States, along with Wells Fargo, Bank of America, and Citigroup. With more than $2.3 trillion in assets, JPMorgan is one of the 10 largest banks worldwide.
The company, as we know it today, is the result of a series of mergers of a group of major U.S. banks. It is one of the four major banks in the United States, along with Citibank, Bank of America, and Wells Fargo. JPMorgan operates as a bank holding company with a number of subsidiaries engaged in the company's four main areas of financial enterprise:
Retail banking Commercial banking Corporate and investment banking Asset management
In addition to regular retail, commercial, and investment banking services, JPMorgan offers Treasury services, letters of credit for domestic or international payments, foreign exchange, fund administration, and private banking services.
JPMorgan had a market capitalization of $261.7 billion as of May 15, 2020. The company reported consolidated net income of $36.4 billion for the 2019 fiscal year.
An analysis of JPMorgan Chase using Porter's Five Forces reveals that the company must concentrate on the competition from industry rivals, the bargaining power of consumers, and the threat of substitute products. The bargaining power of suppliers is a lesser force, while the threat of new entrants to the industry is considered minimal.
Competition From Industry Rivals
Competition within the financial industry is probably the strongest of Porter's model when analyzing JPMorgan Chase. The company not only faces intense competition from the other three major money-center banks in the United States, but there's also a threat from international banks like HSBC and Barclays.
JPMorgan faces stiff competition from domestic rivals as well as major international banks on a global scale.
The relatively low switching costs from one bank to another intensifies the importance of competition from within the industry, especially in the retail and commercial banking spheres. It doesn't cost much—in most cases, nothing at all—to close an account at one bank and open a new account at another one. And to sweeten the pot, major banks extend offers to draw customers away from their rivals. JPMorgan is no exception. New customers can earn as much as $600 when they open a checking and savings account as long as they meet certain eligibility requirements.
Overall, JPMorgan deals with industry competition in three main ways:
By distinguishing itself in the marketplace primarily on the basis of its history and experience By staying on the cutting edge of offering customer convenience and low-cost and cutting-edge services By acquiring smaller banks, thereby removing some potential competition from the marketplace
The Bargaining Power of Consumers
The banking industry relies heavily on the bargaining power of consumers. Some have more power than others. For instance, individual consumers, especially those in the retail banking marketplace, have relatively little bargaining power. That's because the loss of a single account basically has minimal to no impact on the company's bottom line. Consider what effect Mr. Jones has on the bank when he decides to close his account. On the whole, the loss of his account won't bother the bank too much.
But the bargaining power of large groups of customers is greater because the bank cannot afford to suffer mass defections of depositors. Corporate clients and high-net-worth individuals (HNWI) also have greater bargaining power since the loss of sizable accounts and sources of revenue can more substantially affect the bank's profitability.
JPMorgan addresses the issue of customer bargaining power primarily by extending attractive sign-up offers to new clients. It also makes efforts to get existing clients to open additional accounts and sign up for additional services, which effectively increases the switching cost for consumers by making it more troublesome for them to transfer their finances to another bank.
The Threat of Substitute Products
The threat of substitute products has increased in the banking industry, as companies outside the industry have begun to offer specialized financial services that were traditionally only available from banks. PayPal and Apple Pay, prepaid debit cards, and online peer-to-peer lenders (P2P) such as Prosper.com or LendingClub.com offer a multitude of options that cost JPMorgan—and other major banks—a considerable amount of revenue.
So how does JPMorgan keep up? The bank has initiatives that include a division that focuses on small business lending. It also established Chase Pay, its own digital wallet service.
The Bargaining Power of Suppliers
There are two main suppliers for a bank. The first group comprises of depositors who supply the primary resource of capital, while the second is its employees, also known as the resource of labor. The threat from individual depositors is minimal, just the way it is with the bargaining power of consumers. Major corporate customers, HNWIs, and large groups of depositors, though, tend to be a big threat.
JPMorgan's approach to dealing with this force is to try to attract new clients and to increase the extent to which existing depositors hold funds and access the bank's services. When it comes to the bargaining power of suppliers of labor, individual employees have little bargaining power unless they're major executive employees. JPMorgan must address its overall bargaining power by offering an attractive salary and benefits package to retain the best employees.
The Threat of New Entrants to the Industry
The threat of new entrants from within the financial industry is relatively small. It isn't easy for a new bank to enter the market and try to compete on the same level as JPMorgan. In fact, a new competitor would face a number of significant obstacles, notably the massive amount of capital required, the length of time needed to establish a significant brand identity, and the cumbersome government regulations that apply to the operation of banks.
While brand new entrants may not be much of a threat, JPMorgan does have to brace for some competition from already established banks in other countries. For instance, the company must keep an eye out for major banks in developing economies such as China that will eventually compete on an international scale.
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b02c06c41ca57f5ae3d8dd6673598173 | https://www.investopedia.com/articles/markets/021316/how-medtronic-makes-money-mdt.asp | How Medtronic Makes Money | How Medtronic Makes Money
If you were starting a business from scratch and intending to go global, you could do worse than zeroing in on medical devices. The industry features customer base numbers in the hundreds of millions, and almost all the purchasing is done via third parties.
Medtronic (MDT), the $145 billion Minneapolis-based global entity, exemplifies the industry, selling medical devices in 150 countries while generating more than $30 billion in revenue. Medtronic’s four major reporting segments are cardiac and vascular, minimally invasive therapies, restorative therapies, and diabetes. Let's look at each to see how the company makes money.
Cardiac and Vascular Segment
Cardiac and vascular accounted for $11.4 billion of revenue in fiscal year 2018 and makes, among many other devices, pacemakers and defibrillators. This segment is divided further into subgroups that manage the following types of diseases: cardiac rhythm and heart failure, coronary and structural heart, and aortic and peripheral vascular.
Key Takeaways Medtronic (MDT) is a medical-device company that generates more than $30 billion in revenues from four business segments: cardiac and vascular, minimally invasive therapies, restorative therapies, and diabetes.The cardiac and vascular segment is the largest, generating more than $11 billion in revenues, and makes devices like pacemakers and defibrillators.Medtronic is a world leader in the area of implants and bone grafts.In 2014, to minimize tax liabilities, Medtronic officially relocated its headquarters to Dublin, Ireland—a controversial corporate practice called corporate inversion.Now, with operations in 150 countries, the medical-device company only gets larger still.
The cost of traditional pacemakers average $2,500, according to the Alliance of Cardiovascular Professionals, while a defibrillator can run about $2,000. Almost always, an insurer or medical provider pays the bill.
Another heart product in the Medtronic line is the cryoballoon, which freezes heart tissue that’s responsible for irregular beats. Such devices are prohibitively expensive for personal use, although it's highly unlikely that a patient with an irregular heartbeat would be administering their own cryoballoon anyway. Instead, the devices are sold to hospitals, enabling thousands of patients to be treated.
Medtronic makes other devices that would have been the stuff of science fiction to the eyes of the company’s nineteenth-century founders. This includes cardiac monitors inserted into the body that record electrical activity during fainting spells and palpitations, as well as surgical replacements for diseased heart valves. It’s easy to forget that modern medicine is as amazing as space travel.
Minimally Invasive Therapies Segment
Medtronic's minimally invasive therapies division accounted for $8.7 billion of revenue in 2018. This division has two subdivisions of its own, the first covers vital items that seem less revolutionary than pacemakers and defibrillators—products like staples and mesh and bronchoscopes, which are flexible contraptions that go up through a nostril to afford an examination of the lungs.
The patient monitoring and recovery division, which develops ventilators and resuscitation bags, also falls under the corporation's minimally invasive therapies unit. Finally, Curity—a maker of gauze, bandages, and sponges—is also a Medtronic brand and within this segment
Restorative Therapies Segment
Restorative therapies is an unheralded division that took in $7.7 billion in sales in 2018, making it Medtronic’s third-largest unit. Its subdivisions include neurovascular, surgery, spine, and neuromodulation. Given that minimally invasive types are accounted for elsewhere, the therapies in this division range from moderately to maximally invasive.
Products include interbody spacers, about which the American Academy of Orthopedic Surgeons says, "Your surgeon gains access to your spine by removing the bone and retracting the nerves. Then the back of the disk can be removed and a spacer inserted." Sounds as easy as an oil change.
Medtronic also makes implants for different pieces of the spine, the cervical region requiring more care than the thorax and the lower part of the back.
Bone grafts for degenerative disc disease are a functional lifesaver—a medical necessity. No one thinks of them as a commodity or a brand-name product, but indeed they are, as Medtronic is among the world leaders in the market. For the record, Medtronic’s most popular bone graft includes proprietary use of a protein that stimulates growth in certain parts of the spine, jaw, and face.
The other branches of the company’s restorative therapy business include deep brain stimulation, which is a developmental means of fighting the progress of Alzheimer’s disease. It’s a breakthrough that’s already been adopted in much of the world, but which, ironically, has been slowed by the bog of regulatory approval in the U.S., although the FDA graciously offers what’s called a humanitarian device exemption for deep brain stimulation, upon certain conditions. Other space-age breakthroughs under the restorative therapies umbrella include blades for tissue dissection and coils administered to treat diseases.
Diabetes Segment
Lastly, there's Medtronic's diabetes group, which generated $2.1 billion in revenue in 2018. Spurred by the spread of one of the world's fastest-growing diseases, Medtronic is betting big on helping to manage diabetes and has become known for its insulin pump that continually monitors the levels of glucose in a patient's blood.
30 Million The number of adults in the U.S. with diabetes, or 9.4% of the population, in 2015, according to the CDC's Division of Diabetes Translation.
A generation ago, the average diabetic injected him or herself with a hypodermic needle and could only hope that the insulin would do its job, let alone track and save data. Today, a tiny integrated system not only administers insulin but suspends its delivery when glucose levels stabilize. The system costs a few hundred dollars, but for conscientious diabetics, that’s a bargain. However, known as the MiniMed 630G, the system is almost primitive when compared to professional-grade cousins that capture real-time data in a physician’s office.
Overseas Tax Advantages
Facing a 10-digit tax liability if Medtronic remained based in Minnesota, the company relocated its headquarters to Dublin in 2014 after it bought Irish medical devices company Covidien. Ostensibly, the move was the inevitable result of purchasing, but it also allowed Medtronic to take advantage of friendlier tax laws, a practice known as corporate inversion, which many multinational firms choose to exploit.
Such maneuvering of headquarters to keep profits outside the U.S. to avoid taxes has ignited lots of recent debate in Congress over the country's corporate tax code—and it played a big role in the 2016 election. Consequently, by becoming an Irish firm, Medtronic can now put far more of its cash flow to work—an extra quarter of every dollar.
The Bottom Line
Check the logo the next time you’re lying prone in a surgical imaging machine. First, it will take your mind off whatever analysis the technicians are conducting on your body, and second, you’ll have first-hand evidence of Medtronic’s importance in a modern, advanced economy. As one of the most technologically adept companies in its industry and also a serial acquirer—it has averaged one acquisition every five months in this decade—Medtronic only gets larger.
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6d5a0c60cfc5d8b6c9e79146debcb89f | https://www.investopedia.com/articles/markets/021316/how-starbucks-makes-money-sbux.asp | How Starbucks Makes Money | How Starbucks Makes Money
Starbucks Corp. (SBUX) has rapidly grown into the world's dominant coffee shop-themed chain over five decades by roasting, marketing, and selling specialty coffee and an ever-expanding assortment of other beverages, food, and branded products. These products were sold through more than 32,900 stores in 83 markets around the world as of December 27, 2020. Beverages are the biggest revenue generator by product type. The Americas segment accounts for the vast majority of revenue for the Seattle-headquartered company.
Starbucks' primary competitors for sales of coffee beverages are other specialty coffee shops. While Starbucks dominates the U.S. market, it faces increasingly tough competition in international markets, including from U.K.-based Costa Coffee, a subsidiary of Coca-Cola Co. (KO); and China-based Luckin Coffee Inc. (LKNCY).
Key Takeaways Starbucks sells beverages, food, and other items in 83 global markets. The company gets the vast majority of sales from beverages and from its Americas segment, comprised of the U.S., Canada, and Latin America. Starbucks is focusing on international expansion and new products for future growth. Nearly all of Starbucks' stores have reopened after being closed for reasons related to the COVID-19 pandemic. Starbucks is undergoing a major restructuring, including leadership changes and expected store closures.
Starbucks' Financials
Starbucks, like many restaurants and retailers, has been severely affected by the impacts of the COVID-19 pandemic over the past year. The coffee chain posted net earnings of $622.2 million for Q1 of its 2021 fiscal year (FY), the three-month period that ended December 27, 2020. Net earnings were down 29.7% compared to the year-ago quarter. Total operating income for the quarter was $913.5 million.
Net revenue in Q1 FY 2021 was $6.7 billion, down 4.9% from the same quarter a year ago. Broken down into product type, beverages sold within the company's operated stores were responsible for 63% of total revenue, while food sold in the company's stores comprised 17% of the total. Packaged and single-serve coffees and teas, serveware, royalty and licensing revenues, and other items comprised 20% of total revenue.
Starbucks said that its fiscal first quarter reflects continued recovery from the effects of the pandemic. The company also indicated that nearly all of its company-operated and licensed stores have re-opened after being closed for reasons related to the pandemic. However, many stores were operating at less than full capacity during the quarter.
Starbucks' Business Segments
Starbucks operates through three main business segments and breaks them down into revenue and operating income: Americas, International, and Channel Development. The company also provides data on non-reportable operating segments in a "Corporate and Other" category, which includes unallocated expenses. Corporate and Other posted an operating loss of $355.6 million despite net revenue of $20.5 million in Q1 FY 2021. These figures, as well as any negative amounts, were not used in the calculation of the segment percentage shares below nor in the pie charts above.
Americas
Starbucks' Americas segment comprises company-owned and licensed stores in the U.S., Canada, and Latin America. The segment accounts for about 70% of the company's total segment revenue. It posted net revenue of $4.7 billion in Q1 FY 2021, falling 6.1% compared to the year-ago quarter. The segment reported operating income of $813.5 million, a 26.0% drop from the previous year. The Americas comprise about 64% of total segment operating income.
International
Starbucks' International segment includes company-owned and licensed store revenue and operating income in China, Japan, Asia Pacific, Europe, Middle East, and Africa. It comprises nearly 25% of total segment revenue. The segment posted $1.7 billion in net revenue in Q1 FY 2021, a 5.3% increase compared to the year-ago quarter. The International segment posted operating income of $274.8 million, down 0.4% from the same quarter a year ago. It accounts for about 22% of total operating income across all segments.
Channel Development
Starbucks' Channel Development segment includes branded roasted whole bean and ground coffees, including Seattle's Best Coffee; Starbucks- and Teavana-branded single-serve products; ready-to-drink beverages such as Frappuccino, Doubleshot, Refreshers, and Teavana iced tea; and other branded products sold worldwide outside of company-operated and licensed stores. The Channel Development segment comprises less than 6% of total segment revenue. Net revenue for the segment was $371.4 million, down 24.9% compared to the year-ago quarter. Operating income rose 3.0% to $180.8 million, comprising about 14% of total segment operating income.
Starbucks' Recent Developments
In its Q1 FY 2021 earnings press release, issued on January 26, 2021, Starbucks noted in a footnote that Chief Operating Officer (COO) Roz Brewer was leaving the company at the end of February to accept a position as chief executive officer (CEO) for another publicly traded company. Her chief operating responsibilities are being distributed to other members of Starbucks' existing leadership team.
On January 7, 2021, Starbucks announced that Patrick Grismer would be retiring from his position as executive vice president and chief financial officer (CFO), effective February 1, 2021. Rachel Ruggeri, senior vice president of Finance, Americas, was appointed to succeed Grismer.
Starbucks noted in its Q1 FY 2021 filings that it had announced during its previous fiscal year that it was implementing a restructuring plan to optimize its North America store portfolio. As part of that restructuring plan, the coffee chain expects to close approximately 800 stores in the U.S. and Canada.
How Starbucks Reports Diversity & Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Starbucks and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Starbucks releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Starbucks discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Starbucks breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
Starbucks Diversity & Inclusiveness Reporting Race Gender Ability Veteran Status Sexual Orientation Board of Directors C-Suite General Management ✔ (U.S. Only) ✔ (U.S. Only) Employees ✔ (U.S. Only) ✔ (U.S. Only)
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49713063eaf69f24577287c9674432dc | https://www.investopedia.com/articles/markets/021416/how-toyota-makes-money-tm.asp | How Toyota Makes Money | How Toyota Makes Money
To hear American car makers and the United Auto Workers tell it, government assistance is non-negotiable. Cash infusions courtesy of the taxpayer are necessary to protect a vital industry, keep people employed, and maintain Detroit’s place as one of commerce’s "shining beacons." Yet the world’s largest car company manages to not only survive without help but generate $272 billion in revenue for FY2019. Toyota Motor Corp. (TM) generates revenue through three primary operations: automotive, financial services, and other business, including the manufacturing of non-automotive machines and various other activities.
Headquartered in Japan, Toyota began in the 1920s as a loom manufacturer. After developing and selling the patent for an automated loom, founder Sakichi Toyoda entered into the automobile business. The first Toyota vehicles were built in the early 1930s, while the Toyota Motor Company was established in 1937. First focusing on compact cars, Toyota eventually expanded to produce pickups, SUVs, trucks, sports cars, and other vehicles as well. Along the way, the company developed into one of the largest automotive manufacturers in the world; indeed, as of 2017 Toyota is the largest manufacturer globally.
Toyota produces 10 million vehicles annually, 2.8 million of those in North America. And that latter number is expected to grow thanks to economies of scale. The Japanese automaker consolidated its United States operations in Plano, Texas, where it will move the production capacity of 11 manufacturing outlets and three distribution networks, along with the company’s North American sales, marketing, and financing headquarters.
For FY2019, ending on March 31, 2019, Toyota reported net revenues of nearly 30,226 billion yen, or about $272 billion. This marked a 2.9% increase over FY2018 revenues. As of July 17, 2019, Toyota's market capitalization is $185.4 billion.
Fast Fact Since 2012, Toyota has produced at least 10 million cars per year.
Toyota's Business Model
Toyota generates the large majority of its revenue from its automotive business, which can be further divided into separate subsegments based on brand and geographic focus. In total, the company sold just under nine million vehicles in FY2019. The company also earns revenue from its financial services branch and through a third, much smaller wing that focuses on miscellaneous business.
Key Takeaways About 90% of Toyota's revenue comes from automotive sales.A smaller portion of the company's revenue is generated by its financial services department, as well as other business operations.Besides passenger vehicles, Toyota also manufactures forklift trucks and various other machinery as well.
Toyota's Automotive Business
Toyota's automotive business has multiple distinct business units, each a paean to streamlined Japanese efficiency. The first and most profitable of those is Lexus, the automaker’s renowned luxury brand. The company feels strongly enough about Lexus that the unit is under the direct supervision of the company president.
Last year, Lexus celebrated its 10 millionth vehicle sold throughout its history, including both coupes and sport-utility vehicles. Despite being a Japanese brand, one that technically sells worldwide, Lexus sells a hugely disproportionate share of its vehicles in the United States, with North American Lexus sales figures typically in the area of 300,000 per year.
The Lexus brand originated in the early 1990s as a competitor to other mass-market Japanese automakers’ new luxury brands, such as Honda’s Acura and Nissan’s Infiniti. A generation later, Lexus has surpassed those brands to compete directly with the heavyweights of the luxury division, including BMW and Mercedes-Benz. So far, success for Lexus at the next level has been less than forthcoming.
The corporation’s also has divisions relating to the sale of vehicles by geographic region. Toyota Motor North America, for instance, is a Texas-based holding company that engineers, produces, and sells certain Toyota vehicles throughout North America. Stateside, Toyota is the proud manufacturer of the Camry, America’s best-selling car, with the Corolla, Highlander, Tundra, and RAV4 following respectively.
The majority of Toyota's vehicle sales take place in Japan and North America, though a smaller portion of sales occur in Europe and other parts of Asia as well.
Toyota's Financial Services Business
Unlike some other major car makers, Toyota derives a relatively small portion of its revenue from its financial operations. While Toyota’s financial services division is growing faster than automotive sales are, the company is still a manufacturer first and a lender second. Automotive activities accounted for almost 90% of worldwide revenue last year, while financial services barely generated 6%.
Toyota Financial Services is the subsidiary that focuses on automotive sales financing, credit cards, and other related services. It operates in roughly 30 countries, covering about 90% of Toyota Motor Corporation markets.
Toyota's Other Business
Besides vehicle sales and financing, Toyota generates revenue from other business operations and investments as well. The company holds stakes in other automotive companies like Subaru, Isuzu, and Mazda. It also has interests in biotechnology, robotics, aerospace, and other industries as well. In the last decade, Toyota has been particularly focused on the development of hybrid electric vehicles and related technology.
Fast Fact As of May 2019, Toyota was among the top 15 largest companies in the world by market cap.
Future Plans
Since its founding, Toyota has followed what it refers to as the "Five Main Principles of Toyota," a set of values and guidelines which inform all company decisions. According to its 2019 Corporate Governance Report, the company has decided to focus in the short term on fostering innovation, particularly in the areas of robotics and artificial intelligence (AI), and on growing its business. Among other goals, the company seeks to enhance the "connected" capability of its vehicles and to create new mobility services going forward. The company is also focused on sustainability and the environment: Toyota has set as a goal the elimination of carbon dioxide emissions from its vehicles as of 2050.
Key Challenges
Although Toyota is a dominant automotive company, it nonetheless faces a wide variety of challenges. One of the biggest of these is competition, particularly from other well-established vehicle makers around the globe. Because Toyota now competes in all classes of vehicles, it faces threats to its sales from several rivals.
Adaptation is Key
In order to remain successful, the company must also continue to adapt. Although Toyota enjoys tremendous name recognition and customer loyalty, changing tastes, new technologies, and an invigorated sense of environmental responsibility on the part of customers require that Toyota invest large amounts of money in developing new products and tools. If Toyota does not anticipate how the automotive industry will change and react accordingly, it may lose business.
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6b09a3f19ee8c8b3336568bb11023334 | https://www.investopedia.com/articles/markets/022015/how-3m-makes-its-money.asp | How 3M Makes Money | How 3M Makes Money
What Is 3M?
Thirty-six yards of Scotch Tape costs just a few dollars. While most of us have a roll or two on hand, it’s hardly a daily staple. Yet 3M Co. (MMM), the company that produces Scotch Tape, had a market cap of $79.8 billion as of May 15, 2020. Are adhesives really that big of a business? When coupled with dozens of other enterprises under one roof, the answer is yes.
Key Takeaways: The company posted revenues of $32.1 billion in 2019. Constantly striving for innovation and new products, 3M invested more than $3.6 billion in R&D in 2018. 3M generates revenue from sales of about 55,000 products across five segments: Industrial, Safety and Graphics, Electronics and Energy, Health Care, and Consumer.
Understanding 3M
3M generates billions in net sales each year from the sale of products across five different business segments. In more than a decade of history, 3M has become one of the world's leading providers of miscellaneous products across all of these industries and others. The company sells its products both directly to consumers and through a host of wholesalers, retailers, and distributors. It also invests heavily in research and development (R&D) to continue to improve and grow its product lines. In 2019, the company invested more than $3.6 billion in R&D and capital expenditures.
The Minnesota Mining and Manufacturing Company got its start in the early 20th century by extracting corundum, a mineral that is one level below diamond on the Mohs Hardness Scale. These days, 3M has expanded beyond corundum to the point that it sells a more diverse line of products than just about any industrial conglomerate on the market. 3M shows consistent healthy financials. In 2019, although 3M faced declines in key end markets such as China, automotive and electronics, according to the company's annual report, "3M maintained operating margins of nearly 22%, even while reducing inventory levels by $370 million— which reflects the strength of the 3M model."
3M's Business Model
Beyond Scotch Tape (and the more contemporary, but equally revolutionary, Post-It Note), 3M produces an almost incomprehensible 55,000 items. The company organizes those numerous operations into four main business segments: Safety and Industrial, Transportation and Electronics, Healthcare, and Consumer Business.
3M's Safety and Industrial Business
Safe and industrial business dwarfs all the other segments is 3M’s operations. It’s all but impossible to come up with a representative list of 3M’s industrial offerings in part because there are so many of them. Membrane switch spacers? Foam fabricators? 3M makes it all. The former is a layer that goes between other layers in, say, the keypads of the cardio machines at your gym. The latter is used to make gaskets and soundproofing insulation. These are products that most of us take for granted but are engineering marvels.
Under 3M's safety operations, you won't find products, but you will find enhancements that make products functional, for example, the reflective sheeting on highway signs or the roofing granules that keep the interior of your house insulated. 3Ms safety and industrial business composed 36% of 3M's total net sales in 2019.
3M began as the Minnesota Mining and Manufacturing Company, a mining operation.
3M's Transportation and Electronics
3M’s true genius is adding value to already marketable products made elsewhere. Instead of making computer screens, 3M's Transportation and Electronics sector makes the glare filters that cover them. For inkjet printer cartridges, 3M provides the flexible circuits that are inside the cartridges. From power cables to pressure-sensitive resins, most of 3M’s Transportation and Energy products are far removed from everyday consumer use. However, 3M is the leading company in the United States for pressure-sensitive tape as of July 2019, and the company produces products for over 25% of the American market. This segment accounted for 30% of the company's total net sales for 2019.
3M's Healthcare Business
Unlike Transportation and Electronics, 3M’s Healthcare business includes recognizable items, such as surgical drapes and teeth whiteners. But even in a realm as specialized as healthcare, 3M still runs the gamut. Healthcare products include everything from coding software and metered-dose inhalers to stethoscopes and personal-use items. That last category includes “invisible” tooth braces, skin cleansers, and antiseptic foam. Healthcare accounted for 23% of 3M's total net sales in 2019.
3M's Consumer Business
Unsurprisingly, 3M’s consumer operations include office supplies. That’s in addition to other products that you may not associate with the 3M brand but likely encounter in everyday use, such as air conditioner filters, bandages, sponges, shower pads, and many of the insulation products that line snow boots and winter coats. Less prominent but equally important, 3M produces household swabs that determine lead levels and stainless steel skirtings. Despite its stature, consumer operations is the smallest of 3M’s segments. Consumer business accounted for almost 16% of the company's total net sales in 2019.
3M operates manufacturing facilities in more than three dozen countries around the globe.
Big Goals for the Future
In recent years, 3M has embarked on a large-scale reshuffling of its business model, moving from 40 different business lines to 23. In 2018, the company sold off its communication markets business in an effort to further streamline. Investors should expect that 3M will continue to make adjustments along these same lines into the future. Through 2023, 3M has financial goals including 8 to 11% growth in earnings per share and 3 to 5% organic sales growth.
Key Challenges
3M's uniquely varied lines of business are both a tremendous advantage and also a challenge. Unlike highly specialized companies, 3M does not focus its efforts entirely in one area. As a result, 3M's product offerings are diversified and resilient in the face of major changes in any one area. On the other hand, because 3M is involved in production in so many different industries, it must work that much harder to ensure that its products remain relevant across many channels.
Because many of 3M's products are ancillary items designed to improve the performance or marketability of existing products, 3M is subject to changes in many industries. 3M also faces competition from a huge number of rivals, given its broad focus across industries. Similarly, a change in global economic circumstances could mean significant turbulence in 3M sales. With so many products in its arsenal, 3M is also dependent upon clear and controlled lines of components, compounds, distribution, and more.
A History of Success
3M has been part of the Dow Jones Industrial Average since 1976, which is longer than all but five of the index’s other 29 components. That fact alone indicates 3M’s formidable ability to adapt to change in an endless milieu of creative destruction. The company specializes in businesses in which few aspiring entrants have either the patience or the capital to build market share. 3M’s profit centers are myriad.
Most recently, 3M has responded to the COVID-19 pandemic. Since January 2020, 3M has doubled production of N95 respirators to 1.1 billion per year at its global manufacturing facilities in the United States, Asia, and Europe. 3M will double its capacity again to 2 billion per year by 2021. 3M is also partnering with other companies to develop innovative solutions to protect healthcare workers and first responders.
Putting it all together, it’s a safe bet that 3M will still be flourishing once many current Dow components have come and gone.
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0ad91de20dbb2e7c045c9704b49ec69d | https://www.investopedia.com/articles/markets/022016/if-you-had-purchased-100-netflix-2009-nflx.asp | If You Had Purchased $100 of Netflix When it IPO'd | If You Had Purchased $100 of Netflix When it IPO'd
Shares for digital entertainment giant Netflix (NASDAQ: NFLX) traded as high as $380 on March 31, 2020, short of its all time highs above $400 seen the summer of 2018, but resilient in the face of the COVID-19 global pandemic as households remain at home and watch more TV and movies. In fact, so far Netflix has been one of the few companies in the S&P 500 to see its share price rise in March 2020, as global markets crashed.
If you had bought 1 share of NFLX at its IPO back in 2002 at $15 a share, you would have made $365 in profit, or 2,433%. If you had therefore purchased $100 of NFLX at its IPO, you'd now have $2,533!
Key Takeaways While Netflix is now a household name, when it IPO'd in 2002 at $15 a share it was anything but a sure bet. The company had hit some rough patches as it grew from a DVD-by-mail service to a behemoth of online streaming media by the late 2010s. If you had bought $100 worth of NFLX stock when it IPO'd you'd now have nearly $2,500 in profit.
Rough Patches and Growing Pains
As remarkable as NFLX’s growth has been in recent months and years, the stock was actually considered a dud throughout much of its early trading history. The initial public offering (IPO) for Netflix occurred on May 23, 2002 at a price of $15.00 per share. By early 2004, it looked as though NFLX was a rising star, announcing a 2:1 stock split after share prices blew past $70 in February of that year. Unfortunately for NFLX, the stock subsequently sputtered for the next four-plus years.
By late November 2008, NFLX traded for less than $19.00 per share. You would have lost value up to that point if you had purchased the stock immediately after its February 2004 split.
The narrative would be completely different if you had purchased NFLX in 2009. Not only did Netflix stock appreciate magnificently faster starting in 2009 – indeed, the trend was quickly improving in December 2008 – but NFLX beat the returns of the S&P 500 by more than 1,750% between 2009 and the end of 2015.
Here’s the journey your Netflix holdings would have taken if you had purchased $100 after New Year’s Day 2009:
2009: Steady Growth After Netflix Shifts Focus
NFLX had an unadjusted market value of $29.89 per share on January 1, 2009. If your order managed to get filled as soon as trading began on January 2, your $100 order would have purchased 3.346 shares of NFLX, assuming zero trading costs.
During 2009, Netflix made some pivotal moves to transform its outlook. It partnered with Sony (NYSE: SNE) and other consumer electronics manufacturers to stream its product over the PS3, smart TVs and other devices. This signified a shift in the company's focus from DVD delivery to on-demand content.
Shareholders responded to the company’s new direction. NFLX hit its 2009 peak during November, barely edging past $60 per share before a minor selloff. Though your shares’ growth would never have reached a fevered pitch during that first year, you’d see your NFLX portfolio grow to hit $184.33 by December 31, 2010.
2010 to July 2011: NFLX Finds Hope
NFLX’s first explosive year came in 2010. The company's commitment to expanding its reach by providing its content through various electronic devices was delivering, and shares were already trading past $100 by April. This means your original 3.346 shares had a market value of nearly $340. Basic arithmetic would should you’d have already seen an incredible 340% growth on your investment.
In addition to partnering with Sony to stream over the PS3, in 2010 Netflix became available on gaming consoles such as the Nintendo Wii and on an array of Apple (NASDAQ: APPL) products, including the iPad, iPhone and iPod Touch. Netflix later set its sights on international markets, offering services in Canada for the first time and reaching out to markets in Latin America and the Caribbean.
With few exceptions, Netflix stock performed like a superstar throughout the year. At the end of 2010, NFLX closed just over $175 per share. By mid-February 2011, NFLX hit $247.55 per share – your holdings would reach– over $825 for you, a more than eight-fold increase on your initial $100 investment in just two-and-a-half years.
Mid-2011 to 2012: Panic and No Growth
Netflix made an ill-advised price hike in the second half of 2011, losing approximately 800,000 subscribers during the third quarter alone. Investors panicked after hearing about the subscriber exodus; NFLX shed 75% of its value by November. At $63.86 per share, your investment was now worth $213.67.
Netflix spent the remainder of 2011 and most of 2012 without any real increase in market capitalization. Other than a momentary spike in early 2012, NFLX traded below $100 and even reached a multi-year low of $53.87 August 2, 2012. At $53.87 your portfolio was under $190 and had lost more than $600 in a year.
Fortunes picked up in September 2012 and the stock rallied for the remainder of the year. On December 31, 2012, NFLX closed at $92.59 – $309.81 for your 3.346 shares.
2013 and Beyond: Rocket Fuel, Burnout, Second Wind
By the beginning of 2013, Netflix had become the comeback story of the year. The first three weeks were unexceptional, with shares trading around $99 on January 22, 2013. Within a two-day period, however, Netflix climbed 42% and closed above $140. The stock would only gain steam from there.
CNN Money published an exacerbated article after the climb, wherein it wrote that NFLX “shocked the investing world” and blamed short-sellers for the sudden climb. It helped that Netflix announced new content deals with Disney (NYSE: DIS) and Time Warner (NYSE: TWX) in the prior quarter. Netflix was positioned to capitalize on the rapidly growing trend toward on-demand streaming, beating out established competitors in the space while dumping its mail-in DVD system.
NFLX closed at $354.99 on October 21, 2013. If you’d held on to your shares through the prior turbulence, they would have been worth $1,187.79. The value would have been slightly lower by the end of the year, giving way for an up-and-down 2014.
NFLX prices in 2014 were similar to those in 2012. Prices oscillated between $314.21 and $484.39, witnessing two major upswings and suffering two subsequent corrections. On December 31, 2014, NFLX was at $341.61 and your stake would have been worth $1,143.08.
NFLX opened on January 20, 2015, at $340 flat, but an earnings report was published that showed Netflix delivered at three times the consensus estimates. Investors sprinted in, pushing NFLX to $409.28 by the end of the January 21. By January 27, 2015, share prices were above $450. April 16 saw another huge jump that established a new record price of $562.05. By then your 3.346 shares would be worth $1,880.61.
Share prices kept reaching new heights through the following months. On July 13, 2015, Netflix stock hit $707.61 – raising your stake to $2,367.66. On July 13, 2015, Netflix announced a 7:1 split, becoming just the second stock ever to be split at this ratio (Apple was the first). Investors rejoiced because their shares suddenly seemed more liquid. At this point, your 3.346 shares would have become 23.422 shares.
On November 30, 2015, Netflix shares were trading as high as $126.60. Since you own seven times as many shares as before, your portfolio reaches an all-time high market value of $2,965.23, representing approximately 3,000% growth. Unfortunately, NFLX hit another slump following the late November peak.
Shares fell significantly in January 2016. NFLX closed at $82.79 on February 5 before rebounding to $91.61 on February 24. At this point, your stake sat more than $800 below its all-time high. However, your portfolio still grew from $100 to more than $2,145 in just seven years. From 2017 onward, the share price rose to above $400 and remained mainly a trading range between $300-$400 for most of 2018-2020.
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9c115cddeea20701df0100d35c278f49 | https://www.investopedia.com/articles/markets/030116/worlds-top-10-natural-gas-companies-xom-ogzpy.asp | The Top Natural Gas Companies in the World | The Top Natural Gas Companies in the World
Most of the world's biggest producers of natural gas are global energy giants with worldwide oil and gas operations spanning the full range of upstream and downstream activities. Together, these companies accounted for about 30% of worldwide natural gas production in 2016, the most recent year for which figures are collectively available. When production is viewed by country, the U.S. is the top producer of natural gas followed by Russia, Iran, Qatar, Canada, and China. Here's a look at the top producers of natural gas, along with some key facts about each company.
Key Takeaways The top 10 natural gas companies produced about 30% of the world's natural gas in 2016. The United States is the top producing country of natural gas in the world. Russia's Gazprom is the world's top publicly-listed natural gas company. Exxon Mobil produced about 9.97 billion cubic feet of natural gas per day in 2018.
Gazprom
Russia's Gazprom (OGZPY) is the world's top publicly-listed natural gas company. As of Dec. 31, 2018, it was responsible for the production of nearly 35.2 billion cubic feet of natural gas each day, about 12% of the total world output on an annualized basis. Gazprom dominates the Russian natural gas industry, accounting for more than two-thirds of all production in the country.
Gazprom also ranks as Russia's third-largest oil producer and its largest owner and operator of gas turbine power plants, which account for approximately 15% of Russia's total installed power-generation capacity. Gazprom is controlled by the Russian government, which holds slightly more than 50% of outstanding shares in the company. As of September 2019, Gazprom had a market capitalization of about $80.56 billion.
Exxon Mobil
Exxon Mobil (XOM) produced 9.97 billion cubic feet of natural gas per day in 2018, a substantial increase in the company's natural gas operations since 2009 when it produced only about 1.2 billion cubic feet of natural gas per day to rank ninth in the U.S alone. Since then, Exxon Mobil has made substantial investments in natural gas, including the acquisition of the largest independent natural gas producer in the U.S. at the time, XTO Energy.
As of September 2019, Exxon Mobil had a market capitalization of $311.96 billion, making it one of the world's biggest oil and gas companies and one of the biggest global companies in any industry.
China National Petroleum
China National Petroleum (CNPC) is China's largest natural gas producer. It reported production of just more than 109.37 million cubic meters of natural gas per year in China as of Dec. 31, 2018. CNPC also has vast oil and petrochemical production and oil and gas marketing operations.
While CNPC is a state-owned enterprise, much of its operations are organized under a publicly-listed subsidiary company, PetroChina Company (PTR). PetroChina shares are listed on the NYSE, the Hong Kong Stock Exchange and the Shanghai Stock Exchange. The company had a market capitalization of about $161.09 billion as of September 2019. CNPC, and through it the Chinese government, maintains a majority stake in the company.
Royal Dutch Shell
Royal Dutch Shell (RDS-A), also known as Shell Global, reported production of more than 9.3 billion cubic feet of natural gas per day in 2014. The company's natural gas operations are spread across the globe. About 34% of production comes from the East and Southeast Asia regions, about 32% from Europe, and about 17% from North America.
In addition to its natural gas operations, Royal Dutch Shell has vast crude oil exploration and production activities, as well as downstream operations including refineries, petrochemical plants, and retail service stations. Royal Dutch Shell is headquartered in the Netherlands and incorporated in the U.K. It had a market capitalization of about $229.46 billion as of September 2019.
BP
London-headquartered BP (BP) is a global energy giant with vast operations spanning the length of the oil and gas supply chain. The company reported natural gas production of about 8.7 billion cubic feet per day in 2018. BP operates major natural gas production sites around the globe, from the Americas to the Middle East to Southeast Asia. It also has substantial worldwide oil exploration and production operations, in addition to petrochemical, lubricant, and retail gasoline businesses. As of September 2019, BP has a market capitalization of approximately $131.42 billion.
Chevron
Chevron (CVX), an American integrated energy giant, reported daily natural gas production of about 5.86 billion cubic feet per day in 2018—right in line with the company's production levels in recent years. The company operates major natural gas fields across the globe, including sites in Asia, Australia, Africa, Europe, Latin America, and North America.
Chevron also maintains vast upstream oil operations and downstream activities in petrochemicals, lubricants, additives, and gasoline. Chevron had a market capitalization of about $235.63 billion as of September 2019.
Total
Total (TOT), a French oil and gas company, is an integrated oil and gas company with worldwide upstream and downstream operations. It produced approximately 6.99 million cubic feet of natural gas per day in 2018. The company produces about 19% of its natural gas from fields in the Asia-Pacific region. Its operations in Europe, the Middle East, and Russia each account for close to 18% of its total production. The firm has a market capitalization of approximately $135.9 billion, as of September 2019.
Equinor
Haven't heard of Equinor (EQNR)? Maybe you're familiar with its previous name: Statoil. The majortiy state-owned Norwegian company changed its name from Statoil to Equinor in 2018 after receiving approval from shareholders. The company reported just under 4.2 billion cubic feet of daily natural gas production. Nearly 81% of the company's production in 2014 is attributed to domestic operations in Norway's offshore gas fields.
Shareholders approved the name change of Norway's Statoil to Equinor in 2018.
Statoil has a presence in more than 30 different countries and has ongoing exploration activities in numerous locations around the globe. The government of Norway maintains a controlling interest in Statoil, holding 67% of the company's outstanding shares. As of September 2019, Statoil had a market capitalization of more than $67.77 billion.
ConocoPhillips
ConocoPhillips (COP), an American oil and gas producer, reported just over 2.7 billion cubic feet of natural gas production per day in 2018. This was just under its daily production rate of 3.270 billion cubic feet per day. In addition to its domestic activities, ConocoPhillips has oil and gas production operations in 17 countries.
In contrast to the other companies on this list, ConocoPhillips operates only as an upstream oil and gas exploration and production company. Its downstream operations were spun off to form an independent company, Phillips 66, in 2012. ConocoPhillips has a market capitalization of about $69.86 billion.
Eni
Eni SpA (E) is an Italian oil and gas conglomerate with its headquarters in Rome. In 2014, it reported natural gas production of just more than 4.2 billion cubic feet per day—roughly in line with results in recent years. About 41% of Eni's production comes from the company's North African operations. It also has substantial natural gas operations in Sub-Saharan Africa, Europe, Asia, and the Americas. Eni had a market capitalization of nearly $57.4 billion.
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f6cd88f5e8f35f14b93f2a6745c84285 | https://www.investopedia.com/articles/markets/030216/worlds-top-10-telecommunications-companies.asp | 10 Biggest Telecommunications Companies | 10 Biggest Telecommunications Companies
Telecommunications companies use various technologies to transmit information globally. Some of the largest companies in the telecommunications sector provide fixed-line telephone and wireless services, as well as Internet data and video communications.
The telecommunications sector is changing rapidly. Traditional technologies such as wireline telephone, radio, and television once dominated the telecommunications universe, but wireless mobile and Internet technology are quickly becoming the new norm.
These are the 10 biggest telecommunications companies by 12-month trailing (TTM) revenue. This list is limited to companies that are publicly traded in the U.S. or Canada, either directly or through ADRs. Some companies outside the U.S. report profits semi-annually instead of quarterly, so the 12-month trailing data may be older than it is for companies that report quarterly. The data in this story are from YCharts.com. All figures are as of January 12, 2021.
Some of the stocks below are only traded over-the-counter (OTC) in the U.S., not on exchanges. Trading OTC stocks often carries higher trading costs than trading stocks on exchanges. This can lower or even outweigh potential returns.
#1 AT&T Inc. (T)
Revenue (TTM): $172.9 billionNet Income (TTM): $11.1 billionMarket Cap: $204.4 billion1-Year Trailing Total Return: -19.7%Exchange: New York Stock Exchange
AT&T is a holding company that provides communications and digital entertainment services globally. Its services and products include wireless communications, data/broadband and Internet services, digital video services, local and long-distance telephone services, telecommunications equipment, managed networking, and feature film, television, and gaming production and distribution. The company also owns and operates regional TV sports networks.
#2 Verizon Communications Inc. (VZ)
Revenue (TTM): $128.4 billionNet Income (TTM): $18.3 billionMarket Cap: $237.0 billion1-Year Trailing Total Return: 1.7%Exchange: New York Stock Exchange
Verizon Communications is a holding company that provides communications, information, and entertainment products and services. It offers wireless voice and data services and equipment sales, as well as data and video communications products and services, such as broadband video, data center and cloud services, security and managed network services, and local and long distance voice services.
#3 Nippon Telegraph & Telephone Corp. (NTTYY)
Revenue (TTM): $108.7 billionNet Income (TTM): $7.9 billionMarket Cap: $96.8 billion1-Year Trailing Total Return: 10.3%Exchange: OTC
Nippon Telegraph & Telephone is a Japan-based holding company that provides telecommunication services. It offers domestic intra-prefectural communication services, such as fixed voice-related, Internet Protocol (IP), and packet communications services, and sells telecommunications equipment. The company also provides mobile voice-related, IP, and packet communications services, as well as system integration and network system services. Additionally, Nippon operates businesses in real estate, finance, and more.
#4 Deutsche Telekom AG (DTEGY)
Revenue (TTM): $106.0 billionNet Income (TTM): $3.5 billionMarket Cap: $87.4 billion1-Year Trailing Total Return: 17.0%Exchange: OTC
Deutsche Telekom is a Germany-based provider of telecommunications and information technology services. The company offers fixed-line telephone services, mobile communications services, Internet access, and combined information technology and telecommunications services to customers in Germany, Eastern Europe, and the U.S.
#5 T-Mobile US Inc. (TMUS)
Revenue (TTM): $59.9 billionNet Income (TTM): $3.1 billionMarket Cap: $159.7 billion1-Year Trailing Total Return: 68.3%Exchange: NASDAQ
T-Mobile US is a major U.S. wireless carrier offering various data plans as well as consumer and business telecommunications services. T-Mobile also offers prepaid wireless products and services as well. In April 2020, T-Mobile completed its merger with Sprint Corp., which the company expects to sharply increase its capacity by a factor of 14 in the coming six years. It sells devices and services through company owned and operated stores and websites.
#6 Vodafone Group PLC (VOD)
Revenue (TTM): $50.5 billionNet Income (TTM): $2.9 billionMarket Cap: $46.1 billion1-Year Trailing Total Return: -5.9%Exchange: NASDAQ
Vodafone Group is a U.K.-based company that provides a range of telecommunications services, including voice and data communications. It offers mobile services, such as call, text, and data access, as well as fixed line services, including broadband, television, and voice. The company also offers Internet of Things (IoT), public and private cloud services, cloud-based applications, and products for securing networks and devices.
#7 Telefonica SA (TEF)
Revenue (TTM): $49.9 billionNet Income (TTM): $505.3 millionMarket Cap: $24.2 billion1-Year Trailing Total Return: -29.4%Exchange: New York Stock Exchange
Telefonica is a Spain-based multinational integrated and diversified telecommunications group. The company is engaged in activities related to wireline, wireless, cable, data, Internet, and television businesses. Telefonica offers fixed telecommunication, Internet and broadband multimedia, and digital services such as IoT.
#8 America Movil SAB de CV (AMX)
Revenue (TTM): $49.0 billionNet Income (TTM): $3.4 billionMarket Cap: $49.0 billion1-Year Trailing Total Return: -3.8%Exchange: New York Stock Exchange
America Movil is a Mexico-based provider of telecommunications services to customers worldwide. The company offers wireless voice, wireless data, fixed voice, fixed broadband, fixed data, pay television, and information technology services.
#9 KDDI Corp. (KDDIY)
Revenue (TTM): $48.3 billionNet Income (TTM): $6.2 billionMarket Cap: $70.3 billion1-Year Trailing Total Return: 6.2%Exchange: OTC
KDDI is a Japan-based telecommunications operator. In addition to cellular services, the company provides network, data center, cloud/SaaS, security, and IoT services in Japan as well as dozens of other countries around the world. It also offers financial and payment services. KDDI serves individual customers and businesses.
#10 Orange SA (ORAN)
Revenue (TTM): $46.9 billionNet Income (TTM): $3.2 billionMarket Cap: $32.7 billion1-Year Trailing Total Return: -10.3%Exchange: New York Stock Exchange
Orange is a France-based multinational telecommunications company. As one of Europe's largest operators, Orange serves residential, professional, and large business clients. The company provides services including fixed-line telephone, leased lines, data transmission, mobile telecommunications, cable television, internet services, and broadcasting. It also offers mobile financial services.
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e88796f489f57e9fad216075af74c018 | https://www.investopedia.com/articles/markets/032015/how-mcdonalds-makes-its-money-mcd.asp | How McDonald's Makes Money | How McDonald's Makes Money
When the story of McDonald's is told, it often begins with Ray Kroc, the native Chicago milkshake mixing machine salesman who had the vision to see what the business model deployed by one of his clients, Speedee Service System, could become. Speedee Service System, launched in 1948, was the brainchild of two brothers, Richard James (Dick) and Maurice James (Mac) McDonald, who successfully utilized the "drive-in" concept to food delivery and, ultimately, franchising opportunities. Impressed by what he saw, Ray Kroc became their franchise agent in 1954, opened up the first McDonald's franchise in 1955 and, in 1961, bought out the McDonald brothers for the, then hefty, sum of $2.7 million. The rest is part of the entrepreneurial lore that is the hallmark of iconic businesses.
Key Takeaways McDonald's makes money by leveraging its product, fast food, to franchisees who have to lease properties, often at large markups, that are owned by McDonald's. According to the data from their latest annual report, approximately 93% of total capacity are franchises, which is still below McDonald’s long-term goal of 95%. Franchisees are lured by the impressive margins that make McDonald's franchises an almost guaranteed moneymaker. McDonald's remains committed to growth, continuing its aggressive deployment of the three growth accelerators — EOTF, Delivery, and Digital — in 2019 and beyond.
Almost 80 years later, the enterprise has grown to about 38,000 restaurants globally that serve close to 70 million customers — roughly 1% of the world's population — per day, all wanting a burger, fries, and/or chicken nuggets as quickly as possible. It has, effectively, morphed into the most popular family restaurant that appeals to children and adults alike and emerged as the dominant force in the "Quick Service Restaurant (QSR)" end of the market.
The QSR category contains a number of popular franchises, including McDonald's Corp (MCD), KFC and Taco Bell (YUM), and Wendy’s (WEN). In 2019, McDonald's emerged as the most valuable QSR (i.e., fast-food) chain with a brand value nearing 130.36 billion USD and total assets worth 47.5 billion USD. McDonald's has, consistently, led this market segment in terms of overall sales and number of restaurants worldwide, followed by Starbucks (SBUX) and Subway.
On the way to serving hundreds of billions of people, McDonald's has blazed multiple corporate trails since its 1955 incorporation, such as franchising and institutionalized training. McDonald's even had a mission statement long before mission statements were a thing. "Quality, Service, Cleanliness and Value" is self-explanatory, and McDonald's has set standards for at least the first and fourth of those qualities. As legendary Michelin chef, Ferran Adria, once said of the Big Mac: "Ferran Adria and the 100 best chefs in the world cannot do better for the price."
In 2018, McDonald's emerged as the most valuable QSR chain with a brand value nearing 130.36 billion USD and total assets worth 47.5 billion USD.
Business Model
Essentially, McDonald's makes money by leveraging its product, fast food, to franchisees who have to lease properties, often at large markups, that are owned by McDonald's. As reported in their 2019 10-K, 36,059 of the 38,695 restaurants were franchised with McDonald's operating the remaining 2,636 restaurants. So, approximately 93% of total capacity are franchises, which is still below McDonald's long-term goal of 95%.
The advantage of this model is that the revenue stream (rent and royalty income received from franchisees) is far more stable and, most importantly, predictable, while the operating costs are measurably lower, allowing for an easier path to profitability. McDonald's, because it has control over the land and long-term leases, can leverage its market position to negotiate deals. As has been noted by analysts, this is akin to a subscription, where the subscriber (the franchisee) pays a fixed amount each month.
According to industry analysts, McDonald's keeps about 82% of the revenue generated by franchisees, compared with only about 16% of the revenue from its company-operated locations, which is further trimmed by the costs incurred in operating these units. This would explain their pursuit of getting to the 95% franchise mark.
Why Are McDonald's Franchises in Demand?
McDonald's has notoriously strict criteria for its franchisees (net worth, liquidity, etc.). Additionally, the franchisees are also responsible for paying salaries, ordering supplies, and paying rent/owning the premises. So, why become a franchisee? The lure is that McDonald's provides them with an almost guaranteed moneymaker due, in large part, to the impressive margins.
The restaurant industry is infamous for its turnover, and as any restaurateur will tell you, one major reason for this is that the margins can be thinner than a slice of processed American cheese. Yet, McDonald's operating margins are Double Quarter Pounder thick — north of 40%! How is that possible in a business whose very purpose is providing inexpensive food?
The answer lies in the fact that the food is even cheaper to prepare than one might think. Some menu items — coffee, for instance — sell for dozens of times their cost. Note to people who think nothing of paying $5 for an iced mocha — you’re drinking a few pennies worth of beans, boiled in water that's too cheap to measure, and some chocolate syrup.
93% Franchised 35,085 of the 37,855 restaurants were franchised, with McDonald's operating the remaining 2,770 restaurants.
Markets & Business Segments
As per their recent 10-K, effective May 14, 2020, McDonald's is operating with the following global business segments: U.S., International Operated Markets, and International Developmental Licensed Markets and Corporate. Each sector accounts for 37.2%, 54%, and 8.7% of revenues, respectively, as of the company's most recent annual report.
U.S.: The largest segment, with revenues of $7.843 billion in 2019. International Operated Markets: Markets including Australia, Canada, France, Germany, Italy, the Netherlands, Russia, Spain, and the U.K. This segment had $11.398 billion in revenues in 2019. International Developmental Licensed Markets & Corporate: Comprised of developmental licensee and affiliate markets, plus corporate activities. This segment had $1.836 billion in revenues in 2019.
Financial Statements
According to McDonald's 10-K, 2019 free cash flow was $5.7 billion, a 36% increase over 2018, and global comparable sales increased 45.9% and global comparable guest counts increased 1%.
McDonald's Income Statement 2018 (Dec. 31) 2017 (Dec. 31) 2016 (Dec. 31) Total Income $21,025.20 $22,820.40 $24,621.90 Total Operating Costs ($12,202.60) ( $13,267.70) ($16,877.40) Operating Income $8,822.60 $9,552.70 $7,744.50 Interest & Taxes ($2,898.30) ($4,360.4)) ($3,058) Net Income $5,924.30 $5,192.30 $4,686.50 Shares Outstanding (Basic) $778.20 $807.40 $854.40 EPS (Basic) $7.61 $6.43 $5.49 Shares Outstanding (Diluted) $785.60 $815.50 $861.20 EPS (Diluted) $7.54 $6.37 $5.44 Dividends per Common Share $4.19 $3.83 $3.61 MCD 10-K | Data in millions except EPS & Dividends
Total revenues decreased in 2018 but the percentage from franchised restaurants rose, which is reflective of the transition to a heavily franchised business model. Revenue from franchised restaurants (rents, royalties & initial fees) was $11.01 billion, which is over 50% of McDonald's total revenues and a substantial increase over 2017. Operating income was lower than what was reported in 2017, which was skewed by gains from the sale of assets in China & Hong Kong. Excluding these, operating income rose by 2% in 2018. Operating margin increased, which would bode well for future franchisees.
McDonald's Balance Sheet 2018 (Dec. 31) 2017 (Dec. 31) Assets Total Current Assets $4,053.20 $5,327.20 Total Other Assets $5,915.30 $6,028.20 Net Property & Equipment $22,842.70 $22,448.30 Total Assets $32,811.20 $33,803.70 Liabilities & Shareholders' Equity Total Current Liabilities $2,973.50 $2,890.60 Total Shareholders' Equity ($6,258.40) ($3,268) Total Liabilities & Shareholders' Equity $32,811.20 $33,803.70 MCD 10-K | Data in millions
McDonald's has a track record of paying dividends on its common stock for 43 consecutive years and, even more impressively, increasing the dividend amount every year. The 2018 full year dividend of $4.19 per share reflects the quarterly dividend paid for each of the first three quarters of $1.01 per share, with an increase to $1.16 per share paid in the fourth quarter. This increase in the fourth quarter dividend can be viewed as McDonald's confidence in the ongoing strength and reliability of its cash flow, which is a validation of their business model.
McDonald's Statement of Cash Flows 2018 (Dec. 31) 2017 (Dec. 31) 2016 (Dec. 31) Operating Activities Cash Provided by Operations $6,966.70 $5,551.20 $6,059.60 Investing Activities Cash from (used for) Investing ($2,455.10) $562 ($981.60) Financing Activities Cash Used for Financing ($5,949.60) ($5,310.80) ($11,262.40) Effect of Exchange Rate Changes ($159.80) $2,640 ($103.70) Change in Cash & Equivalents ($1,597.80) $1,066.40 ($6,288.10) MCD 10-K | Data in millions
In 2018, cash provided by operations increased by $1.4 billion or 25% compared with 2017, primarily due to lower tax payments. McDonald's current ratio, which is a measure of liquidity, is 1.36 and confirms that the company is on sound financial footing.
According to the annual report, "Over the long-term, the Company expects to achieve the following average annual (constant currency) financial targets:
System-wide sales growth of 3% to 5% Operating margin in the mid-40% range Earnings per share (EPS) growth in the high-single digits Return on incremental invested capital (ROIIC) in the mid-20% range"
McDonald's Stock Chart - MCD(source: TradingView)
source - tradingview.
Future Plans
As noted in its latest annual report, "In 2018, the Company continued to evolve to a more heavily franchised business model, and is currently about 93% franchised, with a long-term goal of approximately 95%. The Company will continue to make progress toward this long-term goal in 2019 primarily by re-franchising restaurants to conventional licensees. As a result of the continued evolution of the Company’s business model, in September 2018, the Company announced several organizational changes to its global business structure. These changes are designed to continue the Company's efforts toward efficiently driving growth as a better McDonald’s through the Velocity Growth Plan."
The Velocity Growth Plan, introduced in 2017, is McDonald's customer-centric strategy that focuses on the key drivers of the business, namely food, value, and customer experience.
Retaining Existing Customers: Focusing on areas where it already has a strong foothold in the Informal Eating Out (IEO) category, including family occasions and food-led breakfast. Regaining Customers Who Visit Less Often: Recommitting to areas of historic strength, namely quality, taste, quality, and convenience of its product: food. Converting Casual to Committed Customers: Building stronger relationships with customers so they visit more often, by elevating and leveraging the McCafé coffee brand and enhancing snack and treat offerings.
McDonald's remains committed to continuing its aggressive deployment of the three growth accelerators (also identified in 2017) in 2019 and beyond. The growth accelerators are:
Experience of the Future ("EOTF"): Restaurant modernization and technological upgrades to transform the restaurant service experience and enhance customer's perception of the brand. Digital: By evolving the technology platform, McDonald's is expanding choices for how customers order, pay and are served through additional functionality on its global mobile app, self-order kiosks, and technologies that enable conveniences such as table service and curb-side pick-up. Delivery: In 2018, McDonald's expanded the number of restaurants offering delivery and it is now available in over half of the global system. McDonald's has been, and intends to be, quite proactive in keeping up with the current trends when it comes to expanding its brand and business. In 2017, McDonald's announced it would partner with Uber Eats for home delivery for the first time in the U.S and followed that up by adding Doordash and GrubHub this year (2019). These partnerships are part of a strategy to keep up with the newer generations who prefer home delivery over pickup.
Key Challenges
McDonald's has managed to stay comfortable ahead of its main competitors, like Burger King, Wendy's, Kentucky Fried Chicken, etc., in the fast food arena, but its key challenge might just be a consumer who demands healthier, organic menu choices coupled with fast-food convenience.
Over the past few years, another restaurant model, one that offers consumers freshly-prepared, higher-quality food in an informal setting and with efficient counter service, has been making a bid to garner the attention of the consumer, or more appropriately, their palates. Dubbed as fast-casual restaurants, these entities — Chipotle (CMG), Shake Shack (SHAK), among others — have been making inroads into the space long dominated by QSR's like McDonald's.
Fast-casual differs from fast food in that their aim is to provide consumers healthier selections with fast food convenience at a slightly higher price point that consumers would be willing to pay. The growing consumption trends for food that is healthy, economical, and available with minimal wait times has begun to eat into the market share of leading QSRs. McDonald's recently reported a 6.47% decline year-over-year sales for the 12 months that ended March 31, 2019.
This didn't go unnoticed by McDonald's. In late 2018, it announced that it was removing all preservatives, fake colors, and other artificial ingredients from seven of its burger selections. Its menu now features a Southwest Grilled Chicken Salad, and you can get apple slices with a kid's Happy Meal.
source: Statista 2019.
The Bottom Line
Fast food should be as stable an industry as any. People need to eat and they want their food fresh and fast without having to spend unnecessarily. That said, the industry does face challenges relating to a shift in demand towards healthy eating. A restaurant chain that sells familiarity and consistency needs to recognize that those qualities themselves are enormous assets. Even when McDonald's has an under-performing year, it's still profitable. When operating at its peak, it's a must-have stock in any comprehensive portfolio, especially since it has similarities with REITs as well.
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0831c61cc3432d4a389933f644cb25ec | https://www.investopedia.com/articles/markets/032715/how-boeing-makes-its-money.asp | How Boeing Makes Money | How Boeing Makes Money
Boeing Co. (BA), one of the world's leading aerospace companies, develops and manufactures commercial jets, military aircraft, weapons systems, and strategic defense and intelligence systems. The company offers services and support to customers globally, and provides financing for orders and deliveries. One of Boeing's biggest customers is the U.S. government.
One of Boeing's biggest rivals, especially for commercial aircraft, is Europe-based aerospace firm Airbus SE (EADSY). Boeing also has aerospace rivals based in Russia, China, and Japan. Additionally, the company's defense and space business faces competition from major players like Lockheed Martin Corp. (LMT), Northrop Grumman Corp. (NOC), Raytheon Co. (RTX), General Dynamics Corp. (GD), U.K.-based BAE Systems PLC (BAESY), and Elon Musk's Space X.
Key Takeaways Boeing produces commercial and military aircraft, weapons systems, strategic defense and intelligence systems, and related products and services. Defense, Space & Security has overtaken Commercial Airplanes as Boeing's largest revenue source. The U.S. government is one of Boeing's largest customers. The 737 MAX has returned to service after being grounded for nearly two years.
Boeing's Financials
Boeing has faced a number of struggles over the past year that have adversely impacted its business, including the COVID-19 pandemic and the grounding of the company's 737 MAX aircraft. Boeing posted a net loss of $11.9 billion in FY 2020, a significant deterioration from the net loss of $636 million in FY 2019. Revenue for the year fell 24.0% to $58.2 billion.
The company noted in its annual filing for FY 2020 that the pandemic has caused a significant shock to demand for air travel. The fall in demand has adversely impacted the entire aerospace manufacturing and services sector. Boeing said it expects it to take about three years before travel will return to 2019 levels and a few years longer for the industry to get back on its long-term growth trend.
Unlike other aerospace companies, however, Boeing also faces financial challenges related to its 737 MAX passenger jet, which was grounded in March 2019 by the Federal Aviation Administration (FAA) after being involved in two fatal air crashes. The FAA lifted its ban on the aircraft in November 2020. The company still faces multiple lawsuits related to the 737 MAX.
Boeing’s Business Segments
Boeing operates its business through four segments: Commercial Airplanes (BCA); Defense, Space & Security (BDS); Global Services (BGS): and Boeing Capital (BCC). The company provides a breakdown of revenue and earnings from operations for each of these segments. The pie chart for earnings from operations pictured above does not include segments that reported a loss for the period, such as Boeing's Commercial Airplanes segment.
Commercial Airplanes (BCA)
Boeing's commercial airplane segment develops, produces and markets commercial jet aircraft and provides fleet support services, primarily for the global airline industry. The segment supplies jetliners to meet global airlines' varying requirements for transporting passengers and cargo. In FY 2020, the segment posted a loss from operations of $13.8 billion. Revenue fell 49.9% to $16.2 billion, comprising about 28% of Boeing's total revenue. BCA is the segment responsible for producing the Max 737, and was thus hit hard by the aircraft's grounding in March 2019.
Defense, Space & Security (BDS)
Boeing's BDS segment researches, develops, produces, and modifies military aircraft and weapons systems for strike, surveillance, and mobility. The segment also researches, develops, produces, and modifies strategic defense and intelligence systems, as well as satellite systems. The segment's top customer is the U.S. Department of Defense, which accounted for about 83% of its revenue in FY 2020. Earnings from operations fell 41.1% in FY 2020 to $1.5 billion, comprising 75% of the total. Revenue grew 0.6% to $26.3 billion, comprising 45% of the total for all segments.
Global Services (BGS)
Boeing's global services segment offers services to its commercial and defense customers around the globe. The segment provides a wide range of platforms, systems, products, and services. These include supply chain and logistics management, engineering, maintenance and modifications, upgrades and conversions, spare parts, pilot and maintenance training systems and services, data analytics, and digital services. Earnings from operations fell 83.3% in FY 2020 to $450 million, comprising about 22% of the total. Revenue fell 15.8% to $15.5 billion, comprising nearly 27% of the total for all segments.
Boeing Capital (BCC)
Boeing Capital provides customers with financing to buy and take delivery of their orders, and manages the parent company's overall financing exposure. The segment's portfolio is comprised of equipment under operating leases, sales-type/finance leases, notes and other receivables, assets held for sale or re-lease and investments. Earnings from operations grew 125.0% in FY 2020 to $63 million, comprising 3% of the total. Revenue rose 7.0% to $261 million, comprising a tiny share of Boeing's total revenue.
Boeing’s Recent Developments
Boeing announced in its Q4 FY 2020 press release that as of January 25, 2021, it has delivered more than 40 737 MAX aircraft since being approved for return to service by the FAA.
On January 27, 2021, the European Union Aviation Safety Agency (EASA) approved the return to service of a modified version of the 737 MAX. The EASA mandated a package of software upgrades, electrical wiring rework, maintenance checks, operations manual updates, and crew training.
Boeing announced in October that it plans to cut another 7,000 jobs due to the reduction in air travel and reduced demand for jetliners amid the pandemic. The grounding of the 737 Max has also hurt demand for Boeing's airplanes. Boeing CEO Dave Calhoun told employees that the company plans to have a staff of 130,000 by the end of 2021, down from 160,000 at the start of 2020.
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4b833f68f97f7b3a34fd60022a4dd9e2 | https://www.investopedia.com/articles/markets/040115/how-abbvie-makes-its-money-abbv.asp | How AbbVie Makes its Money | How AbbVie Makes its Money
Occasionally a company will spin off a division, only to have the offspring grow to rival its parent. Pharmaceutical company Abbott Laboratories (ABT), with a market capitalization of $160.9 billion, is now slightly smaller than its spinoff AbbVie Inc. (ABBV), which has a market cap $169.9 billion as of June 9, 2020.
Devised as the research arm of Abbott and based in Chicago, AbbVie became a pharmaceutical company in its own right in late 2012. Abbott retained the non-research interests—everything from baby formula to sports nutrition to heart stents. At the time of the spinoff, Abbott management claimed that the move gave investors a chance to objectively value two businesses that were heading in disparate directions. However, cynical investors suspected that Abbott’s board of directors constructed AbbVie as a repository in which to dump some of its imminently expiring patents.
Still, the new company seemed to be on a roll for the next few years, with its stock—originally issued at $33—soaring as high as $116 in early 2018. Unfortunately, it started to tumble shortly thereafter, and came under further press pressure on July 19, 2018, when prominent short-seller Andrew Left's Citron Research called AbbiVie the "next great drug short."
Nevertheless, the company is a solid performer. For 2018, it posted net revenues of $32.75 billion, a 16% increase over the previous year, for a net profit of $5.687 billion. On Nov. 1, 2019, AbbVie reported Q3 earnings with net revenues of $8.48 billion, up 3.5% operationally compared to the same quarter last year—beating estimates. Its board of directors declared an increase in the company's quarterly cash dividend from $1.07 per share to $1.18 per share beginning with the dividend payable on Feb. 14, 2020.
key takeaways Pharmaceutical company AbbVie, spun off by Abbott Laboratories in 2012, is now larger than its erstwhile parent. AbbVie has a market cap of over $160 billion. AbbVie produces close to 20 drugs, including Imbruvica, Lupron, and Humira, which accounts for roughly 58% of its revenues. While expiring patents for its drugs are a challenge—Humira sales dropped for the first time ever in 2019—AbbVie will soon launch several others and is also acquiring Allergan, manufacturer of Botox.
AbbVie's Product Line
AbbVie’s entire product line consists mainly of 16 drugs, among them Lupron (for prostate cancer), Androgel (a testosterone booster) and Creon (pancreas therapy). But the company’s undisputed heavyweight champion is Humira, an anti-inflammatory medication that just happens to be one of the world's best-selling drugs.
AbbVie sold $19.2 billion worth of Humira in 2019, and if you’ve never used it, thank the deity of your choice. Physicians use Humira to treat such ailments as Crohn’s disease and rheumatoid arthritis, a far more damaging and painful counterpart to common, non-inflammatory osteoarthritis. A standard prescription costs about $5,800, which means AbbVie sells about 3.3 million prescriptions a year. Humira means almost as much to AbbVie as tires do to Michelin. The drug alone was responsible for around 58% of AbbVie's revenue in 2019.
Humira is expensive, but so were the years of research and testing that went into developing it and preparing it for market. Your average Crohn’s patient will take that trade. Humira brings in more than five times more revenue than AbbVie’s next most lucrative drug, Imbruvica, which is used to treat certain types of leukemia and lymphoma.
One of AbbVie’s most versatile drugs, Lupron, brought in $720 million in revenue in 2019. Developed to fight everything from prostate cancer to vaginal fibroid tumors to early puberty, Lupron is a drug for every age and both sexes.
AbbVie's Expiring Patents
The drugs that generate money one year aren’t necessarily the drugs that generate it the next. That’s not necessarily because superior drugs have supplanted the older ones, but rather because patents have expired and the market share of the drug in question has thus shrunk. For instance, AbbVie sells multiple drugs for the treatment of dyslipidemia (unhealthy levels of lipids in the blood) like TriCor and Niaspan, but some of the patents expired in the last couple of years, significantly reducing the drugs' contribution to AbbVie’s income.
Another cause for concern: barbarians at the gate of the Humira empire. The patents protecting the drug began to expire in 2016. Its first competitor arrived in India and sold for $200 a vial, one-fifth of the US price of the drug at the time. For a while, sales of the name-brand drug continued to grow as AbbVie filed additional patents to protect its main source of revenue, and also raised prices; worldwide Humira sales increased by 8.2% in 2018. But cheaper copycat versions, arriving in Europe in late 2018, began to take a toll the following year (the stock price's tumbles, and Lefton's "short" comment, largely reflected the arrival of these European competitors). In 2019, international sales of Humira dropped for the first time ever—by 33.5% in Q3—generating close to a $2 billion cut in revenue for the year.
AbbVie's Future Prospects
A Humira biosimilar competitor is not expected to hit the market in the United States until 2023, so U.S. sales of the drug remain robust (up 8.6% in 2019). And AbbVie aggressively continues to develop other drugs and pharmaceutical avenues, with several forward steps occurring in 2019. The company has gained the U.S. Food and Drug Administration's (FDA) approval of its Rinvoq for the treatment of moderate to severe rheumatoid arthritis. The FDA's also given a green light to Skyrizi, a treatment for psoriasis.
In June 2019, AbbVie also announced the acquisition of Allergan, manufacturer of Botox; though the price tag is $63 billion, the deal could be a money-saver in the long run, as it lets the company acquire popular products without having to spend on research and development.
The Bottom Line
If there’s one thing we’ve learned from analyzing the financial reports of large pharmaceutical companies like Merck & Co. (MRK), Pfizer Inc. (PFE) and Novartis (NVS), it’s that in general, it’s far better to produce an expensive drug with a small user base than a low-margin one taken by tens of millions. Walmart Inc. (WMT) might dwarf Trader Joe’s, but pharmaceuticals are a different game with a different strategy. The more ambitious the drug and the more serious the ailments it counters, the better for the manufacturer. As long as AbbVie can bring its new drugs to market faster than its patents expire, the company should be in a great position in the long run.
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28b5f27a715fb2320a8d324a02370f6b | https://www.investopedia.com/articles/markets/041714/how-warren-buffett-made-berkshire-hathaway-worldbeater.asp | How Warren Buffett Made Berkshire Hathaway a Winner | How Warren Buffett Made Berkshire Hathaway a Winner
Berkshire Hathaway (BRK.A) is one of the most coveted stocks and one of the biggest companies in the world. The conglomerate has made a name for itself, thanks to the prowess of Warren Buffet who acquired the company in the mid-1960s. The billionaire investor spent his time as the head of Berkshire, turning it into a holding company by buying up troubled businesses and turning them around. With names like Geico, Dairy Queen, and Fruit of the Loom under its belt, the Omaha, Nebraska, company has a market capitalization that exceeds $504 billion, with one share reaching above $300,000 over the last year. This article looks at how Buffet turned the company into the success that it is today.
Key Takeaways Warren Buffett purchased Berkshire Hathaway in 1965, turning it into the world's largest holding company by buying troubled businesses and turning them around. Premiums paid to Berkshire Hathaway insurance companies remain on hand or are invested as its managers see fit. Berkshire Hathaway invests in companies that have a long history of paying dividends. Buffett's strategy is to reinvest dividends rather than paying one out to Berkshire Hathaway investors.
Berkshire Hathaway: A Brief Overview
Berkshire Hathaway was founded in the 19th century not as one, but as two separate Massachusetts cotton mills—Berkshire Fine Spinning Associates and Hathaway Manufacturing. The two companies merged in 1955 to become Berkshire Hathaway. In 1965, Warren Buffett and his investment firm came in to purchase and take full control of the struggling company. Under his leadership, Berkshire Hathaway became one of the world's biggest holding companies.
Buffett officially made Berkshire Hathaway a conglomerate, purchasing National Indemnity—the first of what would become many insurance acquisitions for the company—while distancing itself from the textile industry by liquidating those assets completely. The company expanded its holdings to include other insurance companies as well as those in the financial, clothing, entertainment, food and beverage, utilities, furniture, household products, media, and materials and construction industries.
Some of the major, well-known subsidiaries under the Berkshire Hathaway banner include:
Geico Dairy Queen Fruit of the Loom Benjamin Moore Duracell Pilot Travel Centers
1:41 How Warren Buffett Made Berkshire A Winner
Berkshire Hathaway's War Chest
Berkshire Hathaway's lifeblood is what industry insiders call a float. This is any money paid to Berkshire Hathaway’s insurance subsidiaries in premiums but has yet to be used to cover any claims. This money—also referred to as available reserve—doesn't actually belong to the insurance company. Instead, it remains on hand to be invested as its managers see fit. The company's float—over $129 billion in 2019—is not only one of the largest in the world, but more 3,000 times what it was in 1970. It allows Berkshire Hathaway to quickly purchase temporarily wounded companies and breathe life back into them. That's exactly what it did with Fruit of the Loom. Berkshire purchased the struggling clothing company for a mere $835 million in 2002 after its stock lost 97% of its value.
One of the prime tenets held by Buffett’s mentor, Benjamin Graham, is that dividends are an investor’s secret weapon. Many of the Fortune 500 companies in which Berkshire Hathaway holds large positions—Apple (AAPL), Coca-Cola (KO), and American Express (AXP), to name a few—have a steady history of maintaining or increasing dividends every year. Coca-Cola, for example, increased its annual dividend 55 years in a row. While imprudent speculators chase hot stocks whose prices are rising, their patient brethren load up on companies with fundamentals formidable enough to allow regular cash payments to shareholders.
Financial news outlets rarely showcase dividend data the way they do stock price and price movement figures, even though dividends provide one of the surest measures of a company’s potency. After all, management will hand cash over to owners only when operations turn a large enough profit to make said payments feasible. Having said all this, it's Buffet's pursuit of dividends that made Berkshire Hathaway so consistently successful.
Pay A Dividend? No Way
If dividends are what attract Buffett to a company, the same rule doesn't necessarily apply to his conglomerate. In fact, the same Buffett who invests in companies that pay dividends avoids paying them out to his own investors. At first, this seems so self-evident that it barely counts as an observation—it makes sense to take the cash that other companies offer you, but never to pay cash out yourself. The only time Berkshire Hathaway actually paid a dividend was once in 1967 to the tune of 10 cents per share. To this day, Buffett claims that he must have been in the bathroom when the dividend was authorized.
That being said, it would be short-sighted for any Berkshire Hathaway shareholder to complain about the company’s refusal to pay dividends. The stock price has skyrocketed since Buffett took the helm, trading at $275 in 1980, $32,500 in 1995, and over $317,480 as of October 2, 2020 market close—a track record without comparison.
Berkshire Hathaway’s rationale is simple and arguing with it can prove to be difficult. Buffett prefers to reinvest the money rather than pay it out. Think about it. If you’re an investor, would you rather have a dividend payment to spend, or would you prefer to see that money put back by the team that turned a humble textile investment into one of the largest, most-respected, and most financially robust companies to date?
While you probably won't be able to purchase shares in Berkshire Hathaway's Class A stock, you may be able to invest in the company's Class B shares if you can afford to do so.
Since a single share of Berkshire Hathaway Class A stock is equivalent to several years’ worth of the average American salary, it’s no wonder that shares trade infrequently—approximately 300 or 400 change hands a day. Buffett has never entertained the notion of a Class A split, as doing so could encourage speculation. Buffett did, however, authorize the creation of Class B shares (BRK.B), which was valued at 1/30 the value of its Class A counterpart. After a 50-for-1 split of BRK.B in 2010, the Class B stock replaced BNSF on the index. The lower price and concomitant liquidity make Class B stock suitable to be included in an index that attempts to gauge the value of the market. Class A stock is too expensive and too sparsely held to make an effective index component.
The Bottom Line
Some investors look for value, then purchase shares of companies that fit their criteria. Berkshire Hathaway takes a similar approach. But instead of buying a few shares, it buys the whole company. After decades of applying that investment strategy, the result is a global conglomerate without a match.
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4308f784dc6904ed83ddc7ad758d1ddd | https://www.investopedia.com/articles/markets/041816/who-are-advanced-micro-devices-main-competitors-amd.asp | Who Are Advanced Micro Devices' (AMD) Competitors? | Who Are Advanced Micro Devices' (AMD) Competitors?
Companies in the semiconductor industry are in a constant race to build smaller, faster, and cheaper chips. The industry, which began in 1960 when fabricating semiconductors became feasible, grew from a $1 billion industry in 1964 to a $412 billion industry by the end of 2019. The semiconductor industry is dominated by some very large players with distinct niches and advantages--including Advanced Micro Devices (AMD).
Advanced Micro Devices Inc. has historically been one of the significant players in the semiconductor industry. The company has seen its market capitalization decline precipitously from the highs it reached during the dot-com bubble in the late 1990s and again in 2005 when analysts and market participants perceived the company as an innovator in the industry. AMD generated net income of $341 million in 2019 and a gain of 80.01% in its share price. Here, we take a look at four AMD competitors.
Intel
Intel Corporation (INTC) is the largest pure-play competitor to AMD. The company creates, produces, and sells integrated digital technology platforms all over the world. As the largest player in the space, the company has historically invested heavily in research and development (R&D). For the fiscal year ending in December 2019, the company had $72 billion in annual revenue and gross margins of 58.6% overall. The company generated a record $33.1 billion cash, and paid dividends of $5.6 billion. Intel earned $4.71 per share. As of May 31, 2020, the company had a market cap of $266.5 billion and a price-to-earnings (P/E) ratio of 12.18.
IBM
International Business Machines Corporation (IBM) is a diversified technology products and services company, and semiconductors represent one piece of the company's overall business. IBM is a global leader in technology R&D, and it continues to invest a substantial amount of money in chip technology. In July 2019, IBM also finalized its acquisition of Red Hat for $34 billion as it continued to look into open source, hybrid cloud solutions. IBM had $77.1 billion in revenue for the fiscal year that ended in December 2019, which included its total cloud revenue of $21.2 billion. In addition, its consolidated diluted earnings per share was $10.56. This was an 11% increase year over year compared to $9.52 for 2018. IBM generated non-GAAP earnings per share (EPS) of $12.81 for the fiscal year. As of May 31, 2020, the company had a market cap of $110.9 billion and a P/E ratio of 12.37.
NVIDIA
NVIDIA Corporation (NVDA) is a semiconductor company specializing in chips used primarily in graphics and gaming. Its Tegra division produces chips that integrate a computer’s circuitry onto a single chip. For the fiscal year 2019, the company had $11.72 billion in revenues--up 21% from the previous year. The company's non-GAAP earnings per diluted share were $6.64, and had impressive growth margins of 61.2%. As of May 31, 2020, the company had a market cap of $218.34 billion and a P/E ratio of 66.28, which is one of the highest in the large-cap semiconductor space.
Analog Devices
Analog Devices Inc. (ADI) is a semiconductor company that creates, produces, and sells a suite of products that use analog, digital, and mixed-signal processing technology to manufacture integrated circuits and other solutions for industries and consumers. The company serves niche markets in the automotive and communications industries and sells its products worldwide. For the fiscal year 2019, the company had $6 billion in revenue and ended its fourth quarter with gross margins of 65.3%. In addition, Analog Devices had an operating cash flow of $2.3 billion and free cash flow of $2 billion. As of May 31, 2020, the company had a market cap of $41.61 billion and a P/E ratio of 37.88.
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fe92220765b2fe87b6d5669ae3d204f7 | https://www.investopedia.com/articles/markets/042316/amc-vs-regal-entertainment-which-better-my-portfolio.asp | AMC vs. Regal Entertainment: Which Is Better for My Portfolio? | AMC vs. Regal Entertainment: Which Is Better for My Portfolio?
As interest rates rebound from near-zero levels following the Great Recession, many investors have chosen to avoid consumer discretionary stocks. The consumer discretionary sector has exposure to economic cycles, resulting in profit declines during sluggish economic periods.
Although the movie exhibition industry is part of the consumer discretionary sector, it has its own cycles. The movie theater industry’s cycles result from seasonal viewership. Its strongest viewing seasons are during the Christmas holidays and throughout the summer. As a result, movie studios release their high-budget movies during one of those two viewing seasons.
With movie ticket prices averaging $8.93 in the third quarter of 2019, the quarter brought a total box office gross exceeding $2.8 billion. This places the movie theater industry above the $2.7 billion in proceeds from the same quarter last year.
Box office revenues since the Great Recession have been solid, attracting the attention of the retail property management business. Malls need foot traffic and movie theaters are desirable anchor tenants because they enhance that traffic. Resilient box office revenues in the era of streaming availability of first-run movies are driving investors to load their portfolios with movie theater stocks.
AMC Entertainment
AMC Entertainment (AMC) has a unique history. On Aug. 30, 2012, Chinese conglomerate Dalian Wanda Group purchased AMC Entertainment Holdings, Inc. from a consortium of investors at a cost of over $2.6 billion.
Some of the consortium members included J.P. Morgan Partners LLC, The Carlyle Group and affiliates of Bain Capital Partners. On Dec. 18, 2013, Dalian Wanda Group took AMC Entertainment Holdings public by way of an initial public offering (IPO), while retaining 80% ownership of AMC.
AMC Entertainment Holdings has a market capitalization of $727 million, putting it near the lower end of the mid-cap spectrum. As of the end of 2018, AMC owned or operated over 600 theaters with more than 8,000 screens. In 2016, AMC acquired Carmike Cinemas.
Regal Entertainment Group
Regal Entertainment Group is the largest movie theater chain in the U.S., but it's now owned by the U.K.-based company Cineworld, which purchased Regal in 2017. This $2.5 billion market cap company owns 790 theatres across 11 countries.
Accordingly, it is AMC Entertainment Holdings’ primary competitor. Regal had previously concentrated on the markets of mid-sized metropolitan areas and suburban growth regions of larger metropolitan centers throughout the U.S. Some 80% of Regal theaters had offered stadium seating.
Since Regal, and its previously hefty dividend yield, is no longer a public company, investors are left with AMC if they're looking to get exposure to this unique part of the consumer discretionary market.
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93cea686203b0f67a10c6ac9216da874 | https://www.investopedia.com/articles/markets/042516/3-ways-tax-haven-governments-make-money.asp | 3 Ways Tax Haven Governments Make Money | 3 Ways Tax Haven Governments Make Money
In recent years, the issue of comprehensive tax reform has caused quite a heated debate among politicians and members of different economic classes throughout several developed nations such as the United States, the United Kingdom, and Australia. In these countries, both companies and the top income earners have complained in vain about being burdened by very high-income tax rates and extremely tedious tax compliance requirements. According to the Tax Foundation, a nonpartisan tax research organization, the U.S. ranks number three in the world among nations with the highest top marginal tax corporate income tax rate. It is also important to note that it can be very expensive for businesses, especially small businesses, to simply stay fully compliant with the Internal Revenue Service (IRS). That is because the complexity of America's more than 70,000-page tax code will often require the need to get counsel from lawyers and accountants who not only studied the intricacies of tax law but also keep abreast with regular updates to the tax code. It is no wonder why Dr. Laura D’Andrea Tyson, an economics professor at University of California, Berkeley, described the country's current tax system as, "Not an attraction to the U.S. as a place to do business, either for U.S. companies or for foreign companies."
The broken tax system in America has forced many wealthy individuals, their families and companies to make use of offshore financial centers to significantly minimize, and even eliminate, their total income and capital gains tax liabilities. These centers are commonly referred to as tax havens because they are often low tax jurisdictions that have strict bank and corporate secrecy laws. The Cayman Islands, the British Virgin Islands, Panama, Nevis and Bermuda are some of the most popular tax havens. As a result of their relatively minimal income tax revenues, some might wonder how exactly do tax haven governments raise enough money to pay for things like healthcare, education and law enforcement. Below we will take a look at the different ways that governments of tax havens can make money with very low, and in some cases no, corporate and personal income taxes.
Customs and Import Duties
Despite what their name might imply, tax havens are not completely tax-free. Low-income tax jurisdictions normally supplement lost government revenues with taxes on most goods imported into the country, known as customs and import duties. These are a form of indirect taxes and can make the cost of living high because they are applied to the price of items before being sold locally. In Britain’s Trillion Pound Paradise, a 2016 BBC documentary on the Cayman Islands, the presenter was shocked to find out that the island’s high import duties caused a pack of fish fingers to retail for as much as £8.50. ($12) (You might also like: Why Is Panama Considered a Tax Haven?)
Corporate Registration and Renewal Fees
As already mentioned, there are a lot of companies that find the legal and business environment in tax havens to be very attractive. A research paper published by the International Monetary Fund (IMF) in 2011 entitled Republic of San Marino: Selected Issues for the 2010 Article IV Consultation revealed that there were more than 600,000 offshore companies registered in the British Virgin Islands alone. Furthermore, earlier this year the Guardian reported that there were more than 100,000 companies domiciled in the Cayman Islands. To put that into perspective, that’s roughly two companies for every resident on the island.
Although most offshore financial centers impose no corporate income tax, their governments still financially benefit from having thousands of companies registered in their jurisdiction. That is because tax haven governments typically impose a registration fee on all newly incorporated business entities like companies and partnerships. Also, companies are required to pay a renewal fee each year to still be recognized as an operating company.
There are also additional fees that are imposed on the companies depending on the type of business activity that they engage in. For example, banks, mutual funds and other companies in the financial services business usually need to pay for an annual license to operate in that industry. All of these various fees add up to create a strong source of recurring revenue for tax haven governments. It is estimated that the British Virgin Islands collects over $200 million each year in the form of corporate fees. (For related reading, see: Panama Papers Reveal The Secrets Of Dirty Money.)
Departure Taxes
Quite a few tax havens have a very vibrant tourism industry, welcoming hundreds of thousands and even millions of visitors each year. This high level of tourism creates an extra revenue source for some of these countries in the form of departure taxes. A departure tax is essentially a fee that is levied on a person upon their exit of a country. (Also, see: Switzerland's Declining Tax Haven Appeal.)
The Bottom Line
Income taxes are a major source of government revenue for most countries. According to the Tax Policy Center, individual income tax has been the U.S. government’s largest source of revenue since the year 1950. There are a handful of countries, known as tax havens, that impose very low-income taxes on their citizens and domiciled companies. Some of the ways that their governments make up for the loss of potential income tax revenue include collecting annual license fees from incorporated entities and levying a customs duty on the majority of imports brought into the country.
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a9c6492034096211766cf1e4f97a0f02 | https://www.investopedia.com/articles/markets/042716/baba-who-are-alibabas-main-competitors.asp | Who Are Alibaba's Main Competitors? | Who Are Alibaba's Main Competitors?
Alibaba Group (BABA) is a Chinese e-commerce company established in 1999. The company is headquartered in Zhejiang, China. The service-based e-commerce model that the company provides allows users to buy and sell goods on its platforms, much like the eBay (EBAY) business model. Alibaba has three primary businesses: a business-to-business (B2B) e-commerce platform, Alibaba.com; a business-to-consumer (B2C) platform, Tmall.com; and a consumer-to-consumer platform, Taobao.com.
Key Takeaways Alibaba Group is a service-based e-commerce company that provides a platform for users to buy and sell goods, much like the eBay (EBAY) business model. Alibaba has three primary businesses: a business-to-business (B2B) e-commerce platform, Alibaba.com; a business-to-consumer (B2C) platform, Tmall.com; and a consumer-to-consumer platform, Taobao.com. While Alibaba dominates e-commerce and cloud computing services in China, Amazon dominates those industries in most other growing markets around the world. JD.com is one of Alibaba's primary domestic competitors in the e-commerce space. Alibaba also faces smaller national competitors and local upstarts across the Chinese landscape, including the Chinese e-commerce site Pinduoduo.
How Alibaba Makes Money
Alibaba generates revenue primarily from sales commissions, fulfillment services, advertising fees, and other service-based fees, including those from its online payment platform, Alipay. The company also operates a cloud computing business, Aliyun, and other e-commerce businesses and websites.
Alibaba reported $56.12 billion in revenue for the fiscal year ended in March 2019, an increase of 51% year-over-year. Annual active consumers on the company's Chinese retail marketplaces reached 654 million, an increase of 102 million from the 12-month period ended March 31, 2018.
In 2010, Alibaba launched AliExpress, a cross-border e-commerce platform that has catapulted the business onto the world stage and made it a major competitor outside of China. In Russia and Brazil, AliExpress is the top e-commerce marketplace. In 2019, Alibaba focused its expansion efforts on Europe, beginning in Spain, Italy, and Turkey. The company also opened its first brick-and-mortar store in Madrid in August 2019.
Amazon
While Alibaba dominates e-commerce and cloud computing services in China, Amazon (AMZN) dominates those industries in most other growing markets around the world. However, as Alibaba's operations have expanded internationally, the company has attempted to undercut Amazon's seller fees in order to attract new sellers. Alibaba's strategy of securing overseas shoppers is likely to continue in the future, making it more likely that Amazon will emerge as its biggest competitor in certain countries and geographical regions. The company's goal is to have over one billion annual active shoppers worldwide by the end of the fiscal year 2024. In addition, Alibaba's move to allow international merchants outside of China to sell on its AliExpress platform has put additional pressure on Amazon. Previously, AliExpress was only open to Chinese merchants who wanted access to the global retail market.
In addition to Amazon's well-known B2C platform, the company introduced its B2B platform, Amazon Business, in 2015. With Amazon Business, companies of all sizes can buy from and sell to each other. Amazon Business provides access to everything from IT and lab equipment to education and foodservice supplies with business-only selection and pricing. While there are many other B2B marketplaces that use the same model as Amazon Business, Amazon benefits from brand-name recognition and its success in its other commercial ventures have given it a good reputation.
While Amazon's efforts to penetrate Asian markets have been successful, they have faced some setbacks in the country of China. In 2019, they closed down their Amazon China store, despite its 15-year history in the country. However, online shoppers in China can still purchase items from Amazon's global store.
JD.com
Established in 2004, JD.com (JD) is one of Alibaba's primary domestic competitors in the e-commerce space. Alibaba and JD.com are the two largest e-commerce companies in China. In May 2019, Alibaba's percentage of total retail e-commerce sales in China was 55.9% and JD.com's was 16.7%, according to a report by eMarketer.
JD.com is a direct-sales retailer that uses a model similar to Amazon. In contrast to Alibaba's e-commerce model, JD.com warehouses, markets, and ships merchandise directly to Chinese consumers through its national shipping network, which includes a last-mile delivery component throughout much of the nation.
According to unaudited financial results for the full year ended on December 31, 2019, JD.com had a net revenue of $82.9 billion, an increase of 24.9% from the full year of 2018.
Alibaba and JD.com have very different business models. With direct control over its supply chain, JD.com has developed a reputation for authentic products and reliable, fast shipping. Alibaba, on the other hand, has long battled an association with counterfeit goods among both domestic and international customers and brand owners.
Other Domestic Competitors
Beyond JD.com, Alibaba faces smaller national competitors and local upstarts across the Chinese landscape. According to eMarketers, the Chinese e-commerce site Pinduoduo had 7.3% of the market share in 2019. For smaller merchants who cannot afford the cost of marketing fees on Alibaba, Pinduoduo is a cheaper alternative. Pinduoduo was started by a former Google engineer in 2015 and has succeeded in reaching consumers in smaller, more rural Chinese markets.
The Future of Ecommerce in China
In the fourth quarter of the fiscal year 2019, Alibaba had 654 million active shoppers on its online shopping platforms in China. In comparison, Pinduoduo had 443.3 million active shoppers, and JD.com had 310.5 million active shoppers. Amazon has 300 million active shoppers on its marketplace.
China maintains the world's largest online retail market, much larger than the online retail market in the U.S. As the middle-class population of China has grown, there is more of a desire for international brands among Chinese consumers. Alibaba has been crucial in introducing overseas brands to the country. While Alibaba will likely be successful in its quest for more international growth, its ongoing issues with counterfeiting could stimmy some of its expansion.
Most recently, Alibaba introduced a digital financial services branch. Through its Ant Financial affiliate, Alibaba offers business and consumer loans and mobile payments. Ant Financial also operates Alibaba's online payment platform, Alipay. Currently, Alipay is one of the most popular mobile payment services in China, but it also has international ambitions as Ant Financial works to implement Alipay at retail businesses overseas.
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703a8e9b87f6984e1d636b8f424cdb56 | https://www.investopedia.com/articles/markets/042815/how-ebay-makes-its-money-ebay.asp | How eBay Makes Money | How eBay Makes Money
eBay Inc. (EBAY) began in the mid-1990s as a way for otherwise unconnected buyers and sellers to meet, through the previously unknown method of typing in a URL. According to folklore, founder and current chairman Pierre Omidyar created the site to help his girlfriend deal in Pez candy dispensers. The company now officially debunks the legend, which was created to add public relations color to this unfamiliar, revolutionary new way of buying and selling. Today, eBay generates revenue through transactions taking place across its platform and by marketing services, including classifieds and advertisements.
Like most of its dotcom boom brethren, particularly the successful ones still doing business today, eBay grew both organically and through acquisitions. In this century, it’s bought a company roughly every three months; including Skype, which was later sold to Microsoft Corp. (MSFT), and StubHub—not to mention a quarter interest in Craigslist. But easily eBay’s most noteworthy acquisition was that of PayPal (PYPL) in 2002, which it purchased for $1.5 billion and spun off into its own company in 2015. That makes this something of a story of two related concerns. PayPal will soon be publicly traded and the spinoff will, at least temporarily, remove eBay from its position as a $68 billion titan. In fact, it’s estimated that the sale will almost halve eBay. PayPal was responsible for 40% of the combined company’s revenues in 2014. In July of 2015, eBay completed its plan to spin PayPal off into its own company, and in early 2018, eBay announced that it would utilize Netherlands-based startup Adyen as its primary payments service in place of PayPal.
As of the end of 2018, eBay had 179 million active buyers with more than one billion live listings on its platform. Gross Merchandise Volume (GMV), accounting for the total value of all completed transactions across the primary Marketplace platform as well as StubHub, was $95 billion. This generated net revenues of $10.7 billion, up from $9.9 billion in 2017, according to the 2018 annual report. As of July 12, 2019, eBay has a market capitalization of just under $36 billion.
One of the first items sold on eBay was a broken laser pointer.
eBay's Business Model
eBay is an idea that came along at the perfect time—the moment that technology had advanced to the point that the ultimate worldwide marketplace became feasible, ushering in an era when spending money on bricks, mortar, or storefronts became more or less optional. Not that eBay doesn’t have huge capital expenditures, mind you. Facilitating a site where market participants come together requires more than 50,000 servers, consuming over 20 megawatts of power, all of it hidden behind the interface of a single unassuming website. Actually, that’s not quite true. The company operates dozens of sites, including the eBay brand localized for different markets from Sweden to Poland to Hong Kong.
Even 20 years after its founding, just the description of eBay is elegant in its pithiness: a marketplace for just about anything, with no cost for buyers. Indeed, individuals can set up eBay accounts in just a few minutes. Once activated, an account allows users to buy, sell, communicate with other eBay account holders and leave feedback after completing transactions. Items can be listed for sale in a variety of ways, with two of the most common being an auction-style method—in which interested buyers can bid increasing amounts on the item—and a straightforward purchase method, where buyers can pay a set price to bypass the auction setup. Frequent sellers can set up an eBay Store to consolidate their transactions and gain additional benefits. The company also sells classifieds.
eBay divides its revenue into two categories: net transaction revenues and marketing services and other (MS&O) revenues.
Key Takeaways eBay is primarily a consumer-to-consumer ecommerce marketplace, which generates revenue through transaction fees and marketing services. As one of the few lingering successes of the dotcom era, eBay sports more than 179 million individual users. The company is heavily invested in other companies and has at one time or another owned all or part of PayPal, Skype, Craigslist, StubHub, and others.
eBay's Transaction Business
Individuals wishing to sell items through eBay's platform benefit from the company's massive user base, with listed items potentially reaching dozens of millions of possible customers. However, because of eBay's near-monopoly on the consumer-to-consumer ecommerce marketplace, that access does come with a cost: listing or transaction fees. The company charges sellers fees to list an item for purchase or transaction costs based on the final value of the item at the successful completion of an auction.
As anyone who’s paid eBay’s 10% listing fees can attest, that market share allows the company to make an absurd amount of money. In 2018, eBay earned $7.4 billion in transaction fees through its Marketplace platform. An additional $1 billion in revenue came from StubHub transactions.
eBay's Marketing Services Business
Not all of eBay’s money comes from listing fees, though. Or did you not notice the highlighted listing on each page every time you shop? eBay earned $1.2 billion in advertising revenue last year. If eBay were purely an ad agency, it’d be among the United States’ couple dozen largest. Additionally, the company generated a further $1 billion in classifieds revenue for 2018.
Through its eBay for Charity program, eBay enables customers to support more than 60,000 nonprofit organizations around the world.
Future Plans
eBay stated in its 2018 annual report that one of its primary focuses going forward was on developing the user experience on its platform. On the buyer side, the company will aim to reduce friction, add new ways to compare value and to search for unique inventory. The experience for sellers will also transform; sellers will have new tools at their disposal as well as additional data points. Though eBay has a sizable customer base already, it aims to continue to expand into the future, particularly by encouraging new customers to make a first purchase. Finally, all customers will see benefits as a result of improved delivery and returns infrastructure.
Beyond the Bid
Outside of the marketplace itself, eBay will continue to expand its advertising business as well as its payments branch, attempting to turn them into $1 billion and $2 billion opportunities, respectively.
Key Challenges
Given dramatic and fast-moving changes to the ecommerce industry since eBay first launched, the company faces a consistent onslaught of challenges to its business model. It must continue to adapt to changing customer tastes, new technologies, and growing competition in order to remain profitable. Although eBay is a sizable operation, it is dwarfed by other tech giants like Alibaba, Amazon, and Google, all of which have made ecommerce efforts as well. As such, it's crucial for eBay that it continues to develop its corner of the market and cultivates its user base.
Economic Volatility
As with other ecommerce businesses, changes to the global economy could influence customer spending habits, potentially causing a negative impact on eBay's business. Ongoing trade battles could also impact eBay, as cross-border trade is a crucial component of its business practice.
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fb52c8c8b344adabcb09de718fc26506 | https://www.investopedia.com/articles/markets/042816/adt-who-are-adt-corporations-main-competitors.asp | Who Are ADT Corporation's Main Competitors? | Who Are ADT Corporation's Main Competitors?
ADT Corporation (NYSE: ADT) provides monitored security systems, monitored life safety systems and building automation systems to homeowners and small- and medium-sized businesses throughout the United States and Canada. The company's home security offerings include around-the-clock burglary and emergency monitoring services, real-time networked video solutions, and automated lighting and climate control capabilities. Additional security offerings for businesses include video surveillance, access control, and intrusion detection services. In the health and life safety category, ADT Corporation provides in-home and on-the-go emergency response services and remote health monitoring. ADT serves 8 million customers, making it the largest monitored security and home automation company in North America.
ADT Goes Private, Then Public
On Feb. 16, 2016, ADT Corporation was acquired by private equity funds managed by Apollo Global Management LLC (NYSE: APO). Since the company was bought, the security company saw a loss of $296 million on $3.2 billion in revenue during the first 9 months of 2017. On January 18 of 2018, the company raised $1.47 billion in its US IPO, priced at $14 a share, well below Wall Street's expectations of $17 to $19 per share. Other private security firms will surely be watching the early days of the ADT stock
Stanley Convergent Security Solutions
Stanley Convergent Security Solutions, Inc. is a wholly-owned subsidiary of Stanley Black and Decker, Inc. (NYSE: SWK), an industrial and household tool manufacturer and security company. Stanley CSS provides a full range of monitored security solutions in the U.S., Canada and across Western Europe. A similar range of services is also marketed throughout Latin America under the Stanley Security Solutions brand. Stanley Black and Decker reported revenue of $2.097 billion for its security segment, which includes Stanley CSS and Mechanical Access Solutions, its access-control hardware business.
Stanley CSS designs and installs a full range of customizable security solutions for businesses and institutions of all sizes. It offers fire and intrusion monitoring services, managed access control solutions, video surveillance capabilities and a whole host of emergency response solutions. In the home security category, Stanley CSS offers burglary and emergency monitoring services with video surveillance options. Stanley CSS counts more than 300,000 commercial and residential customers in North America.
Vivint
Vivint, Inc. is a smart-home technology company providing monitored security and home automation services to homeowners primarily in the U.S. and Canada. Vivint provides burglary and emergency monitoring services, including indoor and outdoor networked video surveillance capabilities. Its smart-home services include remote access control and remote climate and lighting control capabilities, as well as locally installed cloud storage solutions. Vivint is a wholly-owned subsidiary of the privately held holding company APX Group Holdings, Inc. It reported revenue of $228.7 million for Q3 2017. At the close of the year, the company had more than 1.27 million subscribing customers.
Tyco International
Tyco International PLC (NYSE: TYC) is a global fire protection and security company, and it is the former corporate parent of ADT Corporation. ADT became an independent publicly-traded company after the completion of a 2012 spinoff from Tyco. As a result of the spinoff agreement, ADT Corporation owns the rights to the ADT brand in the U.S. and Canada, while Tyco holds the rights to its use in all other jurisdictions.
While Tyco has not competed in the home security market in North America since the ADT spinoff, it does compete against its former subsidiary in the business security market through it's North American integrated solutions and services division. The operating unit designs, installs, and monitors integrated electronic security systems, and fire detection and suppression systems for business, institutional and governmental customers of all sizes. It offers security and emergency monitoring services, video surveillance services, access control solutions, and other related security services. The unit reported nearly $30 billion in sales in the fiscal year 2017.
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93acc6074072f669dbeb1b718eb73664 | https://www.investopedia.com/articles/markets/050416/economics-report-compare-and-contrast-india-vs-brazil-pbr.asp | Economics Report: Compare and Contrast India vs. Brazil | Economics Report: Compare and Contrast India vs. Brazil
India vs. Brazil: An Overview
India and Brazil are both multi-trillion-dollar economies and members of the oft-cited BRIC countries along with Russia and China. While both are among the most-watched emerging markets, the economic fortunes of Brazil and India appear to be on divergent paths. India should continue to gain ground on Brazil unless the South American country confronts difficult political and economic challenges.
Key Takeaways India and Brazil are both important developing economies, part of the BRIC nations, with large populations and a wealth of natural resources. While each has enormous potential, several limitations stand in the way of stable growth and prosperity for all.
India
India, a land of diversity and interesting opportunities remain high on the list of investment destinations by international investors and businesses. It is the world's largest democracy and boasts a vibrant economy in many areas including technology and the service sector. With a lot of positives—a large population, stable government in the center, rising forex reserves, high-value capital markets—India seems to be on a firm growth path with the expectation of a double-digit growth rate.
However, regulatory inefficiencies, corruption, a slow growth rate over the last decade, bureaucratic red tape in starting and running businesses, political pressures, and heavy financial burdens due to subsidies, are some of the challenges facing India’s economy and business environment. While there is wealth in India, there is also still a large amount of poverty and inequality remains high.
Brazil
Brazil is South America's largest economy. The country has a lot going for it as it has an abundance of natural resources and people to fuel its workforce. Yet, as recent negative economic events have shown, having an abundance of these things does not necessarily mean strong incomes for citizens. These resources must be appropriately managed and developed. Brazil has some of the fundamental components of what it takes to make its economy strong, but if it wants to truly improve the lives of its citizens then it will need to develop greater productivity and increase its international competitiveness.
In recent years, Brazil's economy has experienced some trouble, The country depends on its export-driven commodity trade, and China's slowing demand for these products is a lightning strike. On the upside, the trade war between China and the U.S. has increased demand for Brazilian exports in agriculture and natural resources.
For investors in Brazil stocks, the damage has been an unfolding disaster for some years. The iShares MSCI Brazil ETF, for example, fell 75% from a high in 2011 to a low in mid-December 2015. Many hedge funds and institutional investors have given up and abandoned the old thesis of Brazil as a renaissance country leading Latin America to better days.
Comparing Economic Growth
Measured by aggregate gross domestic product (GDP), the Indian economy is larger than Brazil's, according to countryeconomy.com. This is mostly because India's population, which reached 1.34 billion in 2015, is significantly larger than Brazil's at 210 million as of 2018. Measured on a per capita basis, however, Brazil is far richer. The estimated GDP per capita in Brazil was $8,919 in 2018, roughly four and a half times larger than India's at $2,009 GDP per capita.
Greater exposure to international markets appears to drive India's growth. According to World Bank data, approximately 19% of India's GDP was generated from exports compared to only 12.5% for Brazil in 2017. International markets and investors triggered an industrial revolution in India during recent decades, allowing cheap Indian labor access to more than just agricultural careers.
Brazil, meanwhile, saw international trade shrink after the U.S. energy boom and a devaluation of the Chinese yuan. The United States and China are Brazil's two largest trading partners and major components of its recent economic structure.
Brazil's Scandals and Cronyism
Several high-profile scandals rocked Brazil between 2014 and early 2016. The most notable involved former president, Luiz Inácio Lula da Silva, along with dozens of other politicians and the semi-public energy company Petróleo Brasileiro SA (NYSE: PBR). Known as Petrobras, it is perhaps the most important company in Brazil. A long investigation uncovered more than $2.1 billion in government kickbacks and bribes, which earned Petrobras lucrative contracts among other benefits.
Measured by market capitalization, Petrobras accounted for as much as 10% of the Brazilian economy in 2014. The scandal coincided with a global drop in commodity prices, which helped balloon fiscal deficits and job losses in Brazil.
The Brazilian economy cratered in the second half of 2015. Inflation remained a threat despite high interest rates, and debt issues threatening the public and private sectors. By early 2016, the Brazilian Congress voted to impeach then-president Rousseff on charges of manipulating government accounting and she was forced out later in 2016.
Brazil's economy slowly began to recover in 2017 with 1% GDP growth and the same for 2018 due to a weak labor market, election uncertainty, and a trucker strike that halted economic activity in May 2018.
India's Pro-business Transformation
India entered 2016 with by far the lowest output per person among BRIC countries. Still, India's GDP per capita was roughly equivalent to Brazil's in 1985, Russia's in 2000, and China's in 2004. Each of those countries experienced more than a decade of strong growth in subsequent years, particularly after liberalizing markets. India has the chance to make similar strides, and it continues to be a bright spot in the struggling emerging market landscape.
For India to maintain its stride in productivity, the country needs to move from a rigid caste system and incorporate more efficient growth-oriented rules. Markets received a boost in 2014 with the election of Prime Minister Narendra Modi, a pro-business reformer. India's growth hit a multiyear high of 7.3% during his first year in office. However, efforts to simplify the country's complex and redundant tax code and make it easier to acquire or transfer land stalled in parliament.
In 2018, India is the world’s third-largest economy and could become a high-middle income country by 2030. Long-term GDP growth is stable, and India is expected to grow at over 7% per year. However, despite regulatory improvements to boost competitiveness, private investment and exports are at relatively low levels, which could slow long-term growth.
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416fdb4ab40e4d9b1f7ea605979167c7 | https://www.investopedia.com/articles/markets/050616/starbucks-stock-capital-structure-analysis.asp | Starbucks Stock: Capital Structure Analysis | Starbucks Stock: Capital Structure Analysis
Just hearing the name Starbucks probably conjures up images of coffee and the company's swanky cafes that can be found in almost every corner of the world. The company had humble beginnings in the western part of the country, but has become a giant in the beverage world. But just how does it rank as an investment? In this article, we look at an analysis of the capital structure for Starbucks for the year-over-year (YOY) period from December 2017 to December 2018, with an update using 3Q 2018 data to see how the company has grown since.
Key Takeaways Starbucks continues to dominate the coffee and beverage market, with more than 27,000 stores in 78 different countries. The last time the company initiated a stock-split was in March 2015, with a two-for-one stock split for shareholders. Starbucks continues to add to its long-term debt, announcing a $1 billion issue in 2019. In 2019, the company bought back 23.5 million shares, paying out a quarterly dividend of 36-cent per share on Aug. 23, 2019.
Starbucks: A Brief History
Seattle-based Starbucks (SBUX) started its saga as a single store offering coffee beans and coffeemakers in 1971. Howard Schultz joined the company in 1982 and expanded distribution to include restaurants, coffee bars, and various retail outlets. Schultz left Starbucks in 1985 after failing to persuade owners to serve coffee and other beverages. After his departure, he formed a chain of coffee bars called Il Giornale throughout Seattle. These bars were modeled after those he visited in Italy. In 1987, Schultz purchased Starbucks and renamed all of his locations under the Starbucks banner.
The company popularized the specialty coffee genre, expanding into licensing and distribution. Starbucks also spawned some of the most popular beverage brands including Teavana, Tazo, Ethos, Frappuccino, and La Boulange. Starbucks has now grown into a global brand operating more than 27,000 stores in 78 countries.
Financials
The company's fiscal year generally runs between October 1 to September 30 each year. For the full year ending Sept. 30, 2019, Starbucks generated full-year annual revenues of $26.5 billion, with the majority of revenue coming from company-operated stores. This is a 7% increase from the same period in 2018. The company returned a total of $12 billion in dividends and share buybacks to shareholders.
Equity Capitalization
Starbucks had 1.51 billion fully diluted shares outstanding, with a market capitalization of $61.88 billion on Dec. 31, 2014. The company implemented a two-for-one stock split for shareholders on record as of March 30, 2015—the last time the company initiated a stock split. Shares began trading on a split-adjusted basis on April 9, 2015. This caused the market cap to spike to $143.77 billion at the end of the first quarter. The diluted share count representing stock compensation nearly doubled from 11.3 million to 22 million shares at the end of the second quarter. The total equity market cap fell to $82.67 billion during that period.
Starbucks initiated a two-for-one stock-split for shareholders in March 2015.
Third-quarter diluted shares reached 30.5 million, representing $1.76 billion in stock compensation, at the end of September 2015. This raised the total equity market cap to $87.88 billion. The fourth-quarter diluted share count dropped to 9.4 million valued at $567 million by the end of December 2015, closing out the year with 1.49 billion total fully diluted shares outstanding valued at a $90.17 market cap, for a 45.7% YOY rise. Shares of Starbucks gained 47.98% for full-year 2015 compared to 1.38% for the Standard and Poor's (S&P 500) Index performance.
Starbucks' market cap was $98.57 billion by the end of trading on Nov. 1, 2019, with a trailing P/E of 28.40x based on diluted earnings per share of $2.93 for the 12-month period ending September 2019.
Debt Capitalization
The company's debt load increased by net $2.08 billion to a total of $11.17 billion at the end of the 2019 fiscal year. In March 2019, the company announced a new bond issue worth $1 billion. The company also issued additional long-term debt during the 2018 fiscal year in the form of senior notes at three time periods:
Two issues in November 2017: $500 million of 3-year 2.200% notes and $500 million of 30-year 3.750% notes Two issues in February 2018: $1 billion of 5- year 3.100% notes and $600 million of 10-year 3.500% notes Three issues in August 2018: $1.25 billion of 7- year 3.800% notes, $750 million of 10-year 4.000% notes, and $1 billion of 30-year 4.500% notes
These issues helped the company pay for general corporate expenses including repurchases of its common stock, as well as its share buyback program and dividend payments to shareholders. At fiscal year-end 2019, Starbucks had $11.17 billion in total debt divided by $19.22 billion in total assets for a debt-to-equity (D/E) ratio of 58.1%.
Enterprise Value Analysis
Starbucks started the 2019 fiscal year with $85.07 billion in enterprise value (EV). For full-year 2019, Starbucks saw global comparable same-store sales grow 5% year-over-year (YOY) on a 3% YOY increase in store traffic. Full-year earnings dropped 10% YOY to $2.92 per share. The company also bought back 23.5 million shares in 2019. Starbucks paid out a 36-cent per share dividend on Aug. 23, 2019. This resulted in a year-end 2015 EV of $110.89 billion.
As of Nov. 1, 2019, Starbucks commanded an enterprise value of $106.98 billion with an Enterprise Value/EBITDA ratio of 19.89x.
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74118046bbce22a6e51a12f4c06a56da | https://www.investopedia.com/articles/markets/050716/lowes-stock-analyzing-5-key-suppliers-low.asp | The Top 4 Suppliers of Lowe's (LOW) | The Top 4 Suppliers of Lowe's (LOW)
Lowe’s Companies Inc. (LOW) is an American home retailing company that provides customers with an extensive range of home improvement products, including home decorating, repair, remodeling, property maintenance, and installation services. Lowe's offers its products and services to both retail and wholesale customers. Lowe's reported fiscal third-quarter earnings on November 20, 2018. The home retailing company reported $17.42 billion in revenues this quarter, reflecting a 3.8% increase from the same period last year.
On Nov. 5, 2018, Lowe's announced that the company will close 51 underperforming stores in North America, with 20 locations in the U.S. and 31 in Canada. Lowe's will close the locations by Feb. 1, 2019, says CEO Marvin R. Ellison, as part of the company's efforts to focus "on its most profitable stores and improve the overall health of its store portfolio." The store closures come as the most recent update from Lowe's Companies, whose CEO of 13 years Robert Niblock retired in March. Lowe's Companies is now headed by Ellison, former CEO of J.C. Penney.
Following news of the store closures, Lowe's announced on Dec. 12, 2018 that the company would buy back $10 billion in company stock. Lowe's shares were down about 1.5% leading up to the company announcement and shot up by nearly 3% in afternoon trading. The company buyback suggests that the company may be confident heading into fiscal year 2019, despite shares having fallen about 5 percent so far this year.
Throughout the company's business and structural changes, Lowe's has remained committed to the belief that a diverse portfolio of products better meets customer needs. Most of Lowe's 106 suppliers are located within the United States, but the company also has suppliers based in South Korea, Canada, China, and Taiwan. Here are the company's four largest suppliers of Lowe's as of Dec. 12, 2018.
1. Advanced Environmental Recycling Technologies
Advanced Environmental Recycling Technologies Inc. (OTC: AERT) is an American producer manufacturing company. It develops and commercializes recycling technology solutions and green building compounds. Advanced Environmental Recycling Technologies supplies Lowe’s with technologies to recycle waste polyethylene plastics, along with branded do-it-yourself (DIY) decking products. In March of 2017, AERT was bought by Oldcastle Architectural for around $117 million. Oldcastle bought the company to get into the competitive decking market. Advanced Environmental Recycling Technologies generates approximately 50% of its revenue through business with Lowe's. Oldcastle's parent company CRH has a market cap of $21.17 billion as of Dec. 12, 2018.
2. Shenzhen Jiawei Photovoltaic Lighting Co.
Shenzhen Jiawei Photovoltaic Lighting Co. Ltd. (SHE: 300317.SZ) is a Chinese production and manufacturing company that develops, manufactures and sells solar energy and light-emitting diode (LED) combined photovoltaic lighting products. Shenzhen Jiawei Photovoltaic Lighting supplies Lowe’s with home garden products that include solar lawn lamps and solar courtyard lamps. The company generates 35.19% of its revenue through Lowe’s and boasts a market cap of $4.44 billion as of Dec. 12, 2018.
3. Hangzhou Great Star Industrial Co.
Hangzhou Great Star Industrial Co. Ltd. (SHE: 002444.SZ) is a Chinese consumer durables company. It is involved primarily in research, development, manufacture and distribution of hardware products. Hangzhou Great Star Industrial supplies Lowe’s with hand tools, lithium battery electric tools, lithium-ion batteries, car protection and machinery tools, landscape and outdoor tools, and floor and tile tools. The company generates 27.37% of its revenue from Lowe's. Hangzhou Great Star Industrial had a market capitalization of $10.86 billion as of Dec. 12, 2018.
4. Primo Water
Primo Water Corporation (NASDAQ: PRMW) is an American consumer non-durables company that provides Lowe's with water bottles and water dispensers. The water manufacturer produces filtered water through the installation and servicing of water filtration systems and generates 19% of its revenue from Lowe’s. Primo has a market capitalization of $541.03 million as of Dec. 12, 2018.
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6d0b2c8ac3a1fc4bfd5772710d7b0218 | https://www.investopedia.com/articles/markets/050716/nike-stock-capital-structure-analysis-nke.asp | Nike Stock: Capital Structure Analysis (NKE) | Nike Stock: Capital Structure Analysis (NKE)
Nike Inc. (NYSE: NKE) is one of the world's largest apparel and footwear suppliers. As of April 2016, the company had a trailing 12-month revenue of $31.9 billion and a market cap of $100 billion. Nike's capital structure has high equity capital relative to debt, with a debt-to-total-capital ratio of 0.14, though this figure rose slightly over the 12 months ended February 2016, following a $1 billion bond issuance. The company's enterprise value grew rapidly over the three years leading up to April 2016, driven almost entirely by the appreciating market value of its equity.
Equity Capital
Equity capital is a measurement of capital contributed by equity holders and retained earnings, so the value can include common stock at par value, preferred stock and minority interest. As of February 2016, Nike had total shareholder capital of $12.3 billion, comprised of $7.5 billion of additional paid-in capital, $4.1 billion of retained earnings and $645 million of accumulated comprehensive income.
Nike's February 2016 equity capital of $12.3 billion is higher than the $10.8 billion at the fiscal year ended May 2014, but it is slightly lower than the $12.7 billion in May 2015. Nike had retained earnings of $4.9 billion in fiscal 2014 and $4.7 billion in fiscal 2015, contributing to the modest decline in equity capital in early 2016. Through the first three quarters of fiscal 2016, Nike's cash outflows were $752 million on dividends and $2.7 billion on repurchase of common stock, so buybacks were a more significant contributor to falling retained earnings. Accumulated comprehensive income fell through fiscal 2016 from $1.2 billion as of May 2015, pushing equity capital down further. Additional paid-in capital rose from $5.9 billion in fiscal 2014 and $6.8 billion in fiscal 2015, partially offsetting the effects of changes to accumulated comprehensive income and retained earnings.
Debt Capital
Debt capital typically includes all short- and long-term debt, such as bonds, term loans and unsecured notes, though a wider set of liabilities is occasionally used by some investors. Debt financing is generally senior to equity financing in the event of liquidation, though it is often acquired at a lower cost by firms with sufficient creditworthiness. As of February 2016, Nike's total debt was $2 billion, consisting of only $7 million in short-term debt, $66 million of term loans, and $1.99 billion of bonds and notes. The long-term debt had interest rates ranging from 2% to 6.79%, with maturity dates ranging from 2017 to 2045. Nike's total debt was $1.3 billion at the end of fiscal 2015 and $1.4 billion at the close of fiscal 2014. The company's rising debt load was driven primarily by a $1 billion bond issuance that took place in October 2015. Standard & Poor’s and Moody’s rated the company’s credit high-grade to upper-medium grade.
Financial Leverage
Financial leverage measures the amount to which a company's capital structure uses debt financing relative to equity financing. The debt-to-total-capital ratio is a useful metric when tracking trends in leverage over time, or when comparing firms. As of February 2016, Nike's debt-to-total-capital ratio was 0.14, which was up from 0.09 at the end of fiscal 2015 and 0.11 in fiscal 2014. This is relatively low financial leverage for a company of Nike's maturity and size. For comparison, Adidas AG (OTC: ADDYY) had a debt-to-total-capital ratio of 0.24 as of December 2015.
Enterprise Value
Enterprise value (EV) measures a firm's total value based on the market values of common stock, preferred stock, debt and minority interest, less cash, and investments. As of February 2016, Nike's enterprise value was $97.3 billion, down from the trailing three-year high of $110 billion from December 2015. Strong financial results, a charging U.S. equity market and increasing debt caused Nike's enterprise value to rise sharply over the three years ending in 2015. In January 2013, the company's EV was $43 billion, so the company's three-year compounding annual growth rate was 36.8% over that three-year span.
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61bf9e57aec896552d755613d87552f2 | https://www.investopedia.com/articles/markets/050916/disney-stock-analyzing-5-key-suppliers-dis.asp | The Walt Disney Company Stock: Analyzing 5 Key Suppliers | The Walt Disney Company Stock: Analyzing 5 Key Suppliers
The Walt Disney Company (DIS) is one of the largest media companies in the world, with a market capitalization of roughly $173 billion, as of March 2020. From its world-class amusement parks and iconic cartoon characters to its valuable Star Wars movie franchise, the company is remarkable for its ability to create content and experiences that touch people of all backgrounds and all ages. These various endeavors create a huge amount of revenue for the company.
On March 20, 2019, the company acquired Twenty-First Century Fox, Inc. (TFCF) and a controlling interest in Hulu. For the fiscal year 2019, the company reported revenues of $69.5 billion. (Results for the fiscal year 2019 reflect the consolidation of TFCF and Hulu.) The four busiest theme parks in the world are owned by Disney: Magic Kingdom at Walt Disney World in Florida, Disneyland in California, Tokyo Disneyland, and Tokyo Disneysea. Many of Disney's feature films are among the highest-grossing films of all time. In 2019, Disney's "Avengers: Endgame" became the highest-grossing film of all time at the international box office. Disney also owns several other media outlets, including the American Broadcasting Company (ABC) and ESPN, the industry leader in sports broadcasting.
Key Takeaways The Walt Disney Company is one of the largest media companies in the world, with a market capitalization of roughly $173 billion, as of March 2020.While the majority of its vendors are in the U.S., Disney has worldwide operations for most of its divisions, so its list of major vendors includes companies from the United Kingdom, France, Israel, Japan, Canada, Australia, and Switzerland.Among the companies who receive a significant portion of their revenues from Disney, the major professional sports leagues are among the most notable, including the NBA and the NFL, whose yearly contracts with ESPN are valued at over $1 billion.
Disney relies on vendors from around the world for its multimedia needs. While the majority of its vendors are in the United States, Disney has worldwide operations for most of its divisions, so its list of major vendors includes companies from the United Kingdom, France, Israel, Japan, Canada, Australia, and Switzerland. Among the companies who receive a significant portion of their revenues from Disney, the major professional sports leagues are among most the notable.
Point.360
Los Angeles-based Point.360 provides post-production services for motion picture and television production companies. It specializes in archiving, closed captioning, subtitling, restoration, vaulting, and physical and digital distribution. Using Point.360's state-of-the-art technology, production companies convert their physical assets into digital assets, enabling them to monetize them across a myriad of distribution platforms on the Internet. In July 2019, Point.360 announced its voluntary delisting from the Nasdaq exchange. It now operates as a private company. However, in 2017, it had a market capitalization of $408,000 and generated $6.7 million in revenue, of which more than one-quarter was derived from Disney-related projects. Point.360 also collaborates with studios and production teams at Netflix, Amazon, and Apple.
Globant
Globant S.A. (GLOB) was founded in Buenos Aires in 2003 as a software producer for Latin American companies. Within the next decade, it became a multinational company. In 2018, the company had over 8,300 employees and operations in 14 countries. Globant is known for helping companies utilize emerging technologies to enhance the digital experiences for their customers. The innovative company serves as a digital marketing agency and a research and development lab in designing and marketing software solutions. In 2018, Walt Disney Parks and Resorts Online was Globant's top client, accounting for 11.3% of its revenues. Globant has a market capitalization of $3.78 billion, as of March 2020.
Major League Baseball
Over the life of its current contracts, Major League Baseball (MLB) is scheduled to receive more than $12 billion in revenues with the major sports broadcasters, averaging $1.5 billion a year. The largest contract was signed in 2012 between MLB and ESPN for $700 million a year through the year 2021. This deal represented a 100% increase over its previous deal, and it created an all-time record for an MLB broadcasting deal. The contract grants ESPN the right to broadcast up to 90 regular-season games across all of its networks.
National Basketball Association
In 2014, the National Basketball Association (NBA) renewed its broadcasting contracts with ESPN and Turner Network Television (TNT), valued at $2.66 billion per year and starting with the 2016-2017 season. This deal gave ESPN additional rights–through the 2024-2025 basketball season–to television, digital, and audio properties, and up to 44 postseason games, including the conference finals. The contract amount represents a 180% increase over the previous deal (which was for $930 million annually). In 2018, the NBA generated around $8 billion in revenue; these broadcasting deals with ESPN and TNT represents around one-third of the league's revenue.
National Football League
ESPN, which has hosted Monday Night Football since 2006, signed a new deal with the National Football League (NFL) in 2011 to extend its contract through the year 2021. The total value of the new contract is $15.2 billion, which is a 73% increase over their prior contract. The annual value of the contract–$1.9 billion for an average of 17 Monday Night Football games– represents the largest amount of money paid per game in broadcasting history. In the 2018 season, the NFL recorded revenues of more than $8.1 billion.
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5bea39de4248ddd62a23b8f112fb030b | https://www.investopedia.com/articles/markets/051316/airlines-begin-feel-effects-terrorism-ryaay-dal.asp | How Airlines Feel the Effect of Terrorism | How Airlines Feel the Effect of Terrorism
When terrorists strike—as they did during the November 2015 Paris attacks and the March 2016 Brussels bombings—the effects reverberate across the globe. These high-profile and devastating tragedies impact human behavior in a variety of ways, particularly immediately after the event.
People often rethink their travel plans after an attack, becoming more cautious about traveling to certain parts of the world. This change in behavior directly leads to the changes airlines see in the number of passengers booking flights. By reviewing the financial statements for specific carriers, we can get a clearer picture of how terrorism, such as the attacks on Paris and Brussels, affects the airline industry.
Key Takeaways After terrorist attacks, people frequently rethink their travel plans, which can lead to a decline in the number of passengers booking flights and decreased revenue for airliners.After the November 2015 Paris attacks and the March 2016 Brussels bombings, the earnings reports for several European airline carriers showed weakening demand and significant revenue declines.In general, the revenue declines and losses carriers experience after a terrorist attack appear to be short-term, although this is not a hard-and-fast rule.
Predictable Stock Drop Across Carriers
Most of the major European airlines announced their earnings relatively soon after the Paris attacks. A majority of those reports mentioned weakening demand. The effects were worsened after the 2016 Brussels bombings, likely because the attacks occurred in an airport terminal and metro station.
Ryanair
Europe's largest low-cost airline lost over 10% of its stock value in the six months following the Paris attacks, eventually culminating in a more than 25% loss following the Brussels bombings.
easyJet
After the attacks, Europe’s number two low-cost carrier reported a half-year loss of $34.6 million. The company said a few things contributed to these results. French air traffic controllers went on strike earlier that spring, which caused hundreds of flights to be canceled. In addition, the company said the terrorist attacks affected the demand for air travel. The airliner lowered their ticket prices in an attempt to get people back in the air.
International Airlines Group (IAG)
Subsidiaries British Airways and Iberia, as well as Irish carrier Aer Lingus, stated that demand in March 2016 was notably weaker due to the attacks in Brussels. "Revenue trends in quarter two have been affected by the aftermath of the Brussels terrorist attacks, as well as some softness in underlying premium demand,” IAG CEO Willie Walsh said in a statement. “As a result, IAG has moderated its short-term capacity growth plans."
Deutsche Lufthansa AG
Commonly referred to as Lufthansa, Europe’s largest airline also reported weakness in the same quarter. They attributed most of their issues with increased competition and pricing. Chief Financial Officer Simone Menne mentioned the company saw weakening demand by both U.S. and Asian group bookings after the Brussels attacks.
Air France-KLM
Another of Europe’s large airlines said they lost roughly $76 million in the aftermath of the Paris attacks. The good news for the company is they saw a quick recovery in terms of passenger numbers, reporting these numbers had improved by December.
Delta Airlines, Inc.
Out of the three U.S.-based airlines that fly to Europe, Delta Airlines, Inc. was the only one that mentioned terrorism as having an effect on their business in the first quarter. Delta reported a first-quarter operating revenue decrease of 1.5%. Management reported the Brussels attacks had a $5 million impact on the company.
The Bottom Line
Based on historical evidence, it appears airline stocks decline for the short-term after a terrorist attack. The trend seems to reverse itself rather quickly, as was the case for airliners after the attacks on Paris and Brussels. However, this is not a hard-and-fast rule. For example, the September 11 attacks caused some stocks to drop in an unprecedented fashion over a longer period. American Airlines stock was down over 90% over the year following the attacks.
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c36bf7708da7506c7de9cc917c60369f | https://www.investopedia.com/articles/markets/051416/nike-stock-analyzing-5-key-suppliers-nke.asp | Nike Stock: Analyzing 5 Key Suppliers (NKE) | Nike Stock: Analyzing 5 Key Suppliers (NKE)
Nike (NKE) is the largest seller of athletic footwear and apparel in the world. Its business is focused on product design and development, marketing and sales. Key product categories are running, basketball, the Jordan Brand, soccer, training and sportswear. Nike has more than 1,150 retail stores in the United States and internationally, and employs approximately 76,700 workers worldwide. For the 2019 financial year, it reported $39.11 billion in revenue, up from $36.4 billion the year before.
Nike is supplied by 112 footwear factories located in 12 countries. Vietnam accounts for 49% of contracted footwear production, China 23% and Indonesia 21%. The company contracts apparel manufacturing to 334 factories operating in 36 countries. China is its largest source of apparel at 27%, followed by Vietnam with 22% and Thailand at 10%.
Nike also relies on technology companies, equipment suppliers, professional services firms, and other suppliers to carry out its operations. Here are a handful of key Nike suppliers operating in countries around the world.
Key Takeaways Nike is the largest seller of athletic apparel and footwear, generating nearly $40 billion in sales. Most of its products are sourced from China, Vietnam, Indonesia and Thailand. Major suppliers include Pou Chen, PT Pan Brothers, Fulgent Sun International, Delta Galil and Eagle Nice. These major suppliers also do business with other shoe and apparel brands such as Adidas, Under Armour and The North Face.
Pou Chen Corporation
Pou Chen Corporation is the largest manufacturer of branded athletic and casual footwear in the world. Its customers include Nike, Adidas, Asics, New Balance and Timberland. It makes more than 300 million pairs of shoes annually, and accounts for roughly 20% of the global wholesale value of branded athletic and casual footwear.
Pou Chen was founded in Taiwan. It has factories in China, Indonesia, Vietnam, Bangladesh, Cambodia and Myanmar. In addition to producing footwear, the company sells sportswear under its own YYSports brand in China, Hong Kong and Taiwan.
PT Pan Brothers
PT Pan Brothers is an apparel manufacturer with a client roster that, in addition to Nike, includes major brands such as Uniqlo, The North Face, Adidas, Hunter, Lacoste, H&M, J. Crew, L.L. Bean, Geox, Ralph Lauren, Armani, Prada and Columbia.
The company manufactures fall and winter jackets, pants, shorts, casual pants, dress shirts, snowboarding and ski outerwear, polo shirts, golf shirts, track suits, sweat suits and other active wear at its factories throughout Indonesia. The company sells to Nike through its subsidiary PT Prima Sejati Sejahtera.
Fulgent Sun Group
Fulgent Sun Group is a sports and outdoor footwear manufacturer based in Taiwan. The company makes shoes in Vietnam, Cambodia and China. In addition to supplying Nike, Fulgent Sun is a contract manufacturer for other major brands such as Columbia, The North Face, Timberland, Toms and Under Armour (UA). Fulgent Sun has supplied Nike since 2009.
Delta Galil Industries
Delta Galil Industries (DELTY) is maker of private label apparel. The company produces intimate apparel, socks and active wear for global brands such as Nike, Victoria's Secret, Calvin Klein, Maidenform, Tommy Hilfiger, Lulu Lemon and Under Armour. Delta Galil also makes private-label products for Walmart (WMT), Target (TGT), Marks & Spencer and Amazon (AMZN). Delta Galil manufactures a variety of clothing products for Nike. It operates with Nike a strategic development center for socks in the U.S.
Eagle Nice International Holdings
Eagle Nice International Holdings is a maker of down jackets, sweaters, sports pants and other sportswear. The company is based in Hong Kong and manufactures apparel primarily in China and also Vietnam and Indonesia. In addition to Nike, Eagle Nice manufactures product for brand names such as Puma and North Face for the Asia-Pacific market. The company reported HK$2.7 billion in sales in 2019, or US$348 million. It does not provide figures detailing its business with Nike.
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e9f4caf337c71d5b12ed32bf1311e2d5 | https://www.investopedia.com/articles/markets/052215/goog-or-googl-which-google-should-you-buy.asp | GOOG or GOOGL: Which Stock Do You Buy? (GOOG, GOOGL) | GOOG or GOOGL: Which Stock Do You Buy? (GOOG, GOOGL)
There are two ticker symbols for Alphabet Inc. on the NASDAQ stock exchange: GOOG and GOOGL. There's little price difference between the two – as of March 5, 2020 it was $1,319.04 vs. $1,314.76, respectively – still, what gives?
The short answer is a stock split, but a longer answer is an attempt by the co-founders of Google, Sergey Brin, and Larry Page, along with company chairman Eric Schmidt, to retain as much control of the company as possible.
The two tickers represent two different share classes: A (GOOGL) and C (GOOG). The B shares are owned by insiders and don't trade on the public markets. It's those B shares that are still in the possession of Brin, Page, Schmidt and a few other directors.
In 2015, Google created a corporate structure under a new holding company and moniker called Alphabet.
Class Inequities
Google split its stock in April 2014, which created the A and C shares. Like any other one-for-one split, the number of shares doubled, and the price dropped in half. There is, however, one crucial difference. A shares receive one vote, C shares receive no votes, and B shares receive 10 votes. Anyone who held A shares at the time of the split received an equal number of C shares, but their voting power did not increase.
With 298.3 million A shares outstanding, and 47.0 million B shares, that means the B shareholders receive 470 million votes, or 61% of the voting power. So, if you want a vote at the shareholders meeting, buy the A shares. They trade at a slight premium, which shows that the market does place some value on voting power. See the difference in the chart below:
Image by Sabrina Jiang © Investopedia 2020
Note that the A shares consistently trade at a premium to the C shares. The difference is not large—perhaps 2% at most—but it is there. Google plans to continue issuing C shares to finance acquisitions and reward employees, so it's far from clear whether the market will price the C shares at larger discounts in coming years or simply bake in the current difference at a few percentage points.
Class C
There was one twist that came with owning the C shares. In part to quiet some stockholders' objections to the original split, Google promised to compensate C class shareholders if the price of their shares fell more than 1% below those of A shares a year after the split. While the difference isn't huge, it did exist.
What about the B shares? Brin and Page owned some 44.6 million B shares at the end of January 2015, but they announced a plan to sell some of those shares. In March 2015, there were some 52 million B shares outstanding, but Securities and Exchange Commission (SEC) filings showed that Brin converted a total of 48,998 B shares to A shares towards the end of April 2015, to be sold over a period of time. This somewhat reduced his voting control of the company.
The upshot is that Google allows investors to buy a very large share of its equity. Control of the company, though, not so much. Some investors are willing to accept that because Google, like Apple Inc. (AAPL) and Facebook Inc. (FB), is very much a bet on its founders and executives. Other companies may be like that as well, but, in Silicon Valley, it's particularly salient because so many firms are based on one person's big idea.
Not every investor will be so sanguine, however. There are surely many who see some of Google's more out-there ventures—the investment in SpaceX, driverless cars—as a distraction from its core search and advertising business that drives the company's revenues and reputation.
1:14 What’s the Difference Between GOOG and GOOGL?
The Bottom Line
There's definitely a difference between the price of the two types of Google shares you can buy, though it is relatively small. If voting at the stockholders' meeting is important to you, aim for the A shares.
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dc30fa94707cc2fa95439235861ab727 | https://www.investopedia.com/articles/markets/052216/how-death-benefit-variable-annuity-works.asp | Death Benefits in a Variable Annuity | Death Benefits in a Variable Annuity
Most variable annuity (VA) contracts include an insurance component that provides a death benefit. The death benefit is usually triggered by the passing of the annuitant, although there are contracts in which the contract owner’s death triggers the benefit. That's because annuities allow for the owner and annuitant to be different people.
Key Takeaways Death benefits in a variable annuity (VA) may be triggered by the death of the annuitant or the contract owner. Fees for a VA death benefit are part of the mortality and expense charge (M&E), included in the VA prospectus, and can be as high as 2% of the contract value. The standard death benefit is initially set at the amount invested and then resets according to the contract. Once set, it only decreases if the contract owner takes a distribution. Enhanced death benefits riders, which guarantee an annual step-up in the VA's cash value, can be used to increase a death benefit's value for the recipient. Before investing in a variable annuity with M&E fees, consider the extra costs and whether the benefits are important in your situation.
The Cost of a Death Benefit
The fee for the standard death benefit in a VA is part of the mortality and expense charge (M&E), which varies by contract and share class as well as the insurer. VA share classes—which include B, C, and L—are usually linked to the length of the contract’s surrender schedule. M&E fees for each share class can be found in the VA prospectus.
Many investment-only VAs do not include a standard death benefit and have no M&E fee. But for a VA that does have an M&E charge, the cost can be as high as 2% of the contract value. The fee is charged every year, and insurers use various methods to calculate when the fee is automatically swept from the VA cash value. If you have a VA worth $250,000 and a 1.25% M&E charge, for example, you are essentially paying $3,125 a year for insurance. For many people, this can be a very expensive way to buy a limited amount of death benefit (with a cost that continues to increase if the VA balance grows).
How Death Benefits Work
The standard death benefit in a VA is set initially at whatever amount is invested. Depending on the VA, the death benefit then resets—either on the contract anniversary date if the contract value has increased or whenever the contract cash value reaches a new high. Additional investments in the annuity can also help increase the death benefit. Once set, the death benefit doesn't decrease if the contract declines in value, but it does decrease if the contract owner takes a distribution. The adjustment may be a dollar-for-dollar or percentage decrease.
Many contracts also offer an enhanced death benefit rider that can be purchased for an additional fee of around 0.5% to 1.0% of the contract value. The additional fee is charged each year. Enhanced death benefits vary, but many contracts offer an annual guaranteed step up. The contract may, for example, guarantee that the death benefit will increase by the greater of 5% a year or reset to the highest contract value. Over time, it is not unusual for a VA to end up having a death benefit that is higher than the actual contract surrender value.
Annuity beneficiaries may pay income or capital gains tax on death benefits they receive, but these benefits don't have to go through probate.
Maximization Strategies
If you already own or are considering purchasing a VA with M&E fees, here are a couple of strategies to consider.
For a conservative investor or someone with a shortened life expectancy who wants to leave the money in the VA to their spouse (or someone else) but is concerned about making an investment that could lose value, the enhanced death benefit offers a solution. Since the value of the enhanced death benefit grows each year, the beneficiary is guaranteed to receive the greater of the death benefit or VA market value. There is no potential for a loss. This strategy also allows the investor to allocate the funds more aggressively, knowing that a guarantee is in place if they were to pass away during a market decline.
In an existing VA, where the death benefit is higher than the cash value, the contract can be partially surrendered. In a partial surrender, you leave some of the cash value in the contract, which helps preserve a portion of the death benefit. To make this strategy work, be sure to leave enough cash value in the VA to cover any future M&E and contract fees.
Also, be sure to check on any remaining surrender fees before making a distribution, and if the VA is an IRA, be sure to make a trustee-to-trustee transfer.
Special Considerations
In 2019, the U.S. Congress passed the SECURE Act, which made changes to retirement plans containing annuities. The new ruling makes annuities more portable. In other words, if you leave your job, your 401(k) annuity can be rolled over into another plan at your new job. Also, the new retirement law removes some of the legal risks for annuity providers by limiting whether an account holder can sue them if the provider goes bankrupt and can't honor the annuity payments.
For those who have named beneficiaries within their retirement accounts, the new ruling did away with the "stretch provision." Before the ruling, a beneficiary of an IRA could stretch out the required minimum distributions from the IRA over time, which also stretched out the taxes owed on the inherited funds.
Starting in 2020, non-spousal beneficiaries must distribute all of the funds in the inherited retirement account within 10 years of the death of the owner. However, there are exceptions to the new law. As a result, it's important for investors to consult a tax and financial professional to review the new changes to retirement accounts and their designated beneficiaries.
The Bottom Line
Variable annuities with M&E fees can be an expensive way to invest if you don’t need the added benefits. Before making any investment decision, it’s important to fully understand what you are paying for and gauge whether the added cost makes sense in your particular situation.
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aad68957f4381111486fc9370e1afa46 | https://www.investopedia.com/articles/markets/052416/top-10-highestpaying-retail-jobs.asp | Top 10 Highest-Paying Retail Jobs | Top 10 Highest-Paying Retail Jobs
Year in and year out, the retail industry has been one of the largest employers in the United States. According to the Bureau of Labor Statistics, roughly 15.2 million people work in the retail trade as of October 2020. Most jobs require entry-level skills, so hourly pay is generally at the lower end of the pay scale but typically higher than minimum wage.
Retail jobs that pay higher than the median wage come at a premium, often requiring more experience and training. Workers in production and non-supervisory roles earn almost $18 per hour. The highest paying retail jobs go to front-line supervisors and managers, who pull in a little over $19 per hour. Cashiers, customer service reps, and sales and stock clerks make anywhere between $11.40 and $13.65 per hour. This information is on a national level and would be higher for states with a higher minimum wage.
The highest-paying retail jobs are found at some of the industry's leading retailers and include a comprehensive offering of employee benefits.
15.2 million The number of people the retail industry employed as of October 2020.
Costco
Costco Wholesale (COST) is an undisputed leader in the membership warehouse club business, with 782 stores across the globe, $149 billion in revenue, and 254,000 employees. Workers in the U.S. report making more than $17 per hour, while some earn up to $26 per hour, which are some of the highest hourly rates in the industry. The company also provides a 401(k) plan, bonus pay, and vision, dental, and health benefits.
Nordstrom
Nordstrom (JWN) began in 1901 as a humble shoe shop in Seattle and now operates more than 350 stores in the U.S. and Canada. It employs 71,000 workers on a full- or part-time basis. Nordstrom is renowned for offering some of the best benefits in the industry. Employees report making an average of roughly $16 per hour.
Amazon.com
No company has disrupted the retail industry as much as Amazon.com Inc. (AMZN), which had $170 billion in North American sales at the end of 2019. Amazon is a logistics powerhouse, operating from 192 million square feet of warehouse space in its home market.
As of Dec. 31, 2019, an army of 798,000 full- and part-time employees work around the clock to make sure your package arrives on time. These fulfillment center jobs pay a minimum of $15 and include health care, 401(k) plans with company matching, and parental leave, though benefits vary by state.
Lowe's
Lowe's Companies (LOW) has 2,200 stores in the U.S. and Canada and employs approximately 300,000 associates. Employees report earning an average of approximately $13 per hour, though some workers earn as much as $19 per hour. Lowe's offers an array of benefits, including retirement, health, dental, vision, and life insurance.
Home Depot
Home Depot (HD) perhaps was the first to bring the economics of big box retailing to do-it-yourself home improvement. It was founded in 1978 and now has 1,984 stores in the United States. It employs 415,700 associates, of whom 29,500 are salaried.
Home Depot sales associates, who proudly don the orange apron, report earning $12.69 per hour, though others make upwards of $18 per hour. Benefits include bonus pay, tuition reimbursement, 401(k) and employee stock purchasing plans, medical, dental, and vision plans, life insurance, adoption assistance, and a host of employee discounts.
Sam's Club
Opened in 1983, the warehouse retailer operated by Wal-Mart Stores (WMT) now has nearly 600 stores in the U.S. Sam's Club rang up $57.8 billion in sales in 2019, lagging behind its larger rival Costco. Eligible employees have access to retirement benefits, stock purchasing plans, healthcare, parental leave, $5,000 of adoption assistance, and college tuition assistance. Employees report earning an average of $12.42 per hour, with others making upwards of $17 per hour.
Best Buy
At Best Buy (BBY), one of the largest retailers of technology products in the U.S., associates are trained in the sale of products ranging from computers and peripherals to high-end cameras and the latest flat-screen TVs. Employees report earning roughly $13.24 per hour, and some earn as much as $19 per hour. Benefits include medical, dental, and vision plans, maternity support and paid leave, 401(k) and stock purchasing plans, life insurance, flexible spending accounts, adoption assistance, and tuition assistance.
Gap
Since its founding in 1969, Gap Inc. (GPS) has created a global fashion empire, which includes the Gap, Old Navy, Banana Republic, Athleta, Intermix, and Hill City brands. As of Dec. 31, 2019, it operates 3,345 company-owned stores and 574 franchise locations and has a presence throughout Asia, Europe, Latin America, the Middle East, and Africa. Employee benefits include health care, 401(k) and employee stock purchasing plans, commuter benefits, tuition reimbursement, and discounts on merchandise. Gap employees report making an average of $13.67 per hour.
Big Lots
Big Lots (BIG) is one of the largest discount retailers targeting people who shop on a budget. Employees report earning an average of $11.49 per hour. On top of that, Big Lots offers benefits such as health, dental, and vision plans, 401(k) plans with company matching, education assistance, and flexible spending accounts.
Staples
With stores located throughout the world, Staples is a leading brand in retail office supplies. Sales associates are trained in all facets of office supplies and technology, including computers and peripherals, handheld electronics, office furniture, and office services. Employees report earning an average of $12.68 per hour. Benefits include health coverage, flexible spending accounts, 401(k) plans, adoption assistance, and employee discounts.
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abcb1b1d962cc05027efeaf168bbfe89 | https://www.investopedia.com/articles/markets/060215/how-does-biogen-make-its-money.asp | How Does Biogen Make its Money? | How Does Biogen Make its Money?
Biogen Inc. (BIIB) is at the forefront of the biotechnology industry — one of the world’s most important and least understood sectors. The $73 billion company’s entire product line consists of a handful of very expensive, highly effective drugs that combat some of the worst afflictions humans can suffer, including multiple sclerosis, leukemia, and hemophilia. Unlike many pharmaceutical company's products, Biogen's drugs are not the mass-marketed ones advertised on prime-time TV. Rather, Biogen targets a smaller, more motivated clientele. If you want help with anxiety or your inability to put the fork down, Biogen can’t help you; if you have MS or a handful of other debilitating conditions, it can. (For more, see: 3 Things Biogen's Management Wants You to Know.)
Biogen's drug line is what keeps the company's income statements looking so good and with new products in the pipeline, the future is bright. Revenue came in at $12.3 billion in 2017, up 7% from 2016. Biogen has plans to delve into drugs that counter Alzheimer’s, lupus and stroke. (For more, see: CanBiogen Change How We View Alzheimer's Disease? and Is This Biogen's Next Billion-Dollar Blockbuster?)
On July 5, 2018, Biogen and Eisai (TYO: 4523), a Japanese pharmaceutical company, announced that their experimental Alzheimer's drug passed the mid-stage of a clinical trial successfully. The highest dose of the drug, provisionally named BAN2401, slowed the progression of the disease after just 18 months of treatment.
Biogen reported Q2 2018 revenues of $3.4 billion, a 9% increase from Q2 2017.
Treating MS
According to Biogen's own literature, 38% of multiple sclerosis sufferers worldwide use the company's drugs, making the company $8.9 billion. That's pretty impressive since the company manufactures just 12 drugs (nine if you exclude a psoriasis medication available only in Germany). six of the pharmaceuticals Biogen manufactures — Tecfidera, Avonex, Plegridy, Fampyra, Tysabri, and Zinbryta — treat MS. (For related reading, see: The Ups and Downs of Biotechnology.)
Tecfidera costs $128 per daily dose and is the best selling oral MS drug in the United States. Oral MS drugs are a recent development and since Tecfidera went on the market in 2013, some (how many) patients have taken it, mostly in the U.S. and Germany. This has made Tecfidera a multibillion-dollar contributor to Biogen’s revenues. (For more, see: Biogen's Tecfidera Loses Some Luster.)
Tecfidera is just one of Biogen’s MS drugs, though, and each carries a price tag commensurate with huge research and development costs, scarcity and utility. Avonex is taken once a week by MS sufferers at a cost of $6,935 per dose. Biogen recently has tried to shift some of its Avonex users to Plegridy, which is similar in cost but taken less frequently. Ampyra, formulated to make walking easier for MS sufferers, costs $40 per tablet and is taken twice a day. Rounding out Biogen’s MS roster is Tysabri, a monthly infusion treatment administered by a professional that costs upwards of $6,800 per dose. (For related reading, see: Sectors with Similar Pros/Cons as Drug Sector.)
Biogen claims that Tysabri has been administered more than two million times, thus accounting for a major component of the company’s revenue, $1.9 billion in total (two-thirds of which come from the United States). In total, the company's MS medications make up more than 80% of Biogen’s sales. (For related reading, see: Using DCF in Biotech Valuation.)
Q2 2018 MS revenues were $2.3 billion, and the number of patients treated with Biogen's MS drugs globally remained relatively stable compared to last year.
Non-MS Products
The United States is among the most cancer-ridden countries in the world, largely because it is a wealthy developed nation where the population lives long enough to get cancer. The five countries with higher incidences of cancer are Denmark, France, Australia, Belgium and Norway. Biogen offers a leukemia-fighting drug called Gazyva for use domestically. A year of Gazyva treatment costs $82,600; Gazyva and sister drug Rituxan contributed $377 million to Biogen’s total product revenues in Q2 2018. Rituxan, used to treat both lymphoma and rheumatoid arthritis, costs up to $750 per use. (For related reading, see: Invest in Cancer Research with These 3 Stocks.)
Biogen doesn’t accomplish all this by itself, mind you. Rituxan and Gazyva, for instance, are sold in partnership with fellow pharmaceutical firm Genentech, while Swedish Orphan Biovitrum helps develop and bring Biogen’s hemophilia treatments to market. (For related reading, see: Major Players in the Drug Sector.)
The Bottom Line
Biogen’s recent income statements are impressive, and the company's pipeline of drugs should keep the company on a steady growth path for at least the next decade. While the company's concentration is in pharmaceuticals to treat multiple sclerosis, Biogen is diversifying by supporting its existing drugs to treat cancers, rheumatoid arthritis and hemophilia and developing new drugs to treat diseases such as Alzheimer’s and lupus, as well as stroke. (For more, see: Is Biogen Worth Owning for the Long Haul?)
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221cce2bfd2a8b9b552de26678b89881 | https://www.investopedia.com/articles/markets/063016/4-reasons-why-riders-choose-uber.asp | 4 Reasons Why Riders Choose Uber | 4 Reasons Why Riders Choose Uber
San Francisco-based Uber Technologies Inc. (UBER) took the transportation industry by storm when it released its groundbreaking ride-sharing app in 2009. Uber is available for Google Android, Apple iOS, and as a web app. The app connects riders with nearby screened drivers who provide rides in their private vehicles. Passengers pay competitive prices for the service, which is cheaper than taxis in many places.
On a cold and snowy evening, StumbleUpon founder Garrett Camp and his business partner Travis Kalanick had trouble finding a taxi. That experience inspired them to start the ride-sharing company. Uber celebrated 10 billion rides with much fanfare in June 2018. Uber's highly anticipated initial public offering (IPO) finally took place in May 2019. Although the stock's price initially tumbled, Uber was still worth over 53 billion dollars as of July 1, 2020.
Statista estimated that about 110 million people actively used Uber each month in 2019. There are enough enthusiasts that industry observers are wondering why so many people choose Uber.
KEY TAKEAWAYS Uber customers typically get where they are going faster or cheaper than they would by taxis. Uber now requires all prospective drivers to submit to motor vehicle and criminal background checks. Partygoers can rely on being able to find available Uber drivers through their apps late at night. The combination of Uber and expanding online grocery delivery is making it more practical to live without a car.
Fast Trips Any Time, Almost Anywhere
Many believe that the failure of taxi companies to get customers to their destinations quickly enough is what allows Uber to thrive. The taxi companies often blame their drivers for being unable to pick up and transport passengers in a timely manner. The taxi drivers respond by complaining about the low fares customers pay for short-distance trips, creating a cycle of inefficiency for taxi companies.
While wait times vary, Uber customers typically spend far less time waiting than customers of traditional taxi services. Riders also have the option to share rides with others heading in the same direction through UberPool, the app’s ride-sharing feature. As a result, Uber customers typically get where they are going faster or cheaper than they would by taxis.
Public transportation doesn't run around the clock, and not all taxi companies run 24 hours a day. People who work or party late at night often use Uber to get home quickly when bus and metro train lines are shut down.
Safety
Riders choose Uber over other transportation methods for safety reasons. The company experienced serious incidents in the past, such as drivers attacking passengers. Uber now requires all prospective drivers to submit to motor vehicle and criminal background checks. The company runs annual background checks. The checks include a search of multistate criminal databases, motor vehicle records, and a review of the National Sex Offenders Database.
Post-Party Rides
It may be difficult to persuade taxi drivers to pick up riders who have had too much to drink in obscure parts of town late at night. There are around 4 million Uber drivers in over 900 cities worldwide. Partygoers can rely on being able to find available Uber drivers through their apps in the wee hours of the night. Picking up intoxicated passengers is not without its challenges. Rowdy passengers even attacked drivers on some occasions. Uber drivers in India were the first to get access to a panic button on the Uber app to contact the police for this type of emergency. Uber drivers operating in the U.S. gained access to the panic button in 2018.
Avoid the Cost of Owning a Personal Vehicle
The true cost of owning a car is higher than most people think. Consumers paid about $9,492 to own and operate their vehicles in 2020. Urban dwellers who do not need cars can also save money by using Uber. These savings apply mostly to riders who don’t need cars daily but sometimes need a ride for weekend outings and other special occasions. The combination of Uber and expanding online grocery delivery is making it more practical to live without a car.
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b1459dca8663a4ab9d3facda53a94872 | https://www.investopedia.com/articles/markets/071315/why-colt-went-out-business.asp | Why Colt Can't Stay out of Bankruptcy | Why Colt Can't Stay out of Bankruptcy
Very few gun manufacturers have the kind of history that Colt has. The Connecticut-based company is a pioneer in the gun industry. Its diverse assortment of guns and firearms has fueled American conquests in the West and abroad. They were also the preferred weapons of choice for local law enforcement agencies and gun enthusiasts for many years.
That is why it made news when the iconic gun manufacturer filed for bankruptcy in June 2015. In its bankruptcy filing, the company said it was unable to pay the hundreds of millions it owed to dozens of creditors. Colt missed a payment of $10.9 million to holders of senior bonds only one month earlier.
Key Takeaways Unable to pay its debts, the iconic gun manufacturer filed for bankruptcy in June 2015.The company's missteps involve a mix of bad management, product portfolio, and imprudent financial engineering. Colt officially exited bankruptcy in January 2016 and has since been working to regain market share and prove its financial stability moving forward.
The company sought bankruptcy protection to meet all of its obligations to customers, vendors, suppliers, and employees while it restructured its balance sheet. So what went wrong at an iconic company that made guns used to "win the West"? The answer to that question is a complicated one and involves a mix of bad management, product portfolio, and imprudent financial engineering.
Understanding Why Colt Has Been in Bankruptcy
Colt's Business Through the Years
Colt is no stranger to bankruptcy proceedings. In fact, the company's first bankruptcy was in 1842, just six years after it was started. Subsequently, the company's eponymous founder Samuel Colt went back to the drawing board and designed a range of new products for the company.
The new products powered American expansion and—at one point in time—Colt was one of the richest businesspeople in the United States.
Regular wars and political crises fed into the company's profits. For example, the company's sales surged during the Vietnam War in the 1960s. As the war ended, the firearm industry courted disenchanted males fearful of America's economic decline as new customers.
The United States' military engagements in the Middle East during the early 1990s and the last decade resulted in similar profitable infusions to the company's bottom line.
In the period between the Vietnam War and the conflict in the Middle East, however, Colt's fortunes dipped as design patents for its firearms expired. The company's products, which set the standard for the rest of the industry, became also-rans as a flood of discounted competitors hit the market in the 1980s.
Losing Market Share
The company also lost key profitable markets. For starters, law enforcement agencies exchanged their Colt weaponry for Glock's guns. The Austrian weapons manufacturer began by making firearms that were cheaper and lighter than Colt's products. Moreover, they held more ammunition.
Glock was not the only one: Smith & Wesson Holding Corp. also introduced similar guns. Both companies reaped the benefits of this innovative approach during America's war on cocaine in the 1980s, when police officers relied more on their weapons in the fight with armed criminals.
Simultaneously, the company lost vital defense contracts to foreign players. For example, the company's iconic M1911 reigned as the primary sidearm of the U.S. military for 90 years before being replaced in 1985 by Beretta M9, made by the Italian arms manufacturer.
FN Manufacturing
Similarly, in 1988, the army replaced Colt with FN Manufacturing, a subsidiary of Belgium-based FN Herstal, as its primary provider of M16 rifles. These were originally designed by Colt and used extensively during the Vietnam war.
As a result of losing market share across the board, Colt filed for bankruptcy in 1992. Industry experts cited excessive debt, reduced civilian demand, and loss of government contracts as primary reasons for the company's problems.
The Clinton administration tightened the screws on the personal firearms and ammunition industry by introducing strict gun control measures. A wave of litigation and lawsuits followed, resulting in increased spending by gun lobbyists in Washington.
Iraqi-American financier Donald Zilkha, who bought Colt in 1994, attempted to steer the company away from consumers to military contracts and new markets. Colt was trying "to be a different animal," he said in an interview with The New York Times at that time.
However, the company's move to court new customers ended in disaster.
Smart Guns Proved Not-So-Smart
The introduction of smart gun technology, which was designed to make guns safer, alienated Colt's core customer base of gun advocates who misconstrued the move as one that provided further ammunition to gun control advocates.
These developments occurred despite prevailing market trends that were favorable to the industry. Thus, even though the number of gun owners had declined in recent years, the number of guns per person has increased.
But Colt has struggled to overcome its mistakes. The company is attempting to revive its business in the consumer market as part of its post-reorganization strategy, but the company has not quite made up for those losses in the government contracts market.
Financial Engineering Gone Wrong
The company's product woes are just one part of the equation, however. The reshuffling of business and executive priorities over the years further complicated Colt's already-precarious financial position. Private equity firm Sciens Capital Management began taking control of the gun manufacturer in 2002 after Zilkha lost interest in the business. The transfer resulted in a tens of millions of dollars in debt from fees and distributions for the company.
Most private equity firms attempt to wring their maximum possible profits from their investments. Sciens was no different. Immediately after the transfer, the firm created a separate arm for Colt's defense operations and let its consumer division languish. Even as the company lost money over the next couple of years, the firm awarded generous bonuses and consulting remuneration to its officers.
According to one estimate, at least $131 million of the total debt incurred by Colt during its recapitalization was used to make "distributions" to Sciens in 2007. Sciens also attempted to take the company public in 2005 but had to abandon plans after investors remained unconvinced about the gun maker's ability to turn a profit. Colt went on a borrowing spree shortly after.
The company borrowed an additional $250 million in 2009 before its most recent bankruptcy filing.
Moving Forward
When Colt officially exited bankruptcy on Jan. 13, 2016, the company claimed it had reduced its debt load by $200 million and had more cash on hand to maintain operations.
Since 2017, Colt has been working to regain market share, introducing several new product offerings in the commercial firearms business, as well as prove its financial stability and strength moving forward.
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e2f441a4ab05a1034116994c3b922363 | https://www.investopedia.com/articles/markets/072215/southwest-airlines-business-model-could-soon-be-industry-standard.asp | Southwest Airlines' Biz Model Gives Stock Edge | Southwest Airlines' Biz Model Gives Stock Edge
Southwest Airlines Co. (LUV) has become the darling of the U.S. airline industry (and its investors) since its inception in 1966. With a focus on commuter benefits, low airfares and efficient operations, it is known as one of the best airline companies in the entire industry.
While many airlines place heavier weight on amenities and comfort, Southwest Airlines has been a pioneer, with its commuter-focused business model that caters to people looking for quick, cheap and painless flights from point to point.
What specifically makes Southwest Airlines so great? What has helped it to achieve such great success and stand out among its U.S. airline industry competitors? Find out why Southwest Airlines has been able to achieve consistent stock growth to become a leader in the U.S. airline industry.
Plan Efficiency
Many airlines offer a range of service and flight options and have many different types of planes to meet that range of options. While this diversifies an airline's offerings, it also increases operating costs and dilutes the core messaging of the company.
Southwest Airlines, on the other hand, focuses primarily on the Boeing 737. This saves Southwest Airlines millions in yearly maintenance costs and other operating expenses, allowing the company to offer low price solutions to its customers. In 2012, it also added the use of the Boeing 737-800 which seats approximately 30 more passengers with a capacity of 175.
Gate-to-Gate Flight Paths
Southwest Airlines is one of the few U.S. airlines that focuses on point-to-point flights, meaning that most of its flights are nonstop direct to a customer's desired destination. This is in contrast to other airlines that focus on airport hubs, where customers are picked up from out-of-the-way airports and transported to a hub airport first, before catching a connecting flight to their desired destinations.
Customer Service
Many airlines offer a range of amenities, such as first class, in-flight meals, and many drink options. Southwest Airlines, with its commitment to low-cost solutions, does not offer any of these amenities. Instead, Southwest offers a single coach cabin that's slightly roomier than other airlines due to a lack of first-class space. While it offers free snacks and a complimentary drink, it doesn't offer the range of drinks and food that other airlines offer. This allows Southwest to clean and stock a plane quickly, getting it ready for an efficient turnaround.
Southwest Airlines also offers its customers an advantage through its points system. Using points, travelers have the flexibility to cancel or reschedule flights at any time.
No Hidden Fees
The airline industry is notorious for rising costs and low profitability. To combat this, many airline companies have slashed perks and increased fees, such as bag fees for checked bags. Rather than passing on costs to its customers, Southwest Airlines has kept costs down with efficient fuel management, minimal ticket price buckets and other solutions.
This allows Southwest Airlines to keep ticket costs down for its customers, who expect low-cost options. Southwest is also one airline that offers two bags free for its customers.
Management Team and Company Culture
Southwest Airlines has boasted one of the strongest management teams in the entire airline industry. From the original CEO Herb Kelleher to the present-day CEO, and all the way down the management team, Southwest Airlines has stayed true to its value proposition and the way it services its customers.
Southwest Airlines is also a great place to work. The highly ranked company culture is also an aspect of Southwest Airlines that separates it from the competition as its focus on employee happiness also trickles down to customer happiness. Southwest employees have some of the best benefits and compensation packages in the industry, and it shows.
Competitor Comparison
Through June 2018, Statista reports Southwest Airlines as holding the second largest industry market share at 18%. This is nearly even with American Airlines at 18.1% and ahead of large competitors Delta and United at 16.8% and 14.9% respectively. Through October 3, 2018, the stock is reporting the greatest five-year annualized total return at 33.84%.
See also: Economic Analysis: The Low-cost Airline Industry
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61ef0bba57eba9d65fc4e2f1d42c8341 | https://www.investopedia.com/articles/markets/080415/how-aig-makes-its-money.asp | How AIG Makes its Money | How AIG Makes its Money
Capitalism, at least in its pure theoretical form, is supposed to reward success and punish failure. Build a better mousetrap, sell enough units at a sufficiently high markup, and you’ll prosper. Burn through billions of dollars of investors’ money without showing a profit, and you should cease operations and find yourself another line of work.
American International Group (AIG) didn’t merely fail, it failed at a level that no business before or since has. AIG lost tens of billions of dollars in the late aughts and what’s worse, most of that money wasn’t even the company’s to begin with. The company’s managers went broke, petitioned the U.S. Treasury to make up a $40 billion shortfall and — somehow — got it. The generous representatives of the Treasury weren’t spending their own money, and thus had no skin in the game, but the result is that AIG survived to seek alms another day. (For related reading, see: Why You Might Buy Your Next Car From Costco.)
That's not an auspicious start to a tale about a mammoth company with a history of growth and success, so bear with us.
Covering the World
AIG is, innocently enough, an insurer. Insurance sounds like the second-blandest enterprise this side of accounting, and it is. An insurer makes calculations in advance, determines how many policies it’ll end up having to pay out on, then charges high enough premia to turn a profit. The behind-the-scenes work may be complicated, but the finished product is easily understood, and it ought to be easy for an observer to navigate the road from revenue to profits.
AIG shook things up for the better in 2014, at least as far as reporting activities goes. That’s a promising move for a company that could use an image makeover after the debacle of 2007-08. (The firm’s previous CEO infamously drew a parallel between outrage over executive bonuses and lynch mobs. His predecessor authorized an executive retreat at a luxury hotel on the Pacific Coast, less than a week after receiving bailout money.) Today, AIG’s operations are divided into two major segments: commercial and consumer insurance, and corporate business. Each accounts for half of AIG’s revenues.
Commercial insurance is nominally defined as things such as general liability and workers’ compensation for your clothing store, airplane parts factory or car dealership. AIG separates those commercial operations into three subsets — property casualty, mortgage guaranty and institutional markets. (For more, see: World's Top 10 Insurance Companies.)
Property casualty insurance can cover contingencies you never thought of, probably because you’re not an insurance adjuster. Cybersecurity risk? It’s there. Marine insurance and natural disasters? Ditto. When a giant container ship meets a cyclone and has to jettison some of its cargo, it’s companies such as AIG that provide the coverage. Even such arcane types of insurance like kidnap and ransom coverage fall here. Among the three types of commercial insurance under the AIG umbrella, property and casualty is easily the largest, responsible for 88% of said revenues.
Regarding the mortgage guaranty business, it ought to be familiar to anyone who’s ever bought a house with less than 20% down. That’s private mortgage insurance, and it’s one of AIG’s biggest markets.
As for the antiseptic phrase “institutional markets,” that’s the category for such items as stable value wraps: funds that hold low-risk securities (highly rated bonds, mortgage-backed securities, etc.) This is also where AIG keeps its arsenal of guaranteed investment contracts, which are sold to large institutions as a means to pay out on, say, a highly rated bond series. The institutions in question are typically 401(k) providers and other large entities with millions of customers. By the way, guaranteed investment contracts is where AIG spent almost $10 billion of the original round of taxpayer money it received back in 2008. GICs are supposed to be conservative investments, but then again, GIC issuers are supposed to report billion-dollar losses accurately and honestly.
Consumer Offerings and "Other"
Consumer insurance is subdivided into retirement, life and personal. Through its subsidiaries, AIG offers retirement planning on a colossal scale, providing plans for school districts, healthcare organizations and governments, among others. As for life insurance, that’s fairly self-explanatory. AIG allows you to effectively bet on your own demise via several of its companies, including American General Life, United States Life and AIG Fuji Life. (For more, see: How Does Cash-Value Life Insurance Work?)
Personal insurance refers to coverage of everyday, non-vital things. Cars, health, travel, home, etc. Among the varied types of corporate insurance AIG offers, personal insurance makes up a plurality: about 44% of the personal insurance total. Retirement planning income accounts for most of the remainder.
That leaves corporate insurance and "other." Corporate insurance consists mostly of the derivatives and hedging instruments that made AIG notorious, and they're still a large and lucrative part of the firm’s portfolio. “Other” includes AIG’s business consulting arm and the firm’s real estate investments: aircraft leasing operations, etc.
To peruse the AIG organizational chart is to see an impenetrable ganglion of subsidiaries, parent companies and overseas departments. AIG’s property casualty business includes smaller companies, some purchased, some organic, and many of those with no obvious connection to AIG, like National Union Fire, Fuji Fire & Marine and Lexington. (For more, see: Falling Giant: A Case Study of AIG.)
For a company that was allegedly too big to fail, AIG has recently gotten gradually smaller. Revenue has dwindled consistently over the past three years with profits down a marked 19% year-over-year. About 58% of last year’s revenue derived from policy premia, and as AIG’s fortunes fall, such payments account for a larger and larger proportion of the whole.
AIG’s operations aren’t restricted to the U.S. Slightly less than half its net premia are written outside the Americas, and in its home hemisphere AIG conducts operations everywhere from Guyana to Uruguay.
The Latest Chapter
In June 2015, the U.S. Federal Court of Claims ruled that the Fed's bailout of AIG was not authorized by the Federal Reserve Act and therefore illegal. A lawsuit filed by AIG shareholders and led by former AIG CEO Hank Greenberg and Starr International Co. (the largest AIG shareholder at the time at 12%) sought $25 billion in damages. They argued that federal officials acted illegally in the initial $85 billion loan package to AIG, imposing a 14% interest rate and securing an 80% stake in the company. It turned out to be a pyrrhic victory, though; the judge ruled that equity losses from a bankrupt AIG would have been total, so no damages were due (which AIG would have had to pay).
The Bottom Line
It can take years, if not decades, to wash off the residue of propping up private companies with public funds. It should be noted that when the $182.3 billion the Treasury loaned AIG through the Federal Reserve Bank of New York was paid back it generated a $22.7 billion profit for the government via its sale of AIG shares (AIG also sold off several businesses to repay the loan). That said, even a relatively happy ending to government intervention is overshadowed by a simple public relations gaffe; when AIG paid back its initial round of bailout money, company pride called for a series of YouTube videos about AIG’s honesty and forthrightness. When the reaction turned overwhelmingly negative, AIG decided to disable comments. With taxpayer-generated cash flow in the past and operations in the black, AIG hopes to maintain its position as a global insurance giant for the rest of the decade and beyond. (For related reading, see: How UnitedHealth Group Makes Its Money.)
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aa3b399d1172a1aa51ed06a15e0f8d1b | https://www.investopedia.com/articles/markets/080415/how-nike-nke-makes-its-money.asp | How Nike Makes Money | How Nike Makes Money
Nike Inc. (NKE) is a global company that designs, develops, markets and sells athletic footwear, apparel, equipment, accessories, and services. Although primarily designed for athletic use, many of its products are worn for casual or leisure activities. The majority of Nike's products are manufactured by independent contractors, and are sold either direct-to-consumers through Nike retail outlets and digital platforms, or through independent distributors, licensees, and sales representatives.
Nike, which is based in Oregon, has a large number of major global rivals, including Adidas AG (ADDYY), ASICS Corp. (7936), Lululemon Athletica Inc. (LULU), Puma SE (PUMSY), and Under Armour Inc. (UAA).
Key Takeaways Nike designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories.Most of Nike's sales are generated by selling footwear to wholesale customers in North America.Nike's direct-to-consumer sales business grew in Q2 FY 2021, while sales from its wholesale business fell.Nike's business continues to be impacted by the COVID-19 pandemic.
Nike’s Financials
Nike posted net income of $1.3 billion on $11.2 billion of revenue during Q2 of its 2021 fiscal year (FY), the three-month period that ended November 30, 2020. Net income rose 12.2% in Q2 FY 2021 compared to the same quarter a year ago. Revenue grew 8.9% compared to the year-ago quarter.
Nike said that its revenue performance was impacted by strength in digital growth, which was offset by lower revenue in its wholesale business and its company-owned stores. The company also noted that it experienced temporary closures of stores in regions seeing rising COVID-19 cases and that some regions continue to experience declines in physical retail traffic. However, the majority of Nike's stores remain open.
Nike’s Business Segments
Nike breaks its financial metrics into three categories: NIKE Brand; Converse; and Corporate. The NIKE Brand also is further broken down into geographical segments: North America; Europe, Middle East & Africa; Greater China; Asia Pacific & Latin America; and Global Brand Divisions. The NIKE Brand segment comprises 96% of the company's total revenue.
Nike also breaks out revenue, but not profits, for its major product lines and distribution channels. The share of revenue generated by each of Nike's product lines, for example, is: Footwear (64%); Apparel (32%); Equipment (3%); and Other. A negligible amount is attributable to Other, which includes revenue from licensing businesses of the Global Brand Divisions and Converse segments, and to foreign currency hedge gains and losses accounted for in the Corporate segment.
Nike reports both revenue and earnings before interest and taxes (EBIT), its primary measure for evaluating operating performance, for its geographic business segments. The data reported in the pie charts above and in the share percentage calculations in the breakdowns below exclude segments with negative revenue or negative profits.
NIKE Brand: North America
Nike's North America segment posted $4.0 billion in revenue in Q2 FY 2021, comprising nearly 36% of total revenue. EBIT came in at $1.0 billion, comprising about 33% of the total. The segment's revenue grew 0.6% while EBIT rose 16.9% compared to the year-ago quarter.
NIKE Brand: Europe, Middle East & Africa
Nike's Europe, Middle East & Africa segment posted $3.0 billion in revenue during Q2 FY 2021, comprising about 26% of total revenue. EBIT was $660 million, about 21% of the total. Revenue and EBIT for the quarter rose 16.6% and 29.4%, respectively.
NIKE Brand: Greater China
Nike's Greater China segment posted $2.3 billion in revenue in Q2 FY 2021, about 20% of total revenue. EBIT was $891 million, comprising nearly 29% of the total. Revenue and EBIT were up 24.4% and 28.4%, respectively, compared to the same three-month period a year ago.
NIKE Brand: Asia Pacific & Latin America
Nike's Asia Pacific & Latin America segment posted $1.5 billion in revenue during Q2 FY 2021, about 13% of total revenue. EBIT was $424 million, about 14% of the total. Revenue and EBIT rose 0.2% and 12.5%, respectively.
NIKE Brand: Global Brand Divisions
Nike's Global Brand Divisions segment revenue is primarily attributable to NIKE Brand's licensing businesses that are not part of any of the geographic segments, demand creation and operating overhead expense, and costs associated with its global digital operations and enterprise technology. The division posted $8 million in revenue during Q2 FY 2021, making up less than 0.1% of total revenue. The segment posted an $841 million loss before interest and taxes as revenue fell 20.0%.
Converse
Nike's Converse segment is engaged in the design, distribution, licensing and sale of casual sneakers, apparel and accessories under the following trademarks: Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell. The segment posted $476 million in revenue during Q2 FY 2021, comprising about 4% of the total. It reported $87 million in EBIT, about 3% of the total. Revenue fell 0.8% while EBIT dropped 3.3% compared to the year-ago quarter.
Corporate
Nike's Corporate segment revenue primarily consists of foreign currency hedge gains and losses related to revenues generated by Nike's other operating segments. The segment posted revenue of $26 million in Q2 FY 2021, comprising a scant 0.2% of total revenue. The segment reported a loss before interest and taxes of $718 million despite a 1,200.0% rise in revenue.
Nike also breaks down the share of revenue from its distribution channels: Sales to Wholesale Customers (59%); Sales through Direct to Consumer (i.e. NIKE Direct) (40%); and a negligible amount from the rest. The Direct to Consumer distribution channel grew 31.7% in Q2 FY 2021, while Wholesale Customers revenue declined 2.7%.
Nike’s Recent Developments
Nike announced in late July a series of senior leadership changes as part of its Consumer Direct Acceleration (CDA) program. The CDA program, first announced in June, aims to accelerate its digital transformation in order to generate long-term growth and profitability. The company expects the leadership changes to result in a net loss of jobs across the company, which will result in pre-tax one-time employee termination costs of somewhere between $200 million to $250 million.
How Nike Reports Diversity & Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Nike and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Nike releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Nike discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Nike breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
Nike Diversity & Inclusiveness Reporting Race Gender Ability Veteran Status Sexual Orientation Board of Directors C-Suite General Management ✔ ✔ Employees ✔ ✔
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268f8afd87a9da2348843bbe0ee63484 | https://www.investopedia.com/articles/markets/080416/how-congress-retirement-pay-compares-overall-average.asp | How Congress Retirement Pay Compares to the Overall Average | How Congress Retirement Pay Compares to the Overall Average
Many Americans struggle to save for retirement. Funding for employee pension programs, both public and private, can also be challenging. While many are facing lots of uncomfortable realities—elected representatives and senators in the United States Congress still receive envious pension benefits for life. Retirement pay for Congress is not normally a big election-year issue, but it might serve as evidence of a disconnect between lawmakers and mainstream America.
Overview
The median net worth for a member of Congress surpassed $1 million in 2013, where it remained through 2018. This compares to the average American household median net worth of $94,670 according to 2016 Census data. As reported by the Center for Responsive Politics, "it would take the combined wealth of more than 18 American households to equal the value of a single federal lawmaker's household." Entering 2019, less than 10% of U.S. households could be classified as millionaires, compared to more than 50% of the members of Congress.
Congressional members are eligible for their own unique pension plans under the Federal Employees Retirement System (FERS), though there are other retirement benefits available, ranging from Social Security and the Civil Service Retirement System (CSRS). Currently, members of Congress are eligible for a pension dependent on the member's age at retirement, length of service, and salary. The pension value can be up to 80% of the member's final salary. Since 2009 Congressional pay has been $174,000 per year, which, at an 80% rate, equates to a lifelong pension benefit of $139,200. All benefits are taxpayer-funded.
Additionally, members of Congress enjoy the same Thrift Savings Plan (TSP) as all other federal employees, which is similar to a 401(k). More taxpayer funds are used to match Congressional contributions up to 5% per year, in addition to an extra 1% giveaway regardless of how much the congressman or congresswoman contributes, if anything. Because members of Congress earn far more than the average American citizen, their initial Social Security benefits average just under $26,000 per year compared to $17,652 for the average retired worker in 2019.
Few private employees have the option to contribute to an employer-sponsored defined benefit pension plan. Most have the option to contribute to a 401(k) or 403(b), while others may contribute to an employee stock ownership plan (ESOP) or some other retirement option. The median benefit for private pensions and annuities is approximately $10,000 per year.
For those receiving Social Security and a private pension, the median income was between $30,000 and $35,000 per year. As far as other retirement assets, research from the Federal Reserve in 2013 found that the median retirement account balance was $59,000 and the mean balance was $201,300.
How Benefits Have Changed Over Time
Participation in defined benefit pension plans peaked in the private sector in the early 1980's. Greater than 80% of American employees who worked for large companies in the private sector contributed to a pension plan. That rate dropped below 20% by 2011, according to the U.S. Bureau of Labor Statistics. Between 2001 and 2004, almost one-fifth of the Fortune 1000 closed down or at least froze their defined benefit retirement plans.
In 2017, defined contribution plans have become more prominent with 48% of private sector companies offering them versus 8% offering defined benefit plans. In the private sector, 70% of workers report access to retirement benefits and 54% report that they are participating.
Increasingly, American workers are forced to rely on 401(k) plans, individual retirement accounts (IRAs) and Social Security for their retirement. Among these, only Social Security provides a guaranteed minimum payment in retirement, and even those benefits seem uncertain, considering the massive unfunded future liabilities faced by the U.S. government.
Previous Pensions
Congress did not always receive a gold-plated pension. Before 1942, members of Congress did not receive a taxpayer-funded retirement plan and most of them spent the majority of their time away from Washington D.C. This early system was quickly scrapped after public outcry, however. A post-war pension was put into place after World War II and eventually replaced by FERS in the 1980s. The current Congressional pension system has not changed much since 2003, after which all incoming freshmen representatives and senators were no longer able to decline FERS.
Congress has not voted to increase its retirement benefits at all since the Great Recession. However, due to the struggles faced by most individual retirement plans and corporate pension programs, the Congressional retirement package did increase relative to the average American retirement plan.
During and After the Financial Crisis
Unfortunately, the once-promising 401(k) era failed to live up to its promise after unrealized gains were wiped out by the 2000–2001 and 2007–2009 recessions, though some of the lost retirement wealth from 2009 recovered quickly. By 2011, the average retirement account balance increased by 7%.
Those gains were conspicuously concentrated among the wealthiest Americans; approximately 45% of workers saw declines in the value of their retirement assets between 2009 and 2011, despite the fact that the S&P 500 grew approximately 54% over that period.
This coincides with participation rates for defined contribution retirement plans. Nearly nine in 10 families in the top 20% of income earners contribute to retirement savings accounts. For the bottom 20%, that ratio drops to below one in 10.
Of course, every member of Congress has several retirement plans, and their defined benefits are not negatively impacted by stock market recessions. Congress also has the unique position of determining its own benefits without having to worry about turning a profit—a private company may have to freeze its pension plan or perform a buyout if it experiences balance sheet problems, but the U.S. Congress must only appropriate tax dollars.
Even state and local government pensions are often limited by balanced budget amendments or the tolerance of local taxpayers. It is different for federal employees under FERS, because the United States government can conjure up and sell new bonds to the Federal Reserve whenever it needs an infusion of cash. This form of monetizing annual deficits does serve as a de facto tax through inflation, though voters rarely make that association. After all, their nominal tax burden does not increase.
There have been several motions, particularly from a few Senate Republicans, to cut higher pension contributions and change the health care benefits for federal employees since 2008. In 2015, and based on the recommendations of the National Commission on Fiscal Responsibility and Reform, Senate Budget Committee Chairman Mike Enzi (R-WY) proposed a $170 billion cut over 10 years as part of a larger deficit-reduction plan. This plan and subsequent measures received little support.
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7484668673051481c1e6df21838d2bde | https://www.investopedia.com/articles/markets/080716/why-negative-interest-rates-are-still-not-working-japan.asp | Why Negative Interest Rates Are Still Not Working in Japan | Why Negative Interest Rates Are Still Not Working in Japan
The Bank of Japan (BOJ) keeps trying to print Japan back to economic prosperity, and it is not letting 25 years of failed stimulus policies get in its way. Negative interest rates were announced by the BOJ in January 2016 as the latest iteration in monetary experimentation. Six months later, the Japanese economy showed no growth, and it's bond market was a mess. Conditions deteriorated so far that the Bank of Tokyo-Mitsubishi UFJ Ltd., Japan's largest private bank, announced in June 2016 that it wanted to leave the Japanese bond markets because BOJ interventions had made them unstable.
While these economic woes present major problems for prime minister Yoshihide Suga and BOJ Governor Haruhiko Kuroda, they can serve as a cautionary tale for the rest of the world. Wherever they have been tried, chronically low-interest rates and huge monetary expansions have failed to promote real economic growth. Quantitative easing (QE) did not achieve its stated objectives in the United States or the European Union (EU), and chronic low-interest rates have been unable to revive Japan's once-thriving economy.
Why Japan Went Negative
There are two reasons why central banks impose artificially low-interest rates. The first reason is to encourage borrowing, spending, and investment. Modern central banks operate under the assumption that savings are pernicious unless they immediately translate into new business investment. When interest rates drop to near zero, the central bank wants the public to take your money out of savings accounts and either spend it or invest it. This is based on the circular flow of income model and the paradox of thrift. Negative interest rate policy (NIRP) is a last-ditch attempt to generate spending, investment, and modest inflation.
The second reason for adopting low-interest rates is much more practical and far less advertised. When national governments are in severe debt, low-interest rates make it easier for them to afford interest payments. An ineffective low-rate policy from a central bank often follows years of deficit spending by a central government.
No country has proven less effective with low-interest-rate policies or high national debt than Japan. By the time the BOJ announced its NIRP, the Japanese government's rate was well over 200% of gross domestic product (GDP). Japan's debt woes began in the early 1990s, after Japanese real estate and stock market bubbles burst and caused a steep recession. Over the next decade, the BOJ cut interest rates from 6% to 0.25%, and the Japanese government tried nine separate fiscal stimulus packages. The BOJ deployed its first quantitative easing in 1997, another round between 2001 and 2004, and quantitative and qualitative monetary easing (QQE) in 2013. Despite these efforts, Japan has had almost no economic growth over the past 25 years.
Why Negative Interest Rates Do Not Work
The Bank of Japan is not alone. Central banks have tried negative rates on reserve deposits in Sweden, Switzerland, Denmark, and the EU. As of July 2016, none had measurably improved economic performance. It seems that monetary authorities may be out of ammunition.
Globally, there is more than $12 trillion in government bonds trading at negative rates. This does little for indebted government, and even less to make businesses more productive or to help low-income households afford more goods and services. Super-low interest rates do not improve the capital stock or improve education and training for labor. Negative interest rates might incentivize banks to withdraw reserve deposits, but they do not create any more creditworthy borrowers or attractive business investments. Japan's NIRP certainly did not make asset markets more rational. By May 2016, the BOJ was a top 10 shareholder in 90% of the stocks listed on the Nikkei 225.
There appears to be a disconnect between standard macroeconomic theory by which borrowers, investors, and business managers react fluidly to monetary policy and the real world. The historical record does not kindly reflect governments and banks that have tried to print and manipulate money into prosperity. This may be because currency, as a commodity, does not generate an increased standard of living. Only more and better goods and services can do this, and it should be clear that circulating more bills is not the best way to make more or better things.
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60cf9327a3b64537b4db627544babbc2 | https://www.investopedia.com/articles/markets/080814/fracking-cant-happen-without-these-companies.asp | Fracking Can't Happen Without These Companies | Fracking Can't Happen Without These Companies
With all the attention paid recently to fracking – and the oil and gas sectors generally – many want to know where the good investment opportunities are. Are fracking companies set on finding oil or natural gas a good bet? Do we need to invest in fracking infrastructure?
Defining Fracking
Fracking is short for hydraulic fracturing, also known as hydrofracking, which is a process that allows companies to more easily extract oil and gas by artificially breaking up rocks in the way. Typically, a fracking process involves drilling a well, which is designed to go horizontally through the rock. Then water is pumped into the well, mixed with a substance called a "proppant," which is usually sand. A trace of other chemicals is often added to increase the viscosity of the fluid, such as guar gum.
The pressure fractures the rock, allowing whatever hydrocarbons are in it to flow more freely and exit through the well. The proppant helps keep those cracks open, and the result is more natural gas and oil. Hydraulic fracture is generally used on rock that ordinarily wouldn't be permeable enough to allow oil and gas out fast enough to be profitable.
It's an old technique, but it was only the twin pressures of higher oil prices and improved technology for digging that made it what it is today: the source of nearly two-thirds of the natural gas production in the United States.
Key Takeaways Fracking companies are responsible for extracting natural gas and oil by artificially breaking up rocks to speed up the process. Approximately two-thirds of U.S. natural gas production comes from fracking, signaling a big dependence on the controversial process. Fracking companies make up a competitive market, including involvement from energy giants such as Chevron, ExxonMobil, and ConocoPhillips and many others.
Big Companies Trailing
The companies that do the fracking are a varied lot. There are some big, familiar energy giants in that group, such as Chevron Corp. (CVX), ExxonMobil Corp. (XOM), and ConocoPhillips Co. (COP). However, the big petroleum companies have more often been on the trailing edge of the boom that fracking has produced; only Conoco is primarily a natural gas company and it has shifted away from that recently. More often the traditional oil producers own the leases to the land on which fracking is done and contract the work out to oilfield services companies.
Marc Bianchi, an analyst at Cowen and Company, notes that the pressure pumping and drilling businesses don't have high barriers to entry, as getting the pumping equipment is relatively easy to do. At the same time, that also puts a cap on profit margin growth, as competition holds prices down. And big players, like Halliburton Co. (HAL), are still in the industry as well. "It ends up with some pretty severe booms and busts in that business," he says.
Growing Demand
The bust, though, might still be some years away. The demand for energy – and natural gas – has been increasing steadily. It is, after all, a big reason why hydraulic fracking is worth doing to begin with. In 2019, the United States set a new record using 85.0 billion cubic feet per day of natural gas, up 3% from the previous year.
Then there are the companies that provide the equipment to do the fracking, and the sand that goes into the water used to fracture the rock. Bianchi says one interesting area regards proppant providers. U.S. Silica Holdings Inc. (SLCA) and Emerge Energy Services LP (EMES) are two examples of companies that have both benefited from the increased activity in both oil and gas extraction. It's actually more difficult to add supply in this market, Bianchi says, so the proppant providers tend to be more insulated from competition. The stocks of both U.S. Silica and Emerge have produced five-year returns measured in the hundreds of percentage points at certain points in time.
Not Just Gas Prices
For anyone wanting to play in the fracking space, oil prices are going to be a factor. Natural gas and oil are different markets, in the sense that oil is basically global and natural gas is more localized. The extraction of natural gas, though, tends to track oil production because the types of rock that produce natural gas also happen to be the ones that carry oil. Historically, a lot of natural gas production is a byproduct of oil production.
Areas such as the Marcellus Shale in the eastern U.S. produce natural gas, an area that's frequently in the news because hydrocarbon production isn't typically associated with upstate New York. However, a sizable portion of new production sites are also in Texas or North Dakota, says Bianchi.
That's changing – in the future, there are likely to be more "pure" gas plays as the technology develops for getting gas out where oil isn't worth it. But for now, it's a good rule of thumb that as oil production rises, so does natural gas. The converse is also true.
Exports Still Factor
Another factor to consider in investing in fracking infrastructure is exporting natural gas. In 2018, the U.S. actually exported some 3.61 trillion cubic feet of natural gas to 33 countries, according to the EIA (the latest figure available). That's the highest on record; in fact, the trendline has been steeply rising since 2000, when the U.S. sent out 243 billion cubic feet. Almost all of it leaves the country via pipeline to Canada and Mexico.
The wild card in this is Europe and Japan. To be sent to either place, natural gas has to be liquefied, which costs a significant sum to make economic sense. The price of natural gas has to stay relatively high in Europe and Asia while staying low enough in the domestic market that it isn't simply more profitable to sell it here.
It's possible the European Union may want to reduce its dependence on Russian natural gas, but as Russia already has the infrastructure in place to deliver it, prices would have to be high in order for imported gas to be competitive, unless there is a political decision to stop importing Russian gas.
The Bottom Line
With a low barrier to entry, the amount of competition to drill for and extract oil and gas via fracking tends to keep profits down – not to mention the relatively low price for gas. Assuming that, the companies that provide the implements and services to frackers could be the better bet.
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e3ff95ed629102ec091c9411e41e9abd | https://www.investopedia.com/articles/markets/080816/what-are-biggest-risks-associated-banks-today.asp | What Are the Biggest Risks Facing Banks Today? | What Are the Biggest Risks Facing Banks Today?
As a result of the 2008 financial crisis, the risk management strategies used by banks have undergone a significant change. While many of those changes resulted from new financial regulations designed to prevent another crisis, technological advancements have raised customers’ expectations and created new risks.
Banking risk management responsibilities expand far beyond the area of limiting credit risks and implementing procedures to monitor those risks. Changes in banking regulations and reliance on new technologies bring novel challenges in addressing the risks associated with banks.
Key Takeaways Banks today face risks that extend beyond their depositors' balances and loan portfolios. Cybercrime, consumer protection, and financial regulation are all aspects of day-to-day operations that could land a bank in trouble for missteps. Inadequate protocols for ensuring compliance with various regulations can result in fines and other sanctions.
Cybercrime
Surveys of bank executives and banking experts list cybercrime as the leading risk for banks. Mark Cooke, group head of operational risk at HSBC, warned that expanding digital banking service channels and the increasing sophistication of cyberattacks have exacerbated rising vulnerabilities to cyber risk. Cooke noted that banks could experience reputational damage as a result of lost client information or denial of customer services.
When a bank data breach appears in news reports, many of the targeted bank's customers respond by transferring their accounts to other institutions out of concern that their bank’s security controls are not adequate to protect confidential customer data. Consumers grow resentful of banks when it becomes necessary to change bank cards and update their online accounts with new numbers. The costs expand beyond those incurred for the re-issuance of new cards.
In late 2015, the Federal Reserve Bank of New York identified cybersecurity as one of its foremost risk priorities. Nevertheless, in July 2016, the New York Fed faced ongoing criticism for having been tricked by hackers into transferring $101 million from Bangladesh Bank to accounts in the Philippines and Sri Lanka on Feb. 4, 2016.
A Reuters investigative team obtained documentation from cybersecurity firm FireEye (NASDAQ: FEYE) revealing that the hackers were able to access the Bangladesh Bank’s computer system with stolen credentials. The fact that hackers could deceive the New York Fed sends a dire warning to the banking industry about the need to verify credentials used in processing online transactions.
Stolen credentials can also be used in constructing completely synthetic identities for obtaining loans and conducting fraudulent online transactions.
Conduct Risk
Another significant risk confronting the banking industry is known as conduct risk. Conduct risk concerns the consequences resulting from how banks deliver services to their customers and how those institutions perform in relation to their competitors. In the wake of the 2008 financial crisis, the Consumer Financial Protection Bureau (CFPB) was created to educate and inform consumers about abusive banking practices.
Inappropriate conduct, such as making misrepresentations about financial products and bank services, can result in lawsuits and regulatory sanctions arising from claims of fraud. Exposure for claims of market abuse can arise from such oversights as the failure to implement adequate safeguards to prevent money laundering. The CPFB is levying significant fines for market abuse and poor conduct. Banks should be mindful of the consequences resulting from failure to provide employee awareness programs for avoiding conduct risk.
Regulatory Compliance
The increased regulation of the banking industry since 2008 has brought risks of misinterpretation of new regulations as well as risks arising from failure to implement the necessary changes to keep up with regulatory expectations. Banks must comply with the statutory requirements set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as the regulations established by the CFPB. Banks must devote time, effort, and resources toward understanding and complying with these new regulations.
Banks can become faced with the challenge of resolving conflicts in their business priorities as a result of new rules. Smaller banks experience greater infrastructure pressures when attempting to keep up with these regulatory changes. Managers must sacrifice time from other tasks and change their focus toward addressing regulatory compliance.
Transnational banking regulations, such as Basel III, which established new bank capital requirements, can create new challenges when a conflict or lack of consistency between overlapping regulations from different jurisdictions arises.
The Bottom Line
The risks facing modern banks exceed simple financial considerations or whether the markets are rising or falling. Identity theft and data breaches, mishandling consumers, or sidestepping regulations can all land a bank in deep water.
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a89898f33a1e15b9143ed3a04d03f906 | https://www.investopedia.com/articles/markets/081315/look-cocacolas-advertising-expenses.asp | A Look at Coca-Cola's Advertising Expenses | A Look at Coca-Cola's Advertising Expenses
Coca-Cola (KO) is a global leader in the nonalcoholic drinks industry. In fact, the company is the largest beverage company in the world. It offers hundreds of soft drinks, fruit juices, sports drinks, and other beverages. You'll probably know the company from its most known brands like Coke, Diet Coke, Fanta, Sprite, Powerade, and Dasani.
Given its status, it's no surprise that the company is a major powerhouse in the global economy and is one of the corporations on the S&P 500. So it's only natural that the amount of ad dollars Coca-Cola spends is high—a vital strategy if it wants to keep its stellar reputation. This article highlights Coca-Cola's history and commitment to advertising. Keep reading to learn more.
Key Takeaways Coca-Cola is a globally recognized brand and household name.The company still competes against other beverage makers and brands.Coca-Cola spends the most on global advertising and marketing than any other soft drink producer.The company averaged about $4 billion each year on advertising between 2015 and 2020.
Coke: A Brief History
Coca-Cola was founded in 1886 in Atlanta, Georgia, by pharmacist John Pemberton. The company's initial success came with the soft drink that made it a household name—a combination of cocoa, the kola nut, and carbonated water to make a soda fountain drink. Even then, branding was on the forefront of Pemberton's mind. His bookkeeper and partner, Frank Robinson, perceived that two Cs would be better for branding, leading to the birth of the Coca-Cola name.
The company owns and licenses more than 500 different brands of nonalcoholic beverages which are sold in more than 200 countries. It partners with a series of bottling partners, distributors, retailers, and wholesalers who help bring the company's products to consumers.
The company's stock trades on the New York Stock Exchange (NYSE) and had a market capitalization of $185.8 billion as of May 15, 2020. Coca-Cola reported revenue of $37.3 billion for the 2019 fiscal year, an increase of 9% from the previous year.
Because of the highly competitive nature of the beverage industry, large brands like Coca-Cola must spend on multi-channel marketing campaigns. This means that if Coca-Cola does not advertise consistently, it will lose market share to other large competitors like PepsiCo (PEP). This is even more important as consumers turn away from sugary drinks due to health concerns, leaving soft drink brands to amplify their creativity to stay in front of consumers.
Large brands like Coca-Cola must spend on multi-channel marketing campaigns in order to boost sales which results in shareholder value.
Coca-Cola's Commitment to Advertising
The so-called cola wars can spur an advertising arms race of sorts. Remember the Pepsi Challenge? Coke's rival launched the campaign in 1975, asking people to undergo a blind taste test between Pepsi and Coke to choose the one they prefer. It was a great gimmick—one that helped put Pepsi on the map. It's just one example of how large brands in the beverage industry try to outspend each other in an attempt to solidify and gain market share.
Coca-Cola has made a yearly commitment to large ad spends. It commitment to advertising has been fairly consistent between 2015 and 2019, spending an average of $4 billion each year to market its drinks to consumers around the world. The company spent roughly $4.25 billion on global advertising in the 2019 fiscal year—a big chunk of which went to market Coke.
This large budget allows Coca-Cola to gain a competitive advantage in several key areas. Its spending and strategy help it successfully introduce new products into the marketplace, increase brand awareness and brand equity among consumers, increase the knowledge and education of consumers, and increase overall sales.
Comparison With Competitors
Coca-Cola's brand value is estimated to be roughly $80.9 billion for the full 2020 fiscal year. Its market share, at least in the U.S. is almost 43%. This is due to the company's advertising budget. But how does the competition stack up?
Let's look at Pepsi, the company's primary rival, which had a market cap of $188.6 billion at the end of the May 15, 2020, trading day. Pepsi has spent roughly the same amount of money on advertising as Coca-Cola since 2015—about $4 billion each year. But keep in mind that Pepsi is much more diversified and owns a number of different food brands as well including Doritos, Fritos, Sabra, and Ruffles. In April 2020, the company announced it would reshift its advertising focus and reduce what it called nonessential advertising.
Advertising in Alcohol Companies
Leading alcoholic beverage companies also found a direct correlation with advertising spend and market share, namely breweries such as Anheuser-Busch. In 2018, Anheuser-Busch spent $1.5 billion on global ads—the most recent statistics available. Although ad spending has a direct correlation to market share, it actually doesn't increase the size of the overall market.
For example, if a consumer already decides to purchase beer, their brand preference can be influenced by advertising. Ad spending in the alcohol industry does not induce consumers to purchase a soda or beer if they had not already wanted to purchase one.
This supports the importance of ad spending in the beverage industry, where brands need to outspend competitors' brands so that consumers who already are looking for a soda are induced to purchase a Coke over a Pepsi. Ad spending in both the alcohol industry and the beverage industry does not influence the purchasing decisions of consumers who aren't already participants in those industries.
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96c90286805cc12ca304f4267d10e9f9 | https://www.investopedia.com/articles/markets/081415/comparing-cocacola-and-pepsis-business-models.asp | Coca-Cola vs. Pepsi's Business Models: What's the Difference? | Coca-Cola vs. Pepsi's Business Models: What's the Difference?
Coca-Cola vs. Pepsi's Business Models: An Overview
Coca-Cola Co. (KO) and PepsiCo, Inc. (PEP) are very similar businesses in terms of industry, ideal consumers, and flagship products. Both Coca-Cola and PepsiCo are global leaders in the beverage industry, offering consumers hundreds of beverage brands. In addition, both companies offer ancillary products such as consumer packaged goods.
On the surface, Coca-Cola and PepsiCo have similar business models. As potential investors dig deeper, however, they find key differences and key similarities between the two business models that make the companies what they are as of 2020. The following are a few comparisons between Coca-Cola and PepsiCo's business model that make the two companies fierce competitors and unique businesses.
Key Takeaways PepsiCo, Inc., owns roughly 24 individual brands, including popular food brands, like Quaker Oats as well as many brands of drinks.More than half of PepsiCo’s global revenue comes from snack and food products. The Coca-Cola Co., on the other hand, primarily owns beverage brands of varying types, including Honest Tea, and Fairlife ultra-filtered milk.
PepsiCo
PepsiCo is a company known for a highly diversified product portfolio, both within the beverage industry and in other industries such as the consumer packaged goods industry. In contrast, Coca-Cola only focuses on a diversified product portfolio within the beverage industry and has few products outside of that industry. This means PepsiCo's products in the snack food category account for more than 50% of its business revenue, while a majority of Coca-Cola's revenue comes directly from the 100-plus beverage products it owns.
With PepsiCo's diversified business model, the company has been able to acquire or create complementary products in both the food industry and the beverage industry. According to Information Resources, Inc., a market research company, 54% of U.S. consumers polled reported that when they buy a salty snack, they also buy a beverage in the same checkout basket.
Coca-Cola
Even though Coca-Cola may have an advantage with a more focused business model, PepsiCo created a scenario where one product the company owns may induce a consumer to purchase a second product the company also owns. In contrast, Coca-Cola has made efforts to dominate the beverage industry almost exclusively and shied away from the cross-promotion of multiple products in multiple industries.
Between 2008-2018, Coca-Cola has a higher market share than Pepsi, according to Beverage Digest, a trade publication. Pepsi's market share has dropped in the same time period.
In addition, Coca-Cola has more focus within the beverage industry, allowing it to make key investments and communicate key messaging with consumers.
Special considerations
Both Coca-Cola and PepsiCo are so large, they face the issue of market saturation. There are not many new or emerging markets that remain untapped for either company. However, both companies have made a push into the energy drink category, as Americans have begun to be more concerned about sugar and chemicals in their food and drinks.
This push highlights the fact that sales volume for Diet Pepsi and Diet Coke have declined steadily in more than 10 years, according to Time magazine.
What is interesting to note is that Time magazine also reports that the energy drink segment of the beverage industry has captured year-over-year growth over the past 10 years. Keeping with the theme of diversification and product complements, Coca-Cola bought a large stake in Monster Energy in 2014, and PepsiCo decided to start its own energy drink: Mountain Dew Kickstart.
The Bottom Line
With both companies facing market saturation, Coca-Cola and PepsiCo have made strong commitments to more efficient operations. Since every large market has been fully tapped by the beverage industry, the remaining smaller markets require efficient operations to turn a profit and make a lucrative investment, since the sales volume felt in countries such as the U.S. is not there. These more efficient operations help both companies increase the price per share given it should result in higher earnings per share, or EPS, even if sales remain flat.
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f15c2ddad1820b3919ddc9f1cf4b2906 | https://www.investopedia.com/articles/markets/082015/startup-analysis-how-much-dropbox-worth.asp | How Much Is Dropbox Worth? | How Much Is Dropbox Worth?
Dropbox, Inc. (DBX) is a file hosting service company based in San Francisco, California. The company specializes in cloud-based storage, synchronization, and personal cloud and client software. Essentially, Dropbox allows users to create unique folders on their personal computers; the software then saves and syncs those folders to the cloud (rather than taking up storage space on a computer), where the users can view the files within those folders at any computer location.
The company filed for an initial public offering (IPO) in 2018, pricing its shares at $16-$18 a piece, putting its valuation as high as $8 billion. While this valuation was lower than the $10 billion it received during a 2014 funding round, the company has achieved rapid growth since it was founded in 2007, with over 500 million users in over 200 countries. Along with the valuation and IPO pricing, Dropbox also announced a $100 million pre-IPO private placement to Salesforce Ventures (CRM), reported CNBC.
On March 21, 2018, the company raised its price range by $2 to $18-$20 per share, due to strong demand, pushing its valuation higher to $8.7 billion. One day later, the IPO was priced at $21, above its expected price range. On March 23, 2018, its first trading day, the stock opened at $29 per share, 38% above its IPO price--meaning Dropbox's valuation on IPO day was $9.2 billion.
Though Dropbox's worth hit $12 billion in the fall of 2018, as of July 26, 2020, Dropbox has a market cap of approximately $8.82 billion.
$8.82 billion Dropbox's valuation, as of July 2020
Dropbox's Valuation
This $8.82 billion valuation is less than its 2018 $12 billion high, which was more than 10% higher than the previous numbers reported four years prior. Dropbox was given a $10 billion valuation in January 2014 after the company raised $1.1 billion in an investment round. For context: when a private company decides to raise funds, it goes through a 409(a) valuation by an independent third-party firm. The firm gains exclusive access to the company's books and data.
The 409(a) valuation gives the private company an overall value as well as a price per private share. After the value has been decided, investors can come offer to buy shares for a specific price per share, usually priced at a premium, in reference to the true value per share.
The $10 billion valuation was derived from the post-money valuation after the $1.1 billion investment round. However, many knowledgeable firms, such as Business Insider and CB Insights, claimed that this valuation was too high.
Slow Growth and No Innovation
With the company going public, it now faces an uphill challenge of delivering big growth in order to keep investors hooked.
Dropbox has chosen to operate in a highly competitive business environment. Competitors such as Google Drive, Amazon Cloud (AMZN), and Box (BOX) have caused what's known as a race to zero, where competitors keep slashing prices so they can compete in the marketplace.
These large companies, such as Google (GOOGL), are not afraid to burn dollars. Dropbox may be facing a never-ending decline in prices.
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bbf01306ecf9d3422e1ac01c79ab77a2 | https://www.investopedia.com/articles/markets/082515/how-theskimm-works-and-makes-money.asp | How TheSkimm Makes Money | How TheSkimm Makes Money
One of the latest email newsletters to meet with widespread success, theSkimm generates revenue through directed and targeted advertisements, as well as a paid subscription service through a mobile app. The company's co-founders have also released a book and are engaging in a related promotional tour as well. Email newsletters can generate advertising revenue based on numbers of subscribers, open rates, and other factors.
Danielle Weisberg and Carly Zakin founded theSkimm in 2012 after leaving their jobs as news producers for NBC. Just four years later, the company raised $8 million in Series B funds in order to launch a video component called Skimm Studios, per Bloomberg. In 2018, the company raised an additional $12 million in funding, just months before theSkimm announced that it had roughly seven million subscribers.
Financial information for theSkimm, aside from funding figures provided above, is not readily available to the public.
The daily newsletter of theSkimm, The Daily Skimm, is sent each weekday morning and caters to an audience primarily composed of millennial women.
TheSkimm's Business Model
TheSkimm is a daily news digest newsletter that is dispatched via email early each weekday morning and contains a digest of five to six news stories, along with short commentaries. These brief news/commentary digests are referred to as skimms. The skimms contain hyperlinks that readers can click on to read more about a story or topic if they wish. The newsletter's website offers a connection to theSkimm's blog site, archives of previous issues, and Skimm Guides, which are 500 to 800-word articles that explain current, ongoing news topics such as "The Greek Debt Crisis" and "Iran Nuclear Talks."
TheSkimm has been a success story almost from the beginning, obtaining 100,000 plus subscribers its first year of operation and expanding its mailing list to over 1.5 million barely 18 months later. The newsletter and its two main editors have impressed venture capital firms with their revenue potential. The company used the money earned through two fundraising rounds to establish an office, as the two producers started the business working out of their apartment, and to hire additional writers, editors, and support staff. Part of the venture capital obtained has been dedicated to marketing.
TheSkimm makes money primarily through three avenues: targeted advertisements, a paid subscription service, and through additional branded products, such as "How to Skimm Your Life," a book written by the company's co-founders.
Key Takeaways TheSkimm provides a daily email newsletter with short summaries of newsworthy items known as The Daily Skimm. The company generates revenue through advertisements, a paid subscription service called Skimm Ahead, and a book and promotional tour. TheSkimm has generated more than $20 million in investor fundraising.
TheSkimm's Advertising Business
A company that publishes an email newsletter or has a blog site monetizes its products primarily through advertising revenues. This is a proven business model for newsletters, both print published and email.
A premium ad space in a newsletter typically pays the publisher something between $20 to $100 cost per thousand impressions, or CPM. Assuming theSkimm is mailed daily to seven million subscribers, with TheSkimm's approximately 50% email open rate well above the email newsletter average of 10-15%, which potentially translates to approximately $70,000 to $350,000 per newsletter send.
Newsletter publishers can obtain advertisers by negotiating deals directly with individual advertisers or by using an ad network to supply ads appropriate for their readership. Ad network revenues are substantially lower than what direct advertising deals make; however, publishers often use them on days when they do not have arrangements to run any directly negotiated ads.
Dedicated Email Advertising
Dedicated emails fetch even higher CPM rates. Dedicated emails are basically an email ad for one product or company mailed to a newsletter's subscribers, usually consisting of a one-page note that contains a special offer and an endorsement from the newsletter publisher of the product or company being advertised. While dedicated emails bring higher ad revenues, they can only be done on a limited basis, perhaps once or twice a month.
Otherwise, the newsletter publisher risks alienating its audience by constantly bombarding it with ads.
The advertising rates that newsletter publishers can command are affected by a number of factors, including numbers of subscribers, the demographics of the readership, and the open rate, or the percentage of subscribers who actually open and look at the email. TheSkimm has distinguished itself from competing newsletters by managing an open rate nearly four times higher than average.
The publishers of TheSkimm have found some creative ways to put together advertising efforts beyond just the traditional ad-inserted-into-newsletter format. This enabled them to develop significant deals with clients such as the NBA and ABC television network. To publicize the NBA Finals and All-Star Game, they arranged for NBA players to write skimms.
Fast Fact TheSkimm has a special focus on politics: the company registered more than 100,000 people to vote in the 2016 election.
TheSkimm's Subscription Service
In 2016, theSkimm launched Skimm Ahead, a paid subscription service available through its mobile app. Skimm Ahead provides users with advance notice of events and stories related to categories of interest. Users can specify a focus on a given topic, such as sports or politics. Skimm Ahead includes a calendar that can be synced to a user's Google (GOOGL) or Apple (AAPL) calendars, audio episodes, and more. Currently, Skimm Ahead is available for $2.99 per month, or $29.99 for a year-long subscription, and theSkimm also offers a free trial for users wishing to test out the app service before committing.
TheSkimm's Additional Businesses
In June of 2019, co-founders Weisberg and Zakin released a self-help book called "How to Skimm Your Life." The book is currently listed for sale on Amazon.com (AMZN) for $27. Weisberg and Zakin launched a promotional tour called "Night Out" in support of the book release, covering 10 cities across the U.S. in just over two weeks. In addition to revenue earned from book sales, theSkimm also earns revenue from ticket sales for these events.
Key Challenges
One of the primary challenges facing theSkimm is the continued engagement of its user base. In order to remain attractive to advertisers and investors, theSkimm must be able to prove that it has a growing base of interested subscribers who are likely to click on ad links and, hopefully, to purchase products with partner companies as a result. TheSkimm draws in users with an engaging, easy-to-read digest of news stories and other topics of interest. The company must continue to meet its users' evolving tastes in order to maintain success.
Future Plans
Newsletter publishers or blog sites may eventually generate additional revenues by creating a brand associated with the newsletter and marketing their own products, such as coffee mugs or T-shirts. TheSkimm's editors have already done this, offering "swag" to so-called "Skimm-bassadors," subscribers who refer a specified number of new users to the site and service.
The Bottom Line
Given theSkimm's recent venture into other media, it's likely that the company will continue to leverage its popularity and growing user base into additional product development.
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df8ccc0a597bf35509fdb6ab175366cc | https://www.investopedia.com/articles/markets/082615/5-biggest-canadian-oil-companies.asp | The 5 Biggest Canadian Oil Companies | The 5 Biggest Canadian Oil Companies
There are a vast number of oil companies operating and based in Canada. However, the majority of oil production and refining in the country is carried out by less than 20 companies. The largest companies consistently compete against each other for the number one place. Research and development, or R&D, and alterations in processes, along with acquiring new technology and tools, play large roles in this competition.
Many Canadian producers are developing an interest in new energy technologies and the growing value of licensing rights. This new form of competition caused a shift in research and development toward producing patents. Oil companies sometimes utilize patents as tools to negotiate new deals.
Some of the largest and most productive oil companies in Canada are Enbridge, Inc. (ENB), TC Energy Corp. (TRP), Suncor Energy, Inc. (SU), Canadian Natural Resources, Ltd. (CNQ), and Imperial Oil, Ltd. (IMO). However, this list does not cover everything. There are more Canadian oil and gas companies worth the attention of investors.
1. Enbridge, Inc.
Enbridge is based in Calgary and is noted as one of the country's largest energy delivery companies. It had a market cap of about $61 billion (83 billion Canadian dollars) as of July 24, 2020. The company's main focus is transportation, distribution, and generation of energy throughout North America, primarily in Canada and the United States. In these two countries, Enbridge is responsible for operating one of the longest crude oil and liquid hydrocarbon transportation systems in the world. Because the company is first and foremost a distributor of energy, it owns and runs the largest natural gas distribution network in Canada. Its distribution services extend to Quebec, Ontario, and New York.
The company was first incorporated by Imperial Oil in 1949. However, Enbridge later bought its independence and began operations under its current name. It advanced several of its largest projects in the 2000s, including the Enbridge Northern Gateway Pipelines project and the Alberta Clipper pipeline project in 2006, the latter becoming operational in 2010.
2. TC Energy Corporation
TC Energy Corporation, formerly known as TransCanada, is among the top North American energy/oil companies. TC's headquarters are in Calgary, and it had a market cap of $41 billion (55 billion Canadian dollars) on July 24, 2020. The company focuses on developing energy infrastructure in North America. TC Energy is perhaps best known for the controversial Keystone XL pipeline, which was designed to transport oil from Alberta to Texas for refining and shipment. However, the company also builds and operates natural gas pipelines in Canada, the U.S., and Mexico.
3. Suncor Energy, Inc.
Suncor is one of the largest companies in Canada in terms of total revenue. It had a market capitalization of about $26 billion (35 billion Canadian dollars) as of June 2020. It was established in 1919 as the subsidiary of a company now known as Sunoco Inc. More than any other company, Suncor led the development of the Athabasca tar sands. The tar sands are an area of crude oil deposits located in the northern region of Alberta that hold a potential supply of trillions of barrels of petroleum.
The company has multiple refineries that function at high capacity, as well as upstream, midstream, and downstream operations. Suncor also operates over 1,500 gas stations around Canada. The value of the company's real estate holdings alone, where its production facilities are located, is significant.
4. Canadian Natural Resources, Ltd.
Canadian Natural Resources, or CNRL, is one of a few oil companies that is wholly Canadian. For the first 20 years of its operations, the company had little recognition. However, the development of the Athabasca sands presented a perfect opportunity and thrust it into the national spotlight. CNRL operates far beyond Western Canada. The firm has expanded its operations around the world, generating billions of dollars in Europe and even more from its light crude blocks in Africa. As of June 2020, CNRL, with a market cap of $20 billion (28 billion Canadian dollars), is one of the world's largest natural gas and crude oil producers.
5. Imperial Oil, Ltd.
Imperial Oil had a market cap of about $12 billion (16 billion Canadian dollars) on June 24, 2020. At that time, Exxon Mobil Corp. (XOM) owned approximately 70% of the company. Imperial Oil is a major producer of crude oil and natural gas. It is also a significant petroleum refiner in Canada. Furthermore, the company is a petrochemical producer and marketer for the nation, with retail and supply networks across the country. The company's headquarters are in Calgary, after moving from Toronto in 2005. It has significant holdings in the Alberta Oil Sands.
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44ab8382f4d76845d3bbe41a54fb79ef | https://www.investopedia.com/articles/markets/090715/who-are-exxons-main-competitors.asp | Who Are Exxon Mobil's Main Competitors? | Who Are Exxon Mobil's Main Competitors?
Exxon Mobil Corp. (XOM) is the largest and most profitable oil and gas company in the U.S., and one of the largest companies in the world. As of July 2, 2020, the company had a market capitalization of more than $186 billion, and more than 28 million shares traded in average daily volume.
Exxon Mobil is a major integrated energy company with many energy commodity interests, including electrical power generating operations, but at the core of its business is the exploration, production, and distribution of oil and natural gas. In 2017, Exxon Mobil earned $14.3 billion and had net oil-equivalent production of 4 million barrels per day. XOM paid a dividend yield of 7.89% as of July 2020.
This is a look at some of Exxon Mobile's top competitors, which include Chevron Corp. (CVX), ConocoPhillips (COP), and Royal Dutch Shell (RDS.A).
Chevron Corp.
Based in San Ramon, CA, Chevron Corp. is the second-largest U.S. oil company, with a market capitalization of $164.9 billion and an average daily trading volume of more than 5.7 million shares as of July 2020. The company has integrated petroleum, chemicals, mining, and power generation operations.
Chevron had total earnings of $2.9 billion in 2019, and its annual per-share dividend payout rose for the thirtieth consecutive year. The company's average oil-equivalent production was a record of 3.06 million barrels per day. CVX had total dividends and share repurchases of $13 billion in 2019.
ConocoPhillips
ConocoPhillips, based in Houston, TX, has positioned itself as an exploration and production company within the oil and gas sector. The company engages in the worldwide exploration, production, transportation and marketing of crude oil, bitumen, natural gas, natural gas liquids, and liquefied natural gas.
As of July 2020, the company's market capitalization was $44.8 billion, and its average daily trading volume was 4.7 million shares. COP paid a dividend yield of 1.68%.
ConocoPhillips earned a total of $36.7 billion in 2019, and it produced over 1,348 barrels of oil equivalent per day. The company also had another 5.3 billion reserves of oil equivalent during the year.
Royal Dutch Shell, PLC
Royal Dutch Shell is another major integrated oil company. However, it's not based in the U.S. Headquartered in the Netherlands and incorporated in London, the company had a market capitalization of more than $124.9 billion as of July 2020, with more than 4.2 million shares traded in average daily volume.
Royal Dutch Shell had net earnings of more than $15.8 billion in 2019 and ended with reserves of 11,096 million barrels of oil equivalent.
Unlike many other oil companies, Shell is actively looking into alternative energy sources. The company has interests in seven wind energy projects in North America and Europe. One project is an offshore wind project in the Netherlands. It anticipates that its future growth will come from its upstream operations, where technological advances will help the company find new liquid and natural gas reserves. The company also has growth strategies in integrated gas and underwater drilling.
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666f1b34257c69e8e2faeddcda467388 | https://www.investopedia.com/articles/markets/090915/who-are-wells-fargos-main-competitors.asp | Who Are Wells Fargo’s Main Competitors? | Who Are Wells Fargo’s Main Competitors?
The financial services industry is one of the most important parts of the U.S. economy. The sector includes insurance, investment, and real estate firms, and, more importantly, banks. According to the Federal Reserve, there are 1,836 banks in the United States alone, ranging from nationally chartered to state-chartered firms. One of those names is Wells Fargo, which ranks as the third-largest bank in the country. It achieves this position by the size of its market capitalization as well as the total amount of domestic assets it holds. This short article outlines some of the key facts about Wells Fargo and its main competitors in the U.S.
Key Takeaways Wells Fargo is among the largest banks in the U.S. by market capitalization and by total assets. JPMorgan Chase is the largest bank in the country and among the ten largest banks in the world. Bank of America reached its size through a series of mergers and acquisitions including NationsBank and Fleet Boston Financial. Citigroup, which was once the largest company and bank worldwide, ranks as fourth-largest bank in the country, after Wells Fargo.
Wells Fargo: An Overview
Wells Fargo (WFC) was founded in 1852 by Henry Wells and William G. Fargo. It holds the distinction of operating under the very first national bank charter granted in the U.S. Headquartered in San Francisco, Wells Fargo offers a wide range of banking and financial services through more than 50 business lines and operates in more than 35 countries worldwide. The bank had more than 5,300 retail branches in the United States as of the end of the fourth quarter of 2019.
Wells Fargo reported net income of $19.5 billion and revenue of $86.4 billion at the end of its 2019 fiscal year. The company's return-on-asset (ROA) ratio was 1.02% and its return-on-equity (ROE) ratio was 10.23% for the same period.
The bank suffered several crises after being slapped with fines following a series of violations. In 2018, the bank agreed to pay $1 billion in fines for charging mortgage and loan customers extra fees. It also paid $185 million in penalties after acknowledging that it opened 3.5 million unauthorized bank accounts and credit cards going back to 2016. The bank also agreed to issue refunds to affected customers.
Despite this, Wells Fargo remains one of the country's top banks by market capitalization—$117.4 billion as of Mar. 31, 2020. As of Dec. 31, 2019, the bank held about $1.7 trillion in domestic assets. In 2018, It was also recognized as the world's third most valuable bank brand name behind ICBC and China Construction Bank in a Brand Finance study of more than 500 banks.
The main competitors of Wells Fargo are three of the other big four major U.S. banks—JPMorgan Chase, Bank of America, and Citigroup. Combined, these four banks together hold between 40% to 45% of all bank deposits in the country and serve the majority of personal and commercial accounts in the United States.
The four largest banks in the United States hold between 40% to 45% of all bank deposits and serve the majority of the country's personal and commercial accounts.
JPMorgan Chase
Market Capitalization (as of Mar. 31, 2020): $274.3 billionDomestic Assets (as of Dec. 31, 2019): $1.8 trillion
JPMorgan Chase (JPM) as we know it today was formed through the merger of JP Morgan Bank and Chase Manhattan Bank in 2000. It is the largest bank in the United States by market capitalization and total assets held in the country and is among the top ten banks in the world by total assets.
Headquartered in New York, the bank operates across the entire spectrum of banking and financial services in more than 100 countries through four divisions. They include asset management, corporate and investment banking, consumer and community banking, and commercial banking. The bank has engaged in a number of mergers and acquisitions (M&A) including Bank One, the Bank of Chicago, and Bear Stearns.
The company reported net income of $36.4 billion and revenue of $115.6 billion for the 2019 fiscal year. Its ROA ratio was 1.29% and its ROE ratio was 13.26% for the same period.
Bank of America
Market Capitalization (as of Mar. 31, 2020): $185.2 billionDomestic Assets (as of Dec. 31, 2019): $1.7 trillion
Bank of America Corporation (BAC) is headquartered in Charlotte, North Carolina, but has a vast retail banking presence with more than 4,500 retail operations in all 50 states, serving more than 50 million consumer and business accounts.
It is the second-largest bank in the United States by market capitalization and by total assets. It achieved its current size through a series of mergers and acquisitions, including NationsBank in 1998—the biggest bank merger at that time—and Fleet Boston Financial. Bank of America's 2008 acquisition of Merrill Lynch transformed it into one of the largest investment banking operations worldwide, boosting it to one of the largest wealth management companies in the world.
For the full year of 2019, Bank of America reported revenue of $91.2 billion. Net income came in at $27.4 billion. As of Dec. 31, 2019, Bank of America's full-year TTM ROA ratio was 1.21%, while its ROE was 10.36%.
Citigroup
Market Capitalization (as of Mar. 31, 2020): $88.4 billionDomestic Assets (as of Dec. 31, 2019): $854 billion
Like its peers, Citigroup (C) is a multinational banking and financial services company. Headquartered in New York, the bank was formed through one of the largest mergers in history, that of Citicorp and the financial services firm, Travelers Group. The bank falls in fourth place, behind Wells Fargo.
Prior to the Great Recession, Citigroup was ranked as the largest company and the largest bank worldwide, but the company suffered massive losses during the financial crisis, dropping all the way down to the last position among the big four.
Citigroup's TTM ROA was 1% and its ROE ratio was 10.04% for the full year of 2019. For the 2019 fiscal year, Citigroup reported net income of $19.4 billion on revenue of $74.3 billion.
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5b1d87b4148784e14ab4a60cd83f95d9 | https://www.investopedia.com/articles/markets/092115/these-are-benefits-investing-walmart.asp | Benefits of Investing in Walmart | Benefits of Investing in Walmart
Walmart (WMT) is a U.S.-based multinational retail corporation that operates as a chain of discount department stores and a chain of warehouse stores. The company has over 11,500 locations across the globe and is the world's largest company by revenue. Additionally, Walmart is the largest private employer in the world with over 2.2 million employees.
Walmart has made investments in its employees, such as increasing wages and offering benefits for same-sex partners. For investors, the company is an attractive investment, as it has outperformed the S&P 500 over the past few years. For investors on the fence, the following are the top four benefits of investing in Walmart in 2020.
Key Takeaways Walmart's focused expansion into emerging markets provides investors some stability as they grow their international portfolio by backing a well-known company into these newer Asian markets. Technology investments made by Walmart allow the company to remain relevant and profitable in spite of increased competition from e-retailers. Reinvesting in the company as well as giving back to shareholders via increasing dividends provides a strong message regarding the health of the company. The expected average annual growth rate of 5.6% over the next five years coupled with a dividend history of increasing year over year since 1974 makes Walmart a smart investment.
Stability and Brand Name
With Walmart, it is pretty well-known what an investor is going to get from an operational perspective. The company is a retail juggernaut and continues to be the largest company in the world by sales. Additionally, it has increased revenue, profit, and earnings per share (EPS) steadily for the past 20-plus years.
Over the next five years, Walmart is expected to grow earnings at an average annual rate of 5.6%. Stock price aside, due to these forecasts and its past performance, Walmart remains a stable company that should be viewed as a long-term blue-chip investment.
Roughly 75% of Walmart's store management began their careers as hourly employees with the company. This shows the company's focus on retaining talent by investing in employee growth as well as growing the business.
Dividends and Reinvestment
For investors, Walmart has done a great job managing its increasing profit, using a smart reinvestment strategy, and giving back to shareholders. Over the last twelve months, the company has reinvested over $10 billion in capital expenditures (CAPEX), paid out over $6 billion in dividends, and bought back over $4 billion in shares.
Walmart has a track record of increasing its annual dividend every year since it started paying a dividend in 1974, and its dividend yield is roughly 1.7%. Walmart sits on almost $15 billion in cash and short-term investments, providing additional opportunities for the company to reinvest and return capital to shareholders. These are all good signs that regardless of current stock performance, Walmart should continue to grow and add value to shareholders through capital gains and dividend payments.
Focused Effort on Continuous Innovation
While the company is a retail giant, it has also done an admirable job ensuring it is not slow-moving. Walmart has made strides to introduce new technologies, such as a "scan and go" app for iOS and Android.
The scan-and-go app is designed to offer customers a more efficient way to shop, and also makes Walmart’s daily operations more efficient. Additionally, the company has been investing in e-commerce to stave off competition from the likes of Amazon and eBay. It is also testing out emerging e-commerce strategies such as pickup lockers for online orders.
Global Diversification
Over the past decade, emerging markets have achieved rapid expansion. South Asian economies have tripled their output since 2000, and East Asian economies grew output from $3.3 trillion in 2000 to $11.2 trillion in 2010. Expanding into these emerging markets not only allows a company to achieve growth but also allows for diversification against economic downturns.
Due to these factors, Walmart has made an effort to continue its expansion globally. By investing in the company, it is possible to realize increasing international revenues and profits and own stock that won’t be affected as heavily by global recessions.
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