“In life, you don’t soar to the level of your hopes and dreams, you stay stuck at the level of your self-worth. ~ Jamie Kern Lima, author of new book, Worthy: How to Believe You Are and Transform Your Life.

New York Times Best-Selling author Jamie Kern Lima, is author of new book, Worthy: How to Believe You Are and Transform Your Life. In her book, she states aptly   “You don’t become what you want, you become what you believe you’re worthy of: in life, in love, in friendships, in your career, and in your hopes and dreams.”

Essentially, in your business, leadership, relationships, friendships and ambitions, you don’t rise to what you believe is possible, you fall to what you believe you’re worthy of.

When you build your self-worth, you change your entire life.

Jamie Kern Lima, who has been on Forbes’ list of America’s wealthiest self-made women for six years, started “IT Cosmetics”

• Redefine and embrace rejection – I’m one of the brave and courages ones to go for it  
• Rejection is God’s protection!!!
• You were not rejected, I hid your value from them because they are not assign to your destiny.
• Things are happening for you, not to you!

If you have doubt, then you lack Faith. Self-doubt and  Faith cannot coexist. Feeling Worthy means your trusting God’s word; having self-doubt means your listening to your own voice.

“I was born for greatness!” ~ Oprah Winfrey

The bottom-line is “No matter how vividly you visualize your goals and dreams, no matter if you take action toward making them happen, if deep down inside you don’t actually feel like you are deserving or worthy of those dreams and goals, then you won’t achieve them.”

Reference:

1. https://podcasts.apple.com/us/podcast/oprahs-super-soul/id1264843400?i=1000645265849

FinChat provides a simple screener to find High Quality Small-Caps:

1.) Market Cap: $50M-$3B
2.) 10-Year Average ROIC: 15%+
3.) 10-Year Revenue & EPS CAGR: 10%+
4.) Net Debt/EBITDA: Less than 5x

Here are a few companies that make the cut

Simulation Plus $SLP – The company’s primary software solution (GastroPlus) simulates the absorption and drug interaction of compounds administered to humans and animals.

10-Year Return: 690%
Market Cap: $823 million
EV/Operating Income: 56x

CoreCard Corp. $CCRD – Sells software solutions that allow companies to offer various types of transacting account or card issuing programs, as well as installment and revolving loans.

10-Year Return: 409%
Market Cap: $102 million
EV/Operating Income: 14x

VirTra $VTSI – Provides force training simulators & firearms training simulators for law enforcement and the military.

10-Year Return: 764%
Market Cap: $113 million
EV/Operating Income: 11x

DLH Holdings $DLHC – Provides business process outsourcing, program management solutions, and public health research & analytics services in the US.

10-Year Return: 568%
Market Cap: $227 million
EV/Operating Income: 15.1x

Source:  https://x.com/finchat_io/status/1762890129847542220

The Future Investors presents the 25 highest-quality stocks in the market, listed from A to Z. High-quality criteria:
– EPS & Revenue next 3Y >10%
– ROIC >15%
– Gross margin >50%
– Net/FCF margin >20%
– Altman Z >3
– Mcap >10B

🖼️ 1. $ADBE – Adobe
💚 2. $ADYEN – Adyen
🏭 3. $ASML – ASML
🛜 4. $ANET – Arista Networks
🖥️ 5. $AVGO – Broadcom
✏️ 6. $CDNS – Cadence Design
👞 7. $DECK – Deckers Outdoor
🎰 8. $EVO – Evolution AB
🧐 9. $FICO – Fair Isaac
🔐 10. $FTNT – Fortinet
🔍 11. $GOOGL – Google
👜 12. $RMS – Hermès
🔗 13. $MANH – Manhattan Assoc.
💳 14. $MA – Mastercard
🧑🏻‍🔬 15. $MEDP – Medpace
🛒 16. $MELI – MercadoLibre
👤17. $META – Meta
💻 18. $MSFT – Microsoft
🥤19. $MNST – Monster Beverage
🏦 20. $MSCI – MSCI
💊 21. $NVO – Novo Nordisk
🎮 22. $NVDA – Nvidia
🪙 23. $PGHN – Partners Group
💸 24. $PAYC – Paycom
💳 25. $V – Visa

Source:  https://x.com/ftr_investors/status/1762905584330740205

Here are these super investors’ top 10 most widely owned stocks, according to Brian Feroldi on X:

$AMZN – Amazon
$BRK.B – Berkshire Hathaway
$GOOG – Alphabet
$V – Visa
$META – Meta Platforms
$MSFT – Microsoft
$MA – Mastercard
$UNH – United Health Group
$AAPL – Apple
$WFC – Wells Fargo

“Historically, the stock market has doubled on average every 10 to 12 years.” – Ron Baron

Staying invested in equities over the long term increases the likelihood of positive long term returns, says Ron Baron. Historically, the economy has grown on average 2%-6% nominally per year, or doubling every 10 or 12 years, and the stock markets have closely reflected that growth.

Effectively, as GDP has grown, so has the stock market.

U.S. GDP in 1968 was $951 billion, 55 years later it is $27.6 trillion. That’s over 29 times greater than it was in 1968.

The Dow Jones Industrial Average was around 936 and the S&P 500 was 103 in 1968. They are now 33, 507 and 4,288, respectively.

An investor in a product that tracks the S&P 500 Index would have had a 69% chance of generating a positive return during any given quarter between 1926 and 2023.

Increasing the investment horizon to 10 years would have resulted in a 95% chance of a positive return. And investing over any 20-year or 30-year period would have produced positive returns 100% of the time.

Long-Term Investors Have Had Better Chances of Positive Returns

An investor in a product that tracks the S&P 500 Index would have had a 69% chance of generating a positive return during any given quarter between 1926 and 2023.

Increasing the investment horizon to 10 years would have resulted in a 95% chance of a positive return. And investing over any 20-year or 30-year period would have produced positive returns 100% of the time.

A Few Missed Days May Be Costly

Since we cannot predict when economic and market cycles start or end, there is no good time to time the market.

Over the past five market cycles, missing the best five days would have resulted in a 38% lower value of a hypothetical $10,000 investment, and missing the best 10 days would have resulted in a 55.3% lower value.

As big down days are often closely followed by big up days, those who panic and sell on the down days are likely to miss out on the ensuing up days.

“Compounding [interest] is the most powerful force in the universe” – Albert Einstein

The purchasing power of the dollar has fallen about 50% every 17 years over the past 55 years. While inflation causes currencies to lose value over time, it has a positive impact on tangible assets, businesses, and economic growth.

Inflation causes currencies to lose value over time. However, it has a positive impact on tangible assets, businesses, and economic growth. This means stocks are the best hedge against the devaluation of your money.

While the simple answer to combat inflation is to invest your money over the long term, the concept of compounding tells us why. When your savings earn returns (e.g., bank interest, dividends), compounding allows these returns to earn even more returns.

Over time, this effect snowballs, and earnings grow at an increasingly fast rate. Given a small initial investment, in year one the amount you earn on your investments will not be a lot. However, in year 10…or 20…or 30… you will not believe the impact of the “power of compounding.

References:

1. https://www.baronfunds.com/sites/default/files/the-power-of-active-long-term-investing-9.30.2023_0.pdf

“Strong free cash flow generation, a long runway of free cash flow growth, and the price we pay for it are all that matters to long-term investing success.” ~ Motley Fool

Return on invested capital (ROIC) is the most important financial metric because:

• An increase in ROIC always increases intrinsic business value, but revenue growth does not always increase intrinsic value. Revenue growth only increases the intrinsic value when ROIC exceeds the weighted average cost of capital (WACC).
• Companies with high ROIC outperform the stock market by a country mile.
• Companies with rising ROIC (and high incremental returns on invested capital) outperform the market even more!

While profit, gross margin, operating margin, and revenue are all important, they are still only pieces to the ultimate scores: free cash flow and return on invested capital.

Free cash flow can be calculated from an income statement and balance sheet. Below is the equation.

Free Cash Flow (FCF) =

Earnings Before Interest & Taxes (EBIT) x (1 – Tax Rate)
+ Depreciation and Amortization
– Changes in Working Capital (Growth in Assets – Growth in Liabilities)
– Capital Expenditures (Property, Plant, and Equipment)

This free cash flow is what we care most about because it can be used to reward shareowners by either (1) paying down debt (which reduces the claim that debtholders have on the business and strengthens the company’s financial position), (2) paying a dividend, or (3) buying back stock at attractive prices. Then, any leftover free cash that isn’t used to pay down debt, pay a dividend, or repurchase stock can sit on the balance sheet and be used later (i.e., large cash and net cash positions create optionality value).

Free cash flow margin measures a business’s true economic profitability and cash-generating power. It is simply the number of pennies of FCF a company generates for every dollar of sales.

Free cash flow yield is the inverse of the enterprise value-to-FCF multiple. Thinking in terms of yield allows investors to compare a stock’s FCF yield to the risk-free rate (the yield on the 10-year U.S. Treasury bond), to the yields of other stocks and bonds, and to the yields from investing in real estate (a real estate’s cap rate is calculated as annual net cash flow divided by the purchase price of the property).

FCF yield is the amount of cash (as a percentage of the firm value) a sole owner could take out of the business every year to pay themselves. This is the excess, unencumbered free cash that is left over after investing to maintain and grow the business, and it is calculated as NOPAT less new invested capital, where invested capital is any form of investment including working capital, capital expenditures (property, plant and equipment), or acquisitions.

Return on Invested Capital is usually represented as a percentage or ratio and is calculated as follows:

Return on Invested Capital (ROIC) =

Earnings Before Interest & Taxes (EBIT) x (1 – Tax Rate)
÷ (Total Assets – Cash – Total Liabilities)

References:

1. https://www.stratechi.com/fcf-and-roic/
2. https://www.fool.com/investing/2022/06/29/companies-with-high-free-cash-flow-margins-and-hig/

Many investors steer away from small-cap stocks, wary of their reputation as riskier and more volatile than their larger-cap counterparts. While this can be the case, investors avoid this asset class are missing out. In our opinion, small-cap stocks offer fantastic opportunities for research-driven investors who are able to do the deep dive to find the hidden gems.

Small-cap stocks enjoy several advantages. With close to 3,000 listed U.S. stocks (excluding penny stocks), this category has plenty of companies to analyze. Small caps can offer greater and faster growth potential than their larger peers, as they are earlier in their growth trajectory and have captured just a small portion of their overall target market.

In addition, small caps tend to be underfollowed on Wall Street. On average, a large-cap company is followed by 27 analysts, compared with six for the average small cap. This sparser coverage in part is a reflection of SEC regulations that make it difficult for funds to own more than a certain percentage of a company. The result is that many large mutual funds forego small-cap companies because they cannot take a position big enough to have a material impact on their overall portfolio.

It takes extensive research to spot promising companies early on. Many small-cap stocks fly under the radar,. When compared to large caps, stock returns of smaller companies are more driven by company-specific events and less so by industry and market events.1 This means the skilled stock picker who is able to understand and evaluate a company’s idiosyncrasies has more opportunities in this asset class.

On the downside, small caps can be volatile. As long-term investors, you must be accustomed to riding out short-term volatility and must be willing to selectively take advantage of a downswing to initiate or build a position. As less well-established businesses, small caps can also carry more risk than their larger peers.

Thus, it’s essential as a long-term investor to take a multi-faceted approach to managing risk, which is critical to successful management of a small-cap portfolio.

Emphasizeing fast-growing areas of the economy such as:

• Cloud computing
• Cybersecurity
• Semiconductors
• Defense and aerospace
• Genetics
• Minimally invasive surgical procedures
• Biotechnology and pharmaceuticals
• The use of technology in health care products and services
• Unique retail concepts

Long-term perspective, allows you to do the due diligence needed to gain an in-depth understanding of these companies, including getting to know their management teams and visiting key sites they may hold. It also gives us the chance to research new investment prospects.

You should look for what you believe to be companies with strong management, durable competitive advantages, and open-ended growth opportunities, at an attractive valuation.

Smaller companies can enjoy phenomenal growth in a short period of time. However, as any small-cap portfolio manager can attest, you can have volatility on the downside as well. Although you are long-term investors, the volatility of this asset class demands that you incorporate risk management into every aspect of your investment process.

References:

1. https://www.baronfunds.com/sites/default/files/baron-investor-baron-discovery-fund-9.30.23.pdf