REWIRING YOUR SUCCESS

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BOOK TITLE : REWIRING YOUR SUCCESS:  |  AUTHOR : JOHN QURESHI
Success is not a matter of luck.
Successful people are not just lucky; they make their luck by taking action and persevering through setbacks.
Success is a journey, not a destination.
There is no one-size-fits-all formula for success. What works for one person may only work for one person. The important thing is to find your path to success and to be willing to make the necessary sacrifices along the way.
Success is not about money.
Money is important, but it is not the only measure of success. Successful people also find fulfillment in their work and make a positive impact on the world.
Success is a habit.
Successful people have developed habits that help them achieve their goals. These habits include setting goals, taking action, and never giving up.
Success is a choice.
You choose to be successful or not. It is not something that happens to you; it is something you create.
Success is a mindset.
Successful people have a positive mindset that allows them to see possibilities instead of obstacles.
Success is about personal growth.
Successful people are constantly learning and growing. They are unafraid to step outside their comfort zones and try new things.
Success is about giving back.
Successful people use their success to help others. They know they are not alone and feel responsible for giving back to the community.
Success is about leaving a legacy.
Successful people want to make a difference and be remembered for their positive contributions.
Success is possible for everyone.
You can achieve your dreams no matter where you come from or your circumstances. It takes hard work, dedication, and perseverance, but you can reach your full potential.

10 Lessons from The 80/20 Principle: The Secret to Success by Achieving More with Less
  1. Identify the critical 20% of activities or efforts that yield 80% of the desired outcomes and prioritize them over less important tasks.
  2. Work smarter, not harder. Focus on maximizing efficiency in the tasks that deliver the most significant results rather than trying to do everything.
  3. Streamline processes and eliminate unnecessary complexity to increase effectiveness and productivity.
  4. Develop a strategic mindset by focusing on high-leverage activities that align with long-term goals and objectives.
  5. Recognize that not all decisions are equally important. Focus your time and energy on decisions that have the most significant impact on your goals and outcomes.
  6. Identify and leverage resources, talents, and opportunities that contribute the most to your success.
  7. Embrace a continuous improvement mindset by regularly evaluating and refining your strategies and processes.
  8. Remain flexible and adaptable in the face of changing circumstances. Be willing to adjust your approach as needed to stay aligned with your objectives.
  9. Recognize and mitigate potential risks that could derail your progress toward your goals.
  10. Seek balance and harmony in your life by focusing on what truly matters and letting go of unnecessary distractions or obligations.

Warren Buffett’s Investment Strategy

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An initial investment of  $10,000 in Berkshire Hathaway when Warren Buffett took over in 1964 would now be worth more than $438 million!

Despite his reputation for picking winning stocks, Berkshire chairman and CEO Warren Buffett wrote to investors in his 2022 Berkshire Hathaway letter: “Charlie [Munger] and I are not stock-pickers; we are business-pickers.”

Over the decades, Buffett has refined a holistic approach to assessing a business—looking not just at earnings but also at its overall health, deficiencies, and strengths. He focuses more on a company’s characteristics and less on its stock price, waiting to buy only when the cost seems reasonable.

In short, Warren Buffett’s investing strategy is not complicated:

  • Buy businesses, not stocks. In other words, think like a business owner, not someone who owns a piece of paper (or, these days, a digital trade confirmation).
  • Look for companies with competitive advantages that can be maintained or economic moats. Firms fending off competitors have a better chance of increasing intrinsic value over time.
  • Focus on long-term intrinsic value, not short-term earnings. What matters is how much cash a company can generate for its owners in the future. Therefore, value companies use a discounted cash flow analysis.
  • Demand a margin of safety. Future cash flows are, by their nature, uncertain. Always buy companies for less than their intrinsic values to compensate for that uncertainty.
  • Be patient. Investing isn’t about instant gratification; it’s about long-term success.

Other investing virtues prized by Buffett include candid communication with shareholders, patience in letting an investment bear fruit and emphasizing practical vehicles over investing fads.

Patience Pays:  An initial Investment of  $10,000 in Berkshire Hathaway when Warren Buffett took over in 1964 would have purchased approximately 808 company shares at a stock price of just $12.37 per share.

As of the end of 2023, Berkshire Hathaway’s Class A shares (which have existed since 1964) traded for just over $542,625 per share. The stock has produced an overall gain of 4,386,621% from 1964 to 2023. Your initial $10,000 investment would now be worth more than $438 million!

While Berkshire Hathaway’s past 60 years have been an impressive growth story, Buffett cautions that the company’s size has become too large to sustain the same 20% growth rates over the long term. He believes future gains will not be as dramatic as those of the past 60 years.

Nevertheless, Buffett’s core investment strategy prioritizes thinking like a business owner and viewing investments as actual companies, not just as stocks.

He has long advocated for “boring” investing and the notion that real moneymaking happens when you sit back and trust in a long-term plan instead of strapping in for a wild ride seeking short-term profit. He continues to focus on lifelong learning, whether that means unpacking what a new product is all about or reading up on interdisciplinary subjects.

And he intends to give away 99% of his wealth to philanthropy.

Source: Susan Dziubinski, How to Invest Like Warren Buffett, Morningstar, March 13, 2024.

Reframing and Overcoming Rejection

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“Rejection is God’s protection.”  Jamie Kern Lima

Jamie Kern Lima explains that setbacks and rejections are not indications that your dreams will not happen; they’re just an inevitable part of a journey for anyone brave enough to pursue their dreams and goals.

Jamie Kern Lima is a New York Times best-selling author, host of The Jamie Kern Lima Show, and Founder of IT Cosmetics. She started the company in her living room and sold it to L’Oréal in a billion-dollar deal, becoming the first female CEO of a brand in its 100+ year history.

You were not rejected, God hid your value. This powerful statement reminds us that sometimes what appears to be rejection or disappointment is actually a redirection toward something greater.

In moments of adversity, it’s essential to recognize your inherent worth and value. Just like a precious gem hidden beneath layers of earth, your true essence remains intact, waiting to be discovered.

So, embrace your uniqueness, trust the journey, and remember that your value transcends any external circumstances. You are worthy, cherished, and destined for greatness!

“Hundreds and hundreds of setbacks and rejections are no indication your dreams will not happen. It means you’re one of the brave ones going for it.” ~ Jamie Kern Lima

In her book “Worthy: How to Believe You Are Enough and Transform Your Life”, Jamie Kern Lima shares a profound insight:

“In life, you don’t soar to the level of your hopes and dreams, you stay stuck at the level of your self-worth. When you build your self-worth, you change your entire life. You are worthy, and your value is immeasurable.”

“Self-confidence is the belief in your abilities as a person. Self-worth is the belief in your value as a person.” – Jamie Kern Lima. This quote reminds us that our worth extends beyond mere abilities—it encompasses our intrinsic value.

2024 Personal Consumption Expenditures for February

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The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred way to measure inflation, rose 0.3 percent in February, while the annual inflation rate rose to 2.4 percent in February, up 0.1 percentage points from January. The number excluding volatile food and energy prices rose 0.3% on a month-to-month basis, slightly faster than anticipated.

https://www.facebook.com/share/dPZDHUTEz93HSPdH/?mibextid=WC7FNe

Federal Reserve Chair Jerome Powell indicated the latest PCE report did not undermine the central bank’s baseline outlook, but said with the economy on a “strong” footing, “that means we don’t need to be in a hurry to cut.”

Some details of the PCE data for February, economists noted, showed improvement in aspects of inflation that the Fed considers important, even as the headline numbers have shown little progress in the first two months of the year.

The central bank last week held its benchmark overnight interest rate steady in the 5.25%-5.50% range and also reaffirmed – narrowly – a baseline projection that the rate will fall by three-quarters of a percentage point by the end of 2024.

Source: Howard Schneider and Ann Saphir, New US inflation data ‘along the lines’ of what Fed wants, Powell says, Reuters, March 29, 2024. https://stocks.apple.com/A8OnyemvKT4ue7DzP7DFCdg

Investing and Building Wealth

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“Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.” – Warren Buffett, 1992 Berkshire Hathaway Shareholder Letter.

Investing is putting money into different securities or investment vehicles, hoping these securities will increase in price and payout profits.

In particular, investing in the stock market involves buying shares of companies that then rise in price. Some companies also pay dividends on their shares at regular intervals.

The end goal of investing is to spread your wealth in different vehicles that grow your money over time.

“Don’t be afraid to overpay for a stock with a history of rewarding shareholders. Winning stocks tend to keep winning if you have a long-term outlook.”  Charlie Munger convinced Warren Buffett that sometimes it’s worth paying a premium for a great business.

A company’s intrinsic value is the present value of all of its future free cash flows (meaning from now until the end of time- all the free cash flows that it will ever generate).

Free cash flow (FCF) is the amount of cash the firm generates from its operations minus the amount of money it reinvested into its operations. Cash flows are “free” because they can be used to pay off debt, buy back shares, pay dividends, or leave in the firm’s bank account.

If you own a private company, this is what you would think of as “real earnings” that you can pay yourself with, given that you don’t have to reinvest those funds into the operation.

”Good things happen to cheap stocks of out-of-favor, industry-leading companies.” ~ Nancy Tengler

The most crucial quantitative evidence of an economic moat is a high return on invested capital (ROIC).

Return on invested capital, or ROIC, is a financial metric that helps understand how efficiently a company generates profits. The less capital it requires to produce earnings, the better.

For example, what does an ROIC of nearly 920% mean? It basically says that a company like Apple can generate massive profits with little investment.

The formula for ROIC is highlighted below. To reinforce, the larger the numerator (NOPAT is the after-tax operating profit) relative to the denominator (which can be defined as fixed assets plus net working capital), the more efficient the company is.

ROIC = NOPAT/Average Invested Capital

ROIC = NOPAT/Average Invested Capital

Investors— both shareholders and creditors— require a certain level of return in exchange for providing a company with the funds it needs to run its business. This is called the weighted average of capital (WACC). A company generates excess returns if its ROIC consistently exceeds its WACC.

For example, imagine little Joey wants to open a lemonade stand. He needs $100 upfront to buy a table, a pitcher, lemons, sugar, ice, and cups. This is invested capital. Joey borrows $50 from Mom and promises to pay her 5% interest ($2.50). Dad has a higher risk tolerance, so he buys $50 of common stock in Joey’s lemonade stand. Dad equity return (this is called the cost of equity).

Buffett created a concept called owner earnings. It is a measure of the firm’s potential free cash flows if it weren’t reinvesting them:

Owner Earnings = Earnings + Depreciation & Amortization + Other Non-Cash Charges – Maintenance Capital Expenditures

Attaining prosperity and financial freedom and building wealth through investing in the stock market for the long term is fundamental.

References:

  1. https://www.forbes.com/sites/qai/2022/01/19/financial-freedom-in-2022-investing-in-stock-market-ideas
  2. http://www.comusinvestment.com/blog/growth-returns-on-capital-and-business-valuation
  3. https://einvestingforbeginners.com/buffetts-return-on-invested-capital-formula-daah/

Spending More Than You Have Never Ends Well

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Spending more than you have never ends well.

Spending more than you have is indeed a precarious path. It’s like diving into a stormy sea without a life jacket, or standing on a brick wall while simultaneously removing one brick at a time. It can lead to financial stress, debt, and instability. Whether you’re young or mature, wise financial choices are essential.

Remember, financial stability and planning are like a well-anchored ship. They can provide you with financial peace of mind, lead you to financial independence, and help build wealth.

Keep in mind:  In the ocean of expenses, sail with care,

Overspending waves can lead to despair.

Budget your voyage, trim the excess sail,
And watch your financial ship weather the gale.

So, set sail wisely, and may your financial compass always point toward prosperity and abundance!

Here are some prudent tips to avoid falling into the overspending trap:

  1. Budgeting: Create a realistic budget that outlines your income, expenses, and savings goals. Please be sure to stick to it diligently.
  2. Emergency Fund: Build an emergency fund to cover unexpected expenses. Having a safety net helps prevent overspending during crises.
  3. Track Expenses: Keep a record of your spending. Use apps or spreadsheets to monitor where your money goes. Awareness is key.
  4. Prioritize Needs Over Wants: Distinguish between essential needs (like rent, groceries, and utilities) and discretionary wants (like dining out or shopping). Prioritize needs first.
  5. Avoid Impulse Purchases: Pause before making a purchase. Ask yourself if it’s necessary or if it’s an impulsive desire.
  6. Limit Credit Card Usage: Credit cards can encourage overspending. Use them wisely and pay off balances promptly.
  7. Set Financial Goals: Establish short-term and long-term financial goals. Having a purpose for your money helps curb unnecessary spending.

Remember, financial well-being is a journey. By practicing mindful spending and making informed choices, you can avoid the precarious path of overspending.

Superior Investors are Lonely

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“Large amounts of money [or wealth] aren’t made by buying what everybody likes. They’re made by buying what everybody underestimates.” ~ Investment Books

If everyone likes a stock or company, it’s likely the asset has been mined too thoroughly, and has seen too much capital from investors flow in.

“Large sums of money or wealth are not made by investing in what everybody likes. They are made by investing in what everybody underestimates. This implies that if everyone is investing in a stock or company, it has probably already been thoroughly researched and too much capital has already been invested in it, leaving little room for any bargains to exist.

Furthermore, if everyone likes a stock or company, it is highly probable that its price is overvalued and inflated, which means it is at risk of falling if the crowd changes its collective mind and decides to sell.

Successful investors, therefore, tend to identify and purchase assets when their price is lower than their intrinsic value or when they are mis-priced and undervalued by the crowd or market. This means that superior investors often spend a lot of time being lonely since they buy assets that others do not recognize or appreciate.

In essence, superior investing involves two primary elements: identifying a quality or economic moat in a company or stock that other investors do not recognize, and having it turn out to be true (and accepted by the crowd and market).

It is essential to note that macroeconomics may influence a stock price in the short term, while microeconomics dominate in the long term. Therefore, investors should look for situations where macroeconomic factors depress prices.

Ultimately, if a company delivers consistently quarter after quarter, year after year, the price will eventually follow.”

nto it for any bargains to still exist.

If everyone likes the stock or company, there exist significant risks that the stock’s price has become too inflated and overvalued, and will fall if the crowd changes it collective mind and moves to the exit.

Superior investors know—and buy assets—when the price of a company’s stock is below its intrinsic value or is lower than it should be. And the price of an investment can be lower than it should be when the crowd does not recognize its merit.

Large amounts of wealth are not made by buying what everybody likes or following the proverbial crowd. Wealth is made by buying what everybody or the crowd underestimates or mis-prices.

In short, there are two primary elements in superior investing:

  • Seeing some quality or economic moat in a company or stock that other investors don’t recognize or appreciate (and it’s not reflected in the stock’s price)
  • Having it turn out to be true (and accepted by the crowd and market)

That is why it is said that successful investors spend a lot of time being lonely.

Source:  https://x.com/investmentbook1/status/1759534213752102957

Macroeconomics determine a stock price in the short term. In the long term, microeconomics dominate.

If a company delivers quarter after quarter, year after year, eventually, the price will follow.

Look for situations where macro depresses prices.

Dividend Kings

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The highest yield is only part of it when finding the best dividend stocks. Income investors know there’s no substitute for regular dividend increases over the long haul.

Dividend Kings are a unique class of stock that offers investors a phenomenal track record of annual dividend increases.

These elite members of the Dividend Aristocrats, which are companies in the Standard & Poor’s 500-stock index that have raised payouts once a year for 25 years running, have far more extensive track records. Specifically, Dividend Kings must have at least 50 consecutive years of uninterrupted annual dividend hikes.

Dividend Kings’ appeal should be evident after 2020’s COVID-19 outbreak. Many dividend stocks cut or even suspended their payouts amid uncertainty and disruptions. Income investors who had hoped these companies were lower risk simply because they paid dividends received a rude awakening, as the payout cuts often came along with deep share price declines.

With half a century of increasing distributions, however, Dividend Kings have an excellent track record that adds a layer of stability in an otherwise uncertain market environment. Nothing is ever certain on Wall Street, but these are 15 of the best stocks for dividend growth. The names featured here are all longtime leaders who exhibit more than 55 years of increases – including one pick with a track record of 69 straight dividend hikes – making them a bit more trustworthy than your typical income investment.