“You may encounter many defeats, but you must not be defeated. In fact, it may be necessary to encounter the defeats, so you can know who you are, what you can rise from, how you can still come out of it.”
― Maya Angelou
“Winners are not those who never lose, they are the ones who never quit.”
Sometimes you may not win. But that is not your defeat. You are defeated only when you accept it. You must never accept your defeat at the first occurrence. In the game of baseball, if a batter swings and misses the first pitch, it doesn’t mean that he is out.
A focus on finding small cap companies with great fundamentals and big growth prospects.
A small-cap stock is a stock of a publicly-traded company whose market capitalization ranges from $300 million to approximately $2 billion, explains Corporate Finance Institute. The word “cap” in this term refers to a company’s market capitalization.
Savvy investors cannot afford to overlook small-cap growth companies. Although, there are several pros and cons of investing in small-cap stocks that must be considered.
Small-cap companies, in general, tend not to get the same kind of publicity as their large-cap siblings. They aren’t going to lead a segment on CNBC or the home page of the Wall Street Journal on a daily basis.
With smaller market capitalizations, small-cap companies tend to fly under the radar.
The Rise of Small-Cap Stocks
Reasons that people may invest in small-cap companies are capital appreciation — they think the stock price will go up and dividends — where the company pays you to hold it.
But some of these are solid companies and excellent small-cap stocks to buy.
Small-cap equities are more sensitive to the economy (inflation, rising interest rates and dollar strength), so a robust economic rebound would favor them.
Small-cap stocks are popular among investors because of their potential for providing better returns in the long term relative to their large-cap peers.
The advantages of investing in small-cap stocks are:
1. Growth potential – Relative to bigger companies, small-cap companies show significantly higher growth potential. For small-cap companies, it is easier to grow significantly their operational and financial base than is the case for most large-cap stocks.
Picking the right small-cap stock can turn into a profitable investment.
2. High probability of inefficiencies in the market – Information about the small-cap stocks is harder to find compared to large and mid-cap companies. Analysts typically give little attention to these companies; thus, there is a high probability of improper pricing of small-cap stocks. This situation creates vast opportunities for investors to leverage the inefficiencies in market pricing and earn a great return on their investments.
3. Financial institutions do not push prices up – Financial institutions, including mutual and hedge funds, should comply with certain regulations that do not allow them to invest heavily in small-cap stocks. For this reason, it is unlikely that the stock price will be artificially pushed up because of large investments from major financial institutions.
Nevertheless, there are some disadvantages of investing in small-cap stocks:
1. High risk – Investing in small-cap stocks involves higher risk. First, small-cap companies may have an unreliable and faulty business model which can result in company’s management not being able to adjust the business model, and can result in poor operational and financial results. And, small-cap companies usually have less access to new capital and new sources of financing. Due to this reason, it is more likely that the company will not be able to bridge gaps in its cash flows or expand the business because of the inability to undertake the necessary investments.
2. Low liquidity – Small-cap stocks are less liquid than their large counterparts. Low liquidity results in the potential unavailability of the stock at a good price to purchase or it may be difficult to sell the stocks at a favorable price. Low liquidity also adds to the overall risk of the stock.
3. Time-consuming – Investing in small-cap stocks can be a time-consuming activity. Due to the under-coverage of small-cap stocks by financial media, institutions and analysts, the amount of available research on small-cap companies is usually limited.
Moreover, small cap technology and all small cap stocks are discounted to a great degree by investors in a rising interest rate environment, purely due to the fact that they have the bulk of potential earnings and cash flow far out into the future. The higher long-term rates are, the less those future earnings and cash flow are worth. This goes for virtually all unprofitable growth tech stocks.
Essentially, small-cap stocks may provide investors with an opportunity to earn a substantial return on their investments. However, this type of investing should be approached with caution as small-cap stocks are often risky and volatile.
The tongue is like the rudder of a ship in that it steers a person’s life in the same way the rudder steers a ship. Even in the midst of fierce winds and strong currents, the rudder is powerful enough to steer the ship. In the same way, no matter the circumstances, the tongue is powerful enough to steer a person’s life.
In life, your tongue steers and determines your life. Words spoken by your tongue determine the direction and the destination of your life, just like the rudder of a ship determines the direction a ship will go.
Words may not cause you to arrive at the destination immediately, but they head you in that direction, and eventually, if you continue in that direction, you will arrive there.
Your words are very powerful. Even when it seems that circumstances are against you, your tongue holds more power than the circumstances.
If you want to change the circumstances and the direction your life is headed, then change the words you are speaking! Your words are very powerful.
But this principle can also work against you. If you are a person who says things like “I always get sick, nothing good ever happens to me, etc”, then you are likely seeing those things as reality in your life.
If you want to change your circumstances, change your thoughts and the words that are coming out of your mouth. If you want to see good days, learn to control the thoughts you are thinking and to choose carefully the words you are speaking.
People who don’t understand the power of words are constantly saying things that they don’t really mean, and they train their bodies not to believe or take their words seriously. Therefore, when it comes time to rebuke sickness or command healing, their bodies don’t respond the way they should.
Start controlling your tongue by speaking the word of positivity and victory out loud. This will train your thoughts and tongue to speak goodness and positivity, even in contrary circumstances. Start to think about the words you speak. Your life will get better and better and you will begin to see the good and positivity become a reality in your life!
Pay attention to your words and to your conversations with others understanding that what you are saying is actually directing and steering your life. The Bible says in James 3:4-5; “Look at the ships also: though they are so large and are driven by strong winds, they are guided by a very small rudder wherever the will of the pilot directs. So also the tongue is a small member, yet it boasts of great things.”
Whom you are is an expression of your inner dialogue. Your ‘inner dialogue’ is quite simply your thoughts. It is the little voice in your head that comments on your life, whether that is what is going on around you, or what you are thinking consciously or sub-consciously. All of us have an internal dialogue, and it runs all the time.
It’s essential that you observe the tone you use in your internal dialogue. Adopt the type of tone that a loved one would use if they were reassuring you. Or reflect on how you would speak to someone who was struggling with something. Work to speak calmly and compassionately to yourself, even when you hit a setback.
Speaking creates how you think, how you move, where you go. Talk to yourself or have dialogue with yourself in such a way that brings you into action, doing and being the things that you want.
The ultimate direction your life takes will be determined by how well you control your tongue. Perfectly controlling your speech is tough work, but the payoff will be immense. A warm tone helps you accept yourself just as you are. Everyone has limitations, and accepting yourself and controlling your tongue, limitations and all, leads to setting the correct course and heading in the right direction.
EBITDA, (or Earnings Before Interest, Taxes, Depreciation and Amortization), is an accounting term that is an alternative way to measure a company’s profitability.
EBITDA is simply an acronym:
To calculate EBITDA, you start with Net Income (also known as Earnings). Then you add back Interest, Taxes, Depreciation, and Amortization
EBITDA is a Non-GAAP number, meaning it doesn’t comply with “Generally Accepted Accounting Principles” For that reason, you won’t see it on many companies’ financial statements. However, some management teams do provide it and focus on it heavily.
Amortization & Depreciation are the accounting process of writing down the value of an asset over time:
Depreciation is the accounting method used to allocate the cost of a TANGIBLE asset over its useful life. A TANGIBLE asset is something you can physically touch (house, car, factory). Depreciation represents how much of a tangible asset’s value has been “used up”.
Amortization is the accounting process of writing down the value of a loan or an INTANGIBLE asset. It’s VERY similar to depreciation, but amortization happens to “Intangible” assets, which are assets that you can’t physically touch (patents, trademarks, goodwill).
Although Wall Street might love EBITDA, many investors do not. Why? EBITDA can be very misleading. Ignoring “depreciation” as an expense is a big reason why, as Buffett explained in 2017.
“A mindset that can be paranoid and optimistic at the same time is hard to maintain, because seeing things as black or white takes less effort than accepting nuance. But you need short-term paranoia to keep you alive long enough to exploit long-term optimism. Jesse Livermore figured this out the hard way.” ― Morgan Housel, The Psychology of Money
There are several mental and emotional traits that are important for being a successful long-term investor, according to the Ethical Entrepreneur. The factors are:
Being calm and unemotional. Keep away from and ignore the over-hyped financial and headline news when it comes to investing. Avoid excitement and speculation – if your personality craves these then you may not be well suited to investing. One way to combat the adrenaline cravings is to invest using a process – develop some rules and stick to them.
Not being greedy. You will never, ever sell at the top and buy at the bottom with every investment you make. It’s impossible. The sooner you accept this and move on with developing your strategy, the better off you will be. If you feel yourself starting to get greedy “just another 10%”, sell and move on.
Not being overly fearful. Listening to daily (or hourly basis) financial and headline news is only guaranteed to stoke needless anxieties and panic, neither of which are conducive towards building wealth and investing.
Being focused, patient and discipline. Have a plan and strategy. Avoid making quick and rash decisions. Have the facts to make an informed decision. If you need to rush to make an investment then you’re probably sticking your leg straight into a bear trap. Stop, calm down and think about it. If it’s really a great opportunity then it will still be here tomorrow.
Understanding your strengths and limitations. There’s a tendency today for people to act like a guru and ‘fake it until they make it’. In some ways, a bit of confidence is a good thing, but don’t fall for your own hype. What makes you so different from the thousands of other investors in the market? What are your weak spots and what have you done to guard against them? Are you playing to your advantages and how do you know they’re better than the competition? Are you in possession of all the relevant and accurate facts and if so, can you make sense of them?
Being realistic. You might read about Warren Buffet and think “I could do that” but the truth is that Warren is the outlier, not the rule. You’re not going to double your money every year and you’re not going to pick winners every week. Accept it and move on. Aim for an annual compounding rate of 10-15% and consider that an almighty challenge at the best of times. If you can compound your money at 10% a year for 20 years, that will build wealth.
Control what you can and don’t worry about the rest. You can’t do anything about what the market thinks or feels about a position hour to hour or day to day. It might feel frustrating to watch your stock sliding backward but if you’ve done your due diligence then have faith that it will be rewarded in time. Focus on your buy price, your position size, portfolio construction and how to bank profits – clear your mind of the noise.
Always seek new knowledge and how to apply them. Never stop learning! There is more knowledge and understanding about the world than anyone before us; make use of it!
Writing about and discussing the psychology of investing are much easier than actually living and following them. Enjoy your life as much as you can – you only have one! If you’re not happy with something in your life, then decide what you truly want, make a plan to achieve it and set a deadline – then make it happen. Life is far, far too short for missing daily joy, peace and abundance!
You must spend some time each day considering investing rules and tactics. Consider how you will overcome the investing challenges and focus on implementing your plan. You will inevitably slip backwards at times, but discipline, patience, persistence and perseverance will help to embed them in your behavior.
“Money’s greatest intrinsic value—and this can’t be overstated—is its ability to give you control over your time.” ~ Morgan Housel, The Psychology of Money
“Spending money to show people how much money you have is the fastest way to have less money.” ~ Morgan Housel, The Psychology of Money
Don’t sell too early. Let your winner run and experience the magic compound growth over the long term.
Capital is precious and limited, buy high-quality, avoid garbage. Doing nothing is almost always the best investing strategy and tactic. Valuing and researching great companies is also extremely important.
Sometimes, the best stock you can buy is the one you already own. Add to your winners and not your losers. Winners tend to keep on winning.
Your biggest edges as a retail investor are focus, discipline and patience, don’t waste it.
Get comfortable doing nothing. Doing nothing is almost always the best investing strategy and tactic. It’s really hard to get comfortable doing nothing, but you have to get comfortable doing nothing. Valuing and researching great companies is also extremely important.
Know what metrics to look at, and when to look at them, and when to ignore them. Study the business cycle. Know what valuation metrics matter, when they matter and when they don’t.
Personal finances come first. Make sure you have an emergency fund, because life happens.
You’re going to be wrong a lot. Get comfortable with that. If you buy ten stocks, six will be losers, three will be market beaters and one will perform extraordinarily.
Find an investing buddy, or rather don’t invest alone. Get involved in a good community of investors. Find like-minded people. The Internet makes that so much easier.
Watch the business and not the market price of the stock. What really matter in the long-term is the company’s fundamentals.
“Attention to risk must be a 24/7/365 obsession, with people – not computers – assessing and reassessing the risk environment in real time.” ~ Seth Klarman
At an early age, Billionaire and Baupost Capital CEO Seth Klarman was fascinated with business and making money. By the age of ten he was investing in the stock market.
During Klarman’s time in the investing world, he’s been able to compound capital at a 20% annual return.
In 1991 Klarman wrote his book, Margin of Safety, and there have only been 5,000 copies printed. As a result of such a small supply and enormous demand, Klarman’s book is very expensive reselling for $1,500 to $2,500.
James Clear — who writes about habits, decision making, and is the author of the #1 New York Times bestseller, Atomic Habits — summarizes the book, Margin of Safety, as follows:
“Avoiding loss should be the primary goal of every investor. The way to avoid loss is by investing with a significant margin of safety. A margin of safety is necessary because valuation is an imprecise art, the future is unpredictable, and investors are human and make mistakes.”
2010 Baupost Capital’s annual letter
Here is an excerpt from the 2010 annual letter of Baupost Capital written by Seth Klarman. He was shocked at how quickly investors have returned to the risky investing and financial behaviors that got them in trouble during the 2008 Financial Crisis;
1. Things that have never happened before are bound to occur with some regularity. You must always be prepared for the unexpected (the Black Swan) event, including sudden, sharp downward swings in markets and the economy. Whatever adverse scenario you can contemplate, reality can and will be far worse.
2. When excesses such as lax lending standards become widespread and persist for some time (e.g., ninja (no income, no job and no assets) loans), people are lulled into a false sense of security, creating an even more dangerous situation. In some cases, excesses migrate beyond regional or national borders, raising the ante for investors and governments. These excesses will eventually end, triggering a crisis at least in proportion to the degree of the excesses. Correlations between asset classes may be surprisingly high when leverage rapidly unwinds.
3. Nowhere does it say that investors should strive to make every last dollar of potential profit; consideration of risk must never take a backseat to return. Conservative positioning entering a crisis is crucial: it enables one to maintain long-term oriented, clear thinking, and to focus on new opportunities while others are distracted or even forced to sell. Portfolio hedges must be in place before a crisis hits. One cannot reliably or affordably increase or replace hedges that are rolling off during a financial crisis.
4. Risk is not inherent in an investment; it is always relative to the price paid. Uncertainty is not the same as risk. Indeed, when great uncertainty – such as in the fall of 2008 – drives securities prices to especially low levels, they often become less risky investments.
5. Do not trust financial market risk models. Reality is always too complex to be accurately modeled. Attention to risk must be a 24/7/365 obsession, with people – not computers – assessing and reassessing the risk environment in real time. Despite the predilection of some analysts to model the financial markets using sophisticated mathematics, the markets are governed by behavioral science, not physical science.
6. Do not accept principal risk while investing short-term cash: the greedy effort to earn a few extra basis points of yield inevitably leads to the incurrence of greater risk, which increases the likelihood of losses and severe illiquidity at precisely the moment when cash is needed to cover expenses, to meet commitments, or to make compelling long-term investments.
7. The latest trade of a security creates a dangerous illusion that its market price approximates its true value. This mirage is especially dangerous during periods of market exuberance. The concept of “private market value” as an anchor to the proper valuation of a business can also be greatly skewed during ebullient times and should always be considered with a healthy degree of skepticism.
8. A broad and flexible investment approach is essential during a crisis. Opportunities can be vast, ephemeral, and dispersed through various sectors and markets. Rigid silos can be an enormous disadvantage at such times.
9. You must buy on the way down. There is far more volume on the way down than on the way back up, and far less competition among buyers. It is almost always better to be too early than too late, but you must be prepared for price markdowns on what you buy.
10. Financial innovation can be highly dangerous, (think cryptocurrency) though almost no one will tell you this. New financial products are typically created for sunny days and are almost never stress-tested for stormy weather. Securitization is an area that almost perfectly fits this description; markets for securitized assets such as subprime mortgages completely collapsed in 2008 and have not fully recovered. Ironically, the government is eager to restore the securitization markets back to their pre-collapse stature.
11. Ratings agencies are highly conflicted, unimaginative dupes. They are blissfully unaware of adverse selection and moral hazard. Investors should never trust them.
12. Be sure that you are well compensated for illiquidity – especially illiquidity without control – because it can create particularly high opportunity costs.
13. At equal returns, public investments are generally superior to private investments not only because they are more liquid but also because amidst distress, public markets are more likely than private ones to offer attractive opportunities to average down.
14. Beware leverage in all its forms. Borrowers – individual, corporate, or government – should always match fund their liabilities against the duration of their assets. Borrowers must always remember that capital markets can be extremely fickle, and that it is never safe to assume a maturing loan can be rolled over. Even if you are unleveraged, the leverage employed by others can drive dramatic price and valuation swings; sudden unavailability of leverage in the economy may trigger an economic downturn.
15. Many leveraged buyouts (LBOs) are man-made disasters. When the price paid is excessive, the equity portion of an LBO is really an out-of-the-money call option. Many fiduciaries placed large amounts of the capital under their stewardship into such options in 2006 and 2007.
16. Financial stocks are particularly risky. Banking, in particular, is a highly leveraged, extremely competitive, and challenging business. A major European bank recently announced the goal of achieving a 20% return on equity (ROE) within several years. Unfortunately, ROE is highly dependent on absolute yields, yield spreads, maintaining adequate loan loss reserves, and the amount of leverage used. What is the bank’s management to do if it cannot readily get to 20%? Leverage up? Hold riskier assets? Ignore the risk of loss? In some ways, for a major financial institution even to have a ROE goal is to court disaster.
17. Having clients with a long-term orientation is crucial. Nothing else is as important to the success of an investment firm.
18. When a government official says a problem has been “contained,” pay no attention.
19. The government – the ultimate short-term-oriented player – cannot withstand much pain in the economy or the financial markets. Bailouts and rescues are likely to occur, though not with sufficient predictability for investors to comfortably take advantage. The government will take enormous risks in such interventions, especially if the expenses can be conveniently deferred to the future. Some of the price-tag is in the form of back- stops and guarantees, whose cost is almost impossible to determine.
20. Almost no one will accept responsibility for his or her role in precipitating a crisis: not leveraged speculators, not willfully blind leaders of financial institutions, and certainly not regulators, government officials, ratings agencies or politicians.
The lessons investors can learn from the FTX debacle are not all that new or even groundbreaking. But, the lessons are important ones for investors to learn who desire to build long-term wealth and achieve financial freedom.
The significant lessons are the importance of investors understanding an asset and doing thorough research on companies in which they intend to invest.
In FTX’s case, here is a company, led by it’s under thirty CEO Sam Bankman-Fried (SBF), that in three years grew from relative nothing to $32B literally overnight. It’s meteoric rise attracted thousands of investors who were more than happy to invest their capital in a young company and its brash CEO.
Yet, by performing just basic research on how the company made its money, on the experience and acumen of the CEO, and on the executive management team, and on the company’s financial profitability would have raised red flag to cause serious investor to pause before investing their capital in the company.
Additionally, SBF, FTX’s thirty-something CEO was consider a “wunder-kid” of sorts and featured by Forbes as its #2 “The Forbes 400” in 2022.
In a relatively short time, SBF took FTX from near zero is capitalization to $32B. His feats caused both seasoned and retail investors to flock to FTX.
Now, at the beginning of the week, FTX possessed a capitalization of $32. By Friday, FTX was at near zero capitalization, SBF had resigned, and the luster and shine of the once high flying company had been completely tarnished.
Thus, this is a classic and stark example why investors must understand and do thorough research, and remain disciplined before investing their capital.
Walt Disney World is raising the range of prices for some of its single-day, single-park tickets at Magic Kingdom, Epcot, and Hollywood Studios in Orlando, FL ~ Janet H. Cho
Families will have to splurge more for their Walt Disney World vacations starting December 8, 2022, because some single-day, single-park ticket prices at Disney’s Magic Kingdom, Epcot, and Hollywood Studios in Orlando could cost as much as $189 a person during the nine-day peak period around Christmas and New Year’s Day.
Single-day ticket prices to Disney’s Magic Kingdom Park are increasing to between $124 and $189 a person. The $189 ticket price is specifically for that peak holiday season around Christmas and the new year, and not all year, the Disney spokesperson told Barron’s.
Single-day tickets to Disney’s Animal Kingdom are staying at the current $109 to $159 range for visitors ages 10 and up.
Single-day tickets to Epcot are increasing to a range of $114 to $179; and
Single-day tickets to Hollywood Studios are increasing to $124 to $179.
Instead of the current system, which lets visitors make their theme park reservations only after buying their tickets, the new single-day tickets automatically include theme park reservations. The price of the Park Hopper option that lets people visit a second park the same day for $65 more is also changing.
What’s Next: Except for renewals by current annual pass holders, Disney has paused new sales of all but its Pixie Dust annual passes, available to FL residents only, which are staying at $399 a person. It is raising the price of its other annual passes, including the Incredi-Pass, which is going up to $1,399.
Under a separate program, discounted multiday tickets for active or retired members of the U.S. military, their families and friends, are increasing by $20 to $369 plus tax a person for the five-day ticket package plus Park Hopper, or $349 plus tax a person for the four-day package.
Disney also added more blackout dates when military tickets aren’t eligible, including around Christmas and New Year’s this year, and around spring break and Thanksgiving next year.
#NBA and #collegebasketball should implement a triple bonus policy of 15+ team fouls.
Basketball games are difficult to watch and appreciate from a fan’s perspective when one team is constantly committing personal fouls in the final minutes of the game in a desperate attempt to erase a deficit and achieve a comeback.
Currently, losing teams are free to commit an unlimited number of personal fouls to put the opposing team on the foul line in attempts to slow the game and to try to stage a come back. During these periods of relentless fouls and slowing the pace of the game, the game becomes difficult and painful to watch from the fans perspective.
To disincentivize this practice of relentless fouling in the final minutes of a basketball game, professional and college basketball should implement a triple bonus team foul policy of two free throw attempts and the ball out for the foul shooting or victimized team. This would speed up the final minutes of the game and would increase the enjoyment of viewing the game for fans. Television networks broadcasting or streaming the game would offer audiences a much better product, especially in the final minutes.
This triple bonus team foul policy would also force basketball teams and their players to become more discipline in the manner they play the game.
Fifteen total personal fouls are more than an adequate number of fouls to permit in a game. Effectively, every foul above fifteen would be treated like a technical foul, two free throw shots and retain possession of the ball.
It’s well past time to fix this part of the game that is painful to watch for fans.
