Benchmarking your performance

Benchmarking your performance

Whether you are investing in oil, gold, stocks and shares or some other asset, you need to have a benchmark to compare and contrast your performance. Many people simply look at the actual figures and if they have made money they are happy but if they have lost money they are concerned. However, all of your performance benchmarking should be relative to give you the real picture.

Without a target, how can you achieve your goal?

The vast majority of investors today will have a goal in mind whether this is a $1 million pension fund, a 10% return on the year or some other target. Interestingly, there are still investors who enter the stock market for example without a goal. If you do not have a target for the short, medium and longer term, how will you rank your performance? How will you know when you have achieved success? Continue reading “Benchmarking your performance”

Following management with a good track record

US rental numbers highest since 1965

Finding a suitable long-term investment is not easy as there are so many different factors to take into consideration. The market, balance sheet, competition, the list goes on. So, are there any shortcuts to finding potentially lucrative investments for the future? Is there any way to piggyback professionals who have been there done it and are looking to do it all over again?

Follow successful management

How many times have you looked at stocks which have excellent management who have been there for many years and built the company up to be a giant? Any company, no matter how successful, will reach a point where larger expansion plans are required, more expensive takeovers and with these come more risk. As shareholders demand an ever greater return on their investment it can become difficult to maintain forward momentum. In these situations it is not uncommon for management to jump ship and start again at a smaller company or perhaps a shell operation. Continue reading “Following management with a good track record”

Why technology IPOs are better off loss-making

Snapchat, you live by the sword you die by the sword

Experts predict a flurry of IPOs over the next few months as the US market hits new highs. The latest to announce plans to list on the stock market is communications darling Snapchat which has a growing fan base and a rumoured $20 billion valuation. Like so many high-value/loss-making technology companies of years gone by it has polarised views. So, why are technology IPOs better off loss-making when they launch on the stock market?

Hope value springs eternal

If you think about it, if a company has a massive fan base, such as Snapchat, which has yet to be monetised what kind of value would you put on the company? Would you value it at $1 million, $10 million, $100 million or $20 billion? Continue reading “Why technology IPOs are better off loss-making”

Run your winners and cut your losers

The value of using shares to take over other companies

If somebody were to give you the advice “run your winners and cut your losers” you would likely laugh at them and suggest that you knew this already. The idea of cutting your winners and running your losers seems preposterous but how many of us are actually guilty of this in real life? Hand on heart, do you run all of your winners and cut all of your losers?

Rushing to take profits

First of all, whatever the situation, whatever the market and whatever the stock, there is nothing wrong whatsoever in banking profit. At the end of the day that is why we invest in markets, whether this is stock markets, property, etc, we are all in it for a profit. The problem is that at the first sign of profit it is easy to “lose your bottle” and sell up too quickly. Many of us end up kicking ourselves that we bailed out too soon which can sometimes cloud our judgement going forward. Continue reading “Run your winners and cut your losers”

Not all Dragons Den investments actually happen

Big, powerful and influential companies attract enemies

Whether you watch the Shark Tank, Dragons Den or the array of other extremely popular business investment programmes on the TV, very often it is not quite what it seems. Research in previous years has shown that a significant number of deals agreed on the TV are never followed through in practice. Dragons Den in the UK is rumoured to have a 50% success rate which means that only one in two of those agreed in front of the cameras actually happen. So, do these programs simply play up to the television cameras or are there valid reasons why investments might not occur?

Due diligence

The whole concept of Dragons Den is that business experts are presented with business ideas about which they have no background information. They are given limited time to ask questions about trading, operations, the future, etc and then offered the opportunity to negotiate a potential investment. You only need to look at the faces of some of the “contestants” who secure investment on the programme to see how important it can be to them.

Continue reading “Not all Dragons Den investments actually happen”

Are utility companies as safe as some would have you believe?

Are utility companies as safe as some would have you believe?

At the end of the day we all need gas, electric and water to survive in our daily lives as well as the business arena. Utility shares are very often seen as “safe havens” offering sometimes relatively low growth rates but relatively high dividend yields because of their cash flow. At the end of the day, in times of trouble these services will always be required while other luxuries may not. However, are utility companies as safe as some would have you believe?

Long-term steady growth

As we touched on above, the services offered by utility companies will always be in demand in the good times and the not so good times. A mixture of modest price increases and higher usage offer long-term steady growth potential which while not startling is pretty much guaranteed. Many of the smaller utility companies will have a more volatile existence while the large “dinosaurs” continue to plod along. So, on this basis it is not difficult to see why many investors see utility companies as safe havens for the future. Relatively steady cash flow in the form of dividends and even modest long-term growth are music to the ears of many investors. Continue reading “Are utility companies as safe as some would have you believe?”

Will US base rate ever return to normal levels?

US homeownership down to levels not seen since the 1960s

The US base rate currently stands at 0.75% which compares favourably to the UK base rate of 0.25% and the Canadian rate at 0.5%. Even though analysts believe that the US base rate will increase during 2017 when will they ever return to “normal levels”. When you bear in mind we are now approaching a decade since the US mortgage crisis led to the worldwide slump, have we now got too used to the low base rate environment?

Low finance costs

While commercial lending rates are nowhere near the US base rate they do still compare favourably to the historic norm. There is no doubt that this low interest rate environment has helped support investment markets such as real estate and the stock market to some extent. When you bear in mind the minimal return on savings accounts it is obvious that more and more people will look towards the investment markets. Continue reading “Will US base rate ever return to normal levels?”

Are tracker funds too powerful?

Stock markets

A recent report highlighted the significant increase in tracker fund investment which basically allows investors to place money in vehicles which track an array of different indexes. Whether this is the general DJIA, a technology-based index or even an international index, there is now the ability to introduce managed passive investment into your portfolio. However, there are some concerns that tracker funds are extremely powerful and very influential on the market.

How do tracker funds work?

The vast majority of tracker funds will use a mixture of stock and derivative instruments to mimic the make-up of a chosen index. In effect the value of the underlying fund will rise and fall in tandem with the chosen index (although there will be management charges to deduct) therefore offering a popular form of passive investing. If you believe a particular country or a particular index will do well in the short, medium and longer term, simply investing in the underlying index allows you to eliminate stock specific risk and base your investment on the overall index. Continue reading “Are tracker funds too powerful?”

Mark Zuckerberg answers questions on Facebook’s virtual reality investment

Are social media becoming too powerful?

While Mark Zuckerberg is a well-known multi billionaire his business career has not always been straightforward and smooth. The initial creation of Facebook was well covered in a recent movie, suggesting he learnt his aggressive business skills at an early age, and the flotation of the company was a PR disaster. However, as quickly as they try to knock the Facebook CEO down he bounces back with new ideas and new investments. So, what does Mark Zuckerberg think about Facebook’s investment in virtual reality?

Oculus and Facebook

When Facebook acquired virtual reality headset maker Oculus back in 2014 for $2 billion many saw this as an income stream which would come online in the short to medium term. After all, virtual reality was the way forward for technology-based companies and a $2 billion investment put down a significant market. However, only this week the company has lost a lawsuit claiming it used stolen computer code and parent company Facebook has been ordered to pay $500 million in damages. Zuckerberg will probably appeal the judgement but the announcement did slightly overshadow Wednesday’s figures from Facebook. Continue reading “Mark Zuckerberg answers questions on Facebook’s virtual reality investment”

Does the real estate sector offer easy pickings for government taxes?

Stock markets

When you take into account transaction costs and government taxes the UK real estate market is one of the most expensive in the world. Despite this the UK market has been seen as something of a safe haven for some time now and perhaps more so when the UK finally leaves the European Union. However, it does beg the question does the real estate sector offer easy pickings for government taxes?

Attacking the rich

In times of austerity and difficult economic conditions many governments around the world resort to type and play to the masses. Often this means “attacking the rich” with the real estate sector very often the first target on the list. The UK government, to take one example, has increased an array of property related taxes with minimal or no backlash from the general public. As we touched on above, “attacking the rich” seems to be a popular pastime even if those investors are playing a pivotal role in the development of the long-term private rental market. Continue reading “Does the real estate sector offer easy pickings for government taxes?”