Your Home Value

your-home

The World Economic Forum

It’s this time of the year again.

world-economic-forum

The Forgotten Highlander

the-forgotten-highlander

I just read the The Forgotten Higlander: An Incredible WWII Story of Survival in the Pacific by Alistair Urquhart. Alistair who has died aged 97, was a prisoner of the Japanese from 1942 to 1945, surviving both the infamous ‘Death Railway‘ and the atom bomb dropped on Nagasaki. The fact that he lived until he was 97 is a miracle. Alistair, as a POW, was constantly beaten, tortured, starved, malnourished, dehydrated, forced labor, and was hit with every tropical diseases you can think of (Malaria, cholera etc…). You can say that Mr. Urquhart hit hell’s equivalent of winning the Powerball jackpot. When you though that life couldn’t get worse, hell decided to step it up a couple notch. But Alistair was “lucky”. He survived (or maybe the ones that died were the lucky ones). But Alistair refused to die. He worked on the infamous ‘Death Railway‘, where thousands of British, Australian, Dutch, American and Canadian prisoners would perish in the task. He was put on a Japanese ‘hellship’ that was torpedoed. His book, The Forgotten Highlander, is his memoir. There’s a documentary on Youtube: The luckiest man in World War ll

The sad thing is that the POWs that returned were treated like absolute shit. The British government had insisted all POWs take a vow of silence, but like most veterans of the WWII he initially did not wish to speak about what he had witnessed. Britain said that they needed Japan has an allied against Russia, so they didn’t want to “offend” Japan.

Recently Japan marked the 70th anniversary of the end of World War II. Prime Minister Shinzo Abe reiterated his country’s “profound grief” for the millions killed – but stopped short of offering any new apologies. He was remorseful for his country’s actions in the war, future Japanese generations should not have to keep apologizing.

PM Shinzo Abe said Japan “did inflict immeasurable damage and suffering” on “innocent people.” But he added, “We must not let our children, grandchildren, and even further generations to come, who have nothing to do with that war, be predestined to apologize.” Full transcript.

Almost every Japanese prime minister since 1945 has apologized in some fashion or another. But these apologies seem to have never been deemed sufficient. Why? To be fair, the Japanese people also suffered greatly during WWII. It’s the only nation that took the full massive devastation of atomic bombs — not one, but two. Unfortunately almost all of those who perished in Hiroshima and Nagasaki were civilians.

Japan has committed some of the most horrendous war crimes. It’s not widely discussed and it’s downplayed. In school you are taught that the Japanese bombed Pearl Harbor and the U.S. dropped the bomb. That’s it. The issue is politically sensitive. I mentioned that the allied needed Japan as an ally after the war. That’s part of it. We are constantly reminded of the atrocities Nazi Germany committed. We can’t forget the horror of the Holocaust. We know about concentration camps, we know about Schindler’s List and Anne Frank. But we never talked about the crimes committed by the Empire of Japan. Japan did attacked the U.S., not Germany. What the Japanese did to the Chinese is on par or worse than that the Nazi did, think Nanjing Massacre. (It’s not just Japan, we don’t talk about Stalin’s brutality the same way we talked about Hitler’s.) Maybe it’s a cultural thing. Much of Nazi victims are Europeans with western culture (including European Jews), and Americans identify better with them compared to Chinese and South-East Asians who became the victims of the Japanese. The Japanese war crimes just wasn’t a Western problem, it was far from our eyes. We see the same attitude today towards massacre in Africa. We treat it as  “just another African problem”.

Japan has turned it around since the end of the war. Today Japan is a pacifist country. It’s sophisticated, developed and rich. Their army only participates in humanitarian missions. I’ve been to Japan. It’s a great country with amazing people that has accomplished so much after WWII.

Edge of Eternity

ken-follett-edge-of-eternityI finally got around writing the review for the last book of this trilogy which I finished last month. Edge of Eternity by Ken Follett is the conclusion to a trilogy that covers the 20th century.  This 1,000 page brick covers the event that followed WWII. So it touches the Cold War, JFK, the Berlin Wall, the Vietnam War, the Civil Right movement, up to the fall of the Berlin Wall.

I’m not sure what there’s to say that hasn’t been covered in the first two posts about book #1: Fall of Giants, here, and Winter of the World, here. If you like history but having a hard time reading the stuff out there, these book provides entertainment and knowledge. You follow a bunch of characters/families throughout the major events that happened last century. The 20th century really shaped the way we live our life today, including two World Wars and a technology revolution (communications, TVs, media, airplanes, transportation/cars, Internet etc…)

My favorite was book #1, the one about WWI and the surrounding events. There was a lot I didn’t know about the first World War. The book did an excellent job explaining the complexity of the events leading up to the war. The second book covers WWII and the surround events. This last book covers a lot, from the 1960s to the fall of the Berlin Wall. That’s a lot of stuff and it doesn’t feel like you are reading a 1,000 page book. These books are excellent and might get even better over the years as the 20th century becomes a distant memory.

Mike Tyson the Investor

mike-tyson-trading

I love Mike Tyson.  He was the absolute dominator in his prime. There hasn’t been a fighter like him since. But it’s really hard to fall for this ad. Associating Mike Tyson to online trading…I’m not sure that’s a smart move. Mike Tyson can punch really hard. That’s his thing. I don’t know if you have heard him speak, but it doesn’t rhyme with forex or futures’ trading. What’s even more ridiculous is the note in the bottom left corner stating that U.S. citizens cannot trade on Trade12. I’m pretty sure Mike is a U.S. citizen and if he’s trading on Trade12 that would make what he’s doing illegal. I don’t think Mike is trading. He just sold his image because he’s broke (again why would that be a good person to promote making money?) But I would love to have Mike as a counter-party (in trading, not in the ring).

I don’t think the ads got much traction. There’s two videos on Youtube has about 300 views combined since July.

Rationing Table at the Cuban Store

Below are pictures of what happened when you don’t focus on freedom, innovation, the search for wealth and prosperity. Socialism has never worked. The USSR, Cuba, China, and now Venezuela (among others) were failed states. Venezuela is in a full economic crisis. A country rich in natural resources is now a disaster. Good luck finding toilet paper.

rationing-form
Rationing table at a Cuban store. Source: mises.org
Source: mises.org
Not much to buy. Source: mises.org

Just like everyone in markets…

just-like-everyone-in-markets

My Blackberry Is Not Working!

Video from 2010, still very funny. Includes Apple and Xbox jokes.

Altria Group Inc. – One Of The Best-Performing Stocks Ever

This is my latest piece on multi-baggers. Altria Group, also referred to as Philip Morris, has been one of best performing stock ever in the last 100 years. Tobacco itself was the best performing industry from 1900 to 2000. It wasn’t oil, technology, or IT. No it was tobacco. Here’s an industry that didn’t require any innovation or massive technology breakthrough. It’s just tobacco and it has crushed any other industry. Thanks in part to its addictive nature.

Shares of Philip Morris were publicly available from 1919 but data is hard to come by. Most public website, such as Yahoo! Finance, has data going back to the 1970s. I spoke with investor relations but they couldn’t help either. So I had to calculate my performance from 1970. That’s reasonable holding period. It also represent a working lifetime.

The cost of one share on November 23, 1970 would have been $46.12. Since then there have been many splits. My one share would have turned into 96 shares. There was a 2 for 1 split in 1974, 1979, and 1986, a 4 for 1 split in 1989, a 3 for 1 split in 1997.

It’s possible there were splits before the 1970s but the data are extremely difficult to come by. My single $46.12 share would have turned into 96 shares worth $6,145.92. This represents a 57466% change, or a 574.6-bagger in Peter Lynch’s parlance. A $1,000 investment (2081.30 shares split adjusted) would have been worth $575,666.84. The yearly dividend payment would have been 5,077$, five time my original investment. Investing in Atria may not have been the most ethical choice but it would have been a financially sound decision, and more.

The full article is on Seeking Alpha and is free to read. They have the rights to it so I can’t post the full piece. One of the best part are the comments. I love reading stories on how certain people have been holding to certain shares for more than 30 years and saw their investment compounded many fold. One commentator said that his shares of Altria has been in the family for almost 100 years!


Altria Group Inc. – One Of The Best-Performing Stocks Ever

By Brian Langis

Summary

  • The full corporate story of Philip Morris is complex but the outstanding performance of its stock makes it worth looking into.
  • Investing in Atria may not have been the most ethical choice but it would have been a financially sound decision.
  • How much your investment in Philip Morris Companies would be worth today is very complicated due to the number of spinoffs, mergers, splits, and IPOs.
  • One share of Philip Morris in 1970 is equal to 96 shares today!
  • $1,000 invested in 1970 would give you $5,077 in dividend payment today!

Marlboro Man, Hollywood California. Source: Arthur Grace, photographer.

I’m a big fan of history and business. I’ve been researching multibaggers and along the way, I’ve decided to write some articles. So far, the feedback has been amazing. Here are my first two articles in the multibagger series.

The best part about writing these articles are the comments. I love reading people’s stories. In my previous article, one commentator suggested I write an article on Philip Morris Companies Inc., better known as Altria Group Inc. (NYSE:MO) since 2003. At first, even though I knew the tobacco industry was a money-printing machine, we don’t talk about Philip Morris in the same conversation as the Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX) of this world. That is, companies that made people very rich.

My first two articles were about two high-tech stocks that changed people’s lives for the better – Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). Philip Morris’ products are not known to make life better. I see a couple of reasons why the Altria Group is not lumped with the “cool” high return companies. The first reason is that the tobacco industry is boring. Second, when you think of Philip Morris, you think of big fat reliable slowly growing dividends, not an innovative company with amazing growth prospect. The suggestion to write about Philip Morris led me to research it and I liked what I saw.

Today Altria Group is a $122b market cap company with approximately $19b in revenues. The cigarette manufacturer distributes annualized dividend of $2.44 per share that provides a yield of 3.9%. The Altria Group owns 100% of Philip Morris USA, John Middleton (machine-made cigars), Philip Morris Capital Corporation (leveraged leases), U.S. Smokeless Tobacco Company, and the Ste. Michelle Wine Estates. Altria also owns 9.6% of Anheuser-Busch InBev. It’s a pretty diversified group but it’s mostly known for its cigarettes and its Marlboro brand.

Source: Altria Group

I bring up the dividends early on because it has been such an important contributor to its performance. Altria has increased its dividend 51 times in 48 years. Altria targets a dividend payout ratio of approximately 80% of adjusted earnings per share. The dividends have turned Altria into a dominant investment. It has been a favorite of dividend investors for a long time, as the company has consistently made healthy payouts to its shareholders. The company has provided the killer combo: the income they need and the capital appreciation they want.

Altria recently revised its guidance for 2016 full-year adjusted EPS from a range of $3.01 to $3.07 to a range of $2.98 to $3.04, representing a growth rate of 6.5% to 8.5% from a 2015 adjusted EPS base of $2.80. Altria aims to maintain its long-term financial goals of growing adjusted diluted EPS at an average annual rate of 7% to 9% and a target dividend payout ratio of approximately 80% of adjusted EPS.

Source: New-York Times, May 23, 1919

Performance

The full corporate story of Philip Morris is complex but the outstanding performance of its stock makes it worth looking into. Determining what your initial investment in the original companies that formed the Altria Group/Philip Morris Companies would be worth today is very complicated due to the number of spinoffs, mergers, splits, and IPOs. There’s a reason why it was called Philip Morris Companies Inc. In addition to the U.S. and international tobacco business, Philip Morris owned Kraft Foods and still owns its original stake in the Miller Brewing company that became SABMiller, and now Anheuser Bush Inbev SA (NYSE:BUD).

There are many layers to this. For an idea of the complexity, just take Kraft for an example. After Philip Morris bought Nabisco Holdings, it combined General Foods, Kraft, and Nabisco Holdings into one company called Kraft Food. Then there was the IPO of Kraft in 2001, its spin-off in 2007 and a split in two companies in 2012 with the other half becoming Mondelez International. At the time, the value of the spun-off Kraft shares was almost 24% of Altria’s total value prior to the spinoff, leaving Altria subsequently about three-quarters as large as it had been.

Then in 2015 Kraft was acquired by Heinz. Then I have to calculate the appropriate cash dividend from all the subsidiaries because Philip Morris International was spun off too and in this case Altria was the much smaller company. This can be a messy exercise. What’s clear is that long-term shareholders of the Altria Group have been very well rewarded. Even though that over time, Kraft and Philip Morris have rewarded their shareholders in their own unique ways, for simplicity’s sake, I focused solely on the Altria Group even though the “full complete” investment performance would be much higher.

Today you can follow many of Philip Morris’ companies:

  • Altria Group Inc. is the original company and subject of this article. It’s the U.S. tobacco business and many other companies mentioned at the beginning of the article.
  • In 2008, Altria Group spun off its non-US tobacco business, Philip Morris International (NYSE:PM) to its shareholders. Altria investors received Philip Morris shares on a 1-for-1 basis. Philip Morris was actually the much larger offshoot, with Altria representing barely 30% of the value of the two companies. The reason for the split was to set free the faster-growing overseas operations while the U.S. business was entangled in smoker lawsuits. It markets and sells its products in approximately 180 countries.
  • Kraft Food is now The Kraft Heinz Company (NASDAQ:KHC). Mondelez International (MDLZ) is still a standalone company. The IPO was in 2001 and was the spin-off in 2007.
  • The Miller Brewing Company became SABMiller and is now Anheuser-Busch InBev SA/NV (NYSE:BUD). Altria owns almost 10% of the newly merged company.

Unfortunately, when it came to calculating its performance, I couldn’t go back all the way to 1919 when it was first publicly available to the public and was majority owned by the Tobacco Products Corporation. I spoke with investor relations and they didn’t know what their investment return was since 1919. However, they did refer me to a paid service that might find out for me but I refused to pay $25. So I had to use the data available to me.

The earliest I could go back is November 23, 1970. That’s as far as Altria would go. However, historical closing prices and dividend payments for Altria dating back to the early 1970s are available on Yahoo Finance. That’s fine since we can reasonably assume that a long-term shareholder wouldn’t have acquired his shares in 1919. That’s also essentially a working lifetime. However, it’s reasonable to assume that one could have held shares for twenty or thirty years.

Source: Buy Out British Interests; Tobacco Products Get Control of Philip Morris & Co. of New York. New York Times, February 14, 1919

You can read the full article here on Seeking Alpha.

Continue reading “Altria Group Inc. – One Of The Best-Performing Stocks Ever”

What Ever Happened After This Round of Golf?

presidents

Here’s an interesting picture taken in 2008. In hindsight, there’s a lot going on here.

Rudy Giuliani, the former mayor of NY, is smiling and doesn’t look crazy. What happened to him? He tried to become President in 2008. Donald Trump was a democrat, pro-war, pro-choice and a Clinton supporter. Now he’s President-elect as a republican. Michael Bloomberg was the mayor of NY and hanging out with Donald Trump. He was considering an independent run to stop Donald Trump. Bill Clinton wasn’t a vegan. And then you have Joe Torre and Billy Crystal photo bombing. I wonder if that pic will ever be taken again.