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Archive for the ‘Rant’ Category

Stratasys (SSYS) and 3D Systems (DDD)

Three years ago, in 2012 I wrote how I was going to sextuple my Netflix investment by 2016. To my surprise, it became an eight bagger in less than two years. So, I sold half my shares, paid off our two family cars, and paid cash for the birth of my second son. (Tip: If you pay cash for health care in America you usually can get a discount between 30%-50%! Great for those of us with High Deductible Health Plans who never hit the deductible). This is why everyone should own at least a dozen individual stocks to go with their index funds in their 401k, it literally can change lives.

*Begin Rant* I vow to never have car payments in our family again, and this promise is a major factor for my wife being able to stay home with our kids. Netflix directly changed my kids’ lives (they are also addicted to it, but that’s a problem I won’t go in to). The average American is broke, has no savings, even while living on two incomes per family. Cars are ridiculously expensive and are a major factor as to why we are slaves to our jobs. Add up your family’s monthly car payments, multiply by twelve. That’s what you are spending per year (not even including gas, taxes, maintenance, etc.). Now, multiply that amount by eight as if you had invested that money in a stock like Netflix back in 2012. That’s some serious money, and that’s just one year’s worth of investment capital! I have learned (and have to constantly remind myself) that money isn’t the fruit, it’s the seed. Once you look at your paycheck as seeds instead of fruit, monthly expenses start to look incredibly expensive. *End Rant*

Fast forward to 2015, and Netflix is now up 12 times since 2012! This is why I always remind myself to avoid arrogance, and remember that calling stock tops and bottoms is impossible. Always plan to be wrong. Make being wrong part of your investing formula. This is why you should never sell an entire position, only trim it. Think of your stocks as trees that get overgrown, and every few years, you should trim them back a bit. You don’t need a perfect lawn, let them get overgrown a bit. The less attention you pay to your portfolio, the better. Though I follow stock news daily, I only look at my portfolio a few times a year. It’s amazing what can happen when you buy a stock, forget about it, and visit it three years later. Now, Netflix is the only stock in my portfolio with dozens of other holdings that has become a twelve bagger. Why Netflix?

Companies defining the future that are hated at the present will be your best investments.

It’s really just another variation of my favorite Warren Buffett quote with a focus on “growth stocks.” Now, Netflix has two other major advantages that makes it extra special: One, every person on earth is a potential customer. Two, monthly subscriptions are the best business models in the world. Netflix doesn’t just launch an incredible product that everyone wants. Netflix launches an incredible product that everyone buys every month. How many of your investments can you say have that quality? For me, it’s only the food, beverage, and energy companies that have these qualities. These companies are usually valued in the tens of billions of dollars and are much harder to quickly grow simply because of their size. I typically use food/energy companies as my dividend paying investments. Dividends make up half of investing returns in the market so you definitely want half of your portfolio in great dividend payers. Netflix was only 3 billion dollars back in 2012, and you have to be small if you are going to increase 12 fold. Babies grow to be adults but adults don’t grow to become senior citizens. You get paid for every inch your children grow.

Though 3D Printing is not the next Netflix, as the market is much smaller, 3D Printing is the future and is currently hated with extreme passion. That’s enough to get me pounding the table. If you aren’t familiar with 3D printing, spend 10 minutes on Stratasys.com and 3DSystems.com and tell me that isn’t the future. The Coke and Pepsi of the 3D Printing world, Stratasys (SSYS) and 3D Systems (DDD) are down almost 75% from their 52 week highs. Past performance can absolutely predict future results, and I am betting that these two 3D titans will eventually hit their 52 week high again. Netflix dropped and recovered, and I think these will too. When that happens, four bagger! Is 3D Printing over? Of course not, it’s just getting started! The reason why 3D printing is so hated is because sales aren’t growing as fast as people would like and there is ever increasing competition. If these investments don’t work, it will most likely be because the competition kills them. What if Google, Apple, Amazon, Microsoft, or HP start making 3D printers? Or, what if another startup dominates? That’s always a possibility that could make these shares losers. This is why you should always own at least a dozen stocks, place many small bets, and just try to be right once. If these two investments are losers, so what? With a portfolio of losers and moderate winners, you only need one 12 bagger to beat the market for years. Plant a lot of seeds ($400 a seed, the cost of one SUV car payment, is all that is needed!), watch them grow/die over the years, and only trim every few years.

Monty

Stat DDD SSYS
Price (Market Cap) 2.46 Billion 1.90 Billion
Cash And Equivalents 284 Million (179 million in 2011) 442 Million (It was only 20 million in 2011!)
Long Term Debt 0 (Was 131 million in 2011!) 0
FPE 25.05 19.93
PEG 2.06 -11.84
Dividend
And Yield
N/A N/A
Price/Cash
Flow
44.30 -9.40
Price/Book 1.96 .82
ROE N/A N/A
Motley Fool
Caps Rating
4 stars 4 stars
Size of Position In Portfolio Increased from 2.5% to 5% Increased from 2.5% to 5%
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10 Demands For The Occupy Wall Street Protest

10 Demands For The Occupy Wall Street Protest

The protestors don’t have an official list of demands, but I have some for our protestors.

  1. Get off Wall Street.  Why just be symbolic when you can get real results? Here’s how to get results:
  2. Get friends and family to switch to a local bank, or even better, a credit union. The banks can’t be too big to fail if they aren’t too big. Obama didn’t break up the banks but you can. Big bonuses can’t be paid if they don’t have money to burn.
  3. Find Out When Teenagers Learn Personal Finance In Your Local Schools. If they don’t, lead the effort to make sure this is taught with writing, math, and history. If  you don’t know how to read, you shouldn’t be signing contracts. By recognizing a bad deal, you won’t make one. This is the #1 cause of the great recession that nobody talks about.  Education is your best defense against greedy corporations.
  4. Pay Off All Credit Card Debt. The banks have no power over you if you don’t owe them money.
  5. Massively Cut Your Spending. “The things you own end up owning you.” – Tyler Durden. Americans spend the majority of their money on three things: housing, automobiles, and education. Forget clipping coupons or canceling cable. Move to a cheaper area. Downsize your house. Rent instead of own (but do the math to make sure it’s actually cheaper). Sell your car and buy a used car with cash.  Ride a bike. Use public transportation. Try car sharing. American’s didn’t even have mortgages until after WWII. We set housing prices. Who says we need them now? It’s the serial savers that buy houses with cash. You can take guitar lessons or computer classes without going into debt but can’t get a degree without a student loan? When I got my CNE I could have paid $12,000 to a local tech school. Instead, I just bought the books and learned at home. Tested at the school. Cost? $1,000. I have seen this model applied to State University BS degrees as well.
  6. Save 20% Of Your Gross Income. It doesn’t matter if banks aren’t lending to you if you don’t need their money. Start by auto-deducting $31 a month from your bank (it’s just a $1 a day!) and keep increasing it until you hit 20%. Pay this like your power bill.
  7. If You Don’t Have A Job, Create One. Take your favorite part-time hobby and turn it into your favorite part-time job. The best way to bring economic equality is to compete with the fat cats and take market share from them. Apple, the biggest corporation in the world, started in a garage and a bedroom. What are you doing with your garage or bedroom?
  8. Prevent Monopolies. Every dollar going to your neighborhood business is a dollar taken from the greedy fat cats. Paying more for a product built in America keeps jobs in America and builds the middle-class. I know this isn’t always possible. I occasionally shop at Wal-Mart. But, to prevent monopolies I also go to K-Mart, Shop Ko, Fresh Market, Smith’s, Amazon, eBay, mom and pop markets, and lemonade stands. Buy local and American as often as you can. If you patronize everybody with your hard earned cash, you have more power than our government to prevent monopolies, bail-outs, too big to fail, corporate lobbying, and outsourcing. Voting with your wallet is the most powerful vote in America.
  9. Know who makes the products you buy. You may be supporting a monopoly and might not even know it. You may be supporting a company you are against when you could be supporting a company you are for. Look at what Procter And Gamble makes.  Check out General Mills. The amount of monopolies in America is shocking and is hidden under brands if you don’t pay attention. Next time you are at the grocery store, try to buy nothing made from Procter And Gamble Or General Mills. Flip the bottle over and find the distributor, that’s an easy way to find out. I have nothing against these companies but it’s a great exercise in monopoly detection.
  10. Destroy The 99% By Becoming The 1%. Start your own business and become the 1%. Then, give the money back to the people that made you rich, your employees. Reduce the 99% to 90%, then 80%, etc. Taxing the 1% won’t fix the problem as the government is the leader in wasting money. We need good people to rise to the top, and then reward everyone who helped them get there. Why aren’t Apple Store employees making over $100,000 a year? They should be. The middle-class is shrinking because CEOs aren’t doing what’s best for society, they are doing what’s best for shareholders. YOU can build the middle-class. YOU can be the non-greedy thin-cat CEO. Just ask Derek Sivers. A multi-millionaire who cares about society first, and corporate profits second.

 Thanks for reading.

Monty

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Why not borrow from Coke instead of the obsolete Napster?

Today Netflix (NFLX) announced its spinning off it’s DVD business into a new service called Qwikster. I think this is such a huge mistake, I have to send Reed Hastings a letter even though he will never read it, but, hopefully you will. Here’s the letter:

Dear Reed Hastings,

I am ecstatic that you do not want to follow the fate of America Online, and are self-aware that you easily could. You do not display the type of arrogance of most CEOs who think they are immune to change and this gives me more assurance of Netflix’s survival because “Only the paranoid survive.” You respect your customers enough to alert them of a rate-hike. Comcast has never given me such respect and every month my Comcast bill is slightly higher with no explanation. However, you are forgetting two extremely important points with your latest decision.

1) Brand power is your most important asset and makes it much easier to raise prices on your customers.

2) American’s have an extremely short term memory, react irrationally short-term, and don’t even realize the “new” prices are really 2005 Netflix prices but with better content.

Most customers have no idea that due to archaic movie studio laws a new release on DVD is cheaper than a new release digitally and by going streaming only they are giving up access to most new releases.  It’s $4.99 to rent one new release in HD on iTunes. You clearly understand this, and that’s why you have said you aren’t interested in acquiring new releases for streaming, but are focusing on older, back-catalogue, long-tail content. Your customers would have come back as there is no cheaper alternative for the ultimate new-release DVD combo combined with  back-catalogue streaming content.   However, by renaming Netflix “Qwikster” you have diluted your brand and made the service more inconvenient and confusing for customers. You have turned a temporary problem into a permanent one. Two separate websites? No synchronization? I want to be able to have that movie in my DVD queue until the “watch now” button shows up right next to it. I want to think about movies, not how they are delivered to me. Who cares about the type of box a package comes delivered in? These two packages shouldn’t be sold by separately branded businesses as both brands sell the same product, video.

The beauty of the name Netflix was it worked two ways. It explained that you could rent DVDs (flix) over the Internet. It was forward looking,  because it also worked even better for streaming flix over the ‘net.

As we all know, physical media is obsolete but due to horse and buggy content owners, I’m sure in 2021 we will be saying the same thing just like we did in 1999. Physical media was your largest Warren Buffet Moat. If it puts Netflix into a better economic strategic position by having two separate companies, I understand. But, why not borrow from Coke instead of the obsolete Napster and separate the DVD business into “Netflix Classic.” You already share the same color scheme and I always drink Coke with my nachos while watching movies. Please keep your strongest asset, your brand.

I, along with my friends and family, are extremely excited that video games are finally coming to Netflix, err..Qwikster. Just imagine if you would have announced that you are increasing prices because video games are now included as part of the service. Customers, like myself, would have actually felt as if they are getting more for their money.

I am an extremely happy Netflix customer, shareholder (along with my 1 year old son), and have yet to find a better alternative to Netflix. I’m not cancelling, and I’m not selling, but your initial instincts were right, and you should have stuck to your guns. It is a marketing problem, not a pricing problem. But, Qwikster only makes it worse. Please bring back the classic brand everyone loves. Netflix is the perfect name, Netflix is Coke. Qwikster is 2011’s New Coke.

Sincerely,

Monty Singleton

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