Novel Investor

It’s been a rough year for markets as we edge closer to the halfway point of 2022 but it may not be all bad news. There is some upside to bear markets.

The S&P 500 exceeded a 20% loss year to date before recovering slightly last week. The Nasdaq did the same with a 30% loss.

Of course, the losses should not be surprising at this point. The bloodbath in certain Nasdaq stocks has been well documented, which explains why its performance is worse than the Dow and S&P 500.

But it’s not all bad news for investors. Lower stock prices bring lower valuations. And, broadly speaking, lower valuations lead to higher returns going forward. Continue Reading…

Stock markets have a long history of fraud and grift during bull markets. Grifters find it easier to entice would-be “suckers” when everyone seems to be making a fortune but them. One such example took place at the start of the 1900s that has played out in some form or another in every bull market since.

Stock promotion was legal at the turn of the century. Promoters pumped new companies in order to raise money in exchange for a cut of the total take. In some cases, their cut was upwards of 40%. A promoter could walk away with over $100,000, on a $1,000,000 stock offering, after paying promotional fees for advertising and articles pumping the stock.

The 1901 stock promotion boom was the byproduct of a speculative bull market. Two years early a merger mania began as Wall Street power players combined railroad and industrial companies into regional and national monopolies. Speculators saw an opportunity to get rich quickly in the millions of new shares created by the mergers.

The mania briefly sputtered with the North Pacific panic before going wild in a stock promotion boom in 1901. Over the course of two years, hundreds of new companies were created and promoted to unwitting investors. Continue Reading…

The average life of a company is shrinking. Today, the average age of an S&P 500 company is 15 years. That compares to 67 years in the 1920s. Yet, outliers exist that defy that trend.

One such group of outliers is known as the Henokiens. To be a Henokien, a company must be founded over 200 years ago and still controlled by the founding family. There are 48 member companies in the group.

What does it take for a company to survive over 200 years? Lessons from Century Club Companies answers that question. The author, Vicki TenHaken, studied companies over 100 years old to see what characteristics set them apart from all the rest.

Interestingly, her results carry some crossover lessons to investing. It starts with having a mission statement.

Live the Mission Statement

Long-term success is the byproduct of a company successfully working its mission. Every century-old company has a written mission statement that led the company to where it is today. Continue Reading…