Soaring Highs for Wal-Mart Stores, Inc.

Something exciting happened this past week.

Incase you missed it, Walmart’s stock jumped approximately 10% to $ 99.6 US per share on November 16, 2017. According to online sources, this jump was most accurately connected to Walmart’s third-quarter press release which showed how the company has performed from August to November.

Wal-Mart Stores, Inc. employs approximately 2.3 million people across the globe through Walmart US, Walmart International and Sam’s Club. The company has certainly grown from its humble beginnings in Arkansas under the entrepreneurial direction of Sam Walton. Today, Wal-Mart Stores, Inc. earns well-over $400 billion USD in revenue annually through their stores and online platforms.

According to the company’s third-quarter annual report, the company earned over $100 billion USD over the course of three months. Compared to last year, this is a performance improvement of approximately 4.2%.

Should investors buy stocks in Wal-Mart Stores, Inc? Well, the traditional advice is to buy low and sell high. Is Wal-Mart at a ‘high price’? Probably, given that the recent 10% climb has brought Walmart to its highest stock price ever. However, the dollar-cost-averaging approach would encourage investors to buy the stock anyways, even though it is likely to correct. The company is probably a sound investment because it earns hundreds of billions of dollars each year and has increased its dividend payout each year since 2012.

Thanks for reading & happy investing,

Your team at CanadianDough.

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The Drive Behind Nike’s 11% Gain Overnight

It came as a pleasant surprise when I saw on my iPhone that Nike’s shares have jumped up 11% today. All of the companies that I track don’t move up or down more than 1% on a typical day.

Of course I was curious about what lead to the 11% climb. A quick Google search shows that Nike recently published its 2017 full year result earnings. It must have been a good report.

According to Nike’s investor relations, Nike earned revenues totalling $34.35 billion USD, which is 6% higher than what it earned throughout 2016. To save the confusion, Nike’s financial year ran from June 1 2016 to May 31 2017. After deducting all of the company’s expenses and taxes, Nike was able to retain $4.2 billion USD, which is 13% higher than last year’s performance.

Is it a good time to buy Nike stocks? Who knows, maybe the stock will continue to climb, or maybe it won’t. Hopefully the first quarter of the 2018 financial year will start off on the right foot.

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Choosing an ETF

I’ve been fortunate enough to have some extra spending money left over from a trip to New York City. I suppose I could cash the American dollars at the bank and receive Canadian dollars, or I could use the American dollars to buy American stocks. I like that option a lot because the greenback has been appreciating in value and American stocks continue to go strong.

I’m deciding on buying an ETF this time around. I think an ETF is great, especially one that tracks the S&P 500, because they would let me ride the wave that is the American stock market. Over at least the past 30 years, the S&P 500 has managed to grow at an average rate of 12% per year. Plus investing in an ETF that tracks this index is like investing in the whole stock market. I have faith in what major investors have said in the past, that the American stock market will continue to grow over time. I would expect some years to be better or worse than others, but if I can find a way to make extra money without having to touch my stock portfolio, it should pan out well.

I’ve narrowed my search of ETFs to three: OEF, SPY and IVV. I like OEF because it is the most affordable ETF out of the three, but it also has the highest expense ratio, which I think, means it actually costs the most to own. However, IVV and SPY are close in their price, but they’re expense ratios are slightly different even though they seem to have the same holdings. Also, they both pay dividends every three months (roughly $1 USD per share). The expense ratio of SPY is about 0.09% and the expense ratio of IVV is 0.04%. According to online sources, this means that 0.09% or 0.04% of the funds total assets will be used to cover expenses. So when you buy $100 worth of shares, a percentage of that will be used to cover expenses. If that’s accurate, I suppose that means an investor only pays the expense ratio when they buy their shares. Correct me if I am wrong.

Since the IVV and SPY seem very close but only differ in their expense ratios, I will likely move forward with IVV. Wish me luck!

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Timeless Advice from Peter Lynch

I’ve been reading a book by Peter Lynch called ‘Beating the Street’. The book is an autobiographic approach to investing and it brings up a number of interesting approaches to investing.

One tenet of investment according to Peter Lynch has been ‘focus on the company, not on the stock.’ I suppose he meant to encourage investors to read balance sheets and financial reports instead of looking only at stock charts or reading the annual highs and lows of the stock price.

One way to approach buying stocks has been to treat it like you’re buying a business. Although I don’t have experience acquiring companies, I would imagine it requires a thorough analysis of the annual expenses, revenues and tax costs compared to a handful of years. Fortunately, financial reports give investors the opportunity to review these metrics.

According to ‘Beating the Street’, Peter Lynch used to take his analysis one step further and reach out to investor relations representatives, company executives and stock analysts to compare his own research too. He made an effort to demystify the metrics he was measuring. Is this an approach available to the average investor? Maybe. Investor relations sections of company websites usually have a contact number made available incase investors have any questions, I would suppose.

The goal for Canadian Dough’s portfolio will be to investigate the metrics of small to medium sized companies in Canada or the United States. These companies may be listed on the S&P 500 or some other index. More information coming as Canadian Dough’s research carries forward. Thanks for reading!

RBC Publishes 2016 Annual Report

Today I received Royal Bank’s 2016 Annual Report in the mail. I skimmed over the CEO’s letter to the shareholders, which seemed optimistic yet admitting to the various economic challenges the company faces.

Then I got to the financial reports. According to the financial highlights, RBC managed to earn roughly 8.7% more in 2016 than it did in 2015. Totalling $38.4 billion dollars in revenue, RBC can surely call itself an economic powerhouse. Of that $38.4 billion, RBC manages to retain $10.4 billion in profit, which is good news for shareholders. With profit increasing from 2015 to 2016 by 4.3%, investors can hope for a continuing increase in dividends in 2017. Impressive as their earning power is, their ability to attract and sustain wealth is even more impressive. As of 2016, RBC has $526 billion in assets under management.

Part of the reason why RBC is able to earn such an enormous amount of money is surely because of the people they employ. My own experience at RBC has always been pleasant, with courteous service at every branch I’ve visited. With 1,400 branches and 75,510 employees RBC is surely making a lasting impression on North America and beyond.

Investing in the American Markets

Canadians are able to invest in American companies. Before taking the plunge into the American stock market, one should consider the current Canadian/American exchange rate. One American dollar can buy approximately $1.31 Canadian dollars- this means the Canadian dollar is relatively affordable for Americans. Where does this leave Canadians? From an investment perspective, it would seem as though Canadians are at a disadvantage. However, this may not be the case. If a Canadian investor habitually saves American dollars, say $50 per month, and invests it in an American company, such as Visa, they may be earning money as the currency continues to appreciate.

Investing in an American, dividend paying stock could yield multiple benefits for the Canadian investor. First, an investor could be collecting dividends. Dividends are additional cash-flows created when a stock is owned. Dividends are often monthly, quarterly or annually paid out to investors. Second, investors can be rewarded through capital appreciation which occurs when the stock’s price increases. Finally, a Canadian investor can be rewarded when the American dollar continues to appreciate in value. Once a Canadian has bought American dollars and then invested those dollars into an American stock, those dollars are gaining value when the exchange rate continues to appreciate.

Although no one can really say for certain whether the American currency will continue to appreciate or depreciate, Canadian Dough has learned of an economic theory that explains that an exchange rate is connected to a country’s exports. As a country exports goods, the importing country naturally demands the exporting country’s currency. This increased demand in a country’s currency leads to an increased value in the exporting country’s currency. Its essentially a theory of supply and demand. Therefore, as a country exports more, its currency is demanded more and its currency increases in value. Although this is only one of many economic theories, it certainly demystifies theories of the American dollar’s projection.

Visa: A Billion-Dollar Company!

Visa is headquartered in California but doing business on a truly global scale. Visa is officially operating on every continent on the globe and processes billions of payments each year. In 2015 alone, Visaโ€™s global network processed 100 billion transactions, totaling $6.8 trillion USD.

An important question: is Visa a good investment for the Canadian investor? Letโ€™s look at itโ€™s financial reports to help determine if Visa is as healthy as it appears to be.

Visaโ€™s total revenue generated in 2015 was $13.8B USD, compared to $12.7B USD in 2014 and $11.8B USD in 2013, which is a total growth of 17.8% from 2013 to 2015. Visaโ€™s total operating expenses have grown by 6.1% from 2013 to 2015, totaling $4.8B USD in 2015. I suppose the larger the company, the larger the operating expenses would be to pay: staff, taxes and office space. Visaโ€™s net profit, the profit after taxes and all expenses, has grown by 29.2% since 2013 to 2015, reaching a total of $6.45B USD. Visa is a billion dollar company.

The next question is whether Visa was able to pay for its liabilities in 2015. According to its balance sheet, Visa had total debts or liabilities amounting to $10.4B USD. Visa also has total assets reaching $40.2B USD, therefore itโ€™s likely safe to say that Visa can afford to meet itโ€™s liabilities and is therefore a healthy company.