Short post announcing the new HardyStocks logo! After making a mess by trying to do design something myself, I sought out professional design help. My friend Mike who I met at PyCon 2018 introduced me to Tyler Sowles, who created the logo seen below. I highly recommend Tyler: very professional, works quickly, great listener, patient, and good at incorporating the ideas behind what I’m creating. The entire process was super convenient.
I also want to thank my friend Jona for his offer to also help me with the logo. I appreciate your generous spirit and helpful nature. I feel fortunate to know designers, because they are talented in a very important area (where I need help).
I like the company Omnicom (OMC). I understand the business model: an advertising agency that helps large clients run advertising campaigns. OMC is currently a member of the S&P 500 index. The perspective I use with OMC is the way I would evaluate a long-term business partner to manage an important venture for me, by looking at the 30-year history of OMC’s financial performance. OMC pays out a significant portion of earnings as dividends, so dividends are an important topic to discuss in order to understand this company. I don’t try to predict OMC’s stock price or forecast OMC’s future financial results. I have no special secret knowledge about OMC. Everything I like about OMC is based on information out in the open.
OMC is one of the most consistently improving companies in the S&P 500 based on 30 years of history, although it has experienced a few setbacks in recent years. Let’s start by looking at the diluted earnings-per-share (EPS), my favorite metric:
I really like the company The TJX Companies (TJX). I understand the business model: they sell discount clothes and home furnishings, often brand-name and designer products that are liquidated/clearance inventory from other retailers. TJX is currently a member of the S&P 500 index. (TJX runs a bunch of stores where I’ve shopped: TJMaxx, HomeGoods, Marshalls. I don’t do all of my shopping at these stores, but if I happen to find something worthwhile, the price is unbeatable. We have shopped at Marshall’s for my son’s toys, socks, shirts … at HomeGoods we found a great bench for our garage, and a stylish-looking full-length mirror.) I evaluate TJX as I would evaluate a long-term business partnership, with the lens of looking at 30 years of their historical financial performance. I don’t try to predict TJX’s stock price, nor do I try to forecast their future financial results. I have no special secret knowledge of TJX. Everything I like about the company is based on information out in the open.
TJX is one of the most consistently improving companies currently in the S&P 500, based on the past 30 years of performance. The first place I look is at the historical diluted earnings-per-share. Diluted EPS takes into account stock options that can be exercised, and that might dilute the shares outstanding in the future. This potential dilution is why I prefer looking at diluted EPS instead of basic EPS. Some companies issue lots of stock options to executives and employees, and so it’s important to account for that dilution when looking at earnings per share.
I really like the company AutoZone (AZO). I understand the business model: they sell car parts to people who want to fix up their own cars. I see AutoZone stores everywhere here in Southern California. AZO is currently a member of the S&P 500 index. The lens I use to view AZO is evaluating a business partner for managing an important business venture for me. And I have been impressed by the past 30 years of AZO’s performance. I don’t try to predict AZO’s stock price tomorrow. I don’t try to predict the financial results next quarter (or even next year). I’m not basing my view on any secret hidden information. Everything I like about AZO is based on information out in the open (you can verify everything below).
AZO is one of the most consistently improving companies currently in the S&P 500, based on the past 30 years of performance. Let’s start by looking at the diluted earnings-per-share.
It is a rare and admirable characteristic for an individual to consistently improve over many years. Consistent improvement over many years requires a combination of discipline, vision, adaptability, teachability, resolve, and creativity.
Similarly, a company that consistently improves its financial performance over many years is a rare elephant. These companies should be enshrined in the Business World “Hall of Fame”. Unlike athletes, “Business Hall of Famers” can get better with old age, as they leverage advantages from an older era into a newer era. For the serious long-term buy-and-hold investor, identifying and studying these types of companies is a worthwhile endeavor.
Here is the simple question to frame a complex topic: which of the 500 companies currently in the S&P 500 has most consistently improved over the past 30 years? Which of these companies will continue to be great companies in the long-term future? That’s a great place to start. But since great companies are priced for continued greatness, there is a second important follow-up question: which of these rare elephants are priced attractively enough to consider for long-term investment?
Limiting our focus to the S&P 500 is an arbitrary limitation that emphasizes large market capitalization names (and exclude some smaller high-growth companies). But it is a worthwhile goal is to simplify a complex topic. Everyone knows the S&P 500. In the future, we have plenty of room to explore other avenues of analysis.