On today’s Passive Income Investment Idea Episode we are analyzing Schlumberger, ticker SLB.  Schlumberger is a High Quality, Narrow Moat Company Selling at a Significant Discount to Fair Value.

Schlumberger is the world’s largest supplier of products and services to the oil and gas industry. The company operates its business via multiple groups: reservoir characterization, drilling, production, and Cameron. It is investing more than any other services firm to make its offerings more bundled, which it believes is likely to be one of the key industry trends during the next 10 years. Efforts on this front are most visible via the Schlumberger Production Management business, which now accounts for 10% of its revenue.

As of Nov. 11th, 2020, Schlumberger has an S&P Credit Rating of A with a 55% LT Debt/Capital.  Morningstar rates Schlumberger as Narrow Moat (meaning it can fend off competition for at least the next 10 years) with a Stable Moat Trend, Exemplary Stewardship, and High Fair Value Uncertainty currently trading Significantly Undervalued at a 62% Discount to Fair Value and 5 Star Rating.

Analysis of the historical trends using FastGraphs shows that Operating Cash Flow has correlated strongly with stock price over time.  The historical Price to Operating Cash Flow Multiple Range has been Wide, ranging from 15-10.  Over the past 10 years, the multiple has been approximate 13.5x.  Currently the Blended P/OCF is 8.41, an approximate 38% discount to the 10YR historical range.  This translates to a 11.89% Blended Operating Cash Flow Yield. The consensus of 3 Analysts expect Schlumberger to grow Operating Cash Flow an average of 9.72% per year between today and the end of 2022. The trailing 10 YR Operating Cash Flow Growth has averaged -4.54% per year and traded at an average P/OCF ratio of 12.22.  Therefore, the company is projected to grow Operating Cash Flow Faster than in the past. As such, we can easily justify using the low end of the historical multiple’s range for valuing the company today.  Assuming Schlumberger grows Operating Cash Flow at a rate of 9.72% annually and reverts to a valuation of just 10 times Operating Cash Flow, an investment today would return over 28% Annualized.  The current price is $18.31 and our Target Sell Price based on Projected Operating Cash Flow is $40.

In Summarizing their thesis, of which we agree, Morningstar states that “Schlumberger remains our top oilfield-services pick. Thanks to its strong balance sheet and focus on less-volatile international markets, we expect it to weather the storm facing oil markets over the next two years. Investors shouldn’t be discouraged by the temporary dividend cut, which is a wise precautionary move given the severe nearterm industry environment. In the long run, we think Schlumberger will benefit from secular growth in international capital expenditures. Also, we think the company is poised to gain market share and improve margins via its efficiency-boosting integrated and performance-linked project initiatives.”

For an even better option, we are Selling Cash-Covered Puts to generate either guaranteed returns over 30% annualized or an even better entry position into Schlumberger at a lower price.  To learn more, be sure to take our Online Course about Selling Cash-Covered Puts.

P.S.

***** If you’d like to get access to all of our Investment Analysis Reports along with all of our Online Courses on Investing for Passive Income and Total Return to Reach Financial Independence as well as our Monthly Portfolio Updates then simply go to BusinessAndInvestingSherpa.com and sign up for a PRO Membership. *****

Your first product is crucial to your overall success because it will either be profitable and allow you to grow or … not. The lessons in this post are of paramount importance.

Resources Needed to Start Your Business and Invest the Profits (Our Top Recommendations) -

Jungle Scout - (30% Discount with this Link) Top Tool for Selling on Amazon  - https://businessandinvestingsherpa.com/junglescout

TaxJar - Essential for Sales Tax Collection for Sales on Your Website - https://businessandinvestingsherpa.com/taxjar

QuickBooks - What we use for accounting, we love setting up automated rules - https://businessandinvestingsherpa.com/quickbooks

Disclaimer: The above links are affiliate links, meaning we will each a small commission at no cost to you.  We greatly appreciate your support of the show in this way!

P.S. 

***** If you want to start your own online Amazon Ecommerce business simply follow the steps of our Ultimate Guide by Clicking the Following Link: https://businessandinvestingsherpa.com/how-to-start-an-amazon-business/

On today’s Passive Income Investment Idea Episode we are analyzing Intel, ticker INTC.  Intel is a High Quality, Wide Moat Company Selling at a Significant Discount to Fair Value.

Intel Corp is one of the world's largest chipmakers. It designs and manufactures microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors. It is also the prime proponent of Moore's law for advances in semiconductor manufacturing. While Intel's server processor business has benefited from the shift to the cloud, the firm has also been expanding into new adjacencies as the personal computer market has declined. These include areas such as the Internet of Things, memory, artificial intelligence, and automotive. Intel has been active on the merger and acquisitions front, recently acquiring Altera, Mobileye, Nervana, Movidius, and Habana Labs in order to assist its efforts in non-PC arenas.

As of Oct. 28, 2020, Intel has an A+ S&P Credit Rating with a 32% LT Debt/Capital.  Morningstar rates Intel as Wide Moat with a Negative Moat Trend, Standard Stewardship, and Medium Fair Value Uncertainty currently trading Significantly Undervalued at a 35% Discount to Fair Value and 5 Star Rating.

Analysis of the historical trends using FastGraphs shows that both Earnings and Operating Cash Flow have similar correlation with stock price over time.  The historical Price to Earnings Multiple Range has been Wide, ranging from 12-18.  Over the past 10 years, however, the range has been between 12-13.  Currently the Blended PE is 9.34, an approximate 25% discount to the mid-point of the historical range.  This translates to a 10.71% Blended Adjusted Earnings Yield. The consensus of 16 Analysts expect Intel to grow earnings an average of 1.62% per year between today and the end of 2022. The trailing 10 YR Earnings Growth has averaged 9% per year and traded at an average P/E ratio of 12.96.  Therefore, the company is projected to grow Earnings Slower than in the past. As such, we should use the low end of the historical multiple’s range at best for valuing the company today.  Assuming Intel grows Earnings at a rate of 1.62% annually and reverts to a valuation of 12 times Earnings, an investment today would return over 16% Annualized.  The current price is $45.64 and our Target Sell Price based on Projected Earnings is $61.  Moreover, you would lock in a Dividend Yield of 2.9% with a Low Payout Ratio of 25%. As a bonus, the Current and Trailing Twelve Month Buyback Yield is 9.47% for a Total Yield of 12.33%.

Additionally, Intel has High Operating Performance with 5 Yr Average Return on Equity of 22%, Return on Invested Capital of 16% and Net Margin of 23%.

Overall, here at the Business and Investing Sherpa, we are opportunistically adding more shares of this High Quality, Wide Moat Company to our Portfolio to generate Passive Income of around 3% in the form of Dividends while targeting a Total Annualized Return of 16% with a current target Sell Price of $61 between now and the end of 2022.

For an even better option, we are Selling Cash-Covered Puts to generate either guaranteed returns over 15% annualized or an even better entry position into Intel at a lower price.  To learn more, be sure to take our Online Course about Selling Cash-Covered Puts.

***** If you’d like to get access to all of our Investment Analysis Reports along with all of our Online Courses on Investing for Passive Income and Total Return to Reach Financial Independence as well as our Monthly Portfolio Updates then simply go to BusinessAndInvestingSherpa.com and sign up for a PRO Membership. *****

When you are just beginning to think about your brand, should you think Big or Small?!?

I’d argue that it’s good to think Both!  By that, I mean that it’s good to be thinking BIG in terms of what your Brand could grow into and become but SMALL in terms of what your initial product line will be.

To successfully get a business launched, it can be very helpful to be hyper focused on just one, small Niche!

In today’s episode, we’re going to talk about why that is …

Without further ado … let’s discuss the 5 Reasons You Should Focus on a Small Niche when you are just starting out:

2. You can hone your skills to become an expert in your niche.  This will give buyers the confidence in your brand they need to purchase your products.

3.  All of your efforts, systems, and advertising will build upon and complement each other, giving your products the best chance for success.  When you are hyper focused on one niche, everything you do works together to build a product or product line that is more competitive and hopefully better than the competition.

4. For anything to be done successfully, it has to be done well and it’s much better to do one thing well in the beginning, thus giving you the best chance to be successful.  When you spread thin, nothing gets done well.

5. Focusing on one niche not only Increases your Focus, but it Reduces Overwhelm and Burnout.  The biggest risk to the success of your business is Burnout because as soon as you give up and quit, the business has failed.

6. Lastly, Targeting a niche gets your products in front of shoppers who are almost ready to buy instead of casually browsing and it does so with your best foot forward.  Once people are searching for very specific products they know what they want and are more likely to buy so by standing out in a niche you are more likely to convert those shoppers into customers.

Now that we’ve talked about why it’s sooo important to niche down, it’s equally important to know HOW to successfully identify a niche that you will be able to compete in and gain market share to begin building a reputable brand.

This includes things like:

If you are serious about creating an E-Commerce business then these are some of things we detail out and teach about in our course on How to Build a Profitable, Scalable, Multi-Million Dollar Ecommerce Business which you can get at BusinessAndInvestingSherpa.com.

Amazon is a Momentum Game:

What I mean by the fact that Amazon is a momentum game is that the more you sell on Amazon, the more your organic rankings increase for more and more keywords.

The reason this is so important is because it has major impacts on the overall strategy you should take when approaching selling on Amazon.

For instance, when you launch a new product,you do not want to run out of inventory. This is because running out of inventory makes your organic rank drop.

Instead, what you want to do when you launch a new product is to spend money on advertising to begin to build the momentum of the sales which will then increase your organic rank, which in turn, increase your profitability because you get more sales through more keywords and pay less advertising fees to Amazon.

There are two forms of product listings in the search results. One is from paid advertising, and the other is from free organic ranking. The two go hand in hand.

The paid advertising drives traffic to your product, which increases your sales. And in turn, this also boosts your organic rank, which drives more traffic and increases your sales at an even higher profitability, because you didn’t have to spend money on ads for the people that bought through an organic listing.

The problem comes in when you run out of inventory. And you have to rebuild all of that momentum that you lost. And this can cost you a lot of money on Amazon.

The fact that Amazon is a momentum game also impacts how many products you should launch at a time. Because Amazon is a momentum game, I recommend that it is best to launch just 1 product at a time.

This is primarily because you want to build maximum momentum behind a product to maximize that products profitability for your company. If you have a good product, the amount of sales you can achieve for just one product on Amazon is enormous!

Usually it’s way more than you think. The key to achieving maximum sales on Amazon is to be ranked at the top of page 1 for as many relevant keywords as possible, especially the keywords with the most relevant traffic (don’t neglect the small keywords too though as they can really add up!).

To do this, my recommended strategy is to set up highly optimized listings and then drive traffic to those listings through Amazon advertising. The traffic you get from the ads will hopefully turn into sales (assuming the product and listing are high quality at a good price with positive reviews) which will increase your organic rank for both the keywords that convert to sales and those in your title and product listing.

This will lead to more and more sales and better profitability as a greater percentage of sales over time shift from coming primarily through ads to primarily through organic rankings. To do this process requires that you don’t run out of stock. Otherwise, your rankings will begin to drop and you will begin to waste the momentum you built which will cost you even more money to rebuild it through ads again when you get back into stock.

So … try not to run out of inventory! Usually this process means that you should stick with one product until you are ranking on page 1 organically for your main keywords and many many more smaller ones and you know that you won’t be running out of stock anytime in the future.

Plus, sticking to one product at a time allows you to focus solely on that one product which gives that product the best possibility to succeed. Once a product has full momentum built and it can be sustained it is much easier to maintain, allowing for efforts to be redirected to the next product.

WHY I LOVE INVESTING IN REITs MORE THAN RENTAL PROPERTIES:

Problems I often see with Rental Properties:

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Even more valuable though, you will get access to our Proprietary Research Tool with the Best REIT Investment Ideas each month as well as full access to our Model Portfolio and monthly updates as to what we are Buying or Selling and WHY! *****

Episode One! Hear our story and our business and investing journey to learn what is possible and how to create an automated, scalable e-commerce business and invest the profits to reach financial independence!

About Us:

Our team previously built and sold an automated, scalable, multi-million dollar eCommerce business in under 4 years.

We then invested the profits for passive income to reach Financial Independence.

Now, we teach the exact strategies we followed step-by-step on this podcast and our website and blog at https://businessandinvestingsherpa.com

Today's Sponsor:

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M1 Finance is one of my favorite investment tools because it’s FREE, it allows you to purchase partial shares of stock (so you can buy Amazon with 3 dollars instead of 3 thousand for example), and it allows you to do automatic rebalancing.  With M1, you can essentially create your own Robo-Advisor and cut out all of the fees by selecting a set of low-cost index funds, setting your target percentage allocations for each fund, and turning on automatic rebalancing.  If you set up auto deposits to the account each week, M1 will automatically weight the purchase of each fund back towards your targets.  Plus, I think M1 is set up to help investors think long-term rather than fostering a trading mentality that you see with other apps.  I have used M1 myself for many years and have no plans of stopping.  One thing I have really appreciated is that when I transfer funds to M1, they are available to purchase the very next day, compared with Robinhood which takes like 5 business days, ouch.  M1 is definitely unique and I love it’s features.  There are plenty more I didn’t even touch on like the ability to create a portfolio line of credit at super low rates on up to 35% of your account balance and earn cash back with your own M1 checking account.  To use this tool, simply click the following link: https://businessandinvesting.com/M1 .  Doing so will help support the show and we would greatly appreciate it.

Resources Needed to Start Your Business and Invest the Profits (Our Top Recommendations) -

Business:

Jungle Scout - (30% Discount with this Link) Top Tool for Selling on Amazon  - https://businessandinvestingsherpa.com/junglescout

TaxJar - Essential for Sales Tax Collection for Sales on Your Website - https://businessandinvestingsherpa.com/taxjar

QuickBooks - What we use for accounting, we love setting up automated rules - https://businessandinvestingsherpa.com/quickbooks

Investing:

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Disclaimer: The above links are affiliate links, meaning we will each a small commission at no cost to you.  We greatly appreciate your support of the show in this way!