Stock Stories

This French oil major has been around for almost a century, and managed to compete with other industry juggernauts.  They have higher inside ownership than other majors, and have leading operations in Europe and Africa.

History of Total (Youtube playlist) 

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Royal Dutch Shell was formed with two companies from two different countries joined forces to keep Rockefeller's Standard Oil at bay.  It is one of the largest of the oil majors, and has a presence in over 70 countries.

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Irreducibility is the principle of breaking things down until you can't break them down any further.  This can apply to processes or products.  Think about the processes you observe as an investor that can be improved upon or otherwise remain unmodified based on this principle.

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When the massive Standard Oil company broke up in the early 1900s, one of the remaining companies was Standard Oil of California.  This company ended up growing to become what we now know as Chevron.  Like the other oil and gas companies, Chevron find, extracts, and processes petroleum, natural gas, and other related products.

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Part of John D. Rockefeller's legacy, ExxonMobil boasts one of the world's largest expanse of oil and natural gas reserves.  They help provide the raw materials for the world's energy.  Though its business goes through long boom and bust cycles, companies like this can reward patient investors who can stomach significant volatility.

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Can you feel the "luv"?  Southwest Airlines, whose trademarked symbol is a colorful heart, has been dominating the skies in the U.S. for decades now.  Throughout the 1990s and 2000s, they were successful at taking market share away from legacy airlines with their unique culture and simplified approach.

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Basic Idea - what gets rewarded gets repeated, regardless of any ethical considerations.  Specifically “bad money drives out good”

History - named after Sir Thomas Gresham, who was an English Merchant in the 1500s.  Also attributed to Copernicus and Aristophanes.

Gresham brought to public attention that, in an economic system with fake coinage, the fake coinage will drive out the real coinage in circulation.  People will keep what is valuable and spend what is not.

A few ways to interpret this:

1. Things of value will tend to become more scare, while copycats and imitators will proliferate in a given market place
2. Systems of morality tend to fade away when practical benefits that appeal to human nature overshadow it

Example: savings and loans crisis in the 1980s

• Interest rates from the Federal Reserve started rising higher than the rate at which S&L’s were paying out interest on deposited funds...recipe for disaster
• S&Ls, instead of immediately becoming insolvent, began to invest in speculative ventures, reaching for yield
  • A lack of regulation contributed to this slow but painful downfall

Example: sub-prime mortgage crisis

• Comedian Kathleen Madigan: “sure, put down birthday clown”
• Anyone who wanted a mortgage could get one, as banks were thirsty to increase their profits without thoroughly accounting for the risks of their lending profile

Investing 

• look for management behavior within a particular company or industry.  Is a CEO taking some corporate action just because their competitors are doing it?  Even if it doesn’t make any sense?
• For-profit prisons - yes you can invest in them.  No I would never invest in them.
  • Simply because people have made money with privatization of prison systems around the world doesn’t mean it should be that way - morality enters the investing process and is highly personal
  • No matter how much an annual report (see GEO Group) talks about charitable donations or how many “participants” are awarded GEDs, the business model is fundamentally flawed because the success of the company’s owners is diametrically opposed to the progress of civilization...primarily because people are jailed against their will and subject to legal and cultural systems that do not have their best interest at heart
  • Prisons do need to exist at some level but I do not believe they should have a profit motive

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As the largest creator of medical devices in the world (by revenue), Medtronic supplies all sorts of devices used by hospitals and clinics around the world.  Their background has roots in developing cardiac solutions - they created the first externally powered pacemaker in the late 1950s.  Since then they have moved on to be become a leading provider of all sorts of medical devices, and have recently moved into the field of robotic surgery.

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Who makes the devices that doctors around the world use to perform procedures to help people get healthy?  Boston Scientific is one of the big producers of medical devices.  From helping people with Parkinson's Disease to predicting heart failure before it happens, they have a wide array of solutions for numerous conditions.  The company has decent growth prospects, but is the stock too high to make an investment worth it?

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As the world's largest investment manager, they control over $7 trillion of capital.  Yes, that's $7,000,000,000,000!!  Because of their scope and size, they are able to offer a wide variety of financial products to institutions and individuals.  By making some key acquisitions in past years - namely Barclays iShare - they have been able to maintain a solid market share in a rapidly changing industry.

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