The Goals for 2015

Since I just started this blog and haven't had any real goals for 2014, except some saving goals. I am now thinking that it could be a good strategy to set up goals for 2015.

Although I had problems with how to define the goals and make them relevant and attainable I luckily found this magnificent and interesting blog post from Dividend Mantra: "The Importance of Being Smart With your Goals". Which made me understand how I will set up and define my goals for 2015.

The S-M-A-R-T goals methodology was first published in a paper from November 1981 Theres a smart way to write managements goals and objectives. written by George T. Doran. There are a few different versions of the S-M-A-R-T criteria but I will apply the ones that George T. Doran came up with the year 1981.

Specific - There should be a goal that is specific and narrowed down. Not a general goal that are vague and could be hard to measure in the end.

Measureable, In other words the goal should easily be measured in some way. It should be quantifable.

Achievable. The goal should be reachable, in other words physical possible to reach.

Relevant. It should be relevant to your journey, if its not your end goal will say.

Timeline. The goal should have a specific deadline when it should be accomplished.


So now over to how my goals will be for year 2015.

• Save 100 000 SEK from my salary (Approx. 10 000 EUR).
• Start to follow a monthly budget. I have done this 2014 but not as strictly as I want.
• Reach 300 000 SEK in savings (Approx. 30 000 EUR).
• Pay off 12 000 SEK on my student loan (Approx. 1200 EUR). 

Due to make it as simple and specific as possible will I only have four goals for 2015. I will follow up my goals on a monthly basis to keep track of them and to see that I am on the right journey to financial independence. Why so often, comes from that I realized from 2014 that I need to be much more strict with my goals to not loose focus.
As you could see have I not chosen any goals linked to the valuation of my stocks, this comes from the reason that I believe I cannot predict and affect the share price over one year, all my investments are at least based on a time horizon on 3 years. I could even say that it will be hard to predict a share price after only 3 years, but I know for fact that in some future the real value of my company will be shown in the share price. In other words a goal linked to the share price wouldn't have followed all the S-M-A-R-T criterias.

Over and out,

EWI

McDonald´s (MCD)

Here´s the analysis of the McDonalds stock I promised to publish. I owned the stock for a certain time but sold it due to the last sales numbers. I still believe in McDonalds but I think my money could find more attractive assets then McDonalds now. I got out from McDonalds with an 4.7% profit from the improved SEK/USD currency.

Introduction - McDonald´s Corporation

McDonalds is the largest fast-food restaurant in the world serving more than 68 million customers daily in 119 countries over 35 000 restaurants. McDonalds restaurants are operated in three different ways, either as an franchisee, affiliate or by the corporation itself. 

The core products in McDonalds portfolio are hamburgers, chicken, fries, soft drinks, milkshakes, breakfast and desserts. In the last year they have also added some new products to expand its menu to changing consumer tastes, which includes, salads, fish, wraps, smoothies, fruit and seasoned fries.

One of the best things with McDonalds product portfolio are that you know what you get, no matter where in the world you are.

Customers, industry and route-to-market

McDonalds operations are divided geographically between four different divisions, Europe, US, APMEA and other countries and corporate. Europe is their biggest market with 39% of the revenue, US are the second one which contributes with 31% to the revenue and APMEA stands for 23% of the revenue and other countries and corporate stands for 5% (numbers from 2013).

Industry

Accordingly to re-search from IBISworld has the global fast food market been growing in the last five years, which is impressive when thinking about the fact that people are moving away from unhealthy fast food and the financial crisis. At 2013 the fast food industry had a global market size on 477.1 billion USD and is expected to have a size of 618 billion USD by 2019, an impressive growth on 29.5% from todays numbers.
There have been some challenges for the fast food industry in the last years, which has been pressuring profit margins. The total market as a whole has proven that its possible to withstand these challenges, though some players have done better than others. The biggest challenge has been and are the more and more focus on high quality food. In general the fast food today is pre-made and then heated when served to the customer, also much of the food is high in fat and has been shown to increase BMI and therefore cause weight gain. The response from this from the industry has been to adding quality and healthy options to the menu, and have had some measure of success, but still the bad reputation hangs over the fast food restaurants.

How are the prices on the ingredients for the fast food industry? The most important commodities for the fast food industry are, corn, wheat, potatoes and beef. The table below explains the 5 year increase or decrease in prices.

As could be seen in the table has the most ingredients has becoming more expensive in the last 5 years, and within an industry that competition is high, we could expect low profit margins, often south of 10%.
McDonalds profit margin for the last quarter was 15.29% with an average on the last 5 years of 19.76%. To show you some benchmarks numbers Starbucks has a profit margin on 14.06%, Dunkins Brands Group 28.39% and Chipotle 12.06%. The most important number for me here is the difference between the profit margin McDonalds has today and what the average has been over the last 5 years. Why? Because I expect McDonalds to get back to their normal profit margin in a certain future.

Industry recession proof?

In the past the fast food industry has in general been recession proof, and indeed the industry did not suffer nearly as much as other consumer sectors in the 2009 financial crisis. In fact, McDonalds had an increase in visitors to there restaurants as people during the recession tends to choose cheaper food options over traditional restaurants. On the other hand the recession hurt spending, and consumers overall purchased less per visit.

Valuation

Mcdonalds are at the moment trading at a price of 96.31 USD and to 18.95 times 2014 expected earnings, S&P 500 are right now trading at a P/E of 20.21. That McDonalds are trading at a discount compared to the P/E of S&P 500 which seems attractive to me.  From my point of view McDonalds should at least be trading in line with the S&P 500 due to their friendly shareholder management, recession proof, history of strong growth and one of the best brands in the world. I think the company seems to be under valued and should be trading around 115 USD per share at least, Why McDonalds should be traded at a higher price?

Heres why:
-Shareholders will see double digit growth, both from organic and innovation/expansion.
-Re-purchases of shares will do great for the share price.
-Friendly dividend policy.
-Upward revision of McDonalds P/E metric.

Conclusion

McDonalds is a wonderful company that are under high pressure at the moment from a lot of external factors, but after the last sales numbers I still sold my shares. I sold my shares due to the fact I dont know really when this ship will be turned around, McDonalds has been dead money for around 10 years now and I dont know if it will take another 10 years until we will see things start to happen with the share price. If the share price goes down to under 85 USD I will get back my position in McDonalds, but at the price its traded at now (94 USD), I see more potential in other industries/ companies. 

To end this, McDonalds will be on my watch list and I am confident that if you are buying now it will still be a good investment in 7 years a head, but as soon as I dont see organic growth, a more modern menu or Mc Cafe start pay off I will place my money in other sectors. 

Merry Christmas and Best wishes with your investments for 2015!

Sincerely,

Eighth Wonder Investing

November Sales Vardia Insurance Group and the portfolio

Sales Vardia - November

Vardia is still going strong, even if its under my forecast. Sales figures from November are up 67% to 104.7 million NOK compared to 62.8 million NOK last year in November. At the moment we have 3 months in a row that Vardia deliver over 100 million NOK in sales, which is impressive.

My forecast for this month were 115-120 million NOK in sales.
The things that are affecting the numbers and are a bit concerning:

• Denmark are still not up to speed, only contributed with 4.8 million NOK. I expected Denmark to contribute with around 15-20 million.
• Second month in a row with declining sales, could be due to local holidays & number of days in the month. Important to look after this in the upcoming months.
• Sales from Norway dropped an certain amount this month compared to the next. Dont really now why, could be seasonal patterns. Important to look after in the upcoming months.

Still my forecast on Vardia is positive, I think a share price at the moment should be around 40 NOK and in the future should be valued after 1.0 x GWP. I expect the GWP for 2015 to be around 55-60 NOK, which should imply the same share price. Last week I doubled up my position in Vardia.

Portfolio today:

Hennes & Mauritz - 28.11% of the portfolio - Bought at 213.58 SEK

Protector Forsikring -28.8% of the portfolio - Bought at 38.75 SEK

Vardia Insurance - 24.9% of the portfolio - Bought at 28.09 SEK

Tesco (TSCDY) -16.22% of the portfolio - Bought at 102.75 SEK 

Cash - 1.8 % of the portfolio - Will try to grow this to be around 10-15% of the portfolio.

As you see I have sold McDonalds after their last sales numbers. I received 4.7% profit due to the currency. I will present an analysis on McDonalds as I promised you guys (its almost done).

Merry Christmas and Happy New Years!

/EWI

October sales Vardia Insurance Group

Vardia Insurance Group presented strong sales figures for October this week, 11th November. The total new sales in Sweden, Norway and Denmark in October were 106.4 million NOK (66.4 million NOK) which is an increase of 60.2% from October 2013. Norway contributed with 59.4 million NOK, Sweden with 43.3 million NOK and Denmark with 3.6 million NOK.

For me personally it's a bit under my estimation since I expected total sales for fiscal year 2014 to be 1112 million NOK. I really thought sales for October should have been around 113-117 million NOK with Denmark contributing with atleast 9-10 million NOK to the sales. It's no panic yet about the numbers for my forecast, but it would have been nice to be on the right side. To get my sales forecast of 1112 million NOK Vardia has to close business of 252 million NOK in the two upcoming months, which I think  could be hard because of christmas holidays.

Since Denmark was a disappointment I really hope they are steeping up now for the last two months of the year. If they do I am sure Vardia will show profit for at least some month this year and the concern about the cash problem will go away and we could see a more normal valuation for Vardia.

Here are the actual sales for 2014 up to October (rounded),

I also bought some more companies, Mc Donalds (MCD) and Protector Forsikring (PROTCT). Mc Donalds for a price of 95.3 USD per share and Protector for a price of 36.2 NOK per share. More info and analysis will come in the upcoming weeks.


Over and out,

EWI

Documentaries for the general knowledge about investing and economy

Since I am a big fan of documentaries, economy and investing, I have seen the most investing and economy documentaries which are out there and I thought it could be a great idea to share my top list of the ones I seen. I don't have the time to write a small summary about everyone today and rate them, I will do it subsequently with around 4-5 per week. All of them could be seen under the tab "Documentaries" and of course ranked by rating. Hope you have the same taste as I have, the first four could be seen below.

Quants: Alchemists of Wall Street

Rating: 9/10
A documentary about the quants on Wall Street which are creating the complex products which are used in the financial world today. The documentary are showing how the world has becoming increasingly dependent on mathematical models trying to predict the future and quantify risk. I must say that the documentary are one of the best I have seen and especially if you believe in quantitative analysis of companies. Highly recommended.

Inside job

Rating: 8/10

One of the best documentaries reflecting the 2008 financial crisis. The movie is directed by Charles Ferguson and he described the movie during as being about "the systemic corruption of the United States by the financial services industry and the consequences of that systemic corruption". The film is narrated by Matt Damon, which has a harmonic voice and really get you interested and excited about the worlds economy. 

The plot is divded into five parts which all of them is describing the financial crisis in chronological order, with the start how we got there and where we are now (2010).

From my point of view this is really the best documentary about the financial crisis and is a must for all people that some kind of interests about economy.I give Inside Job a rating on 8 out of 10 from me.

The Tax Free Tour

Rating: 7/10

Documentary about how multinational enterprises are paying taxes (or not paying taxes) really good and with a lot of insight in different tax havens and the tax setup the big companies has today, also a bit humoristic at some parts. The same director as the Quants: Alchemists of Wall Street, Marije Meerman.

Where do multinationals pay taxes and how much? Gaining insight from international tax experts, Backlight director Marije Meerman, takes a look at tax havens, the people who live there and the routes along which tax is avoided globally.

Those routes go by resounding names like "Cayman Special", "Double Irish and Dutch Sandwich". A financial world operates in the shadows surrounded by a high level of secrecy. A place where sizable capital streams travel the world at the speed of light and avoid paying tax.

The Tax Free Tour is an economic thriller mapping the systemic risk for governments and citizens alike. Is this the price we have to pay for globalized capitalism?

The World's Greatest Money Maker: Warren Buffett

Rating: 6/10
As Warren Buffett were one of the ones who got me interesting in investing and how you think as a value investor I must say I were a bit disappointed on this documentary. On the other hand it could have with the reason that I read all books there is about Warren Buffett before I saw the documentary. That's why I am only giving this one a six out of ten, but I still think as a value investor you should have seen this. General knowledge for an investor.

Over and out,

EWI

Vardia Insurance Group

Vardia Insurance Group - The journey starts

I am sorry for the low activity on the blog, last week have been really rough at work and I promise it will be better in the future. Finally this week my journey to financial independence starts with my first invested money in an insurance company, exciting. Vardia Insurance Group is my first inwestment and it happened on the 16th Oktober 2014 to a price of 24.6 NOK (2.492 EUR). It have been a bumpy ride so far, down to 22.5 NOK directly after I bought it and now its up to 27.8 NOK. An massive development on 13%, but in matter of fact the ups and downs now doesn't matter for me the importance is where we are in 4-7 years.

This post will consist of my first analysis of Vardia Insurance Group and also the points that made me buy Vardia Insurance Group.

   

Introduction - Vardia Insurance Group (VARDIA)
Vardia Insurance is a Norwegian insurance company which operates in three countries, Norway, Sweden and Denmark, headquartered in Oslo, Norway. The stock is trading on the Oslo Stock Exchange under the ticker OSE:VARDIA. Main products for Vardia are to insure causalty and property for private customers and small medium enterprises. Vardia distributes its products mainly through sales centers, which is spread around the countries they are operating in. At the moment Vardia has over 440 employees and has more than 100 000 customers. Fiscal year 2013 had the Vardia revenues on 720 million NOK and gross premium income on 520 million NOK, which was a 330% growth from the previous year. The company has never been showing profit and has until now been financed by issuing new shares. Vardia went public in the beginning of 2014 and that was the time they made their last and biggest new share issuing, which gave the company 175 million NOK. The management has communicated that this will probably be the last time investors has to put in money, because from Q4 2014 the cash-flow will be positive (This will also me make or break for my investment, not a month in Q4 with positive  .

  

Customers, industry and route to market
Vardia customers are spread geographically with Norway on 49%, Sweden on 49% and Denmark on 2%. Denmark has just started and September 2014 was their first real fair month in terms of business, thats the reason why Denmark has such low percentage of the customers. These numbers also goes with the premium income with Norway and Sweden is shared equally and Denmark stands for a small portion.

How does the insurance market in general do in Sweden, Norway and Denmark?
I could start to say that the nordic insurance market are a profitable industry, which means that the industry as an whole has an combined ratio below 100%. Combined ratio in short, combined ratio are the amount of premium collected from the insurers minus the claims paid out to insurers. A combined ratio above 100% may nevertheless say that the company are loosing money because it could still remain profitable due the return on the assets (investments). At the moment the combined ratio for Sweden, Norway and Denmark are approximately on 90%, which is a really good number. During the 1990:s the combined ratios for the Nordic countries were much higher, Sweden for example had a number over 100% until 2003. As you probably understand is the Nordic insurance industry in a really good time, and I can't see anything that would change this during the next 3-5 years.

Market share, both Sweden and Norway has almost an oligopoly on their insurance market with four big players dominating the market. In Sweden the big players are, Länsförsäkringar,IF, Trygg Hansa and Folksam, these companies stand approximately for 80% of the market. In Norway the four biggest players has 75% of the market, IF, Gjensidige, Sparebank1 and Tryg. The difference between the Swedish and the Norwegian market are actually only one thing and thats the growth. Norway has at the moment an higher growth then Sweden (the Swedish market are very stable), approximately 6-8% annually, versus the Swedish on 3-4% (estimations on the biggest companies, couldn't find any data). The problem or opportunity to have an industry that is growing a lot is that you will have a lot of new companies enter the market, (could be both good and bad), and this is also what is happening on the Norwegian market, a lot of new small insurance companies are starting to enter the market.
In Denmark we have a different market, the four biggest companies are only having 60% of the market, Tryg, Topdanmark, Codan and Alm. Brand. The Danish insurance industry is having a growth on around 1-3% which should be seen as low, on average the danish market has an combined ratio are below 100%.

Which market that will be best for Vardia is hard to say, but I think Denmark should have the highest potential, because of all the small players. Always harder to break an "Oligopol" than a normal market.. On the other hand Sweden and Norway are the ones performing right now, so we will see what the future looks like.

Route to market

Vardias route to market is mostly direct to the private sector and SMB (small medium businesses) customers under the name Vardia, but they also have business through re-sellers and partners which sell Vardias insurance products under their own name (and re-selling). 
A small part of the sales are over the internet, dont remember the number exactly but I read it some weeks ago and it was around 1-2%.

Management
Vardias management should be seen as strong, everyone has an great experience from the insurance industry and haven't been involved in any scandals (at least cant I find it). At the moment the management in Vardia owns 28% of the company, which should be seen as big stake and also the commitment from the management to the shareholders.
CEO Ivar S Williksen has over 25 years of experience from the industry and from different management positions at other companies, mostly from Gjensidige were he worked for 13 years. I am confident on the management part.

Numbers and forecasts
Now over to the most interesting part, the numbers. Will start with the sales,

Sales
Since Vardia still not are making any profit on the bottom line because of their aggressive expansion, for me as an investor one of the key metrics are the sales history and an estimation about how I think the sales will develop over the upcoming 7 years.

So how has the sales been the last 15 months? Very very good! Since July last year the sales has almost jumped up 3 times, which is insane for me. The best part of the story is that Denmark is not up and running yet, which I think has the same potential as Norway, which means we will still have an increase in sales for a long time ahead. I do not think Vardia will be able to keep up this sales growth although but I think we could expect annual growth of approximately 30-40%.

Lets play with the sales numbers in Excel for my investment horizon of 7 years. I assume and am confident that Denmark will be up and running for 100% within 11 months and that Sweden and Norway will be growing in a more moderate speed (20%, haha). With these conservative estimations I will use an sales growth annually for the upcoming 7 years on 30%. Let also assume this year ends at 1112 million NOK and by 2021 should the sales be around 7000 Million NOK, which could be seen below.

But how much will turn up on the last row? If we take a conservative number and say that we will have a gross written premium percentage on 85% (GWP), which means GWP in total will be around 5930 million NOK 2021. Now is it pretty easy to estimate a value on the company with just apply the market valuations we have today in the nordic insurance industry. The valuation in the industry now is spread between 1.7 - 3.1  x GWP is equal to the enterprise value, if we apply this on Vardia for my estimation on the GWP for the year 2021 we will end up at a value between 10 081 - 18 384 million NOK. If we take the most conservative valuation 10 081 million NOK Vardia will have a share price on 312 NOK /share (number of shares: 32 241 988), this is an return on 1168% from my purchase price. I think this numbers really show the potential for Vardia in the upcoming years, even when I deduct my margin safety on 30%, which I have for high risk companies, Vardia is still heavily under priced. The only thing that actually could make me sell this company are that its not showing profit and positive cash flow before end of february 2015. Will be really interesting to follow this young insurance company. Below a box with key metrics from the valuation.

Take care and have a nice evening, 

Eighth Wonder Investing

Disclaimer: EWI (Me) takes no responsibility for losses on shares based on the information on this blog. I am not a financial professional and should be treated just as a normal person without any knowledge. Any information from this website could be wrong or misspelled and should be treated as wrong. Neither is this site or author responsible for any losses based on information from this site, please do your own due-diligence and consult with a certified professional financial consultant before investing.

Budget

As I said in the last post will this be about my budget. I must say it is harder then I thought to do the budget, especially when I don't really have a clue what I am spending my money on (embarrassed).

Let's start with the confession part,

I went through the last month in my head and the credit card statement and realised that a lot of my money goes to eating out, partying and tobacco.  I could assume I am spending 700 euros on restaurants per month at the moment, insane amounts, then I could see around 250 euros on alcohol on average, 60 euros on snus (swedish tobacco), 100 euros on taxis and then the normal things to the household (rent, food, internet, telephone, insurance). All together adds up to my salary which is net approximately 2400 euros + benefits.. Something has to change and that's soon..

Changing the lifestyle,

First of all I will stop using tobacco, will be really hard but are something that will save me money and give me an healthier lifestyle. 

Next thing will be to change the restaurants visits. I must say that I'm really in need of those, both because of the social part and the time savings from not standing in the kitchen. The goal is to get this number down to around 300 euros, yes, a lot of money, but as I said I'm in highly need of restaurants visits.

Third thing will be the partying, alcohol and the taxi drives that goes hand in hand with this. This part will actually be the most easy one, I'm not addicted to alcohol and not a big fan of partying. I have actually an idea of being 100% sober, but that's a to big commitment to do at the moment, but we'll see in the future.

The last thing to cut costs is to see what I could do with the households expenses like Internet, insurance and telephone. I'm sure I could save some bucks here as well, as said the goal is to put away 1000 euros per month.

A side note, my first real month will be in November 2014. I want to start the 1st of the month so I could be focused and knowing when I entering the second month that it's possible to make a complete month.

How does my budget looks like,

Expenses

Rent               -700

Telephone      -11

Food              -80 

Restaurant     -300  

Clothes          -50

Travel             -100

Pocket cash  -40

Additional      -60

Total exp.:       -1341   

Income

Salary (net)   +2347

Food vouch. +180

Total inc.:        +2527      

Difference:      +1186

With this budget my goal of 1000 euros a month will be achievable and I even have some margin every month which feels nice. We will see in the end of November if I made the first month or not, I am really excited and motivated at the moment!

Next article will probably cover some of the stocks I am planning to buy or already have invested in.

Have a great time!

Regards,

Eighth Wonder Investing   

About me and the Holy Grail

All,

As I said in my first blog post this will be an introduction about me and where I am financially at the moment (budget will be present in the upcoming week).

Defining the goal,
Since the age of fifteen my goal have always been to become financial independent, at first the dream were more to become wealthy but during the university something changed my mind and I actually realized that it is not wealth that are my holy grail, it is financial independence and freedom.

The goal is to exit everything that today are a must at the age of 40 and still have a decent life. This comes with some questions, which follows.

What is actually a decent life?
A decent life for me includes a couple of things, health, family (3-4 people), friends and material things. The only thing I actually can control is the material things, but I will still consider that we are two adults which split the costs equally when doing the estimation of a decent life budget, below the budget can be seen. Important note is that the budget is a hypothetical "decent life budget" for me in today's money, everything could be changed over the years. What do you think about it? To tight?

2491.5 euros per month does my money machine needs to generate, annually 29 898 euros. This implies that I need to have a cash flow from my investments which generates 29 898 euros on an annual basis.

What is a moderate cash flow to count with on my investments?
Since my investments only will consist of global dividends champs (when the goal is reached) will I calculate on a 3.3% dividend yield. Yes, I know it's above the average yield on S&P 500, which is around 2%. But since the focus will be on high dividend yield stocks, I still consider 3.3% to be achievable and moderate dividend yield.
In other words my goal will be reached when I have a total amount on 906 000 euros (29 898 EUR / 0.033), sounds like a big pile of cash, possible to achieve?

How should I now achieve this big pile of cash?
The tactic are pretty simple, save as much as possible and invest it wisely, my target is to put away 1000 euros per month and have a return on assets on 14 percent per year, as I said budget will come in the upcoming week. At the age of 41 and after 17 years I will reach my goal with, if I stick to 12 000 euros saved per year and with an annually return on assets by 14%.
As I said this calculation are very conservative,  I will probably be able to save more and I know my salary growth will be very high the upcoming years, expect my salary to double within three years. Simulation graph could be seen below.

216 000 euros are invested and 689 473 euros comes from return on assets, which really shows the value of compounded interest and what Warren Buffett would have called "The Snowball effect".

About me
As my journey and goal should be the important thing on this blog, will this section be short and effecient. I am 24 years old, five years at the university, degree´s within accounting and finance, having at the moment an international graduate position at a Fortune 500's Top 10 company and aiming for financial independence as soon as possible.
I decided to be anonymous and write under the pseudonym Eighth Wonder Investing (EWI), because I don't want the blog to affect my personal and social life.
Why haven't I reached my goals yet, I am still 24 years old? Biggest obstacle have been to be on a small budget as a student, still think I done a great job, which has 22 000 euros already.

Probably will you find out more about me as long as I proceed to write on the blog.

Over and out,

Eighth Wonder Investing

Companies for my portfolio

Dear reader,

The time has come when even I will start a blog. The reason why I do it is plain and simple, I will start a journey and wants to have the journey on paper when it's done.

My first post will not be an introduction about who I am, it will be a perspective of which kind of companies to own to make this journey as fast and smooth as possible. The second article will instead be an introduction, define the goal and how I will make it.

Let's start,
As the title says will I try to explain for you which kind of companies I will have in my portfolio and also the reason why I think these companies will beat the market in the long run.

Company A
Company A are a company that producing cars. The company are always facing a lot of heat from the competition and also pressure from the customers to have the most innovative cars with the latest things in it. To meet these drivers the company are doing the only thing they could do which is to invest heavily in their product portfolio to be ahead of the competition and meet the requirements from the customers.  

Company B
Company B are a company that producing a sort of bread with a well known brand. They don't spend almost any money on their product portfolio, the recipe for the bread has been the same for 100 years and will much unlikely change in the upcoming years. They spend some money on marketing to maintain their well known brand by young customers.

The answer on which kind of companies I would prefer to have in my portfolio are not that hard to make. Which one of Company A and B do you think could promote the shareholders interest, do not lower their dividend in depressions and beat the market in the long run? From my perspective the question is simple, Company B.
Of course does everything comes with a backside as well, it needs to be a fair price of Company B. This requirement will be my first one on my investment path and I know it will help me lower the risk substantially.

Sincerely,

Eighth Wonder Investing