What Happened:

Stocks wrap up the single best month in 3 years.

Screen Shot from 11.30.23

 

What Does it Mean?

Ironically, just one short month after relaying to anyone that would listen our view that the investor mood was ripe for a rally. This came to fruition as the S&P notched 10.97% while the NASDAQ added 12.95% for the month of November.

Why Do we Care?

The mood on Wall-Street, which seems to be changing by the day as noted by the Investor survey chart below showing the rapid rise in bullishness, is a solid reminder that becoming too negative and allowing the current headlines influence our investing decisions is a fool’s game. Markets will always ebb and flow with the foundation being rooted in capitalism and the desire to turn a profit. As long as that remains the sole focus of a publicly traded company, they will work for their investors to do just that and ultimately this should show up in their stock price.

Despite the rapid rise in stocks, far surpassing the cozy risk-free rate of 5% in US treasuries or money markets, the amount of money still sitting on the sidelines remains at historic levels. It is my opinion that before this bull market is over, this money will be lured back in, chasing stocks at much higher prices. It will be at this point where we will gladly sell them some of ours!

Sourced American Association of Individual Investors: 11.30.23


What Happened:

Quint appeared on CNBC this week discussing a few individual stocks. You may see the clip HERE.

What does it Mean:

I’d like you to pay special attention to the fun exchange regarding Cracker Barrel (CBRL) and a dangerous mistake I see investors making on a regular basis, not to mention so-called fiduciary advisors selling these so called ‘safe investments.’

On the surface an investor may be drawn to Cracker Barrel as it currently yields almost a 7% dividend. What’s not to love? The return is better than one can get in a CD, or money market and let’s face it, it’s Cracker Barrell for goodness sakes, they’re certainly not going anywhere, and have you ever seen an empty restaurant?

Satire aside, the fundamentals in this story matter as the company currently has debt that exceeds their asset base by more than 200%. Basically this means that for every $1 in assets they have, they owe someone $2. Sometimes, in business, this may be warranted as long as cash on hand is sufficient to cover this expense. In the case of Cracker Barrell the company has a mere $25M in cash which may sound like a lot until you realize their debt, according to July SEC records is over $1.1B. Yes, that’s a B for Billion.

But what about that thick and juicy dividend? Well, unfortunately the company is expected to earn $5.92 a share next year and is slated to pay out around $5.24 in dividends. This means that the company is paying out almost 90% of what it is making, while needing to somehow figure out how to pay down over $1B in debt with only $25M in cash. I’m not asking you to become an investment savant, but I am using this as a good example of how dangerous it is to just be drawn to an investment because of a dividend yield or a company name.

Other pieces of goodness.

Logan sat down with the folks from Schwab Network to talk stocks this week as well. You can check out his interview HERE.

Don’t forget to sign up for our free tax-planning webinar on December 6th. You won’t want to miss this opportunity to learn about what strategies you may be able to implement before year end to save money! Who doesn’t like to save money?! SIGN UP HERE

Jacob Thompson – US ½ Marathon Champion and Olympic hopeful sat down with Quint on this week’s DIY Money to discuss his running career, Olympic dreams as well as his growing business. Jacob was a previous student of Quint’s and it will be fun to track his progress as he sets his sights on Paris 2024! You can catch that Podcast HERE.

Until next time

~ Quint

 

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