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What now with Home Depot? How fees slice your returns. How your iPhone can save your life..

My favorite retailer, Home Depot (HD) has tanked dramatically in the last three days. Here’s a five day chart:

I own HD and am up. As it fell, I did something stupid. I tried to catch a falling knife by buying more. I was about to write something saying “Stay the Course,” when Joel Ross’s words (from The Ross Rant) dropped into my inbox:

As the market continues to set new records, I thought using Home Depot would be a good example of my investing strategy. As you know they hit earnings, but missed analyst forecast a bit on sales and lowered full year forecast. The stock got slammed even though the company is doing very well, and will continue to do very well going forward. However, the issue is, they have been investing in various business building computer programs which have not yet paid off, but will in the future. I have owned HD since November, 2009. My holding is up 729%. That is an average annualized return of 22%. It pays a 2.5% dividend on current market price, but which is a 18.7% yield on my cost. What else pays that return and has such growth. No other companies in my portfolio have nearly as good returns, but ten are in triple digits. Despite the small setback this week, I will continue to hold HD because it is a very well run company, its brand is the best, low interest rates will mean a good housing market for a long time, and it has a sound balance sheet. The point I am making is, find very good companies, and invest for the long term. Do not let small blips like this week in HD throw you off track of long term value creation investment. Monitor the company regularly, so if there is a major change in strategy, balance sheet or industry dynamics, then reassess and sell. Macy being a very good example of one I sold out of long ago for a profit before it totally tanked. Patient investing in very good companies will make you a lot of profit in the long term. It has worked for Buffet and others. It is the old Graham & Dodd strategy.

Now you know. I also am holding onto my Home Depot. I love shopping there, too. Far better than Lowes.

LED bulbs are no-brainers

An LED bulb will save you 80% to 90% over a “normal” bulb.

Even better, you may never have to change an LED bulb in your lifetime.

This nirvana has warts:

+ LEDs don’t fit and don’t work in all fixtures, especially those with dimmers. I don’t know why.

+ Some LEDs shine grotesque bright white light. I prefer 2700 kelvin.

In short, you need to experiment, and wait. There’s new stuff coming all the time and LED bulb prices are dropping dramatically.

I just bought six of these little charmers from Amazon for $14.99. They give out as much nice warm light as a much bigger bulb. Being small, they’re easy to install. I love them.

Neat packaging. Click here.

More dangerous marketing

What’s so difficult about not smoking, vaping or taking dietary supplements?

Vaping is really dangerous:

The best estimates, published recently in the Journal of the American Medical Association, now say that 25 percent of high school students nationwide vape regularly, along with 11 percent of middle schoolers.

The Centers for Disease Control and Prevention (CDC) recently identified one possible culprit: Vitamin E acetate, a chemical compound that’s harmless when applied topically but can severely damage the lungs. The organization has reported 2,172 confirmed or probable cases of lung injury related to vaping, with 42 deaths attributed to the epidemic.

Dr. Brian Quaranto, a thoracic surgeon at Buffalo General Hospital in New York, said “Vaping was supposed to cut down on the amount of nicotine from cigarettes, but then they give you these ultra-high-nicotine-type pods to smoke. There’s some business and some science going to the ultimate goal of getting people off cigarettes. What happened instead was this capitalistic orgy, and then some kids died because it’s unregulated.”

One state, Massachusetts, implemented a four-month ban on the sales of all vaping products starting in September, and began mandating the reporting of all suspected vaping-related injuries. More than 200 suspected vaping-related lung injuries have reported since then. In November, the third person on record in the state died from vaping-related injuries.

The Feds were meant to implement a nationwide ban on vaping. But the president kyboshed the idea because it allegedly wasn’t popular among his supporters. Meantime, people are dying. It’s really sad.

Another tip

+ Don’t plug into loose cables dangling from loose chargers at airports. They could be surreptitiously stealing your data.

Most useful iPhone apps

Wear your Apple Watch while playing tennis. Download this free app.

Click it and you’ll see this:

It’s a chart of my heart rate all through the day. If it drops too low, or spikes too high, I know something is wrong. And I should get myself to the E.R. or a doctor. This one little app has already saved lives. Another good reason to buy an Apple Watch Series 5 (the latest).

Two friends in serious car accidents

Both got hit front on.  In one accident, the other guy was speaking on his cell phone when he ran a stop sign and hit my friend.

There’s no accounting for increasing driver stupidity. Nor there’s much you can do — except drive a large heavy car and watch for cars running red lights and stop signs.

All about spam emails. This is funny.

Fees eat you alive

Back in the early 2000s I got sold a Citicorp venture fund that had “great” management.

The management left. The fund got sold. And it’s now called StepStone Capital Partners II. It’s now long after it’s original forecast death date of 10 years. And the reason? Fees, fees and more fees.

I just received financials to June 30, 2019. They show an estimated gross IRR of 12.1% and a net IRR (what I get) of 8.5%.

Think of that huge 3.6% difference eaten by fees! No wonder the managers are prolonging my agony.

By contrast, today’s 30-year Treasury is yielding only 2.21%.

They’re taking nearly twice as much in fees as I (or they) can earn on a 30-year Treasury. No wonder they prolong my agony.

They’re not going away

Earn 9.76% yield on Alerian MLP (symbol AMLP).

This thing owns bits and pieces of 25 master limited partnerships that schlepp oil and gas around the country.

It’s come down a lot in the past five years.  But the present high-yield should hold it for falling much further.

Check it out. My smart friend Todd owns it.

Wisdom

See you Monday. — Harry Newton

  • Rich Marsanico

    Hi Harry,
    I love the blog.
    What should my company’s 401k fees be?

  • Mike Nash

    Subaru is the best vehicle to drive if you’re in an accident. Don’t rely purely on size. Subaru protects drivers in event of a crash.

    • Lucky

      Absolutely…my Outback has saved us from 3 serious crashes too with the accident avoidance feature. I am just replacing my 4 banger for a 6 cylinder to more easily tow our 15′ fully self contained camper trailer. Four cylinders do the job up the mountains, but, the 6 will do much better and not as hard on the car. I am often approached by people who see what my Subaru Outback can pull with ease. LOVE MY SUBARU!