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February 2013



College Degrees Aren't Always Necessary

February 20, 2013 – Comments (4)

New York Times: The college degree is becoming the new high school diploma: the new minimum requirement, albeit an expensive one, for getting even the lowest-level job.  [more]



Hain Celestial Quick Analysis

February 18, 2013 – Comments (0) | RELATED TICKERS: HAIN

Hain Celestial is one of the leading producers of natural foods, maintaining well-known brands such as Celestial Seasonings, Garden of Eatin’, Health Valley, Arrowhead Mills, Spectrum Naturals, Rice Dream, Soy Dream, and JASON. Hain was founded in 1993 by Irwin Simon, who currently serves as Chairman and CEO. 

What to like: 

1. Brand portfolio. Hain is unquestionably a leader in the natural foods category, selling to natural food outlets such as Whole Foods Market and increasingly to traditional outlets such as Walmart. Hain has the natural/alternative foods market covered with a variety of known and respected brands. 

2. Margin stability and growth. Since 2009, Hain's profit margin has increased and remained stable in the 6.2% region. Over the past several years Hain has shown its ability to increase both revenues and profits, with recent margins significantly improving year-over-year. 

3. Experienced management. Irwin Simon has been with Hain since he founded the corporation in 1993, and maintains strong leadership as Chairman and CEO. The CFO and CEO of Hain's U.S. operations have both been with Hain since the early part of last decade. This experienced management team knows the company inside and out, having worked in various portions of the business for approximately 10 years, and has proven commitment to the company. 

What to be weary of: 

1. Debt. In 2011-12 Hain took on an additional chunk of debt (approximately $160 million). Management has been sufficient addressing debt in the past, and currently the company appears to be paying off debt at the rate of approximately $30 million a quarter. As of the latest quarter, Hain carries $36.15 million of cash on the books with $360.5 million in debt. While I don't doubt management's ability to manage this pile of debt, it is something to closely observe going forward. For the past several years the company has always had 8-10 times more total debt than cash. So long as management can stay on top of the debt and generate sufficient cash flow I don't see much cause for concern. 

Let's face it, people are eating healthy these days and are growing increasingly conscious of what they consume. Hain has a presence in the U.S., Canada, and Europe, with an impressive portfolio of brands in the natural foods market. I see this as a solid long-term investment, given the company is currently valued under $3 billion and selling at a P/E less than 30.  [more]



My Current Holdings

February 18, 2013 – Comments (3)

Over the past few years my portfolio has gone through a good deal of reshuffling, some for the better and others... not so much. Over the past several years my Dad had success with Louis Navellier's recommendation service, which influenced some of my holdings. 

AUY - Yamana Gold
CL - Colgate Palmolive 
CMG - Chipotle Mexican Grill
COST - Costco Wholesale
HAIN - Hain Celestial
MNST - Monster Energy
NFLX - Netflix
PNRA - Panera Bread
SBUX - Starbucks
WFM - Whole Foods Market

Costco and Colgate I recently purchased for dividends and perhaps more security from volatility - two solid companies that won't be going anywhere (probably up or down), but will pay out the dividends as they chug away. 

Right now nothing is really jumping out at me to purchase, so I have a bit of cash on the side waiting for an opportune moment. When the market is ticking up like this, it can be challenging to make a purchase decision. For now I am attempting to practice patience and either A) continue searching for a desirable investment, or B) wait until a current holding or watch list pick gets slammed by the market.   [more]



What's Changed Since I was 12

February 17, 2013 – Comments (2)

 Even though investing isn't the core interest I had during my early teens, I have recently returned to the love of discussing, analyzing, and exploring businesses that flourished so naturally through the Fool and this community. 

Reflecting on the past eight years, and in particular the Fool years, is a remarkable thing. A lot of it seems like it just happened, and in many ways it strikes me as a bizarre but highly entertaining dream. I actually went to Fool headquarters and met Tom and David G, Bill Mann, and a host of other Fool analysts.When I was 15. For the life of me I can't remember what we talked about. Michael Read really nominated for the Feste Award six years ago?! At one point, I think in my junior year of high school, I talked over the phone with a group of HQ Fools, and all but had a job guaranteed at the Fool upon high school graduation. It's incredible for me to think that these experiences were just a few years ago. 

My father, Tim, who is responsible for supporting and cultivating my interest in stocks and the Fool, suddenly and unexpectedly passed away on August 6, 2012, after less than a year of experiencing the symptoms and being diagnosed with prostate cancer. He was just 61 years old - even more shocking considering I can count on one hand the times I remember him being sick when I was growing up. This pencils2 account and moniker, that at one point I began infamously using to give (well-received) investing advice despite being 13 years old, was the one that my Dad started around 2004. 

My dear father's passing has given me the opportunity to help manage his IRA, as well as my mother's. This year I also had to transfer my account from being a custodial account with my Dad, to my sole individual account. This year, for whatever reason, has led me to the direction of resuming my interest in investments, and it has led me back to the Fool community. Part of me feels like I cut the ties that I did have to the Fool, but perhaps a portion of me hopes that people will understand that teenage boys can be unpredictable and sporadic. (Sorry, should have braced you for that revelation.) 

Aside from resuming my passion and interest in investments, I am still enrolled at Berea College in Kentucky - currently in my third year as a Business Administration major (concentration in Marketing). One more year to figure out where to head next. I am Student Government President at Berea, which has been a blast. I'm heavily involved with a multi-year program at the College as well, Entrepreneurship for the Public Good, which has helped me cultivate skills related to entrepreneurship, community development, and other ground-up endeavors.

Enough about me. My investing mannerisms are largely what they were when I was 12 and 13, albeit a bit more refined and grounded. With my personal portfolio, I will not invest in any company I am not familiar with. I don't care who endorses the stock - I simply can't risk my own money investing in a company I either don't know about or don't care about. If I don't use the product or like the product, how can I expect others to use the product? The best investments are not obscure companies waiting to be found in a rare vortex of formulas - the best investments are companies whose products and services we use, enjoy, and recommend. 

Thus, I am comfortable investing in Netflix, Chipotle, Starbucks, and other such businesses. Companies who I am confident investing in for the next 5-10 years minimum. I've found that companies who I don't fully understand tend to be lousy or very volatile investments, which would lead me to make buy/sell decisions based on emotional frenzies rather than through a calm, grounded approach. I'm a firm believer that we don't have to actually look all that far for great investments. Start by analyzing the products and services you utilize on a regular basis - chances are there is a solid company (and potential investment) behind those offerings. Start there and expand the scope of your research based on what products/services you, your friends, relatives, coworkers, etc. are excited about. Remember, successful investments can't be all that obscure because successful companies need either A) lots of customers, or B) high-level clients. People will know who these companies are and utilize their services. 

"Snorefest! Can this kid just leave again alrighty?" Okay, okay, I know this has been a bit much. I hope this post finds you all well, and perhaps willing to rekindle the community that I remember from a few years back with old and new friends alike. I'll be here, at Pencils Palace, posting my investment musings and questions as time allows. I look forward to reconnecting with old friends and developing relationships with new Fools. 

Best regards, 
David K  [more]

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