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The Conservative Income Investor | Aside from the usual recommendations to own companies with dominant market positions, strong balance sheets, and high earnings growth, what is something that investors should keep in mind over the next 20+ years of investing that maybe didn't matter as much in the past? My view is that investors should be taking to heart the 1970s recommendations of Peter Drucker who predicted that one of the endings of perpetual technological development is that friction will cease to exist between the original source of a product and the consumer. This means that you should be wary about investing in companies that act as middlemen. Take something like Dick's Sporting Goods (DKS). It's a $5.3 billion company that is divided into 114 million pieces that trade at $47 per share each. It earns a profit of $350 million, or $3.07 per share. The valuation of 15x earnings is pretty low for a company that has ten-year top-line growth of 11.5%, ten-year earnings per share growth of 16.5%, and a valuation of 19-23x earnings during that time. Since the $3 per share IPO in October 2002, the stock has grown a $10,000 investment into $151,000 in just fourteen years. That is especially impressive when you consider that the current valuation of the stock is competitive with the recession-level P/E ratio level and is otherwise the cheapest opportunity to buy Dick's Sporting Goods since the IPO. Yet, when I study Dick's Sporting Goods, there is a limitation on the type of way it should be considered. It's not something like General Electric, Coca-Cola, Colgate-Palmolive, Nestle, or Brown Forman where you can buy the shares, and then set it and collect the dividends for the rest of your life knowing with a high probability that something will be there decades from now. There will come an expiration date for the company because the original source goods--the Nike and Under Armour products that get customers through the door--are now beginning to contact customers directly without the need for a vendor middleman like Dick's Sporting Goods to act as an intermediary to connect Nike shoes and golf clubs to the consumer. At first, I noticed that Nike and Under Armour were beginning to sell their own products directly to consumers online. That was something that would compete with Dick's Sporting Goods, but not necessarily in a mutually exclusive way--it is conceivable to think of a world where Nike and Under Armour's online sales grow while Dick's Sporting Goods also earns a tidy growing profit selling those goods to customers as well. That's because shoes, jackets, shirts, pants, and so on are the type of good you like to see firsthand and get a feel for--it's distinguishable from buying a book on Amazon because there is a certain in-person customization that enough customers will require. But what has bothered me, from the perspective of someone studying the business model at Dick's Sporting Goods, is that Nike and Under Armour have successfully opened their open stores that sell their products directly to consumers. If there is a pair of Nike shoes that you want, why not just go to Nike instead of an intermediary that will have to raise the price enough to own their own keep as well? The coherence of the intermediary's business model takes on a substantial impairment when the end products that a customer desires can be purchased through the end company itself. There are three reasons why a business earns a profit over the long term. You may buy something because it is cheap, you may buy something because it is convenient, and you may buy something because you want the specific product itself. An example of the first category is airlines--unless you belong to a frequent flyer program, you will choose which airline to travel based on price. If Delta tickets cost $139, and Southwest tickets cost $129, you're going to choose Southwest unless there is some other externality weighing on your decision--e.g. maybe you had a bad experience flying Southwest before, maybe the Delta routes are more timely, etc. Absent an intervening externality, price wins out. Convenience is the second moat, and this is the weakest of them all. You might frequent a grocery store because it's by your house--you wouldn't actively choose it based on price, and you don't seek out the grocery store for it's own sake, but it's only a five minute drive away so you go there anyway. And the third type of business is the strongest--when you want the specific product itself. You don't just want shoes--you want Nike shoes. You don't just want soda--you want something sold through Coca-Cola, Pepsi, or Dr. Pepper. You don't just want acetaminophen--you want Johnson & Johnson's Tylenol. Using our Dick's Sporting Goods example, you can see that the profits are built on convenience. People don't want Nike shoes because they bought them at Dick's Sporting Goods; they buy them at Dick's Sporting Goods because that is the most convenient way to get Nike shoes with the immediate knowledge that they fit. This is the type of business model that is the most vulnerable to disruption. It doesn't mean that you shouldn't buy Dick's Sporting Goods--the current price around $47 per share does offer some protection, but it's the kind of company that you may not want to hold beyond five years. A quick 40% pop, or the spotting of a branded company with a similar valuation to Dick's, is enough justification to get out of the company because firms built on convenience exclusively are not inherently meant to be lifetime holdings. This observation usually leads to a follow-up like: So what do you do if you own Wal-Mart stock? There are three things that Wal-Mart has going for it that might distinguish from an investment in a firm like Dick's Sporting Goods. It sells products that don't face competition from the branded source; it has the additional benefit of cost advantages in addition to convenience advantages; and the firm is 50% owned by the Walton family which reduces the inherent conflict of self-interests that exists in a corporation where there is a disunity between management and shareholders. Although Wal-Mart faces convenient and price competition from Amazon, and in some instances, Aldi and Kroger, it still offers enough of a price advantage on a decent number of offerings that it may be the preferred choice of customers not only because it is close by but also because you want to see the oranges and bananas before you buy them and there's probably not a better price if you look elsewhere either. The Wal-Mart business model isn't just built on convenience; it's built on the mixture of cost and convenience. Also, anytime you buy stock in a company, you also face the disadvantage of not fully knowing what's going on inside the company. When you buy a few hundred or a few thousand shares of a billion-dollar corporation, you can't quite measure the management team's survivalist instinct and know the specifics of how that instinct (if it exists) translates into a sound strategy that will serve shareholders well. With the Walton family collectively owning over $100 billion of the company's $214 billion in market value, you can strongly presume that the survivalist instinct exists at the management level (because the Walton family's control of the board permits them to choose officers) so the only unknown is whether the survivalist instinct translates into a strategy that permits shareholders to prosper. It's one set of unknowns instead of a double set of unknowns. The most straightforward way to solve this problem--recognizing that Wal-Mart has a strong cost and convenience advantage but unsure whether it is built to withstand the decades--is to take your Wal-Mart dividends if Wal-Mart is a meaningful position you hold and then invest them in companies that more clearly have generational-holding characteristics. If the Wal-Mart business model is only meant to grow earnings for 23 more years, well, you get at least 92 dividend payments to mitigate that final outcome. But if you're trying to figure out what should be your investing north star for the next two decades, and have concerns about the rate of disruption brought about by technological change, then you should focus on companies where people seek it out to specifically acquire the products that they sell. Strong brands should be your first priority, and can easily fill two thirds of a portfolio. Then, you focus on the low-cost producers in an industry that have some type of cost advantage--companies with the GEICO, Wells Fargo, U.S. Bancorp, Exxon business model. That can take up anywhere from 10% to 30% of your selections. And lastly, you should aim to keep less than 10% of your wealth that is earmarked for long-term business ownership towards those companies that are exclusively about convenience. Those are the businesses most susceptible to shareholder wipeout, and therefore, should be a disfavored investment category.
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Boat-N-Tackle Outfitters Network - www.boatntackle.com Custom Built Fishing Lures SINCE 2007 WE BUILD CUSTOM FISHING LURES! You Dream It, We Build It! We Can Build Custom: Bucktails, Spinnerbaits, Buzzbaits, Inline Spinners, Jigs, Crankbaits, Tied Bucktail Trebles, Feather Hooks, Marabou Hooks, Tied Flashabou Hooks, Spoons, Soft Baits, Flys, Umbrella Rigs, Fishing Lure Add-Ons, Walleye Spinner Rigs, Live Bait Rigs, Leaders, Add-On Frog Stinger Hooks, Premium Custom Designed Bucktails, Hard Baits, Lead Jigs, Lead Weights, Snag Hooks, Custom Wire Bending, Floating Bucktails, Freshwater, Saltwater, 3D Printed Lures and more... email@example.com We are not a fishing lure manufacturer! We are a custom built fishing lure experience. We care about catching fish and the quality of our lure builds, not quantity! "We design, create and build our custom lures with care, precision, detail, innovation, imagination, forward thinking, higer standards, premium components and excellent craftmanship, which all defines our passion for fishing. We believe that you deserve the very best, when you receive your BNT custom built lure! And...we have a lifetime warranty on our custom built lures*" -BNT Custom Lures * Original buyer, custom lure purchased through BNT or at Fishing Connection Tackle Shop Email Us: firstname.lastname@example.org We have a lifetime warranty on our custom built lure orders!* *Original custom lure owner only, proof of purchase necessary. BNT custom lure bought direct with Boat-N-Tackle Outfitters (BNT Custom Lures) or through Fishing Connection Tackle Shop custom built lure ordering. USPS Priority shipping cost to/from BNT to rebuild lure is at the expense to the original purchaser. Lures can be dropped off/picked up at Fishing Connection Tackle Shop. Standard lures purchased direct on boatntackle.com E-store pages and at Fishing Connection do not have a full lifetime warranty, just custom orders, but we can rebuild them for you for our standard lure building fee. THANK YOU FOR STOPPING OUT AT THE ROLLING MEADOWS FISHING FLEA MARKET 2020! NEW! BNT 3D Printed Fishing Lures "Get your ZOID on!"www.ellipzoid.com The All New BNT 3D Printed"ELLIPZOID FLOATING SPINNERBAIT" "It Floats, It Spins, It Catches Fish. It''s not a Buzzbait, it''s not a Spinnerbait. It''s a Floating Spinnerbait that Buzzes! It''s the EllipZoid!" -BNT Above, BNT Ellipzoid Spinnerbaits, Magnum size EllipZoid''s are now available on our EllipZoid E-store page: ELLIPZOID E-STORE Click above INTRODUCING!The All New BNT 3D Printed"ELLIPZOID FLOATING SPINNERBAIT BASS" In two different sizes. 3/8 oz. and 1/8 oz.Custom color orders only at this time.Above, Medium and Mini BNT EllipZoid Spinnerbaits (Quarter shown in photo for size reference)Above, Custom BNT EllipZoid Spinnerbait Mini in custom color for a client The All New BNT 3D Printed"ELLIPZOID FLOATING BUZZ INLINE""It Floats, It Spins, It Catches Fish. It''s not a Bucktail, It''s a Floating Inline Lure that Buzzes! It''s the EllipZoid!" -BNTAbove, Magnum sized BNT EllipZoid Inlines BNT FLOATING BUZZ INLINE BASS SIZES NOW AVAILABLE FOR CUSTOM ORDERS!Above, Medium BNT EllipZoid Inline BassAbove, Mini BNT EllipZoid Inline BassAbove, custom Mini and Medium BNT EllipZoid Inline Bass in custom colors for a client email@example.com EllipZoid''s are now available on our EllipZoid E-store page: ELLIPZOID E-STORE Click above Almost any custom color variations are available on the 3D Printed EllipZoid Spinning Body, Eyes, Flashabou and Powder Painted Spinnerbait head Custom Order Your EllipZoid today! firstname.lastname@example.org Introducing! The First 3D Printed, Floating Bucktail!The BNT "ELLIPZOID" with a 3-D printed ellipsoid shaped lure body in blade sizes #3, #4, #6, #8, #10 and #12. Designed by an Aerospace Engineering student at Purdue University. "Glide slowly and stop over those weedbeds and shallow points with the BNT EllipZoid!" -BNTNano #3 blade, unpaintedMicro #4 blade, all blackSmall #6 blade, hammered nickel white/silverMedium #8 blade, firetigerMedium #8 blade, 24k gold/black/holographic black FlashabouMedium #8 blade, orange/blackMedium #8 blade, BNT LoonMedium #8 blade, black/holographic blackLarge #10 blade, BNT ChartreuseMega #10 blade, larger body size, larger 7/0 trebles. Unpainted with BNT Loon components.Giga #12 blade, three trebles, unpainted with firetiger components Our 3-D printed BNT ELLIPZOID has an ellipsoid shaped lure body with inset 3-D eyes and gills. Our floating bucktail body is also an oblate shape, unlike any other. Here''s some EllipZoid data below: Above, seven sizes available for custom build Available in different custom paint patterns www.ellipzoid.com EllipZoids in stock and available for custom color order at:(click logo above for tackle shop information) EllipZoid''s are now available on our EllipZoid E-store page: ELLIPZOID E-STORE Click above The BNT Custom 3D printed BNT ELLIPZOID floating bucktail lure is custom color orderable by contacting us at:email@example.com Or we have some colors available at: Our BNT Ebay store page has custom, used, antique and vintage lures! Click the ebay links below: Boatntackleoutfitters Ebay store:Click here Let us make your fishing lures GLOW! BNT GLOW painted lures available per custom painting orders. Lure repaints available per custom order BNT Custom Painted "COSMIC CHROME" LURESBNT Cosmic Chrome lures available per custom painting orders. Lure repaints available per custom order BNT Custom Floating Bucktails The BNT Original Cedar BOILE-R-MAKER SPECIALYou know its ours because our bucktail really floats and has dual treble hooks on every size we custom build! Above, the Original cedar BNT Boile-R-Maker Specials in size #8 blades and dual treble hooks! Above, #8 blade Boile-R-Maker Specials custom colors for clients Above, #10 blade Boile-R-Maker Specials in Brown Sucker and Walleye color patternsAbove, a custom built Boile-R-Maker Special in size #6 blade with perch JigSkinz and dual trebles! Contact us for custom builds of the Boile-R-Maker Special firstname.lastname@example.org The BNT Marabou-N-Feather InlineAbove, BNT Custom Lures, Marabou-N-Feather inlines, dual #8 blade, dual treble, "Spring Sucker", "Nuclear Perch" and "Black Bird" Available on the BNT Premium Lures E-store Page Introducing! "The BNT BASS Collection"Boat-N-Tackle Outfitters is now building custom bass lures and rigs -BNT Chatterbait Dancer Jigs-Brush Jigs-Poison Swingtail Jigs-Floating Jigs-Round Jigs-Weedless Football Jigs-Swimbait Jigs-Herring Underspin Jigs-BNT Frog Stinger Hooks-BNT Prop-On-Top-Rubber Baits-Bass Crankbaits-Custom buildsand More! The BNT Weedless Frog Stinger Available in two weedless VMC hook sizes BNT Weedless Frog Stinger now available in white! Available on the Custom Built E-store page 3 Also, add a BNT Prop On Top to your frog lures along with a BNT Weedless Frog Stinger. Large, medium and small sizes in different colors available! BNT Prop On Top available on the Custom Built E-store page 4 The New BNT"EIGHT"Inline Dual #8 blades with the all new BNT Wide "SILICONEFLASH" skirts!Custom order at email@example.com Wide silicone strands with a flash coating Limited Edition available on the BNT Premium Lures E-store Page Krezy Buzz Inlines Available for custom builds many color patterns and hook choices Contact us for custom firstname.lastname@example.org We can build new, and re-build your old bucktails back to new condition! The BNT Herring Head Under Spin Swim JigAvailable for custom pour and powder paint colorsAbove, 1-1/2 oz. size swim jig with an 8" black grub tail and a 3-1/2 size black willow blade Thank you for stopping at our booth at the 20th Annual Fishing Flea Market in Rolling Meadows, Illinois Above, our booth at the show with custom lure builder and owner Drew(Photo by BNT Pro Staffer Greg Alwes) Talking with our friend, BNT Network Partner, Fishing Lure Historian, National Freshwater Hall of Fame Inductee, writer for Midwest Outdoors Magazine, owner of Historical Fishing Display, Dan Basore (Photo by BNT Pro Staffer Greg Alwes) Above, our custom lure builder Pro Staffer, Luke, at the BNT booth at the 2018 Fishing Flea Market The BNT SPRING SHAFT INLINE BucktailAvailable for custom order in multiple blade sizes, colors and flashabou colors "BNT LOON"Custom dual #8 .040 blade inline with .062 stainless steel wire, dual VMC 4X trebles, solid brass beads, nickel lure body, black and white hand tied Magnum Flashabou Contact Us Today!Email:email@example.com See the current BNT Network Raffle going on now! Click the ticket: We Create Custom Poured and Powder Painted Swim Jigs, Round Jigs, Weedless Brush Jigs, Weedless Football Jigs, Custom Skirts (rubber, silicone, bucktail, feather, rattles, tails) and more! Available for custom orders Above, the BNT Root Beer Collection "FIGHTING CRAW"The Original Fishing Connection "Fighting Craw" by BNT Lures A few color patterns are available on the Fishing Connection E-store Click here:Fishing Connection E-store Two time winner (2017 & 2018) of the most bass caught in 24 hours Larry M. used a "Fighting Craw" jig both years. Custom color builds for special ordersCustom build pricing applies The BNT "Fighting Craw Extreme" Powder Painted, Baked, Weedless Stand Up Brush Jig, Rattles and Custom Colors Available for custom order Custom color builds for special ordersCustom build pricing applies BNT CUSTOM PAINTEDMUSKIE/PIKE SIZEDTOOTHACHES AVAILABLE FOR CUSTOM PAINTING ORDERS 51 lb. lake trout caught on a BNT repainted lure!Ken K. in Canada, July 2019 Repainted flatfish lure body on the BNT epoxy drying rack We pour custom lead rigs Custom lure painting The BNT Buzz Frog with a custom poured rubber frog tail BNT Custom EPS Floating JigsAvailable in different sizes, shapes, hooks and custom colors We also sell bottles Expandable Polystyrene, EPS Beads, High Impact Foam!Buy our EPS bottles on the Custom Built Lures E-Store Page 2 (Click above) The Original "BNT Crank Length Extender" "Gets the rear treble hook back closer to those less committed fish following your crankbait" -BNT Larger .051 wire size model available on the BNT E-store Page 3 (Lure blank shown not included)Available for custom order in different lengths and wire diameters and also with dressed trebles From A Fish Photo...To A Custom BNT Lure! Our pro staff of custom lure builders can build and paint any custom lure for you! Or, we can rebuild, modify, re-paint or fix your old broken lures. Don''t throw them away, let us rebuild them! From lure blank, to custom painted lure, in any fish color pattern, or, come up with a color pattern you wantWe can build your lures with custom painted blades Custom rear bucktail hand tied and glittered epoxy trailer treble hooks available for custom order The Next Generation Of Spinnerbaits! The All New BNT Wide Pattern Spinnerbaits Collection The "BNT2X4" SpinnerbaitPhotos above are the BNT2X4 1oz. A lot going on, in a small space! Dual hook spinnerbait with four blades Photo above: BNT2X4XL Muskie/Pike size with 1-1/2oz. lure bodies (coin shown above is a penny) BNT2X4 and BNT2X4XL are available on the BNT E-store Page 6 Custom colors available for custom orderIn 3/4oz., 1oz. and 1-1/2oz. versions For custom colors, email us below: firstname.lastname@example.org Also in the the BNT Wide Pattern Spinnerbaits Collection: The BNT Springer Willowleaf Triple Spinnerbait1 Oz. size above1/4 oz. size above Available on the Custom Built Lures E-store page 5and Custom Built Lures E-store Page 6 Models available in 1 oz., 3/4 oz., 1/2 oz., 3/8 oz. and 1/4 oz. sizes.Muskie/Pike sizes (1-1/2 oz. and 2-1/2 oz.) available.Custom colors and sizes available for custom order, email us below: email@example.com Custom BNT marble painted Toothache for a client. 16 different colors in stock for endless color patterns! The BNT Pike Rig! Above, a rigged BNT Pike Rig with a large custom poured jig and a 6" grub tail Available on the Custom Built Lures E-store 2 The Custom BNT "Muskie" and "Pike" Lure Collections!Above, Custom 110 Minnow "BNT Golden Hash Brown Muskie"Above, Custom 110 Minnow "BNT Muskie" Above, Custom 110 Minnow "BNT Pike" Above, Custom 7" Large Minnow "BNT Muskie" with custom tied bucktail rear treble Above, Custom 7" Large Minnow "BNT Pike" with custom tied bucktail rear treble Custom color patterns available for custom orders BNT Custom Lure Repainting! Do you like a lure body but don''t like the color pattern? Want it painted another color?"Supreme Pumpkinseed" custom color above From stock colors: To custom colors!"Supreme Pumpkinseed" custom color above for a client Custom BNT lure repainting orders availableDozens of color patterns possible! Email us for details: firstname.lastname@example.org Do you want a different fishing lure than everyone else? Do you want a lure you already own, changed or rebuilt? Do you have a favorite lure color that you want built on another type of lure? Let us build a custom lure for you! The BNT Bass-A-Matic BucktailAbove, the BNT "A Bite Longer" inline spinner. Available on the E-store Page 5 Are you ready to get your D''BADD-ON?A Double Bladed Add On for your lures. Give those old lures a different presentation Buy them on our E-store here:D''BADD-ON E-store Introducing the Oxymoron of Fishing Lures!The BNT"Pretty Crappie"Big Shorty Lure This version, and more, of the Big Shorty Lure is available for purchase on the E-store and at Fishing Connection *Custom painted blades available upon custom order. Below, a Big Shorty with custom painted crappie blades The CustomBNT "BronzeBack" BucktailDual #10 custom painted blades, New Custom "BNT Offset Hook Coil" (See photo below), Black/Bronze/Orange Holographic Flashabou, Dual 5/0 VMC Treble Hooks, Solid Nickel lure bodies and components, 3x triple split rings, .051 stainless steel wire Available on the BNT Premium Lures E-store Page The "BNT Offset Hook Coil"Adds a second level of hook bite below the bucktail. Gets the hook away from the main body of the lure for better hook up and for short strikes. Available for custom order on our custom bucktails in different lengths away from the main wire! The BNT Offset Hook Coil can also be added into existing bucktails (depending on model of bucktail brand) The "BNT Springer Leader"Extreme heavy duty spring lock leader in two lengths, 8-1/2" and 12-1/2", .051 stainless steel wire, 200 lbs. ball bearing swivel, .051 stainless steel spring lock wire Available on the Custom Built Lures E-store 2 Custom lengths available via custom order "Please fasten your seatbelt and keep your reel in the right position!" Our "BNT Airlines" lures are ready for launch!Above, "Chippewa Airlines" Our Custom "BNT Airlines" bucktails. With dual #10 blades, dual 5/0 VMC treble hooks, .062 stainless steel solid wire and 1/16", 480 lb. stainless steel airplane cable Available on the BNT Premium Lures E-store Page Limited Supply!Available at the BNT E-Store Page 2!Click herewww.billsmagicjuice.com "A Polymer fishing rod cleaner and polish that works great!" - BNTAlso, we have the new Bill''s Magic Juice Fly Line Cleaner and Conditioner We buy old fishing rods, old reels, old lures, antique lures, old outboards, trolling motors, old fishfinders, locators and used fishing equipment (In the northern Illinois area only. Prices dependant on condition and resaleability) Contact us at: email@example.com We are an Official Dealer in Illinois for Orderable at Fishing Connection Tackle Shop **We do not have a cart function on our E-store pages since we are a custom lure builder, and most lures when purchased are built, boxed and shipped in the order they come in. 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