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When searching for companies to invest in their common stock, I look at three primary factors: The Company’s Market Share, The Company’s Longevity Potential, and The Company’s Dividend. If a company qualifies on all three metrics, then I will do further analysis on the company based on its performance history, financials, and social impact before choosing to buy stock in the company.
In the United States, it is technically illegal to have a monopoly in business. However, several companies have what I call Pseudo-Monopolies or Functional Monopolies, where they effectively control 95-100 percent of a specific industry. Companies with that kind of power and control are more likely to generate massive amounts of profits, because of their control over prices, revenue, and stability.
One example of a Functional Monopoly is Microsoft with its business software, and cloud computing. If you cannot use Microsoft Office then you will have a difficult time finding a job in a business environment, even though there are plenty of other choices for business software, and business computing.
Even if you use a different software, you will still most likely be using a computer with the Windows Operating System. In the global share of Cloud Computing, around 40 percent belongs to Amazon, 30 percent belongs to Microsoft, and the remaining 30 percent is split among several other companies.
Longevity Potential and Dividend
In order to avoid capital gains taxes and double taxation, I focus on buying stock in companies, and holding onto the stocks for as long as possible. For that reason, any company I buy shares in must have a product or service that has a competitive advantage over present and future competitors. In addition, any company that does not pay a dividend is automatically disqualified. However, we will search into those companies to try and find other ways to invest with successful companies that do not pay dividends.
One example of longevity potential is Coca Cola with its seemingly unstoppable brand that supersedes any singular person. When a brand and the company’s systems exceed the power of the CEO or founder, that brand becomes something you can put your money on. Coke specifically has become so powerful that even when the company makes a mistake in its marketing or recipe, the market immediately sends warning signals, and the company will course correct back to stability.
The “new” Coke Zero Sugar is literally Coke Zero with one word added to the can, and sales increased over 20 percent within one month of changing the name.
What follows is a list of companies I currently own stock in, and heavily suggest you look into for your own portfolio.
There are two companies that own over 80 percent of telecommunications in the United States, and Verizon is one of them (AT&T is the other one). AT&T is a powerful force in itself, however they repeatedly have customer complaints, and satisfaction issues, which suggests a problem in its services. Verizon has consistently provided good products and services for reasonable prices, and continues to quickly adapt and grow with new technological landscapes by partnering with companies like Google and Microsoft, instead of spending their own money for research.
As mentioned before, Microsoft has an incredible hold on business software, hardware, and cloud computing. With their new CEO, they have also stopped wasting time and money trying to compete with Apple in the cell phone business, and have instead returned back to what made Microsoft a multi-million-dollar company in the early 2000s: software and innovation.
Walt Disney Corporation
A little over 30 percent of the top 500 companies in America have connected the business side of the company with the technology side of the company; doing so greatly increases efficiency and profits. The Walt Disney Corporation has had the two sides of the company aligned since the 1930s. As a company, Disney is heavily undervalued, even if you only consider their movie business. The company is a money-making machine when you take into account their television programming that caters to all age demographics, their real estate power, theme parks, multiple islands, cruises, and the powerful Disney Brand.
Disney has been making money for the last 100 years, and they show no sign of slowing down for the next 100 years. As long as people are spending money on entertainment, people will be giving their money to Disney.
Coca Cola Company
When comparing Coke and Pepsi on flavor and variety of products, Pepsi wins every time. Yet, Coke manages to have higher net income, and lower expenses than Pepsi year after year. When dealing with business, perception becomes more important than reality, and the perception of Coke is consistently positive, and does not require money to be spent on innovation. Even without its new healthier juice products, to replace Minute Maid, or other products, Coke could run as a profitable company off the sales from Coke, Diet Coke, Sprite, and Dasani Water.
Check out my other story "Carbonated Soft Drink Industry Analysis" for a more in-depth look.
After the dust cleared from the 2007-2009 Mortgage Crisis, only a few banks were too big to fail; JP Morgan was one of the biggest. JP Morgan maintains this level of power with their international connections, and by recruiting the top talent from universities around the world.
Johnson and Johnson
When the economy inevitably drops again, the most consistent market is consumer goods. When it comes to consumer goods in the United States, Johnson and Johnson, and Procter and Gamble have the majority of the power. Because of their stronger financials, Johnson and Johnson was prioritized for first purchase.
Look in your computer or laptop, and you will have a chip from AMD, Qualcomm, or Intel. The only difference between the three is their ability to generate profits, and pay off debt, and Intel is the best at both. Intel continues to put money into innovation and research instead of manufacturing, unlike AMD, which enhances Intel's ability to maintain their market share and dividend.
If you live in the United States, and pay for indoor plumbing you’re giving money to American Water in some capacity, and it’s been that way for almost a century. Plain and simple.
New York Mortgage Trust
Most people are uncomfortable investing in mortgages, because of the financial crisis, but the key to that crisis was ignorance and deception. By taking the time to look at the quality of mortgages in the New York Mortgage Trust, I am able to keep my financials safe. The 13 percent dividend also creates an incredible return on investment.
Store Capital Corporation
The valuation process I use is heavily inspired by a book from the 1940s written by the man who taught Warren Buffet how to invest. Buffet’s company, Berkshire Hathaway, was able to get more information than was open to the public, and then they immediately invested in Store Capital Corporation. Store is another Real Estate Investment Trust, which means they are able to pay a strong dividend.
There are three companies that control the education products in both private and public schools in the United States. Pearson owns the east coast market of education material. Because of some less-than-satisfactory business practices, Pearson has a consistent revenue stream from selling products that cost little to produce. Some find investing in education risky as the amount of student debt increases monthly, but Pearson’s core market is in elementary to high school age children, and comes primarily from public school payments which means their core revenue comes from tax dollars, not student loans.
In the busiest airport in the world Delta airlines owns half of the ground space. It is difficult to make money in commercial airlines, but Delta’s market share, and monopolized flight paths encourages continued success.
McDonald’s is not a fast food chain; McDonald’s is a real estate company that primarily leases land to franchisees to run a fast food establishment also called McDonald's. Even if people stop eating the cheap and convenient food from McDonald's stores, the underlying assets of land makes McDonald’s a strong company with great longevity potential.
PIMCO 15+ Year US TIPS
Bought mainly for security and stability; this Exchange Traded Fund is comprised of 15-year United States Tax-free bonds.
When it comes to national pizza chains, Dominos has been an industry leader in innovation and cultural impact. In every modernization of pizza in the last ten years, Dominos has been the first one to implement the process or system. Dominos is also a culturally impactful company with their different initiatives like their latest initiative to repair roads in communities near their stores.
BP is a major oil leader in the United Kingdom, and the United States. However, the primary reason for investing is because of their latest initiatives to build electric charging stations in Europe (where electric vehicles are more common) which suggests the company has an eye on the future to maintain relevancy and profits.
Starbucks was always on my list for their ability to utilize their brand in line with their product to drive revenue throughout the year. Starbucks dominates the coffee industry on the west coast of the United States, but they have stores nationwide. One of their biggest problems is not being able to fit all their customers into their stores, because the lines are so long. They recently announced an initiative to combine forces with Microsoft, and two other companies to create a stable and regulated network for Bitcoin.
Because of the failing infrastructure in the United States, steel manufactures have constant requests for more and more steel. Nucor has strong financials, and a strong dividend that has the potential to become even stronger as infrastructure becomes a larger and larger concern for the government and its citizens.
This is the information age, and all of that information needs to be stored somewhere. Iron Mountain is one of the most profitable data infrastructure companies in the United States and has a 5 percent dividend that ensures higher returns.
The healthcare industry in America grows every year, and shows no signs of slowing down since people keep getting sick. Instead of investing in more expensive, and riskier, companies that operate in specific surgical equipment, or prey on sick people with incurable diseases, I chose to invest in hospitals that help people daily. Pfizer manufactures and distributes the basic medical supplies every hospital needs like gloves, needles, and sample trays, in addition to pharmaceutical products
Also, in a list of the most profitable industries, the number two industry is pharmaceuticals.
Global Lithium and Batter Tech ETF
Nearly every modern technology uses a lithium ion battery for power including laptops, cell phones, and electric cars. Mining companies rarely have profits, and rarely pay a dividend, but this is another Exchange Traded Fund that generates profits from owning and operating a large enough amount of those mining companies to pay a consistent dividend.