Jun 282015
 

Earlier this month I blogged about my plan to help make this world a greener place by supporting renewable energy initiatives. One way to do this profitably is to invest in green companies. On Thursday this past week I purchased 50 shares of Brookfield Renewable Energy, (BEP.UN) for $38.05 CAD each for a total cost of roughly $1,900. It also trades as BEP on the New York Stock Exchange for interested investors in the U.S.

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This is my first investment in a pure-play renewable energy company. Brookfield Renewable develops, owns, and operates renewable power generation facilities. It’s one of the largest and most diversified publicly traded green companies in the world. BEP has a diversified portfolio of high quality assets and over 100 years of power generating history. :)

The Business of Brookfield Renewable Energy

I’ve always like the idea of investing in B.C. Hydro or Ontario Hydro because the idea of creating electricity through the power of nature itself (water and gravity) and then selling that electricity to make money sounds like a great business model. The profit margin must be very profitable because once a hydro dam is built it doesn’t cost much to maintain it. But there’s no practical way for me to invest in crown corporations and government operated hydro facilities. Luckily, Brookfield Renewable has the solution. :)

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BEP has over 7,000 MW of installed capacity, predominantly from its large hydroelectric portfolio. This means I can invest in water dams via BEP. :) 80% of the company’s assets is hydro projects, the highest quality renewable asset class. The other 20% is split between solar farms and wind farms with a compelling total return profile. In total Brookfield Renewable has $20 billion of assets under management (AUM,) mostly in North America, as the map below shows.

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Investment Returns

But ultimately what I really want to know is will this company be profitable in the future. First let’s look at its historical returns. Thanks to the experienced management team at the Brookfield Asset Management company (BAM), the parent company of Brookfield Renewable, BEP was able to return to its investors 16% compounded annualized return since inception in 1999. Hey not bad at all! 😀 It outperformed both the Canadian and U.S. stock market indexes.

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Jun 122015
 

When choosing a potential investment to put our money in it’s important to look at all the usual financial metrics like profitability, management, history, and forecasts. But a less conventional measurement to consider and is usually harder to quantify, is employee sentiment. 😀

The world’s largest asset manager, BlackRock, which has more than $4.65 trillion of investments under management, includes employee happiness data into its models for evaluating holdings and investment prospects. “We look for companies that have solid employee rankings and want to buy companies that have improvements in employee opinions,” says Paul Ebner, a portfolio manager at BlackRock. “Happy and engaged employees lead to more wins and more sales opportunities.”

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It makes sense from a practical point of view. People who enjoy their work tend to be better at what they do and are more focused. And companies that are known to keep their workers happy will naturally attract the best talent in the industry. Research appears to back up the findings. Alex Edmans, an associate professor of finance at Wharton School of Business, discovered that companies that made Fortune Magazine’s list of the “100 Best Companies to Work For in America,” outperformed their peers by more than 2% on average annually between 1984 to 2009 (25 years.)

I have looked at the most recent Fortune list of best companies to work for. The top 3 publicly traded names are Google, Salesforce, and Roche (Genentech.) Over the last 5 years (from June 2010 to now) the stocks of all 3 companies have outperformed the Dow and the S&P 500 indexes. :)

  • GOOG = +118%
  • CRM = +197%
  • RHHBY = +115%
  • Dow Jones Industrial Average = +75%
  • S&P 500 = +92%

However other studies have shown there is little to no correction between employee happiness and the profitability of a company. Some critics say it’s an imperfect and unreliable indicator, arguing that the idea of happy workers is just fluffy. I’m not sure if we should gauge a stock by how happy its workers are, but I do think that disgruntled employees can create a toxic work environment which could lower a business’s earning potential.

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Random Useless Fact

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Jun 092015
 

Last week I blogged about how renewable energy is the cat’s jammies right now. It’s growing rapidly all over the world and may be one of the best investing opportunities of our life time. :) Today we’ll take a closer look at how to invest in them.

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Why Invest in Renewable Energy

In 2005 cell phone manufacturers didn’t have a clue how the mass adoption of smart phones would change everyone’s lives. 📱 We literally have the entire internet in the palm of our hands today! YouTube was also created in 2005, by a few young chaps in their twenties. But nobody could have predicted that 8 years later video streaming would make up more than half of all internet traffic by data usage. You guys, 2005 was only 10 short years ago!

My point is the world is advancing quickly, and when it comes to making money, we have to position ourselves accordingly to ride the waves as they come and get in on the ground floor before the opportunities mature. And right now, I believe the next big wave that’s coming is in renewable energy. :) World leaders at the G7 Summit recently said they want to “de-carbonise the global economy” by the end of this century. This means ditching fossil fuels, and moving more towards green alternatives like solar, wind, and hydro electricity. With climate change being a major global priority, now is the time to focus on a greener future. ☀

Imagine investing in Apple in 2005 before the release of the first iPhone or being one of the YouTube founders. That’s the kind of opportunity we have right now with green energy.

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Hipsters are all about Eco-friendly trends. We can be like hipsters too and invest in this industry before it becomes cool. 😀 Over the next 10 years I believe we’ll see a revolution in green technology. So let’s act now. When 2025 rolls around, renewable energy will be a lot more mainstream. But early investors like us can look back at 2015 and feel proud knowing that we were pioneers of this technology. Let’s work together to reduce humanity’s carbon footprint, and make some money doing it.💸

By investing in green energy we help raise capital for businesses to expand wind and solar power which will lessen the reliance for the demand of coal, and natural gas, which currently still make up the majority of the U.S. electricity needs. When we invest in renewable energy, we facilitate lower carbon emissions, create jobs for people, and profits for companies. We accelerate the speed of innovation making green technology more efficient and cheaper to produce. And on top of everything we can expect to make a 4% to 10% annual return from our investments.

Below are 5 different ways to invest in green energy with varying degrees of risk and expected returns. Let’s go over them one by one.

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May 222015
 

Those who invest in cocoa should put their money behind bars. Chocolate bars that is! 😀 Earlier this week in part 1 of my investing in chocolate series I wrote about the insatiable global appetite for chocolate and how to make money from that. :) Today I’ll go into details about how I plan to do it.

Last week I purchased about $4,000 USD of chocolate companies, Hershey Co and Mondelez International Inc. 😀 Both are major players in the chocolate space and own some very high quality products and valuable brands. I bought 20 shares of HSY and 50 shares of MDLZ, which is roughly $2,000 of each company.

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As we can see I bought these 2 stocks in my US dollar TFSA for efficiency. I’ll post a tutorial on how to open a registered $USD account in the future if anyone’s interested. For now let’s go over some analysis to understand why I believe these companies should be in my long term investment portfolio.

The Hershey Company

Famous investor Warren Buffett said one of the secret formulas to a successful business is to “buy commodities, and sell brands.” That is exactly what Hershey is doing. :) It purchases sugar, milk, cocoa, etc, and sells products that have major brand recognition. About half of the chocolate consumed in America is milk chocolate, and that is what Hershey is known for. :) If someone goes into a candy store to buy a Hershey chocolate bar and the store owner says “sorry, we don’t have Hershey, but we have this other generic brand that is 20% cheaper,” then the customer will probably leave and try to find another store to get his Hershey fix. 😆 That is the power of brand loyalty. It automatically puts a 20% value premium over other businesses offering the same food. Check out some of the awesome brands Hershey is responsible for.

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Apr 132015
 

15-04-expensive-internet-memeNorth Americans pay a lot of money for high speed internet access. One way to get around this costly expense is to own the means that produce the service. This means buying shares of the internet service providers that we use. Telecommunication companies are usually very generous to their shareholders as many pay out up to 40% of annual profits to their owners. Over time this gives one the opportunity to have a reoccurring internet bill pay for itself.

Step 1: Figure out your current internet service fee.
Step 2: Save an equal amount of money earmarked to buy shares of your internet provider.
Step 3: Continue buying shares every year for 20 years.
Step 4: Now use the dividend income you receive from your ISP to pay your internet bill. :)

Example: If we currently pay $50 a month for one of Bell’s internet plans, we can simply set aside another $50 a month to buy Bell stocks (BCE) on the TSX. This gives us $600 a year to invest in BCE. To save on trading fees we can buy the shares once a year, not every month.

The average price of BCE last year was around $50 so every year our $600 savings can buy us 12 shares of BCE. After 20 years we’ll have 240 shares total. Bell currently pays its shareholders $2.6 per share every year. With 240 shares, we would get $624, or about $600 after tax, with the dividend tax credit, for most people.

At that point we can essentially use Bell’s dividends ($600/year) to pay for the cost of our internet usage ($600/year.) :)

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