Weekly Brief #40
Weekly Brief #40
Win a $40 Amazon gift card... Starbucks steals Chipotle’s CEO, Bill Ackman buys Nike and Brookfield, Scotiabank invests in KeyCorp, Mars acquires Kellogg’s (cont.), TikTok goes to appeals court.
Good morning investors 👋,
Happy Friday and welcome, or welcome back, to the 40th Weekly Brief.
Giveaway time: This week marks the fortieth consecutive week since the inception of the J. Nicholas newsletter. In honour of this milestone, I’ve decided to host a giveaway for a $40 Amazon gift card. It’s completely free to enter, as long as you’re subscribed to this newsletter. I’m planning on doing one of these every ten weeks, so as the newsletter grows and gets bigger and reaches more milestones, so will the giveaways. Here’s how it works:
As a subscriber, you start with 1 point. Certain actions can earn you more points. The person with the most points by the time Weekly Brief #41 goes live next week will win the gift card. (The winner will be announced that same week.)
Here are the different actions you can take to gain points. (If you’ve opened three of my past newsletter emails, you automatically receive 9 points off the bat):
Like a J. Nicholas post (1 point)
Share/restack this post (3 points)
Follow me on Twitter @thejnicholas_ (5 points)
Follow me on Blossom @jacobb (5 points)
Download my PDF or Excel template (7 points)
Refer a subscriber to J. Nicholas (15 points)
(Must reply to this email or DM me with the emails of the people you refer so I can track the points.)
Good luck, everyone! (PS: This is a Canada-only gift card. For Americans, if you win, you will receive a cash payment instead.)
Let’s get into it.
In this issue:
📈 How to improve your savings rate
☕️ Starbucks steals Chipotle’s CEO
🇺🇦 Ukraine invades… Russia?
FEATURED STORY
📈 How to improve your savings rate
There’s a crazy statistic I saw recently about different time periods of investing in the stock market and how the shorter you hold, the percentage of losing your entire investment goes up. Something like a 50% chance of losing money within a 6-month period, but as the time horizon extends to 5, 10, or 15 years, your chance of losing drops to 0.2% or something similar.
For all of us, investing in the stock market is about making money. And as the data continuously shows, the longer you keep your money invested without touching it, the more money you’ll make over time with essentially zero risk. This means every dollar that can be invested is much more valuable today than it will be tomorrow. Therefore, maximizing every net dollar you can realistically invest and increasing your savings rate will benefit you enormously over the long term.
Below is a post I recently wrote on my Blossom account discussing this exact topic, covering my personal savings rate and how I managed to invest nearly 80% of my income (because, as I already mentioned, I believe maximizing your savings rate is maximizing your future investment growth, and that’s how you ultimately build generational wealth):
Savings rate and how to improve yours
(First, it’s best to get this out of the way: Financial positions are very subjective. I’m going to be talking about how I improved my savings rate, based on my experience and the position I was in. My goal is for you as the reader to contrast this and apply it to your situation. Just keep this in mind.)
Every month, I sit down at my computer, print off bank and card statements, and log all my expenses and income into a Canva template I created. It takes me less than an hour, and it allows me to view my finances in a nicely visualized way completely for free. Doing it like this also comes with the benefit of the Canva app, so I can see and edit my finances on-the-go if needed, including if there’s a cash transaction I need to log.
But more importantly, with all of this being done, it allows me to see my year-to-date (YTD) savings rate.
Now I’m not sure about the actual definition of the term “savings rate,” but for me, it’s the percent of my total cash outflow going into my investment accounts. Every dollar spent, transferred, or deducted counts as an outflow. And it turns out, YTD as of the end of July, my savings rate is almost 80% (with most of that outflow being spent on buying securities):
I’m not saying you should do this, nor spend the time on doing this, but it does give you a nice visual representation of how bad or good you’re doing financially, what you need to cut down on, and, like I said earlier, shows you your savings rate. I’d like to say I’m in a very good financial position for my age. But I’m not yet, actually nowhere close, to the stage of considering myself financially free. And that’s the ultimate goal: financial freedom.
However, getting back on subject, how can you improve your savings rate?
One of the easiest and most effective ways to improve your savings rate is to increase the total amount of net dollars you bring in — that’s it, that’s pretty much the whole spiel, that’s the secret to maximizing savings rates.
Around two years ago, I was spending roughly $0.63 on every dollar I brought in. Simple math says my net income per dollar was $0.37, or a 37% net margin on my total income. That’s the money that hit my bank account after all expenses were paid. And that’s without factoring in taxes, which would have probably taken another 7-10 cents off every dollar. It’s still good; I wasn’t in financial doomsday or anything, and based on the data, I was actually doing good.
But then 2023 came around, and I decided to finally start investing in the stock market. It wasn’t an out-of-the-blue decision, as I’d been thinking about investing for years but just never did anything due to fears of losing my money. Of course, as the year progressed, I learned a lot more about the markets thanks to sources like Blossom, YouTube and investment books like Psychology of Money, and decided to actually take the whole thing seriously.
In that same year, I decided to improve my net income. And a fun little knowledge bite: I didn’t improve my net income by cutting expenses; I simply made much more money than I was spending on expenses. I tried a bunch of side hustles, reopened business ideas, and worked a part-time job in the middle of it all. Even up until now, I’m finding more and more ways to make more money. Including restarting a marketing agency, that if my projections are correct, will earn $10,000 per month in sales by EOY1 2025. Yet, even if the marketing agency doesn’t work out, at least I’m branching out my skill sets.
Now as of August 10, 2024, for every dollar I make currently, $0.78 of that is net income. The remaining 1% that’s not invested within the difference of the two numbers based on the screenshot above is what is left in my bank account. (And for clarification, it says 103% of total income is outflow in the screenshot because I’ve deposited most of my previous year cash reserves in my investment accounts to invest in Canadian T-bill ETFs and other cash havens. I hold my T-bills (TSX: CBIL) via moomoo currently, but I include it in “Wealthsimple Deposits” for simple accounting.)
Essentially, improving your save/savings rate is all about patience and perspective. For example, think of your net income as your earnings per share. Think of yourself as a business. In your current financial position, is it more efficient to cut costs or find ways to make more revenue? (Cutting costs is easy if you don’t need them to keep running.) If you want to make more revenue, you don’t go and venture into new businesses; you find revenue streams that align with your already existing business, your already existing skills.
I hope this helps give you perspective. Happy investing and enjoy the rest of today’s issue.
FINANCE
a. 👟 Ackman buys Nike and Brookfield
William (Bill) Ackman, the billionaire investor and CEO of investment firm Pershing Square, and an investor I follow pretty intently, revealed two new stakes in Nike and Brookfield Corporation during the second quarter of 2024, marking the first new investments for his firm since early 2023.
Ackman’s hedge fund owned about 3 million Nike shares and 6.8 million Brookfield shares as of June 30, together representing around 4% of Ackman’s portfolio. Nike’s stock, which is down 26% this year, jumped 5% in after-market trading amid hopes of activist involvement (even though Ackman has said he’s done with activist investing for now). The filing also showed Pershing Square cut its stakes in Chipotle and Alphabet by 23% and 20%, respectively.
b. 🏦 Scotiabank invests in KeyCorp
Last November, Canadian Tire repurchased Scotiabank’s 20% stake in its financial services arm for $650 million. With this newfound wealth (and a few extra zeros), Scotiabank is acquiring a 14.9% stake in KeyCorp for $2.8 billion, pending regulatory approval. The investment will be completed in two phases. First, an initial 4.9% stake in Q4 2024, followed by another 10% in 2025.
After the final investment, Scotiabank will appoint one senior executive and one third-party director to KeyCorp’s board. (KeyCorp is the 25th largest U.S. bank and operates 1,000 branches and 1,200 ATMs in 15 American states, with $187 billion in AUM.) Scotiabank’s CEO, Scott Thomson, says the deal will enhance their presence in North America and ‘provide attractive returns.’
BUSINESS
c. ☕️ Starbucks steals Chipotle’s CEO
What do you get when you mix overpriced coffee with overpriced burritos? This week, Starbucks surprised investors by announcing that Chipotle CEO Brian Niccol will be their new CEO, effective September 9. Laxman Narasimhan, who became Starbucks CEO in March 2023, is stepping down immediately.
Niccol’s track record at Chipotle is one of the best of any food CEO, where he more than doubled daily volume, doubled revenue, increased earnings per share tenfold, and significantly improved the brand’s offerings and recognition. Until Niccol starts, Starbucks CFO Rachel Ruggeri will be interim CEO, and Chipotle COO Scott Boatwright will act as interim CEO at Chipotle.
d. 🍫 Mars acquires Kellanova (cont.)
Mars is officially acquiring Cheez-It (I swear it was Cheez-Its) maker Kellanova, the spin-off company from Kellogg’s, in a ~$36 billion deal (around $6 billion more than when I first mentioned it), bringing together brands like M&M’s, Snickers, Pringles, and Pop-Tarts under one company. Mars will pay $83.50 per share, a 33% premium over Kellanova’s closing price before news of the deal.
The deal is set to close in early 2025 and will make Kellanova part of Mars Snacking, based in Chicago. Kellanova’s shares rose 8% following the announcement, valuing the company at $28.58 billion, excluding debt. This acquisition is Mars’ largest ever and the biggest deal of 2024.
POLITICS
e. 🇺🇦 Ukraine invades… Russia?
As the Russia-Ukraine war approaches year three in six months, a sudden turn of events has unfolded. And yes, you read that title correct, Ukraine has actually invaded Russia. (Ironic, eh?)
This week, Ukrainian President Volodymyr Zelenskyy announced that Ukrainian forces have taken full control of Sudzha, the largest Russian town captured since Ukraine’s cross-border incursion began earlier this month. Despite its small population, Sudzha is the administrative center of Russia’s Kursk region. Ukraine is currently setting up a military command office in the town.
The incursion, which began on August 6, has caused chaos in Kursk, leading to the evacuation of over 120,000 people and the capture of at least 100 Russian soldiers. Ukraine claims to control not just this one town, but over 80 towns and settlements in the Kursk region. Russia has not officially responded to Zelenskyy’s claims.
f. 📱 TikTok goes to appeals court
This Thursday, TikTok argued in a U.S. federal appeals court to overturn a law passed by Congress earlier this year that requires China-based ByteDance (TikTok’s parent company) to sell TikTok’s U.S. assets or face a ban, stating that the Justice Department misrepresented the app’s ties to China and that the law is unconstitutional.
TikTok brought up that its content recommendation engine and user data are stored in the U.S. on Oracle-operated servers and that content moderation for U.S. users is managed within the country. However, this law, signed by President Biden in April, gives ByteDance until January 19, 2024, to divest or face a ban with oral arguments scheduled for September 16.
📚 Book of the Week
Note: I don’t recommend books that I haven’t read or that I would never read. The books I recommend are books I have already read or that I will eventually read.
100 Baggers — Christopher W Mayer
Book Description:
This book is about 100-baggers. These are stocks that return $100 for every $1 invested. That means a $10,000 investment turns into $1 million. Chris Mayer can help you find them.It sounds like an outrageous quest with a wildly improbable chance of success. But when Mayer studied 100-baggers of the past, definite patterns emerged.
In 100-Baggers, you will learn: -The key characteristics of 100-baggers -Why anybody can do this (It is truly an everyman’s approach. You don't need an MBA or a finance degree. Some basic financial concepts are all you need.)-A number of crutches or techniques that can help you get more out of your stocks and investingThe emphasis is always on the practical, so there are many stories and anecdotes to help illustrate important points.You should read this book if you want to get more out of your stocks. Even if you never get a 100-bagger, this book will help you turn up big winners and keep you away from losers and sleepy stocks that go nowhere.
After reading 100-Baggers, you will never look at investing the same way again. It will energize and excite you about what is possible.
✩ This newsletter, along with my weekly Morningstar fair value estimates and PDFs, will always be free of charge. Your support, whether through a donation or by reading this newsletter and following along, is greatly appreciated.
Thank you for reading today’s Weekly Brief! If you enjoyed or learned anything, please spread the word.
— Jacob
Abbreviation: end of year (EOY).