✈️ BOO? 👻 NO! ❌$VOO!💰
We breakdown a phenomenal investment opportunity for the passive investor!
👋Welcome!
What is up Cruisers?!
** BREAKING NEWS**
CEO Alan recorded himself reading this week’s newsletter and added some commentary on top of the writing! The recording is only 20 minutes and is fun and good vibes (and you do not have to read!)
Give the podcast a listen on Apple Podcasts by clicking here
Give the podcast a listen on Spotify by clicking here
Also, we love feedback and would love to hear your thoughts on CA! Feel free to reach out directly to CEO Alan & either share your thoughts on CA or just say hello at asoclof@umd.edu
Showtime!
🎤Shoutout!
We wanted to kick things off with an awesome moment for CEO Alan from this past week. On Twitter, there is a weekly tradition to shoutout some of your favorite accounts on Friday’s.
Fiducia Invest, a man that has an awesome Twitter page himself, gave a shoutout to our CEO. Fiducia has 3,000 followers and a shoutout from him was a great testament to the quality of work that Alan and the CA team are up to!
If you want to follow Alan yourself on Twitter, click here!
🗒️Tweet Of The Week
This week’s tweet of the week is a drop gross, a drop weird, and not what you would expect in a finance/stock newsletter. But (butt?) it is funny and we are here for it. Eric. Thank you.
💸Portfolio Update
The portfolio is a little bit colorful! What are all the colors about? Under the “Ticker” column we have instituted a color-coded system that allows Cruisers to see how excited the CA team is about certain stocks.
Here is the breakdown:
🟩Absolutely Ecstatic
🟧Just Ecstatic
🟨Some Concerns
🟥Big Concerns
📰Portfolio News
🧲 Magnetic! Portfolio pick Brainsway, recently announced that over 100,000 patients have been treated using their medical device technology. The company’s dTMS technology does a remarkable job of aiding patients that are struggling with Depression, OCD, and quitting smoking. A huge milestone for a company that is doing a lot of good.
🧬East Coast Baby! Portfolio pick and genetics testing company $NVTA released some huge news this week sharing that they are building a testing laboratory and processing facility in North Carolina that will give the company its second facility in the country and first on the east coast. This is a $115 million project and will add 350 jobs (company currently has 2100 employees). This is big. The Amazon of Genomics continues to execute.
⛰️ Building the Mountain! Cruising Altitude’s baby $VIAC, continued to crush it in its push to make Paramount+ home to the best soccer content in the country. Last week, the company announced that over 200 CONCACAF soccer matches (the international conference the US Soccer teams play in) will be broadcasted on Paramount+. This is a huge dub.
🎮Trivia Night!
A question you shouldn't know the answer to but will serve as a fun way to learn more about the portfolio picks!
Question:
1. Early Topps trading cards required this to see the full card.
A. Olive oil B. Water C. Bubble gum D. Vinegar
Answer: B. Topps packaged their first trading cards in 1949 and they required customers to moisten the cards with water to see the full images of people like Jackie Robinson and Babe Ruth. We are told that Topps new NFT cards will not require any water to view the card.
🔍Spotlight: Victor & $VOO
Introduction
Before we get started, I wanted to let you guys and gals know that if there are a few more grammar mistakes this week it is because I went to a baseball game yesterday (which was awesome!) and failed to get the newsletter over to our Editor/Chief Strategy & Technology Officer (my mom!) before it was too late at night!
I couldn’t be more excited for this week’s Spotlight piece as I take all of our readers back to the good ole days of high school and share a really interesting investment opportunity. Investing can be very simple and today I will try and show you just why. Before jumping in, there are three important concepts to understand:
1. ETF-An ETF or Exchange Traded Fund is basically a group of stocks that trades as one stock. ETFs can be bought and sold just like stocks and derive their value from the stocks that are held within the ETF. Some ETFs are actively managed and are constantly buying and selling different stocks (like what Cathie Wood and Co. do at ARK Invest) while others are more boring with minimal buying and selling and referred to as passive (like $VOO!). When investing, there is something valuable to be said about things being boring.
2. S&P 500- Is a group of the 500 biggest stocks in the United States- and is a group compiled by the Standard & Poor’s rating agency. Many feel the S&P 500 is the best way to track how stocks are doing in the country as the S&P 500 is filled with some of the best companies in the US and the world.
3. Expense Ratio- Last I checked, Wall Street is not the #1 charity in the world. Since ETFs are managed by professionals they take a fee for running the ETF (makes sense). When you are looking at an ETF, the lower the expense ratio, the better, as you keep more of the profits from the ETF. Passive ETFs like $VOO typically have lower expenses (since they require less time).
⏰9:35 AM
One of my closest friends from childhood is named Victor. Although Victor and I were a grade apart, our families were and still are very close. Since Victor and I went to a small school, we saw each other all the time but were never in class together. Due to a weird scheduling quirk (go small private schools!) Victor and I had the privilege of being in a daily 9 am class during his senior and my junior year! Let me clarify one thing. This was a privilege for myself and Victor-not our teacher. We made his life tough (Mr. Kennedy, if you are reading this, sorry!).
Victor was and still is an investor in his own right. Especially now, as we have gotten older, and he is working and making money (#jealous), we talk stocks a little more. However, most of our conversations in high school were about sports, sports, and more sports but we still talked investing. When the clock struck 9:35 every morning, I would sneakily take out my phone and check how stocks were doing (the market opens at 9:30 but you have to give it a few minutes to see what direction things are going). Victor wouldn’t need to look at the phone, he would just look at my face and could tell if we had a green day or a red day in front of us. We had a good time playing this game everyday!
**Side note- my poker face has gotten a lot better since then. Sometimes I smile when stocks are down. Ya it is a little weird but if you have some cash and a long term mindset, down days are kind of cool.**
Victor had and still has a different approach to investing than I do. Victor is more into buying Index Funds, while I am more into picking individual stocks. Even though CA is mostly focused on individual stocks (cuz its more fun and has higher upside!), being an index fund investor is a phenomenal alternative and for many people that either don’t want to spend the time researching stocks or the volatility is just a little too much for them to handle, Index funds are a phenomenal alternative!
Today we are actually going to jump into $VOO (which we probably already mentioned 20x.) $VOO is a favorite of Victor that I have started to really like too. If you do not like this write up or stock, I will forward you Victor’s email and we can blame it on him😉
💰 $VOO
A classical balanced S&P 500 ETF that just tracks the index is kind of boring to me. That means you have as much exposure to some of the best companies in the world like Apple, Amazon, and Microsoft to companies like Aflac and Advanced Autoparts. Aflac has good commercials and the duck seems pretty chill, but I would like to put my money in the formerly mentioned companies.
This is why $VOO is so cool. It is a weighted S&P 500 ETF, meaning that it does have exposure to all of the companies in the S&P 500 but it is much more concentrated in others.
Here are the top 5 holdings of $VOO on a percentage basis:
Apple- 5.7%
Microsoft-5.3%
Amazon-3.9%
Google- 3.6%
Facebook 2.1%
Concentration. Beautiful. Almost 20% of your investment in $VOO is in 5 of the greatest companies in the world, and the other 80% is in the other (approximately) 495 greatest companies in the US (probably slightly more boring companies). Anyways, this sounds like a sweet gig especially since you do not have to manage the holdings and just let the experts at Vanguard (who runs the ETF) take care of it.
The performance of the ETF is as good as the set up sounds. If you would have invested 10K in $VOO in 2011 you would have around 35K today. A 350% return on your money in 10 years is not too bad. Check out the chart below that provides a nice visual:
🎪 What is the catch?
Nothing in life is too good to be true (except Cruising Altitude). There has to be a catch.
**Side note: Why did we choose a circus tent as the emoji for “what is the catch.” Well apparently, the origin of the phrase is attributed to P.T. Barnum, arguably the “Greatest Showman” of all time.**
Back to business: What is the catch?
Honestly? Not really anything. Investing is kind of cool where if you give yourself time, things can be really good. If I did have to point out three drawbacks, here is what I would say.
Diversification- Although having your funds in an index fund lowers your risk, the diversification also limits your upside. It is very unlikely that you will see a 1500% gain over 10 years from an index fund like we saw from Apple over the same 10 years (yes. we are not kidding. #stupidgrowth)
Brightest day’s behind: The past 10 years have been one of the greatest bull markets ever with serious technological advances. This has led to Amazon, Apple, and Microsoft becoming Trillion dollar entities through “stupid” levels of growth as I mentioned in the last point. It is almost impossible for those three companies to match the returns they did in the past 10 years than over the next 10. That is why I state, maybe the brightest day’s for this fund are behind.
Expense Ratio: Vanguard obviously takes a fee for putting this ETF together albeit a very small fee. (I just fulfilled one of my dreams of using the word albeit in my newsletter! Lets go!). Vanguard takes a .03% annual fee. Therefore if you invested 10K, after 10 years you would pay Vanguard $75. Okay now that I think about it, that is a steal lol. This just shows there is not much not to like about the ETF!
Victor! Looks like you really found a good one my man. Alan approved. Slowly and surely I will convert you to start investing in individual stocks!
-Alan
💭Final Thoughts:
"A low-cost fund is the most sensible equity investment for the great majority of investors. My mentor, Ben Graham, took this position many years ago, and everything I have seen since convinces me of its truth."
-Warren Buffett, CEO of Berkshire Hathaway
If Warren Buffett is saying it, it must be true. At the same time, there is serious potential that can be found from investing in individual stocks and we at CA look forward to continuing to teach and educate on how to possibly find those. Cruisers! You guys are the best. Talk next week!