Milk Your Profits

  • The Intelligent Investor milks the profits of a good business and doesn't sell unless the business has gone bad.

"Milk your profits" mean to never sell a highly profitable business.

Owning stock in a highly profitable company give us the following:

  • Increasing Dividend Yield
  • Compounding Interest
  • Rising Stock Price
  • All of the above for a very long time

 

Example 1: Coca-Cola

From 1988 to 1994, Warren Buffett accumulated stock in Coca-Cola for $1.30 Billion. As of 2014, his investment is worth $17 Billion. A 1,200% return in his original investment.

 

Initial Investment in 1994 Value as of Year 2014 Return on Original Investment
$1.30 Billion $17 Billion 1,200%

 

Coca-Cola's Stock Chart:
Stock Chart of Coca-Cola
Source: Thinkorswim by TDAmeritrade

 

Example 2: Wells Fargo

Warren Buffett's initial investment in Wells Fargo was in 1990. He invested $289 Million in the company. In 2014, the value of his investment ballooned to around $16 Billion. His return on his original investment is over 5,400%.

 

Initial Investment in 1990 Value as of Year 2014 Return on Original Investment
$289 Million $16 Billion 5,400%

 

Wells Fargo's Stock Chart:
Stock Chart of Wells Fargo
Source: Thinkorswim by TDAmeritrade

 

Example 3: American Express

From 1963 to 1964, American Express' stock price plunged from $67 per share to $37 per share. Knowing it was a highly profitable business, Warren Buffett started accumulating its stock. He had invested around $20 Million at that time. As of December 2014, the value of his investment has skyrocketed to the moon at a value of close to $2 Billion. That equates to almost a 10,000% return on his original investment.

 

Initial Investment in 1964 Value as of Year 2014 Return on Original Investment
$20 Million $2 Billion 10,000%

 

American Express' Stock Chart:Stock Chart of American Express
Source: Thinkorswim by TDAmeritrade

 

My Financial Analysis of Stocks

  • Exchanged AT&T (T) for Time Warner (TWX) and Dumped Hilton Worldwide (HLT) I exchanged AT&T (T) for Time Warner (TWX). Their merger currently gives TWX a 6% premium. AT&T is offering $107/share for TWX. Time Warner is currently priced ...
    Posted Sep 1, 2017, 4:36 PM by Intelligent Investor
  • My Stock Holdings 2017 View Analysis: My Stock Holdings 2017Hilton Worldwide Holdings (HLT) split into 3 companies. So we now own the following 3 Hilton companies:1) Hilton Worldwide Holdings (HLT)2) Hilton ...
    Posted Aug 28, 2017, 6:46 PM by Intelligent Investor
  • Repurchased Apple After Warren Buffett Confirms He Purchased it As a rule-of-thumb, if an investment has a Return on Equity (ROE) of greater than 30%, it means the company has a Durable Competitive Advantage. Apple's Return ...
    Posted Jun 5, 2017, 12:35 PM by Intelligent Investor
  • Purchased Hilton Hotels in Anticipation of a 3 for 1 Stock Spin-Off Last December I purchased Hilton Hotels in anticipation of a 3 for 1 stock spin-off. In other words, Hilton Hotels will be splitting into 3 independent companies. The most ...
    Posted Mar 1, 2017, 6:12 PM by Intelligent Investor
  • Warren Buffett's 5 Best Investing Tips 1) Don't buy or sell based on the headlines.2) Don't try to profit from bubbles.3) Put your emotions aside.4) Always invest in productive assets.5 ...
    Posted Aug 19, 2017, 4:26 PM by Intelligent Investor
  • Sold Wabco (WBC) to Raise Cash in Case there is a Recession The signs of a recession are getting stronger so I've decided that I needed to raise cash. Out of all the stocks I own, Wabco (WBC) seems to be ...
    Posted Sep 7, 2016, 10:22 AM by Intelligent Investor
  • Sold Chicago Bridge and Iron Chicago Bridge and Iron (CBI) comprise 2.5% of my overall portfolio. I first bought this stock at around $46/share. I sold it at $34. So, I basically took ...
    Posted Aug 25, 2016, 9:50 AM by Intelligent Investor
  • 5 Things to Keep in Mind for Entrepreneurs Interesting article from Mark Cuban.CNBC Article
    Posted Mar 18, 2016, 9:54 AM by Intelligent Investor
  • Morningstar's 5-Star Stock Picks 2015 View My Financial Analysis: Morningstar 2015I analyzed Morningstar's 5-star stock pick last year and I have come to the conclusion that many of Morningstar's 5-star ...
    Posted Mar 10, 2016, 1:54 PM by Intelligent Investor
  • IBM may have Bottomed at $117/share IBM stock may have bottomed at $117/share a few weeks ago, the stock is now trading at around $135/share. IBM was just upgraded by Morgan Stanley from a ...
    Posted Mar 10, 2016, 6:39 PM by Intelligent Investor
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