Terrible Year For Investors????

By: Michael Keane

There was a recent article published on Yahoo! Finance and Bloomberg that had the headline "2015 Is turning out to be a terrible year for investors" (link here). This caught the fund's attention for a couple of reasons. We disagree with the assertion that it has been a terrible year for investors. The fund also feels that this kind of headline mismanagement should be checked when needed.

While the fund agrees that 2015 continues to be a tough year for those investors looking to sell shares, those investors looking to actually invest are not really complaining about the downturn. The fund was able to pick up shares of MFA, Ford, and AT&T in the past six months at wonderful valuations. Without the downturn, this could not have happened.

The importance of a headline cannot be understated. KDK Fund is always looking to maximize the message to its readers when thinking about the proper headline. While reading a headline like the article has might gain short term reading, it actually does long term damage to the brand of news outlet delivering it. Seasoned investors know to avoid articles with these types of headlines because they know the content of the article will probably be just as worthless. While KDK Fund is aware that sometimes the writer (in this case Wes Goodman) does not have any control of the headline printed for the story, he or she should make it clear to the editors that the headline should match their quality of writing. Seeing Bloomberg at the headline game is kind of weak and more the norm of its main competitor. 

Well rounded investors know that there is ample opportunity in all markets. Seeing this type of headline screams for new investors and those consumed with knee jerk reaction emotions towards the market. Not only is the headline wrong in regards to the message, it shows a priority on gaining readers eyes instead of educating its readers brains. 

Happy Investing!

**All posts on this blog are information and opinions only. They are not to be considered recommendations to buy or sell any security. Please do your due diligence first before trading and investing. Please direct all questions and comments to the blog or to kdkfund@gmail.com or on twitter @kdkfund.

Why Wal-Mart Won't Be In KDK Fund (for now)

One of the reasons why KDK Fund is being created is that there are companies that the fund does not want its capital to go to., One of those companies is Wal-Mart. The main reason that KDK Fund will not be investing in Wal-Mart is due to the company's employee wage policy. Recently, Wal-Mart's wage policy weaknesses have started to show up and they are affecting earnings for investors in a negative way.

There is a Yahoo Finance story (link here) that shows some cracks in Wal-Mart's fiscal situation. In the story, analysts estimate that low income workers make up 20% of Wal-Mart's revenue. Because of this, the recent decrease in food stamp funding by the US Government has negatively affected Wal-Mart's earnings. That tells KDK that the government is subsidizing a percentage of Wal-Mart's earnings. It also means Wal-Mart is depending on other companies along with its own to keep wages at a level so that food stamps are continuously needed. Wal-Mart sees a lower minimum wage as beneficial because it then receives massive amounts of revenue from the US Government covering the costs of groceries that should otherwise be covered by higher wages. Knowing that, KDK feels that Wal-Mart's policy of both paying a lower wage to keep costs down and then pining for US food stamp revenue to boost its earnings is not something to support.

KDK feels that if a company is sufficiently profitable, employees should be at the least given wages that can sustain life without government assistance like food stamps. Wage policies like Wal-Mart's inhibit the value created otherwise for investors. If Wal-Mart and other companies in the same position would execute a better wage policy, it not only would help the workers, it would help lessen the burden put on the US Government and taxpayers. When a company has both employees that are deca-millionaires and employees that require food stamps, KDK Fund knows to stay away.

If Wal-Mart were able to show that all of their employees are given a living wage, the positive effects would far outweigh the minimal loss in dividends or stock appreciation shown to investors. It would now give people that boycott the store to now shop there. Other models within Wal-Mart are genius and do great things for the company.  Fix this and investors like KDK Fund will reassess whether or not Wal-Mart will receive some of its capital. Don't fix it and possibly continue the downtrend.

What would happen if large money sources like pension funds decided to do the same thing and remove their capital from reaching Wal-Mart's balance sheet? Would Wal-Mart change? If you are under a pension fund system, give your rep a call and find out where your retirement funds are going.

Importance of Dividends

Building a solid dividend base should be one of your first priorities when building a long term portfolio. The advantages include quarterly cash payments for each security, the opportunity to reinvest those cash payments (regularly at no cost) for increased wealth, regular cash flow, and more. KDK Fund will be finding securities with a decent dividend so as to be able to return a percentage back to investors.

Researching how to find stable securities with a growing dividend amount is not that hard. You can use most any financial web site like Yahoo! Finance. Dividendchannel.com is also a decent resource.

**All posts on this blog are information and opinions only. They are not to be considered recommendations to buy or sell any security. Please do your due diligence first before trading and investing.**