Shana responds to Minda’s query regarding the sale of MA40 stock, a company where Minda once worked and holds a significant number of shares. Shana repeats prior discussions about changes in management since Dan’s tenure, the founder who favored the stock. She stresses the importance of not becoming overweight in any one stock and highlights that MA40, while a well-run company offering dividends, has shown mediocre performance over the last decade. She notes that the stock’s P.E. ratio of 31 is expensive and suggests other investment opportunities with similar returns but lesser risk, such as CDs.
Minda inquires about alternatives in the box industry, given MA40’s relation to packaging demand driven by e-commerce. Shana agrees that there will always be a need for boxes but indicates a lack of current peers they endorse. She advises Minda to stay tuned to the buy list for potential future recommendations. Minda plans to sell some MA40 shares based on the input. The conversation emphasizes the importance of committing to an investment strategy rather than individual stocks as the stocks will come and go, but a sound strategy endures.
Hi Shanna. I think you’ve talked about this, and I apologize if I missed it, but I know one of Dan’s favorite stocks was MA40, so I bought a lot of it. I think I have about 600 shares. Full disclosure, I used to work for them. They were a well-run company at the time, and that was years ago. But they pay a fairly good dividend; they’re a foundational stock. So why the sale?
Yep, so you’re right. We did talk about it earlier. There have been changes in management over the years. Dan’s not here, and I can’t really speak to why this was one of his favorite stocks. I don’t know what his expectations were for it over the next 10 years. I do know that Dan was very clear about not getting overweighted in a particular stock. I don’t know what those 600 shares make up as a percentage of your portfolio, or whether you’re up or down on it. And I can’t really say, because Dan’s not here to ask. I can’t say if he would still have the same opinion or not.
But things change rapidly, and things have changed rapidly even since we lost Dan. Dan was also very well known to say, don’t ever fall in love with a stock. You date a stock, but you don’t marry a stock. So, the things that I can say are that it hasn’t turned out to be a stellar company. If you look at the 10-year track record, the price is right about where it was 10 years ago. It’s gone above and below that, trading in a cyclical pattern. It’s paid a good dividend of about 4%, and even up to 6% if you bought at some of the lows. But a 3.8% annual return over 10 years is probably not what Dan expected.
It’s an okay company. Dan always used to say it’s a boring company, but it’s going to track along and give you a good yield. The P.E. on it right now is 31, which means you’re paying 31 times its current earnings. That’s expensive. Some investors I know wouldn’t consider paying more than 12 times earnings. At 31 times, do you really want to pay that for a company that has had mediocre performance? With a 4% yield right now, there are places where you can get 4% in a CD with no risk.
Okay, if I may, one other thing. I think the reason Dan liked it was because there’s always going to be a need for boxes, especially now with all the online ordering. Would there be another company you would recommend? Because I think boxes are never going to go away with all the ordering on Amazon.
Yeah, I would definitely agree with that statement. There’s not a peer that we like right now. The industry itself has been in a bit of a slump. Not to say that won’t change, and there won’t come a day when there’s something we can replace it with. But I would just say stay tuned to the buy list and see what comes on there. The great part of this strategy is that it’s a do-it-yourself strategy. We’re going to tell you what we think, and you get to decide whether you act on those suggestions or not.
Well, I do see it’s been down for a while, so I think I’ll be selling some. Thank you. I really appreciate all of your clarification on holding and selling stocks as well.
Thank you so much. If you didn’t hear the first part of the show, that was your question that we addressed in the first segment.
Okay, great.
Yeah, we appreciate you, Minda. Minda’s been a longtime partner of the ministry, a great friend for a long time, and we appreciate your feedback.
I love you guys. Thank you.
Thank you. You too.
Thank you, Minda.
Thank you.
You know, Shanna, it’s an interesting point. I was thinking as you were talking there, it seems as though getting married to a stock is not a good idea, but we should be married to our strategy, right? That’s the thing that’s long-term. The stocks come and go, but the strategy remains.
Yeah, absolutely.
