A few years ago I was browsing the bizbuysell listings looking at different businesses to potentially purchase. A few stuck out at me but I ultimately decided I didn't want to buy myself a job, deal with employee and customer hassles, and have my assets tied up in something relatively illiquid. And frankly, most industries I dont know the first thing about. Then it dawned on me that there are thousands of businesses offered for sale every day that are managed by hard-working, well-paid, industry-leading executives, requiring no input or decisions from the owners, and are extremely liquid. Obviously I'm talking about the stock market. Let me tell you a bit about the businesses I own as of today...
Forty-one industries with 55 companies: aviation services, car dealerships, plastic manufacturing, electrical product manufacturing, auto parts retailing, business consulting, recreational marine products, pharmaceuticals, sporting goods retailing, fashion retailing, a financial exchange, home building, plastic molding, ag & heavy equipment production, electronic sensors, medical diagnostics & testing, television, oil & gas, retail footwear, gifts & flowers, basic apparel manufacturing, sporting goods manufacturing, toy & games developer, medical imaging, executive search advisory, steel wire manufacturing, RV dealership, broadband internet, laboratory services, building products, commercial real estate brokerage, healthcare services, wristwatch distributor, nutritional supplements, residential real estate brokerage, chemical manufacturing, boat dealership, commercial truck dealership, trucking & logistics, paper manufacturing, firearms, diamond jewelry, auto parts manufacturing, heavy equipment sales, alloy steel, bedding manufacturing, mobility infrastructure, home goods retail, and marine shipping.
Looking at the TTM financials of these businesses, my current share of revenue is $2.7M with net cash flow of $405,000 per year. That is a net profit margin of 15% and YoY revenue growth is 24%. The value of these interests today is $2.26M which indicates a cap rate of 18%. I borrowed $680,000 of that amount from my stock broker at 1.13%, which pushes my theoretical cash on cash return to 25%. However, this is the stock market after all and if the stock price doesnt go up, it makes no difference how much money these businesses happen to generate in the future. I expect around half of these investments will not work out for one reason or another and anticipate a more realistic return to be about 10 to 15% annually. I started this experiment a year ago and am up almost 70% since then so there is a lot of room for it to go down, or a lot of time ahead for it to do nothing to fall in line with the expected return.
I'll post updates here from time to time.
Forty-one industries with 55 companies: aviation services, car dealerships, plastic manufacturing, electrical product manufacturing, auto parts retailing, business consulting, recreational marine products, pharmaceuticals, sporting goods retailing, fashion retailing, a financial exchange, home building, plastic molding, ag & heavy equipment production, electronic sensors, medical diagnostics & testing, television, oil & gas, retail footwear, gifts & flowers, basic apparel manufacturing, sporting goods manufacturing, toy & games developer, medical imaging, executive search advisory, steel wire manufacturing, RV dealership, broadband internet, laboratory services, building products, commercial real estate brokerage, healthcare services, wristwatch distributor, nutritional supplements, residential real estate brokerage, chemical manufacturing, boat dealership, commercial truck dealership, trucking & logistics, paper manufacturing, firearms, diamond jewelry, auto parts manufacturing, heavy equipment sales, alloy steel, bedding manufacturing, mobility infrastructure, home goods retail, and marine shipping.
Looking at the TTM financials of these businesses, my current share of revenue is $2.7M with net cash flow of $405,000 per year. That is a net profit margin of 15% and YoY revenue growth is 24%. The value of these interests today is $2.26M which indicates a cap rate of 18%. I borrowed $680,000 of that amount from my stock broker at 1.13%, which pushes my theoretical cash on cash return to 25%. However, this is the stock market after all and if the stock price doesnt go up, it makes no difference how much money these businesses happen to generate in the future. I expect around half of these investments will not work out for one reason or another and anticipate a more realistic return to be about 10 to 15% annually. I started this experiment a year ago and am up almost 70% since then so there is a lot of room for it to go down, or a lot of time ahead for it to do nothing to fall in line with the expected return.
I'll post updates here from time to time.
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