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Investment Series
Investment Series: Call #1 – February 11, 2019

Jason Weaver held the first introduction call for the “Make It Rain” investment series. 10 high school students who agreed to take part.

I have a 17 year old son, Colin and a 15 year old daughter, Haley. Years ago, Colin and Haley both received separate letters from their local bank. It said that their life savings were going to move to the California State Fund due to inactivity. Unfortunately, there was a glitch in the bank computer system, but that is not what they wanted to hear. This was their future car money.

My daughter Haley was the first to withdrawal all her funds from the bank. We agreed to open an investment account for her, under a UTMA/UGMA arrangement. She has always been more on top of her money. My son Colin followed her lead and opened an investment account also.

Why I started this series:

As an investment adviser, I thought this was the perfect opportunity to introduce them to investing. We started discussing stocks and they have been investing for the past 5 years. I didn’t want them to feel discouraged early on, so I covered all their losses. Soon enough, as they saw their account grow, you could see the wheels turning. Throughout middle school and high school, my son Colin has made friends with very smart kids. Although, his interest in investing comes and goes, I wanted him to reengage. Thus, I created the Make It Rain, Youth Investment Series. I thought if I started a group with his friends, I could peak his interest again. There are now 10 students committed to the group.

I personally invited the first group of students to this investment series.  We have 3 seniors and 7 juniors in the group.  They are some of the brightest students I have encountered while my son has been in school.  Although, many of them have no experience with investing, I have a feeling that we will be able to cover a lot of content over the next 10 conference calls. 

Every week, each student calls in to a conference call number.

For many of them, if not all, this was the first time they have called into a conference call number, so we usually get a late start as some struggle dialing in. 

My first question to them: What would you like to learn throughout this investment series?

The answers I received were:

  • “I want a better understanding of the stock market and how to navigate the different aspects of it”
  • “How to make money”
  • “Ideally the basics and maybe some more advanced ways of investing”
  • “How to trade efficiently”
  • “To make it rain”
  • “Predict the stock market”
  • “I would like to learn how to invest and the basics of investing”
  • “Basic things to avoid when investing”
  • “More about specific areas of the market like gold or currency”
  • “How to safely invest my money in the stock market”

My second question: How would you rate your understanding of the stock market?

Interestingly, most of the students answered a 3 out of 10.  This seems pretty low, but I have a feeling they have a better understanding.

My third question: A comprehension question to validate the 3 out of 10 rating:

Which company is more valuable?

(1) AMZN stock trading @ $1,589 per share
(2) Berkshire Hathaway stock trading @ $303,000 per share
(3) Microsoft trading @ $105 per share

9 out of the 10 kids got it right. Microsoft. But, how did they know? They knew a stock’s price does not always matter. Rather, it is the market capitalization that determines the companies market value. 

My fourth question: What does the following quote mean to you?

“What the wise do in the beginning, fools do in the end.”

  • “Start smart”
  • “Stay a step ahead”
  • “We need to be ahead of the game instead of following the trend”
  • “Fools will buy after the move has already been made”
  • “People are going to buy a stock only after it is hyped up, like what happened with bitcoin”
  • “Look ahead, don’t spend all the money at once”.

Now, you can tell that this group of students is exceptional. This investment series could be a great way for them to use their skills outside of their regular activities. We covered a lot of material in the first call, including growth, inflation and policy. I explained that this Model is broken down into 4 quadrants:

1:  Growth is accelerating.  Inflation is declining
2:  Growth is accelerating, inflation is rising
3:  Growth is slowing, inflation is rising
4:  Growth is slowing, inflation is slowing

We talked about monetary and fiscal policy.  Next, I asked them to take a temperature reading of the US economy.  Has growth accelerated? Is inflation rising?  Are people optimistic and buying consumer goods? 

Secondly, I asked them to analyze Target stock.  I explained that a typical investment analyst measures the following key metrics when issuing a buy/sell/or hold rating: P/E Ratio, Earnings Per Share, PEG ratio, Book Value and Return on Equity. I briefly explained each of these, but for analyzing Target stock, I asked them to only focus on where they think the economy is in relation to the 4 QUADRANTS OF THE ECONOMY. Also, where is the economy headed?  If Target is a buy based on the state of the economy (the quadrant we are in).

Next Monday they will be asked to submit their recommendation:  BUY/SHORT/or PASS recommendation

  • BUY:  Buy shares of Target hoping the stock goes up
  • SHORT: Short shares of Target (shares I hope to buy back at a lower price.  So, I want the stock price to go down.)
  • PASS: They don’t think it is a good time to buy or short.