by MrGraeme
The other day someone mentioned to me that I was a bit frugal. That got me thinking about the relationship between my personal consumption and investment. I wondered whether it would be a good idea to invest in companies that I personally did business with. I figured that these companies would either have such a strong service/product or position in the market that a long-term investment would be justified. So I tested it.
The first thing I had to do was determine the criteria which companies needed to meet to get a spot on my list. The following is what I decided upon:
- Purchases must be notable or recurring. Notable would be defined as single purchases exceeding $250. Recurring purchases would be purchases made at least once annually.
- Companies will only be included on the list if I am able to associate their brand with their product or service.
- Retailers will be included in cases where their brand is relevant to my patronage.
- Companies must be public, Canadian or American(or indirectly available on either country’s markets), and listed at the beginning of the modeled period.
After compiling a list of companies, I looked at the growth(or loss) they experienced over the last 5 years. In my model, I would invest approximately $1,000 into each of the listed companies, rounding to the nearest whole number to determine the number of shares purchased. For example, if I could buy 9.6 shares of $DIS with my $1,000 I would record an investment of 10 shares, while if I could buy 23.26 shares of $KO with my $1,000 I would record an investment of 23 shares.
American Stocks (priced in USD)
| Company | Book Value | Portfolio Value | Growth or Loss $ | Growth or Loss % | Dividend Payouts |
|---|---|---|---|---|---|
| Disney (DIS) | $1,040.80 | $1,330.10 | + $289.30 | + 27.80% | $79.60 |
| Google (GOOG) | $1,113.74 | $2,843.18 | + $1,729.44 | + 115.28% | – |
| Coca Cola (KO) | $995.90 | $1,348.95 | + $353.05 | + 35.45% | $169.28 |
| Lowes (LOW) | $963.17 | $1,597.83 | + $634.66 | + 65.89% | $103.48 |
| McDonalds (MCD) | $989.00 | $2,135.20 | + $1,146.20 | + 115.89% | $198.00 |
| Microsoft (MSFT) | $1,008.55 | $3,930.47 | + $2,921.92 | + 289.71% | $187.68 |
| Netflix (NFLX) | $1,017.60 | $5,530.50 | + $4,512.90 | + 443.48% | – |
| P&G (PG) | $1,021.56 | $1,479.60 | + $458.04 | + 44.84% | $167.52 |
| Visa (V) | $1,017.45 | $2,981.85 | + $1,964.40 | + 193.07% | $58.65 |
| Walmart (WMT) | $1,007.16 | $1,395.84 | + $338.68 | + 38.59% | $122.40 |
| Amazon (AMZN) | $1,140.48 | $6,027.89 | + $4,887.39 | + 428.54% | – |
| Berkshire (BRK.B) | $1,031.87 | $1,551.83 | + $519.96 | + 50.39% | – |
| Ebay (EBAY) | $999.17 | $1,527.66 | + $528.49 | + 52.89% | $22.96 |
| Facebook (FB) | $1,026.61 | $2,609.36 | + $1,582.75 | + 154.17% | – |
| Honda (HMC) | $994.20 | $781.20 | – $213.00 | – 21.42% | $134.10 |
| Hershey (HSY) | $1,037.80 | $1,589.40 | + $551.60 | + 53.15% | $131.70 |
| Intel (INTC) | $997.50 | $1,852.80 | + $855.30 | + 85.74% | $169.20 |
| Nestle (NSRGY) | $1,015.95 | $1,398.41 | + $382.46 | + 37.65% | $152.36 |
| Nvidia (NVDA) | $992.70 | $12,297.60 | + $11,304.90 | + 1,138.80% | $122.85 |
| Total | $19,411.21 | $54,209.65 | + $34,798.44 | + 179.27% | $1,819.78 |
We saw average annual growth of 35.85% on our American investment. By comparison, the $SPY index saw average annual growth of just 10.6% over this same period.
Canadian Stocks (priced in CAD)
| Company | Book Value | Portfolio Value | Growth or Loss $ | Growth or Loss % |
|---|---|---|---|---|
| Air Canada (AC) | $999.54 | $3,245.67 | + $2,246.14 | + 224.72% |
| A&W (AW.UN) | $985.71 | $1,219.35 | + $233.64 | + 23.70% |
| CIBC (CM) | $956.70 | $1,219.35 | + $118.30 | + 12.37% |
| Canadian Tire (CTC.A) | $1,053.76 | $1,159.12 | + $105.36 | + 10.00% |
| Empire Company (EMP.A) | $984.96 | $1,016.32 | + $31.36 | + 3.18% |
| Husky Energy (HSE) | $1,017.87 | $287.12 | – $730.75 | – 71.79% |
| Intact Financial (IFC) | $989.45 | $1,684.32 | + $694.87 | + 70.23% |
| Telus (T) | $1,022.12 | $1,182.43 | + $160.31 | + 15.68% |
| TD (TD) | $986.40 | $1,346.58 | + $360.18 | + 36.51% |
| Total | $8,996.51 | $12,215.91 | + $3,219.40 | + 35.78% |
We saw an average annual growth of 7.16% on our Canadian investment. By comparison, the TSX Composite Index saw average annual growth of 3.06% over this same period.
Observations
In both Canada and the United States, the stocks chosen based my consumption crushed the market indexes they were compared against. The American stocks saw >3x greater returns than the $SPY while the Canadian stocks saw >2x greater returns than the TSX.
Only one chosen stock in each market saw a decrease in value over the modeled period. Across both markets, nine stocks more than doubled their value. A majority(56%) of chosen Canadian stocks outperformed the Canadian market over this period. A majority(58%) of chosen American stocks outperformed the American market over this period.
Guesses
If I had to guess, I would attribute the success of the chosen stocks to any combination of the following:
- Dominant position in their respective industry.
- Offering an essential product or service.
- Providing an innovative product or service.
- Positive or improving brand perception
I’d really like to hear some comments about this. Let me know what you think, maybe even try it for yourself!
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.
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