Picking stocks based on personal consumption

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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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