Moats and Apple – Part 2

I have been very vocal about Moats in technology companies and have written that Apple has a small moat. Recently I learnt about a Moat that Apple has and it is not a technology moat but of financial and supply chain.

There is a whole article about it but I want to summarize it here.

A company like Apple buys electronics spares from a manufacturer in China, asks another supplier to make their iphone and finally puts it on sale on the Apple Store.

Note: The below quoted lines from the newsletter linked below.

“Assuming company takes 50 days to sell a new product and another 10 days to collect cash from the customer after the sale but pays its suppliers 20 days after first purchasing the product to re-sell. In this example, this hypothetical company has a cash conversion cycle of 40 days (50+10-20).”

This is a common scenario and for a company like Macys this is about 50-60 days.

Now, imagine a company which pays their their supplier 50 days after your customer has paid them. That means, this company without spending any money gets a product from the supplier, sells it to the customer, collects the cash and after 50 days of collecting cash, pays their supplier. That is a dream company. These companies are said to have a negative cash conversion cycle.  Interestingly, Apple is one such company.  You can see how Google, Microsoft and Walmart’s Conversion cycle numbers.

This capacity to make money without spending any money could be called a Moat. Can this Moat deteriorate ? Yes, but not that quickly.

Now after learning this, I must be really dumb not invest again in Apple at the current prices and given that the markets are going down as we speak.

So yours truly is again an Apple shareholder.

Here is the complete article  about Apple’s Cash Conversion Cycle.

Alternative Investments – Crowdsourced Lending

Peer to Peer lending is a way to give loans to people who need them at better interest rates than credit cards and pay day loans. Credit Cards charge about 19 % interest and Pay Day Loans charge about 100% interest over the course of an year.

I heard about this phenomenon in 2006 and it is getting big time nowadays.

The way it works is that usually a company like “Lending Club” finds people who are ready to invest money and connect with folks who need them. They do background verification and all kinds of credit checks on both sides to ensure the loan is safe and given to the correct folks. Lending Club has a website – where one can borrow money as well as invest money. Lending Club acts like a broker and they take a small loan origination fee.

There are indeed a lot of restrictions on how you can invest in this Peer to Peer lending. I want you to read them first.

Here are some of the restrictions from Lending Club, the #1 Peer to Peer vendor.

“I currently reside in one of the following states: CA, CO, CT, DE, FL, GA, HI, ID, IL, KY, LA, ME, MN, MS, MT, NH, NV, NY, RI, SD, UT, VA, VT, WA, WI, WV, or WY;

I have an annual gross income of at least $70,000 ($85,000 if residing in CA) and a net worth (exclusive of home, home furnishings and automobile) of at least $70,000 ($85,000 if residing in CA); or a net worth of at least $250,000(determined with the same exclusions) ($200,000 if residing in CA), OR, if I live in Kentucky, that I am an “Accredited Investor” as determined pursuant to Rule 501(a) of Regulation D under the Securities Act of 1933, AND,

I will not purchase notes in an amount in excess of 10% of my net worth, determined exclusive of my home, home furnishings and automobile and if I live in California and do not satisfy any of the above tests, I will not invest more than $2,500 in Notes”

Prosper is another website that does the same. They were one of the first ones to get into this business although lending club is the biggest one today.

Compare Lending Club vs Prosper 

The website  - has lot of information about such Peer to Peer lending. I suggest you spend some time to understand the risks before jumping into invest in any of the Peer to Peer lending websites.

This is certainly an alternative investment compared to stocks and your “nothing-paying” savings account.

I haven’t researched much into this but will do more as time goes by. Of course, I get better return rates in my investments in stocks so this is not so lucrative for me. But for others, who are hesitant to invest in stocks, this is relatively a better alternative.

Again, please read more before you invest in anything. It is only in a slot machine in vegas, where you could make money by spinning a wheel, in all others you will have to do your groundwork before jumping in.


Good Yield Checking/Savings Account For Canadians

I’ve been a PC Financial customer for a couple of years. It is a no-frills bank and I like it because I can go to Loblaws and talk to someone.

They have a new scheme where they give 3.1% interest on any new money coming into their bank. This is much better than the 0.25% or 0.5% you get from TD or BMO or anywhere.

PCFinancial New Account

PCF used to be part of our emergency money bank accounts. You can see my theory on Emergency money etc., here.


My Returns for July – 6.8% YTD

My investments made a modest progress of 0.45% in July.

The returns so far from Jan 2014 to July 2014 is about 6.8% compared to 4.45% for S&P 500.

These numbers are NOT annualized.

Although my returns are better than S&P in this short term of 7 months, this will not be the case all the time.

My only goal is to get better returns over S&P over a long period of time i.e) 5 years or more.

As a clear disclaimer – none of these results are audited.

I do have purchased some new positions but will discuss them more in detail in another post as they are still developing.

Please see my earlier post on my investments results from 2011 to 2014 here.

Most of my investments are in US and in Canada and I do not do any derivatives or fancy trading stuff. All ideas were generated mostly bottoms up or by cloning other good ideas.

Feel free to reach out if you have any questions.




Intelligent Investing & Power of Compounding