Investing in a Recession | Find Healthy Companies in Any Economy | Rob Armbruster | Skillshare

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Investing in a Recession | Find Healthy Companies in Any Economy

teacher avatar Rob Armbruster, Investing and Personal Finance

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Taught by industry leaders & working professionals
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Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

10 Lessons (30m)
    • 1. Introduction

      1:25
    • 2. Coronavirus Impact on Markets

      2:36
    • 3. The Chipotle Story

      2:38
    • 4. The CVS Story

      2:48
    • 5. Valuing a Company

      4:39
    • 6. The Effects of Debt on a Company

      3:18
    • 7. How Assets Affect Companies

      4:39
    • 8. Fundamental vs Technical Analysis

      2:58
    • 9. The 10-Year Market Vision

      2:56
    • 10. Next Steps

      1:39
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About This Class

In this class, you will learn how to invest in healthy companies in any economy! We'll be sure to cover the effects of covid on the stock market and how to value a company. You'll come away from this class knowing how to identify adaptive companies that are poised for growth.

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This lesson is not considered licensed financial advice. It is purely for educational purposes to help you to manage your own investments. Future trades that you make are done at your discretion.

Meet Your Teacher

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Rob Armbruster

Investing and Personal Finance

Teacher

When I was 24 years old I was sitting in an office with a financial advisor. After he showed me the fees associated with him investing my money, I left the meeting feeling uncomfortable with his proposition. This is how my investing journey started. I began to research how to successfully manage my own investments and found that it was easier than I thought. Today, I'd like to pass on what I have learned over the past seven years of managing my finances to you. 

I have a passion to help people from every race, ethnicity, and background discover their ability to make great wealth! My classes provide the basic fundamentals of making great long-term financial decisions. Please follow this page so that you won't miss any of the great resources coming out in the future!

... See full profile

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Transcripts

1. Introduction: Rob are Brewster here and in this class you'll learn how to find healthy companies to invest in during a recession. We live in a time of fast change and fast paced things happening Tomorrow might be totally different than today, and the same is true with our financial markets. One day everybody might be create totally crazy about a stock loving it. And then the next day everybody's like I would not want to touch that stock with 20 foot boat. That's why it's so important to know the fundamentals of the company that you're investing . And that's what you walk away from this class. I'll talk about how the Corona virus has affected markets. Today, I'll share a story of a company that did the right thing and helped out their community. Then I'll show you how to value a company, and we'll look at what different assets mean on a balance sheet. Then I'll talk about how debt effects companies and end lesson with my 10 year vision for where I see markets going, and this is just one class of many classes that I've made to help you build your wealth for the future. So hop on in and enjoy 2. Coronavirus Impact on Markets: So now I'm gonna tell you how the Corona virus has affected the markets. Whenever there's times of fear or uncertainty, the markets tend to decrease its a time where the stocks of all companies, regardless of what industry you're in, have overall decreased. However, it's times like these that provide opportunities for me and you and people who can afford to invest. The key is to look for companies that have adapted to the Corona virus. Really well, as you go throughout your day, pay attention to what you buy, what services you value more, and you're gonna find companies behind those things that are probably doing really well during this time. The other thing is is to look for companies that sell things that are mawr desirable in a Post Cove it nation. Toilet paper would be one of those things. I don't know about you, but there's been a lot of toilet paper bought lately. A good example of this is grocery stores, so overall people's lifestyles have changed. They're going out to eat less and going to grocery stores more, and so if you look at the stock market, you can see almost across the board every grocery stores stock has gone up. If I had to predict it, I would say that grocery stores will continue to be a very good investment in the future. As long as you make sure that the grocery stores a healthy company, this is the key right here. Think long term. So what are things gonna be like 10 years from now? I believe that a lot of the effects of you know what we're going through right now won't be around in 10 years. But there will be things that that will have affected our lives 10 years from now. There's a lot of debate on how it's affecting airlines, and it's gonna be a good amount of time until airlines get back to carrying people at the same capacity as they were before Cove. It just think about, man, What is this company gonna be like in the next 10 years and gravitate to those investments ? Next up, I'm going to share a story about a company called Chipotle. In the next lesson 3. The Chipotle Story: So a couple months ago, like any growing man, I walked into Chipotle. I was surprised at what I found. It was the first time that I had been there since the Corona virus hit and we walked in. I ended up waiting for 20 minutes for my order. The line at Chipotle was socially distanced, but it was all the way back to the door, so it wasn't containing as many people as it was before because of the distancing that we have to do. But it was still back to the door. And as I was waiting in line, I saw these, these people walking into the store. They were coming in and they were picking up these orders and leaving, and uh, and then I saw, looked over and saw the sign, and it said, Take out orders. Person after person after person came and got these take out orders that Grubhub and other food delivery companies were taking to customers houses. People don't. People don't want to travel as much. People don't want to be exposed as much before Chipotle E. As a company has done a great job of making their food available to the delivery companies and, in turn, the delivery companies to the customer. They were they were doing just as much business or if not even Mawr, business as a result of what was happening with Corona virus. I just love the way that they have organic food. Their product is great, and so that is an example of a company that has responded well and adapted well to the new situations that we're living in. And so ask yourself right now. What? What is a company that I've been using that has adapted well and then ask yourself, Hey, can I invest in them? Is there a way to invest in them? I'll Google the company and ask is so in. So company publicly traded and Google will tell you yes, it's publicly traded or no, it's not publicly traded. So just a tip for you as you do your research and find these companies in the next lesson, I'm going to share about how CVS did a brave thing in 2014 and talk about what their company could look like in the future. 4. The CVS Story: On September 3rd 2014 CVS stores removed all their tobacco related products despite criticism. People said all different kinds of things. They said. You know what? They're just gonna get there smoking products from a different place, your your stocks going to go down because you're not providing this for the people. Why not just give it to them? But what happened in communities that had CVS drugstores was incredible. Instead of people buying from other places, people actually stopped smoking. Smoking addiction went down. The overall health of the people living in places with CVS is near them went up. When I'm looking at a company, I'm not just looking at the quarterly profit and nothing else I'm looking at. Are they somebody who's doing what's right, regardless of the money? I believe that other people are looking for that, too. If you look at the company's stock price history, the stock price increased in the long run as a result of the decision that they may and obviously do your own research, make your own financial decisions. But I just did a little bit of research on the company of CVS in 2008 they posted a net income loss, and that's a fancy way of saying they didn't make any money, and it was because they acquired Aetna. Now Aetna is a health insurance provider. They bought the company for billions of dollars, and so it costs them in the short run. But in the long run, it's going to really pan out for them. The partnership between these two companies, you know, is gonna work out better for the overall company in the long run with CVS and pharmacies. I think in general, anything medical, whether it's it's medicine. Hospitals providers related to that field will be increasing over the next 10 years, as as our population gets a little bit older here. So there's a lot of great reasons to invest in certain companies. You just have toe have to find them out. When people say that all corporations are bad, they're wrong. You can find great companies that are operating with integrity and making great decisions for the public. But you just have to look for them. So moving on to this next lesson, I'm going to show you how to buy stocks as if you're buying the entire company 5. Valuing a Company: So now I'm gonna show you how to buy a stock as if you're buying the entire company. For years and years and years, people have been trying to come up with a really good formula to tell what the value of a company is. It's actually more of an art form than it is a science, because there's no way to completely accurately say that this is what this company is worth , because everybody has a different opinion on how much that company isn't gonna grow in the future. There is no mental mathematical way to do that, which I actually kind of find really cool. But there are some things that you can look at that will give you an idea for the health of the company and the value of the company as a whole. So one of the most valuable things that you can do for a company is determine what the company's equity ISS. Here is the formula for being able to find that out and you can look at a company's balance sheet In order to fill this in. You'll look at the total assets, which is everything. The company owns its cars, its buildings and subtract that by the total liabilities, which are the company's debts that they have to pay. When you do that, you come up with the amount of equity the company owns. If I was to put this an example, think of a company as a house. When you buy a house, you begin to make payments on your home every month, and that's building equity in your home. The same thing happens with companies they by different assets, and they're in the process of paying off those debts. And, ah, healthier company will have less debts and an unhealthy company will have more debts. For example, if we look at the company of GM in 2020 they have $228 billion in assets. But they only have $182 billion in liabilities means they have $46 billion in equity. The other thing that I want to tell you about is market cap. It's the value of the total amount of shares that you have outstanding for your company. And so with GM, you take the stock price of $26.15 and you multiply that by the total amount of outstanding shares, and you get what's called the market capitalization of the company of GM. This is what the overall market perceives this company as being worth. But here's the thing. Often times the market is made up of people just like you and me. And we all have different opinions in different ways of seeing what's gonna happen in the future. But a lot of times, it's not an accurate representation of the value of the company. So here's one thing about G. M. I actually like buying the stock of GM right now because it's perceived as a lower value, but it's still a great company, So it's kind of like buying the company on a discount. Similar to if you went into the clothing store and found a shirt that was 50% off, you'd be more likely to buy it than the same shirt. That was full price. So what I'm saying right now is GM is ah, discount price because people are excited about other things right now. In the bottom bullet point, you'll see that the equity of GM is greater than the total market capitalization of the company, which means that it's very stable. I don't think this is gonna happen, But if GM were to close down and have to sell everything they owned, there would be no risk of us as investors losing our money. They've built all this equity in the company, and so they'd be able to sell their factories there, other assets and be able to return that to us as investors. In this lesson coming up, I'm going to show you how debt effects companies 6. The Effects of Debt on a Company: Now I'm gonna teach you how debt effects companies this is. This is especially important during this Post Cove. It time because companies with a larger debts are going to have to use more of their resource is to pay down those debts before they generate income. The first thing I'll show you is how to look for and find debt on a balance sheet. And then the next thing I'll show you is an example of a company with a lot of debt. On a company's balance sheet debt is listed as liabilities. The two words are synonymous. If you think about it in the same illustration as owning a house, you purchase a house and say it's 100 and $50,000 house. You go into debt and order to be ableto have the benefit of having that house right away. You know, when you go in that you have a monthly payment, and part of that payment is on interest of that loan. And part of the payment is on the principal of the loan, so the exact same thing happens with companies, companies with a lot of debt. What's about to be profit is taken out of the equation in order for that company to pay off its debts. So let's look at Starbucks as an example, and they have 19.2 $1,000,000,000 in assets. But if you look at the liabilities on their balance sheet, their deaths are so big that they're in a negative equity situation. So let's look at Starbucks market cap. Their stock price is $77.21. That way that people see Starbucks is really positive, and I don't think that's necessarily wrong because they make incredible coffee. You know, their business model is overall healthy, but for some reason there's a large volume of debt right now. So if I add up all of the shares that Starbucks has in the stock market, by the price that they cost, I get $90 billion. So that's Starbucks market cap compared to their equity is greater than their equity. This is largely because Starbucks is actually able to still stay profitable there. They'll probably post a profit this year in 2020 and in 2019 they made $3.59 billion in net income. It's not a complete bad situation but I just want you to be aware of companies equity and take that into consideration. When you're purchasing stocks. Don't just look at the market cap to determine the value of a company, but also look at the balance sheet. Look at what sales are gonna be in the future. Doing this is a great fundamental approach toe. Look at the value of what you're purchasing. In this next lesson, I'm going to show you what assets are on a balance sheet and you'll learn how to interpret them. 7. How Assets Affect Companies: an asset is a property owned by a person or company. It's regarded as something that has value in a broad sense. So it's not just a property, but it could be a computer, a car or anything that a company owns to generate profit at this time in history, in the market place, prices of stocks fluctuate really fast because of the fast pace environment that were in with Corona virus. There's a lot of changes. The difference between today and tomorrow could mean a lot of societal changes that happen . What we're seeing is an increase in the fluctuation of the prices of stocks, where where one day people are like, Oh, this stock is great, Let's all buy this stock And then the next day people are like I would not touch that stock with a 20 foot pole, which makes it so important to know the fundamentals of a company. Knowing how to read different assets for a company is key. And so that's what I'll show you how to do. When you look at the balance sheet, the first asset that you'll see is cash and cash equivalents. This is what it says it ISS it's a company's cash that they have on hand, and then a cash equivalent is a stock or a liquid investment that the company can get out of if they need to turn that into cash. The MAWR cash a company has, the more stable they are. And also the more cash a company has, the more likely they are to be able to purchase other companies. The next thing that you'll see on a balance sheet is receivables. Receivables is money that is owed to the company. Four sales. So say Nike sells 20 shoes to a shoe store. Oftentimes, the shoe store won't pay Nike until 30 days after that sale is made. Until that cash is received by Nike, it goes on the balance sheet under the asset section as a receivable. Now inventory, you can probably guess what it is. It's It's inventory. It's whatever the company has produced that hasn't sold yet. Keeping with the example of Nike. It would be shoes that that they've produced, but they're sitting in a Nike warehouse somewhere. Another common thing you'll see on a balance sheet is property, plant and equipment. This is the property, the factories and the equipment that a business uses to generate their product, and this changes a lot for different companies. There's some companies that don't own the properties that they conduct business on. There's other companies that do own the properties. When McDonald's opens up a new store, they have their own separate building and property that they build their McDonald's on. But for a company like Halloween store, I don't know if you've seen Halloween. U S A. They don't They don't buy any specific locations, but they rent their locations to be able to conduct their business. So here is what is not on a balance sheet and what can't be measured by the numbers. It's people. The will of a person is the most powerful force in a company. All these things that you're looking at on the balance sheet are helpful, but they don't give you the full picture of the capacity of a company. It can't measure the ingenuity of people, the experience that they've had in the past, the dreams and the motivations that the people in the company have. There's no way to measure that in dollars, which is why you see such a big difference between the actual value of a company and the value that people want to buy shares of the company for is because it's accounting for the people factor, which leads me to our next lesson. And in the next lesson, I'm going to teach you about fundamental analysis versus technical analysis. 8. Fundamental vs Technical Analysis: surprise. Everything that I've been teaching you in this class has been something that people would characterize as fundamental analysis and what that means. You just think of it as mental, like mental. Logical. It's not so much based on hype about a company, but it's saying Okay, logically, let's look at the numbers. Let's look at the balance sheet. Let's do the research and find a fundamental value for these companies and that is such a key to have success in a post Corona virus market. With that said, there's another side of the coin, which is called technical analysis. It's an attempt to explain why prices move the way that they do. It's a necessary piece of the pie because the numbers and the fundamental don't give the whole picture of what a group of people in a company is capable of. Just if you want to see an amazing example of this, just look at the company of Tesla's because more fundamental people right now are like Tesla. A is terrible, don't invest in them, they don't have any profit or anything, and all the technical analysis people and the people that understand that there's a greater picture are like, Man, what could happen with this company in the future? I want you as a good investor to use both fundamental and technical approaches when you're looking at stocks, and that's what I've included in my lessons. And if you wanna learn Maura about technical approaches, I mention it in other lessons that you can you can look up. I'm not gonna go into all the ins and outs of it right now. I tend to be more of a fundamental approach guy because I'm more concerned with the long term. So that's another difference between the two. Fundamental is saying, Okay, what is gonna happen 10 years from now? And let's try to look at the numbers and come up with something that makes sense for me to invest in. Now a technical person is going to try to study trends. It's going toe. Look at behavior, say Oh my goodness, people's behavior of buying oil increases during the summer time in America every year, and this is just an example. It's not necessarily true, but a technical person would look at what it did last year and the movement of the pricing graphs they would attempt to predict the same movements happening at a future point. I lean on the side of fundamental. I'm gonna equip you for both fundamental and technical, and we're gonna change the world together. 9. The 10-Year Market Vision: so you might ask me. Well, Rob, what's what is gonna happen in the future? What are some things that you see in the world of investments? I would say the biggest thing that's happening is the effect of millennials beginning to invest. According to yahoo dot com, 57% of Millennials have chosen to invest in the markets, and that number is growing all the time. But on the other side of things, there's 43% who haven't invested yet. The general feel for the millennial population is they want to get involved, and I'm a millennial way. Want to get involved. But we also want to be able to know what we're getting involved in with investing. Some people don't feel comfortable investing without an adviser, which is why I'm here. The advice that I'm giving in this class is advice that people spend hundreds and thousands of dollars for to be ableto have so you can use me or or some people go with an advisor and just a note on that. I am not a licensed advisor and this isn't official financial advice, but this is just meant to empower you to make the best decisions possible for you in the market environment. Millennials are really changing the game. We don't necessarily care about making money like making money is kind of important. But doing the right thing is much more important to us. The values of a company is much more important to us. I just see a future for investing. Being the companies that are doing the right thing are the companies that that were all attracted to rather than right now it's transitioning out of this. But we're coming out of generations where the only thing that investors cared about was profit. And they're like, All right, are you making profit okay, like that's all I care about. But I would love to see things change. Mawr and MAWR integrity to rise in the business world. My dream is that everybody, regardless of your class, your race or your education level, would be empowered to build wealth. As a result, everybody would be able to have a say in how business is conducted. That's the beautiful thing that as you learn about this and start to invest more, you become a shareholder and a stakeholder in these businesses in society. My hope is that our voices will become louder and heard more in the future in the next section, I'm gonna tell you what to do with what you've just learned in this class and prepare you to apply what you've learned. 10. Next Steps: here are a few quick things that are going to help you get the most out of what you've just learned in this class. The 1st 1 is I've created a class project for you to do, find three companies and do the equity calculation that I did with GM and Starbucks earlier in the lesson for these companies and then project their net income for the next three years. Once you've complete that assignment, post it on skill share and share what you've gotten with this community here. The next thing that would be incredibly helpful would be toe leave a review. Your review helps future students of skill share know that this class is valuable. I love to know what you thought was great about the class and even feedback of how I could improve classes in the future. If you're interested in mawr great material about investing, there are two lessons that I like to refer you to. The 1st 1 is E. T. ETFs for beginners. I created this class to teach you how to buy and understand e t. F. So it's a great investment if you don't wanna have to be doing a bunch of research and watching the news all the time, you can just buy it and watch it grow. My favorite investment to make is investing in stocks. And so I created a wonderful class on trading in the stock market for beginners, for you to be able to check out to thank you so much and I will see you in the next class.