Kobe’s Legacy Lives On: The Investing Lessons I Learned from the Black Mamba

On January 26, 2019, I had lunch with a prospective client on a Sunday afternoon. During the meeting, my phone vibrated repeatedly in my jacket, prompting me to wonder what the urgency was behind the messages. Later, when I checked my messages, I learned that they related to the death of Kobe Bryant.

One of my friends had sent me a late-breaking piece, and initially, I thought it couldn’t be true. I believed that social media was jumping to conclusions. However, upon visiting various social media sites and popular news media, I encountered the same, inevitable truth. In an attempt to hold onto the hope that Kobe was still alive, I watched replays of his games repeatedly.

The news left me in disbelief for the entire day, and I yearned for more news that would report that it was just a minor accident. It was emotionally difficult to hear that his daughter had died in the same helicopter accident. I couldn’t fathom the devastation that Kobe’s family must have felt after experiencing such a catastrophic helicopter crash. Kobe has always been an inspiration to me, and his loss is deeply felt. Anyone can relate to Kobe because he was genuine. His passion was undeniable, and the way he lived his life was truly inspirational.

Who Was Kobe Bryant?

Kobe Bryant was just 17 years old when he entered professional basketball in the NBA straight out of high school. At the beginning of his career, Bryant didn’t have many opportunities to play, despite having more potential than many of his teammates. When he was given the chance to play regularly, NBA fans saw glimpses of his unique style and skill. As his career progressed, it was clear that he was destined for greatness.

In 2002, I was fortunate enough to see Kobe Bryant and Michael Jordan play in the NBA for the first time. The home game took place in Washington, D.C., with the Wizards, led by Michael Jordan, facing off against the Lakers, led by Kobe Bryant.

The game was intense and close, but the Wizards ultimately beat the Lakers in the final seconds. During the game, Jordan told Bryant that he could “wear those shoes, but never fulfill them.” This critique annoyed Bryant so much that he stopped communicating with his team for two weeks. In the next game against the Wizards, the Lakers won, with Bryant scoring a retaliatory 55 points.

Michael Jordan VS Kobe Bryant – 2002.11.08

There were numerous similar stories about Kobe’s desire for revenge on the court, as he always found ways to improve and get ahead. His work ethic and pursuit of wisdom and knowledge led to five NBA championships and a lengthy list of legendary achievements.

Kobe Bryant’s work ethic was legendary. The best moments of his career were not captured on ESPN; rather, they occurred during the early mornings and late nights when he practiced more than anyone else. Bryant was always the first and last person to arrive at and leave the gym. He followed a strict workout regimen and even found ways to practice while injured, such as focusing on his weaknesses or using his uninjured hand. There was no off-season for Bryant; his summer training sessions were traditionally just as intense as the regular season. Hard work, both on and off the court, was a consistent effort for him. Kobe Bryant exemplified the meaning of perseverance and hard work through his actions.

Talent can only take someone so far in their profession. For example, most starting players in the NBA have the potential to score 20 points per game and some have scored a 20-point game, but most players cannot consistently perform at that high of a level every night. Similarly, most investors will have some years of outperforming the market, but most investors cannot consistently outperform the market average over a lifetime. Those few who can consistently perform at a high level share one trait: hard work.

Bryant believed that he should work hard as if he never had any talent. When asked why he was such a hard worker, he said, “To think of me as a person that’s overachieved would mean a lot to me. That means I put a lot of work in and squeezed every ounce of juice out of this orange that I could.”

Hard work is about commitment and there are no substitutes for it.

Lesson about short cuts: Blackberry (BB) had the potential to compete with Apple (AAPL) but has been unable to do so due to a lack of innovation. As a result, it is no longer a significant player in the smartphone industry. In an attempt to regain market share, Blackberry released a rushed and unfinished smartphone. However, the company did not invest enough in research and development or give its engineering team sufficient time to deliver the promised features. As a result, Apple has already won the market and Blackberry was unable to match its commitment.

Actively Seeking Wisdom and Knowledge

Kobe was skilled at using every tool at his disposal to become a better basketball player. He watched soccer and noticed that soccer players had a unique freedom of movement. He observed that they used more ankle torque than basketball players, but did not experience a higher incidence of ankle injuries. Kobe began researching ways to improve his signature shoe. He asked Nike to remove a few millimeters from the sole to provide better traction and incorporate the benefits of soccer shoes. The result was a low-top shoe that offered structural ankle support, improved traction, and faster response time.

Kobe Bryant was known for cold calling basketball players and business leaders to learn about their successes. He studied the movements of animal predators in order to incorporate them into his jump shots and psychology to gain an advantage over his opponents. Kobe also analyzed the weaknesses of other players and the foul calls made by referees. Some might view Kobe’s behavior as erratic, but those in similar positions of success often see this level of obsession as normal and even beneficial.

Many successful people have an obsession with their work. It is a common trait found in leaders, business professionals, and investors. For example, Sam Walton immersed himself in the wisdom of all he could learn from competitors to junior associates at Walmart. He took advantage of every opportunity to enhance the business. The Walmart business model is built on low prices and efficiency. Another example is Elon Musk, who was months away from bankruptcy and slept in the Tesla factory for months in order to turn the company around. Warren Buffett searched through 10,000 pages of Moody’s manual to become familiar with every public company. Once he found a few suitable investments, he studied everything he could about those companies and invested accordingly.

Champions are constantly seeking to improve and develop their skills. In the world of sports, championships are often determined by small margins such as a fraction of a second, one snap, or one turnover.

In the world of investing, small differences can lead to millions in earnings or bankruptcy.

Kobe Bryant’s dedication to basketball is inspiring. He has influenced many people and shared his wisdom. His “Mamba mentality” is about working hard and living up to one’s potential.

Kobe believed that he should always work hard as if he had no talent.


Maximizing Your Investment Returns: How to Avoid Hidden Costs and Boost Your Portfolio’s Performance

The stock market has been sluggish in recent weeks: the indexes are close to the lows of 2017 and 2018. The frightening news cycle and frenzied financial professionals believe that the stock market may fall even lower. Recent data and business closures demonstrate that a greater recession is possible. I believe that this recession, or the fear of such a recession, is positive for the U.S. economy. Let us not forget that we have already seen signs of life, in every economic recovery, to be greatly disappointed. No matter where the short-term equity market goes, the long-term strategy will always be effective. Two years from now, the stock market may still decline by 30%, but 20 years from now, the market will historically yield at least 10%.

As you probably know, research shows that professional investors have difficulty outperforming the market with stock selection. But as with any statistical data, be cautious about academic topics that have selected bias. Most of these data refer to professional investors as any person who can open a fund. Many well-connected or trust fund babies like Chelsea Clinton’s husband (Marc Mezvinsky) always underperform the market. Pension and endowment funds received 80 cents for every $1 invested by Marc Mezvinsky. Most of these professionals are rich enough to use their capital or well enough connected to collect money from close networks. These affluent and connected professional groups rarely perform the required investment due diligence. Buffet famously said, “Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.”

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Losing out on other opportunities

In this regard, there are many hidden costs to stock-picking. For example, in 2017 more retail investors bought REIT stocks because it was an outperforming the index average. The Real Estate Investment Trusts (REITs) were the best performing industry from 2010 to 2017,the entire industry quickly turned into one of the worst investment opportunities during and after the crash. Malls were a major industry to buy between the 1970s and late 1990s; most developers focus their efforts to build out malls that are quickly becoming empty shells and debt load. If you didn’t know much of this real estate information before reading this post, then you are one of these stock pickers that are at risk of losing money.

Nevertheless, too many people consider themselves a stock-picking genius. The majority of people will be smart enough to invest, but being smart does not offset a higher return. Being a business-orientated or entrepreneurial individual doesn’t make you more qualified as an investor either. Being an investor is a profession, such as being a firefighter. If your house is on fire, the least qualified person to save your house from fire – it’s you.
Anyone can learn about fire safety, but that doesn’t mean they have the knowledge to use that information to save themselves from a fire.

Many people are unwilling to apply due diligence to investments. Anybody can outperform for a few years in a bullish time. The common characteristics of retail stock pickers are individuals who lack financial skills, often have short-term benefits in their portfolio, and lack of long-term stocks.

The Hidden Costs of Trading – FIX Flyer
The Investment Hidden Fees

What are the other hidden fees of stock picking? I called it the T&T problems Time & Taxes

  1. The first cost is Time. If you have little knowledge and try to spend time learning, then you are racing against the clock against someone that is simply more knowledgeable and prepared. Novice investors spend time choosing stocks and never learn more about their investment through due diligence. Studying makes you informative, but it’s a long process before you get really knowledgeable to execute an investment. Knowledge originates primarily from information and experience.
    Everyone on the internet is informed about politics, but not everyone is knowledgeable. If TV ran the news on Biology and Chemistry 24/7, like political news, we would all feel like we can discuss science topics like we are all Ph.D. Scientists. I have another blog which is going to talk about the difference of being informed and knowledgeable. If you continue to choose stocks without being fully informed, you will underperform the market by 5% or more per year (50% in potential missed earnings over 10 years)
  2. The second cost is Tax, if you’re trading in a taxable account. The gap between short- and long-term capital gains is significant. When trading shares, it may be tempting to exit positions, particularly well after just a few months. Trading often leads to greater tax costs and I avoid it. Capital tax gain taxes are 0 to 20% vs income taxes that can be about 25% to 40%. Consider the amount of money you will leave on the table if you pay income tax on your investment performance. My investment strategy is to target long term positions over short term capital gains. Most people are thrilled to receive short-term profit (but they don’t realize that they pay income taxes on it).
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Time & Taxes

Taxes and time can seriously erode performance, particularly for high-frequency stock traders in higher tax brackets. Most economic research studies show these and other mistakes made by the ordinary investor can reduce returns by 4% or more a year relative to a stock index (which hasn’t included the short-term tax fees).

A Difficult Decision: 5 Scenarios Where Your Career May Need to Come First

As an ambitious professional, you may feel pressure to choose between your career and your relationship. You may be asked to give up your career, change locations, or postpone your career goals in order to be in a relationship. But is it possible to have both a fulfilling career and a healthy relationship?

Making this decision can be difficult, but it is important to remember that you are in control of your own life and your own choices. It may be helpful to take some time to reflect on your values and priorities. What is most important to you in the long term? What do you want your life to look like in 5, 10, or 20 years?

Consider seeking out guidance from a trusted friend, mentor, or life coach. They can help you clarify your thoughts and provide support as you navigate this decision. It may also be helpful to set boundaries with your partner and communicate openly about your goals and needs.

Ultimately, the decision of whether to prioritize your career or your relationship is a personal one. It is important to trust yourself and make a choice that aligns with your values and long-term goals. Remember that it is possible to have both a fulfilling career and a healthy relationship, but it may require compromise and effort to make it work.

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Scenario 1 – Career goals that don’t make it easy to stay together

If one person has sacrificed their career for the relationship and the other has a greater opportunity for career growth, it’s important for the latter to pursue their ambitions and for the former to support them.

However, if the career opportunities are in conflicting locations, one partner may have to sacrifice their time to make the relationship work. It’s already challenging to balance a demanding career with a meaningful relationship, so it’s important to ensure that there is still time and effort invested in the relationship. If there is not, the relationship may not survive in the long term.

Scenario 2 – Career opportunities are placed in different regions.

If both partners have equally promising career opportunities, one may need to make the sacrifice to support the other’s career. If one has a better probability of success, the other should offer support.

Scenario 3 – You have a great career to pursue, but your partner doesn’t enjoy a long-distance relationship

If you have a strong career goal but your partner is not willing to maintain a long-distance relationship, you may have to choose between your career and your relationship. You can try to persuade your partner to support your ambitions, but often times their feelings on the matter are already set. If you try to change their mind, it can be ineffective and may only serve to damage the relationship in the long term.

Scenario 4 – Conflicting living preference

One of the first things to consider is the overall well-being and happiness of the relationship. It’s essential to evaluate how living in a particular location will impact the dynamic of the relationship and whether it will be beneficial or detrimental in the long run.

It’s also essential to consider career opportunities and personal goals. If one partner has a strong career opportunity in a specific location, it may be necessary to consider a relocation. It’s important to have open and honest discussions about these opportunities and how they will impact both partners’ careers and personal goals.

Affordability and practicality should also be taken into consideration. It’s essential to ensure that the chosen location is financially feasible and practical for both partners.

Finally, it’s important to consider the role of family and friends in the decision-making process. It’s essential to have open discussions about the importance of proximity to loved ones and find a balance that works for both partners.

Ultimately, the key to making a successful decision about where to live is open communication, mutual understanding, and a willingness to compromise. By considering all of these factors and working together, couples can make a decision that benefits both their relationship and their individual goals and aspirations.

Scenario 5 – You have dreams and goals while the other is content and prevents you from achieving your dreams

If you’re in a relationship with someone who is content and holding you back from achieving your dreams, it may be time to reevaluate the relationship. It’s important to remember that relationships should be inspiring and uplifting, not hindering your growth and success.

If you love someone and are considering giving up your career to be with them, ask yourself if it’s truly worth it. Is it possible to have both a fulfilling career and a supportive relationship? While sacrifice is a natural part of any relationship, it’s not healthy to give up your dreams for someone who isn’t willing to support your ambitions.

In the end, happiness is subjective and it’s important to make a decision that aligns with your values and goals. If you’re with the right partner, a relationship can be a powerful force in your life. However, don’t sacrifice your career for someone who isn’t willing to support your growth and success.

How to invest in stocks for beginners: Begin investing within 30 days

It’s important to understand that there are two main approaches to investing in the stock market. The first is passive investing, which aims to achieve the average market return of around 7-8%.

The other approach is to invest in individual stocks with the goal of outperforming the S&P 500. This approach requires more time and effort, as it involves researching and selecting specific stocks rather than just investing in a broad index. If you have any specific questions or need clarification on anything mentioned in this post, feel free to reach out to me at TomNguyen@agarwoodcapital.com.

1. Decide if you want to put in the time to beat the stock market average returns (Week 1)

Passive investing- The goal of passive investing is to achieve average stock market returns, which are estimated to be around 7% to 8% over the last 100 years. To start passive investing, it is recommended to buy a mutual fund or ETF that represents the S&P 500. This can be done through robo-advisors or standard investment advisors, who provide these mutual funds and ETFs.

Robo-Advisor Services
  • When choosing a service for passive investing, it is important to go with low-cost options such as Vanguard or Fidelity, or robo-advisors like Wealthfront or Betterment. Management costs should be below 1% of your total asset value.
    • A note about indexes: It is also important to note that different indexes represent different segments of the market. The S&P 500 represents the 500 largest companies in the US, and is therefore often used as a benchmark for the overall performance of the US stock market. Other indexes, such as the Dow Jones (DJI), only include a small number of companies and may not be representative of the broader market. This is why the S&P 500 is considered the standard benchmark instead of other indexes.

Active investing- The goal of active investing is to pick stocks and outperform the stock market average, which is represented by the S&P 500. Active investing requires putting in the time to research and analyze both individual stocks and the overall market. If you choose to become an active investor (or the DIY approach, as I like to call it), you will need to learn key aspects for analyzing a stock and strategies for ending the year with returns above the stock market average.

  1. Learning about an industry, company, and competitors
  2. Learning about investment strategies can outperform the average return 
  3. Learning how to read and create financial statements

If becoming an active investor is the path you want, then continue reading.

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2. Start by reading about industries and companies that are the most familiar to you. (Week 2)

It’s important to choose a business industry that is easy for you to comprehend, as this will make your investment journey more enjoyable and successful. One way to do this is to select an industry that is related to your profession or one that you have experience with through your regular purchases.

For example, if you work in the apparel industry, you may find it easier to understand the operations of an apparel company. The apparel industry is a multi-billion dollar investment opportunity, but it can also be highly competitive. To succeed in this industry, it’s important to understand the different distribution channels that are available, such as physical stores and online platforms. For example, Under Armour is a well-known apparel business that sells its products through both physical and digital channels.

As you begin your active investment journey, it’s important to learn as much as you can about the company you are interested in. This includes understanding its products, management, and business risks. It’s also a good idea to ask critical questions and do your own research to ensure that you have confidence in your investment. Remember to start with the basics and learn about the company before diving into financial statements, as this will help you to better understand the financial results. Overall, the key is to find the perfect ingredients for a successful investment by doing thorough research and asking the right questions.

Here are some initial questions I might ask about Under Armour:

  • Why is Under Amour (UA) a better investment than its competitors?
  • What makes UA better than other apparel businesses?
    • Does UA have any patents on their clothes and shoes?
  • Who manufactures UA clothes?
    • Is there a contract or partnership from the manufacturer? 
    • Why was this manufacturer selected?  
  • Who are UA shipping partners?
    • Is UA shipping partner contract?
  • Does UA have its own stores? Why does UA have its own stores?
    • How many stores does UA have?
    • How many retail partnerships do they have? 
  • Did Under Armour ship their apparel from a warehouse, and from which warehouse?
    • How did UA decide to pick this warehouse?
    • Where were the clothes made?
  • Who designs UA’s clothes?
    • What is the designing strategy, do they create athleisure clothes or not? 
    • Who’s the design team leader, how long did they work at the firm? Do they have experience at other firms?

Notice that I did not list any financial or math-related questions. The point of this exercise is to get familiar with the industry and business. As you are learning, there will be more financial jargon and it will get more confusing. Do not be discouraged. If it is confusing, you are learning.

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3. Learn about investment strategies (Week 3)

There are many investment strategies to choose from, but one that has proven to be effective in achieving above-average market returns is value investing. This strategy involves identifying undervalued companies and investing in them with the expectation that their value will increase over time.

Value investing has been used successfully by many billionaire investors, including Warren Buffet, Seth Klarman, and Bill Ackman. It is considered a solid foundation for investors to learn about other investment strategies and can be a powerful tool for building long-term wealth. If you are new to investing, learning about value investing and how to apply it to your portfolio can be a valuable way to start building your investment strategy.

What exactly is value investing?

Value investing identifies companies with a current market price that is less than their intrinsic worth, which means the stock or company is “undervalued.”   

How do I determine the value of a stock and know if a stock is undervalued?

The discounted cash flow – this method provides the net present value by estimating the company’s future profitability to help determine the company’s values. The discounted cash flow will help provide a range of value to the entire business. 

Another way to find undervalued stocks is by using the valuation ratio. A valuation ratio shows the relationship between a company’s market value or its equity and some fundamental financial metric (e.g., earnings). The point of a valuation ratio shows the price you pay for some stream of earnings, revenue, or cash flow (or other financial metrics).

  • Price/Earnings – The historical average of the S&P 500 index P/E is 15, therefore anything under 15 could be considered undervalued relative to the historical average of the S&P 500 index. 
  • Price/Book – Price is the stock’s current market price. Book value represents what the total asset of the company is worth. So, if the price of a company is worth $100M, and the book value is worth $110M, you will see a P/B= .90 ($100M/$110M).

Not all undervalued stocks are suitable investments. Some companies may reflect undervalued but aren’t performant and stay that way. We call these value traps. A value trap will have a valuation that appears cheap, but it has risks and troubles that will cause the company to continue declining.

Understand why stocks become undervalued

  • Missed expectations and lower guidance: Shares can plunge if the company provides quarterly and annual reports that misses target earnings or provides guidance below Wall Street estimates. 
  • Market crashes and corrections: If the entire market drops, it’s a great time to look for undervalued stocks.
  • Bad news: Just like when a stock misses an analysts’ expectations, bad news can cause a knee-jerk reaction from shareholders, sending shares plunging more than they should.

Cyclical fluctuations: Different sectors tend to perform better at different stages of the economic cycle, and it can be useful to look for bargains in industries that are currently out of favor. However, it’s important to remember that not all out of favor sectors will recover or return to normal business operations. For example, the restaurant and retail industries are both known for having a high rate of businesses that go out of business.

Value investing involves looking for undervalued stocks that have the potential to increase in value over time. For example, Tesla stock priced at $200 could be considered a value stock if investors are underestimating the technology and complexity of the company, just as investors initially underestimated the software, ecosystem, and design of the iPhone when it was first released. The general concept behind value investing is to look for opportunities to buy undervalued stocks at a discounted price, similar to buying a $100 bill for $70. While value investing is a straightforward concept, it can be challenging to master, as it requires careful analysis and research to identify undervalued stocks that are right for your portfolio.

4. Learn how to read financial statements and how to create one from scratch (Week 4)

Financial statements will be disconcerting to learn. If math isn’t one of your strongest skills, it will be considerably more difficult. But, most of the investment math is simple algebra. If you cannot interpret a financial statement well, don’t rush to buy stocks. Start a stock account or paper trading account with only the amount that you can afford to lose, but still assert the same spending habits that you would with a larger account. The amount of money you need to buy an individual stock depends on your investment experience and skills. 

How do you know when you are fundamentally ready to invest? 

  • Q: Can you identify seasonality in a financial statement?
  • Q: What happens to cash flow if customers are paying with credit cards instead of cash?
  • Q: How much profit does a company have to pay off its current debt obligations? 
  • Q: Can you teach someone how to read a financial statement