Michael Steele Invests Like a Ferengi

No race of aliens has taught us so much about finance, markets, and economics as Star Trek's Ferengi. The Ferengi Rules of Acquisition, a personal and financial code of ethics, offers a buffet of aphorisms on making money by any means necessary. Greed is the number one virtue for the Ferengi, and they use the word "ethics" only in its loosest form. But some of their rules may have some truth for investors on Earth.

Today, Michael Steele uses the Ferengi Rules of Acquisition to teach you about investing. (Follow the link for the full details.)

Paying attention to the the Ferengi Rule 45, "Expand or Die", shows you why Chipotle Mexican Grill ($CMG) saw its share price plunge last fall. Rule 89, "Ask not what your profits can do for you, but what you can do for your profit", teaches us about dividend reinvesting with dividend growing companies, like Coca-Cola ($KO) which has raised its dividend for 50 straight years. Rule 162, "Even in the worst of times, someone turns a profit", leads us to Costco ($COST), which increased its sales and retained its membership while the 2008-09 recession was hurting the rest of the retail sector.

But not everything the Ferengi say is wise. If you followed Rule 261, "A wealthy man can afford anything except a conscience", you might forego investing in socially responsible companies like Whole Foods Market ($WFM), whose CEO is a leader in the Conscious Capitalism movement. And if you listen to Rule 94, "Females and finances don't mix", you ignore investor psychology studies that say women generally make better investors than men here on Earth; Warren Buffett used "feminine" investing traits to increase the book value of Berkshire Hathaway ($BRK-A, $BRK-B) 586,817% since 1965.

Michael Steele Takes a Closer Look at Warren Buffett's Annual Shareholder Letter

With the 2013 installment of Warren Buffett's annual letter to Berkshire Hathaway ($BRK-A, $BRK-B) shareholders hitting the Internet recently, plenty of stories have been published highlighting the most quotable passages from the letter. News articles abounded with the best examples of Buffett's traditional wisdom and wit.  But Michael Steele delves deeper into the letter and finds six more notable passages that nobody else is talking about.

Why is nobody talking about Buffett's demand that we bow down before his lieutenant?  Or Buffett's false assertion that hamburgers and Chinese food cannot co-exist in one restaurant?  Or Buffett throwing down and trash talking one of his company's biggest rivals in the insurance industry?  Because most financial commentators do not analyze Buffett's writing with the skill and tenacity of Michael Steele.

Michael Steele Protects You From Vampires

You may have prepared for the upcoming vampire apocalypse by putting skylights on your house and stocking up on garlic and wooden stakes (all of which are recommended by Michael Steele), but have you prepared your portfolio for the coming reign of our new immortal, blood-sucking masters?

What's going to become the newest mass market commodity in our post-vampire economy? Blood. And I have several companies in mind that will benefit when pints of blood move from being a high-value medical need to a basic consumer staple, like Baxter ($BAX), CSL Ltd. ($CSL.AX, $CMXHY.PK), and Grifols ($GRFS).

Or, if you're a contrarian who foolishly thinks humanity has a fighting chance against the vampires, I've got stocks for you too, like the leading company in wooden stakes, Weyerhaeuser ($WY) or garlic (and other spices) distributor, McCormick & Company ($MKC)! Or maybe you want to bet on the people who will run for their lives: they will be buying lots of new running shoes from Nike ($NKE)!

Whichever way you think the coming fight for the survival of humanity will go, if you follow Michael Steele's advice, your portfolio can weather the red tides of chaos if you prepare today.

Michael Steele Wants You To Invest in Baltimore

Individual investors are most successful when they buy into the idea that they are owning a part of a business for the long-term, not short-term trading or speculating on stocks. A good way to build and maintain that mentality is to buy companies that you can root for through thick and thin, and adding a little civic pride to your portfolio can be a part of that. By owning a few of the local companies that make your community great and drive your local economy, you can keep your short-term emotions in check and become an owner for the long haul. And since Michael Steele is from Maryland, I illustrated this with a portfolio of five companies from Baltimore on my financial blog at the Motley Fool: Under Armour ($UA), T. Rowe Price ($TROW), Legg Mason ($LM), Jos. A. Bank ($JOSB), and McCormick & Company ($MKC). Think global, invest local!

Michael Steele Teaches Investors About Government Contracting

One of my areas of expertise is investing. In the course of following the news about the companies I own, I will sometimes come across a press release about a company winning a federal government contract. And while I understand perfectly what the company is saying about the contract they won, I worry that some of the details of the language might slip by most investors. Or be misunderstood. Or in some cases, that the wording of the press release makes the value of the contract sound puffed up and more valuable than it really is. Because, you see, one of my other areas of expertise is dealing with the technical side of federal IT contracts.

So, as a public service, I wrote a three part series for the Motley Fool Blog Network about understanding the vocabulary of government contracts for investors:

• Part 1: Fixed Price, Cost Reimbursement, and Time & Materials Contracts, including examples of recent contracts won by Lockheed Martin ($LMT), Booz-Allen Hamilton ($BAH), and SAIC ($SAI)
• Part 2: Indefinite Delivery Indefinite Quantity (IDIQ) Contracts and Modifications, with examples from Amazon.com ($AMZN) and Lockheed Martin ($LMT)
• Part 3: Multiple Awards, Schedules, and Government Wide Acquisition Contracts (GWACs), using examples from Cubic ($CUB), CACI ($CACI), and SAIC ($SAI)

It's a departure from my usual smart-assed financial blog postings, but I promise I will get back to writing those again soon.