Question:
With the economy seeming to be on the rebound, I want to invest in leisure, I think many people will be taking vacations in 2014 to make up for years of staycations. I’ve been looking at Hilton. What do you think?
Answer:
Hilton Worldwide Holdings, Inc. (NYSE: HLT) was bought by private equity company Blackstone Group in 2007. Blackstone brought them back to market in December 2013; however, they only released 25% of the shares. Blackstone remains a 75% owner. Additionally, the private equity firm loaded Hilton up with debt. The hospitality company has 695% debt to equity. We feel the risk is just too great. The stock carries a price-to-earnings ratio of 38 based on 2014 earnings, making it very expensive.
We recommend The Walt Disney Company (NYSE: DIS) as it is a diversified, media, entertainment and leisure play. While the stock is not at its cheapest at 19 times earnings, it is expected to grow at 12%, making it cheap for the entertainment space.
Question:
How do I calculate my net worth and why do I need to know this?
Answer:
Net worth is your total assets minus your total liabilities. It is basically how we keep score. The goal is to grow your net worth enough so when you retire, you can live off your assets. You build your net worth by saving and increasing the value of the assets you buy—most commonly, this is your portfolio of stocks and investments.
Net worth is often viewed without considering your home. Real estate is very illiquid, and the market can be unpredictable. Your positive cash flow also often determines if you can pay the mortgage on that asset. If you are ready to retire, but your net worth is tied up in your home, you may not be able to retire without selling that asset. In our industry, we are presented with an investor’s net worth and then asked when they can retire. When we see net worth tied up in a home, we may have to recommend selling the home to restructure assets to liquid investments that you can live on.
Question:
I know you like to have some international exposure, what is the best way to get that exposure and are there countries to avoid?
Answer:
We prefer to get our international exposure through exchange-traded funds (ETF), which are a portfolio of investments, but trade on exchanges like a stock. Fees on ETFs are considerably lower than mutual funds. We currently recommend the iShares MSCI EAFE Index Fund (NYSEARCA: EFA), which has stocks from developed areas in Europe, Austrailasia and the Far East. While the BRIC countries—Brazil, Russia, India and China—had a good run, their economies were very tied to commodities. With commodity prices falling, their prospects are not as strong.
We recommend avoiding too much exposure to Russia, the Middle East, North Africa and Japan. We believe that Europe is out of its recession. France is still having some problems, but countries like Greece and Spain have seen capital flow back into the country.
While the iShares MSCI EAFE ETF has some exposure to the BRIC countries, as well as the Middle East, North Africa and Japan, it is well diversified and reduces country-specific risk. We would recommend avoiding specific exposrue to those regions.
At Henssler Financial we believe you should Live Ready, and that includes understanding your investments. If you have questions regarding your holdings, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
