Category Archives: Investing

Certifying a Home with LEED v4

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The goals of LEED (Leadership in Energy and Environmental Design) target climate change, resource management, biodiversity, and quality of life. To get a home project certified, the most important note to remember is that you must engage and register your project before designing or building it. Large parts of the LEED certification focus on site selection, so aiming for a certification after construction has commenced will not work. The LEED process is rigorous, and is not for those with shallow pockets.

Prerequisites

Building must be on a “permanent location on existing land.” For example, mobile homes are not eligible for LEED. Prefabricated homes (that are gaining in popularity) are eligible, as long as they are part of a permanent installation. The LEED project seeking certification should include the entire building and the total scope of work, not only the building itself. This includes hardscapes like driveways, bushes, trees, and other landscaping. In addition, local building codes must define the structure as a “dwelling unit,” in order to be eligible for a LEED housing certification. The international residential code stipulates that a dwelling unit must include “permanent provisions for living, sleeping, eating, cooking, and sanitation.”

LEED Certification Levels

Which LEED certification level your project receives is based on an often-debated point system. For LEED Homes, the maximum point potential is 110. The chart below shows the possible points by category for homes. Most categories have a points-for-performance path in
addition to the more standard path.

LEED v4 Home Categories Possible Points
Integrative Process 2
Location and Transportation 15
Sustainable Sites 7
Water Efficiency 12
Energy and Atmosphere 38
Materials and Resources 10
Indoor Environmental Quality 16
Innovation 6
Regional Priority 4
 TOTAL: 110

from http://www.sigearth.com/wp-content/uploads/2016/08/Capture.jpg

The Points

I recommend approaching the LEED point system by reviewing each of the 110 points (including the required pre-requisites that do not award points values) and assign a dollar value to each. This method will help determine both a home design and the LEED certification level target. Once the home is built and ready for review, the $300 cost to pursue LEED certification goes to the US Green Building Council in order to book an onsite certification survey.

Many of the points are awards based on some kind of technical, sliding scale. For example, reducing water usage by 10% is one point, and 20% is two points, etc. I selected a handful of “easy” points below and summarized each category. Achieving all 14+ “easy” points below will put your home project well on its way to reach 40 points for a LEED certification!

Sustainable Sites – This category focuses on the site environment, and supporting the natural ecosystem of the site.

  • 1-2 points for locating trees or non-absorptive materials to cover >50% of roofs or other hardscapes surfaces.
  • ½ point for designing landscape features to provide a minimum 18-inch (450 millimeter) space between the exterior wall and any plantings.

Water Efficiency – This section rewards points for efficiencies in indoor and outdoor water use, and water metering and management.

  • 1 point for the average toilet flush volume across all toilets not exceeding 1.1 gallons (4.1 liters). Each toilet fixture and fitting must be WaterSense labeled.
  • 1 point for all clothes washers to be energy star qualified (or performance equivalent outside the US).
  • 1-4 points for reducing grass areas and increasing native plantings, as percentage of total landscape area.

Energy and Atmosphere – The bulk of this section (18 of the 38 points) focuses on the degree to which energy efficiency can be improved compared to a baseline standard. More efficiency awards more LEED points.

Materials and Resources – This category primarily addresses building materials, including transport and disposal.

Indoor Environmental Quality – This section focuses on air quality, including thermal, visual, and acoustic comfort. This section is one of the most health-conscious parts of the LEED certification.

  • 1 point for a control for the use of the local exhaust fan in full bathrooms, such as an auto-off timer or an occupancy sensor.
  • ½ point for including a non-carpeted mudroom
  • ½ point for sealing all permanent ducts and vents after installation to minimize contamination from construction. Remove seals after all phases of construction are completed.
  • 1 point for multiple thermostat zones for both heating and cooling. Single-family houses with less than 800 square automatically meet the requirements of this credit.
  • 2 points for NOT installing any fireplaces or woodstoves. These can still be installed for 1 point if they are EPA-qualified.

Innovation – The LEED authors largely leave this section open to accommodate future innovations in building design and construction.

  • 1 point for having at least one principal participant of the project team with a LEED Accredited Professional (AP) certification and a specialty appropriate for the project.

Regional Priority – This section awards points to specialized priorities based on region. The point values vary by region. 

Points spreadsheet sample from US Green Building Council

A Common Pitfall

According to a Philadelphia architect who I spoke with, a common pitfall in LEED certifications is shortcuts in construction. Builders may substitute less green materials – say a ceramic floor instead of something more sustainable – on their own accord. In defense of the builder, such a shortcut may be more cost effective and faster to install. Unfortunately, removing the error and installing what was originally needed for LEED points generates even more waste. To avoid this, hiring a LEED-certified builder is strongly recommended.

Resale Value & Conclusion

As of this writing, hard evidence for LEED certifications yielding higher selling prices does not exist. However, several studies and articles support a correlation with energy efficiency improvements to a home and a higher selling price. This makes sense because both LEED and green homes have lower utility costs and are healthier for occupants. Extremely green homes such as those with LEED certifications may sell for as much of a ~30% premium, while homes with moderate energy efficient accommodations and certifications may sell for a ~10% premium. Data is spotty, since US property markets vary widely, and finding both a LEED home and a comparable non-LEED home is difficult. Nonetheless, although the LEED brand may still be new to some home buyers, the benefits of greening a home (that LEED requires) appears to almost always be a smart investment.

For more information about the LEED certification for homes, here’s a link to the US Green Building Council: http://www.usgbc.org/credits/homes/v4

 

Investing Experiment Wrap-Up

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After a year of ten novice investors, ten accounts, and $10,000, we have some RESULTS. Market indexes such as the S&P 500, Dow Jones Industrial Average, and the Nasdaq Composite each outpaced the return on investment for the group as a whole. Once the twelve months had passed, the group lost 4.95% of the original $10,000, and most indexes only lost about 1%-1.5% over the same time period.
overview
As you can see, one participant did exceptionally well. Bryan’s boost from February through June was primarily from a well-timed purchased of AMD stock. Another participant did exceptionally poorly, jumping from one losing position to another. As you can see from the graph, most did not break even.
As the organizer of the experiment, I was able to see and track all trades. Now that it’s complete, the following investing fundamentals are now proven once again:
  • Cutting Losses: Never watch an investment of yours continue to drop with the hope that it will bounce back. Once you’ve lost 15%-20%, it is almost certainly time to cut your loss and sell. According to Warren Buffet and Benjamin Graham, cutting your losses is the most important investing concept.
  • Acting on Impulse – The stock market – and most investors – are driven by impulses and short term market news. Taking 24 hours or more before placing a trade will help to alleviate speculative purchases. Many participants changed their minds from one stock to another in a matter of hours.
  • Beating the Market – Only one of the experiment’s participants managed to beat the market, and he did so by buying a risky stock that fluctuates wildly. Especially for novice investors, index funds are your friend. They will keep pace with the market. Why? Because that’s exactly what they are designed to do!

One opportunity that the experiment uncovered was in text trading. Given the convenience of trading through me, a majority of participants opted to text their trades via SMS. I don’t think many major brokerages support this functionality at this time, so text trading may be an unmet need in the investing market.

Investing Experiment Kickoff

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On July 1st of this year, ten individuals and I kicked off a very unique investing experiment that will last 12 months. Using $10,000 of real money, I allocated $1,000 to each participant to invest how they saw fit. We’ll see who does best (and ask why) after 12 months pass. Although it costs nothing to participate, to better emulate the outcome of real individual investing, profits will be shared with the participants. I will foot the bill for all commissions. On the first of each month, I share a monthly update to all participants showing exactly how their investments are performing.

After less than two months have passed, I’ve observed the following:

  • Participants make trade requests using written communication (not verbal), notably via SMS and Email.
  • Order types (market, limit, etc) vary based on the previous investing expertise of each individual.
  • The only investment that more than one participant purchased was stock in Disney (NYSE: DIS).

The goal for this experiment is not to make money, although that would be a fun bonus. Instead, we aim to analyze participants actions and their investing results. We aim to answer simple questions about individual investing, such as: What triggers an investor to take action? When given $1,000 and zero risk, what do investors buy? What impact does competition have in this group of 10?

Tracking is accomplished using a shared Google Spreadsheet.

Finding Value And Consistency In Consolidated Water Co.

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Consolidated Water Co. Ltd. (CWCO) is a tiny company, with a market cap of only $172mm. As of its latest quarterly report ending Q3 2013, Consolidated Water was trading at 0.8x the value of net working capital. Over the past few years, CWCO has traded well under book value, but remains a small, relatively undiscovered stock. For those looking to diversify into a teeny utility company, Consolidated Water is certainly worth a look.

The stock is much more volatile than most utilities. Consolidated Water’s high beta of 1.5 is surprising, but not necessarily a deterrent. The high beta may be attributed to the small size of the company, enabling any investor with substantial buying power to push the stock up or down. The stock prices of significantly larger utility companies like American Water Works (AWK) and California Water Service Group (CWT) fluctuate much less, with lower betas of 0.29 and 0.42, respectively.

Other fundamentals that provide key insights are the P/E around 15 and the percentage of institutional ownership at 49%. As with other companies in the water supply sector…

—> To continue reading, please see the article on Seeking Alpha, where it was published. 

How the Stock Exchange Works

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I subscribe to the Visual.ly weekly newsletter, which highlights excellent representations of data. As the name suggests, Visual.ly is a community of artists and designers who make data beautiful and easy to digest. Periodically the community branches out of their typical info-graphics (pictures) and into videos. This week, they sent out an excellent video how the stock exchange works:

 

Investing for the Average Person – Ignite Baltimore 13 Conference

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Copyright Bruce F Press PhotographyEarlier this year, the Ignite Baltimore Conference Organizers selected my pitch for the 13th Ignite Baltimore Conference. Ignite Conferences are similar to TED talks – both provide a medium for passionate presenters to share their ideas. The format of Ignite is very rigid, and certainly lives up to the tagline, “Enlighten us, but make it quick.” Each speaker has five minutes to present 20 slides which advance automatically every 15 seconds. As a speaker, planning and practicing with this format in mind is essential.

My presentation, Investing for the Average Person, covered some misunderstandings, intimidation factors, and a simple investing example using index funds. The internet provides a multitude of ways to invest instead of leaving money to grow at a snail’s pace in a bank savings account. However, lacking financial education at all levels leaves many young people unprepared to navigate the countless number of investment products available to them. For the most part, much of the investing world focuses on more information than the average person needs to know. For basic investing, many people can disregard terms like derivatives, options, futures, shows like Jim Cramer’s Mad Money, and worries about large risks. The average person can largely ignore many of these distracting terms and media that is mostly focused on short term market news.

The example I presented demonstrated how an American named Sally could plan, save, and invest in index funds – a type of mutual fund – to finance a purchase of a new car. This example is not exclusive to a car, and could be applied to support retirement, a property, or savings toward a degree. Sally’s first step is to plan her investment. How much does she need for her car? Are there investment minimums she must save up to before investing? Questions like these will help Sally shape her investment planning. Once she has saved the needed funds, she invests her money and largely relaxes.

Sally planned to put half of her dollars into a stock index fund (such as ticker VGTSX), and half of her dollars into a bond index fund (such as ticker VBMFX). This plan is called a target investment allocation. Instead of picking a few stocks, investing in index funds diversifies Sally’s investment over hundreds of industries and sectors, which lowers her potential risk. For an average investor who does not care to analyze detailed earnings reports and study financial news, index funds are ideal. The only action Sally may need to take as her investment matures is to re-balance her investment back to the 50/50 target she initially planned. Sticking to her plan will help her stay on track and achieve her goal of a new car.

As I wrapped up, I touched on a few important concepts an average person should be familiar with: capital gains taxes, keeping a personal financial ledger, and inflation [Investopedia links]. With this basic knowledge, an average person will gain the confidence and organizational skills to invest their money and achieve their financial goals.

Yahoo! CEO Mayer’s Four Pronged Strategy for Success

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Acquisitions and Strategy

The age old expression “you have to spend money to make money” drove Yahoo (YHOO) and CEO Marissa Mayer to acquire Tumblr for $1.1 Billion. Yahoo already owns several social-media focused business units like Flickr, GeoCities, Koprol, Snip.it, and Bix. Buying Tumblr caught the most headlines, but Yahoo also acquired eight other companies in the second quarter: Summly, Astrid, Milewise, Loki Studios, Go Poll Go, PlayerScale, Rondee, and Ghostbird Software. The Tumblr acquisition adds a massive blogging platform to accompany the successfully rebooted Flickr photo service. Tumblr focuses on blogging in the purest form – simple paragraphs and heavy use of media, with a nod to extensive community commentary. A quarter-million new blogs are created every day, and each creates more internet real estate for Yahoo’s display advertisements. Mayer’s strategy is to focus Yahoo on four key areas: Search, Mobile, Display, and Video. The advertising market in these segments looks to be held by Google (GOOG) and Facebook (FB). If Yahoo is to continue to exceed financial expectations in CEO Marissa Mayer’s four areas of focus, success hinges on driving searches and advertisements with user-generated content.

Earnings and Revenue

Yahoo continued to buyback shares as part of the $5 Billion buyback program announced last year. On the Q2 2013 earnings call, CFO Ken Goldman announced that $1.9 Billion in shares remain to be repurchased. With less common stock shares outstanding YHOOepsperelatedin the market, buybacks will drive earnings per share (EPS) higher and the price-to-earnings ratio (P/E) lower. A positive EPS and low P/E are both fundamental indicators of a healthy, profitable company. Yahoo’s relatively low P/E of 7.91 is not uncommon for similar companies [see graphic, right].

To help pay for the share buyback and all of Yahoo’s acquisitions, the company sold $846 million of their preferred shares of the Alibaba Group, the Chinese E-Commerce giant. With new companies being acquired at an increasing rate and a $1.9 Billion left to buyback, Yahoo is burning through cash. Between the end of Q1 2013 and the end of Q2 2013, the company’s cash stockpile decreased by $600 million. $4.8 Billion in cash remains on their balance sheet after Q2 2013 though, so Yahoo is not at risk to dip into the red anytime soon.

YHOOsurpriseFurther fundamental analysis suggests that Yahoo is still an attractive investment even after the stock has gained over 60% in the past year. The Beta of just 0.83 shows that the stock is less volatile than the rest of the market. A low beta is ideal for a long position in the stock, since the share price is less likely to have sweeping changes and fluctuations, potentially giving investors more time to contemplate a change in position. The PEG ratio average for Yahoo’s industry is 2.97%, while the entire S&P stands at 1.98%. The PEG ratio – the P/E divided by the expected growth rate – is 1.28% for Yahoo, showing that Yahoo is less expensive compared to the rest of the market. Quarterly earnings reports are a huge perception of performance and health, and Yahoo’s Q2 results continued the company’s earnings beat.

CEO Marissa Mayer’s Strategies are Working

 

The revolving door of candidates at Yahoo’s CEO position for the past few years left the company misguided and lacking a vision. Mayer’s leadership has energized Yahoo’s employees and given the company a firm direction. With the Tumblr blogging platform now a part of Yahoo, Mayer is looking to solidify Yahoo’s business in mobile and display, as she mentioned in the Q2 earnings call. Aside from turning Yahoo’s financials around, Mayer has changed the culture at Yahoo immensely. Since Mayer started at Yahoo in July 2012:

YHOO1yr

  • The stock price has gained over 50%
  • Falling revenue ($7.5 Billion in 2008 to $5.5 Billion in 2012) has stopped falling
  • Employee attrition has decreased 59% year over year
  • 12% of new hires are Old Employees returning

In one of the most clever business moves in recent memory, Mayer decreed that employees would no longer be able to work remotely from offices due to widespread reports of an unproductive remote workforce. Any employee who cannot adhere to this policy “should quit.” Without the morale impact of a layoff, Mayer effectively trimmed resource costs and increased efficiency. I doubt that this move was a layoff in disguise, but the result of better teams and cutting costs is very similar.

With a clear business strategy in four key areas, a competent leader who is reshaping the culture, and rising earnings results, don’t be surprised if Yahoo’s stock continues to rise.