Thursday, July 28, 2005

Roth IRA and JSDA

Once I start receiving paychecks, I'm going to gradually make the maximum contribution to my Roth IRA. I'm starting to think about how I plan to invest the funds in the IRA. For the first year or two, there's only going to be a few thousand dollars. If I invest in individual stocks, I do want to buy at least 100 shares. This means that my IRA for the first few years would be made up of only a few stocks. I could also invest in ETF's for the first few years and then gradually select certain stocks.

Then I started thinking generally about investing, and I'm hoping you will share your opinion.
Here's the question: would you invest your Roth IRA in a more conservative way or a more aggressive way?

I've read various articles in the past and have heard opinions of financial managers. Some say that since all the capital gains can be taken out tax-free, it's best to go with a more conservative approach. This way, the probability of the IRA losing value over the years will be minimal and you can enjoy the tax benefits.
Others say that you should be more aggressive because of these tax benefits. By choosing to use an aggressive approach, you have the chance of great gains and keeping all of these gains.
What would you do, or for those who have IRA's, what do you do?

Note: you can also blend the two, either by using both at the same time (10% aggressive, 90% conservative, etc.) or by being more aggressive at a younger age and then turning more conservative.

Jones Soda
I listened to the conference call (stockdiva, what did you think?) and I wasn't thrilled, but saw some potential. I wrote down some notes and hopefully I got all the figures correct. Sales increased by 21%, but the bottom line was hit by an increase in expenses. The quarter ended with a net loss of 1 cent compared to a 3 cent profit last year. So far things are just looking so-so, but the increase in expenses was due to brand awareness and marketing costs for promotions with Target. They seem positive with their Target results, so these expenses will probably be worth it in the long run. But they better be right with their expectations of the Target program.
Sales did increase at a strong rate, but the increase in expenses of $1.1 million was huge when compared to the increase in sales. So these operating expenses were to increase brand awareness and boost their Target sales. The next few quarters will be important to see if this increase in op expenses were worth it (especially the figures for the summer months).

Other notes:
  • They talked more about expanding, and I think they should definitely use more outlets. Target is a huge chain, but I think that it will be important to continue with Kroger and other chains as well.
  • The organic tea line is exceeding expectations
  • The gross margins held fairly well and they intend to lower freight costs
  • It seems that they are banking on nice growth figures for the near term future because they had greatly higher operating expenses (mentioned above) and they are increasing their inventory (inventory turnover went form 49 to 61 days). From one side, it looks like a big risk, but from another side it also looks like they have full confidence in their numbers and estimates for strong growth.
  • They plan to move to Nasdaq and will provide benefits for the future. In the near term, this could make the outlook appear fuzzy because of the increase in expenses. I looked on the Naz site and the fees for listing as a small cap can't exceed $50k (they also noted this during the CC). The annual fees will also be $21k per year. These expenses, along with other promotional expenses could hinder the chance of profitability for the near future.
  • They are going to do a Halloween promotion where they are hoping people will buy small cans and give them to trick-or-treaters. Honestly, I'm not so sure about this one (I rather get candy). Hopefully they aren't putting too much money into this, and I'm not sure if they said any estimates.
  • One caller talked about the pricing of cans of soda vs the bottle prices. I think this was a strong point, because it could become a cannibalization of sales. Rather than adding to sales, people who originally bought the bottles would now buy the cheaper cans. Definitely something to watch.
  • They were able to increase their prices, which just shows the strength of the brand. They had good top line growth with an increase in price, nice.
Okay this is getting a little long, if you're interested in more just email me.