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Alex Trias

 
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  • Retirement Investing For Income ONLY: Doing It The Right Way [View article]
    I just took a look at this book - sounds precisely up my alley. Thank you for the suggestion.
    Oct 21 08:13 PM | 1 Like Like |Link to Comment
  • Retirement Investing For Income ONLY: Doing It The Right Way [View article]
    All funds disclose their share holdings and weightings. If you are looking at dividend oriented funds, you will see a great deal of overlap in terms of what stocks they own. Some funds will hold can't miss stocks, and those stocks will do what the ones you mentioned did. There's no getting away from the occasional stinker when you own individual stocks or funds - you simply must diversify and expect to take it on the chin with certain investments, as you hit home runs with others.

    You can replicate dividend funds to some degree by picking out the top holdings. The difference in doing so will be that you'll save on management fees, but more importantly in my mind, you will avoid asset turnover. Funds are constantly rebalancing, and if you own so called "cap weighted" funds, the funds have a mandate to sell stocks when the price is falling, and buy them when the price is rising. Buying high and selling low, that's bad business, if you asked me. By holding individual shares outright, you can avoid that - do the opposite approach, in fact, when tends to work better. Personally, I tend to buy more stocks when they're falling, and don't sell anything hardly ever unless I need the money for some reason, or the price of one of my stocks is preposterously high.

    The bottom line is, you should ask yourself why you are not comfortable with individual stocks, and then determine whether actually, you'd be any more comfortable with funds (and if so, why). If you can articulate a few good reasons, go with funds.

    I suggest you read a couple of great investment books, too, before making ANY investment decisions regarding funds or stocks. I suggest you read "The Intelligent Investor" by Benjamin Graham, and read "The Essays of Warren Buffett" Edited by Lawrence Cunningham.
    Oct 21 05:36 PM | 2 Likes Like |Link to Comment
  • Retirement Investing For Income ONLY: Doing It The Right Way [View article]
    Thanks for the article - look forward to forthcoming installments. Investing for reliable income and reliable income growth rather than unpredictable capital gains can be a very sensible approach for many investors, but you're going to far by saying the price of a security is not relevant. If you're given the choice between two companies with stable and growing earnings, long histories of dividends and dividend increases, in predictable lines of business with unique competitive advantages and high barriers to entry, exceptional management, why on Earth wouldn't you decide to invest in the one with the lowest valuation? And assuming reinvesting dividends is part of the goal, shouldn't you be on the constant lookout for dividend paying companies trading at a significant discount to intrinsic value? I'd argue that by doing so, you can increase your earnings significantly. And paying too much to buy a company can end up being a huge drag on your income and income growth - to say nothing about your capital gains. If a company you own soars in value, yielding 3% when you bought it, now yielding 1% and trading 50% above intrinsic value. Why wouldn't you sell it, and use the proceeds to buy a different company yielding 3% and that has maybe fallen in price, trading well below intrinsic value. You can ratchet up your portfolio income year after year by doing this. I'll certainly look forward to reading your future articles, but ignoring stock prices altogether? If the goal is to maximize your reliable income and your reliable income growth, you can't ignore prices.
    Oct 21 03:28 PM | 1 Like Like |Link to Comment
  • Retirement Strategy: It Is A Correction, Not A Crash [View article]
    I highly commend the book "The Essay's of Warren Buffett" by Lawrence Cunningham. Page 200, Buffet explains why hope that his investment in IBM will fall, and ideally, that the stock will languish for at least 5 years. His reasoning has everything to do with share buybacks - so I think you might find this book very interesting.
    Oct 11 02:02 PM | 2 Likes Like |Link to Comment
  • Why The Market Topped Out [View article]
    I sure hope the author is right, and we do get a correction (at least). Bull markets are the functional equivalent of a sales tax on investors, forcing investors to pay more and more for lower and lower shares of corporate earnings, eating away at the investor's portfolio yield. Thankfully, bull markets do eventually pass, giving investors a chance to finally reinvest their dividends and buy the same share of corporate earnings at lower prices.

    It's a sad fact that not every area of the market will fall as hard as every other area. Fortunately, as he points out, there is already a bear market in some areas, like energy infrastructure. Investors can now buy companies in these segments of the market at far better prices than just two weeks ago, and with hope, prices will fall EVEN HARDER and, we can all hope, STAY LOWER for a very long time. We all know that it takes time to continually reinvest dividends, and that bear markets can be annoyingly brief. Still, as long as we are vigilant and reinvest dividends into the cheapest areas of the market, we can make what little hay we can while we can.
    Oct 10 09:35 PM | 5 Likes Like |Link to Comment
  • Retirement Strategy: It Is A Correction, Not A Crash [View article]
    My suggestion to anyone who gets uncomfortable with stock market gyrations is to do this: once a month, every month, regardless of whatever the stock market is doing, take some of your portfolio dividends and reinvest them. Make a personal choice to do this for the rest of your entire life, and as you become comfortable with this choice, you will come to view bull markets as some kind of horrible sales tax on investors. You will then appreciate that the very best thing that can happen for you (financially speaking) will be for the stock prices of companies you own to fall harder, and most of all, to stay low for years and years to come while you reinvest more and more dividends to buy more and more shares.
    Oct 10 09:20 PM | 6 Likes Like |Link to Comment
  • Retired Investors: Learn The Success Secret Of All Great Value Investors: Part 2 [View article]
    Another great article - thanks Chuck. In addition to looking at intrinsic value, I use a similar, related trick to calm down when stock prices are tanking. I regularly use a spreadsheet to keep track of how many dividends I expect to earn each year, as well as my personal expenses, and the expected growth rates in both my expenses and expected dividends. The difference is my investing budget, and with it, I can forecast how much I'll be able to afford to invest over the next year, five years, ten years and so forth.

    Now, each time I reinvest my dividends, I can see the multiplier effect that has on my projected income and my projected investing budget going forward. The key here is that my spreadsheet assumes that my future investments will garner a dividend yield equal to the overall yield on my portfolio TODAY.

    So, when the market tanks, what I see is the yield on my portfolio going up. As you will recognize, this has a salutary impact on the yield of my future investments, my future investing budget, and the self-reinforcing cycle of these two factors on my future income stream. In other words, I know exactly how much extra money I earn as a direct consequence of the stock market crashing. Often, I have found that the total amount of this extra income is significantly larger than the paper losses I see on my brokerage statement during a bear market.

    Emotions can drown out anyone's rational understanding that falling prices benefit buyers, and that intrinsic value doesn't shift as wildly as stock prices. What you need is a cold, hard number that shows you in dollars and cents how much richer the bear market is making you. It's ironic how numbers seem to be more impactful on emotions than rational understanding!
    Sep 27 08:46 AM | 4 Likes Like |Link to Comment
  • How Starbucks Keeps Innovating [View article]
    Among other of his top 15 factors to consider, Philip Fisher noted management relations with labor as an important indicator of future business success. Starbucks has always done a great job taking care of employees - offering health care coverage to part-timers, etc. When a story breaks about unfair employment practices at a local Starbucks store, no one less than the CEO charges in and within one day, the problem is addressed publicly.

    I go to Starbucks regularly. It's always crowded. I know most of the guys who work there, and enjoy speaking with them each morning. They're upbeat, they don't seem like they're watching the clock, buying lotto tickets. From the ground up, it seems like a well managed place.

    The other thing is that when I buy coffee there, I know I am spending more than I would at any of the many other coffee choices I have conveniently available. I don't care. If Starbucks raised prices again, I might or might not notice, and frankly, an extra 10 or 20 cents a cup wouldn't stop me from marching in there every morning for my coffee. When I look around at the other customers, I see that I am 100% unremarkable in this (and many other) regards. From a business perspective, having a brand characterized by mindlessly devoted customers who refuse to switch brands irrespective of price is, quite simply, magic. Very few businesses can create magic out of a completely fungible commodity like a coffee bean - really tells you something about how gifted the company's managers and founders really are. It never ceases to amaze me that I can switch on my computer, click on my brokerage account, click another button and after an $8 commission, I suddenly own more of this business. What a great time to be an investor, with instant and virtually free access that enables you to own simply wondrous businesses.

    The one factor that concerns me is that shrinking profit margin. Nothing speaks a more unambiguous truth than when a business is earning $1.25 for every $1 they spend. SBUX has recently strayed from that path it looks like, which means you really need to trust management's expansion and innovation initiatives. If you do, then you should also keep in mind that life being what it is, sooner or later, trust has a way of getting tested.
    Sep 26 12:59 PM | Likes Like |Link to Comment
  • What Is Risk For A Dividend Growth Investor? [View article]
    David, great article. I've always had a nagging suspicion I am doing something very stupid in terms of how I invest. I am convinced that there are only two things that an investor should do: (1) spend less than she earns; (2) reinvest income in order to get compound returns.
    I do not know my net worth. I rarely follow the price of anything I own unless I am engaged in activity (2). As a result, I have no idea whether my portfolio is concentrated in terms of price. A friend asked me whether I rebalance after a "significant move". I don't know whether there have been any significant moves, and wouldn't rebalance in any event because doing so is not related to activities (1) or (2).
    I do make sure that my portfolio income is coming in from as many different unrelated sources as I think I can follow, and I spend quite a bit of time chewing through earnings statements, shareholder presentations and business articles. And yes, whenever I reinvest dividends, I look to see which assets I own that have fallen the most, or which I think are otherwise cheap, and buy more of them. It means I check prices about once a quarter, but I don't really track the price of the overall portfolio. I have no idea whether my portfolio has outpaced or underperformed the S&P500, but I don't care because I don't own the S&P500. I am happy if my portfolio income grows at least 3% a year, to keep up with inflation, provided my spending grows at 3% or less. Anything beyond that, I treat as irrelevant because it won't make a difference in my lifestyle, and I don't aspire to build a financial empire.
    Ever since I started investing this way, I've managed to stay in one piece, which I equate with success. As importantly, I feel like I am focusing on what matters most, and ignoring things that are not strictly speaking relevant. But like I said, I've always wondered whether I am doing it all wrong, because it seems like an approach nobody uses or talks about. SO, I found your article very comforting, in fact.

    Sep 20 08:43 AM | 7 Likes Like |Link to Comment
  • Checking Stock Quotes Regularly Is A Waste Of Time [View article]
    Great advice, but I have two questions.

    First. What about those massive tectonic shifts that happen to an industry ever so often? Kodac in the early part of last decade - I remember one quarter when they chalk up their sagging profits to the "sars" epidemic in Asia. It hits me that everyone I see is walking around snapping photos with their cell phones, and all those boxes of film they sell at the drugstore? Well, nobody's buying them. And these crackpots at Kodac just don't get it - they're thinking up every excuse under the sun, but the truth is, profits are stinking because the business of selling film is going the way of the horse and buggy. What do you do? Hold on like a stubborn mule, or just admit that the business is dead, take whatever money you have left in the company and sell? I'm not asking rhetorically. Look, some companies adapt - I don't see lots of Xerox machines out there anymore, but the company adapted and is actually doing very well. You might see the tectonic shift coming, but still get it wrong on which companies will get killed and which will adapt and prosper. The point is, you don't know, but if you can't make money investing in things you know, why on Earth would you think you could make money investing in things you cannot possibly know? Why not sell and go with companies that aren't in the midst of a massive technological upheaval?

    Second question. Ok, I say you should never do business with people you don't trust. You smell one whiff of dishonesty, and you walk away, 100% with no ands, ifs, buts or maybes. I think we can all agree that's a smart policy, so what do you do when a company you own just got nailed by the SEC for cooking the books? Think Worldcom. Think Enron. Do you hang on, betting that all the dishonest managers are now suddenly going to be magically transformed into honest people since they've been caught? Or do you tell yourself that if you see 1 cockroach, there are at least 10,000 others creeping around that you don't see. Now unless you're a Gecko, I say "who wants to own a business encrusted with cockroaches, when there are plenty of others that are NOT encrusted with cockroaches?" Or do you just hold your nose, wait for the sucker to go bankrupt and then claim your capital losses?

    I think a bright line rule like "just never sell" might be too rigid, too simplistic. There's a balance between being disciplined and sticking to your guns, and being flexible and quick to admit when you were just simply wrong. Or do you not agree with that?
    Sep 15 07:37 PM | 4 Likes Like |Link to Comment
  • Checking Stock Quotes Regularly Is A Waste Of Time [View article]
    I have a spreadsheet on GoogleDocs where I keep the last five to seven years of company earnings for all the stocks I own and others I don't but am interested in because I really like the business the company is in. The spreadsheet calculates out the intrinsic value of a company using a Graham Dodd model. The spreadsheet automatically downloads stock price information about every twenty minutes. I have an "if" condition cell next to each ticker symbol, and if the price ever goes below the intrinsic value, then the "if" condition is satisfied and then the spreadsheet will say "buy" next to that ticker symbol. I don't have to really look at the stock price, because if it's a good company trading at a fair price, that's good enough information for me. I check this spreadsheet once a month after I've paid my bills and I can tally up how much dividends and interest I have left over to invest. I like to buy just one thing at a time to keep my trading commissions down to $8 a month. So far, it's worked out pretty well. I have no idea what my portfolio is worth, but the portfolio income keeps going up year after year, faster than my expenses, so I figure that's good enough for me and I don't need to fuss with much else, besides reading seekingalpha articles and the fairly high quality commentary I find here.
    Sep 15 04:30 PM | 7 Likes Like |Link to Comment
  • Checking Stock Quotes Regularly Is A Waste Of Time [View article]
    Excellent article! I suggest that there are just three parameters that will account for the overwhelming bulk of your returns: (1) spending less than you earn; (2) reinvesting your savings regularly; (3) making sure you are diversified. Every single investment activity you engage in should be directly related to only these three parameters.

    For example, someone tells you "why don't you check to see how your portfolio is doing compared to a particular benchmark?" You ask yourself "will doing that help me spend less than I earn, or to reinvest my savings, or stay diversified?" You realize it will not, and so you tell the person "the reason I won't check that is because I don't care."

    Another example. One of your portfolio companies just raised it's dividends by 5%. Do you care? Of course you do! Now you can re-calculate how much cash your portfolio will pay you in dividends and interest this year, and see how much money you should have left over each month to invest.

    The only other thing worth doing besides spending less than you earn, reinvesting your savings and making sure you are reasonably diversified is to read annual reports, or shareholder presentations. The reason why is to help you understand what you own. This activity seems useful mostly to people who just like to learn about business and finance because they like to. You could probably just skip doing this and still be fine. One or more of your businesses might go bankrupt or cut dividends while you aren't looking, but so long as that's a risk you can live with (meaning, your portfolio will still generate more income than you can spend), then you can live with it.
    Sep 15 02:30 PM | 1 Like Like |Link to Comment
  • QE3's Ominous End Looms For Stock Markets [View article]
    Yes. Global finance is interlinked, and QE is just starting in earnest in Europe, and highly unlikely to end in Japan anytime soon. Plus, the idea that the Federal Reserve would just sit back and allow financial chaos to ensue in the wake of QE is bizarre.

    I have no idea what will happen to stock prices, and neither does the author. I have no idea whether the price of gold will rise or fall - and neither does the author. I will note that as the price of gold grinds lower and lower, the howling of gold bugs touting gold as an investment rises in inverse proportion. What this tells me is that we are still at the denial stage of the investment sentiment cycle, where gold bugs hope that the promise of virtually certain gains in the near term will vindicate all the losses they've taken over the past three years. This denial stage is something you often see at the front end of a long-term secular bear market.
    Sep 6 10:13 AM | 5 Likes Like |Link to Comment
  • TAL International: Gradual Deterioration Turning Into Sudden Problems [View article]
    At current prices, a dividend of $2.08 would equate to a yield of around 4.7%, which is more in line with TGH's or Sea Cube's 5% yield. All things being equal, it seems the market is has priced in a potential dividend cut for TAL (which trades at a premium yield of 6.51%. Assuming these companies ought to trade at comparable yields, I'm not sure I see how you forecast a 59% swoon in the stock price if TAL cuts the dividend. Also unclear why you assume TAL would continue a 10% retained equity growth policy under this scenario - why wouldn't they continue to pay the $2.88 dividend, and apply only $1.93 towards equity retention instead of $2.74?

    Also, does the recent uptick in the Baltic Dry index this August impact your analysis of shipping container lease rates?
    Sep 3 10:21 AM | Likes Like |Link to Comment
  • Colgate-Palmolive: An Innovative Consumer Product Company With Increasing Dividends [View article]
    Waiting forever? Nothing stays high forever.
    This market is a challenge, but there are still plenty of choices for income producing assets trading at or below intrinsic value. NOT that many in big blue chip names, though.
    Sep 3 09:46 AM | 2 Likes Like |Link to Comment
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