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Bob Johnson

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  • My KISS Dividend Portfolio: 1st Quarter 2014 Update [View article]
    Hi chowder,

    I often agree with what you say, and certainly acknowledge and thank you for the continuing contribution you make to SA and its investors.

    However, I need to take a step back from your approach to ignore external measurements of successful investing and present another perspective.

    You seem to contend that the objective of an investment portfolio is to make one happy, happy in achieving their goals, whatever they are. This is like saying, "perception is reality." That may be true to some degree in a philosophical sense, or as in the concept, "with our minds we create the world."

    However, investing and dollars has a lot to do with objective reality, with measurement against real world standards and norms. One cannot make much sense of statements like, a P/E of 40 is fine for a railroad, or a PEG of 6.0 indicates rapid growth, or that a debt laden balance sheet is a matter of taste. No. There are acknowledged ratios and norms for all sorts of measurements, one of them being performance against well known indexes and averages.

    To say that measuring performance against a standard like the S&P 500 is "crazy" is to me a weak excuse for poor performance and simply an evasion of accountability. It is like running a 5 mile race with no concern as to where you finish as long as you feel good. To me it is not the real world of hard quantifiable data by which investing success is measured. It is by real world comparisons with known indexes and averages.

    That is a different point of view than yours, I believe, and it is a big part of the way I measure myself. I do not mind that you feel differently, but I think I have a very legitimate point of view which is not at all crazy.

    Best regards,
    Bob J
    Apr 15 11:35 PM | 4 Likes Like |Link to Comment
  • My KISS Dividend Portfolio: 1st Quarter 2014 Update [View article]
    Great report and wonderful portfolio! In addition, the mix of stocks seems very age appropriate, with lower yielding growers and some high yielding issues too.

    I think a yield hurdle could be anywhere from 2.5% to 3.0% at your age in this market. However, I wonder how much below your chosen yield a stock should go before you eliminate it.

    Here is how I, granted I am 20 years your senior, look at a low yielding stock. If my current yield hurdle is 3.5% and I am holding a stock only yielding 2.0%, is that an effective use of capital? For me, with a need for current retirement income from my portfolio, the answer is no.

    One question sometimes put forth against holding such a stock is, "If it doesn't meet your current buy criteria, why hold it if you can replace it with a stock which does?" Of course, there has to be some sort of buffer, a hold area, before one gets to the selling point or the churning would be counter productive.

    The average yield of the S&P 500 is about 2%, and that is one place one could draw the line. This line, of minimum hold yield, will gradually change as one's portfolio evolves to an income portfolio over time.

    According to the April CCC, MDT has a yield of 1.82%, a 1 year DGR of 6.9; 3 year of 7.9; 5 year of 11.6. The 5/10 AD value is 0.77. I believe this is a great company, with a nearly forever period of increasing dividends, and a admirably low payout ratio. It is arguably fairly valued (Just over the orange line on FAST Graphs, 3 Stars from Morningstar.) Do I think you should sell it? Absolutely not. If you should have you would have; your rules make sense. Besides, the universe of stocks of the quality of Medtronic's is very limited.

    However, this is the kind of issue you will have to increasingly struggle with as you age. As you ramp up the yield hurdle, to me it would make sense to add a bottom number too. But then, that's me.

    Best regards,
    Bob J
    Apr 15 02:53 PM | 3 Likes Like |Link to Comment
  • Constructing A High Income, Lower Risk CEF Portfolio [View article]

    I would emphasize ROC is an important consideration. I believe it needs to be factored in to do a fair comparison of funds. My experience is that many investors confuse distributions with yields, and are not receiving the yields they think they are.

    Bob J
    Apr 15 11:06 AM | 1 Like Like |Link to Comment
  • Ares Capital: The Titan Of The BDC Industry [View article]

    Thanks for the very good article. I hold ARCC, MAIN and TCPC which I consider among the safest BDCs. Perhaps ARCC is in a class of its own. I will consider adding to that position.

    Best regards,
    Bob J
    Apr 15 10:45 AM | Likes Like |Link to Comment
  • Escape From The Matrix: Alternative Finance And Investment Advisors [View article]
    James, There obviously has to be some regulation to offer a shield from unscrupulous operators, be they lenders, borrowers, intermediaries or advisors. That implies a well crafted body of regulation and the collection of massive amounts of data about every transaction, along with a copy to the tax man. It seems to me that a massive infrastructure would be required along with a new regulatory agency or agencies. In the US, if we were to follow the banking model, that would mean one or more federal agencies and 50 additional state agencies.
    It is not the nature of the various legislatures in the US to let any entity avoid regulation and reporting.

    So, I wonder how this could work.

    Best regards,
    Bob J
    Apr 14 03:59 PM | Likes Like |Link to Comment
  • 12 Stocks Held In Common By S&P 500 Low Volatility, High Quality And High Yield Indexes [View article]

    Thank you for directing us to a number of top quality stocks. These are great firms by many measures. Some are overvalued but I believe there are some buying opportunities.

    Morningstar gives BAX 4 stars, one of only 32 wide moat undervalued stocks. WM looks pretty sick unless you go behind the numbers and see what I believe is evolving as a better company. SO is another on the list that is fairly valued, but has had some bad press.

    Even in the "high priced stores", something is often on sale at a bargain price. Of these 12, my choice is Baxter International.

    Best regards,
    Bob J
    Apr 14 11:42 AM | 2 Likes Like |Link to Comment
  • Bank Of America: Intrinsic Value Approximately $26 Per Share, Upside Potential 63% [View article]
    Thanks for the article.

    Morningstar puts today's value at 15.00 and analyst consensus target is 17.52. I have less confidence in future earnings and long term growth than the author does, and have a hard time calculating a current valuation above the recent high, which I believe was 18.03.

    I don't have a position in the stock nor do I have much confidence that the banking system in the US is healed.

    Best regards,
    Bob J
    Apr 13 08:52 PM | 1 Like Like |Link to Comment
  • Safety, Stability And High Income For The Retired Dividend Growth Investor [View article]
    extreme, south, Be here, 622...

    I am enjoying the conversation and the very learned evaluation of alternatives. There are more than I was aware of, and there can be a lot of variation in tax rates and planning horizons, making it difficult to say to say any one solution is the best.

    Thank you,
    Bob J
    Apr 8 06:38 PM | Likes Like |Link to Comment
  • Actually It Is All About Total Return...Totally! [View article]
    Dale, Thank you for an excellent article which stated a clear mathematical truth. $2 Million is better than $1 Million. Whatever method of retirement investing one uses, there comes the day that the savings and accumulation is mostly past, and that income from the investments is the primary concern.

    At that time, each and every investor would do themselves a great favor to sit down and write a new set of portfolio rules for their retirement portfolio. This will guide a transition from accumulation to income. The criteria for the stocks one holds will be somewhat different. A stock yielding 2.5% makes very little sense in the distribution phase. Sell it and buy a stock yielding between 4% and 6.0%; you will double your income.

    Investing for a future generation? Do it in a separate account with different rules.

    Thanks for the mention, Dale. My combination of Core and Satellite holdings has a current yield of about 4.8%.

    Best regards,
    Bob J

    Apr 8 10:44 AM | 5 Likes Like |Link to Comment
  • Use Ensco To Build Dividend Income [View article]

    Thanks for the article.

    You have given me good reason to take a closer look at Ensco. I believe they made an acquisition about 5 years age, and they seem to have done better since then.

    Bob J
    Apr 6 12:11 PM | Likes Like |Link to Comment
  • Reduce Your Portfolio's Downside Risk Before The Coming Market Correction [View article]
    @Robert Allen Schwartz

    I certainly can understand your confusion. In this article I tried to address ways of preventing too much of a loss for those who might have weaknesses in their portfolios.

    "•Now is the time to evaluate your portfolio for weaknesses in balance and holdings.
    •A guide is presented to evaluate the downside risks of individual stocks in a correction."

    I went through this exercise with my own portfolio about a month ago, and made one change. I sold AZN and I bought BAX. AZN is a great drug company that has an empty pipeline. It had declining earnings last year and they will decline again this year, however at a slower rate; as the percentage will be less, they will effectively do a little better this year than last, hence the rating of + on EPS growth in the table. Perhaps I should have left that space blank. AZN recently cut their dividend. Morningstar gives them only two stars and says that they are 15% overvalued. That is what I consider a stock at risk.

    BAX was a little undervalued when I bought it, and is in the same sector. While I would like to be holding a stock in its place with a higher yield, it will do for the short to intermediate term, and is better than holding cash.

    That is what I mean by evaluating a portfolio for weaknesses and balance. Another strategy could have been to buy a bond with the proceeds, which would have provided more immediate income if the term were long enough as well as buffer a correction. That still is an option for me.

    I am now holding about 10% cash, which will give me opportunity to pick up a stock on sale. I had a big gain in AZN and also trimmed another overvalued stock a little.

    However, this is me and is done with my goals and my planning horizon in mind. Everyone's situation is different and it is not my intent to say there is only one way to do things.

    I agree with Chuck Carnevale's position, in general, that it is a market of stocks and not a "stock market". With that philosophy one would be hesitant to change anything, as says RAS, in light of an upcoming correction, bear or continuing bull market. To those people I say, "Stay the Course". This is especially true of investors in the late accumulation stage of investing or in retirement. A portfolio is like a bar of soap, the more you handle it, the smaller it gets.

    It is my hope that people with different investing philosophies might gain by reading an article I write. I hope to give you things to think about. I most sincerely hope you will do that which is best for you.

    Best regards,
    Bob J
    Apr 6 10:08 AM | 5 Likes Like |Link to Comment
  • My Income Portfolio Quarterly Update (Q1 2014) [View article]
    Invest Yourself,

    Thank you for the article. I understand that some folks are very interested in Yield on Cost. For the rest of us it would be useful to include the current yield, which is current dividend/current price. Usually this is based on the TTM dividends.

    Using YOC numbers concerning an income portfolio can lead on to make poor decisions that are costly. If you are holding a stock in an income portfolio that is currently yielding only 2.2%, then it makes sense to replace it with a higher yielding stock. If not, you are throwing available income away and it is also likely that you are holding a dangerously overvalued stock.

    Bob J
    Apr 2 01:16 PM | Likes Like |Link to Comment
  • Retirement Strategy: ETF Portfolio Versus The Stock Only Portfolio; Our First Update [View article]

    It is a foregone conclusion that a group of equity stocks yielding 3.55% will produce more income than another group of equity stocks yielding 2.40%, at least for the short and intermediate term.

    However, I will be interested in seeing the 3, 5 and 10 year results.

    Best regards,
    Bob J
    Apr 2 09:55 AM | 1 Like Like |Link to Comment
  • Reduce Your Portfolio's Downside Risk Before The Coming Market Correction [View article]

    Let me take a guess about your strategy. You are bullish on a stock, but rather than buy it you are buying a call so that if the stock crashes you will be out less money than if you had bought the stock?

    I haven't used options in many years, so I may not have this right.

    Trailing stop losses may be a good strategy. I use only stop-loss-limit orders since the flash crash. I do not have any stop orders in place at this time.

    Bob J
    Apr 2 09:28 AM | Likes Like |Link to Comment
  • Reduce Your Portfolio's Downside Risk Before The Coming Market Correction [View article]

    Thanks for the added detail. Evidently I got some misinformation. TLT and TLO are very similar in holdings and duration.

    Best regards,
    Bob J
    Apr 1 08:52 PM | Likes Like |Link to Comment