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Investment Pancake
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My investment process is (1) own rock solid businesses with healthy earnings and that pay me dividends, (2) spend less than I earn, and (3) reinvest what I don't spend into similar businesses, at the lowest price available at the time. I avoid selling, or dipping into principal.
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  • I Won't Eat That.

    We all know that we should eat our vegetables, and moreover, ought to eat a healthy variety of vegetables. But suppose your mommy packed you something like what is shown below into your lunch box?

    (click to enlarge)Cherry

    Now, as it happens, I found this little red veggie spray-painted onto a wall up here in Barrio Alto, and my first reaction was, what is it? A cherry? A radish? A beat? I haven't a clue! But being a vegetable, I know that it is generally good to eat vegetables, so the three eyed unknown vegetable fruit whatever thingy should probably maybe be sort of healthy I guess. The bias is to at least take a little nibble of this thing because it is a veggie, veggies are healthy and it's responsible to eat them, and yet.... yet.... something is holding you back. What?

    I'll tell you what is holding you back. Like me, you don't actually know what this thing is, and so you are quite naturally disinclined to put it into your mouth. And, you know, it has three eyes and fangs. The more you look at it, the more of a no-brainer it becomes. It's simply not going into your mouth and that just becomes more and more obvious the longer you stare at this thing.

    Which got me thinking. If I wouldn't put this red cherry thingy with three eyes into my mouth, why would I ever want to put a three eyed, green tongued, unknown share of stock I can't quite categorize into my portfolio? As I wave the notion off with a dismissive snort, we all recognize the question is almost ridiculous to ask, of course. I wouldn't buy an unknown unknowable share of anything any more than I'd put slices of whatever this graffiti veggie is into my salad.

    But remember, that wasn't really what we were talking about earlier. My ORIGINAL question is, what would you do if your mommy packed this into your lunch box? Rephrasing the question into a more prosaic financial terms, what do you do when a COMPANY you own spins out shares of some subsidiary business that you know nothing about, landing the proverbial three eyed radish cherry thingy smack into the middle of your stock portfolio? Does it go into your mouth because it is presumed to be a healthy, vitamin packed, nutritious morsel? I'll get to that in a moment.

    But first, it may surprise you that I come at shares of stock from a rather different perspective than I come at vegetables. When confronting shares of stock of a business I don't understand or even know anything about, I'm like a toddler assessing anything OTHER than chicken tenders and fries on my plate. That is to say I ASSUME it is toxic as hell until proven otherwise. Not only will I not put it into my mouth, I will actively contemplate flinging the offending piece of unknown whatever-it-is-mommy-is-trying-to-feed-me onto the floor with a resounding splat. And maybe throwing a tantrum for good measure, too.

    Why the distinction, though? What makes shares of General Electric fundamentally any different from, say, a stalk of celery or a parsnip? The answer lies in the simple fact that companies don't ever lay off their star employees. Nor will do companies ever hire a bevy of expensive investment bankers to spin off their most desirable lines of business. Face it, a corporate spin off is the equivalent of "hey, give it to Mikey, he'll eat anything."

    So, when those spin off shares of stock arrive in my portfolio, my first instinct is, you know, not only is this thing presumably a three eyed cherry with a green tongue, not only can I not identify what the hell it really is, but the person who CAN identify it won't put it into his mouth? Whoah ho ho, sorry man, I'm not putting that thing into my mouth, either. No, I'm thinking I'm going to fling it, that's what.

    And so I come to the issue of CCP - the recently spun off skilled nursing care REIT from Ventas, one of my core holdings. I tend to subscribe to the view that if you don't know what you are doing, don't do it. I have literally no idea whatsoever what I am doing when it comes to CCP, but neither does a toddler fully grasp what she is actually seeing when mommy plops a plate of raw oysters in front of her for dinner. Doesn't need to either! The choice is swift and uncompromising: the oysters go on the floor, not in the mouth.

    Accordingly, my "I don't ever sell except when...." alert is flashing, and my plan will be to liquidate CCP, and just reinvest the proceeds right back into Ventas. When I will do this, I can't say. I think it will be soon, but I typically like to avoid doing anything when lots of other things are happening. And my plate happens to be filled with enough other strange items to keep me solidly focused on matters besides three-eyed cherries with fangs. Items such as orange cows with lime sections licking strange bread loaf object thingies, which I found spray painted onto a wall along Travessa Cabra in front of our old convent here in Barrio Alto.

    (click to enlarge)moo

    Sep 04 6:15 PM | Link | 11 Comments
  • Ventas REIT

    Ventas declared a dividend of .73 per share today. The company recently completed a spin off of it's nursing care facilities, which trade under ticker symbol CCP. CCP will pay dividends of .57 a share, which on a pre-split basis means that Ventas has just increased it's quarterly dividend from .79 a share to .8725 a share. It's the sort of robust dividend growth VTR is known for, and why I own a substantial position in the company's stock. The increase will boost our portfolio income by about $500 a year, which means I'll be putting that much more to work buying more shares of I don't know what.

    In fact, though, much of that extra $500 a year will go towards the month of Portuguese lessons my wife and I just signed up to take. It is two hours a day every day, and we plan to keep up that pace for about three months until we are as close to fluent in the language as we can get. It will take a few more dividend increases to pay for all of the language lessons I project we will need, but it's a step in the right direction.

    I came across an interesting graphic carved into a corner of an old building up in Principe Real. You wonder how many intricate carvings and inscriptions and old tiles are lurking in the dark or unobserved corners of the city. In the top of the photo is a nasty old lime that someone left sitting out. Limes show up in many mixed drinks in Lisbon, and mixed drinks show up many, many times in just as many places around the city.

    (click to enlarge)Phone

    Sep 03 10:55 AM | Link | Comment!
  • Month End Buys

    Today, I reinvested dividends into KMI and started a new position in TGH. Several accounts did not accumulate many dividends this past month, only containing a few hundred dollars. To save on commissions, I have been investing amounts under $1,000 into commission free ETFs offered by my brokers. In every case, I have been simply investing in passive, broad-based European equity index ETFs, mainly since the yields are somewhat higher than the S&P500. Nothing is better than waking up to a 300 point drop in the Dow Jones when you've got some investing to do that day.

    I am going to change up my investment approach, though, based in part on a very wise article I read on SeekingAlpha. Rather than investing once a month, I will now invest whenever I find that I have an extra $1,000 to deploy. This will run up my brokerage expenses, but will accomplish two goals. First, I will be able to take more frequent advantage of price declines. That means I should be able to grow our portfolio income that much more reliably, since I will hopefully be finding investment bargains more frequently. Second, and most important, I won't have to sit on my hands for weeks after receiving extra dividends, waiting for the end of the month, praying that prices will drop further or, at a minimum, not rally in the interim. I'm impatient, so waiting for month end to do my investing is not much fun. It also inspires me to commit the cardinal investment sin: to hope. Waiting leads to hoping, hoping leads to delusions, delusions lead to irrational investment behavior, which in turn leads to losses. If taking the waiting around part of investing out of the equation will make it less likely I'll indulge in prayers and hopes, then it's worth a little brokerage commission here and there to make that adjustment.

    As the global equity markets collapse, my shopping list is at the ready. As ever, I am keenly interested in businesses with stable, fee-based income, locked-in cost structures, and favorable tax characteristics. If I can find businesses fitting that description at a low price, with dividend growth of at least 7% a year and a yield of at least 7%, I'm going to be very happy. TGH fits that bill quite nicely, and I wish I had more of it. Fear of a massive China slowdown (or perhaps a Chinese financial crisis) will probably weigh heavily on the shipping sector for a long, long time. And yet, the strong will survive. TGH is the largest shipping container leasor in the world, and will probably still be around once the cycle turns over again in however long that might be. In the meanwhile, it will be rewarding shareholders with a juicy 11% yield and substantial dividend growth rates.

    Tags: TGH
    Sep 01 10:06 AM | Link | 8 Comments
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