Kenyan Investor

Dividend investing, long only, growth at reasonable price, portfolio strategy
Kenyan Investor
Dividend investing, long only, growth at reasonable price, portfolio strategy
Contributor since: 2012
True, thats why one should be properly diversified. In 2008, TLT went up while SPY went down as an example. KO only went down 33%. GLD went down 25% or so. Other things went down more. I tend not to market time, but it seems like that could be another source of protection.
The real challenge is being down 50% and not selling... But you need to know yourself before doing investing of any sort, especially with leverage.
I'd be surprised if it even hit 85. A lot of the miss had to do with a strong dollar, which is not unexpected at all.
I'm not sure avoiding margin loans is always a bad idea. For example, one can get margin loans at discount brokers for very low interest (I use Interactive Brokers, which currently charges about 1.65%).
You can lever up a portfolio to 130% with very little risk of a margin call. The market would need to drop 69% for a margin call at 130% leverage, which should (nearly) never happen if you have a well diversified portfolio including some bonds. I look at it as taking out a low-interest mortgage on high-quality, long-term investments that allows me to take advantage of market crashes.
Interesting food for thought as usual. Thanks for the article.
Really sensible advice and a nice reminder for those who view D-G stocks as bond proxies. Thanks for the article.
Thanks for the kind words Abegaz! There's definitely risk out there, especially in the precious metals space on a day-to-day basis.
NoGood - thanks for the catch on Lundin! It's obviously LUNMF, I'll submit the correction.
'If Barrick is in such a precarious financial position, which is not likely to improve if Chile prevents them completing the mining operation, how do you expect them to pay more than a half billion back to SLW? Out of petty cash?"
I'd expect them to raise equity with a secondary stock offering if the situation came to that. It wouldn't be fun for current shareholders, but with Barrick's size and asset base there's no way anyone would let them go bankrupt. SLW will almost certainly have its contracts honored.
I really like the idea of easing in and out of a SLW position using covered calls and puts to help profit from the volatility. I had a couple Jan 2014 $30 puts out on SLW before the recent drop which are now underwater, but the decent put premiums definitely take some sting out of the drop.
George - thanks for the kind words!
Thank you for the article Christopher. Also, you have a lovely girlfriend, congrats.
Agreed, SYY could probably issue preferred shares for sub 6% if they wanted to, hard to see how WACC could possibly be 9.2% in this environment.
prairiedog555 - I love KMI too, in fact I filled out my full position for my own portfolio at the end of last week! Like you say, it has a lot of wind at its back as the US produces more oil and gas. The recent price drop makes me scratch my head a little, but everything in the company looks good, so we might as well take advantage of the discount.
No foreign tax are withheld on companies based in the U.K.
"This means that (by investing over the long-term) he needs to replace the income by purchasing another investment yielding better than 11 percent (to replace the income he currently receives from Realty Income)."
This is not true at all. He only needs to find an investment that is higher that Realty Income's current yield.
jsea - Thanks for the Singapore stock ideas. My knowledge of the country extends mainly to large-caps, but Suntec Reits especially looks like a good candidate for further due diligence.
Good point, implied volatility on SU is generally quite high. Even at very conservative strike prices an extra 1-2% per quarter is possible.
fahmed - There is information about getting tax credits for foreign taxes paid on the IRS website. A good place to start might be here: http://1.usa.gov/MlL1uW
Bombardier is an interesting suggestion, thanks for bringing it on my radar!
It's probably possible using options, just be forewarned there's never a free lunch on Wall St.
Hawmps - I couldn't have said it better myself. A high short interest would indicate an artificially low stock price (assuming the shorts aren't correct, which is a bet I'm willing to take with companies like JNJ). This artificially low price both increases my YOC and sets me up for some capital appreciation assuming the shorts are eventually forced to cover and drive up the price again.
Cash Cows Investor - you make some good points in your comment, that's very true that DG investors might not care about a pop in price if they plan on holding the stock forever. I agree that it's a lot about insurance, as the pool of sellers on a stock with high short interest has gotten smaller reducing the likelihood of further price declines, and having a price go up on a core dividend stock is a great problem to have. Part of the capital could always be deployed to more undervalued names.
Glad you enjoyed the article!
priaprism - That's true that people short because they have a negative opinion of the stock, but if short interest is high, most people who want to short have already done so. Most of the selling has already happened, while the pool of potential buyers has gotten larger, stacking the odds in your favor provided you stick with higher quality names. Agreed that high short interest is food for thought, but it should only be a starting point for due diligence, as always.
DAG1996 - Thanks for the nice words.
WestEndDividend - I was using data from the last 3 full years, 2009, 2010, 2011 where the dividend only grew by 2% total in GBP over the entire period. You're right that the summer dividend for 2012 increased though relative to 2011, so hopefully it's a sign of more growth going forward.
Uncle Pie - thanks for your extended explanation of BHP Billiton shares as well as the ideas on Australian ADRs, I'll have to check those out.
rickevan - That's a good idea. I don't currently but it would be a good idea for another future article for me to compile one, and I will do so once I have time.
39413 - Thanks for the comment, VOD is also a great stock, I am also long. I didn't include it in this article since it pays dividends semi-annually. I am including it in another upcoming article.
oneeyejohn - Thanks for the comment.
Swisser999 - thanks
I agree, WMT is expensive now, but I am ready to add to my position once the yield approaches 3% again. I guess its a nice problem to have if a stock you own goes up "too much".
David Fish - thanks for the kind words.