Beating The Market Is Harder Than You Think [View article]
Portfolio123 does not suffer from survivorship bias nor lookahead bias. The database keeps tracks of all stocks and if your criteria gets you into a stock that goes bankrupt in 6 months - the portfolio testing program shows it. The same cannot be said for Zacks Research Wizard.
Stock-Picking Isn't Just A Guessing Game [View article]
You can indeed sign up with a free membership (portfolio123) and use the stock screener and backtesting abilities up to 1 year. If you are just starting out new just use that. Also, you can use a 45 day free trial at any subscription level and downgrade to free before the trial is up with the click of a mouse. I put my screens on there for free and you can access them through the Screener search menu
Are Dividends Irrelevant, Or Even Harmful? (Part II) [View article]
I believe there is a stronger link between one dollar in my dividend investment strategy for a consistent return (or better yet yours David) than one dollar invested in R&D, CAPEX, buyouts (or what have you), which has an unreliable link to earnings growth which in turn has unpredictable effect on share price movement.
A company can double thier earnings from $1 to $2 per year but that $1 profit might not be reflected in share price if investors were expecting $3 (in fact I might be at a loss despite them reivesting my cash for decent gain). The book value might double but the share value might not go up exactly with the equity increase due to a drop in sentiment. I say give me the cash (which also keeps valuations down) and let me turn my dollar into $1.10 this year. I know Mr. High-Growth Company Owner might be able to turn it into $1.20 but I could still be left with 80 cents at the end of the year from all the extra moving parts in the equation - along with the leap of faith in his ability to make smart growth decisions.
Buy what you can see, take the profits that are currently there, don't rely on a growing economy (at least not right now), and re-invest the profits in actual shares.
I agree with a move downwards. I see a pullback short-term to the 1250-60 range with good odds on a 1225 bounce - and we go from there. You might also want to add that aggregate forecast earnings for the S&P 500 have stalled since March of last year and are bouncing lower. The valuation premium in the market is starting to lessen. http://tinyurl.com/7z2...
5 Companies Paying Their First Dividend In 2011 [View article]
Where is the $1 per year dividends coming from? Are you simply multiplying this abnormally large dividend by 4? If you look at the earnings you'll see that this is an impossibility as its 3x higher than what they make and not much cash built up either.
Are Dividends Irrelevant, Or Even Harmful? [View article]
Good points made. However, dividends help manage price and push down valuations which is something high-growth stocks (not paying dividends) don't have a mechanism for.
Some look to forecast earnings growth hoping that this translates into decent returns. But with higher P/E ratios, much of the gain is factored into the price and the downside risk is large if forecast targets are not hit. On the other hand - with high yielding stocks - you don't necessarily require much in the way of earnings growth to get a 5 - 10% total annual return. Risk is still there but I've found, personally, that investing and basing returns in what is already there and what the company is already doing is safer than investing in what you hope will happen (speaking of current earnings versus earnings growth of course).
Granted, you seem like the kind of person that digs deep into each company, can likely forecast returns on capital expenditures by companies, and knows what price is a good entry to profit from future earnings growth. Whatever works best for you is how you should invest.
Misguided Popularity Of Dividends: Not Always What They Are Cracked Up To Be [View article]
Lower P/E means higher yields - there is a reason why the stock must go up if P/E is low. If share prices didn't bounce back from this, eventually you would be getting 100% return on your money. If a $100 stock with no earnings growth fell by its $10 annual earnings every year, in 9 years it is a $10 stock giving 100% yield? Your future return on a dividend stock is directly linked to P/E - more dividends = lower P/E and lower P/E = higher dividend yields.
But I see your point that the share price should rise exactly the amount of annual earnings and once paid out the price deflates. But what happens when earnings are retained? Share price may not go up dollar for dollar with earnings as people begin to discount the net money earned (or book value).
It is similar to buybacks (provided the share price doesn't move and shares could be taken off the table all at once). Cash is gone and EPS is higher leading to a lower P/E ratio. So in theory - a buyback should not move prices on a fundamental level. In that case - the only buying pressure is a technical one which is the act of buying. Shares should fall back down to original levels once that is finished.
Are Dividends Irrelevant, Or Even Harmful? [View article]
And this speaks of earnings growth which is a risky game in this environment. But the one dollar drop in equity may not affect current earnings. Look at GNK trading at $6.88. They have $8.30 in cash. If they paid this out to shareholders and took out a line of credit in case they went into negative earnings - the share price would still be above 0. If prices settled at $1.70 the company would have a trailing P/E ratio of 1. You would have made 45% profit on this company. If their earnings were $1 per share (down from $4.28 in 2010) and they paid out 50%, your dividend yield would almost be 30%. Likely share prices would still be in the $3 - 4 range despite a special one-time dividend and on-going dividends (almost a double-bagger). This happens in a small way every time a dividend is paid out.
Its not a great example since GNK is barely profitable but removing cash from a company and giving it shareholders can lead to excess gain as price to book and price to earnings are two totally different ratios. You are paid out of the book value (so to speak) but your yields are based on the earnings which are not affected by the dividend (although future earnings growth may be but your dividend comes from current earnings not some future potential).
Dividends would be moot if removing 20% of the net equity also lowered current earnings by 20%. Then the company would trade at a lower price with the same valuations and you would merely be shuffling money around from pot to pot paying higher tax. This is not the case.
Are Dividends Irrelevant, Or Even Harmful? [View article]
The article is showing how investors in general can receive excess gain on companies giving decent dividends (like the ones you suggest), as opposed to not paying a dividend. This is to show how dividend policy in general can lower valuations of a stock (lowering price while not affecting current earnings).
My other articles give specific dividend picks, or you can follow my blog and my public portfolios. This was meant to show why dividend stocks have - on average - higher total gains than those companies that do not.
How To Profit From A Netflix Earnings Hit Or Miss [View article]
If you look at this with weekly bars - it is a great pullback to the 20 week ema - which could lead to explosive downsides following earnings. Will need to watch price action up to and follwing earnings but a lot of recent counter-trend buyers will turn and flee sending this down hard if its not fireworks.
You Know How to Pick Great Stocks? Prove It [View article]
No doubt. But it is up a lot from $3 - 4 (split adjusted) in the late 90s. No implication was meant towards future growth - just pointing to the huge jump it has already experienced.
Why I'm Cancelling Netflix, And Why You Should Care [View article]
$8 isn't much but I get the tv shows I want for free with the listed networks. Do you have the Canadian version of Netflix? One-third the content and not a great line-up either. The point is that I am not addicted to movies and I have lots to do with my time. If I only watch 2 movies a month - I can pay $4 to $5 per show and actually get what I want for the same price.
Why I'm Cancelling Netflix, And Why You Should Care [View article]
I hear you. But in Canada I am having a hard time finding one or two new good movies a month. Once you burn through their light-weight catalogue of so-so movies you pay $8 in the hope of new content that is worth watching. Good value for the first two or three months - not so much after that.
Since I wrote that article little over a month ago the stratetgy is up 14.26% which far outstrips the market. http://bit.ly/sqBs3W
This is another article trying to get a free ride by flaming contributors who actually did some homework. No, backtesting in itself is not the only consideration. But your vague statement about balance sheets being ridiculous and betting against healthcare just becuase it is defensive is not a well-defined strategy nor is it likely to be profitable. You slam me for offering up backtested proof with robustness, where is your proof that standing in front of a bus is a good idea just because busses usually win and this time you think it'll be different? I can show you backtested proof of contrarian investing if you like - but you will flame it too no doubt.
It seems like you did not the actual article with cautions and a methods to limit risk. You extracted a portion out of context and offered up nothing in return. Do your due diligence and be honest next time.
Beating The Market Is Harder Than You Think [View article]
Stock-Picking Isn't Just A Guessing Game [View article]
Are Dividends Irrelevant, Or Even Harmful? (Part II) [View article]
A company can double thier earnings from $1 to $2 per year but that $1 profit might not be reflected in share price if investors were expecting $3 (in fact I might be at a loss despite them reivesting my cash for decent gain). The book value might double but the share value might not go up exactly with the equity increase due to a drop in sentiment. I say give me the cash (which also keeps valuations down) and let me turn my dollar into $1.10 this year. I know Mr. High-Growth Company Owner might be able to turn it into $1.20 but I could still be left with 80 cents at the end of the year from all the extra moving parts in the equation - along with the leap of faith in his ability to make smart growth decisions.
Buy what you can see, take the profits that are currently there, don't rely on a growing economy (at least not right now), and re-invest the profits in actual shares.
Was Tuesday The Top? [View article]
http://tinyurl.com/7z2...
5 Companies Paying Their First Dividend In 2011 [View article]
Are Dividends Irrelevant, Or Even Harmful? [View article]
Some look to forecast earnings growth hoping that this translates into decent returns. But with higher P/E ratios, much of the gain is factored into the price and the downside risk is large if forecast targets are not hit. On the other hand - with high yielding stocks - you don't necessarily require much in the way of earnings growth to get a 5 - 10% total annual return. Risk is still there but I've found, personally, that investing and basing returns in what is already there and what the company is already doing is safer than investing in what you hope will happen (speaking of current earnings versus earnings growth of course).
Granted, you seem like the kind of person that digs deep into each company, can likely forecast returns on capital expenditures by companies, and knows what price is a good entry to profit from future earnings growth. Whatever works best for you is how you should invest.
Thanks for posting.
Misguided Popularity Of Dividends: Not Always What They Are Cracked Up To Be [View article]
But I see your point that the share price should rise exactly the amount of annual earnings and once paid out the price deflates. But what happens when earnings are retained? Share price may not go up dollar for dollar with earnings as people begin to discount the net money earned (or book value).
It is similar to buybacks (provided the share price doesn't move and shares could be taken off the table all at once). Cash is gone and EPS is higher leading to a lower P/E ratio. So in theory - a buyback should not move prices on a fundamental level. In that case - the only buying pressure is a technical one which is the act of buying. Shares should fall back down to original levels once that is finished.
Are Dividends Irrelevant, Or Even Harmful? [View article]
Its not a great example since GNK is barely profitable but removing cash from a company and giving it shareholders can lead to excess gain as price to book and price to earnings are two totally different ratios. You are paid out of the book value (so to speak) but your yields are based on the earnings which are not affected by the dividend (although future earnings growth may be but your dividend comes from current earnings not some future potential).
Dividends would be moot if removing 20% of the net equity also lowered current earnings by 20%. Then the company would trade at a lower price with the same valuations and you would merely be shuffling money around from pot to pot paying higher tax. This is not the case.
Are Dividends Irrelevant, Or Even Harmful? [View article]
My other articles give specific dividend picks, or you can follow my blog and my public portfolios. This was meant to show why dividend stocks have - on average - higher total gains than those companies that do not.
How To Profit From A Netflix Earnings Hit Or Miss [View article]
You Know How to Pick Great Stocks? Prove It [View article]
Why I'm Cancelling Netflix, And Why You Should Care [View article]
Why I'm Cancelling Netflix, And Why You Should Care [View article]
Why Healthcare Is Not Defensive [View article]
http://bit.ly/sqBs3W
This is another article trying to get a free ride by flaming contributors who actually did some homework. No, backtesting in itself is not the only consideration. But your vague statement about balance sheets being ridiculous and betting against healthcare just becuase it is defensive is not a well-defined strategy nor is it likely to be profitable. You slam me for offering up backtested proof with robustness, where is your proof that standing in front of a bus is a good idea just because busses usually win and this time you think it'll be different? I can show you backtested proof of contrarian investing if you like - but you will flame it too no doubt.
It seems like you did not the actual article with cautions and a methods to limit risk. You extracted a portion out of context and offered up nothing in return. Do your due diligence and be honest next time.
Dividends Vs. Buybacks: Putting The Debate To Bed, Part II [View article]