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Nelson Smith

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  • PIMCO High Income Fund Offers 12% Yield, Lots Of Risk [View article]
    To clarify for Seth and everyone else, my concern is when you look at the distribution compared to the NAV. A 12% yield looks reasonable until you compare it to NAV, which pushes it up to an 18% yield on the invested assets.

    There is no way they can invest their capital in junk bonds and get 18%, even with the leverage. So the managers of the fund have to play risky derivatives. Those have worked out for the fund in the past, but I'd rather get 8-9% on a fund that doesn't use derivatives to enhance returns on a junk bond fund. Junk bonds are already risky enough.
    Nov 4 04:45 PM | 11 Likes Like |Link to Comment
  • Target: Sometimes The Market Consensus Is Right [View article]
    I live in Canada, and visit a Target store a month, approximately.

    The company had two major problems in Canada - shelves were empty, and customers just weren't showing up. They've started to fix the shelves empty problem, but there's still a ways to go. If the shelves were a 4/10 before, they're maybe up to 6/10 or 7/10 now. Better, but still not even close to their competitors.

    The problem with slow foot traffic is a long way from getting fixed. I visited a location last week that was located next to a Loblaw's Superstore (Loblaw is Canada's largest grocer), and the Superstore was at least ten times busier. I'm not exaggerating. Target had two registers open. Superstore had the majority of its 20 registers open, and there were lineups at each one.

    American investors continually downplay the situation in Canada because they're not here. It's a disaster, and is years away from getting fixed in any sort of meaningful way.

    Oh, and my girlfriend bought two items and both were priced wrong. She cursed the place and probably won't be back soon. All over $1.20. These details matter, especially in the ultra competitive Canadian retail market.
    Jun 8 11:05 PM | 8 Likes Like |Link to Comment
  • Do Dividends Lower Total Return? [View article]
    "How come dividend paying stocks outperformed all other asset classes over the past 100 years?"

    It's a case of confirmation bias. Successful companies tend to have mature businesses that have predictable cash flows. Therefore, successful companies tend to pay dividends. Successful companies are not successful because they pay dividends. They just happen to have those things in common.

    Essentially, saying dividend stocks outperform is saying that successful companies outperform unsuccessful ones. They are not successful because they pay dividends, they (mostly) happen to have those two things in common.

    I hate this argument so much. Would Coke or Apple or any other giant company be any less successful if it stopped paying a dividend tomorrow? Or even if it stopped 20 years ago? Of course not. There are all sorts of successful investments that don't pay a dividend, including Buffett's baby.
    May 2 12:15 AM | 6 Likes Like |Link to Comment
  • Do Dividends Lower Total Return? [View article]
    @ butterfly, smurf, etc.

    One of my last posts for SA was on some of the weaknesses of DGI. I also pointed out that a DGI investor could just buy an ETF and replicate the returns of their DGI portfolio pretty easily.

    And the insults that flew from pissed off DGIers were amazing. While it never went as far as Nazi comparisons, my intelligence was also insulted, and one overly aggressive commenter publicly pondered legal action against my opinion piece.

    Many investors come to SA to expand their horizons and to get investment ideas. A certain group of DGIers show up to talk among themselves about how awesome their investment philosophy is. It's confirmation bias at its finest. Heck, it's almost cultish. These people are only interested in the next DGI idea, all other investment ideas should be sent to the trash where they seemingly belong.

    I almost feel compelled to chime in during these comment threads, just in case an investor clicked on this article to hear a reasoned analysis, instead of a rah rah DGI is the best with no downsides piece masquerading as something that looks at both sides equally.

    I read a lot of what Larry writes. It's interesting and makes me think. The 2,791st article on why JNJ or KO is a good dividend growth stock are neither interesting nor thought provoking, and further cementing your belief that the 100 or so (out of what, 6,000 publicly traded North American stocks) companies that have been around long enough to raise dividends 'x' number of years in a row are the best investments NO MATTER WHAT is a pretty poor way to grow as an investor. We need people who are willing to look at things outside of the box.

    I'm not anti-dividend. Many of my holdings pay dividends. I hold preferred shares, a junk bond ETF, and shares of Rogers Sugar strictly because I think each are going to consistently spin out 7-8% a year which I can then reinvest (or spend, if I was a retiree). Most DGIers aren't willing to expand their investment philosophy to even consider those stocks, even though it takes decades for a faster growing 3% yield to catch up to a slower growing 7% yield.

    I was just struck by an overwhelming thought about how big of a waste of time this is. I think I'm going to go and do some actual research now.
    May 3 01:49 PM | 5 Likes Like |Link to Comment
  • Misguided Interest In Dividend Paying Stocks [View article]
    I wondered why my ears were burning this morning.
    Dec 17 10:09 AM | 5 Likes Like |Link to Comment
  • Do Dividends Lower Total Return? [View article]
    The difference between me and you is that I know Exxon and JNJ would be just as successful if they didn't pay dividends, while you would shun them like lepers.
    May 2 11:37 AM | 4 Likes Like |Link to Comment
  • PIMCO High Income Fund Offers 12% Yield, Lots Of Risk [View article]
    And there's the crux of my argument.
    Nov 5 12:02 PM | 3 Likes Like |Link to Comment
  • BlackBerry: A Solid Buy On Long-Term Growth Potential [View article]
    It's unlikely the Canadian government will ever let another company buy out BlackBerry. Here's why.
    Jun 22 01:34 PM | 2 Likes Like |Link to Comment
  • Why Buying A House Is A Terrible Investment [View article]
    I live in Canada, which many people argue has an extremely overvalued real estate market. I tend to agree with those people, so a year ago I sold my house (which I had just paid off), and invested the cash at a pretty piddly 2% return. I didn't mind, since the goal was to make sure I have the capital available to buy again, and not to maximize my return.

    I was just looking at the numbers, and the market in my small town has fallen 13% compared to last year, thanks to a couple local factors (i.e. a medium sized employer laying off a bunch of folks). So far, my decision to sell has earned me about $30k. I'm anticipating values fall further, but that's just speculation on my part. I'm fairly certain prices across the country will fall. I'm just not sure when, or how my local market will be affected.

    Even after I factor in my share of the rent of my new place (which I share with my girlfriend), I've still made a cool $27k or so. In the meantime, I've moved to a new city, and am about to embark on some long term travel. These have been good developments for me, personally. I didn't experience these things *because* I sold my house, obviously, but I still think I made the right choice. So I can certainly see the mobility aspect of not owning.

    But I will end up owning a house again one day, probably after the long term travel comes to an end. It'll be time to settle down again, etc. Will I buy because it's an investment? Nah. I just want a place to live where I decide what to do, what color the walls are, and so on. The emotional aspect of having a paid for house is what appeals to me, not the potential capital appreciation. Because once you factor in improvements, taxes, etc., there isn't much in gains over time. But that's okay, because making money on it is only a secondary goal, if that.

    The point? Buying a house is something a lot of folks should do. But the author is right. It's a pretty poor investment.
    Jun 16 01:24 AM | 2 Likes Like |Link to Comment
  • Rogers Has At Least $5 Billion Of Hidden Value [View article]
    I doubt the Raptors are worth $1.5 billion. Even after their recent playoff run, the team is still only the 3rd most valuable in its own market, after the Leafs and Blue Jays. They're worth more than the Milwaukee Bucks (which recently sold for $550M), but nowhere close to the Clippers. I'd peg them at $750M, tops.

    The other two ideas are good though. I didn't realize Roger's owned a piece of Cogeco.
    Jun 15 02:54 PM | 2 Likes Like |Link to Comment
  • Acco Brands: With A 15% Earnings Yield, Shorts Are Playing A Dangerous Game With This $6 Stock [View article]
    I'm not sure I'd call the balance sheet conservative. Yeah, debt to assets is just a hair above 25%, but a full 50% of the assets are goodwill and intangible. Huge goodwill write-offs are coming. It's only a matter of time.

    The brands have value, I'd agree, and it's certainly a contrarian name. I'll put it on my watch list, and take another look at it if it falls a couple bucks more. At this point though, I can't really get excited about it.
    May 30 02:25 PM | 2 Likes Like |Link to Comment
  • Do Dividends Lower Total Return? [View article]
    @ Don

    LOL wut.
    May 3 01:06 PM | 2 Likes Like |Link to Comment
  • Sorry Warren, But I'd Stick With ConocoPhillips [View article]
    Smurf, the only reason COP is down is because Buffett sold some. Nothing has changed with the company in a week. It's the Buffett effect, plain and simple.
    Nov 20 10:26 AM | 2 Likes Like |Link to Comment
  • PIMCO High Income Fund Offers 12% Yield, Lots Of Risk [View article]
    I will give you $1.49 for it, and no more.
    Nov 5 12:28 PM | 2 Likes Like |Link to Comment
  • PIMCO High Income Fund Offers 12% Yield, Lots Of Risk [View article]
    SmartyMarty is correct. My info came from Google Finance, which showed a missed dividend in October 2008.

    Still, I'd say missing a dividend does count as a "small hiccup," even if they did catch up on that dividend a month later.
    Nov 5 12:00 PM | 2 Likes Like |Link to Comment