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As a contributor to the New Low Observer (http://www.newlowobserver.com/about-this-site), we intend to give new insights on a low risk approach to trading in dividend paying stocks for tax deferred accounts. The New Low Observer (http://www.newlowobserver.com/about-this-site) is not intended for... More
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  • Dow's Theory On Investment Values

    According to Charles H. Dow, a values-based approach to financial data determine future worth

    "Values will tell in the long run. The value of railway stocks can be ascertained to a reasonable extent. If a railway stock is selling below its real value, based not upon hearsay, but upon a careful study of the figures, it will work higher, even if the general market declines (May 19, 1900)."

    Who was Charles H. Dow?

    "Charles Henry Dow was an American journalist who co-founded Dow Jones & Company with Edward Jones and Charles Bergstresser. Dow also founded The Wall Street Journal, which has become one of the most respected financial publications in the world. He also invented the Dow Jones Industrial Average (NYSEARCA:DIA) as part of his research into market movements. He developed a series of principles for understanding and analyzing market behavior which later became known as Dow theory, the groundwork for technical analysis (source: Wikipedia.org)."

    Tags: DIA
    Jul 04 7:12 AM | Link | Comment!
  • National Dairy Products: 1927-1937

    The chart below highlights two issues:

    1) How long did it take for a stock to get to breakeven?

    In the case of National Dairy Products, the stock did not get to breakeven by the 1937 peak. National Dairy declined approximately -90% in price from 1929 to 1933. From late 1933, National Dairy rose as much as +180% to the 1936 peak.

    2) What happened to the dividend during the stock market crash and "Great" Depression?

    In spite of the market decline from the 1929 peak, National Dairy's earnings continued higher by the end of 1930. Once earnings started to slide in 1931, the pace of dividends continued to move higher. In 1932, it became apparent to management that the dividend policy had to be reduced. The pace of the decline in dividends tracked closely the decline in earnings. However, when earnings started to increase, the dividend was not pushed higher until two years after the declining trend reversed.

    The change in dividend policy is a great example of management's expectation of future prospects. However, when a policy of cutting the dividend started, in 1932, most dividend investors were probably becoming fearful of the prospects going forward and reacted by selling their stock. In reality, 1932-1933 was the time to start accumulating shares of the stock.

    (click to enlarge)

    Jul 03 5:40 AM | Link | Comment!
  • Dow's Theory On Earnings Expectations

    Charles H. Dow's thoughts on the impact of earnings expectations

    "A general belief that a stock is going to earn a given rate is sometimes as effective speculatively as the actual demonstration of such earnings (Dow, Charles H. Wall Street Journal. Review and Outlook. March 27, 1900)."

    Who was Charles H. Dow?

    "Charles Henry Dow was an American journalist who co-founded Dow Jones & Company with Edward Jones and Charles Bergstresser. Dow also founded The Wall Street Journal, which has become one of the most respected financial publications in the world. He also invented the Dow Jones Industrial Average (NYSEARCA:DIA) as part of his research into market movements. He developed a series of principles for understanding and analyzing market behavior which later became known as Dow theory, the groundwork for technical analysis (source: Wikipedia.org)."

    Tags: DIA
    Jul 03 5:37 AM | Link | Comment!
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