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Tim McAleenan Jr.

 
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  • Recent Buy: The Walt Disney Co. [View article]
    I have a strong emotional and logical reaction to Seeking Alpha commenters that criticize someone for the amount of money that they are investing at a particular time.

    In the 23rd Chapter of "To Kill A Mockingbird", Atticus Finch says: ""As you grow older, you'll see white men cheat black men every day of your life, but let me tell you something and don't you forget it—whenever a white man does that to a black man, no matter who he is, how rich he is, or how fine a family he comes from, that white man is trash." I would update that quote to this context by saying that any affluent man that criticizes another for being of lesser means is also, in that moment, acting like trash.

    I have a great respect for anyone that is trying to improve his lot in life, and chooses to combine grit and intelligence to execute that plan. Jason's posts provide us with a regular peek into that quest for higher ground, and I have the highest respect for the arc of someone's life that went from having nothing to having something.

    And now, for the logical part of my response: People write on Seeking Alpha to discuss ideas and strategies for improving one's wealth. The same successful idea that increases wealth five-fold over twenty years will just as readily turn $10 million into $50 million as it will turn $5,000 into $25,000. The amount of capital does not reflect the percentage gain returns offered by a particular investment, and I hope that you possess the wisdom to evaluate the legitimacy of individual arguments without getting distracted by the context that is irrelevant.

    Oh, and Jason, nice article.
    Dec 5, 2014. 11:33 PM | 82 Likes Like |Link to Comment
  • Some heavy hitters eye Coca-Cola [View news story]
    The gutting out of American business will continue as long as shareholders continue their hyper-active focus on the next quarterly result and think nothing of selling out an ownership position for 30% to 50% premiums, the long-term employment effects of the home country be damned.

    The $70 per share buyout of Anheuser-Busch in 2008 was merely Act I.
    Nov 20, 2014. 11:38 AM | 14 Likes Like |Link to Comment
  • Why You Shouldn't Buy Automatic Data Processing Now [View article]
    You, sir, are a powerhouse.
    Nov 14, 2014. 10:05 PM | 6 Likes Like |Link to Comment
  • Safety Insurance: A 4.5% Dividend Yield Growing At 12% Annually [View article]
    It seems we are looking at different numbers. Over the past twelve months, they've made $4.08 per share in profits. If it were trading at a P/E ratio of 70, that would be a stock price of $285 per share.

    I likewise don't see the multi-year decline you're talking about. I'm reading the company's statements and see: $3.80 per share in earnings in 2012, $3.98 per share in earnings in 2013, and 2014 numbers should be above $4.08.
    Nov 3, 2014. 03:11 PM | 1 Like Like |Link to Comment
  • The New Nifty Fifty, Part 3: Dividend Growth Ideas And Valuations [View article]
    Mike, I find your identification of Lockheed as a superior permanent investment to be exceptionally wise. It doesn't get a lot of mention, but its breadth is staggering. On the same level as Johnson & Johnson, Nestle, Exxon, and Coca-Cola, IMHO.

    Thank you for this series, and thank you for including me.

    If others found it half as useful as I did, you have performed a great service.
    Oct 30, 2014. 07:16 PM | 11 Likes Like |Link to Comment
  • Becton, Dickinson And Co. Continues To Print Money Like It's Going Out Of Style [View article]
    Keith, that's probably my least favorite thing about investing in businesses--there's a dirtiness to it that you cannot escape. I absolutely despite the quarterly earnings culture, in which people that want to do things right get shoved aside in favor of the people who find a way to increase profits a nickel per share (even if it creates long-run drains on non-quantifiable things like employee morale).

    The race to the bottom--layoffs, cut benefits, lower input costs--helps the short-term investor often at the expense of the long-term investor and American society as a whole.

    I have no knowledge of Becton Dickinson's employment practices or culture during the 1980s. However, based on what you said, it reaffirms the special fondness I have for privately run family businesses. If you own something generating millions of dollars, well above your spending requirements, the absence of other shareholders demanding growth permits a more genteel, humanitarian approach to business management if your heart finds that attractive.

    Also, I just realized I misread your comment a bit, but I have a class in three minutes-- I hope you will find what I said useful regardless.

    P.S. Good stock choices ;)
    Oct 29, 2014. 02:07 PM | 2 Likes Like |Link to Comment
  • Becton, Dickinson And Co. Continues To Print Money Like It's Going Out Of Style [View article]
    Doug, that's my thought exactly. If you establish sizable positions in companies with high internal rates of compounding--I have in mind Visa, Franklin Resources, Disney, and Becton Dickinson--you can put yourself in that favored Charlie Munger position where all have to do is sit on your rear as the money compounds on its own once you hit that buy order.

    The time involved identifying such companies can be extensive, but the workload involved after making the initial investment is minimal. That's why I enjoy the search for getting it right. The rewards of excellent research are simply tremendous. It grants a freedom the likes of which only 0.001% of the world will ever know.
    Oct 29, 2014. 12:55 PM | 3 Likes Like |Link to Comment
  • Coca-Cola, How A Giant Company Starts Losing Relevance [View article]
    Ha! Larry, if you gave me your e-mail address, I'd forward you a message I got from a reader wishing me an early death after I wrote a pro-Philip Morris International article. The internet is not as fun of a playground for me as you imply.

    To address Adam's point in the article, it seems that the word of Coca-Cola's death (or more precisely, loss of relevance) is greatly exaggerated. Coca-Cola volumes in North America have been a concern throughout the past decade--the figures hem and haw 2% up, 2% down in many years.

    Yet, earnings per share have grown 8.5% annually over the past ten years. Why? International soda volume growth, volume growth in non-soda beverages both here and abroad, stock buybacks, and increases in soda prices (at a rate greater than the volume lost) have all acted as countervailing forces that matter more than Coca-Cola sales in North America.

    Coca-Cola (the beverage) is slowly losing its centrality to the growth of Coca-Cola (the business). Look at what Coca-Cola is doing in the non-soda, coffee, tea, energy drink, and water markets. Within a few years, 5% of all liquid consumed in the world will be at the trough of The Coca-Cola Company. It has become so much more than soda, and coloring water remains immensely profitable (as seen by the sustained 20% profit margins companywide).

    Buffett and Munger aren't fools. Sarofim and Yacktman aren't fools. Why have they bought, and why do they continue to hold, so much Coca-Cola? Lord knows Buffett isn't afraid to discard blue-chips--look at what he has done with Procter & Gamble this past decade. Perhaps it's because they know it's not just soda--it's vast beverage distributorships, trademarks, and low-cost syrup reserves that consist of an ever-growing collection of well-branded names. Heck, even Dr. Pepper hawks its wares through Coca-Cola's pipelines.

    This company's story ain't over yet, and many more millionaires will be minted in the meantime.
    Oct 29, 2014. 01:43 AM | 15 Likes Like |Link to Comment
  • What Likely Happened To Dividend Growth Retirees In The Recession: Another Point Of View [View article]
    David, I find your articles both informative and enjoyable to read, primarily because of your common sense and personal touch.

    Established dividend growth companies rarely fail, and when they fail, the results are often better than you'd guess. Owned Kodak through bankruptcy? That sucks, but you got shares of Eastman Chemical along the way that are worth a tidy amount. Owned Sears because you thought it was a blue-chip retail outfit? Cool, you picked up shares of Morgan Stanley, Discover Card Services, All State, Sears Canada, and Land's End along the way.

    Where you really got screwed? General Motors, Wachovia, and a few others that went down. Perhaps AIG, Citigroup, and even Bank of America as well because of the massive share dilution, though their stories aren't over yet, and the token recovery becomes more substantial with the passage of time.

    If you own 20-35 investments, and the bulk of them consist of companies that have been growing dividends for 25+ years, I can't see the dividend cutters posing more than a trivial risk because you can create countervailing forces for yourself.

    1. You can diversify across industries so that no company can single-handedly jeopardize more than 5% of your annual income.

    2. You can reinvest dividends, so that your annual income will go up by the amount of the dividend growth rate + the amount of new shares added by reinvesting.

    3. You will have some good performers during the year. if Colgate, Becton Dickinson, Visa, Disney, and IBM are giving you dividend raises of over 10% in a given year, that is going to do something to offset the income loss if you own a failing company at the same time.

    I don't know who a typical dividend growth investor is, or what he did during the recession, but I do know there are intelligent moves you can make to minimize the damage without forfeiting your claim on future growth. Diversification, reinvestment, and owning a few obvious companies with high dividend growth rates are just a few of the things you can do to position yourself well.

    Your articles are great illustrations of these principles, and a welcome reprieve from the nonsense out there.
    Oct 26, 2014. 06:29 AM | 38 Likes Like |Link to Comment
  • The New Nifty Fifty, Part 2: Dividend Growth Investing's Greatest Hits [View article]
    Owner, it's the process of ignorance removal in action!

    Some companies located outside the United States have taken awhile for me to get around to studying. That means companies like: Reckitt Benckiser, Lindt Chocolate, and LVMH Moet Hennessy Louis Vuitton are permanent buy-and-hold businesses, but they weren't companies I studied at the time I made my "Master List of Stocks" list.

    I've been hesitant to revise the list, so perhaps I'll put addenda towards the end to note companies that get discovered along the way.

    Hmmm...you've given me something to think about. Thank you!
    Oct 23, 2014. 02:01 PM | 1 Like Like |Link to Comment
  • The New Nifty Fifty, Part 2: Dividend Growth Investing's Greatest Hits [View article]
    Bob, they’re the largest ice-cream manufacturer in the entire world. I have to get my money back somehow.

    Just kidding. But really. They own Klondike, Heartland, Breyers, Popsicle, and Ben & Jerry’s.

    If someone needs to lose weight and buy Slimfast, because hey, you just ate a gallon of Unilever’s Ben & Jerry’s ice cream, you send money to Unilever because they own that, too.

    When you drink Lipton ice tea, you are sending money to Unilever.

    When you use Axe deodorant or shampoo, you are sending money to Unilever.

    When you grow up and get sick of Axe and switch to Dove soap instead, you are sending money to Unilever.

    If you put Hellmann’s mayonnaise on anything, you are sending money to Unilever.

    If you’ve ever put I Can’t Believe It’s Not Butter or Country Crock on a dinner roll, you’ve sent money to Unilever.

    If you’ve ever used a Q-Tip to clean the gunk out of your ear, you’ve sent money to Unilever.

    If you’ve ever gotten a chapped lip and used Vaseline, you’ve sent money to Unilever.

    If you’ve ever been a teenager trying to get rid of acne or a sweaty adult, and purchased Noxzema to clear up your skin, you’ve sent money to Unilever.

    If you’ve ever put on Brut cologne, you’ve sent money to Unilever.

    They also have a bunch of brands that don’t mean much to American investors, like Omo and Rexona (we call it Degree here), that nevertheless generate over $1 billion Euros per year. Their website brags about seventeen billion-euro brands. They have over 1,000 brands in all.

    As a matter of style, they are one of five companies (along with Berkshire Hathaway, General Electric, Johnson & Johnson, and Nestle) that takes division of labor extremely seriously via a decentralized model that always sources capital to the highest perceived returning investments.

    I included Unilever because it’s a fifty-year bet on people continuing to bathe and eat ice cream, but it’s also so much more than that.

    Because of how my budget works, I won’t be purchasing anything new until January, and hopefully it’ll stay down until then. Unilever, along with Colgate, Chevron, and Nestle, are the highest-quality firms in the world I don’t currently own, and three of the four are flirting with fair value or are there already. A stock market decline of 20% or so that is related to the irrationality of others rather than declining fundamentals would be really nice, and would give prospective business owners a chance to do some planting in fertile soil. A guy can ask, right?

    Consider that penultimate sentence my Dear Santa letter.
    Oct 23, 2014. 12:25 PM | 20 Likes Like |Link to Comment
  • Are SCHD And NOBL Good Dividend Growth Investments? [View article]
    Dave, very good piece.

    Even though many of the companies on the list are quite similar to what (I imagine) you'd find in the portfolio of a do-it-yourself investor that is focused on dividend growth, I don't think they're so similar as to be interchangeable.

    For instance, if I were constructing my own mutual fund, I'd happily include T. Rowe Price, which has been growing profits at over 15% annually for the past decade. The low starting yield would be justified by the high growth rate attached to each share.

    But then, when I look at Cintas, I'd be more hesitant to add that to a fund of my own choosing. The dividend growth rate has been nice, but it's been somewhat illusory in the sense that profits have only been growing at a rate of 5% for the past ten years. The current dividend yield is only 1%, and that is likely a product of its overvaluation. It's not that Cintas is a bad company, but I can't imagine that there are many rationales for Cintas at $68 being the best place to put your money (though I saw some analysts predicting 12% growth ahead for the firm, and if you found that likely, buying it now would at least have a rational basis).

    NOBL is not bad in an absolute sense--someone who doesn't enjoy investing and doesn't want to think about it will not meet the same fate as the Steadman investors of the last generation. In fact, they'll have ownership stakes in many of the companies owned by dividend growth investors that focus on wide-moat firms. But, if you enjoy investing, you could doably build a collection of assets that (1) either has a higher starting yield than the S&P 500 by a significant amount, or (2) consists of companies that have such high earnings per share rates that it would justify accepting a lower starting yield.

    Conclusion: I find NOBL adequate but not optimal, but maybe that's just me. And when you include the expense ratio, it only gets worse.
    Oct 2, 2014. 05:12 PM | 2 Likes Like |Link to Comment
  • Apple, Google Will Crush Microsoft Just As Amazon Did Best Buy [View article]
    Rocco! Welcome back my brother.
    Sep 24, 2014. 12:29 PM | 2 Likes Like |Link to Comment
  • Dividends Matter If They Matter To You [View article]
    David, this is a very nice piece.

    Some of the disagreement does stem from the tendency of people, including me, to say "Because I value X, you should value X as well."

    Another source of disagreement has to deal with vocabulary. When a dividend investor says that price doesn't matter to them, some people who post overwhelmingly negative comments on this site towards dividend investors take it to mean, "Those dumb-dumb dividend investors would hate a $10,000,000 net worth and would be cool with their portfolio collapsing 90%."

    Every clumsily worded statement or shorthand gets held up as proof of a dividend investor's stupidity if a reader has the pre-existing viewpoint that dividend investors aren't smart enough to be in the same room with non-plastic knives.

    Really, when a dividend investor says "total returns don't matter", they are really saying something along the lines of, "Owning something like Abbott Labs from 2003 through 2011, when it delivered no capital appreciation, is tolerable for me because the business profits doubled and the dividend doubled over that time frame, still giving me 5% annual returns when every dividend payment was reinvested. Abbott Labs is an excellent company that I intend to hold for life, and I live off the dividends, so I prefer the reinvestment effect of lower prices over the temporarily feel-gooditis of a rising stock price because I won't sell this holding during my lifetime."
    Aug 14, 2014. 06:23 PM | 24 Likes Like |Link to Comment
  • What The Coca-Cola Critics Are Missing [View article]
    Thanks, Happo.

    What I like about Coca-Cola is the downside protection that comes with it.

    A lot of people will point to other stocks and say, "This one beat Coca-Cola by a percentage point, this one beat it by two percentage points over the past three years" and so on.

    The incompleteness of arguing like that is the fact that you're not discussing risks that could have materialized but didn't.

    Imagine if we saw Great Depression conditions re-emerge sometime in our lifetime (God hope not). People will still drink soda, water, and sports drinks. The cash flow keeps coming, even in severely distressed economic scenarios.

    I don't devalue Coca-Cola as an investment just because terrible conditions could have materialized but didn't. I like knowing the protection is there.

    Read this story about a Florida banker who bought Coke stock for everyone during the Great Depression and helped them not only ride out the storm, but become millionaires.

    My favorite line: "Mr. Pat noticed that even during the depression, people would spend their last nickel on a cold Coke. He thought that was one of the things that would make it a good permanent investment."

    http://bit.ly/XtDUcg

    That's what I'm talking about.
    Aug 2, 2014. 04:07 PM | 8 Likes Like |Link to Comment
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