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Tim McAleenan Jr.  

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  • 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.'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."

    That's what I'm talking about.
    Aug 2, 2014. 04:07 PM | 8 Likes Like |Link to Comment
  • Notes On Yahoo's Strategy [View article]
    David, this was a very candid piece.

    You're doing good things here.

    Thank you.
    Aug 1, 2014. 06:58 AM | 6 Likes Like |Link to Comment
  • Why It Can Be Self-Destructive To Compare Yourself To The S&P 500 [View article]
    pjsburk, good question.

    No, I did not. I also own Visa. Because they didn't show up as tickers, I didn't see them when filling out disclosures.

    See that includes tab? It says: "ABBV, ABT, IBM, JNJ, SPY"

    That's what I was looking at when I filled out my disclosure because BP and Visa were mentioned in passing and not included as tickers.

    I submitted a revision that will hopefully be updated soon. Thank you.
    Jul 30, 2014. 12:57 AM | 2 Likes Like |Link to Comment
  • Why It Can Be Self-Destructive To Compare Yourself To The S&P 500 [View article]
    Tuliptown, that's a great question! You're correct to note that it's a balancing act between self-improvement and personal satisfaction, and there should be triggers to indicate when a company has quite frankly become a bad pick.

    For me, it depends on the investment. When contemplating a purchase in Visa or Becton Dickinson, I would consider my investment "bad" if the earnings per share growth was low (less than 5% or so annually, for a period of 7+ years, absent catastrophic economic conditions like a prolonged 2009 type of period in which you adopt the Billy Joel advice that "just survivin' is a noble fight").

    If I owned something like AT&T, I would be bothered by a dividend cut significantly. If the dividend got cut in half, and it was backed by deteriorating earnings power rather than the Board of Directors going off on a wild frolic of their own, I'd probably conclude "Whoops, botched this one, let's see what I can learn so I don't diminish my potential again."

    Although, I'm still hesitant to have absolute standards: The business cycle is long and sometimes harsh, and I think bad things happen when you train "successful investment" to be synonymous with "consistent performance all the time." The past five years for GlaxoSmithKline haven't been as good as envisioned, but I suspect investors buying here will do well over the next ten years in a high-quality, risk-adjusted way that gives them a lot of total income and total returns that resemble or slightly surpass the S&P 500. My basis for that belief is that they have thousands and thousands of high-quality products churning out profits, but the pharmaceutical side makes things lumpy a bit.

    I'd rather not abandon stocks when they encounter choppy waters because it just seems bad business to sell low, and this incidentally reinforces why I focus on dividend stocks: even when McDonald's struggled in the late 1990s and early 2000s, Johnson & Johnson struggled in the mid to late 2000s, and GlaxoSmithKline is struggling now, you still get sent a regular stream of cash for putting up with it.

    To directly answer your point--no, I don't need to know I am above average. A lot of my great fortune came at birth--imagine if I were born in Zimbabwe, I'd likely be dead by now. Instead, I just try to harness any advantage I possess in a way that I can lead a life that is higher quality, more fun, and can eventually facilitate significant charitable giving.

    If you owned 25,000 shares of Chevron, do you think you would be getting frustrated whether or not you beat the S&P 500? No, you'd be looking at those $107,000 annual dividends that are growing at 8% each year, and think, "Damn, I can do some fun things for myself and make the world a better place simultaneously. I can get a nice place with a sweet pool. I can walk away from antagonistic or unethical situations in a way that I couldn't if I were an employee absolutely reliant on a paycheck. I could sneak into bursar's offices of state colleges and pay off the tuition balance for a random student, and do it completely anonymously, and the fact that I did it without any need for self-aggrandizement would make the moment all the sweeter, and I could meet my death knowing that at least one person benefited from my entrance into the world on August 3rd."

    Maybe I should tilt your question: it's not beating the S&P 500 that would make feel above average; it's living life on my terms that would enable me to feel above average. But even then, I wouldn't sit around thinking "I'm above average", I'd be moving around thinking "I have these enormous cash-producing assets that make me free and independent so I can choose how to spend my time, taking care of myself and others as I see fit."

    True passive income is an enormous power, and can create permanent thrills when you: (1) think outside of your own immediate interests, (2) don't care about what others think beyond your close circle of friends, and (3) make a habit of helping others in your community precisely because you look around and see nobody else doing so.

    I just see money as the tool for accomplishing those things.
    Jul 30, 2014. 12:53 AM | 11 Likes Like |Link to Comment
  • Why It Can Be Self-Destructive To Compare Yourself To The S&P 500 [View article]
    Hey mkemac!

    It's true, I have written a book.

    However, I want to give you the heads up:

    1. Being accused of "selling something" is not something I take as an insult. Creating and selling stuff is the only way a civilization can advance in a way that improves standard of living, and creating a product means you combined skill, labor, and time to build something instead of spending your days mindlessly watching television, biding your time while doing nothing.

    I'm actually more proud of writing an ebook than some things I've done as an employee because I can look at it and say, "but for me, this wouldn't exist", whereas some of my work as an employee has left me with the feeling that an empty suit could have accomplished the exact same task if I were not there. So a word of caution: When you try to insult me as selling something, I actually walk away taking that as a compliment, and figured I should give you that warning.

    2. I couldn't advertise it in a more unobtrusive fashion. To date, I've never referenced my eBook in any of my articles on Seeking Alpha or done any promotion of it here beyond the listing at the top. Not that doing so would be wrong, but I try to focus on the task at hand (here, discussing individual performance against the S&P 500) rather than pursue sales without regard for style.

    3. Almost all of my writing, over 99%, is free. You get almost 500 articles here, and over 300 on my personal site, totaling almost one million words, that you don't have to pay me anything to read. If, for some wild reason, you're not sick of me yet, you can buy the book.

    But there's no pressure to do so. You can completely ignore it--scrolling away from the masthead as quickly as possible--and it's all good. I don't show up in your bedroom with a flashlight in the middle of the night to say, "Did you buy my book yet???" It's an option that you can either accept or decline.

    To me, that's how free markets work. You do your best to create something that you believe will help others, and if someone thinks it will improve their life in some way, they can use their own free will to buy it. I get rewarded for the time spent working rather than lounging around, and the buyer gets something of value in return. It's the most micro form of free will interacting with labor interacting with people trying to improve their lives. I love that part of America.
    Jul 30, 2014. 12:25 AM | 26 Likes Like |Link to Comment
  • Are Growth Stocks Appropriate For Retirement Portfolios? [View article]
    This is a great article. I have nothing to add.

    Nice job, Chuck.

    Jul 23, 2014. 05:48 PM | 9 Likes Like |Link to Comment