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William Greenfield

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  • Retirees Please Don't Index, You Deserve Better Than Average [View article]
    Chuck,

    In your answer to Mister J you say there is no survivorship bias but you write an article showing how stocks would have done from 1996 to present there is an inherent bias. Many of the stocks you would consider today may not have even gotten on your radar in 1996. Some of them may have only been paying dividends for a short time. So to point to the select few that have paid for the last 20 years and say "if you had bought them in '96 you would have beaten the averages" is biased. You must instead look at which stocks would have been considered in '96 and then follow their performance. As we all know, some cut dividends in '03 and many cut dividends in '08-'09.

    We get your point. Buy stocks at low prices with good dividend history. But to prove your point you should show which stocks you would've chosen 20 years ago and then tell us how they would have done. And none of this "earnings were falling so I would sell". Most of the DGI's are consistently saying that they only sell when the dividend is cut, regardless of what earnings do.

    I am not saying that I disagree with your logic. In fact, I like buying dividend stocks at bargains. But we must realize that when trying to show the world that this is a good strategy you need to bring proof without using 20-20 hindsight.
    May 30 10:41 AM | 17 Likes Like |Link to Comment
  • Is Apple's iPhone Losing The Smartphone War? [View article]
    Excellent article.
    Nov 22 09:12 AM | 8 Likes Like |Link to Comment
  • Trying To Beat The Market Is A Fool's Errand [View article]
    Chuck,

    Nice article. The fact that investing is not necessarily to beat the market is something I have trouble explaining to some people. I think that having an absolute goal (e.g. a set income yield, or an absolute rate of return that one would be happy with) is a much better goal.

    With that said, I didn't quite understand how you chose the 20 stocks for you dividend portfolio. You mention taking stocks with a dividend yield over 3%.
    "The following Portfolio Review is comprised of 20 blue-chip dividend growth stocks that together provide an average current dividend yield of 3% per annum."

    By using current div. yield then that means that you are looking back through time with a little bit of 20/20 hindsight. It might be better to go back and find stocks in 1993 that were yielding 3% (or more) and have your graph track the performance of those stocks. Your way of picking stocks has a bit of "survivorship bias", in that it uses stocks that exist today to prove something is true for the last 20 years.

    If you can get that historical data I would love to see what the outcome would be. I also think your 20 stocks would be entirely different.

    Thanks,
    William
    Oct 17 11:54 PM | 8 Likes Like |Link to Comment
  • How I Can Explain 96% Of Your Portfolio's Returns [View article]
    Kiran,

    Thanks for the article. Personally, I'm a Graham fan so I don't go for thinks like the Fama-French model which rely on EMH. However, I would like to thank you for explaining it in terms that are understandable to retail investors like myself.
    Dec 31 02:58 PM | 7 Likes Like |Link to Comment
  • Retirees Please Don't Index, You Deserve Better Than Average [View article]
    Chuck,

    Nice article. Two comments.

    When you measured the dividend aristocrats did you the list as it was in 1996 or only looked at the list as it is today?

    There an ETF that tracks the Dividend Aristocrats. Perhaps investors should buy the ETF when they feel the underlying stocks (as a whole) are fairly valued or undervalued. Would you recommend such a plan?
    May 29 03:34 PM | 6 Likes Like |Link to Comment
  • Retirees Please Don't Index, You Deserve Better Than Average [View article]
    This is precisely what I was trying to get at in my comment above.

    Furthermore, by buying the "Dividend Aristocrats" you are in essence buying an index, albeit a small one. These aristocrats in-and-of-themselves are an index. Just buy SDY when you believe it's fairly- or under-valued. So to say "don't index" is misleading.
    May 29 06:28 PM | 4 Likes Like |Link to Comment
  • California Chrome Arbitrage And $300 On The Sidewalk [View instapost]
    So Chris is this the new special situations that you referred to? Takes a lot of imagination to have spotted this on the go.

    How much money do you need to start an account?
    Jun 26 01:02 PM | 1 Like Like |Link to Comment
  • Dividend Aristocrat Rejects [View article]
    Mike,

    I know that there are many DGIers that stress value. Regardless of whether you or Chuck or other DGIers buy only undervalued or fairly priced stocks, the fact that the Aristocrats are selling at high valuations is undeniable. This tells me that the masses are buying these high-quality stocks at high prices.

    Further, even if DGIers look at price when they buy, they don't look at price while holding. This can be just as bad.

    Perhaps you can explain to me why a DGIer holds on to an overvalued stock that is paying him 15%-20% on his cost but is only yielding 2% on current price. If he sells and picks up another undervalued stock with a 2% yield then he will have the same income.

    The above is a sincere question that I have. I just don't get the mentality, I guess. I would really appreciate it if you can explain it to me and the readers in a respectful fashion.

    Thank you.
    Jun 16 09:56 AM | 1 Like Like |Link to Comment
  • Retirees Please Don't Index, You Deserve Better Than Average [View article]
    Chowder,

    Thanks for replying. I am glad you have found an investment theory that you are comfortable with.

    I understand why DGI is "in" these days, but that doesn't mean it's a good response to the Great Recession especially if everyone is bidding up the price of the stocks that fit the DGI bill. Now I know that sounds blasphemous to many DGIs but price matters and when the price is bid up to a point that is nonsensical people's portfolio's will suffer, even if they continue to get their dividends.

    I refer you to the "Dean of Wall St.". Benjamin Graham wrote in "Security Analysis" (2nd ed. 1940 page 532) the following words - "We suggest that about 20 times average earnings is as high a price as can be paid in an investment purchase of common stock." Two pages later Graham points to the blue chip stocks of the time (GE, KO, and Johns-Manville, a company that was bought by Berkshire Hathaway in 2001). Graham calls these stocks "speculative because of their high price". Notice, he doesn't say "investments because of dividends despite high price".

    Now, I know some readers will quickly point out that Chuck specifically says to stay close to a P/E of 15. But if we look at a list of the current Dividend Aristocrats you will find that only 6 out of 54 have a P/E below 15 - that's 11% of the list. Further, there are only 21 out of 54 with a P/E below 20 (39%) . So according to Graham most of today's Aristocrats would fall into a "speculative" price range. DGIers are paying up front for those dividends. The fact that DGI is "in" is preciously the reason to be cautious and wary. The prices of the stocks are reaching prices far above what their value
    Jun 6 12:03 AM | 1 Like Like |Link to Comment
  • Retirees Please Don't Index, You Deserve Better Than Average [View article]
    Chuck,

    Thank you for your response.

    Before I continue I would like to point out that I enjoy your articles and I enjoy the intellectual conversations they stimulate. Investing theories are always open to debate and I think that by having the readers comment and question an authors articles helps both the readers and the contributor understand each other better.

    Moving on, I totally get what you are trying to say and tell the readers. However, many of your articles that you write on SA try to prove that DGI is a better way to invest, both for retirees and for younger folks. In this article you have shown what would have happened if you picked today's winners 20 years ago. Doesn't something about that strike you as manipulating the data?

    You claim that you are showing that the stocks that you are choosing today have done well (at the fundamental level and therefore, at the stock level as well) and should continue to do well. However, this doesn't prove any of this will be true. Instead, can you please write an article that shows what you would have bought (or did actually buy) in 1996 and how well it will have done.

    I am currently reading a book by a DGI written in 1997. The author (a doctor) chose 20 stocks to buy that were blue chip stocks and had a consistent dividend record. His idea, like yours, was to keep reinvesting the dividends and eventually live off of them in retirement. He retired at age 40 in 1996. Not bad. But I went to see how he would have fared since then and it didn't look great. Sure the famous companies are still around, but there are a bunch that have gone to the trash. All in all, I wonder how well he has done since then.

    Recently I pointed out to a friend that there have been many articles written on SA about being a DGI. It seems very "in" these days. But there is something that I've noticed that is disturbing. No one seems to be saying that they were doing this before the crash. And if they were, how come I don't see any articles saying how well they did and how they weren't worried in the least during 2008.

    Again, I think that you, Chuck, are a great writer and that being a DGI is a great idea if done as you suggest. I am merely asking that you give us an article that shows how well you have done, or would have done if you had been choosing stocks in 1996. When Ben Graham wrote his books he didn't say "be a value investor and buy stock X today b/c it has done well for last 20 yrs." Instead he showed actual stocks that were bought and how well they did. And he didn't just give a few examples...he gave tons! Most amazingly, when you read his books he was very quick to give examples that were current and he felt would do well and then he would prove his methods by pointing to actually stocks that he bought in the past under similar conditions. He was also very upfront with his losers as well.

    Looking forward to your next article,
    William
    Jun 3 11:29 AM | 1 Like Like |Link to Comment
  • Warren Buffett Is Wrong About Dividends [View article]
    I regret to inform you that there is something wrong with the scenario you have run.

    When a company pays dividends it comes from the earnings, not the stock price. So lowering the stock price doesn't really account for the long-term effect it will have on the companies earnings. In order to get a real idea of what would happen you must lower the retained earnings for each year that you take a dividend. This would lower the assets that Buffett has to work with. Do you think he could've bought BNSF if he hadn't had all those earnings reinvested for all those years, growing at a compounded rate of ~20%? If you don't think that such a reduction would affect growth imagine having to give away a nice chunk of your portfolio to some other people and then tell me it won't effect your total returns.

    I am not saying that I don't enjoy getting dividends. I primarily invest in dividend paying stocks, but I appreciate the value of a company reinvesting their earnings if they have shown they are competent and capable of doing so intelligently.

    @David at Imperial Beach: I am almost positive that BRK.A is convertible into BRK.B. (See here http://bit.ly/WaeHvx). You would not have to pay tons of transaction fees. Your broker may charge you a small fee to convert them. So to say that a holder of BRK.A is forced to sell and buy BRK.B and lose lots money in the exchange is simply not true.
    Feb 6 10:43 PM | 1 Like Like |Link to Comment
  • Apple Is Poised To Disrupt Another Industry [View article]
    You do realize that buying stock in a company makes you an equity partner (stocks are literally called equities).....so by your own logic you should care very much about the money in the bank!

    I know that you meant "partner" in the more "significant influence" sort of way, but you must keep in mind that the money in Apple is in reality the shareholders'. That is precisely why people like Icahn are calling for more of it to be returned to the shareholders'.
    Jan 30 03:04 PM | 1 Like Like |Link to Comment
  • Bonds: Don't Fear The Reaper [View article]
    Hey Cranky,

    Nice article, sorry I didn't see it sooner. And for your son's sake I will go and check out the your other article you mention.

    Can you tell me your thoughts on Guggenheim's Bulletshare Bond ETF as opposed to the traditional bond ETF, which is more of a perpetual bond?

    I have some money in both types. I really think the Bulletshares may offer some better protection when rates go up since they have an actual maturity date, mimicking bonds more realistically.
    Nov 10 11:52 AM | 1 Like Like |Link to Comment
  • Straight Shootin': The Truth About Ruger [View article]
    Niemann,

    Thanks for reading.

    Off the bat I should mention that I am a strong believer in our 2nd amendment. So, the "anti-gun lobbyists" haven't gotten to me in an investment capacity.

    Secondly, their "great quick ratio" (your words) is all of 1.6, according to their latest 10-Q. That is not exactly "great."

    Thirdly, buying back shares rewards shareholders that are in it for the long term. With less shares outstanding, each share is worth more and gets more of the earnings. This causes each share that you hold to go up in value.

    Lastly, I am glad to hear that your wife is long RGR and buying on the dips. I am sure you noticed that my last paragraph mentioned that this may be a good long term investment given the right price. Sounds like that is exactly what your wife is doing.
    Sep 15 05:15 PM | 1 Like Like |Link to Comment
  • Dividend Aristocrat Rejects [View article]
    Mike,

    Thank you for the response and explaining your reasoning behind your portfolio.

    I agree that one should not sell a stock just because it's slightly overpriced. I own MET and get a great yield from it even though I think I got as much as I will get from a capital gains perspective.

    I think we differ in what it would take to sell. If I think MET gets overvalued to the point that a significant drop (>20%) is inevitable I would most likely sell. The div. yield isn't enough to make up for such a loss of the gains I have.

    As for KO and PEP I am a huge fan of both companies (although I lean more towards KO to drink and PEP to invest), but I'm waiting for a drop in prices before I buy. I just don't think I can buy a stock that is priced at 20x earnings, when I think the growth of their earnings will be less then 8% annually for the next 5 yrs. I understand that this may prove to be a mistake, but I think that if such a drop never comes it should not bother me. I will find (hopefully) other stocks that I think are fairly priced (or better) that have good prospects.
    Jun 17 10:29 AM | Likes Like |Link to Comment
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