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My primary objective is income replacement! ... The objective is to start earning an income stream now, to replace the income that will be earned throughout the working years. I want that income to be reliable, predictable and increasing. The income stream will need to continue to grow to stay... More
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  • Establishing A Core Portfolio 46 comments
    Jan 30, 2013 6:29 AM

    Investing is much like parenting or learning to play sports. It all starts with the fundamentals. Fundamentals give you a solid base from which to develop as a person, as an athlete and as an investor. In times of adversity, we always go back to the fundamentals to pull us through.

    As a person, our morals and values are the fundamentals that define us as a person. As an athlete our fundamentals may center around technique, footwork or arm motion. In investing, our fundamentals are based around our "core" positions.

    A well defined investing strategy is one of the cornerstones of a successful financial life. While investing techniques may vary, a solid foundation is what will help you weather the storms the market is sure to throw your way.

    The number 1 principle in investing comes not from hoping for the best, but in knowing how you will handle the worst.

    Nobody really knows what's going to happen next. Some things can be predicted, most things can't. Since nobody really knows what's going to happen, your plan must allow for the fact that the markets will experience some unexpected downturns every now and then.

    As a Marine we were taught to always be aggressive, always on the attack, always move forward. There were times when you had to stop and regroup. When forward progress was stalled, we put out a perimeter. That perimeter was our first line of defense against attack. How well you were protected was defined by the skills and alertness of your perimeter team.

    In investing, as you organize, plan or simply regroup, it's your core positions that you will send out as your perimeter.

    A core holding is the central part of your portfolio. The core requires investments that will be reliable year in and year out. They are the solid foundation of the rest of your portfolio. The rest of your portfolio is spice, something to sprinkle on, in or around your core positions.

    In 1999, The Single Best Investment by Lowell Miller was published. If you haven't read it, I highly recommend that you do. There should be a law that requires all dividend growth investors to read it. And when you are finished reading it, do it again and again and again. Each time you read it, you'll have different things reach out and grab you.

    Miller suggests that your core positions should represent at least 50% of your portfolio value because you are relying on these long term investments to help you achieve long term success.

    It was suggested that a portfolio contain 25-30 holdings and of those holdings, at least 50% of them should be core holdings. It was also suggested that the smaller the number of your holdings, the more conservative they should be.

    In 1999, when the book was published, the top two sectors that Miller suggested you focus your core holdings on were REIT's and utilities. He also lists MLP's under the utility umbrella. He wanted to add consumer companies to the list but at the time the consumer stocks were way overvalued.

    Miller even went as far to state that if you only held 5 positions, they should all be utilities and REIT's.

    His advice came prior to the Lost Decade. The top three sectors coming out of the Lost Decade were:

    1. MLP's

    2. REIT's

    3. Utilities

    How was that for excellent advice? He had no idea The Lost Decade was coming!

    What constitutes a core position? In my opinion, and the way I have our portfolios established, is that I want companies that offer a product or service that we must, or will use, regardless of economic conditions. I refer to them as the "necessity companies." These are the companies we need for our everyday living basics.

    My core positions survived the recession of 1987, the recession of 2000-2002, the Lost Decade and the Great Recession of 2008-2009. Not only did they survive, they increased dividends as well during those volatile times.

    What made MLP's, REIT's and Utilities so valuable as core positions?

    They all have guaranteed revenues regardless of economic conditions. THey all have long term contracts in place with their customer bases.

    High quality utility companies have been solid investments for decades. Utility companies aren't seen as terrific growth prospects, but they do perform under the very basic concept of, it's not how much you make, it's how much you keep. Here is a 20 year total annual return performance sample.

    20 Years: (Annual Return)

    SO - 15.7%

    D - 13.9%

    SPY - 8.1%

    In looking at the REIT's, I only have stats for the past 18 years.

    18 Years: (Annual Return)

    O - 23.1%

    HCN - 14.0%

    NNN - 12.9%

    SPY - 8.0%

    In looking at MLP's, I used data when EPD went public and that was 14 years ago.

    14 Years: (Annual Return)

    EPD - 20.9%

    KMP - 19.4%

    SPY - 4.4%

    (I own all of the above except SPY.)

    These core positions not only played defense, they achieved excellent total return as well, but it takes time for that return to develop.

    In addition to the sectors above, I also include consumer companies as part of my core positions. I prefer the companies that sell products we must use everyday of our lives. These necessity items have reliable earnings due to repeat sales.

    In the consumer arena I look to companies like PG, CL, KRFT and GIS as core positions. I even include CVX and COP under this umbrella.

    In closing, what is the moral of the story?

    If you want to be successful as a long term investor, you must invest in companies that have reliable earnings. Reliable earnings come from companies that offer a product or service we must use regardless of economic conditions. You can lose your job and you'll still find a way to use the product or service of a long term core company. Make your core positions at least half of your portfolio, if not more. It's your core positions that you will have to fall back on in times of adversity.

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Comments (46)
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  • Bob Wells
    , contributor
    Comments (5402) | Send Message
     
    Great article chowder....

     

    Simple stated and ever words rings true...I so have to get the Lowell Miller book.

     

    Take care
    Bob
    30 Jan 2013, 07:44 AM Reply Like
  • mjwrona
    , contributor
    Comments (229) | Send Message
     
    Bob - Here is a link to a pdf file of the entire book, right from Miller's site.

     

    http://bit.ly/1dmSet1

     

    I was bragging about my kindle copy in a comment thread, and someone - I think it was MathRulz - provided this free link to the entire publication.
    12 Jan, 01:20 AM Reply Like
  • rnsmth
    , contributor
    Comments (2017) | Send Message
     
    If you take requests for comments on specific stocks - JNJ and MCD. I have been considering them core-ish :)

     

    Thanks for another good blog. I am over the 50% mark
    30 Jan 2013, 09:03 AM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » Ron, I agree with you. I gave a few examples in the article, but I own JNJ and MCD and I consider them core positions. Same with tobacco and booze. People are going to use them regardless of economic conditions.

     

    I've got a couple of other articles I want to write. I take some things for granted so much, due to their being a part of what I do, that I want to organize those thoughts where they might make sense to others. ... Ha!

     

    I am going to write an article on the Psychology of the Market, but it won't be this week. Too much information to put together while trying to make it concise enough as to not overwhelm.
    30 Jan 2013, 09:52 AM Reply Like
  • ipaduser
    , contributor
    Comments (700) | Send Message
     
    Gem of an article. It's the boring investments that often pack the greatest long term punch.
    30 Jan 2013, 09:23 AM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » ipad, if I were to reflect on my investing career, and categorize my mistakes in the order of importance, the biggest mistake I made years ago was allowing my ego to keep me from investing in widow and orphan stocks. They were too boring. I was too aggressive. I was too stupid. ... Ha!

     

    Nobody 20 years ago would have predicted that SO and D, a couple of utility companies, would outperform BRK.A over the next 20 years. People doubt it even today. But they did!

     

    That's why they make great core holdings and why I own 9 utility companies.
    30 Jan 2013, 09:57 AM Reply Like
  • ipaduser
    , contributor
    Comments (700) | Send Message
     
    I know what you mean.
    Early in my contracting career I knew a building supplier who sold sand for $5 a sack. Turns out he bought 10 yards at a time and hired a temp to bag it. $250 turned into over $4000.
    Sand.
    30 Jan 2013, 10:25 AM Reply Like
  • cdostrom
    , contributor
    Comments (100) | Send Message
     
    Yep, my ego got in to the way of smart investing. And yet every now and then something good happened... I invested 40 dollars into Atlantic Electric on 12/31/1976 and 10 years later the dividends were 177 dollars per year... or 1748 dollars from the 40 (essentially 43.5% return annually).

     

    Now I focus on income from core holdings and businesses I buy into.
    21 Jan, 03:16 PM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » Yeah I agree. Every now and then something works out okay. My ego play is MHR which is up 1,209% as I type.

     

    Although it's nice to see the gain, it isn't something that can be achieved on a consistent basis.

     

    I can consistently grow my income in double figures every year though, and that's what counts for me in the end.
    21 Jan, 03:29 PM Reply Like
  • cdostrom
    , contributor
    Comments (100) | Send Message
     
    I do not know if I have already mentioned this, but I am very glad that you have spent the time to relay your experiences and written about your thought processes.
    Funny thing about your MHR purchase, I offset a ROTH conversion tax liability by going with a MHR MLP that they offered in 2011.
    22 Jan, 09:59 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (13519) | Send Message
     
    Chowder, I continue to marvel at how your military training and your sport training have so well prepared you for investing.

     

    You have such a clear writing style. I learn something from everything you write!

     

    Can't wait for the next one!

     

    Robert
    30 Jan 2013, 09:59 AM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » Robert, one of the formulas I learned in leadership courses was call R2 A2. Not the Star Wars character R2 D2!

     

    R2 A2 stood for Recognize, Relate, Assimilate, Action.

     

    Recognize:

     

    In everything you read or observe, we were taught to recognize principles, concepts, or in other words, to determine the moral of the story.

     

    Relate:

     

    What does that mean to me?

     

    Assimilate:

     

    How can I use that to my benefit? Can I come up with a plan to use those concepts and principles? Plan your work.

     

    Action:

     

    Time to do the grunt work. Time to follow through. You've planned your work, now work your plan.

     

    Over time it became easier and easier to apply the formula to most things in life. I'm not smart enough to create new ideas or new things. I'm not a creator.

     

    However, with the power of R2 A2, I can innovate. I can make it work better for me. I'm an innovator. I work within my known limits.
    30 Jan 2013, 10:09 AM Reply Like
  • Garthilk
    , contributor
    Comments (588) | Send Message
     
    As a newbie, I understand the need to aquire a core position in companies like PG, CL, KRFT, CVX, etc. Unfortunately I hold none of these. Finding the right entry point is difficulty. I find myself, retrospectively identifying good entry points throughout the year, but in the moment it's sometime difficult to buy when it's in front of your face. I've got to make a list of must buy when hit's X. Then have the cash on hand to do it.
    30 Jan 2013, 10:21 AM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » Garthilk ... Ha! Ha! ... Been there, done that!

     

    When I get to my article on the Psychology of the Market, you may want to follow along and pay attention.

     

    People don't fail at investing due to lack of knowledge, they fail due to an elevated level of emotion.

     

    I'll get the article completed, I won't rush it though. It's too important, in my opinion.
    30 Jan 2013, 10:24 AM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3298) | Send Message
     
    Chowder,
    Thank you for good blog. I like it but as a native contrarian let me put few comments/questions:
    1) Although I consider almost all my positions (except ~ 3% of stocks there I play dividend capture) as core and intend hold them forever, I do not marry any stock if it strongly overpriced.
    Did you sell anything during 1995-2000 bubble?
    2) Well we know that some products and so companies depend of economic conditions. So why to exclude a good solid company (e.g. based on your criteria with only 1 negative annual earnings in a decade) from core portfolio?
    3) It seems that you are mostly in US (well most DG firms are here) but people in other countries also use utilites, food, etc. So what % of portfolio in your opinion should be abroad?
    4) There is article today with portfolios comparison /http://seekingalpha.co... - let me copy my comment from there:
    "It seems useful if "DG portfolio managers" who update us with their holdings also start to describe stocks they considered but rejected and why. Just a wish...."
    I believe it will be fruitful to know your "back-stage".

     

    Good luck
    SDS
    30 Jan 2013, 10:32 AM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » SDS, I have re-balanced core positions in the past when they got too far ahead of the others. In retrospect, I think it was a mistake. Since I'm still in the accumulation phase, I simply should have brought the other weightings up, not take my best performer and downsize it.

     

    I think I made a mistake in dumbing down my winning positions.

     

    If someone is close to retirement, or already in retirement, my attitude would be different. I think re-balancing would make more sense under those circumstances.

     

    As to your second question, I don't know what you consider a core position. I have stated what I want my core positions to be.

     

    I do allow room for other holdings. I own LMT and I hope to hold it for a long time, but I don't consider it a core holding. I want to keep it as long as a core holding, but it is expendable.

     

    I own SDRL and INTC, but I don't consider them core positions, even though they are weighted as such. If they disappoint, I will sell. If one of my core positions disappoints, I will add. I think that perspective helps define a core position from a holding that is simply a long term position.

     

    I own NGG in my utility sector of holdings. DEO is held in Project $3 Million. We also own PM and SDRL. That's out International exposure. Other than that, a lot of the companies I own sell their products overseas. That's good enough for me.

     

    I don't understand what you mean by back-stage. If you want to know why I may reject certain companies, there are some sectors I simply don't wish to invest in. Banks, Casino's, Auto's, Home Builders, etc.

     

    If you want to know other reasons on why I may reject a company, you'd have to check out my stock selection process. If a company doesn't pass step #1, I go no further. If a company passes #1 but doesn't pass step #2, I go no further!

     

    I don't care how good the story sounds. I spent most of my adult life in sales, we could make garbage seem like the deal of the century. ... Ha!

     

    Here is my stock selection process:

     

    http://seekingalpha.co...
    30 Jan 2013, 10:50 AM Reply Like
  • rnsmth
    , contributor
    Comments (2017) | Send Message
     
    I considered and rejected Hasbro, Inc, the toymaker.

     

    It was a borderline call on my part, mainly because I am unsure how well they will continue to navigate the journey to a digital toy/games future.

     

    I reconsidered it on the recent earnings miss, but I still feel too much uncertainty to pull the trigger. I may add to Wisconsin Energy instead, taking it to an overweight position
    30 Jan 2013, 10:53 AM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3298) | Send Message
     
    Chowder,
    Thank you for answers.
    SDRL and INTC are good examples for my 2nd question.
    I did read your stock selection process and it has many common points with my. rnsmth just showed example of rejection.
    SDS
    30 Jan 2013, 02:08 PM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » SDS, I don't own BDC's or mREIT's. I don't wish to own them either, regardless of how much they yield. There are simply sectors I don't want to be in.

     

    I've rejected companies like BDX, SBUX, CHD, FDO, HRL, LOW, ROST,TJX, TGT, WMT and YUM because the yields were too low. All of them are on my watch list. I will consider any of them with a yield north of 2.5% as long as they continue the dividend growth pattern they have established.

     

    I don't own any railroads or other cyclical's. I would strongly consider companies like CAT, DE and DD, along with the rails, on a strong pull back in the market. They would need to trade in the historically higher yield range they have established.

     

    An article on this concept is on the back burner for later articulation.
    30 Jan 2013, 02:17 PM Reply Like
  • 100million
    , contributor
    Comments (12) | Send Message
     
    Does length to retirement play any factor in choice? For example I hold CHD with its low intial yield (1.6%) but quite high DGR. I have about 20 years before retirement. I am willing to sacrifice initial yield for that DGR, although I know it will not likely maintain that high %....simply because I have time to wait.
    4 Feb 2013, 08:35 AM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » 100million, I've been thinking about that. I think it's a great idea as long as the company can continue that dividend growth, but as you say, that is a long time to count on it, and then what if the company doesn't.

     

    I have CHD on a watch list for my son's portfolio because he has so much time for dividend growth to play out.

     

    I think I'd prefer something in the 2.5% yield range for a company like CHD. We both own CL for its high dividend growth rate, but we purchased at a yield of 2.5%.

     

    In looking at CHD's history, I wouldn't hold my breath waiting for a 2% yield, never mind a 2.5% yield.

     

    I don't see anything wrong with your investing philosophy with regard to CHD as long as you realize that the strong dividend growth pattern was initiated in 2007.

     

    Companies like FDO, SYK and TEVA for example, have been at that strong dividend growth for a longer period of time and their yield is on par with CHD.

     

    I'm on board with your plan!
    4 Feb 2013, 01:35 PM Reply Like
  • 100million
    , contributor
    Comments (12) | Send Message
     
    Thx for your response. I seem to be drawn to those hi DGR, low initl yields. I also have CMI, ARG and IBM that fit this mold. In my simplistic way of thinking (1) there must be some capital apprec to yield <2.0% after 10 yrs of 20ish% DGR (ARG example) which i am not going to argue with, and (2) the Champions and Contenders of tomorrow are some of the Contenders and Challengers of today. I hope to get lucky and hit on a few.

     

    Thanks for challenging my views on what I am trying to accomplish.
    4 Feb 2013, 02:16 PM Reply Like
  • tuliptown
    , contributor
    Comments (843) | Send Message
     
    Thanks for this article, chowder. On your advice i got Miller's book. Very good! I am hoping you will write an article on evaluating MLP's. i keep not understanding them (some have over100 %) distributions. Miller touches on this but i still have trouble defining valuations for these guys.
    30 Jan 2013, 05:06 PM Reply Like
  • Erikans
    , contributor
    Comments (4) | Send Message
     
    Thanks Chowder, from a longtime follower of your comments. The Single Best Investment is a great book. I own it and I will follow your advice and read it again!
    30 Jan 2013, 06:56 PM Reply Like
  • Dividend Dynasty
    , contributor
    Comments (1047) | Send Message
     
    "The Single Best Investment" by Lowell Miller is my favorite book which I re-read many times each year. The other books that I read and quote frequently include Jeremy Siegel "The Future For Investors", Peter Lynch "Beating the Street", Dan Peris "Strategic Dividend Investor", Bill Staton "Double your Money in America's Finest Companies" and Josh Peters "The Ultimate Dividend Playbook".
    30 Jan 2013, 08:24 PM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » DD, I'll have to reread the Strategic Dividend Investor by Dan Peris. I don't recall being impressed with it the last time I read it. I only read it once. It could have been my mind was elsewhere. I'll check it out though.

     

    I re-read Josh Peter's book often as well. It is my second favorite book.
    30 Jan 2013, 08:34 PM Reply Like
  • Dividend Dynasty
    , contributor
    Comments (1047) | Send Message
     
    I liked most of Peris' book, but it did try to lead you to professional management. The first half of the book was better than the second as it was more informative on how he invests.

     

    I'm probably biased by my professional experience with Mr. Peris as an analyst. While speaking with him you felt like you were being interrogated. He was extremely thorough and could not be B.S.'d. As he said in his book, he let you know how he thought you should run your company (show me the dividend). My experience with him probably made the book more interesting.
    30 Jan 2013, 09:05 PM Reply Like
  • Yield Hunter
    , contributor
    Comments (294) | Send Message
     
    First of all, thanks for your posts. Think about how much money you could make if you just submitted them as premium articles :)!

     

    Second, and I'm just trying to learn more about one of the more personally influential posters on SA, you've had "core" positions since the mid-80's? I thought you were a trader in your youth? And you said you're not too close to retirement, but you have a child who's at least 27? (I must stress that I'm not questioning your veracity; I just feel that having a better picture of your story can help shape mine.)
    1 Feb 2013, 01:41 PM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » Yield Hunter, I'm more convinced than ever NOT to submit my articles as premium articles. I'm not motivated by the money, I'm motivated by the quality of work and the quality of the comment stream.

     

    I recently read an article where SA changed the author's title to include some silly title saying that David Fish's CCC list was worthless, or some such thing. By the time I read the article, SA had to change the heading due to all of the complaints they received, so I don't know the exact headline.

     

    The author spent time and effort putting together something I thought was worth discussing, even though I questioned his conclusions, but the discussion never happened, sabotaging the author's efforts. People complained publicly and refused to participate in the comment stream.

     

    I've seen other articles where the comment stream got personal and off track. That won't happen here. Nothing gets changed unless I change it and I can delete messages in the event trolls show up.

     

    I'm not into quantity of page views, I'm into quality. I'll sacrifice the cash for quality.

     

    Okay, I did have core positions in the 90's but sold most of them to take advantage of the new age technology boom. It was a disaster. At least that part of my portfolio was. I also switched over to energy stocks when oil was down to about $5 per barrel. I made good money there.

     

    After the tech crash, I went exclusively oil service companies and it was during that time that I perfected my trading skills via the use of technical analysis.

     

    I then traded for quite a few years until we hit the Great Recession. At that point I decided this won't be a problem, I'll invert my chart patterns and short these companies as opposed to going long.

     

    I was unable to do this because order after order came back saying, no shares available. Great, how am I going to earn a living now? There was no way I was going to trade to the long side during the great sell off.

     

    I noticed how one of my core positions, Dominion Resources, like the Energy Bunny, just kept going and going and going. I also noticed Blue Chip companies with historically high yields. I then decided enough was enough. The trading was exciting, but I was going to have to build an income stream at some point, and it was then that I went all in on dividend growth investing.

     

    I only hold one position now from my trading days and it has turned into a long term hold. That company is MHR, which I bought at 62 cents per share. ... Ha!

     

    My son just turned 28 this week. Project $3 Million is his portfolio. It is published online and I manage it for him.

     

    In looking back at my trading days, if I were to do it over again, and I'm not, I would not have leveraged all of my gains back into trading. I think I would have taken part of those gains to rebuild and add to my core dividend growth companies.

     

    I didn't look at them as dividend growth companies back then, I only looked at them as a company that paid dividends. I now see the power of dividend growth, thus my change in my investing philosophy.
    1 Feb 2013, 02:17 PM Reply Like
  • Yield Hunter
    , contributor
    Comments (294) | Send Message
     
    Chowder-

     

    I read that article, too, after the title was already changed, so I have no idea what all the commotion was about and I completely agree with your sentiment.

     

    Also, I really appreciate your feedback and giving us some personal historical perspective. As a young hoping-to-be investor, numbers and facts are nice, but I think it helps to see a little bit of the person behind also, so thank you.
    4 Feb 2013, 12:28 PM Reply Like
  • ttlead
    , contributor
    Comments (2) | Send Message
     
    Okay someone beat me up. How does one get themselves over losing a fortune in options and start over with only $4,000 in their account. So stuck in the mud and at 60 years not a happy place to reside. Is it possible to rebuild with that little and a bad history in day trading?
    4 Feb 2013, 10:27 AM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » I'm sorry to hear about your losses.

     

    I don't know if it's possible for you to rebuild or not. I suppose it depends on how much cash you can contribute to the portfolio on a monthly basis.

     

    In my opinion, I think all you can count on is to do the best you can with what you have, and that is going to depend on your monthly contributions.

     

    I know one thing though, I wouldn't be looking for high risk plays that seem like they have a chance of doubling.

     

    I think I would start out with some high yielding companies that have strong financial ratings. Collect the dividends in cash and use them along with your monthly contributions to add new companies as you go.
    4 Feb 2013, 01:48 PM Reply Like
  • jaych79
    , contributor
    Comments (506) | Send Message
     
    Chowder is far more qualified than I am at giving advice, but I would first put on a positive attitude. Instead of saying "only $4,000" just be glad you have that much to start with! Secondly, you have to lay out a plan. Like chowder said, you need to make monthly contributions. Figure out how much you need in X amount of years and then formulate a monthly contribution plan. If it's not within your budget, try to figure out a way to bring in some additional income (yard sale or something like that). You just need to be creative. Age is never an excuse. Look at Colonel Sanders. Ttlead, you can do it. You have time. You just need to come up with a plan that works for you. I know I am sounding like Tony Robbins but in all honesty if I was in your shoes I would want that hope. But this is legit hope. You are 60, not 90. Keep your chin up and keep reading the bloggers like chowder. SA is a great site with great resources. I would be willing to bet you are not the only person in your situation.
    6 Feb 2013, 05:35 PM Reply Like
  • Big Thunder
    , contributor
    Comments (559) | Send Message
     
    chowder, I've been thinking about this article since I first read it. I've been thinking through the definition of "core" that you offer here; I had been considering my core stocks as being companies that are rated 1 or 2 for safety by Value Line, that are financially solid, and that have a proven history of dividend and earnings growth. Adding in the component of products/services that will continue to be consumed regardless of how the economy is doing brings my core down to somewhere around 40%, so I have a little work to do.

     

    The Lowell Miller book is on order, btw!
    4 Feb 2013, 05:36 PM Reply Like
  • John Liddil
    , contributor
    Comments (158) | Send Message
     
    I think of the comment stream as the ripple effect. Similar to throwing a stone into a calm pond the initial splash is the article and it keeps growing and moving as people comment and add to the discussion. When you attract the best minds the ripple effect moves into another category altogether. I would liken it to a sonic boom. I look forward to your articles and comments. And know this, you are a great contributor.
    11 Feb 2013, 03:22 PM Reply Like
  • Linwi
    , contributor
    Comments (3) | Send Message
     
    I have been a newbie and lurker for several months now. But I just wanted to say, Thank You to Chowder and all the rest of the great folks here. I have Millers book in hand via my local library, and I know I'll be ordering it to own as soon as I put it down.
    I have been investing over the years, but my progress has been like a rudder-less ship. Thanks to SA, Chowder, and Miller, I now know exactly what I need to do to ensure a secure retirement. Thank you!
    18 Feb 2013, 07:56 AM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » Thanks for the kind words Linwi. Feel free to drop in, anytime.
    18 Feb 2013, 08:02 AM Reply Like
  • Yield Hunter
    , contributor
    Comments (294) | Send Message
     
    Linwi-

     

    I don't know if you've read chowder's other posts, nor do I know your policy on opening links posted by strangers, but I posted a link to a pdf of SBI on another of chowder's instablogs here http://seekingalpha.co... entitled "dividend growth investing- getting your mind right." There are definitely certain advantages to having it on your computer, and saving the ten bucks, but that's each person's call obviously.
    18 Feb 2013, 09:30 AM Reply Like
  • jdhd
    , contributor
    Comments (513) | Send Message
     
    Chowder,

     

    As part of re-vamping my main portfolio I started to ask myself again ~ what are my core holdings?
    Your analogy of perimeter fire rang back to my days in the USMC where each rifleman overlays the other in a defensive stance while regulated to a specific area of responsibility.
    As examples, I have T and BCE, MO and LO, AVA and AEP plus some REITS and MLPs. Some stocks are full positions but I don't look at them as "core" ~ SCCO comes to mind, but it can be spicy.
    My question is do you look to have core holdings within each of the sectors you are invested in?
    I hear people talking about sector rotation and overweight, equal or underweight within a sector. Norman Tweed talks about this based on the business cycle. Wondering how you view this?

     

    Thank-you...jdhd
    21 Mar 2013, 01:51 AM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » >>> Your analogy of perimeter fire rang back to my days in the USMC where each rifleman overlays the other in a defensive stance while regulated to a specific area of responsibility. <<<

     

    Ahhhh yes. Assigned fields of interlocking fire. ... Ha!

     

    My core positions don't have to be in every sector. Every sector doesn't meet one of my Core criteria and that's where they sell a product or service we must or will use regardless of economic conditions.

     

    I don't do sector rotation. As a long term investor, when people rotate out of one of my Core sectors, I add to my high quality positions and build those positions up for the flight to quality that will eventually come when they rotate back into my sector.

     

    I'm not chasing results! I'm letting them come to me by being patient and sticking with high quality companies.
    21 Mar 2013, 02:06 AM Reply Like
  • jdhd
    , contributor
    Comments (513) | Send Message
     
    >>Every sector doesn't meet one of my Core criteria and that's where they sell a product or service we must or will use regardless of economic conditions.<<

     

    That is what I was looking for. Your mandate is defense in what will hold or lose the least based on necessity or sin (We drink when times are good and drink more when times are bad).
    The comment you made earlier to SDS about bringing other positions up to your core positions also answered how to let a winner run.
    I was going a little nutz because my strong companies were running up through DRIP and I was either getting way overweight on a stock or trimming out of a core position when I really didn't want to.
    Much appreciated...jdhd
    21 Mar 2013, 02:29 AM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » In keeping with the spirit of this instablog, the top 3 sectors during the Lost Decade were MLP's, REIT's and Utilities.

     

    So far this year my top 3 sectors are MLP's, REIT's and Utilities and in that order. My Consumer Sector is a strong fourth.

     

    For a year and a half I have been hearing that the Utility sector is overvalued and yet, it keeps plugging along.

     

    You aren't going to get a utility at a deep discount unless something is seriously wrong with the company, like an EXC for example. Your high grade, financially sound utilities can be purchased at fair value and they will still continue to perform well over the long run. It's their consistency and a need for a safe yield by people who can't invest in CD's and Bonds anymore. The key is to stick with quality.

     

    My current utes are: AVA, D, LNT, PNY, SO, SRE, UNS and WEC.

     

    If you don't own any utes, consider purchasing a couple on any market correction of 3 to 5 percent.
    29 Mar 2013, 01:34 PM Reply Like
  • chowder
    , contributor
    Comments (7730) | Send Message
     
    Author’s reply » Ooops, my apologies. My Consumer section was third with utilities a strong fourth.

     

    This doesn't diminish the moral of the story about utility companies though.
    29 Mar 2013, 01:57 PM Reply Like
  • rnsmth
    , contributor
    Comments (2017) | Send Message
     
    Reading your comments about utilities over the past months led me to increase my exposure. I now hold WEC, D and LNT

     

    Consumer, energy, REITs and utilities consitute 60% of our dividend - listed in the order of weight.
    30 Mar 2013, 11:10 AM Reply Like
  • 528497
    , contributor
    Comments (13) | Send Message
     
    Thank you very much for your most valuable blog - to me. I'm in the process of finding my footing in investing for our retirement, your article couldn't have come soon enough to give me guidance to my own decision.
    Thanks for sharing so freely and without financial motivation. It will enable me to help friends who know even less than I do- hard to imagine.
    I got here from stumbling upon Martin Rice series of article on dividend investing. Lucky for me.
    Consider me a fan.
    poppy
    30 Mar 2013, 10:08 AM Reply Like
  • ghaukness0929
    , contributor
    Comments (172) | Send Message
     
    Thanks for this great thread Chowder!

     

    I looked at some of the equities listed here and wanted to strengthen my picks when the next dip occurrs (we are hitting a possible lower high). I strengthened the picks by runnning a Piotroski value screen averaged over the last 5 years since I plan on this being a 5 year position. The chart field indicates that the 5 year chart is in on uptrend as defined by a 6 mo EMA and bullish parabolic SAR on a monthly chart. 5 year CAGR not included because I did enough homeowrk for you anyway.

     

    Pio. Score Chart
    SCCO 7 Y
    CLMT 6 Y
    GLP 4 Y
    PAYX 6 N
    MCY 6 N
    BPL 5 Y
    WEC 7 Y

     

    WMT 6 Y
    BHP 6 Y
    KRFT 7 Y
    CVX 7 Y
    WAG 6 Y
    BHP 6 Y
    COST 7 Y

     

    On a cost basis the 3 best are WEC, KRFT and BHP (thanks to the gold slide). Waiting for an Ichimoku reversal to enter BHP.
    25 Apr 2013, 11:17 AM Reply Like
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