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Market Strategies
  • Market Strategies - Buy Low, Sell High 84 comments
    Mar 6, 2013 7:07 AM

    Buy low, sell high! That's the shortcut to a fortune, right? ... Wrong!

    It's another one of those accepted concepts that actually sets us up to depend on Wall Street. It is just one of many-causing cliches that the crowd chants as they lose money and continue to underperform, over and over again.

    You heard me right! Buy low, sell high is nothing more than a cliche. It is not a blue print for action.

    How do you define buy low, sell high? How do you measure it? How do you know what the target is ahead of time? Buy low, sell high is no different than measuring your results against the market, which was covered in an earlier instablog. It's nonsense. You only know what it is in hindsight. You can't accurately plan for it. You can't even come up with a high probability of it. You can't adjust for it. You don't have any idea what the high and low points are until it has occurred. All you did was guess, and if you guessed correctly, you were lucky. Does that sound like a good business plan? ... Really?

    Most investors who focus on the concept of buy low, sell high are blinded to how professionals approach the market. Professionals will often times buy high and sell higher. It just depends on the situation. They leave their options open. Buy high and sell higher is often the best plan of action, under the right conditions, and it is my hope to provide some insight into that in this instablog.

    Too many investors are concerned about current earnings. Too many investors discount the value that the market buys and sells on "future," rather than current earnings.

    Now let's stop for a moment and think about this. Professional investors buy or sell on future earnings rather than current earnings.

    If you are willing to accept that universal market truth, then why would we want to be buying PBI or EXC? Why do we jump at a price drop in a company whose earnings are expected to be lower going forward? If Institutional Investors aren't going to be buying in volume, how is price supposed to rise? If the market isn't going to support or back the price, why own it?

    Part of it is ego. Part of it is greed. Part of it is ignorance. And, part of it is that nonsensical cliche; buy low, sell high.

    If it's simply speculation, then there's a time to enter, but you must be patient. I will share some ideas on this as I go.

    Now, don't get me wrong, there are times to buy near 52 week lows, but we must put the odds in our favor when we do. Think of card counting. If you know the count, you won't win every hand but the odds will have you coming out a winner. ... Winner, winner ... chicken dinner.

    There are also times when it is smart to buy 52 week highs and I am definitely going to cover that as I continue here.

    One of the things that separate the professional investor from the amateur or self directed investor, is that they know when to let their winners run, and they know when to add to them. They also know how to minimize their losses.

    "The Tape Tells All."

    In a time before computers, professional investors would have a ticker tape machine in their office or home. They were constantly reading the tape. They weren't just looking at stock symbols or prices.

    Reading the tape has become a lost art. I wonder how many of you know what professional investors were looking for when reading the tape.

    They selected a specific company of interest and they were monitoring price and volume. ... Price and Volume! ... Price and Volume!

    When the price rose, they wanted to know what the volume of the buy was. If it was 100, 200, 300, or 500 shares for example, they knew it was the retail investor buying. If they saw 5,000 share blocks or more, they knew it was Institutional buying. The reverse was true on the sell side.

    They needed to know who was supporting the price action for that day, and which segment of the market was more involved. Price supported by the retail investor doesn't have lasting power. We don't have the juice to keep it going. If the Institutional Investor was responsible for price action that day, then you followed the money, whether it was on the long or short side.

    Price and Volume! ... Price and Volume!

    Professional investors know that if price is rising, and is at or near the 52 week high, and the retail investor is supporting the price, that the volume levels are going to be low. Low volume with new price highs, usually indicates that price is going to pull back, unless some market moving news comes out.

    If price is breaking out of a 52 week high, and is accompanied by huge volume, that's indicating Institutional money. That's your signal that the market is taking your position higher! This is usually accompanied with some news event. So it's easy to confirm.

    When you see price break out of a 52 week high, and volume is at least 50% above normal, with price closing at or near the high of the day, you should already be in or have added to your position. The odds are high that you are now in the early stages of a new uptrend, or a higher trading range. Institutional money is going to defend that breakout price point. They are going to provide price support. Those that missed the breakout, and missed earlier pullbacks because price didn't pull back enough, are now going to look at that old 52 week high for a place to buy as it now becomes support. ... Ha!

    Old resistance becomes new support. That's how it works with company's showing strength. The strong often get stronger.

    I know some of you can relate to this. I know some of you have sat back and watched share price take off without you because you were focused on price. What you didn't focus on was volume. If you can't read the tape, you're going to get left behind or make one of many variable mistakes.

    "The Tape Tells All" is more than a slogan. It means that all relevant information about a company's earnings, new products, management, and so forth is already incorporated in the price of its stock. We simply aren't going to find out any more news about the company before it hits the tape, and by then it's already too late.

    I realize that reading a price and volume chart isn't something a long term investor may think is important, but it does provide clues as to setting up "high probability" buy and sell points. And that's when you need to have a way to determine what to do. It can tell you when to let your winners run or take some profits off the table. That could be significant over time. It can also prevent you from catching the proverbial falling knife.

    The strong often get stronger, the weak often get weaker. You need to know when to hold them and when to fold them. The buy and sell points need to be calculated on market based knowledge, not guessed at.

    Knowing When To Buy.

    When a company's share price is at a 52 week low, a lot of value investors assume that's a good place to pick up a position or double down. Sometimes it is. Sometimes it isn't. We need to define what is and what isn't.

    When price is at a 52 week low, that means that every single share owner who purchased that company in the past year, and is still holding that position, is showing a loss. Every ... single ... one of them. It's not a good feeling.

    A lot of those share owners are now praying to the stock gods for price to rise, make them whole, and allow them to get out even where they promise never to buy that dog stock again, and they get out of the dog house with their spouse.

    Those shares that are waiting to come to market are called overhead supply. The demand on the buy side has to be powerful enough to take out that overhead supply and continue to head higher.

    If the company's share price is at a 52 week low, there has to be a reason why price is falling. What is the catalyst at this point that is going to be powerful enough to ignite share price, and make it powerful enough to take out that overhead supply and head higher?

    Price isn't simply going to turn around and head higher because we bought the low. It may go lower. For price to head higher, we need a catalyst. We need to light a fire under that puppy.

    Here's an idea. At some point the selling is going to dry up. You don't need to jump the gun, you can be patient. There will come a point where everyone who wants to sell, has. The rest aren't selling no matter what happens. They will ride it to zero if they have to. That's good, they are now your support level. Once the selling dries up, and there isn't a catalyst to drive price higher, price will trade sideways or in a trading range, forming what we technical analysts call a base. The longer the base (time frame), the more solid the support level. This is good!

    It's at this point where you want to watch the volume. See what kind of volume action you are getting on up and down days. If volume is higher on the ups days than it is on the down days, that's an early sign of accumulation. This is where you can take a starter position.

    If you have been patient enough to wait for a pull back, continue that patience to let the selling dry up, allow price to form a base, and then watch for rising volume on up days. Easy peasy! It's your emotions you need to keep in check.

    PG traded in a range for a couple of years between $54 and $64. At any time over a two year period, buying at $57 was a solid entry point. There were two significant buy points off the low when Institutional money showed up. The first event was in August 2011 and the second event was in July 2012.

    When you look at the volume bars, red is selling, black is buying and the red horizontal line is average weekly volume. Note the amount of volume those two weeks. Those were buying events.

    http://stockcharts.com/h-sc/ui?s=PG&p=D&st=2012-10-04&en=2013-01-25&id=p14750728543

    When a company's share price is at a 52 week high, every person who bought a position during that year, and is still holding that position, is showing a profit. Every ... single ... one of them! How exciting! Everybody is happy. Everyone is backslapping themselves because they were smart enough to own that stock. Their spouse, for the time being, is glad they married a financial genius. But more importantly, since every single share owner is showing a gain, there is no overhead supply waiting to come to market. This is where some of your strongest uptrends develop because there isn't any resistance (overhead supply) to offset the demand. This is one of the reasons why the strong often get stronger.

    Let's slow down for a moment and take a deep breath because this point is important.

    When price is at a 52 week high, check on when the next earnings announcement is due. As a rule, it's usually at this point where you should determine whether to take some profit or let your winner ride. It's also at this point where you decide whether to add to your position or not. The strong often get stronger.

    If the company meets earnings, and forward guidance is in line with expectations, then expect price to pull back. That earnings and forward guidance was already priced into the stock. This is where you can take profits if you are inclined to do so. Those of you who wish to hold, then hold. I'm not selling core positions at this point, I'm looking for entry points to add, not take some off the table. To each their own, there's no wrong answer.

    If the company had lower than expected earnings, but guides higher in the coming year, then you may want to consider holding on. Price may drop in the early trading, but then often times the market wasn't expecting the forward guidance and it will start to price that in. This is where I think holding will suffice. I wouldn't be adding here, not anything significant anyway.

    If the company comes out with better than expected earnings, and guides higher, watch the price and volume. I want to see the price gap up at the open and hold that opening price for the first 30 minutes of trading. I want to see a lot of volume to support that price movement. If that criteria is met, price is going higher! This is where you add to a position you thought was overvalued. There isn't any overhead supply (resistance) to stop that price from rising.

    At the end of the day, you want to see price close at or near the high of the day. You want to see volume at least 50% above the average daily volume. This indicates that Institutional Investors pushed price higher. You should want to follow the money. Institutional Investors will now support that new breakout price because they are committing their money. Money talks.

    This is where a new, higher trading range will establish itself, and this is a case where you let your winners run.

    When you see this happen, valuations are going to rise in the following days or week as brokerage firms raise the fair value numbers, and you were in at the early stage of this new uptrend at best, new higher trading range at worst.

    On Jan 25, 2012 PG came out with better than expected earnings and guided higher for 2013. Here is a comment I made on another financial site some 41 minutes after the market open.

    To: rnsmth who wrote (13944)1/25/2013 10:11:52 AM
    From: chowderRead Replies (2) of 14757
     
    This is where value investors are at a disadvantage. PG is breaking out to a new high, on unexpected good news and the company is guiding better results going forward. This is where you add to your position! Most value investors wouldn't think about it. Some will say, I wish I owned more. This is going to establish a new trading range for PG, where down the road, people will be looking for a pull back to this break out point to add.

    I wouldn't swear under oath that it will work out this way, but it sure has a high probability of success of doing so.

    You will end up seeing huge volume by the close. That will be Institutional Investors buying up shares. They will defend this price point.

    That volume showed up and PG has headed higher!

    When you know the rules of the game, it gets easier as you go. The tough part is controlling your emotions, and stop listening to wall Street. Don't do as they say, do as they do. Learn to follow the money.

    In closing, let me say, eliminate the cliche of buy low, sell high from your investing vocabulary. Buy smart and sell smarter.

    Never guess at a bottom, wait for buying volume to show up. Wait for a catalyst if you have to. They usually come around at earnings time.

    Don't be afraid of 52 week highs. The strong often get stronger. Again, wait for the catalyst and don't be afraid to add a small position to your already successful position. If it's a new position, don't be afraid to act. Big money is on your side at that point.

    Use the information in this instablog as a springboard for knowing when to hold them, when to fold them, or when to buy the house.

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Comments (84)
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  • Bob Wells
    , contributor
    Comments (5176) | Send Message
     
    Wow...Chowder this article is powerful. I'll be re-reading more than a few time in order to fully absorb all its wisdom. As always my friend, many thanks.

     

    Bob
    6 Mar 2013, 08:14 AM Reply Like
  • Big Thunder
    , contributor
    Comments (531) | Send Message
     
    My thoughts exactly. This article was like finding a piece of the puzzle that you didn't even know was missing. Thanks very much chowder! Your instablogs are pretty much my most anticipated reading.
    6 Mar 2013, 09:14 AM Reply Like
  • J Paradiso
    , contributor
    Comments (20) | Send Message
     
    Mr. Wells has taken the words out of my mouth.

     

    Let me just say "Thank you" for your generosity in sharing your insights with us. I've learned a lot from many authors on SA but undoubtedly I've learned the most from you.
    6 Mar 2013, 08:54 AM Reply Like
  • Eric Landis
    , contributor
    Comments (712) | Send Message
     
    Agree with the others completely. Thank for sharing Chowder!
    6 Mar 2013, 09:48 AM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3182) | Send Message
     
    Chowder,
    Thank you for good article.

     

    "Buy Low, Sell High" versus "buy high and sell higher" - is pure semantics IMO. Both statements for long investor (i.e. not short) say that action 1 occurs at lower price than action 2. Hence I'd not agree that both are "nonsensical cliches" - I think any is one of the first rules investor must understand and use (too me "Buy Low, Sell High" is easy to understand and memorize). BTW another one of the first rules is SEC enforced cliche "Previous results do not guarantee" even that they were correct 8-) /look how often companies restate earnings/.

     

    Nobody know direction of stock price at the moment of action 1 and statistics is not perfect helper in stock market.
    IMO as long as you buy and you sell ONLY when you want (regardless of your ego or greed, opinions market pundits, dividend cuts, noisely news and rumors, etc...).
    The sell action must satisfied 2 mutually exclusive conditions:
    a) you recognized the mistake
    OR
    b) you satisfied with the gain (for a case for this see http://bit.ly/wUM47n)
    except if you urgently need cash for unpredictable situation like medical surgery not covered by insurance.

     

    So. the difference between good and bad investor is in
    a) probability of a mistake he/she makes at buy (IMO most retail investors have ~ 50% during each action, so should not trade often)
    AND
    b) "concentration of iron" in inventor nerves.
    IMO wide diversification helps decrease "concentration of iron" to healthy level (e.g. I bought BP before disaster, and still hold it, I hold PBI due to their promising R&D, I hold NOK - this company re-invented themselves few times in XX century all because each stock is ~ 1% of my portfolio).

     

    Many companies define progressive dividend policy with 5-7 years time horizon and smooth earnings. On another hand it is well known that earnings beyond 2 years are unpredictable. IMO retail long-term DGis have advantages not to look on numbers which often Wall Street understand better and try to predict near feature but just be calm and ignore fluctuations.

     

    I agree and bought sometimes near 52 weeks high but I prefer to buy near 5 years low (again diversification and consumption of iron from apples /do not mix nice fruits with dividend-unfriendly company/ 8-) allow me sleep well if stock drops another 50% after I bought).

     

    HFT and institutional traders (responsible for ~ 80% of volume) hide their intentions buy small lots (I read the scholar paper that states decrease of average lot from few thousands shares to less than 300 shares now). So, old tape techniques probably do not work anymore. On another hand, TOTAL non-zero period (like couple weeks) volume vs. average volume might be informative but non being a technician this is just my unproved hypothesis. Also I think that most of technician tricks can be (and indeed were) programmed in computer trading and retail investor cannot compete in this field with proffi.

     

    “Every ... single ... one of them!” – I think you ignore long-term investors. 52-week low or high might have opposite mean for them to compare with short-term investors.

     

    “Their spouse, for the time being, is glad they married a financial genius.” – so should investor have 2 spouses – one for long positions and another for short positions 8-)?

     

    SDS
    6 Mar 2013, 11:02 AM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    Another good blog!

     

    I have been fortunate as I have established our DG portfolio this year, and some of that good fortune is directly related to having read chowder on the forum where he posted that reply to me.

     

    I have referred several new dividend investors to chowder's series of instablogs. This is good, moneymaking information!
    6 Mar 2013, 11:25 AM Reply Like
  • Be Here Now
    , contributor
    Comments (3799) | Send Message
     
    Your study of how volume can be a forecaster of subsequent price action goes back at least to Joseph Granville's On Balance Volume (OBV).

     

    Exceptionally high volume on climax selloffs can be a signal that the last of the weak hands have sold, and although rare, these can be especially good times to buy. Look at what happened to GE on the very day in March 2009 when both it and the market bottomed. Close to 800 million GE shares traded on that day. This was total capitulation by the weak hands. A lot of supposedly smart big money such as hedge funds were forced to liquidate to meet margin calls, which IMO is where a lot of this volume came from.

     

    Another approach is to look for stocks that are punished by extrinsic factors that have nothing to do with the company's prospects. Look at the price and volume action of OHI at the start of the Euro spasm in early August 2011. It reached a new 52 week low on exceptionally high volume, then rebounded strongly on high volume. There was another downside selloff in late Sept-early Oct, again on high volume. This second selloff tested but did not break the intra-day low of the first selloff. This was an especially strong signal that the last of the weak hands had sold, and strong hands were in control. I bought OHI on Oct 3 when it was yielding 11%. That investment is now up 95% plus all the dividends.

     

    Another example of this extrinsic effect is PM, during the same time as the OHI example. PM reached a low for that two month period on Oct 4 2011. That was its low point for the two month market selloff, and although that was not a new 52 week low, PM is a very strong stock so new lows are a rarity. On that day its yield rose to 5%, which is my yield hurdle, and then is when I bought. Its downside volume did not spike, but it was clear at least to me that this was market irrationality that begged to be bought. That particular investment is now up 48% plus dividends.
    6 Mar 2013, 11:59 AM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Be Here Now, I agree with your comment. There are so many various situations, and you provided a few excellent ones. I can't cover them all in a single message. I thought long and hard about this instablog and decided to try and keep it simple by focusing on a company that is broken and not the condition of the market.

     

    During market sell offs, as you suggested, it's a different strategy, and one where I may tackle that type of set up at a later date.

     

    Others need to keep in mind that when the entire market is pulling back, it's usually best to position yourself with the blue chip companies and then get ready for the "flight to quality" when the market turns around. Human nature, being what it is, switches from fear to safety before gaining the confidence to take on more risk. ... Maslow's "Theory On Motivation." ... Ha!
    6 Mar 2013, 05:36 PM Reply Like
  • cheryl1028
    , contributor
    Comments (135) | Send Message
     
    You have a talent of making the difficult into the understandable. In trying to learn and apply your teaching about volume and retail vs institutional investors to a real-time situation, I again feel woefully lacking....example KMP is down over $2.20 today. I've checked everywhere I can, but haven't found any news which would drive this sell-off. Cnbc.com's chart shows volume....however that doesn't show retail vs institutional. Volume is up today over past 5 days and month, and of course that volume shows selling. How do I go from here? Where do I go to understand what is happening today. I'd like to add to my position (and likely would have before reading this article today). Now I'd like to learn and understand rather than add to my position even if I miss a good buy.

     

    I look forward to any input and help applying this valuable information.

     

    Thanks as always!!!!
    Grasshopper
    6 Mar 2013, 02:44 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Grasshopper, KMP was down today? I didn't even notice, I hadn't looked. ... Ha!

     

    All the MLP's are down today, you made me look. This is indicates profit taking. It isn't anything company specific. I love these kinds of pullbacks in the market because it means there isn't anything broken with the company, and they are usually good situations where you can add to positions.

     

    With today's volume up over 50% above the normal volume, it does indeed indicate Institutional money was involved. However, since the price did not close near the low, it indicates some of that Institutional money was buying. The low of the day was $83.70 and it finished at $84.99.

     

    KMP had such an explosive jump to the upside in JAN and FEB, that I expect to see a little more profit taking and possibly see price settle in a bit, but if you can ignore the short term noise, and are thinking long term, I don't see anything wrong with adding in the next day or two.
    6 Mar 2013, 05:27 PM Reply Like
  • curreyr
    , contributor
    Comments (689) | Send Message
     
    It wouldn't surprise me if ETF's that correlate to $OIL also impact delivery MLPs.
    6 Mar 2013, 07:09 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    I do not mind the drop at all. I like having the buffer of the upside all of my MLPs have had (KMP, APU, SEP). That helps me emotionally when they head down. No change in the income they provide is the key, but as a relatively new DG investor, the upside they have experienced does not bother me a bit, no siree.
    6 Mar 2013, 08:26 PM Reply Like
  • Chumpmenudo
    , contributor
    Comments (622) | Send Message
     
    Thanks for the article Chowder, this is new stuff for me, and very interesting.

     

    Chump
    6 Mar 2013, 06:33 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Chump, most people focus on share price and valuations. There is nothing wrong with that, it's the first step. The next step is to determine the law of supply and demand. That can only be learned from volume.

     

    When I say I can read a chart, I can read a chart. Most people can't read a candlestick chart. I can . Most people love using F.A.S.T. Graphs because they can read the valuation chart. I loved it the moment I saw it because I was able to relate immediately. I can also read a price and volume chart, and that's important when it comes to high probability buy and sell points.

     

    People won't have to spend the time I did learning this. I'll provide some coaching along the way and keep it as simple as possible.
    6 Mar 2013, 07:39 PM Reply Like
  • dumpsterchicken
    , contributor
    Comments (17) | Send Message
     
    Chowder,
    This is one of the best articles I have read on Seeking Alpha. I personally worry more than a pregnant nun when it comes to deciding when to buy or sell. You have laid out some great strategies that I now hope to implement. Thank you for sharing your knowledge. It is greatly appreciated. Jason
    6 Mar 2013, 09:43 PM Reply Like
  • Garthilk
    , contributor
    Comments (588) | Send Message
     
    Short of a major change in a business, it's dividend policy, I plan on holding all my stocks. I know I could maximize my money by selling and rebuying, but I just prefer to hold and let time and compounding do it's work.

     

    Another topic I find myself debating is opportunity cost. Right now I have some debt that I would like to pay off. I am planning to sell off my BAC and C positions to pay off that debt. Now in the future I can repurchase my BAC and C positions, but obviously not for where I orginally got them and so I risk the different between my sell price and a future theoretical purchase price. At this point I am trying to weigh out, is the stock price going to go up in X period of time to such a degree that the missed profit is so high that is outweighs and charges incured by debt.
    6 Mar 2013, 10:50 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Personally, I would prioritize. Which is more important to you? Then I wouldn't worry about anything else. Focus on what you can control and move forward.

     

    Just my opinion.
    6 Mar 2013, 10:55 PM Reply Like
  • lokee
    , contributor
    Comments (2) | Send Message
     
    Chowder you are a genious.........
    Thanks you for sharing you're wisdom.
    Blessings from Jim in Norway
    7 Mar 2013, 06:14 AM Reply Like
  • Contraria2
    , contributor
    Comments (357) | Send Message
     
    A HELPFUL genius. Much better, and extremely rare!

     

    Thanks, Chowder
    7 Mar 2013, 11:20 PM Reply Like
  • Zalach
    , contributor
    Comments (101) | Send Message
     
    To echo Mr. Wells: wow

     

    Once again a great post. As an amateur, I thought I had a pretty decent thought process for identifying the lows and highs and false breakouts... clearly I need another 30 or so years...
    I suppose there can be instances where the institutional money isn't enough and can't support the new price point. But if we're talking about the ultra healthy companies in the CCC list the number of these surprises must be quite few.
    I guess I need to also rethink my understanding of break-outs(up). Maybe you have some thoughts? If a stock does jump higher on institutional buying, but then dips below this new support level, it should be viewed as a further buying opportunity? A false breakout? Like you said, you don't know until the tape has gone by...
    I guess in the end, does it even matter? Particularly since I still view the company as a multi-year hold?
    Thanks again Chowder. Your insights are just that,... and Man. United lost. So, 'tis a good day indeed!
    ~Zalach
    7 Mar 2013, 06:23 AM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Zalach, Man UTD not only lost, they lost to Real Madrid which is my Spanish team. Heh, Heh!

     

    I also root for Arsenal in Premier, AC Milan in Serie A, Schalke in Bundesliga and Celtic in the Scottish League. Celtic didn't do very well yesterday. (sigh)

     

    To expand on your comment about times when a price point may not hold after Institutional Investing was the cause of the breakout, it's true, it does happen. Usually it's when the entire market pulls back, not because of something company specific. This is an important differential.

     

    False breakouts are usually accompanied by low volume, or volume not quite as high as 50% above normal. The other criteria is that when it does break out on 50% or more volume above the normal, it needs to close near the high of the day. That's a solid break out!

     

    If a solid breakout fails, the condition of the market usually causes it. It's often times a buy setup for the next decent up day in the market, but if I didn't buy the initial breakout, the price pulled back, and then headed higher, I might wait until price sets a new high. Counter intuitive to most people's way of thinking, but you just got confirmation the break out is solid.

     

    It's sort of like how the media performs. Everyone is in such a hurry to be first with the story, they often get it wrong. Wait for confirmation. Tell the story right!
    7 Mar 2013, 12:37 PM Reply Like
  • giorgiolb
    , contributor
    Comments (5382) | Send Message
     
    Chowder,

     

    Real Madrid did have the huge advantage of a Turkish ref. Nani's red card was an abomination. It ruined what had been a decent game up to that point.

     

    You may of course feel differently...
    7 Mar 2013, 03:04 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Earlier this year, Eboue in a game against United did the exact same thing and The Sir of Alex said it was a 100% red card. There wasn't any difference from his play and that of Nani.

     

    I'm aware that most knowledgeable people think it was a harsh call.

     

    I think if it was Giggs, he gets a yellow. Since Nani has a reputation of being an undisciplined player, he doesn't get the benefit of the doubt! His reputation caught up with him at a most critical time.

     

    Since I'm an AC Milan fan, I'm delighted of course! ... Ha!

     

    Watched Chelsea lose in Europa today, so I'm a little giddy.
    7 Mar 2013, 03:48 PM Reply Like
  • giorgiolb
    , contributor
    Comments (5382) | Send Message
     
    As they say in Scotland, Sir Alex is a wee bit biased.

     

    That said, harsh is putting it mildly. There was no intent to injure. Nani was looking the other way, trying to bring down the ball

     

    If anything Arbeloa should have gotten a foul for running into Nani's outstretched leg..... and I said foul, no yellow card necessary.

     

    Yep, I saw the Chelsea game. I thought the PK was a soft call as well. Football is being ruined by all these namby-pamby decisions. Let the guys play.

     

    Spurs are kicking butt. Good thing you aren't an Inter fan.
    7 Mar 2013, 04:32 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » There was no intent with Eboue either when the Sir of Alex said it was a 100% red card. What goes around, comes around. Heh, heh.
    7 Mar 2013, 06:30 PM Reply Like
  • giorgiolb
    , contributor
    Comments (5382) | Send Message
     
    Chowder,

     

    Hey, I'm not defending Sir Alex. My beef is with refs who alter the course of a game.

     

    A good ref knows when to flash a card and when to keep it in his pocket.
    7 Mar 2013, 06:48 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » I thank everyone for the kind words. My next instablog will be about dividend reinvestment, yes or no. I will be providing real results, not theory or academic studies. It may open some eyes, I don't know.

     

    The draft has been written on a legal pad, I have to edit it, and then I have to have time to type it. I don't know how to type. I use two fingers, so it takes a couple of hours to write a stupid blog page. ... Ha!

     

    At least Percy and I get to spend quality time together when I type.
    7 Mar 2013, 12:45 PM Reply Like
  • Chumpmenudo
    , contributor
    Comments (622) | Send Message
     
    Chowder, in the context of your article above, what do you think of HAL right now? It's had a nice run, it's nearing a 52 week high, volume seems pretty low, not spiking by any measure, and FASTGraphs shows the price nearing it's "normal" fair value PE (I used the past 6 years). They are guiding flat EPS for 2013, and announced a $0.03 dividend increase a couple of weeks ago (39%). My position has grown to 4.5% vs. my target of 3%, so I'm thinking of trimming my position some.

     

    Chump
    7 Mar 2013, 05:25 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Chump, I haven't followed HAL in years. I don't have a clue what is going on with them.

     

    One of the things about charting is that 80% to 90% of the charts you look at are ambiguous, you need to look for compelling information and I don't see anything compelling with HAL.

     

    All I see is price in the middle of a trading range and a lack of buying enthusiasm, but also a lack of selling. It looks like everyone, longs and shorts are waiting for a catalyst, some news to come out.

     

    I would assume price will drift between $39 and $43, forming a nice base until something lights a fire under them, one way or the other.
    7 Mar 2013, 06:28 PM Reply Like
  • Market Map
    , contributor
    Comments (201) | Send Message
     
    The invention of the visually informative "chart" has powerful effects on human behavior. The subjectively intuitive part of the brain "wants" to see and confirm that something is there; patterns, lines, formations, uptends, downtrends etc. This incites arousal; ( greed or fear ) and overrides our analytical brain. Yet subjectivity has been difficult to prove empirically in a robust manner; an empiricism that is needed most when the brain is challenged to remain calm and cool. Unfortunately, a vast industry of "investor education", televised and streamed financial programming and opinion has been built on this subjectivity. Good luck chart readers !
    8 Mar 2013, 09:29 AM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » >>> The subjectively intuitive part of the brain "wants" to see and confirm that something is there; patterns, lines, formations, uptends, downtrends etc. This incites arousal; ( greed or fear ) and overrides our analytical brain. <<<

     

    You make an excellent point. One that I agree with! I studied most of the technical indicators and applied all of them for a number of years. After making more than my fair share of mistakes, I found that most technical indicators are simply confirming what the price chart is saying. I don't need that type of confirmation, I can see that in the price action.

     

    I think what is indisputable is that Institutional Investors establish price trends and the retail investor rides along. If Institutional Investors are accumulating positions, it shows up in the volume. If I can get in at the early stage of the next leg up, that provides me with a price buffer in my positions where I'm not tempted to sell in a market correction. It helps to keep me invested.

     

    A lot of firms try to buy smaller blocks to build positions within a certain price range. They are trying to camouflage their attempt because they don't want other people to start buying and drive price higher. They know if we see large blocks crossing on the tape, that someone is buying.

     

    At the end of the day, it doesn't matter how much an Institution tried to hide their intent, the volume doesn't lie, just like dividends don't lie. When I see increasing volume, that means price is heading higher and it doesn't matter what the fundamentals are at that point. It's the simple law of supply and demand.

     

    I'm not saying fundamentals aren't important because they are, for the long term investor. I'm just saying that volume is such a powerful indicator, it doesn't matter who the company is or what it does for a living.

     

    If I can match fundamentals with the right price and volume metric, it makes my job easier in knowing who my next purchase is going to be.
    9 Mar 2013, 04:38 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    <<If I can get in at the early stage of the next leg up, that provides me with a price buffer in my positions where I'm not tempted to sell in a market correction. It helps to keep me invested.>>

     

    Yes. The last 9 months have been a very good time to start our DG portfolio. We have enough leeway for patience - but I will still look closely at any position that goes 10% lower than my purchase price :). Have sold a couple due to that. I may have let FTR dip below that even, but I avoided some loss there by selling when I did.
    9 Mar 2013, 07:28 PM Reply Like
  • bluebird40
    , contributor
    Comments (30) | Send Message
     
    Thank you Chowder for an excellent post. Wow. You've managed to explain a complex topic in a very approachable way. The candlesticks are starting to make more sense now to this newbie. Thank you for sharing your knowledge and wisdom.
    9 Mar 2013, 03:37 PM Reply Like
  • jdhd
    , contributor
    Comments (511) | Send Message
     
    Chowder,

     

    I have been rebalancing, re-evaluating, redo-ing, and a lot of other "re" stuff as a re-sult of your message.
    Mission Statement has been restated.
    Strategy has been rehashed.
    Tactics are reformed.

     

    The process re-minded me of a nursery rhyme that I use to hear when I was little, "There was a crooked man who walked a crooked mile.."
    My appreciation to straightening my financial perspective and path. I know I've thanked you in the past but let re-peat it.

     

    Re-Thanks,
    jdhd
    20 Mar 2013, 12:57 AM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » jdhd, thanks for the kind words.

     

    Speaking of nursery rhymes, there was a book out years ago that said everything you need to know to succeed in life, you learned by the time you were in kindergarten.

     

    We were always asked to explain the moral of the story.

     

    We don't hear about the moral of the story anymore and most certainly don't apply it to everyday decisions.

     

    Sometimes we try to be too smart when all we need to do is simply look for the moral of the story and use common sense. ... Ha!
    20 Mar 2013, 09:43 AM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    There were some dividend stocks some of us own that hit or came close to 52 week highs today on heavy volume. One I do not own and it was pointed out by chowder elsewhere -

     

    GIS Today volume: 9,052,501 Average Volume: 3,845,680
    52 week high: 48.02 - closed today at 47.61

     

    WAG Today volume: 15,551,550 Average Volume: 6,782,790
    52 week high: 46.33 - closed today at 46.03

     

    ARCP Today volume: 14,496,796 Average Volume 1,753,520
    52 week high: 14.82 - closed today at 14.66
    I have the last two. Anyone have others to post?
    20 Mar 2013, 06:18 PM Reply Like
  • Big Thunder
    , contributor
    Comments (531) | Send Message
     
    Although not all on heavy volume, it looks like 14 members of my portfolio hit 52-week highs yesterday: CVX, D, GIS, NSC, PG, PSX, TGT, UTX, WAG, VZ, KRFT, PSEC, ARCP, and LNT.
    21 Mar 2013, 07:32 AM Reply Like
  • Contraria2
    , contributor
    Comments (357) | Send Message
     
    I hold D GIS VZ KRFT and LNT. I had NO idea they hit 52 week highs yesterday.

     

    Chowder will be proud.
    21 Mar 2013, 10:42 AM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    KRFT hit a 52 week high on 1.24 times average volume (per yahoo finance). Not bad, but volume was not has high as the above 3. KRFT is also being included in the NASDAQ 100, which may have something to do with its recent rise.

     

    There were several other 52 week highs or near highs in my portfolio, but most of those were on average or below average volume
    20 Mar 2013, 06:27 PM Reply Like
  • Smallstep
    , contributor
    Comments (831) | Send Message
     
    Chowder,
    It is a complicated issue that seems you are talking face to face to me. How can I thank you for this? I am not sure why I missed this article on 3/6. Thanks for rescued me again. It is saved now in my "Chowder" file.

     

    At first I was wondering what is "tape" ? Is that still using now... then I realized you were educating me with telling the history of how people did it. I always saw that 52 week high and low, I was questioning myself why they posted those. Oh, then I think, it is a guideline for everyone to know not to get in when it is on the top of the price.... what a silly thinking. Now after reading three times of your article, I have a little wake up call from you.

     

    Yes, have to learn how to read the tape, watch the volume..... I now have to reset my rule of "buy" that I was thinking it is easier to do even an hour ago. Wow, so much to learn from you. Thank you very much!!!!! You are not only a good teacher, a smart person but also is a very big heart friend. I also wonder you should have working in Wall Street or Chicago exchange some time...haha. How can you know so much...??? All the respect, thank you!!!
    ---Small
    20 Mar 2013, 09:02 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Thanks for the kind words Small. Speaking of the Chicago Stock Exchange, a number of years ago, someone was kind enough to link me up to a traders desk at the Chicago Exchange. This person was impressed that I shared so much of my experiences with others that he wanted me to experience what a day on the floor was like.

     

    That was an incredible and exciting day. I listened to the traders as they determined which stocks they were going to push that day. Traders hold an inventory of stocks of their own and use them to help keep an orderly flow to the market when buying and selling dry up. It's their job to keep the market flowing.

     

    Anyway, they started pushing a couple of inventory loaded stocks and the market just kept following along. Someone knows something and people kept buying. This went on all morning.

     

    The market was up, CNBC was singing the praises of the rally and after lunch one of the traders asked if they should lock in profits and take the market lower. The answer was no. Let's take it higher. They did.

     

    Around 3 PM the word went out to lock in profits and they started selling. The market followed. All of the day's gains had disappeared and the market finished down on the day.

     

    That night on CNBC, they were giving the reasons for the market decline late in the day. It had nothing to do with what really happened. I knew then and there I was done following CNBC news for market action. ... Ha!

     

    I don't know if trading is done that way anymore or not now that we have so many electronic exchanges, but that's how it worked when I was exposed to it.
    21 Mar 2013, 01:25 AM Reply Like
  • Smallstep
    , contributor
    Comments (831) | Send Message
     
    Wow, that is weird. It must be exited to see all the traders flipping fingers and shouted loud. I was surprised enough that when I put the order in, next, less than 5 second it was in my "history" and I was in. It was amazing to me. Hope one day I can go to NY and see that trading floor action.
    I agree with you, CNBC, Bloomberg... just the same as other entertainment TV stations. I realized this not too long ago---means, I always has a weak point, believe in everyone. Hard to change my personality. So far I am busy watching my basketball game...that would never be a fake one--I hope. Thanks Chowder. ---Small
    21 Mar 2013, 07:01 PM Reply Like
  • nbaderGIS
    , contributor
    Comments (13) | Send Message
     
    Geez, and here I thought I had my process down for buying stocks. This one seems too logical to ignore....so into the mix it goes. Seriously though, thanks for the lesson. It is especially applicable for me today as I finish reading Bob Wells's article questioning how to deal with the current highs. http://seekingalpha.co...
    22 Mar 2013, 04:37 PM Reply Like
  • Mike Nadel
    , contributor
    Comments (7840) | Send Message
     
    Damn, chowdah ... this is great stuff. I'm glad you posted the link in a comment on Chuck's article today. I wish I had seen it earlier but happy I'm seeing it now.

     

    I'm going to be saving this and referring to it often.
    23 Mar 2013, 12:11 PM Reply Like
  • northhills24
    , contributor
    Comments (1556) | Send Message
     
    hey Chowder just curious why write this on an instablog? Are there any advantages?
    24 Mar 2013, 12:16 AM Reply Like
  • AgAuMoney
    , contributor
    Comments (4430) | Send Message
     
    Less editorial control.
    24 Mar 2013, 12:49 AM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » north, AgAu is correct. I don't want SA changing things through their edit process. I've seen too many articles where half the comment stream is about the title not matching the article or some such thing, and it was SA that changed it, trying to create page views. That's my main reason.

     

    Other reasons, I'm not interested in page views. I'd rather have quality comments as opposed to quantity.

     

    Since I don't get paid for an Instablog, it eliminates any concern about conflict of interest. I'm tired of people getting upset because some authors have a product or service to sell and for some reason they think that detracts from the message of the article. So, that doesn't exist here.

     

    And, if some people wish to be argumentative or insist on staying off topic, I can delete their comments. You can't do that with an article.
    24 Mar 2013, 07:32 AM Reply Like
  • northhills24
    , contributor
    Comments (1556) | Send Message
     
    THanks Chowder- thats what I thought... makes sense and prompts me to perhaps follow u... HAH... not that I am anywhere as astute as you.. I was really hesitant to pick up $OHI at $28... but after reading this i feel a bit better about my decision. Its only 1/3 , my desired position and i have been watching a steady climb - waiting for a better entry which never came. fidelity now has a target of 31.
    Sold off some $WM and $WPRT to add $OHI and more $AGNC. Will give me another +$3400 in div's.
    24 Mar 2013, 04:16 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » If you're going to follow me north, bring beer. ... Ha!
    24 Mar 2013, 04:26 PM Reply Like
  • JosTheBrewer
    , contributor
    Comment (1) | Send Message
     
    Why do some people type a dollar sign in front of the ticker symbol? i.e. Why say "$OHI" instead of "OHI" ? Just curious.
    26 Mar 2013, 05:03 AM Reply Like
  • AgAuMoney
    , contributor
    Comments (4430) | Send Message
     
    '''type a dollar sign in front of the ticker symbol?'''

     

    Twitter convention.
    26 Mar 2013, 09:48 AM Reply Like
  • northhills24
    , contributor
    Comments (1556) | Send Message
     
    how about a nice Malbec? LOL
    an update on the above OHI up 6.75% !!
    28 Mar 2013, 10:13 AM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » north, I've never had a Malbec, never heard of it.

     

    I don't follow my positions that closely to know who is doing the best. I usually just monitor dividends and dividend growth announcements.

     

    My quote tracker is always on but I only look at something when I see a company up or down 3% or more on the day. That's usually news related and I check it out. Otherwise, I ignore the rest.

     

    You forced me to look at my positions in OHI and I noticed they are my best performer YTD. They are up 27.46% on the year as I type. Hmmm, rather impressive.
    28 Mar 2013, 11:06 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (12743) | Send Message
     
    Malbec is a varietal red wine. It is most commonly produced in South America, but originated in France.
    28 Mar 2013, 11:09 AM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    Malbec is a big red, like Cab :)
    28 Mar 2013, 12:38 PM Reply Like
  • northhills24
    , contributor
    Comments (1556) | Send Message
     
    Thanks Robert and msmth - I will have to get a bottle to our friend Chowder.. !!
    Its my favorite as it has few sulfites..
    Chowder OHI is like the little engine chugging along..
    29 Mar 2013, 10:02 AM Reply Like
  • pyc435
    , contributor
    Comments (34) | Send Message
     
    Gosh, I wish I had read this at the time of the post. It would have saved me from a bad entry point. Thanks Chowder.
    26 Mar 2013, 03:25 PM Reply Like
  • cheryl1028
    , contributor
    Comments (135) | Send Message
     
    I must say, looking at daily/average volumes of my holdings, with the understanding of "price and volume" has given me both a new perspective and clarity I've never had before.....when I see a stock up or down and volume well under average, it makes "cents" to me now and adds another level of understanding!!!!!! Thank you again!!
    27 Mar 2013, 04:07 PM Reply Like
  • pyc435
    , contributor
    Comments (34) | Send Message
     
    Malbec - I thought it was an Argentine red wine.
    28 Mar 2013, 11:39 AM Reply Like
  • giorgiolb
    , contributor
    Comments (5382) | Send Message
     
    Doesn't Malbec play centerback for Lyon?
    29 Mar 2013, 09:50 PM Reply Like
  • rnsmth
    , contributor
    Comments (1923) | Send Message
     
    A lot of Malbec is grown in the Mendoza region of Argentina
    29 Mar 2013, 11:21 PM Reply Like
  • ChuckyCheese
    , contributor
    Comments (66) | Send Message
     
    Now I wont let them move my Cheese!!
    Thanks for a great read, Chowder.
    Chucky
    28 Mar 2013, 12:04 PM Reply Like
  • Cheesecake7
    , contributor
    Comments (131) | Send Message
     
    You say you follow divy growth and divy growth announcements. How or where can you chart that growth and those growth announcements on the stock you own. It is a very simple question and possibly seems a dumb question but, I ask for myself and new folks who are new to investing and interested like you in the dividend and its growth. The reason I ask is when it drops or lowers its dividend then it is time to sell if you mission is to increase dividends. Where do you go to find ones that will meet your criteria for the next investment. I realize these seem like immature and foolish questions because they are simple but honest.
    13 Apr 2013, 09:11 PM Reply Like
  • cheryl1028
    , contributor
    Comments (135) | Send Message
     
    Cheesecake, I too am learning and I've found no one here has ever made me feel dumb asking questions. I'm sure Chowder will provide you other resources, however if you search here on SA for David Fish, you'll find he updates every month the champions, (25 years or more increasing dividends, Challengers, more than 10 years and Contenders, 5 years or more).... Incredible resource with a lot of information. He provides in an excel spreadsheet which you can download and search.....here's a link to the March list

     

    http://seekingalpha.co...

     

    Cheers,
    14 Apr 2013, 02:13 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Cheese, I keep a spiral notebook next to the computer with all of my positions listed in it. Every year I mark down the date and the amount of a dividend increase. So, I know when they are supposed to come out.

     

    I know that JNJ last announced a dividend increase on 4/26/12 in the amount of 7.0%.

     

    CVX on 4/25/12 for 11.1%. KMP on 4/18/12 for 3.5%. MMP on 4/24 for 3.1%. PG on 4/13/12 for 7.0%.

     

    So, I look for these companies to raise the dividend in the coming weeks and I watch out for them.

     

    You can use this site for dividend information:

     

    http://bit.ly/16WBkuV

     

    Scroll down halfway and you'll note a blue tab that says, "Dividends Paid Since." ... And you'll get a 5 year history of the Declaration Dates, Ex-Dividend Dates, Record Dates, Payable Dates and the Dividend $ Amount.

     

    Nothing to it, easy peasy.

     

    You can also get this information on company web sites. Take a look at their history to note what kind of dividend increases they have had. Find out what's the norm.

     

    The DRIP Investing Resource Center, lovingly called the CCC list shows "Information for U.S.Dividend Champions." You can pull up historical information in spread sheet form or PDF File. I scroll over to the dividend growth historical data. I look for companies who have the most consistent dividend growth over 10 year, 5 year, 3 year and 1 year time frames. For example, PG has the following dividend growth history:

     

    10 years ... 10.8%
    5 years ..... 10.2%
    3 years ..... 8.7%
    1 year ........7.5%

     

    I love this consistency!

     

    http://bit.ly/aA8y3H

     

    If PG were to drop below 5%, I would be concerned! It would be time to peel off shares and look elsewhere because I can get a 3% yield with better than 5% dividend growth elsewhere.

     

    I sold NUE even though they were still raising the dividend and I sold based on their dividend growth history.

     

    10 year ... 22.6%
    5 year ..... 18.3%
    3 year ...... 1.2%
    1 year ...... 0.7%

     

    I purchased NUE with double digit dividend growth in mind. Three years ago it went on probation as I gave it a year to improve. It didn't, I sold.

     

    I can almost throw a dart at a board and find a company with better than a 3.3% yield and only growing the dividend at 1%, and I can do it with lower risk than a metal company. Almost any utility company can do that.
    14 Apr 2013, 03:32 PM Reply Like
  • cheryl1028
    , contributor
    Comments (135) | Send Message
     
    Cheese, I keep a spiral notebook next to the computer with all of my positions listed in it. Every year I mark down the date and the amount of a dividend increase. So, I know when they are supposed to come out.

     

    I know that JNJ last announced a dividend increase on 4/26/12 in the amount of 7.0%.

     

    Chowder, every time you post something I find a golden nugget!!!! More homework :)

     

    Thanks
    14 Apr 2013, 07:44 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Cheryl, my next blog is going to be about how I monitor a 50 position portfolio.

     

    I also manage quite a few portfolio's for family, friends and siblings of friends. There's a lot there, yet it takes me less time to monitor than some people who own just 10 companies.

     

    I'll share that sometime the first part of next week. (Tues or Wed.)
    14 Apr 2013, 08:01 PM Reply Like
  • cheryl1028
    , contributor
    Comments (135) | Send Message
     
    Thank you for sharing so much. I'm sure PG's 7% increase today has been logged!!! Did the date and % meet your expectations???
    I also completed my weekend homework and thanks to you, Mike & DVK, it was very enlightening....I can see how one position (LMT in my case) holding 10.9% of my dividend income could hurt if there's a cut or freeze. It's really exciting to learn and to watch my income grow as I sit at the feet of some very wise, experienced masters.

     

    If I may, I'd like to ask your thoughts on FCISX. Its been in my portfolio for 10 years or so. It duplicate a number of my holdings plus financial which I won't touch, although I've got ADP on my watch list. When I worked on the spreadsheet, I separated my equity position % of income from FCISX then included it in total and found it represents 21% of total annual income as of Saturday. Any thoughts on reducing, holding???
    Thank you as always.
    Cheryl
    15 Apr 2013, 01:18 PM Reply Like
  • pyc435
    , contributor
    Comments (34) | Send Message
     
    Cheryl, FCISX has an expense ratio of 1.14% with a 5 yr dvd gr of -8.78%. You can do better than that following the advice of the writers that you are following right here on SA. I know I am.
    15 Apr 2013, 01:53 PM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (12743) | Send Message
     
    Yahoo! Finance:

     

    http://yhoo.it/16YNBid

     

    shows their dividend history. I don't see any dividend growth. :-(
    15 Apr 2013, 05:38 PM Reply Like
  • cheryl1028
    , contributor
    Comments (135) | Send Message
     
    Pyc, I've been learning and growing. FCISX has been in my account so long and when I last checked yield it was 5%.... Hence my confusion. In addition it holds financials which I won't touch. Once bitten twice shy. I rode BAC down to low teens....way before I started down the DGI path and found SA...I still have MPT in back of my mind and although I'm feeling better about the equities I hold should another severe market downturn/crash....I'm not sure what to do, hence my question and request for ideas. And yes, FCISX did lose about 40% of value, but since I wasn't paying attention, not sure if dividends were cut. I was also dripping at the time.

     

    What would you suggest??? One thought I have is to add to KO, by selling it in chunks...not sure what else.
    15 Apr 2013, 02:42 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Cheryl, I don't invest in Mutual Funds and I don't follow them. So, I have no opinion or knowledge of FCISX.

     

    I don't know what goes into the funds, I have no way of monitoring them, any income derived from them is unreliable and unpredictable which is the opposite of what I'm trying to achieve.

     

    I don't focus on yields. Focusing on a 5% yield may keep you in an investment you need to get out of. I sold CTL when it froze the dividend even though they had a yield of around 8%. The income stopped rising so I moved out of CTL and saved myself a lot of money because I missed the dividend cut and falling price drop as a result of it.

     

    I didn't sell EXC when they froze the dividend. I decided I'd hold for the 5% yield and give them time. I ended up taking a loss with them. I ignored the rule and held, and I paid a price for it.

     

    My objective is to earn an income stream that is reliable, predictable and increasing.

     

    Any selections I make must meet all three criteria. Mutual Funds don't meet at least two of that criteria.

     

    You must decide what your objectives are and then determine if FCISX meets that criteria.
    15 Apr 2013, 02:54 PM Reply Like
  • cheryl1028
    , contributor
    Comments (135) | Send Message
     
    My objective is to earn an income stream that is reliable, predictable and increasing.

     

    Thanks to your great tutelage, that is my new goal. Using your formula high quality, plus high dividend growth, etc., has become my mission statement......now to understand the metrics and fundamentals I'm not familiar with and continue on this path of learning and investing in stocks which will provide a consistent, reliable income stream!!!!! YES

     

    Cheers,
    Cheryl
    16 Apr 2013, 04:44 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » >>> now to understand the metrics and fundamentals I'm not familiar with and continue on this path of learning and investing in stocks which will provide a consistent, reliable income stream!!!!! <<<

     

    Okay, now you are ready for the next step. You must keep in mind that if you want your dividend income to grow year after year, regardless of market conditions, you must focus on the dividend growth, and the consistency of it.

     

    I prefer to start with companies showing high single digit to low double digit growth rates on a consistent basis. This is where David Fish's CCC list is most valuable in my opinion. I look at the 10, 5, 3 and 1 year dividend growth rates. I want to see consistency in "ALL" time frames.

     

    For example:

     

    CVX ... 10 year ... 9.6%
    ............ 5 year .... 9.2%
    ............ 3 year .... 9.7%
    ............ 1 year .... 13.6%

     

    PG ..... 10 year ... 10.8%
    ............ 5 year .... 10.2%
    ............ 3 year .... 8.7%
    ............ 1 year .... 7.5%

     

    Nice consistent numbers that qualify for my portfolio. Then it's a matter of making sure the fundamentals and price are right.

     

    NUE ... 10 year ... 22.6%
    ............ 5 year .... 18.3%
    ............ 3 year ..... 1.2%
    ............ 1 year ..... 0.7%

     

    WM .... 10 year ... 64.1%
    ............ 5 year ..... 8.1%
    ............ 3 year ..... 7.0%
    ............ 1 year ..... 4.4%

     

    The numbers were too inconsistent, so I sold those positions. They no longer fell under the guideline of reliable, predictable and increasing.

     

    That doesn't mean they won't show capital gains, but the Mission Statement is telling us to focus on consistent income streams.
    16 Apr 2013, 05:28 PM Reply Like
  • Cheesecake7
    , contributor
    Comments (131) | Send Message
     
    Hey, when it says dividend payment type- None. What does that mean? I mean they declare a dividend. Does that mean if I have their stock in a brokerage account they don't give a dividend? That is just nuts if that is the way it works. I mean it is weird to see that on that calculator. Also, I got the spiral and trusty led pencil and eraser.
    that is the link.
    http://bit.ly/16Z3ntt
    15 Apr 2013, 08:15 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » I have no idea what that means. Scroll down and you'll see the dividend.
    15 Apr 2013, 08:22 PM Reply Like
  • Scooter-Pop
    , contributor
    Comments (1992) | Send Message
     
    Chowder,

     

    Any Tax Free Holdings?
    16 Apr 2013, 05:13 AM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » Scooter, I'm not sure I understand the question. If you are asking me if I have any tax friendly holdings in my taxable account, the answer is yes. That's where all of my MLP's are located and a couple of Muni Bond Closed End Funds.
    16 Apr 2013, 07:20 AM Reply Like
  • Scooter-Pop
    , contributor
    Comments (1992) | Send Message
     
    Tax Free Income Funds like Specific CEF's and ETF's.
    16 Apr 2013, 08:27 AM Reply Like
  • Cheesecake7
    , contributor
    Comments (131) | Send Message
     
    ok, thanks..sorry for the bother, but I did get the spiral and am presently doing what ya said ....and thanks for the help. It is great and just what I needed.
    15 Apr 2013, 08:24 PM Reply Like
  • pyc435
    , contributor
    Comments (34) | Send Message
     
    Cheryl, I sounds as though you do not have a written policy/plan yet. Read Chowder's blog about his written policy. Bob Wells is another resource. Several of his articles talk about his struggles and refinement of his investment plan. Once you have a plan, then you can decide if FCISX is right for you. I am still refining my plan, but at least it is to a point, where I know which direction I want to take. I, too, was a MPT believer until I had the Rip Van Winkle moment of realizing that I wanted a predictable and growing income stream that would last until the day I die. I developed my plan and am sticking to it. Only DGI equities for me.
    16 Apr 2013, 10:38 AM Reply Like
  • cheryl1028
    , contributor
    Comments (135) | Send Message
     
    Pyc & Chowder,
    I have begun putting a plan together using Chowder, Bob Wells & DVK suggestions. Slowly, I have been entering/exiting out of positions which don't meet my objectives. Still learning -- my question about FCISX came out of Doug Carey's recent article on balancing where I realized FCISX was 21% of current annual dividend. As I mentioned, I've owned this so long I wasn't paying any attention to it until I calculated % of annual income. I have decided to sell FCISX in lots....in fact today I sold 2000 shares and will likely buy more KO....semi trying to time market and hopefully buying more KO on a dip....especially after today's run up. So once again, learning and growing thanks to SA, I will over the next few months sell off FCISX and purchase additional CCC's....now I need to reasses my "buy list" to prepare to add to my portfolio and add to existing positions.
    Chowder, thanks to all the warnings here, I sold out of CTL and EXC before dividend cut...I'm learning and building my foundation.
    Again, thanks to all!!!!
    16 Apr 2013, 04:37 PM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (12743) | Send Message
     
    Cheryl, KO is somewhat overvalued now. Other Dividend Champions are undervalued now. You might want to broaden your sights.

     

    Robert
    16 Apr 2013, 04:38 PM Reply Like
  • chowder
    , contributor
    Comments (7299) | Send Message
     
    Author’s reply » KO was a buy today. In order to understand that, we must look at it from a different angle.

     

    KO always sells at a premium. It took the Great Recession just to get it down to slightly above fair value. When buying quality, you will often times have to pay a premium.

     

    Now this is important, and I've covered this before in another instablog, Buy Low, Sell High. When a company is selling at a 52 week high and they come out with an earnings announcement that beats the street, shows organic growth across most sectors of their business, and forward guidance is enhanced, IT'S A BUY!

     

    Valuations are going to be raised in the coming days. Today's earnings announcement makes past valuations worthless. We must look forward.

     

    KO trades on average 15 million shares per day. Today saw KO trade almost 32 million shares. We saw more than 100% above average volume. That's Institutional Investors putting money to work. That's a screaming buy signal! They will defend this price point. You will see KO develop a higher trading range and the average investor can only hope now that KO comes back down to the old 52 week high they were so afraid of buying in the first place.

     

    Look at that volume! ... Follow the money! ... Git some!

     

    http://bit.ly/15iU9ub

     

    KO announced fundamental changes that should benefit them over the long run. They are restructuring their franchise agreements to the betterment of KO.

     

    So, when you look at company performance, organic growth, better than expected earnings, and a recent dividend increase of 9.8%, KO is telling you they are wired for the future and their share price warrants the premium people must pay for it.

     

    Things go better with KO! ... Ha!

     

    Price may drop if the entire market drops, but price ain't coming down due to KO.
    16 Apr 2013, 05:08 PM Reply Like
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