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Buyandhold 2012

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  • The Great Beta Hoax: Not An Accurate Measure Of Risk, After All [View article]
    Chuck, I have never considered Beta to be an indication of risk. To me Beta is strictly an indication of volatility.

    In general, I am not a fan of stocks with a high Beta since I do not like a lot of volatility in my portfolio.

    If the Beta of a stock is 2 or higher, I would tend to avoid buying that stock. Too much drama and volatility in my portfolio doesn't help me to be sleep well at night. I prefer less volatile stocks that slowly and steadily increase in value over the long term.
    May 22, 2015. 11:05 AM | Likes Like |Link to Comment
  • Lessons Learned From The Grand Canyon [View article]

    My portfolio of 36 stocks has outperformed the S&P 500 during a 45-year period of time. I now receive more money in dividends each year than I originally invested.

    And getting back to the subject of humility, I have to confess that some of my stock picks were pretty awful. Some of them even went bankrupt. But no one has to bat 1000 to be a successful stock market investor. My long term winners, Philip Morris, Abbott Labs and Exxon Mobil, more than compensated for my other investment mistakes.
    May 22, 2015. 10:49 AM | 5 Likes Like |Link to Comment
  • Lessons Learned From The Grand Canyon [View article]
    "Take a long term approach to investing and before you know it, your "trickle of water" might just produce a Grand Canyon portfolio that you can enjoy in your retirement years."

    David, what investing in the stock market for the past 45 years has taught me is humility. The honest truth is that investing in the stock market is a humbling experience. Investors who have a lot of pride and think that they can vastly outperform the market by frequent buying and selling are more often than not brought down to their knees when they see their mediocre investment results.

    As Chris Demuth Jr. so aptly pointed out recently, the best investors at Fidelity were either dead or inactive. That means that the less you do as an investor, specifically the less trading that you do, the more money you end up with in the long run.

    It is truly a humbling experience for a prideful active investor to realize that dead people and those who are inactive perform better as investors over the long term.

    Time is your best friend as an investor. Just buy the right stocks when they are relatively cheap, stocks such as Colgate-Palmolive, Johnson & Johnson, Kimberly Clark, Proctor & Gamble, Coca-Cola, PepsiCo, Abbott Labs, Philip Morris, Exxon Mobil and Walgreens, and then never sell them. After 30 or 40 years you will be pleasantly surprised by how much they have gone up in value.
    May 22, 2015. 10:05 AM | 8 Likes Like |Link to Comment
  • Abbott Laboratories: The Future Is As Bright As The Past [View article]
    Tim, you can never go wrong with Abbott Labs. Grace Groner invested $180 in Abbott Labs in 1934. 75 years later it was worth 7 million.

    Abbott Labs has been my best performing stock during the past 45 years. There have been two spinoffs. Hospira, which is being bought by Pfizer for $90 a share. And Abbvie.

    Someone once asked me which stock I would own if I could only own one stock and I replied Johnson & Johnson. But then I immediately felt a little bit guilty for not picking Abbott Labs because it has been such a phenomenally good performer over the past 45 years. I guess the grass is always greener on the other side.
    May 21, 2015. 09:31 PM | 4 Likes Like |Link to Comment
  • Dividends At A Reasonable Price: Toronto-Dominion Bank And Royal Bank Of Canada [View article]

    Royal Bank of Canada and Toronto Dominion are two of my favorite bank stocks. The other two that I like are JP Morgan and Wells Fargo.

    I do most of my banking at TD Bank in Connecticut and Florida. TD has the best hours and the best service. I never use an ATM machine and do all of my banking in person.

    Both RBC and TD Bank have been excellent performers over the long term. These are stocks which should be considered for purchase whenever they are relatively cheap and then never sold..
    May 21, 2015. 05:29 PM | 5 Likes Like |Link to Comment
  • Are Dividends A Religious Experience? The Reality Of Why CEOs Increase Dividends [View article]
    Are dividends a religious experience?

    I wouldn't go so far as to say that, but getting a dividend check in the mail always brightens my day. Much better than getting a bill in the mail.

    The Dividend Aristocrats, stocks that have increased their dividends every single year for at least the past 25 years, have outperformed the S&P 500 by an average of 2.5% per year. So a consistently rising dividend is an indication that a stock may be a good investment.
    May 21, 2015. 12:04 PM | 6 Likes Like |Link to Comment
  • Disney, Generating Large (And Future) Profits By Recycling Past Success [View article]

    Anyone who follows Disney knows that it is a lean, mean money-making machine.

    The PE ratio is 23.73. That's a little high. It is better not to buy stocks with PE ratios higher than 20.

    Even with a terrific stock like Disney, price does matter. For example, Disney was 27 in 1999 and 16 in 2002. An investor who invested $400,000 in Disney at 16 in 2002 rather than at 27 in 1999 would have ended up with about one million dollars in more profit at this point in time.

    So no matter how much you love a stock, concentrate on buying it cheap if you want to make the most money over the long term.
    May 21, 2015. 11:54 AM | Likes Like |Link to Comment
  • Retired Investors: When Dividend Growth Slows What Should You Do? [View article]

    Maybe I misunderstood Bob's intentions. But I thought that these stocks were being "benched" or sent into a "time out" as a form of probation with the thought that if these stocks did not shape up they would be shipped out or sold.

    I have not bought any stocks at all since March of 2012 when I initiated a new position in Amphenol and added to my position in GE. So I guess that you could say that all of my stocks have been "benched" or sent into a "time out." But as anyone who has ever read any of comments knows, I never sell unless I am forced to sell by a cash buyout.

    Mike, this making comments thing on Seeking Alpha is getting to be a little frustrating. I see so many youngsters buying wildly overpriced stocks and selling stocks that should never be sold. As Chris Demuth Jr. said in his last interview, the best investors at Fidelity were either dead or inactive. At least dead or inactive investors have the common sense never to sell a Dividend Aristocrat.
    May 21, 2015. 10:38 AM | 6 Likes Like |Link to Comment
  • Conoco: Get Ready For An Extended Dividend Freeze [View article]
    Tim, how should an investor get ready for an extended dividend freeze in Conoco?

    A dividend freeze is not the end of the world. It is certainly better than a dividend cut.

    Conoco is a HOLD at this time. If the price of Conoco ever fell significantly, then it would be a buy.
    May 21, 2015. 07:58 AM | 4 Likes Like |Link to Comment
  • Exploring The Dividend Sell-Off Approach [View article]

    Sell some shares of your high quality dividend paying stocks such as Coca-Cola, Chevron, AT&T and Wells Fargo?

    That is wrong on so many levels that I may not have time to list all of the negative consequences of such a misguided action.

    1) What happens if you sell some of these shares when the prices are low? Suppose you sell Coca-Cola at 40 and then in the next 24 months the price of Coca-Cola rises to 60? In order to buy the shares that were sold you would have to spend 50% more money.

    2) What happens if you sell some shares of Wells Fargo and a few months later the dividend is increased? You have just caused yourself some financial pain.

    3) What about capital gains taxes? Why subject yourself to capital gains taxes if you don't have to?

    4) What about transaction fees?

    5) By selling some shares of high quality dividend growth stocks, you are lowering your future dividend income which is taxed at a favorable tax rate.

    6) The direction of the stock market over the long term is up, so if you sell your shares of high quality dividend paying stocks, the odds are that you will have to pay more money to buy back the same number of shares.

    Selling shares of high quality dividend growth stocks is a mistake on so many levels. No amount of rhetoric can justify such a mistake.

    Whenever an investor has the urge to sell some shares of his high quality dividend growth stocks, he should do something constructive and go for a swim or take a walk instead.

    As Chris Demuth Jr. pointed out in one of his articles, the best investors at Fidelity were either dead or inactive. It is hard to make the mistake of selling a dividend growth stock if you are dead or inactive.
    May 20, 2015. 06:52 PM | 7 Likes Like |Link to Comment
  • Can We Really Trust Nike's Stock Price? [View article]

    I always use the current PE ratio. Never use the projected PE ratio since this number may not be correct.

    Paying more than 20 times current earnings for a stock is generally a big mistake. I know that some youngsters get enthusiastic when they see a high flying momentum stock and happily plunk down 30 or 40 times current earnings for the stock. Some youngsters even plunk down over 900 times current earnings for a stock such as Shake Shack. To those youngsters I have only one thing to say. Curb your enthusiasm. Or the great sucking sound you may soon hear will be the sound of money being sucked out of your portfolio when these high flying momentum stocks suddenly crash and burn.
    May 20, 2015. 04:10 PM | 2 Likes Like |Link to Comment
  • Retired Investors: When Dividend Growth Slows What Should You Do? [View article]

    I have to say that I disagree with your strategy of "benching" dividend growth stocks that do not meet your performance expectations. There are certain stocks, the Dividend Aristocrats and other stocks that tend to perform well over the long term, which should never be sold. Selling this type of stock has negative consequences. 1) Capital gains taxes are owed. 2) Transaction fees are owed. 3) The miracle of long term compounding is interrupted.

    No stock just goes straight up, Bob, or always performs to your short term expectations. It is the long term performance of stocks that matters, which is the reason that stocks that deliver the goods over the long term should never be sold.

    I do not believe in ever "benching" or selling Dividend Aristocrats. But I do believe that investors who make the mistake of selling Dividend Aristocrats should be "benched" or, even more appropriately, sent to the woodshed.
    May 20, 2015. 01:47 PM | 18 Likes Like |Link to Comment
  • Can We Really Trust Nike's Stock Price? [View article]
    "I don't believe that the stock is a good investment at current levels."

    Chuck, the PE ratio of Nike is 29.91. Excellent stock. Very bad price.

    I have a rule not to buy shares of any stock if the PE ratio is higher than 20. That rule lowers the probability that I will overpay for a stock.

    I also avoid buying any stocks at all when the S&P 500 is close to an all time high as it is now. I have found that investors can make more money over the long term if they buy stocks only when the S&P 500 is 20% to 50% lower than its all time high.

    The difference between buying a stock at an attractive price versus an unattractive price can amount to thousands and even millions of dollars in profit over the long term.
    May 20, 2015. 06:33 AM | 8 Likes Like |Link to Comment
  • Why You Shouldn't Put Too Much Weight On Dividends [View article]
    "Companies that pay out dividends tend to be large companies with limited growth prospects."

    Ellie, this article comes to so many false conclusions that I don't even know where to begin. Starbucks, Visa, MasterCard, Stryker, McKesson, Disney, PepsiCo, Johnson & Johnson, Danaher, Philip Morris, Hershey and Apple all pay a dividend. Do you really believe that these companies have limited growth prospects?

    I do agree with you about one thing. Chasing yield is a big mistake. In fact, chasing just about anything in the stock market is a big mistake.

    The dividend history of a stock must be carefully examined before an investor decides to buy the stock. Stocks that have raised their dividends every single year for at least the past 10 years are usually the best investments. The Dividend Aristocrats, stocks that have increased their dividends every single year for at least the past 25 years, have outperformed the S&P 500 by an average of 2.5% per year.

    Dividends really do matter a lot, Ellie. I once asked my 94-year-old mother, who has always been my mentor in the stock market, whether dividends matter.

    "Dividends are the only thing that matters, dummy," she replied.

    Enough said.
    May 19, 2015. 08:44 PM | 49 Likes Like |Link to Comment
  • Why Great Dividend Growth Awaits Citigroup [View article]
    Tim, I have always thought that you were one of the best writers on Seeking Alpha.

    But Citigroup?

    I guess if you are a truly contrarian investor, then stocks like Citigroup and Bank of America should appeal to you.

    Maybe I am not contrarian enough, but I just can't warm up to Citigroup or Bank of America. These two stocks to me are real dogs. I keep thinking of the lipstick on a pig metaphor. Nothing can seem to attract me to Citigroup or Bank of America.

    But maybe at some point investors who take the plunge into Citigroup and Bank of America will be laughing all the way to the bank.

    But those two stocks are not for me. I'll stick with Wells Fargo, JP Morgan, Toronto Dominion and Royal Bank of Canada.
    May 19, 2015. 05:18 PM | 11 Likes Like |Link to Comment