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Smarty_Pants

Smarty_Pants
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  • 3 Reasons I Prefer Dividend Growth Investing [View article]
    Great article DVK. As you correctly point out the general area of friction between DGI types and TR types is in the presumption that TR WILL outperform DGI in the long run.

    In some ways that strikes me as a bit of wishful thinking. Personal experiences shared here on SA and the striking lack of real-time TR portfolios to examine and compare to the real-time DGI portfolios that ARE available seem to be the point where the rubber hits the road.

    I have only one request of TR adherents who claim they WILL outperform DGI.

    Show me. Set up a portfolio starting now, and we'll compare it to the many DGI portfolios already available and see what happens when all the cherry picking on either side is removed. Until then, their claims are nothing more than opinions to me.
    Dec 4, 2014. 07:40 AM | 4 Likes Like |Link to Comment
  • 3 Reasons I Prefer Dividend Growth Investing [View article]
    "I was just trying to figure out whether correlation also makes a difference in beta or not. DGI stocks are likely to be correlated more strongly with each other than with the overall market." - TF17

    Only to the extent that the portfolio is concentrated into a small number of sectors, I believe. Given that a significant number of DG stocks are already a part of "the market", most effects of correlation would be present in some degree in both places.

    Utilities won't be any more correlated to consumer staples, financials, industrials, or resource stocks in a DG portfolio than they are in "the market". If the portfolio holds most sectors in reasonable weights then it shouldn't matter too much for estimating Beta.

    Putting numbers to concepts like Beta and Correlation requires some level of simplification and/or assumptions. As you point out, there are sometimes different factors which may skew the estimate based on the specific portfolio holdings.
    Dec 4, 2014. 07:32 AM | 1 Like Like |Link to Comment
  • 3 Reasons I Prefer Dividend Growth Investing [View article]
    "Doesn't the portfolio beta depend on the correlation between the stocks themselves?" - TF17

    Think of it using this example. Let's take 3 stocks A, B, and C, with Betas of 0.1, 0.3, and 3.0 respectively and identical prices of $10.00. Now make two small example portfolios with different $ allocations and see what you think the overall Beta would be:

    Portfolio 1:
    $99.80 in A, $0.10 in B, and $0.10 in C = $100.00 total
    (9.98 shares A, 0.01 shares B, 0.01 shares C)

    Portfolio 2:
    $0.10 in A, $0.10 in B, and $99.80 in C = $100.00 total
    (0.01 shares A, 0.01 shares B, 9.98 shares C)

    Now fast forward one day in the market with price moves that reflect each stock's Beta after a 1% gain in "the market":

    A => $10.01 (gain of 0.1%)
    B => $10.03 (gain of 0.3%)
    C => $10.30 (gain of 3.0%)

    The new value for Portfolio 1 will be
    $10.01*9.98 + $10.03*0.01 + $10.30*0.01 = $100.1031

    The new value for Portfolio 2 will be
    $10.01*0.01 + $10.03*0.01 + $10.30*9.98 = $102.9944

    So ...
    volatility estimate for P1 is about 0.1031
    and
    volatility estimate for P2 is about 2.9944

    Dollar weighting really matters in estimating the portfolio Beta.
    Dec 3, 2014. 11:15 PM | 1 Like Like |Link to Comment
  • 3 Reasons I Prefer Dividend Growth Investing [View article]
    "Question on portfolio Beta - do you just do a simple average (count of sum of betas / stocks) or do you do a dollar weighted average?" - prices1950

    The proper mathematical way to get the portfolio Beta is to use a dollar weighted average of each stock's Beta:

    Portfolio_Beta = (Beta1*$1 + Beta2*$2 + ... + Beta_n*$_n) / $Total

    Of course that's only an estimate and the end result will depend on how the individual stock's Betas are calculated in the first place.
    Dec 3, 2014. 10:29 PM | Likes Like |Link to Comment
  • Will Linn Energy Post A Windfall Profit For Q4? [View article]
    It seems to me that 2015 DCF should have a good chance to remain reasonably stable.

    NG is fully hedged at prices above 2014. Oil is around 57% hedged at 2014 prices (~40,000 bpd hedged of ~70,000 bpd production).

    Therefore, loss in revenue at $70/bbl oil would be roughly:

    $20/bbl * 30,000 bpd * 365 days = $219 million

    Yet I recall an expected savings in cap-ex between $300 - $400 million annually due to the recent asset swaps, which should make up for the reduced revenue with a 50+%-ish margin of safety.

    Seems to me that the DCF should be safe for 2015 so long as oil remains above $63/bbl (which is where the revenue losses reach $300 million and equal the minimum cap-ex savings).

    That's what I get with a back of the envelope estimation anyway.
    Dec 2, 2014. 10:56 PM | 2 Likes Like |Link to Comment
  • Dividend Growth Investing, Total Return, And Indexing: Let's Take Another Look [View article]
    "As one buys more and more companies or adds index funds one is allowing more and more mediocrity into their portfolio. Not all companies can be or will be successful so I really don't see the point in owning the 3rd and 4th stringers." - conkjc

    One of the underlying assumptions of MPT and the Total Return types appears to be the idea that it isn't possible to distinguish between very well run companies and the 3rd and 4th stringers, so they buy them all thinking they will get the good ones into the pile that way. (At least that's what I glean from reading numerous interactions with them.)

    According to their way of thinking, DGI can't be possible because "stock picking" can't be done reliably, therefore it's not possible to discern which stocks will be 'successful' and which will be 3rd stringers. DGI violates what appears to be a key tenet of MPT / Total Return, ergo it can't be "better" than just throwing your money into an index of hundreds, or thousands, of stocks.

    Of course that's just my opinion, for what it's worth. My "stock picking" seems to be going pretty well thus far, for a DGI newbie. My portfolio has a 10.1+% CAGR in price and a current yield over 5.5% since starting DGI in early 2011. SPY has a CAGR over that same span of 15.1%, so I'm nosing out the index by 0.5% CAGR with a 30 stock portfolio beta under 0.70 (and a significant portion of my dividends have not been reinvested).

    I can live with that.
    Nov 28, 2014. 01:23 PM | 4 Likes Like |Link to Comment
  • Textainer: A 5.4% Yield Plus A Play On Chinese Growth [View article]
    TGH is a good, though volatile, holding for the long term. I picked my shares up in 2012 at $31. Current YOC is ~6%. They carry a lot of debt, but nearly all of their containers are leased very profitably on long term contracts.

    Wait for a good dip in the share price and get some. The high volatility results in the occasional "offer you can't refuse" kind of prices. The share prices dip significantly on any news of economic slow-downs, but their long term leases keep the money rolling in anyway. The company is well run, IMHO.
    Nov 28, 2014. 12:37 PM | 4 Likes Like |Link to Comment
  • Altria: The Best Is Yet To Come [View article]
    MO was the first dividend growth stock I bought when I started converting to DGI back in early 2011. My shares cost me $24.10 and are up about 104% today, with a YOC of 8.6%.

    Not bad after holding nearly 4 years. MO will always have a place in my portfolio, barring a complete market meltdown. Under those circumstances, MO would probably be the last stock I sell. :-)
    Nov 26, 2014. 08:19 AM | 1 Like Like |Link to Comment
  • Dividend Growth Investing, Total Return, And Indexing: Let's Take Another Look [View article]
    Dave, you completely forgot to mention the one thing that makes DGI work: magic pants. <sarcasm off>

    Seriously, I'm beginning to think it's a waste of time pointing out the lameness of most anti-DGI articles any more. Those who 'get it' can see how DGI principles lead to consistent long term results. Those who don't 'get it' probably never will.
    Nov 25, 2014. 07:03 AM | 17 Likes Like |Link to Comment
  • Kinder Morgan begins test drilling on Burnaby Mountain [View news story]
    I guess you might say this is a case of people being excited about Boring (as in drilling a hole into something - in case you didn't get the intended pun).
    Nov 22, 2014. 04:41 PM | 5 Likes Like |Link to Comment
  • The CCC DiviDogs 2011 - Year 1 [View article]
    Thanks for the update Miz. Your doggies are running pretty well.

    FYI, your pooling approach has returned 12.41% CAGR since inception through 11/19/14 (slightly higher actually, since I counted 2014 as a full year when calculating it).

    ($15,967 / $10,000) ^ (1/4) = 1.1241 ==> 12.41% CAGR

    In comparison, $10,000 of January 2011 SPY is currently worth $17,561.39 for a return of 15.60% CAGR. (per longrundata)

    Still, your pooling approach generated ~6.25% income vs. SPY's ~2.25% in 2011, so for retired folk who are spending the income it appears the dogs may have been the better choice with around 6% income and 6% price growth each year, even if the SPY had slightly better CAGR.

    The 2011 - 2014 time frame was a good one for capital gains. Things might turn out somewhat differently for a period where the markets don't go straight up all the time and under those circumstances the doggies might really shine.
    Nov 22, 2014. 11:19 AM | 1 Like Like |Link to Comment
  • Kinder Morgan: Stock Nosedives, Time To Sell Out Or Buy With Both Hands? [View article]
    "most, if not all, dividends from KMI are expected to be a return of capital and thus tax deferred" - Lookingforincome

    My brokerage statements show all of KMI's distributions as qualified dividends.
    Nov 22, 2014. 10:26 AM | Likes Like |Link to Comment
  • Kinder Morgan: Stock Nosedives, Time To Sell Out Or Buy With Both Hands? [View article]
    Given that KMI was trading around $30 back in April and only took that "nosedive" down to just under $40, I'd call today's drop a non-event.

    I didn't sell at $30 and have no plans to sell now. Long KMI, expecting higher income and higher prices in the long term.
    Nov 20, 2014. 06:42 PM | 14 Likes Like |Link to Comment
  • REITs Are Prime-Time Players, Baby! [View article]
    I suppose the classification changes being considered would make REITs the

    Diaper Dandies

    of the Dow Jones classification world.
    Nov 14, 2014. 11:01 AM | 2 Likes Like |Link to Comment
  • Dividend Growth Investing IS Total Return Investing [View article]
    "I think the transition will be quite interesting and quite telling. If BRK can not continue achieving results similar to what it has done the past ... years ..." - PTI

    Additionally, what if BRK performance goes into reverse soon after the transition? How many long term investors will hold on until they have lost 60% of the value of the holdings they built over a life time of trusting WB? (not saying this will happen, just doing a thought experiment)

    How do the faithful know when to exit BRK once WB is no longer at the helm and performance starts lagging? Granted, they might already have enough to live comfortably by selling BRK now and buying an income fund of some type, but old habits die hard and I imagine many will continue to hold BRK (since that always worked in the past) far longer than might be prudent.

    I wouldn't expect that will be the case, but you can't always be certain of what the future holds.
    Nov 13, 2014. 08:06 AM | 2 Likes Like |Link to Comment
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