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Smarty_Pants

Smarty_Pants
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  • The New Nifty Fifty, Part 2: Dividend Growth Investing's Greatest Hits [View article]
    "From an outsiders view, this strategy is just stock-picking, like most people do, albeit from a pool of stocks with limited short term up and down side.. Which is also fine, but not necessarily superior to other methods." - dnorm1234

    Personally I find the DGI sort of stock-picking produces better performance over time than any ETF-picking strategy I have ever considered. But that's just me.

    If you're going to invest, ya gotta 'pick' something to put your money in. I've yet to see anyone explain how picking an ETF or fund of many hundreds or thousands of stocks produces consistently superior performance to picking 30 to 50 quality DGI stocks with historic records of outperforming over long time frames and that are bought at a price which represents a value for the enterprise.

    Once you get past about 50 holdings the ETF's added benefit of "diversification" becomes borderline meaningless and the next several hundred stocks have a difficult time overcoming the added expenses and fees inherent with the ETF or fund, not to mention the fact that very few ETFs or funds make any serious attempt to restrict their purchases to "undervalued" issues. Most seem to pour their money into the stocks they hold without considering the current price at all.

    Based on what I keep hearing, folks could do REALLY well if they could only buy an ETF that held everything BUT the normal DGI-type stock, because somehow every ETF worth considering seems to own them as a significant portion of their holdings. But I suppose that's just a coincidence...
    Nov 5, 2014. 07:00 PM | 6 Likes Like |Link to Comment
  • Generational Market Shift [View instapost]
    Norman I am with you on the gradual move to hard(er) assets. The banks are printing so much money that the price of actual things will have to move upward to match the money supply.

    I am in the process of moving money from my mREITS to LNCO. The recent drop in oil & gas related issues combining with the anticipated rising interest rate environment makes that kind of move beneficial in the medium to long term, I feel.

    I've been holding my mREITS so far just to deploy the high income into other assets. Now that LNCO offers a yield nearly equal, but backed by the production of tangible products like oil and gas, I feel concentrating in LNCO is a gamble that will pay off one day given the current 12+% yield.

    I still get my income and have traded the possible "interest rate downside" for a "higher energy prices" upside. Win-win-win!
    Nov 2, 2014. 05:19 PM | 2 Likes Like |Link to Comment
  • 11.4% Distribution Linn Energy Completed Its Needed 1031 Exchange Trades To Match The Devon Buy [View article]
    "My trade is to dump some of my income from mREIT's and Utilities, and move it into LNCO where the rate is even higher and the capital appreciation a very strong likelihood, whereas there's none in the mREIT's and Utilities, at these prices." - 1sinedo

    I like the idea of swapping mREITs for LNCO, but the utilities I own are proven winners over the long run so I'll continue to hold those. Thanks for suggesting the idea. Trading a "rising interest environment rate is bad" holding for one that is beaten down and has a good plan for continuing growth in the future seems like a plus, especially if the yields are comparable.
    Nov 2, 2014. 02:33 PM | 1 Like Like |Link to Comment
  • 11.4% Distribution Linn Energy Completed Its Needed 1031 Exchange Trades To Match The Devon Buy [View article]
    "$40MM can be the difference between a DCR above or below 1.0x." - rlp2451

    The charts linked above by Matt-Man show a savings of $300 to $400 million in capital run rate after the swap (Chart 6).

    Even if they spend 80% of that savings on other operating / development costs the remainder of savings will more than offset the ~$40 million in lower revenues. It appears they have a lot of wiggle room to either maintain, or increase, the distribution depending on what other operational use they make of the cap-ex savings.

    Also based on current prices and hedging (Chart 14) it appears that the change in revenue will be based on oil prices of:

    2015 $93.02 (93% hedged @ $94, 7% @ $80) ==> -$19.9 million
    2016 $92.32 (88% hedged @ $94, 12% @ $80) ==> -$24.6 million
    2017 $89.38 (67% hedged @ $94, 33% @ $80) ==> -$44.2 million

    That assumes no changes in hedging or the current price of oil. And for what it's worth, the price of oil has been as high as $105 in the past 3 years, so the revenue might not drop that much should the price revert back to the mean over that time frame.

    It seems to me the loss in revenue is dwarfed by the savings in cap-ex.
    Nov 2, 2014. 01:30 PM | 1 Like Like |Link to Comment
  • Lesson Learned: I Was The Sucker [View article]
    "The dips remind me that a lot of this is based on factors that I could not have known of or planned for. For this reason diversification is key." - Jay S.

    Agreed. If you invest in the market there are always unknown unknowns. My experience in the past suggests that more often than not getting out at the first sign of problems is the best path.

    I sold my ACRP in after hours the day the news broke. I got out at $10 with a cost basis of $11.90. Even so, with 30+ stocks in my portfolio the ~15% loss in ACRP was only a 0.4% drop in my total holdings.

    While I don't like losing any money if possible, I can live with those kinds of mistakes over the long run. ACRP was something of a speculative position for me, so having to pay a small price for taking the extra risk is to be expected.

    Keep the articles coming Brad. Your in-depth analysis is much appreciated by a great many people. Nobody's perfect, and those who expect perfection likely have a different reason to look for scapegoats among the contributors they follow here on SA.
    Nov 2, 2014. 12:15 PM | 5 Likes Like |Link to Comment
  • What Likely Happened To Dividend Growth Retirees In The Recession: Another Point Of View [View article]
    "The reason, of course, is that they couldn't do it, and they both knew it." - DVK

    You obviously didn't give them the proper factors to work with Dave. Tsk, tsk.
    Oct 27, 2014. 09:08 PM | 1 Like Like |Link to Comment
  • What Likely Happened To Dividend Growth Retirees In The Recession: Another Point Of View [View article]
    "You're a lot more brilliant than you used to be..." - giorgiolb

    And you now have an above average Ferret to copy from. That's gotta be a big help too. ;-)
    Oct 27, 2014. 08:54 PM | 2 Likes Like |Link to Comment
  • What Likely Happened To Dividend Growth Retirees In The Recession: Another Point Of View [View article]
    "I turned in my notice at work and will join the ranks of the unemployed this coming Friday" - Dave Crosetti

    Congrats Dave!!

    Knowing you I'm reasonably certain that you won't be "taking it easy" any time soon, so I'll wish you an abundance of satisfaction with those secondary pursuits, especially the high school football assistant coaching.

    I envy you the ability to participate in your fun activities as a 'profession'. Try to squeeze in some recreation once in a while too.
    Oct 26, 2014. 06:45 PM | 2 Likes Like |Link to Comment
  • What Likely Happened To Dividend Growth Retirees In The Recession: Another Point Of View [View article]
    "Why would a retiree who needed $40k in income construct a [$1 million] portfolio of stocks that had a yield point that was much less than 4%?" - Dave Crosetti

    This was the primary criticism I had with Dale's article. A 'pure' DGI approach would have planned to generate enough yield to cover the needed income from the start. That doesn't mean some folks would plan otherwise, but then that sort of contradicts the implication of the title for his article applying to DGI in general, when it's probably not true. Doubly so since it really isn't that difficult to create a portfolio yielding over 4% by adding some of the better run utes, REITs, MLPs, and BDCs.

    The other issues you note I can overlook. His portfolio is a simplification to represent one that very likely would hold more stocks. Ditto for WFC representing dividend cutters. Those 'un-realisms' don't invalidate the point he was trying to make, which is that it isn't necessarily the end of the world to sell off a few shares now and again to boost income.

    Why you would put yourself into that position when you could rather easily avoid it is the aspect of his article that doesn't make sense to me. He seems to be 'proving' that there's a second best way to implement DGI which involves selling shares.

    Maybe so, but that's not the way I [would] choose to do it. But that's just me (and probably not a lot of other DGE'ers too I imagine).
    Oct 26, 2014. 06:30 PM | 6 Likes Like |Link to Comment
  • What Likely Happened To Dividend Growth Retirees In The Recession: Another Point Of View [View article]
    "Hence for me the Dale's story is quite artificial although not worthless. The same is for this David's reply - I mostly agree with it but doubt that the case adds anything to our knowledge of DGI" - SDS

    But perhaps this example is the one which provides the "Aha!" moment for someone who is new to DGI. There are readers from all parts of the experience spectrum here on SA. A good example is seldom a waste of time or space.

    Thanks to Dave Crosetti for providing a different perspective on Dale's exercise. It shows that outcomes are often not the worst of cases given the application of a little calm reasoning during the market panics.

    Given the difference, just how important is the process of planning out one's investment methodology, given the difference between panic and rational action? Being prepared can make an immense difference in the long term outcome.
    Oct 26, 2014. 11:59 AM | 7 Likes Like |Link to Comment
  • My Dividend Income Portfolio [View article]
    "Once they have invested 300 times their average monthly expenses, they can retire." - Author

    Assuming their portfolio yields 4% at that point in time, which isn't difficult to do.

    I would also add that the calculations you provide on your blog regarding how long it takes to accumulate that 300E are very conservative because they do not take into account the growth of the investment over the time span. This is one of the beautiful concepts of dividend growth. The yield usually remains in a narrow range while the income grows. As a result the value of the initial investment grows too.

    Example: If you are saving 1E per month (=50% savings rate), you will put 12E into your portfolio each year. That amount should grow at roughly the rate of dividend growth, so after 15 years of 6% DGR that original 12E will be worth approximately:

    12E * (1.06 ^ 15) = 28.76E

    Annual 12E investments compounding at 6% will be worth 296E after 15 years. Monthly investments totalling 12E annually will likely grow a bit faster due to faster compounding.

    The inflation adjusted portfolio DGR will determine the amount of time required to reach your 300E goal. Constructing a 4% yielding / 8% DGR portfolio (with dividend reinvestment) is within reason. Assuming 2% inflation the real DGR will be ~6%.

    15 years of 50% savings rate combined with a solid DGI investment plan with 6% real DGR should reach the 300E savings mark, give or take a few months.

    Well done, you're off to a fantastic start.
    Oct 25, 2014. 11:15 AM | 1 Like Like |Link to Comment
  • The New Nifty Fifty, Part 2: Dividend Growth Investing's Greatest Hits [View article]
    "If I wasn't quite a bit overweight on Consumer Staples, I might grab a little of either or both. But I am. So I won't." - Mike Nadel

    Well, that makes sense. Here I'm thinking you're using some fancy acronym-ish formula like:

    WWTAFD - What Would The Average Ferret Do?

    My mistake ...
    Oct 25, 2014. 09:28 AM | 4 Likes Like |Link to Comment
  • The New Nifty Fifty, Part 2: Dividend Growth Investing's Greatest Hits [View article]
    MOST excellent!! Thanks for sharing your work.
    Oct 23, 2014. 07:35 PM | 1 Like Like |Link to Comment
  • The New Nifty Fifty, Part 2: Dividend Growth Investing's Greatest Hits [View article]
    Six of the Top 10, Seven of the Top 12. I must be doing something right ('borrowing' ideas from the right folks anyway).

    Thanks for compiling everything Mike, and many thanks to the DJs for contributing.

    It would be interesting to see how that Top 10 portfolio has performed over the past 10/20/30 year periods, assuming equal weighting at the start of each period. Any guesses as to whether it would outperform the market or not?
    Oct 22, 2014. 11:10 PM | 1 Like Like |Link to Comment
  • The Bloggers' Dividend Growth Portfolio: Popular Dividend Growth Stocks Trading On U.S. Exchanges [View article]
    Outstanding job compiling, comparing, and contrasting all these portfolios of stocks! Someone new to DGI would not go too far wrong by restricting themselves to the stocks on both of these lists and starting their research at that point.

    One other key point to understand, which you pointed out, is to only buy these stocks at prices which offer a good value (or better). Buying right is nearly a necessary step in generating great performance going forward.

    One other tool you might have mentioned is Chuck Carnevale's F.A.S.T. Graphs (TM):

    http://bit.ly/t3XFTe

    The basic subscription is ~$10 per month and it can save a great deal of time when trying to assign a good value to most stocks. Many DGI adherents use it extensively.
    Oct 22, 2014. 04:04 PM | 2 Likes Like |Link to Comment
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