SDS (Seductive ...'s  Instablog

Well, an investor should do homework and needs data for it. Recently I analyzed CRRC. Company attracts my attention as publisher which expands to cloud computing. Fortunately I have free access to different data sources due to ...., so I took data from them.

(click to enlarge)

As you can see from the picture data from different sources are not consistent. IMO it is quite bad, especially for investors who pay for these numbers.

It seems that Morningstar and Mergent have more clear data then other sources. So double check numbers......

13 May 2013

Disclosure: I am long CRRC.

My portfolio exceeds 100 dividend stocks I cherry picked from 2006.

Some folks complain that it is too hard to monitor more that dozen stocks and I disagree (see also Chowder blogpost seekingalpha.com/instablog/728729-chowde...).

I beleive that I'm at the end of information chain and almost everything I can read is already priced. Because of my investment goal (return on capital rising in time) and vehicle I choose (mostly DG stocks) I monitor:

PRICE

I have Excel marcos (footnote 1) that scan prices of all stocks I have and report ONLY
a) stocks which price change for more than 5%-10% in a single day (limit depend on stock volatility). I usually do this scan at morning and after market closed. In normal day I got nothing and it takes me less than 15 minutes/day to check if something happens (usually company missed earnings expectations for few cents and it is irrelevant for me).
b) stocks which price drops to 50% or 30% of my purchase price. I know that price I paid is irrelevant but I need a point to compare. I the case of significant price reduction I check priceces of country/industry ETFs and if they are not in synx with my stock I do deep analysis company and put it in APPROBATION list (see below) if something seems fishy. I didn't count time but I guess in average it required less than 2 hours/month.
c) stocks which price rises to 200% of my purchase price (in this case I do financial analysis of company, sometimes apply "fool money" approach - see seekingalpha.com/instablog/725729-sds-se... or decide to wait and change limit from 200% to higher value up to 10X). Stock splits create false signal but it is easy to handle them. I didn't count time but I guess in average it required less than 1 hour/month.

I do not have good macro to deal with Jeff Paul's observation on dividend predictor (seekingalpha.com/article/299601-why-divi...) for price drop below -20% for at least 1 month to compare with index (e.g. S&P500 ) but I think it would be useful to re-analyze such stocks with slowly degrading prices.

DIVIDENDS

a) I watch dividends closely almost at daily basis (weekly basis is probably enough but I did almost daily in 2008-2011 and at the end of 2012 - see b) below). I use WSJ Web page about dividend changes and Excel macro allows me to focus only on stocks in my portfolio. I'm happy if company I own increases dividends (it happens quite often) and not so happy if company I own decreases dividends (I faced such situation few times). In the last case if it is not expected (see APPROBATION section below) I verify information (I had few wrong signals during last 4 years mostly because of special dividends) and try to figure out why BoD reduced dividends (footnote 3) and decide if I want to keep the stock (sometimes yes in contrast with most DGis - see why in seekingalpha.com/instablog/725729-sds-se...). It takes me about 1 hour/week.

b) I play sometimes (quite often at the end of 2012) in dividend capture with 2% of my capital and trade stocks with significant special dividends.

c) Most foreign companies pay annual or semiannual dividends. For many foreign companies dividends are voted at shareholders meetings and in this case I get information about dividend proposals ahead of meeting (usually shareholders support BoD proposal). For other foreign companies I make monthly schedule for dividends announcement and I check dividends directly at company WWW site (I check and bookmark dividend page before I purchase stock). It takes me in average about 20 minutes/month but there are more and less busy periods.

d) I thought that a smart BoD can freeze dividends in 2008-2012 and did nothing in this case. I don't know yet about 2013 but David Fish's CCC list provide good information about dividend actions. I might put company to APPROBATION if dividend freeze is too long.

FINANCIALS

I do annual check based on companies 10-K or similar reports. I do not read the reports but Excel macro extracts numbers I need. I keep numbers for last 3 years and if trend is negative I update other relevant information I use in proprietary metrics for dividend reliability. Most companies demonstrate that their dividends are stable but some have problems for 2 consecutive years and I moved that into APPROBATION list. It takes me 2-3 days/year.

APPROBATION

Any company I own that had 2 consecutive years of bad financials or significant structural changes that might affect their dividend is in the approbation list. I monitor their financials on quarterly basis and watch the language of their dividend announcements. It hard to estimate time here I had about 15 companies in this list in 2009-2011 and it took me about 1 hour/week for close monitoring.

Footnotes:

1. I will not share my macros not because I'm greedy but because I want you to learn how to write them (They are quite simple). I use Yahoo for stock prices.

2. I can sustain 50-70% price drop due to wide diversification and quasi-equal spent of my capital in each company I own - see seekingalpha.com/instablog/725729-sds-se....

3. Usually I see a dividend reduction from the price drop (see point a) in PRICES) before I check WSJ dividend page (and I believe that market always obtain such news before I get information). Dividend increase is usually not so visible from my price monitoring, so I please myself mostly checking WSJ dividend page.

17 April 2013

Quite often stock market pundits propose to stay 100% investing. Usually they argue that missing small number of best days (let's say 10) during quite long period (let's say 10 years) significantly affect investor return (they always assume capital gains only).

In my opinion (IMO) there are at least 3 factors in favor of the "stay":

a) Wall Street has simple insensitive - their fee depends directly on amount of money investors handle them;

b) It is rational for mutual fund managers to "stay 100% investing" if they cannot predict next market down-term (and most of humans really cannot) because of i) general stock market uptrend and ii) their common goal "to beat the market" in combination with short time horizon from 1 quarter to couple years;

c) It might be rational for investors not to release capital gains because of taxes asymmetry in favor of Uncle Sam (investor has to pay taxes on ALL gains but only $3K losses can be claim annually).

There are factors against the "stay":

a) Well let me quote folks who phrase the idea better than me:

"Activity is the enemy of investment returns." - Warren Buffett

"It takes character to sit there with all that cash and do nothing." - Charlie Munger

"Cash combined with courage in a time of crisis is priceless." - Warren Buffett

b) Stock return depends mostly on price you paid. You have to have cash during serious market dip (like in March 2009);

c) Don't try "to beat the market" especially in short term. You will not be fired if underperform this and next year but you will be sorry to "stay 100% investing" then big opportunity comes.

Weighting cons and pros I'd conclude that "stay 100% investing" is NOT good advise for individual investors. J

15 April 2013