The Beat Goes On. Making Money From Adversity
Value, Dividend Investing, Growth At A Reasonable Price, Portfolio Strategy
Seeking Alpha Analyst Since 2011
A while back, I discovered a woman named Geraldine Weiss. She was way ahead of her time, being a woman in what was a man's world of investing, back in the day. She came up with a valuation metric to help her select stocks that was uncanny in it's application. She perfected the valuation tool and wrote a book about it called, "Dividends Don't Lie." It was transformative for my stock investing as I was already a Dividend Growth Investor. But applying her valuation metrics to my stock selections has exploded my investment results beyond my wildest expectations. Since 2005, I have been on a roll, growing my portfolio value like never before. Her valuation methods limit the kind of stocks I invest in to Blue Chip, Dividend Growth companies. But that's ok by me, because that's where my interests are. Blue Chip, Dividend Growth. Not only for income, but for capital appreciation. You might want to get her book and change your life.
Summary
- People will tell you that they don't "like" a certain type of company. That is a subjective opinion.
- Opinions are often driven, not by facts, but by emotions.
- When we allow emotions to drive our thinking process, we block our creativity and our ability to grow wealth.
- Try this, "Think And Grow Wealth."
Introduction:
As Americans, we tend to have a lot of opinions about a lot of different things. I'm not worldly enough to know if this phenomena is something that is part of every group of people, on this planet, but one thing is for sure, Americans have an opinion about everything.
But how do Americans arrive at these opinions? Are they fact based? Are they reality checked? Do they make any sense at all?
Most of the time, they don't make a lot of sense, but are in fact driven by emotion and feelings. Presenting the "facts" becomes almost pointless as the opinionated dig into their positions and ignore any critical thinking about what it is they believe.
Even if their belief is "proven" wrong.
Problems With Opinions:
Opinions cost you money. They are destructive to your personal wealth and well being. When you watch "the news", depending on which channel you select, all you are doing is having your personal point of view being reinforced by the talking heads that you are watching on tv. Doesn't matter if you watch FOX, CNN, MSNBC, ABC, CBS, or XYZ.
We don't get news anymore. We get propaganda. We are being programmed to believe in things that someone else wants us to believe and for whatever reason they want us believing it.
And there in lies the rub.
Take Guns For Example:
America has been in a "war" on guns (the 2nd Amendment) for the last 50 years or so. Every time there is a catastrophic gun incident, the battle cry to control drugs is sounded and the debate begins.
And the debate is based, not on the facts, but on opinions, that are, again, based on emotions and feelings.
I do not want to debate guns. I just want to suggest that somewhere in the middle lies the truth about the problem with guns. But we don't talk to one another about guns (or just about anything else anymore), but instead talk at each other and that means "impasse."
Since you can't "win" the argument, why not just ignore the argument, buy guns or don't buy guns, in accordance with the rules and regulations in your state and "get over it."
But, Making Money:
In a previous blog, I talked about two gun stocks. Smith and Wesson (SWBI) and Strum Ruger (RGR).
These are the only pure gun plays that you have as an investor. There are other companies that make things that go with guns, but these two companies pretty much focus on the manufacture, marketing, and sales of guns.
We discussed how guns react to whatever is going on in America. When there is a gun incident, the following gun control folks come out in force and suggest that we "need to do something."
When they say things like that and then propose solutions, other people get anxious and afraid of gun control. So what do they do? They go down to their gun shop and they buy guns. Legally, but not always the best idea.
It is what it is.
The price of gun stocks, (SWBI) and (RGR) do something very interesting, when there is some crisis facing the American people and politicians begin suggesting making wholesale changes to our way of life.
Again, I am not being political here, so get over it. But, the lockdown, the wear a face mask, don't wear a face mask, take this drug, no take that drug, do this, don't do that and all the mass hysteria and confusion (because to be quite frank with you, the people in charge of things have no idea what the hell they are doing).
So, when the stuff hit the fan, people buy guns and ammunition and some of them even bother to learn how to use their new guns safely and legally. Others do not and that is how you get two people outside their home, pointing their guns at "protesters" and facing potential time in jail.
But I digress.
Performance Is Not An Illusion:
There was the Corona Correction in March of this year. A lot of Blue Chip, Dividend Growth stocks went on sale. Neither of these two companies are Blue Chip stocks, but they also went on sale in March and then they began to "revert to mean."
That is, increase in price, relative to the sales of their products as people began to become concerned with the way things were going down in America, if not the rest of the world.
Then when it seemed like we might be out of the woods, the protests over police violence began. And people saw that in light of the protests, the police were impotent in protecting private property, like businesses, cars, homes etc and that politicians decided that mob rule in the streets was preferable to cops doing their jobs. Whoops.
When we last wrote about these two stocks, we shared with you the price appreciation for each company over the last 90 days or so. We bought shares of (SWBI) at $6.00 a share (not the low, but a good price) and we bought shares of (RGR) at $42 a share (again, not the low, but a good price.)
On June 23rd, when I wrote the blog, (SWBI) was priced at $17.68 a share and (RGR) closed at $70.98 a share.
The Beat Goes On:
Since that blog post, both (SWBI) and (RGR) continue to inch higher. Today, (SWBI) is priced over $22 a share which is a gain of 22% in a week, from the blog price of $18 a share. Meanwhile, (RGR) is priced at $77 a share, which is a gain of 7% since our blog was posted.
Our gain on (SWBI) is 266% and or gain on RGR is 83%.
Because the stock's movement, relative to the news about guns causes the price of these stocks to go up and to go down. "Reversion to mean."
We will be watching both stocks closely today and tomorrow and we are approaching the point where we are seriously considering selling. However, the real news about gun purchases and profitability comes "after the fact" and in the next earnings reports for both companies, we expect that this quarter was very profitable for them.
Summary:
1. Emotions and opinion have no place in investing success
2. History repeats itself. All the time. When people tell me that human being are evolving, I have to question "Then why have we not changed in over 3000 years of recorded history?
3. Napoleon Hill wrote about "thinking your way to wealth." A lot of people think that they can't possibly learn anything from a book that was written back in the 1900's. And, they are correct. If you're not going to read it and consider what he is saying, then you will not be "thinking your way to wealth."You will be ignoring his advice without even considering it.
5. Liking a stock is subjective. There is nothing objective in "liking" or "not liking" a given stock. If you want to live in a subjective world, then god, bless you. Or as we say in the South, "Well, bless your heart." Try living in an objecive world for 90 days and see how you like it.
6. Turn off the tv. You would be better off spending the 3-5 hours of tv watching that you do at night, by setting up a gym in your garage and working out. My biceps have grown to 18" since I started lifting weights in January. I've dropped 40 pounds and my waist went from a 48" to a 40". And I sleep like a baby at night. I also do cardio three days a week with Ringo, my dog. He loves getting out and running, while I stagger around the block with him.
7. Stop arguing about things that you have no control over. You can't change a damned thing, so ignore it. All you are doing is raising your blood pressure for no apparent reason.
8. Enjoy the company of your loved ones. Have date nights with your special friend and grill a couple of ribeyes and crack open a Sicilian red without all the preservatives they put in American wine.
9. Focus on increasing your net worth and not letting anyone or anything get in the way of your success.
10. As Nike says, "Just do it."
Analyst's Disclosure: I am/we are long SWBI RGR.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.