Gyroscopic Investing

[quote="AgAuMoney"]


You can download David Fish's spreadsheet (or PDF) from the Tools section on DripInvesting dot org.

AgAu,

Very nice spreadsheet!  Thanks!  I am working with my son-in law and we would be interested in three or four of the best sorts to get this list down to let's go to work and find a value.  Before he buys he reads the 10Q ect and everything you can read before he buys anything.  He is picky picky.  What sorts did you use to get a buy for AFL?  I hate the financials as there is just no way to understand them.  But that is where the current value are.

Thanks for the help.

AgAu,

I did find this article and it seems to be a starting place.  The chart is interesting.

http://seekingalpha.com/article/1250381 ... down-xxxvi

MachineGhost wrote: 1. Low yields.  They buy any stock that just has a history of raising dividends.  Like VIG.  With a current yield of 2.21%.  No one will beat inflation with a portfolio like that!

Current yield has nothing to do with inflation when talking about stocks.

Instead you need to consider dividend growth rate (if income is your primary concern) or total return.

2. Turnover.  When the underlying index being tracked reconstitutes and drops a dividend grower, the fund will drop it as well.  Like PEY.  The current dividend is still about the same as it was when it IPOed over 8 years ago.  That's not dividend growth!

Yup!

So this is one of those cases where stock picking actually does it better than Wall Street can package and deliver.

There has been a lot written about dividend funds compared to dividend growth stock picking.  So far no fund passes muster.  I attribute it to a combination of regulatory requirements (must post total return, cannot highlight dividend and dividend growth) and perverse incentives (must beat results this quarter).

Specifically, the bond equivalent duration of stocks is out of this world...  at least 50 years or more.  Does anyone think yields are commiserate with the duration?  Heck no!

Fallacy, because a bond total return equals yield, not so with a stock.

  The other problem is the legal position of stockholders.

Definitely a difference to bonds.

modeljc wrote:I am working with my son-in law and we would be interested in three or four of the best sorts to get this list down to let's go to work and find a value.  Before he buys he reads the 10Q ect and everything you can read before he buys anything.  He is picky picky.  What sorts did you use to get a buy for AFL?

I'd encourage you to look for Chuck Carnevale on Seeking Alpha.  He publishes under that name most of the time, but a few also under FAST Graphs.  He (and a few other authors) publish static (image) FAST Graphs in their articles.  These are nothing like the real thing you can get by subscribing to his service.

Here is one of his articles and he shows several graphs for AFL:  http://seekingalpha.com/article/1189401 ... irrational

It took me a LONG TIME to convince myself that AFL was worth considering...  It did eventually end up on my "possible candidates" watch list.

I don't remember how it came out on the short list this time.  It took about a week to prune down my list, and I've been doing this awhile.  I know I was looking for about 3% yield or more which means I would have considered only down to 2.75%, so eliminated a bunch on my list, and AFL made it thru that.  I know one of the last steps was when I looked at its FAST Graph and saw it was as good or better value than the handful I was considering.

Working with your son-in-law you might also be interested in:  http://project3million.blogspot.com/  This is Chowder's blog he writes about his son's investing.  Chowder is another guy from Seeking Alpha.

BTW, for the short test period of the dividend raisers, the growth stock picks underperformed by a bit over 50% less CAR, around under 6%-ish.  I haven't run a correlation analysis yet, but I wouldn't be surprised if it wasn't high.

Below is a good article pointing out the weaknesses of ETF's that factor tilt.  The takeaway message I get is that if you want something done right, you have to do it yourself.  Wall Street doesn't care.

http://www.indexuniverse.com/publicatio ... =1&start=6

Also its particularly noteworthy for the OP that past research by Sharpe came to the conclusion that size and style accounted for 80-90% of mutual fund returns, as opposed to 10-20% stock selection.  Add that to the widely misunderstood 90% of asset allocation explains volatility (not returns), and it seems obvious what to focus on for a top-down approach.

I do have a suspicion that sector and industry momentum are subsumed in Sharpe's research, but this is just a theory.

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Dividend growing stocks have outperformed during all types of inflationary periods

So how do they perform during deflationary periods (whether sharp but only lasting a few years like the worst part of the Great Depression or not as severe in terms of economic contraction but much more long and drawn out timewise like the 1990s and 2000s during Japan's Lost Decade(s))? The only real test we had was 2008-09 but that got cut short by TARP, the Fed, the stimulus, etc. How did dividend growers (or at least steady dividend payers, since I don't think dividend growth is considered as important and indication of a company's health and success as it is here) do in Japan from 1990 to 2011? How did dividend stocks do in the US from 1929 to 1933? It would be interesting to see some hard data on that.

D1984 wrote:How did dividend stocks do in the US from 1929 to 1933? It would be interesting to see some hard data on that.

It's out there.  One source, Bill Staton's "Double Your Money in America's Finest Companies: The Unbeatable Power of Rising Dividends" talks about many companies still paying today that paid thru the great depression and some that raised it during the depression as well.

Such as Walgreens (WAG) which initiated their divided in 1933 at $1 and by 1935 was $1.30.

Or Abbot Labs (ABT) paid $1.50 in 1929 but by 1935 had doubled it.  Their share price also did well, if you consider $47 to $17 to $130 to be well.

AT&T paid all the way thru.

Kimberly Clark skipped 1933 and 1934.

IBM was paying 50% more by 1932 than before the depression.

There are other sources but they aren't exactly popular topics to write about.  It was a long time ago...  But the basic idea then was the same as now.  Solid companies with a strong moat.  They keep making money, they keep paying their owners.