I don’t envisage this being a particularly long blog - it is a simple point really so a few paragraphs should cover it. I often see and hear the comment “Don’t buy Tips” and I was thinking about this the other day and came to the view that it is a lot more nuanced than that simple phrase allows for.
The first thought I had was that everything gets Tipped somewhere - i.e. in Investors Chronicle or Shares Magazine, or Mail on Sunday, or Techinvest, or Small Company Sharewatch, or Red Hot Penny Garbage, or Questor in the Telegraph or in the Times or whatever - there are countless sources of ‘Tips’. On this basis, if you were to apply the “Don’t buy Tips” ‘rule‘, then you wouldn’t really be able to buy anything and your Investing Universe would be extremely tiny !!
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Stage 5 - 2015 to 2018 - Well into the Bull Run
Here comes The WheelieDealer. More sophisticated Trading Tricks and focus on Psychology. Enforced Discipline.
After doing my ‘Scores on the Doors’ Blog for 2017 and seeing all the excellent Results that people have achieved on Twitter, it seems timely for me to bash out this Blog and try to put some context around the Returns that have been made and how we should best regard them in relation to our own achievements.
Boiled down to its smelly chicken bones, my contention is that we need to be dead careful when comparing our own Results with those achieved by others - on the positive side they can inspire us to do better but on the negative side they can give us some pretty disheartening and deflating impressions that are probably false and unrealistic. Yes, to a large extent this is maybe yet another Psychology Blog…….
As always with these Blog Series, I have a rough idea of how they will pan out when I start on the early Blogs but as they develop I get to a point where I decide that it deserves some more Parts - hence you will note this is Part 5 of 7 and the next two will be looking at each of the Sector Classifications and highlighting particular Stocks that might be suitable for an Income Portfolio. This extension of the Series partly comes about from the size of each Part and the logical flow but it is also driven by my desire to ensure that at least 1 Part gets released each Week - I am sure this is what Readers want to see and also I am sure you appreciate that it takes me a while to bash them out.
How to Find Suitable Dividend Stocks I guess there are several routes to actually finding the Stocks you want to shove in your Income Portfolio but I will just mention 2 basic methods here which are very much how I tend to go about finding them:
THIS IS NOT A TIP OR RECOMMENDATION. I AM NOT A TIPSTER. PLEASE DO YOUR OWN RESEARCH. PLEASE READ THE DISCLAIMER ON THE HOME PAGE OF MY WEBSITE. IF YOU COPY MY TRADES, YOU WILL PROBABLY LOSE MONEY. I HAVE A VERY LARGE PORTFOLIO AND I USE DIVERSIFICATION TO SPREAD RISK ALONG WITH TRICKS LIKE HEDGING AND OCCASIONALLY BY THE USE OF STOPLOSSES - IF YOU BUY ANY STOCK YOU REALLY SHOULD FOCUS ON HOW IT FITS IN YOUR PORTFOLIO AND KEEP RISK MANAGEMENT AT THE FOREFRONT OF EVERYTHING YOU DO. BE AWARE THAT ALL INVESTORS/TRADERS GET THINGS WRONG AND MANY STOCK SELECTIONS WILL WORK OUT BADLY - MAKE SURE YOU UNDERSTAND THIS.
Boohoo.com BOO came out with Interim Results today and I thought they were superb. Of course, the Market thinks completely differently and the Shares got beat up 15% - it is my Biggest Holding so it did make me wince a little. Anyway, you can read the RNS for the Interims here: http://otp.investis.com/clients/uk/boohoo/rns/regulatory-story.aspx?cid=798&newsid=930898 The big stand out for me is the Growth Rate of the Revenues - up 106% over the 6 months (up 101% in Constant Currencies). Of course, many will trot out the “Revenue is Vanity, Profit is Sanity” adage and this is fair enough - but as often is the case, such simplistic phrases may not always be appropriate (bit like the “Never buy an IPO” which I think is just garbage). My take on this is that BOO is quite simply a Growth Company in the Hottest Growth Sector most of us will probably ever have the good fortune to trip over in our lifetimes - I cannot stress enough how unusual it is to have a Company that can grow at such a stellar pace - from recent memory, only Fevertree FEVR gets even remotely close (bored Readers might want to apply the kind of principles/modelling that I use in this Blog to FEVR and see what pops out at the end).
I am sure many Readers will recognise the sentiment of “missing the Boat” and I regularly see this comment and I am also often asked “How can I justify buying a Stock which is hitting at New All Time Highs?”
In general I think this is a big challenge for New Investors in particular but I also know a lot of experienced Peeps who won’t buy something which is up at New Highs. This might be a Cognitive Error - correction, it definitely is a Cognitive Error !! For me there are 2 aspects to this puzzle. The first one is that if a Stock is making New All Time Highs (and therefore pushing into ‘Blue Sky Territory’ with no obvious Resistance Levels where Sellers will naturally come in) then it clearly has MOMENTUM. I deliberately have used Caps Lock there because we should all know by now that Stocks which possess Upwards Momo are something we should be looking out for and trying to buy; and on the flipside we really must be avoiding Stocks with Downwards Momentum.
The idea for this blog came about on Friday 1st September after a recent new IPO, Ramsdens Holdings RFX, came out with a very positive Trading Update and said “we expect our interim and full year profit before tax to be significantly ahead of market expectations.”
RFX operates Pawn Broker shops but also has a Retail Jewellery bit, Gold Dealing and also they do Foreign Exchange which sort of differentiates them from other Pawn Broker Stocks like H&T HAT. Anyway, as mostly is the case, the Trading Update came out at 7am but by around 9.30am I was reading on Tweets that a couple of Analysts/Brokers had already upgraded their Earnings Per Share (EPS) Forecasts to something like 16p in 2 years time. To be honest, the actual EPS Numbers are not the relevant point here - what struck me was just how fast this was to produce new Forecasts.
Earlier today our Australia Correspondent @nicktudor100 sent round a link on the tweets to a YouTube video by Tony Seba entitled ‘Clean Disruption - Energy & Transportation’, which lasts slightly over 1 hour but I strongly recommend you grab a brew of some sort (or a FEVR enhanced intoxicant if you prefer) and take a bit of time out to watch this:
https://www.youtube.com/watch?v=2b3ttqYDwF0 It covers how ‘Disruptive’ technologies can grow exponentially (the ‘S’ curve) with plenty of examples like Smartfones and it makes the point that once the economics of switching make sense to the End-User, then adoption is extremely rapid. As always he cites the usual example of how fast Kodak declined - believe it or not they reported record Results in just the year 2000.
If you haven’t read Part 1 or you want a refresher, you can read find it here:
http://wheeliedealer.weebly.com/blog/price-vs-value-think-like-an-owner-part-1-of-2 Stoplosses Oh gawd, not that topic again….. I have been refining how I see Stoplosses and their usefulness (or not) and I have written a Blog Draft about this although I have not yet published it and it needs a lot more work. In terms of this current Blog where we are talking about Long Term Investing and Value as opposed to Price, I just see no place for using Stoplosses - in fact, I think they are a downright bad idea. The whole ethos of what I do is to buy Shares of Quality Companies at an Entry Price which gives me a decent Upside Target and a large Margin of Safety. If the Price of the Share falls after I buy the Stock, then all the time the Potential Upside is INCREASING and the Margin of Safety is also getting better - so the idea of a Stoploss where you sell because the Price might be 15% lower, is plain silly - the Price for the Value you are getting has just dropped a lot !!
There has been quite a change to my normal ‘Modus Operandi’ here (I have no idea what that is - probably some sort of Italian Car maybe; I hope it doesn‘t rust too much and the electrics aren‘t too dodgy), and as a total about-face of the usual logic, Part 2 of this Blog has already been published and you should be able to find it not far below on the Blog page. I take the view that it is good to have flexible thinking…..
I had been thinking about a Blog that stresses how important it is for us to try to peep into the near Future and it had merely got to the stage of being on the List of potential Blog Ideas (’The Slate’) but the recent fiasco at Utilitywise UTW has given me fresh impetuous to start work on this one because I see particular relevance as Everyone and his/her Mutt hate UTW but it is quite often the case that when something is collectively hated by the Herd, it is time to be buying. |
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