If it weren’t for oil stocks, as well as my recognition that there are quite a few companies with superior growth rates worth mentioning, I would spend a lot of time talking about just how cheap IBM has gotten in the past two years (and also bring home the point that Benjamin Graham, David Dodd, and Warren Buffett were right when they said that true value investing is not something many people are going to be able to practice in real life because companies can remain cheap for quite a few years, and heck, Abbott Laboratories spent most of the 2000s trading at a discount before the rapid rise in the value of … Read the rest of this article!
There are some aspects of Benjamin Graham’s “enterprising investor” philosophy that have no appeal to me, because they don’t suit my style and also because I don’t believe that I have the skill set to execute in real life—for instance, Graham describes one type of enterprising investor as one who buys in low markets and sells in high markets. The reason that style does not suit my personality is because stock prices tend to track business performance (at least loosely) and the price of a stock is usually at its highest when its business performance is at its best. I’d want to be around reaping the benefit of Nike’s 16% dividend hike or … Read the rest of this article!
Amazing that an entire marketing department at General Electric found it wise to combine the words sin + crony in launching the Synchrony Financial, the former private credit card label arm of General Electric that has been gradually working its way towards becoming a standalone company (I can’t, for the life of me, figure out why General Electric decided to structure this deal as a share swap rather than an outright spinoff, especially when you take into consideration GE’s betrayal of historical expectations when profits collapsed and the dividend got cut in 2009 which is something General Electric had not done since 1938).
Normally, a straight forward spinoff is most enjoyable for shareholders … Read the rest of this article!
Every now and then, I come across some slight spin on an investing truth that I already think I know that makes me see everything in a new light all over again, afresh. Take something like reinvested dividends. I’ve known for about, oh I don’t know, five years now, that the reinvestment of dividends at low prices is one of the reasons why compounding works so well, and has historically had an outsized effect on the returns of companies like Exxon, Chevron, Altria, and Philip Morris International because the dividend payments mixed with attractive valuations give you total returns in excess of what you would otherwise calculate by examining a company’s growth rate … Read the rest of this article!
There are certain cyclical companies—ExxonMobil, Chevron, Emerson Electric immediately come to mind—that have storied records of growing their dividends year after year that make them interesting case studies independent of most other large-cap industrials and energy companies with cyclical business models. The rising dividend is such an important distinguishing characteristic for those few cyclical companies of Chevron’s caliber because it turns uncertainty into your friend—you have a rising dividend that puts more money into even more shares as they fall 15%, 25%, 50%, or whatever.
When I study Chevron’s history, I am reminded of the Tom Lewis quote that the stock market resembles a man walking a yo-yo up the stairs where people … Read the rest of this article!