Right after ConocoPhillips announced a 66% dividend cut in February 2016, a user with the name “nylitigator” offered this very reasonable sounding comment in response to the suggestion that Conoco was a buy:
“I don’t understand what is attractive about COP after the dividend cut. COP is down 45% or so over the last year (and I understand that one year with any energy company is way too short of a time), but COP is down 27% over the last three years and down about 15% over the last five years (I believe this takes into account the dividends received).
So if you were long COP over the last 5 years you’re still down 15% and now have an approximately 3% dividend to look forward to collecting. I have to believe that there are better places for me to invest my money.”
As a factual matter, that comment was incorrect … Read the rest of this article!
For most of this year, it has been difficult to find stocks that could, in any way, be fairly described as “undervalued.” There have been moments when Tiffany, Hershey, and Diageo have offered a modest discount, which is actually more than any investor deserves given that the earnings quality of those businesses is so high. There have also been moments when Exxon, Chevron, and Royal Dutch Shell have gotten cheap, but the investor community didn’t quite “give away” those stocks at prices that I was hoping for when the price of oil briefly dipped into the $20s. And still others, like Wells Fargo and General Electric, are trading at a pretty fair price in relation to expected dividends and earnings growth over the next decade, but require investors to get passed the mental block of knowing that the returns could have been far superior if they had acted at any … Read the rest of this article!
There were always two contradictory ideas I had to carry around in my head when I first started to study investing: (1) bank stocks have a tendency to blow up every generation or two, completely wiping out shareholder equity, and (2) Wells Fargo always found a way to survive these blow-ups and deliver exceptional returns. What’s the magic that seems to make Wells Fargo the superior bank stock investment for those that want to build sizable generational wealth?
You can look at just about any long-term period and the results are staggering. Bought Wells Fargo in 1972, on the eve of a 75% banking sector crisis? You compounded at a rate of 13.5% through the present day and needed to only put $4,000 into Wells Fargo stock to own a million dollars worth of it today. Bought it in 1981? The compounding rate of Wells Fargo stock was 14.7% annually, … Read the rest of this article!
For the second podcast, I have prepared a thirteen step overview of settling an estate in case you ever get asked to be someone’s executor of estate (or, if your prefer the modern term, personal representative). The probate process is a creature of state law that is mostly governed by each state’s statute, so it’s not an exaggeration to say that every state is different–the steps of administering an estate in California will have way different requirements than Texas. Still, there are general steps that are generally followed in all states, and I provided a twenty minute overview of what the process entails if you’re interested in getting the lay of the land for administering someone’s estate.
I’m excited about launching these new podcasts through Youtube because it gives me a chance to cover a lot of topics that I probably wouldn’t get to if I stuck with the written … Read the rest of this article!
I created a Youtube channel titled “The Conservative Income Investor” to post short videos that will supplement the written content for the site.
For the inaugural edition, I discuss how the duty of the investor is to find the best risk-adjusted investment opportunity that is presently available to you, even if the stock you are analyzing previously traded at a more attractive entry point.
I use Nike as an example. Between 2005 and 2007, the valuation of Nike stock climbed from 15-16x earnings to 23x earnings. A lot of people probably stayed away from the stock on valuation concerns. And yet, even if you purchased a block of Nike stock on the eve of the recession at the absolute highest price in 2007, you still went on to compound at a nearly 16% annual rate.
The primary question should be: What is the most attractive investment I can make today … Read the rest of this article!