Improving The Odds

[robertbanking]

Hello you very pleasant and intelligent individuals, i do hope you are doing well and are healthy.

I have been investing for a few years and i notice in my portfolio i usually have a few gainers and a few losers each year, some years i am lucky to make 5%. I am really wanting to try improve the odds of selecting very good stocks. I appreciate everyone does their own research and has their own formula on what would be a good stock selection. I please kindly wondered what you feel is the most important factor or criteria to look at when determining if a stock will do well and improve the chances of success please? For instance a low debt ratio, twice as many assets as liabilities, a certain business industry? Further if a stock meets your criteria and you invest, how often do you review the stock please and what do you look at to ensure it is still a good investment please?

If anyone please had any thoughts on this i would be forever grateful and thankful. Hope you have a very pleasant day and i wish you all the best. Many thanks for your support.

 

[divs4ever]

an extra factor to consider is the companies ability ( and willingness ) to resist take-overs , i have held some nice small/mid cap companies that get taken-over ( often with little resistance from management/fellow shareholders )

sure you end up with a fist-full of cash , but you lose that income stream AND have to find a good place to park the cash

i look for div. returns ( past AND forecast ) if that looks like buying an income-stream to you, you are probably correct , if the share price goes up ( unreasonably high ) i look to see if taking cash off the table is sensible ( some stocks are paying 20+% p.a. on my buying price , in one case over 80% ) if the share price drops , i ask myself is it sensible to add more shares

portfolio value only matters to me , in respect whether it reduces my disability pension ( it get impacted the same whether the money is in a term deposit or a REIT , but the returns differ )

depending on how much time you have to research ( some folks have a job and family ) i try to keep up with the company news as best as i can AND spend the week after Xmas to review the portfolio holdings over the year/decade

some companies just take directions that make me uncomfortable ( AMP , IPL , ORG, WOW, WBC, ANZ as examples ) and get sold off or drastically reduced ,
MQG got reduced because they kept climbing higher and higher despite unrealistic valuations and high risk profile ( sure they are my biggest holding , but i sold 66% of them on the way up .)

BKL was another example the price was climbing and climbing and one day WES ( cum div and still carrying COL ) was at such a price i could swap 1 BKL for 3( plus ) WES and some chump change , that deal was compelling to me .

currently i am trying to look for 'survivors ' ( companies too well run to fail , and that is fricking hard in an era of 'board refreshes ' )

i also favour companies with directors that have 'skin in the game ' ( take N. Politis and APE , or Gerry Harvey and HVN , as examples ) if the company goes bust their pocket hurts as well

i also prefer companies that have low debt ratios , but that is not always practical , and HIGH debt can be a poison pill against take-over plays

i might say companies with large cash ( and equivalents ) holding , BUT sometimes that attracts leveraged buy-out where the predator uses the cash stock-pile against you

cheers

 

[robertbanking]

Thank you very much indeed divs4ever, really nice to hear from you again and thank you so much for leaving such a detailed response, that is really kind of you.

I think that is very important to look at dividend returns (past and forecast), this will give you a good idea of how reliable the company is. I think that is also of crucial importance to look for survivors, companies too well run to fail, i really appreciate all your comments on this, as this is very helpful to me and i cannot thank you enough.

I have looked at the performance of MQG and it has had some excellent performance from 2020 through to 2022. That is very intelligent to reduce 66% of your holding on the way up. Can i kindly please ask you when you bought into MQG and what key factors did you like about the company at this time please?

Thank you so much for your time divs4ever, you are a very kind person, thank you very much for helping me with my learning. Hope you have a pleasant day.

 

[divs4ever]

Can i kindly please ask you when you bought into MQG and what key factors did you like about the company at this time please?

now even back in 2011 MQG had a reputation ( vampire squid was one expressed in the UK ) some might claim it was a Goldman Sachs imitator

BUT MQG was an investment bank , with an aggressive style and wide-ranging mandate , it leases airliners to airlines , does hedging contracts with miners , assists in mergers and acquisitions in the corporate world assists in capital raising , even does a few home mortgages , has a trading platform for stocks ( and a commodity desk ) sets up investment funds ( often in partnership with pension funds ) and much more

now i started buying ( and continued through ) 2011 buying as the share price slid and slid

the rational i used was my portfolio needed some balance across sectors ( and banking was a BIG one at the time ) but the BIG 4 were not only too big to let fail , but the regulator was limiting growth through acquisition , so where do the big 4 grow sensibly ( the last decade has an unkind reply to that )

now MQG had a wide-ranging mandate and encouraged higher risk-lending AND boldly pursued profits across the globe

now so the BIG 4 couldn't give me the capital growth i desired ( or the returns on cash invested ) but as long as i could tolerate the extra risk , and to me if i am taking on more risk , i need a cheap entry price ( so the gains when i win exceed the loses on those who don't ie one ten-bagger offsets eight duds )

go back to the Hayne Royal Commission where several large banks ( especially AMP ) took a reputation hit

when Nick Moore was questioned by the Commissioner about executive ( and management ) salaries , answered 'the sky is the limit '

when asked about management making bad decisions ' they're gone ' ( implying no second chances )

but in 2011 i understood this mentality AND i need one stock that would grow aggressively , to offset the several other solid boring stocks i was buying as well ( many that had little chance of doubling in SP in the next ten years .. like say Stockland [ SGP ] . WOW or BKW )

i thought MQG could easily double or triple in share price between 2011 and 2022 , but to do that i needed to work on my av. buying price ( $26.76 ) luckily for me 2011 was a great year for that strategy , and the MQG div. returns weren't bad either .

the problem now for the new investor .. what is available to do similar ( triple in share price and give div. returns ) in 2022 and 2023 for the next ten years AND reasonable survival chances

it probably still won't be the BIG 4 banks , and it looks like a tough ask of BHP and RIO , ... WOW i don't think so ( COL either )

now WES has some potential ( a war-chest ) a willingness to push out into the risk area , and management with an assortment of skills and knowledge , a $100 share price ( plus some bonus spin off shares ) is not total fantasy , and might get tail-winds from the pharmacy , lithium , or workplace heath and safety arms ( assuming Bunnings will face challenges in the coming 10 years , and K-Mart/Target don't implode , completely ) and who knows what WES will buy-out next

 

[tech/a]

For me a much overlooked issue for long term investors is culling QUICKLY those stocks that don’t perform as expected.
In particular those that are in profit and turn back to lower than your entry price.

For me holding stocks in a watch list if I think they have longterm potential is easier on the portfolio than just leaving them there.

Keep those performing and cull those that don't. You can always re enter.

You maybe interested in the example of using the 20% rule in longer term trading
Post 3856 in the FMG THREAD

 

[barney]

For me a much overlooked issue for long term investors is culling QUICKLY those stocks that don’t perform as expected.
In particular those that are in profit and turn back to lower than your entry price.

Indeed @tech/a

I've been trading Specs for a long time now, but "fell in love" with one of my R/E stocks, to the point that I held on to a very large holding "far too long"

I've still done well from the Stock; and still hold what some would consider a large holding, but hindsight would have seen me "trade" the Stock more often, rather than "accumulate and hold" as much.

"Bad trading habits" are often hard to get rid of for we less disciplined chaps course, lol.

 

[tech/a]

Indeed @tech/a

I've been trading Specs for a long time now, but "fell in love" with one of my R/E stocks, to the point that I held on to a very large holding "far too long"

I've still done well from the Stock; and still hold what some would consider a large holding, but hindsight would have seen me "trade" the Stock more often, rather than "accumulate and hold" as much.

"Bad trading habits" are often hard to get rid of for we less disciplined chaps course, lol.

I don’t have a problem holding for longer periods which I do with super holdings

But don’t understand holding longterm positions into oblivion because it
Isn’t performing to YOUR expectation.

Clearly others don’t give a toss.

If it pulls back to break even , hits a stop , or wallows between stop and buy price for over a few weeks then I’ll cull it.

Just my own personal take