Investing for income

[So_Cynical]

I've been loading up on WOW. It is always a yin and yang between Woolies and Coles.

My tuckermeter, as evidenced by Mrs Gumnut's shopping dockets have been swinging back to Woolies, after some 9 months being Coles.

WOW has a respectable divi and if the XAO moves up this year there may be capital appreciation.

gg

There was some interesting WOW analysis on inside business this morning...some opinion that the good times are over and that according to the figures organic profit growth has stalled.

 

[Garpal Gumnut]

There was some interesting WOW analysis on inside business this morning...some opinion that the good times are over and that according to the figures organic profit growth has stalled.

Thanks S_C , I'll check it out.

gg

 

[McLovin]

I'm not a "value" investor but i would imagine that they would be in a very similar situation to me, as in they are faced with a decision to buy more or take a substantial loss or do nothing...personally, about 80% of the time i buy more if funds are available to do so.

I am a value investor and if the SP falls then I buy more, unless the reason for the investment has changed. On the flipside, if the price increases beyond my valuation then I will sell.

I tend to see value investing as the rally driving of the stock market. Whereas charting is more like the Forumla 1.

 

[ROE]

That's fine if you have $1 million, you would never go from say $250000 to $1 million with that strategy.
Once you get there then yes, no drama living off it.

How to build it up to there is the issue that I am sure most of us are concerned with at the moment, I am anyway.

Sometimes it is about the journey but not the destination..
A lot of people concentrate on how do I turn XXX into YYY and financial advisers are feed on this stuff and maybe that where things gone haywire.

Maybe they should concentrate on first saving as the first priority, stack away 10-20% each pay cheque religiously and from there work out how to deploy the cash for adequate return rather than concentrate on capital appreciation which most fund managers and advisers seem to fail on epic scale.

I'm all about the journey, I stack away so much each month...without doing anything at all my cash holding will be higher next month than this month due this process..

I then look for a safe place to put the cash that deliver reasonable yield...anything else is a bonus....When will I get to a million isn't too much of a concern because this will
be a by product soon enough when you save, invest and get reasonable yield.

 

[ROE]

There was some interesting WOW analysis on inside business this morning...some opinion that the good times are over and that according to the figures organic profit growth has stalled.

Interesting, I dont like the new CEO already, he seem to say everything is rosy
We done well with everything, we don't know Coles market share but we doing well

Man what short of manager are you if you don't know what your rival is doing?
even if Coles don't release figure, you got an army of people out there they should be
able to figure that out...

and he said Dickie isn't a failure? man is this guy joking or what? margin of 2.7% on
Dickie isn't a failure?

http://www.theaustralian.com.au/bus...smith-no-failure/story-e6frg90f-1226288603598

Beware when managers think like he does

 

[pixel]

Given that DS is up for sale, what would you expect Woolies' ceo to say? "Don't touch it. It's cr@p" ?
No, of course he has to try and talk it up.
Big Biz is in a similar situation as Governments around the world: You know they're telling fibs because their lips are moving...

 

[tinhat]

Some info for dividend:
http://www.sharedividends.com.au
http://www.dividend.com

Thanks for those links, but buyer beware regarding sharedividends.com.au there is some dodgy data in there. I wonder if it gets entered by hand. I found some errors with a couple of stocks - misplaced decimal points. Example: http://www.sharedividends.com.au/dtl

 

[wayneL]

Here is another idea for 'income investing'.

Notwithstanding the selection of stocks on the basis of fundamental soundness and yield, or whatever parameters FAs want to use, if the stocks are optionable, one could sell calls at appropriate times to juice up returns.

Now folks here will probably recall that I have been highly critical of covered calls on these boards, but only in so much as how they have been promoted as a wealth building panacea, a get rich quick scheme and the nonsense of '4-8% per month' type marketing.

Used properly, they can be an excellent means of increasing cash returns from a long term holding.

I am not talking about systematically writing calls every month like the seminar simpletons teach you and charge you $3k for their crap, I'm talking about periodically and strategically writing calls at moments when it is statistically advantageous to do so.

One may also, depending on ones confidence, write them somewhat out of the money to mitigate the risk of being called out and precipitating a CGT event (which can be avoided anyway).

Using covered calls in this way (and acquiring the requisite knowledge) you can increase you annual cash returns safely by maybe 3%, maybe 5%, maybe 10% or more on your long term holdings, depending on a number of factors.

The idea is to write calls at strikes where technically and statistically the price is not likely to go. This means waiting for the right times to do so, rather than slavishly writing calls every month because some hyped up cretin on a stage says you'll get rich by doing so.

This could mean writing calls only a handful of times during the year, but an extra 3 - 5% per year could mean all the difference for those relying on income from a share portfolio.

I stress to avoid '4 - 8% per month' tw@ttery you see all over the net... it's bullshyte, Don't anybody give them your money.

DYOR

 

[dutchie]

Here is another idea for 'income investing'.

Notwithstanding the selection of stocks on the basis of fundamental soundness and yield, or whatever parameters FAs want to use, if the stocks are optionable, one could sell calls at appropriate times to juice up returns.

Now folks here will probably recall that I have been highly critical of covered calls on these boards, but only in so much as how they have been promoted as a wealth building panacea, a get rich quick scheme and the nonsense of '4-8% per month' type marketing.

Used properly, they can be an excellent means of increasing cash returns from a long term holding.

I am not talking about systematically writing calls every month like the seminar simpletons teach you and charge you $3k for their crap, I'm talking about periodically and strategically writing calls at moments when it is statistically advantageous to do so.

One may also, depending on ones confidence, write them somewhat out of the money to mitigate the risk of being called out and precipitating a CGT event (which can be avoided anyway).

Using covered calls in this way (and acquiring the requisite knowledge) you can increase you annual cash returns safely by maybe 3%, maybe 5%, maybe 10% or more on your long term holdings, depending on a number of factors.

The idea is to write calls at strikes where technically and statistically the price is not likely to go. This means waiting for the right times to do so, rather than slavishly writing calls every month because some hyped up cretin on a stage says you'll get rich by doing so.

This could mean writing calls only a handful of times during the year, but an extra 3 - 5% per year could mean all the difference for those relying on income from a share portfolio.

I stress to avoid '4 - 8% per month' tw@ttery you see all over the net... it's bullshyte, Don't anybody give them your money.

DYOR

Good post Wayne

If you followed Elliot Wave theory you could sell a covered call at the end of a wave 1, wave 3 and wave 5.

 

[tech/a]

Good post Wayne

If you followed Elliot Wave theory you could sell a covered call at the end of a wave 1, wave 3 and wave 5.

Or a whole portfolio at 5 of 5 of 5.
Personally wouldnt be concerned with covering a position unless its at the end of a completed wave count.

Wayne being af fan(Elliot)would of course be right on this!

 

[pixel]

Good post Wayne

If you followed Elliot Wave theory you could sell a covered call at the end of a wave 1, wave 3 and wave 5.

+2
While I didn't have specifically EW's in mind, I agree with "what Wayne said."
... including his caution about seminar hype and unkept promises.

 

[skc]

Backing businesses, rather than trading the share price can and does work, but you need to know how to analyse businesses and estimate their worth and it takes time to see off the randomness and fads of the market, the longer you’re holding period the lumpier your equity curve – end of story.

If you want income AND a smooth equity curve, selecting businesses for the yield they can produce is probably not your best bet. The smoothest equity curves come from the shortest holding period strategies.

I never thought I would see the day that such words would came out of a value investor.
:bier:

Yes remarkable insight from a value investor and something that all market participants who aspire to generate income from the market should understand.

On the other hand, there are 2 things that one should assess when it comes to picking their approach (regardless of the above).

1. What is your objective? If you can't sit in front of the screen all day then hyperactivem, TH style day trading probably isn't for you.

2. Where is your skill? Do you really know you are good at picking stocks or short term trading? Don't do something you are not good at just because it has the potential to make more income.

And let's face it, most people fail because they don't have the skill, not because they chose one approach over the other.

 

[odds-on]

Yes remarkable insight from a value investor and something that all market participants who aspire to generate income from the market should understand.

On the other hand, there are 2 things that one should assess when it comes to picking their approach (regardless of the above).

1. What is your objective? If you can't sit in front of the screen all day then hyperactivem, TH style day trading probably isn't for you.

2. Where is your skill? Do you really know you are good at picking stocks or short term trading? Don't do something you are not good at just because it has the potential to make more income.

And let's face it, most people fail because they don't have the skill, not because they chose one approach over the other.

Good points skc!

To any investor I would recommend reading Free Capital by Guy Thomas. He profiles a dozen successful investors and quite rightly identifies that the 12 successful investors as “extraordinary” not just some average Joe off the street. They all seem to have an investment “edge” be it laziness, holding periods, networking, strategies, investment tools, business analysis and so on. The key learning point for me from the book is “edge” and how you apply it. I know that I have a lot to learn and accept that I have yet to gain an edge and may have to accept that one may not be there – if I cannot make a CAGR > 15% over a three year period then I am going to spend my spare time doing other stuff and stick my money in an index tracker as John Bogle/Warren Buffett advise. My performance to date highlights 4 things for me to improve on –

1. Poor decision making – do I remove the decision making process completely and just buy a dozen stocks which meet some proven market beating strategy and accept statistically I will probably come out all right. This is very tempting.
2. Diworsification. If I continue to select my portfolio at this stage I should be holding a maximum of 3 core stocks. Anymore is foolish as the risk of me not properly analysing them is highly likely.
3. Money management. Improve my position sizing and SELL rules. This is important if I only hold three stocks.
4. Focus. How much do I spend searching for ideas? If I hold 3 stocks maximum and holding period between 1 to 2 years then 1 good idea a year is all I really need - I reckon an hour a week research is enough to generate 1 idea a year.

Cheers

Oddson

 

[ROE]

Given that DS is up for sale, what would you expect Woolies' ceo to say? "Don't touch it. It's cr@p" ?
No, of course he has to try and talk it up.
Big Biz is in a similar situation as Governments around the world: You know they're telling fibs because their lips are moving...

So you think the buyer of Dickies just walk in and buy with a positive comments from
former owner?

they would look through the books and at that sort of margin most of them would walk..that why there aren't many buyers jump up and down buying Dickies...
That why they have to close so many stores to make the number look presentable

people may buy just for the inventory but you not going to get much good will out
of it and woolies may end up has to close the whole thing down and write it off...

there is nothing wrong with Woolie came out and say we didn't run Dickies well
I think it's a failure on our part, the new owner maybe able to do a better job

and I reckon that wouldn't make any difference to the sale price...

If I was a WOW investors I would feel much more comfortable with that comments
than talk up something you know in your blood is BAD.

What stopping them from doing the same thing for other business like hardware
when they start losing money and hmm everything is cool just start up cost etc...

Good honest management counts and the one that tell bull**** usually dont run the shop well..
too proud, too afraid to admit mistakes...without admitting mistakes you cant fix the problem

Failing Dickies tell me WOW cant handle competition, only with their dominant
market share they doing well when things get touch and the market is crowded watch out.

No wonder when Coles running by Wesfarmers step up with competition, they falling behind
I was WES skeptic but they proved me wrong, Goyder is a very good and able manager

anyway I think I went off topic, no more posting for a while back to next stock research

 

[McLovin]

So you think the buyer of Dickies just walk in and buy with a positive comments from
former owner?

they would look through the books and at that sort of margin most of them would walk..that why there aren't many buyers jump up and down buying Dickies...
That why they have to close so many stores to make the number look presentable

I have some close friends who run a few websites, one of which competes very closely with DSE. They actually think that DSE's online strategy is excellent (and these guys have gone from selling zero to selling ~$100m/year in 7 years albeit coming from a fairly large, ie they are still not the biggest part of the group, established family company). Considering they are carrying a huge store network, their prices are actually quite reasonable. I'm not saying I'd buy DSE but I wouldn't write it off completely.

You close down 70% of the stores and you have a pretty good online business supplemented by showrooms that is profitable.

 

[village idiot]

TLS is oft quoted to illustrate why not to buy income stocks. but at the start of the downslide referred to if I am reading the charts correctly it was paying a dividend of 18c on a 9.00 stock price, around 2% yield. at that point it was priced more as a speculative stock than income, and it wouldnt have appeared on an income investors radar till long after that

its div wouldnt have become an 'income' target till it got to somewhere around $3.80 when it hit a 6% yield. And if you had bought it around 3.80 it has probably done its job compared to non income stuff

 

[tinhat]

Yesterday would have been a good day to top up on CBA @ $47.66 albeit ex-dividend. Yield 6.82% (9.74% grossed up with franking credits).

 

[MrBurns]

Yesterday would have been a good day to top up on CBA @ $47.66 albeit ex-dividend. Yield 6.82% (9.74% grossed up with franking credits).

That's interesting. I'm thinking hard of going in deep around April depending on where the market is, the more battered it is the better I guess.

 

[Julia]

That's interesting. I'm thinking hard of going in deep around April depending on where the market is, the more battered it is the better I guess.

Why April?

 

[MrBurns]

Why April?

Thats when my cash rolls out of the TD.