• After reading our 6 Days to Dividend Growth Investing Series, I thought of giving you a great starting point. I’ve decided to create my own “buy list”.

    Before we start with our buy list, first I wanted to share a few thoughts on how the list was created. When we built our DSR portfolios back in 2013, it was a good time to buy most companies in our portfolios. You can see by our strong results that we did a good job picking the right stocks at the right time. On the other hand, the market is up remarkably from 2013 to early 2015. Now that the easy money is gone, it doesn’t mean that it’s not the right time to invest. However, it is definitely time to become picky before you make each purchase. This is why I’ve personally handpicked a short list of stocks that I would buy today if I had extra cash in hand.

    How the list was built

    First, all stocks in each of our portfolios are picked because they share several metrics in common. At DSR, you know we focus on strong companies showing the ability to grow their revenues, earnings and dividend payments all at the same time, preferably for many years to come. We find these companies using our proven 7 Investing Principles.

    Now, these principles are the foundation of our investment strategy to select strong companies according to our investing goals. And it doesn’t cover the question of when to trade. When do you chose to buy shares of a stock is a difficult science to master. Since we follow our stocks on a daily basis and review our portfolios monthly, we know which companies show the best short term potential. While we believe all companies in our portfolios deserve their place, some are more attractive than others at certain points in time.

    The list has been built choosing stocks with strong fundamentals with an additional edge. I looked to find something more interesting about a single company compared to all the other great picks we own in our portfolio. This is the edge that could boost the stock price to a whole new level over the next two years. It could be several things:

    • A recent competitive advantage that was developed internally,
    • An acquisition opening doors to new markets,
    • Temporarily bad news dragging the stock price into undervalued territory,
    • New products/markets with huge future potential,
    • Possibility of upcoming acquisitions/mergers,
    • Favorable environment for the upcoming years,
    • Incredibly strong business model showing success year after year,

     

    How to use this list

    Then again, at DSR, we dont make stocks recommendations. I’m not your personal broker and I can’t tell you how to make a trading decision. However, we are sharing this list to share our thoughts with you and how we would manage extra money in our account if we had to purchase shares tomorrow morning.

    The list is not built according for a specific portfolio. You could find growth stocks that will be included in a portfolio for a 18 to 36 month strategy to benefit from its short term upside potential. You can also find core (conservative) stocks that are currently undervalued and you will probably hold in your portfolio for the next ten years. It’s just a matter of buying the right stock at the right time.

    The list hasnt been built around a specific sector allocation either. This means you could find 4 stocks from the same sector at one point. If several companies in the same sector are attractive (I’m thinking about the oil industry two months ago for example), I will pick amongst them. My first criterion for a decision to include a stock in this list is to find a company with an edge. It doesn’t mean you should buy all of them if they are coming from the same sector. This would greatly unbalance your portfolio and your overall returns could suffer over the long haul. I will rely on your good judgement to make the right trade for your portfolio, your personal situation.

    How the list will be updated

    The list will be updated monthly through the DSR premium newsletter. Each month, the newsletter will include the latest news around stocks I’ve picked to be on my buy list. If the short term profit is materialized or events change the upside potential of a company, there will be another company picked to replace it.

    If you have any questions regarding the list, please send me an email at dividendustries@gmail.com

    I guess you will understand that this list is available for DSR members only. However, I wanted to give you a quick peek at what the list looks likes in term of data:

    Ticker 5yr Rev Growth 5 yr EPS Growth 5yr Div Growth Current Div Yield
    AAPL 33,63% 37,84% N/A 1,52%
    DSR Member Only 18,71% 24,84% 19,86% 2,44%
    DSR Member Only 6,19% 17,52% 19,70% 1,11%
    DSR Member Only 8,81% 12,99% 7,53% 2,67%
    DSR Member Only -0,52% -11,70% 20,30% 3,87%
    DSR Member Only 39,18% 6,13% 11,37% 7,42%
    DSR Member Only 29,09% 37,83% 17,23% 3,39%
    DSR Member Only 4,42% 4,80% 9,86% 3,84%
    DSR Member Only 14,91% 13,34% 7,45% 3,81%
    AGU.TO 11,94% 21,92% 94,09% 2,83%

     

    For the first issue, I’ve also made a special play. I decided to share it with you as well…

    Mike’s Special Play of the Month

    I will end this newsletter with a special play. Not to be included in our list for the future, but I find this situation interesting. I’m talking about the beating in the market that SNC Lavalin (SNC.TO) suffered. The stock price dropped by 35% since August and there was an additional drop after more fraud accusations were levied by the RCMP.

    snc

    The stock is currently trading at a P/E ratio of 4.27. The market cap is $5.69B while its 17% share of the Ontario Highway 407 is worth $3B alone. Other infrastructures are worth about $1.2B and the company shows an order book worth of $12.3B. Oh… and did I tell you SNC has $1.7B sitting in their bank account. This stock will either soar to $55 or will be declared a value trap shortly. As there are several uncertainties around the fraud lawsuit, the market will remain highly pessimistic for the moment. This trade is not for the faint of heart but could pay well.

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  • Wow! What a week! (again!). This week I officially bought The Dividend Monk (you can read the full story here). I started to work on this acquisition in January, I’m very happy the deal is closed can I can move forward. I have set monthly income goals for my websites in order to be able to leave next year around America. After three months, my results are in line with my projections. I hope this purchase will increase my passive income and confirm that I will be financially free in 2016.

    In the meantime, I’m still working 2 evenings per week + 1 full day on my blogs (this is why I can do so much lately!). I intend to keep up with this pace until I leave. Therefore, I have about 14 months of hard work in front of me. During those hard days of work, I always take a few minutes to read articles across the web.

     

    What to read for the weekend:

    Boomer & Echo talks about the very first account you should open when you start saving: your kid’s account! I’m the first one to be late on this topic (I opened my RESP account for my kids when I had my third one only!), but over the past three years, I’ve put closed to 10K (9.9K to be exact) and I have another $1,000 for my godson (I want to make sure my kids’ cousin go to school too!).

    Dividend Growth Investors explains why stock charts are misleading. Here’s my favorite quote from this article: “It won’t matter whether Johnson & Johnson is selling at a 52 week high, or 52 week low.” I never thought stock price mattered when it comes down to buying the right stock.

    Dividend Ladder covers Chubb Corporation (CB). I know it’s a dividend aristocrats but sales growth are close to… nothing over 10 years. I’m not convinced it’s the best investment at the moment. But that’s my 2 cents.

    Dividend Mantra brings the topic of ethic while investing. There is definitely a large spectrum to ethic for anything and investing is no different. It’s pretty obvious when you talk about cigarette makers but is it the same thing with Coca-Cola and MikeyD selling junk food? Or what about Wal-Mart paying their employees minimal wages? I don’t know where the line stops. I guess it stops when you can sleep at night with your choices!

    Dividend Earner brings an interesting strategy on the table for Canadian Investors; why not buying Canadian dividend stocks in US to receive US money?  It’s a great way to protect your money from the US dollar, never thought of that!

    Bert from Dividend Diplomats analyses Archer-Daniels Midland (ADM). For those who don’t know, ADM process oilseeds, corn, wheat and cocoa and manufacture different kind of vegetable oil. Good valuation, payout ratio under control and an growing dividend. Not to mention they are in a good industry.

    Dividend Hawk talks about Kraft being bought by the same group as Heinz (Huh& Ketchup on my Kraft Dinner??).  I’ve looked at Kraft a while back ago and didn’t find it interesting from a dividend investors perspective, I’ve must have missed something!

    Passive Income Pursuit continues his series about plans for financial independence. I’m part of his 11% who will reach financial independence in the next 1-5 years…. But that’s because I’ll sell everything I own!

     

    A Special Mention To….

    Daniel Norris! He’s a multimillionaire baseball player who lives in a VW camper! His story is truly amazing and inspiring. It’s all about non-confirmity and living by your own rules. I’m now saying everybody should live in a camper, but everybody should live the way they want and enjoy life 100% regardless of people’s judgement.

     

    This will be a busy weekend! My daughter has her fantasy skating show and my son is playing 2 soccer games!

    I hope you will enjoy your weekend!

     

    Mike

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  • We have already arrived at Day #6 of our 6 Days to Dividend Growth Investing Series. For the final day, I would like to suggest a few tips for when you will have more than a few stocks to manage. These are among the best tricks I’ve learned over my 10 years + in the investing world.

     

    #1 Don’t fall for high yield stocks – Go for strong dividend growth

    High dividend yield stocks are usually paying great distributions for a reason; because the market fears they will stop. At best, the company will continue paying its dividend but you won’t see any growth from neither the payout nor the stock value. Go for companies that will supply you with both types of growth instead.

    Don’t limit your thinking to today’s dividend yield and think about the future as well. I’ve made several plays so far with low dividend yield stocks that have paid lots more than any 7-8% dividend yield stocks (APPL, DIS, GS.TO for example).

    If you are not convinced, you can always check my case against high dividend yield stocks.

     

    #2 Don’t fall in love with a stock – Fall in love with your investing strategy

    There are few companies that you will hold during your investing life that are just flawless. You will love their products, love their growth and love their dividend. However, at one point, it’s important to write down the reasons why you bought them and make sure they keep in step with them.

    Falling in love with a stock will blind you from poor results; you may excuse missed earnings projections and forget about a bad year while the market is up. These events should actually become a good reason to go back to the company’s fundamentals and focus on the real reasons why you bought it.

     

    #3 Don’t sell because you made profit – Sell because you have a reason to

    I’m sure you have heard about investors who have a “special rule” for selling. If the stock makes +15, +20 or +25%, they sell. If you talk with these investors, they will tell you they most likely make up their rules very often and sell the stock, rinse & repeat. If you keep talking with them, you will also realize they have left tons of money on the table.

    There are no esoteric rules in the investing universe that will bring a stock down after going up by X%. Therefore, you are simply hurting your portfolio if you sell a winner while it continues to go up. I never look at how much a stock makes in my portfolio to determine if I should sell it or not.

    Sometimes, I sell stocks and they are up by 40%, sometimes I sell them when they show a loss and sometimes, I keep them even if they are +100%. The secret is to have solid investing rules you can rely on and use them to sell your stocks.

     

    #4 Don’t think you can beat the house – Invest wisely

    I’ve seen many investors throughout years think they could (read should!) make up for their past losses with their next play. Investing is not a casino where you can play until you win. There are no “win or lose” scenarios and this is not a game. Investing is a process where you can put the money to work for you. A casino doesn’t work that way. This is why you play at a casino and you invest on the stock market. Never gamble your money, you will lose it.

     

    #5 Diversify

    During your life as an investor, you will see that, sometimes, a specific sector seems unbeatable. The economic environment sets the base for high growth for a small group of companies. It doesn’t mean you should buy all of them. In the early 2000s, Canadian banks and oil sand companies were in two highly promising sectors. We saw the same phenomenon with techno stocks right before Y2K. Investing in too many stocks within the same sector can result in fabulous returns if you are right but will eventually finish with brutal drops once the party is over.

    This has happened in every successful sector at one point or another.

     

    #6 Learn to let go

    For the same reason you should learn to keep a winner, you should also learn to sell a loser. While I’m very proud of my investing returns so far, it doesn’t mean I never lost money on a trade. In fact, I’ve suffered from several stocks losing 50% (RIM, VNP, PDN just to name a few). But I had to let them go and concentrate on the winning plays.

    A bad investment is a bad investment. Then again, there are no esoteric rules guaranteeing that a losing stock will come back from the dead and in order to sell it once it got its value back. This is not going to happen in most cases. If a stock keeps going down, there must be several reasons. Once you find them, you can determine if it is worth keeping it or not. But the historical stock price is not a valid reason.

     

    #7 Never overestimate your results

    I think this advice is probably the most important right now. If you are a young investor who started his portfolio over the past couple of years, you will definitely think it’s easy to invest. I started my investing journey in 2003 and made the same mistake. During my first three years of trading, all I was doing was making more money trade after trade. What I didn’t know is that a monkey would have done the same thing!

    My mistake was to start thinking I couldn’t be wrong. This is when I deviated from my investing process and eventually experienced my first loss on the market.

     

    I hope this series helped you improve your investing skills or to start out on the right foot. If you have any questions, please comment below!

     

    Cheers,

     

    Mike

     

    Related articles:

    Day #1 What is your purpose to invest

    Day #2 Why dividend growth investing

    Day #3 What is the Best Dividend Growth Stock?

    Day #4 How to Proceed with Your First Trades

    Day #5 Tools of the Trades – Dividend Investing Resources

    Day#6 Portfolio Management Tips

     

    Disclaimer; I hold shares of AAPL, DIS and GS.TO

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