Back in January 2010 I wrote a blog entry called "So, What If The Volitity, Bear Market Is Not Over". It seems like it did not even spell "volatility right". In any event, this post for some reason gets lots of spammers adding comments. They praise the site to sky, but all praise is very generic. Did these people not realize that Blogger is very good at catching spam and does not allow these "comments" on my site?
I do not know what it might mean, but spammers have certainly found my site. The generic praise is ludicrous. However, anyone with a condo site in UK or Australia would think that their posts about their condos is in any way connected to my blog entries on investing in dividend stocks in Canada is beyond me.
There is also a number of spammers whose web site shown on the comments does not align well with the underlying web site name. I delete all of these also. I do not want my readers to click on a web site that might be pornography or contain virus.
I must admit that I am very pleased with the programming Google uses to identify spammers. I very seldom disagree with their assessment of blog comments.
On my other blog I am today writing about Medtronic Inc. (NYSE-MDT)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, September 30, 2013
Friday, September 27, 2013
Buying the Market
I have heard many times that if you buy more than says 20 stocks, you might as well buy the whole market as you will not do any better.
However, this has not been my experience. When I started funding my RRSP and then my Locked-In RRSP, I chose different stocks that I had in my Trading Account. I have done the same thing for my TFSA. I currently have 51 stocks. I just bought a brand new one for my TFSA account this year.
My return last year was 13%. The TSX is up by 4%. Mine you I am including dividends in my return, which the TSX is not. However, my dividends accounted for 3.75% of my return, which leaves my capital gain at 9.75%.
My 5 year total return is 6% per year. The 5 year TSX return is negative 2.1%. The TSX adjusted for dividends at 2% per year is negative 0.1%. (I use 2% because I have read it is the long term average dividend return for the TSX. I know the current one is 3%, but it varies all the time and I have not yet found a place where I can find the dividend yield on the TSX over a number of years.)
On my other blog I am today writing about Canyon Services Group (TSX-FRC, OTC-CYSVF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
However, this has not been my experience. When I started funding my RRSP and then my Locked-In RRSP, I chose different stocks that I had in my Trading Account. I have done the same thing for my TFSA. I currently have 51 stocks. I just bought a brand new one for my TFSA account this year.
My return last year was 13%. The TSX is up by 4%. Mine you I am including dividends in my return, which the TSX is not. However, my dividends accounted for 3.75% of my return, which leaves my capital gain at 9.75%.
My 5 year total return is 6% per year. The 5 year TSX return is negative 2.1%. The TSX adjusted for dividends at 2% per year is negative 0.1%. (I use 2% because I have read it is the long term average dividend return for the TSX. I know the current one is 3%, but it varies all the time and I have not yet found a place where I can find the dividend yield on the TSX over a number of years.)
On my other blog I am today writing about Canyon Services Group (TSX-FRC, OTC-CYSVF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, September 25, 2013
Use of Estimates
I use estimates for looking at some aspects of valuing the current stock price. I think that is valid as stock prices tend to move depending on what investors think that the future holds rather than what the future really holds.
For example, to test whether or not a stock price is reasonable or not, I use the estimates, especially the EPS estimates. So my stock price testing using the Price/EPS and using the Price/Graham Price Ratios use estimates. (My stock price testing using the Price/Book Value per share Ratio and the current dividend yield uses no estimates.)
After at least the first quarterly report, I can start to compare the estimates by analysts to what the company is really doing. For example, on Canadian Utilities Ltd, I find that the analysts are calling for a 6.57% increases in EPS in 2013. After the 2nd Quarterly report is in, I find that the EPS for the year ending year ending at the 2nd Quarter, the EPS are up 8.76% compared to the year ending in 2012. This shows that the analysts are probably on the right track in their EPS estimates.
On my other blog I am today writing about Canadian Utilities Ltd (TSX-CU, OTC-CDUAF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
For example, to test whether or not a stock price is reasonable or not, I use the estimates, especially the EPS estimates. So my stock price testing using the Price/EPS and using the Price/Graham Price Ratios use estimates. (My stock price testing using the Price/Book Value per share Ratio and the current dividend yield uses no estimates.)
After at least the first quarterly report, I can start to compare the estimates by analysts to what the company is really doing. For example, on Canadian Utilities Ltd, I find that the analysts are calling for a 6.57% increases in EPS in 2013. After the 2nd Quarterly report is in, I find that the EPS for the year ending year ending at the 2nd Quarter, the EPS are up 8.76% compared to the year ending in 2012. This shows that the analysts are probably on the right track in their EPS estimates.
On my other blog I am today writing about Canadian Utilities Ltd (TSX-CU, OTC-CDUAF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, September 23, 2013
Living Well
This is not really a difficult subject. What you need to live well is happiness, well-being and financial security.
Happiness deals with the fact that you need
Well-being has to do with having a proper balance died and exercise. This amounts to generally taking care of yourself physically.
The financial security has to do with controlling debt and spending and putting something aside for a rainy date and retirement. Your savings can be in an account, CIGs, or invested in stocks, bonds, Mutual funds, ETFs, etc. For money in retirement you also might be part of a pension plan or get CPP and or OAS.
On my other blog I am today writing about Linamar Corporation (TSX-LNR, OTC-LIMAF) ...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Happiness deals with the fact that you need
- Something to do
- Something to hope for
- Someone(s) to love
Well-being has to do with having a proper balance died and exercise. This amounts to generally taking care of yourself physically.
The financial security has to do with controlling debt and spending and putting something aside for a rainy date and retirement. Your savings can be in an account, CIGs, or invested in stocks, bonds, Mutual funds, ETFs, etc. For money in retirement you also might be part of a pension plan or get CPP and or OAS.
On my other blog I am today writing about Linamar Corporation (TSX-LNR, OTC-LIMAF) ...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Friday, September 20, 2013
Good Times, Bad Times
Why is that we accept the good times, but in bad times we want to find someone to blame? This is extremely self-defeating. There is always going to be both good times and bad times or economic expansions and economic contractions. We would be better off if in the good times, we prepare for the next coming bad time.
On my other blog I am today writing about K-Bro Linen Inc. (TSX-KBL, OTC-KBRLF) ...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
On my other blog I am today writing about K-Bro Linen Inc. (TSX-KBL, OTC-KBRLF) ...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, September 18, 2013
Dividend Payout Ratios
Most important question to ask on dividend paying stock: "Can the level of dividends be sustained?" Also, once you have a company, you need to focus also on its ability to pay their dividend rather than on the stock price. I have found that the value of my portfolio has fluctuated a lot, but my dividend income has not. In fact, my dividend income has only increased since I held a basket of dividend paying stock.
If you just concentrate on your portfolio value, it might drive you crazy and you might just sell when you should not. I have found that in recession, some companies cut or eliminate dividends, some keep them level and other increase them. Overall, my dividend income has still increased. So, what you should be looking at is cash flow. When you look at dividend cash flow, you have to look at it over a 3 month period to get Cycle 1 to 3 of dividend payments. Or, you can look at dividend cash flow over a 12 month period.
Of course, when a company I own cuts or eliminates dividends, I check on the long term viability of the company. You have to ask yourself if you should buy more, sell some or all or just hold on a stock on such a company.
I look at Dividend Payout Ratios based on earnings and on cash flow. If I see some problems I might investigate the company further. I know that some analysts look at DPR based on Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) and Free Cash Flow.
I look at such things sometimes on a short term basis and for REITS, but I do not like to do this on a long term basis for a company. When a company cannot provide a positive EPS higher than the dividend over the long term, it suggests to me that the company is mortgaged to the hilt and not a good long term buy. You should be aware that there are many analysts that seem to disagree with this.
Getting back to my main theme, it is all about whether or not a company can afford to pay their dividends. A company's ability to pay dividends will ultimately lead to higher stock prices over time.
The Investopedia site, is a good site to get some basic information and they concentrate on a DPR based on Earnings. See Investopedia. As I had already said, I look at DPR for both Earnings per Share (EPS) and Cash Flow. If I see problems, I look beyond this on an individual stock basis. Also, for REITs, I look at a DPR on Funds from Operations (FFO). (I used to also look at FFO for the old income trust companies.)
Dividend payout ratios vary widely among companies. Stable, large, mature companies (like TSX-BCE or TSX-TRP) tend to have larger dividend payouts. However, with a more growth-oriented company it will tend to keep their cash for expansion purposes, have modest payout ratios. This would be companies like Saputo (TSX-SAP). In fact a lot of consumer stocks have low payout ratios.
Also, dividends are paid with cash and not with earnings. This is why a lot of analysts check the dividend payments against things like Free Cash Flow. See Investopedia for a definition of Free Cash Flow per Share. Others check the dividends against Funds from Operations (FFO) or Adjusted Funds from Operations (AFFO). For a definition on FFO see Investopedia and also Investopedia for a definition of AFFO.
For an example of calculating FFO, see Investing Answers. This site also discusses the difference between FFO and AFFO. Some REITS pay as high as 90% of the FFO in distributions, but others keep the ratio lower (say 60%). If a REIT is paying 90% of the FFO, it is basically paying all its profits in distributions.
Analysts talk about DPR for Earnings at 60% and below and DPR for Free Cash Flow at 80% and below and 40% or lower for Cash Flow. However, now of this is written in stone, as different industries have different standards. You might want to compare any company with DRRS for similar companies. Note that the best companies have cash flows that are higher than earnings.
In the Investing Daily blog is an article on why you should use cash flow values in your DPR. See Investing Daily. There is a recent article in the G&M. This article talks about dividend sustainability and appropriate dividend payout ratios.
There are sorts of perspectives on this ratio and all sorts of blogs mentioning this ratio. See these articles by Million Dollar Journey, Dividend Money, The Market Capitalist and Dividend Ninja, Motley Fool.
On my other blog I am today writing about HNZ Group Inc. (TSX-HNZ.A, OTC-CDHPF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
If you just concentrate on your portfolio value, it might drive you crazy and you might just sell when you should not. I have found that in recession, some companies cut or eliminate dividends, some keep them level and other increase them. Overall, my dividend income has still increased. So, what you should be looking at is cash flow. When you look at dividend cash flow, you have to look at it over a 3 month period to get Cycle 1 to 3 of dividend payments. Or, you can look at dividend cash flow over a 12 month period.
Of course, when a company I own cuts or eliminates dividends, I check on the long term viability of the company. You have to ask yourself if you should buy more, sell some or all or just hold on a stock on such a company.
I look at Dividend Payout Ratios based on earnings and on cash flow. If I see some problems I might investigate the company further. I know that some analysts look at DPR based on Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) and Free Cash Flow.
I look at such things sometimes on a short term basis and for REITS, but I do not like to do this on a long term basis for a company. When a company cannot provide a positive EPS higher than the dividend over the long term, it suggests to me that the company is mortgaged to the hilt and not a good long term buy. You should be aware that there are many analysts that seem to disagree with this.
Getting back to my main theme, it is all about whether or not a company can afford to pay their dividends. A company's ability to pay dividends will ultimately lead to higher stock prices over time.
The Investopedia site, is a good site to get some basic information and they concentrate on a DPR based on Earnings. See Investopedia. As I had already said, I look at DPR for both Earnings per Share (EPS) and Cash Flow. If I see problems, I look beyond this on an individual stock basis. Also, for REITs, I look at a DPR on Funds from Operations (FFO). (I used to also look at FFO for the old income trust companies.)
Dividend payout ratios vary widely among companies. Stable, large, mature companies (like TSX-BCE or TSX-TRP) tend to have larger dividend payouts. However, with a more growth-oriented company it will tend to keep their cash for expansion purposes, have modest payout ratios. This would be companies like Saputo (TSX-SAP). In fact a lot of consumer stocks have low payout ratios.
Also, dividends are paid with cash and not with earnings. This is why a lot of analysts check the dividend payments against things like Free Cash Flow. See Investopedia for a definition of Free Cash Flow per Share. Others check the dividends against Funds from Operations (FFO) or Adjusted Funds from Operations (AFFO). For a definition on FFO see Investopedia and also Investopedia for a definition of AFFO.
For an example of calculating FFO, see Investing Answers. This site also discusses the difference between FFO and AFFO. Some REITS pay as high as 90% of the FFO in distributions, but others keep the ratio lower (say 60%). If a REIT is paying 90% of the FFO, it is basically paying all its profits in distributions.
Analysts talk about DPR for Earnings at 60% and below and DPR for Free Cash Flow at 80% and below and 40% or lower for Cash Flow. However, now of this is written in stone, as different industries have different standards. You might want to compare any company with DRRS for similar companies. Note that the best companies have cash flows that are higher than earnings.
In the Investing Daily blog is an article on why you should use cash flow values in your DPR. See Investing Daily. There is a recent article in the G&M. This article talks about dividend sustainability and appropriate dividend payout ratios.
There are sorts of perspectives on this ratio and all sorts of blogs mentioning this ratio. See these articles by Million Dollar Journey, Dividend Money, The Market Capitalist and Dividend Ninja, Motley Fool.
On my other blog I am today writing about HNZ Group Inc. (TSX-HNZ.A, OTC-CDHPF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Tuesday, September 17, 2013
Kathleen's Show - Transformations 2013
My friend Kathleen with her friends Ethel Christensen, Ulla Djelweh and Wenda Watt is having an art show called Transformations 2013 stating on October 4, 2013.
The show is at the Women's Art Association, Dignam Gallery at 23 Prince Arthur Avenue. Phone is 416-922-2060. This Gallery is near the St. George Subway Station, Bedford Exit.
The Opening Reception is on Friday October 4, 2013 between the hours of 6 and 9 pm. The Closing Reception is on Friday, October 11, 2013 between the hours of 6 and 9 pm.
Viewing between receptions is by appointment and on Saturday October 5, 2013 and Saturday October 12, 2013 between the hours of 1 to 4 pm.
Monday, September 16, 2013
Importance of Capital
Once you start earning money, you should use some of it to produce another income stream. One place to get an income stream is from dividends of stock companies.
Income from investing should be channeled back into other investments whenever you can manage this. You might have to sometimes spend this income. Life does not go smoothly. However, you should not consider using the capital from which this income comes.
It takes a long time to build up capital, but if used, capital can disappear in a flash. Reports that I hear about people who win lotteries are rather disheartening. It does not matter what the country is, Canada, US, UK etc., it does not seem to matter how much people win, it seems that in about 10 years, lottery wins are broke. They are worse off than when they won.
The thing with income from investments, you should be getting more income each year from your overall investments. However, when you have capital invested in stock, the capital you have according to the TSX can gyrate a lot. Basically the market goes up and down based on how people current view the future. People's view of the future keeps changing every minute. I would not worry about this. You should focus on income and how that is changing overall.
On my other blog I am today writing about Reitmans (Canada) Ltd. (TSX-RET.A, OTC-RTMAF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Income from investing should be channeled back into other investments whenever you can manage this. You might have to sometimes spend this income. Life does not go smoothly. However, you should not consider using the capital from which this income comes.
It takes a long time to build up capital, but if used, capital can disappear in a flash. Reports that I hear about people who win lotteries are rather disheartening. It does not matter what the country is, Canada, US, UK etc., it does not seem to matter how much people win, it seems that in about 10 years, lottery wins are broke. They are worse off than when they won.
The thing with income from investments, you should be getting more income each year from your overall investments. However, when you have capital invested in stock, the capital you have according to the TSX can gyrate a lot. Basically the market goes up and down based on how people current view the future. People's view of the future keeps changing every minute. I would not worry about this. You should focus on income and how that is changing overall.
On my other blog I am today writing about Reitmans (Canada) Ltd. (TSX-RET.A, OTC-RTMAF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Friday, September 13, 2013
Income Investing
I was just reading an interesting article on the TriDelta site by Ted Rechtshaffen on "The end of income investing - for now".
I am basically in agreement with him that REITs, Utilities and Telecommunications are overpriced. Personally I just bought some Barrick Gold Corp (TSX-ABX), which he mentions under Strike #1. I also have some tech stocks as he suggests in Strike #3. However, my tech stocks are Canadian, not American companies.
I will also be retaining my REITs, Utilities, and Telecommunication stocks. If you have a diversified portfolio, you will find that different parts of it perform better (or worse) at different times.
If you want some Tech stocks you should go to Can Tech. They had an article in June of this year on 12 dividend paying tech stocks. See the newsletter here.
On my other blog I am today writing about Granite REIT (TSX-GRT.UN, NYSE-GRP.U)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
I am basically in agreement with him that REITs, Utilities and Telecommunications are overpriced. Personally I just bought some Barrick Gold Corp (TSX-ABX), which he mentions under Strike #1. I also have some tech stocks as he suggests in Strike #3. However, my tech stocks are Canadian, not American companies.
I will also be retaining my REITs, Utilities, and Telecommunication stocks. If you have a diversified portfolio, you will find that different parts of it perform better (or worse) at different times.
If you want some Tech stocks you should go to Can Tech. They had an article in June of this year on 12 dividend paying tech stocks. See the newsletter here.
On my other blog I am today writing about Granite REIT (TSX-GRT.UN, NYSE-GRP.U)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, September 11, 2013
Payday Loans Companies
I was reading in the Knowledge Bureau's site about payday loans and discounting providers. You can see the article here.
I do not like either concept and would personally never use them. However, people with money problems are going to and it is better that they are legitimate and government regulated. I would not invest in a financial company that does Payday loans.
I look at the tax discounting a bit differently. People get their taxes done at a reasonable rate. Taxes today are extremely complex so this is a service they are receiving. Not something I would do, but this service fills a need.
On my other blog I am today writing about Teck Resources Ltd (TSX-TCK.B, NYSE-TCK...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
I do not like either concept and would personally never use them. However, people with money problems are going to and it is better that they are legitimate and government regulated. I would not invest in a financial company that does Payday loans.
I look at the tax discounting a bit differently. People get their taxes done at a reasonable rate. Taxes today are extremely complex so this is a service they are receiving. Not something I would do, but this service fills a need.
On my other blog I am today writing about Teck Resources Ltd (TSX-TCK.B, NYSE-TCK...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Tuesday, September 10, 2013
Global Warming Religion
I am called a Denier (i.e. a Global Warming Denier). It is not because I do not believe that our climate is changing and the world climate is getting warmer. I do believe that the world's climate is getting warmer. It is not because I do not believe we should get off oil, because I believe we should. I also believe that we will. I do not know when, but it will come.
I do believe we must stop polluting our environment. I also have hope that we will clean up our environment and do better by our environment than we have in the past. I believe that we have made great strides in the Western world towards clean up the mess we have made with our natural environment.
The problem, you see, is that I wonder, philosophically, how much humans are really in charge of anything. I wonder how much natural forces are contributing to our warning climate. I do not swallow wholesale everything preached by the Global Warming Religion and therefore, I am accused of being a Global Warmer Denier.
I agree that we do have some influence. We can certainly do some great damage to our environment. We have torn up great forests and killed off many land animals. We are responsible for huge changes to our oceans as we have killed off and devastated whole species of fish.
There has been a tremendous growth in population. In 1800 there was 1 billion and today there are 7 billion. I am just reading a history of the US and the author reckoned there were around 3M people in the US at the time of the revolution. There are some 314M today.
It is not like our climate has not been warm (Roman Warm Period, Medieval Warm Period) or cool (Dark Ages, Little Ice Age) in the past. So, we have gone from Roman Warm Period to Dark Ages (cool) to Medieval Warm Period to Little Ice Age, but all weather changes that are now occurring is our fault. There is no possibility of any natural causes?
Does all this not sound like the over tones of religion?
On my other blog I am today writing about Teck Resources Ltd (TSX-TCK.B, NYSE-TCK...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
I do believe we must stop polluting our environment. I also have hope that we will clean up our environment and do better by our environment than we have in the past. I believe that we have made great strides in the Western world towards clean up the mess we have made with our natural environment.
The problem, you see, is that I wonder, philosophically, how much humans are really in charge of anything. I wonder how much natural forces are contributing to our warning climate. I do not swallow wholesale everything preached by the Global Warming Religion and therefore, I am accused of being a Global Warmer Denier.
I agree that we do have some influence. We can certainly do some great damage to our environment. We have torn up great forests and killed off many land animals. We are responsible for huge changes to our oceans as we have killed off and devastated whole species of fish.
There has been a tremendous growth in population. In 1800 there was 1 billion and today there are 7 billion. I am just reading a history of the US and the author reckoned there were around 3M people in the US at the time of the revolution. There are some 314M today.
It is not like our climate has not been warm (Roman Warm Period, Medieval Warm Period) or cool (Dark Ages, Little Ice Age) in the past. So, we have gone from Roman Warm Period to Dark Ages (cool) to Medieval Warm Period to Little Ice Age, but all weather changes that are now occurring is our fault. There is no possibility of any natural causes?
Does all this not sound like the over tones of religion?
On my other blog I am today writing about Teck Resources Ltd (TSX-TCK.B, NYSE-TCK...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, September 9, 2013
Graham Number or Price
On my other blog I am today writing about Enbridge Income Fund Holdings (TSX-ENF, OTC-EBGUF)...continue...
I thought today I would talk about the Graham Price or Graham Number as there has been questions about this item. This is based on the principles of Benjamin Graham and it is meant to be used to calculate the maximum price you should pay for a stock. See Wikipedia for this calculation. Investopedia also explains about this calculation on their site
Benjamin Graham wrote a book called The Intelligent Investor and this book is considered to be a classic investment book. On my website, you can find out how to order this book on Amazon if you care to purchase it. See Graham. Also, this book review and other books I have reviewed are on my website at Book Reviews. Benjamin Graham has an entry on Wikipedia. There is also a good review of this book at Motley Fool website.
Why do I look at this number? I want to be able to figure out what a decent price is to pay for a stock. To this end, I not only look at the Graham Number, but also P/E (price/earnings) ratios, P/B (Price/Book Value) ratios and dividend yield. That is why I look at the current ratios, the dividend yield and the Graham Price and compare them to 5 and 10 year averages.
Having invested for many years, I doubt if you can do better than pay a rather average price for a stock. What I am trying to prevent is over paying for a stock. What I have found is that if you over pay for a stock, the dividend yield that you get over the long term can be affected. If you do this too much, I am sure your portfolio will also suffer.
The formula I use is the square root of (22.5 X EPS X BVPS), where EPS is earnings per share and BVPS is Book Value per share. When I am calculating the current Graham Price, I simply use in my formula, the estimate earnings for the current year and the current book value (all from my spreadsheet).
For other years, in the Graham Prices on my spreadsheet I use the diluted reported earnings per share. There is some controversy about what you should use. Some think that you should use net earnings divided by the outstanding shares. I find mostly that there is not much difference and I want a quick and easy way to get a value to match against the current price.
Some site talks about the NCAV (or net current asset value) and have a formula for that, but I do not use this figure. See the Div-Net site on how they use the Graham Price in valuing Lowes Company (NYSE-LOW).
There is also the Tipblog.in site that explains how they use Benjamin Graham Number to determine a fair price to pay for a stock.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
I thought today I would talk about the Graham Price or Graham Number as there has been questions about this item. This is based on the principles of Benjamin Graham and it is meant to be used to calculate the maximum price you should pay for a stock. See Wikipedia for this calculation. Investopedia also explains about this calculation on their site
Benjamin Graham wrote a book called The Intelligent Investor and this book is considered to be a classic investment book. On my website, you can find out how to order this book on Amazon if you care to purchase it. See Graham. Also, this book review and other books I have reviewed are on my website at Book Reviews. Benjamin Graham has an entry on Wikipedia. There is also a good review of this book at Motley Fool website.
Why do I look at this number? I want to be able to figure out what a decent price is to pay for a stock. To this end, I not only look at the Graham Number, but also P/E (price/earnings) ratios, P/B (Price/Book Value) ratios and dividend yield. That is why I look at the current ratios, the dividend yield and the Graham Price and compare them to 5 and 10 year averages.
Having invested for many years, I doubt if you can do better than pay a rather average price for a stock. What I am trying to prevent is over paying for a stock. What I have found is that if you over pay for a stock, the dividend yield that you get over the long term can be affected. If you do this too much, I am sure your portfolio will also suffer.
The formula I use is the square root of (22.5 X EPS X BVPS), where EPS is earnings per share and BVPS is Book Value per share. When I am calculating the current Graham Price, I simply use in my formula, the estimate earnings for the current year and the current book value (all from my spreadsheet).
For other years, in the Graham Prices on my spreadsheet I use the diluted reported earnings per share. There is some controversy about what you should use. Some think that you should use net earnings divided by the outstanding shares. I find mostly that there is not much difference and I want a quick and easy way to get a value to match against the current price.
Some site talks about the NCAV (or net current asset value) and have a formula for that, but I do not use this figure. See the Div-Net site on how they use the Graham Price in valuing Lowes Company (NYSE-LOW).
There is also the Tipblog.in site that explains how they use Benjamin Graham Number to determine a fair price to pay for a stock.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Thursday, September 5, 2013
PEG Ratio
Someone who follows my blogs asked a question the other day. She was wondering if my Price/Graham Price Ratio was the same as the PEG ratio. It is very different.
The PEG Ratio is the Price/Earnings to Growth Ratio or P/E ratio/Annual EPS Growth. The lower the PEG Ratio is the better the stock price. A fairly priced stock should have a PEG at 1.
For example with Badger, I can calculate both a Trailing or Historical and a forward or future PEG Ratio. For Badger Daylighting Ltd (TSX-BAD, OTC-BADFF), I can calculate the PEG.
The Trailing or Historical PEG would be 2.03 (18.78/9.23) which is the current P/E of 18.78 divided by the 5 year growth in EPS at 9.23%. I can also use the 5 year running average growth over 5 years which is 10.33 and gets us the PEG Ratio of 1.82.
The Forward or Future PEG Ratio would be using the anticipated EPS growth for 2013 of 22.82% and this would give us a PEG of 0.82 (18.78/22.82). You could also use the average of next 3 years of growth and dividend 18.78 by averaging the growth rates of 22.82%, 17.23% and 4.32% for a PEG Ratio of 1.27.
The P/E Ratio I was using of 18.78 is based on a stock price of $55.60 and 2013 earnings estimate of $2.96. This is the forward P/E Ratio. You could also use the Trailing P/E of 23.07 which is based on a stock price of $55.60 and 2012 earnings of $2.41. For a Trailing P/E you could also use the one based on EPS over last 12 months to most recent report of June 2013, which is $2.61. The EPS here is 21.30 based on Stock Price of $55.60 and EPS of $2.61.
Check out information on this ratio at Investopedia. This is generally a good site to get information on all the ratios that are used for stocks. There is also an article on Wikipedia on this subject. I used Google to search these sites. The search engine, especially the Wikipedia one is not nearly as good as Google.
I will talk about the Graham Price or Number in another post.
On my other blog I am today writing about Great-West Lifeco Inc. (TSX-GWO, OTC-GWLIF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
The PEG Ratio is the Price/Earnings to Growth Ratio or P/E ratio/Annual EPS Growth. The lower the PEG Ratio is the better the stock price. A fairly priced stock should have a PEG at 1.
For example with Badger, I can calculate both a Trailing or Historical and a forward or future PEG Ratio. For Badger Daylighting Ltd (TSX-BAD, OTC-BADFF), I can calculate the PEG.
The Trailing or Historical PEG would be 2.03 (18.78/9.23) which is the current P/E of 18.78 divided by the 5 year growth in EPS at 9.23%. I can also use the 5 year running average growth over 5 years which is 10.33 and gets us the PEG Ratio of 1.82.
The Forward or Future PEG Ratio would be using the anticipated EPS growth for 2013 of 22.82% and this would give us a PEG of 0.82 (18.78/22.82). You could also use the average of next 3 years of growth and dividend 18.78 by averaging the growth rates of 22.82%, 17.23% and 4.32% for a PEG Ratio of 1.27.
The P/E Ratio I was using of 18.78 is based on a stock price of $55.60 and 2013 earnings estimate of $2.96. This is the forward P/E Ratio. You could also use the Trailing P/E of 23.07 which is based on a stock price of $55.60 and 2012 earnings of $2.41. For a Trailing P/E you could also use the one based on EPS over last 12 months to most recent report of June 2013, which is $2.61. The EPS here is 21.30 based on Stock Price of $55.60 and EPS of $2.61.
Check out information on this ratio at Investopedia. This is generally a good site to get information on all the ratios that are used for stocks. There is also an article on Wikipedia on this subject. I used Google to search these sites. The search engine, especially the Wikipedia one is not nearly as good as Google.
I will talk about the Graham Price or Number in another post.
On my other blog I am today writing about Great-West Lifeco Inc. (TSX-GWO, OTC-GWLIF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Tuesday, September 3, 2013
Limiting Exposure
Someone who follows my blogs asked a question the other day. It was "I was wondering what your views are regarding the weight of each stock in a portfolio? I have seen some people recommending a maximum weight of 10% while others feel 5% is safer. What weighting do you use in your own portfolio?"
The maximum weighting probably depends on the size of your portfolio. I started off with 3 stocks from 3 sectors and built up my shares before moving on to other stocks. When I got a sizable portfolio, I limited my exposure of any one stock to 10%, and now as my portfolio has gotten bigger, I am limiting my exposure to 5%, although a few a bit higher, but not by much.
However, you should also limit your exposure to different investment sectors. People often talk about a division between fixed income investments and stock investments. I used to do this, but fixed income has not been a category I have invested in for a while. I sold my last bond in 2007. There is just not much money to make there, but there are lots of people who disagree with me on this.
There should be limits to exposure to different stock investments. The most common way is to use the MX sectors of Consumer Discretionary, Consumer Staples, Metals and Mining, Energy, Financial, Health Care, Industrials, Information Technology, Materials, Telecommunication Services, Utilities and REIT. Some people use similar but slightly different categories.
It does not matter how you categorize stocks; you should think about what sorts of things you want to be exposed to. I personally limit my exposure to Metals and Mining and Materials categories. I have little. I also limit exposure to Energy. I have nothing in Health Care. The problem I have with these categories is that they are not the sort of stocks you can tuck away in your portfolio and forget about.
I think that last thing to talk about is when buying stocks. If a stock is a safe, large cap type, I make an original purchase in the neighborhood of $10,000 to $15,000. An example would be Canadian Nation Railway (TSX-CN). If I am buying a small cap I might start with $500 to $1,000. An example of this would be McCoy Corp (TSX-MCB). For a risky stock, I might start with 100 shares. An example might be Canadian Natural Resources (TSX-CNQ). (I think all energy stocks have higher than normal risk.)
I always make an initial purchase and if it works fine, I may buy more. However, sometimes I just purchase a stock to put away for a while to see what happens. I just purchased Barrick Gold Corp (TSX-ABX) for this purpose.
On my other blog I am today writing about Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
The maximum weighting probably depends on the size of your portfolio. I started off with 3 stocks from 3 sectors and built up my shares before moving on to other stocks. When I got a sizable portfolio, I limited my exposure of any one stock to 10%, and now as my portfolio has gotten bigger, I am limiting my exposure to 5%, although a few a bit higher, but not by much.
However, you should also limit your exposure to different investment sectors. People often talk about a division between fixed income investments and stock investments. I used to do this, but fixed income has not been a category I have invested in for a while. I sold my last bond in 2007. There is just not much money to make there, but there are lots of people who disagree with me on this.
There should be limits to exposure to different stock investments. The most common way is to use the MX sectors of Consumer Discretionary, Consumer Staples, Metals and Mining, Energy, Financial, Health Care, Industrials, Information Technology, Materials, Telecommunication Services, Utilities and REIT. Some people use similar but slightly different categories.
It does not matter how you categorize stocks; you should think about what sorts of things you want to be exposed to. I personally limit my exposure to Metals and Mining and Materials categories. I have little. I also limit exposure to Energy. I have nothing in Health Care. The problem I have with these categories is that they are not the sort of stocks you can tuck away in your portfolio and forget about.
I think that last thing to talk about is when buying stocks. If a stock is a safe, large cap type, I make an original purchase in the neighborhood of $10,000 to $15,000. An example would be Canadian Nation Railway (TSX-CN). If I am buying a small cap I might start with $500 to $1,000. An example of this would be McCoy Corp (TSX-MCB). For a risky stock, I might start with 100 shares. An example might be Canadian Natural Resources (TSX-CNQ). (I think all energy stocks have higher than normal risk.)
I always make an initial purchase and if it works fine, I may buy more. However, sometimes I just purchase a stock to put away for a while to see what happens. I just purchased Barrick Gold Corp (TSX-ABX) for this purpose.
On my other blog I am today writing about Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF)...continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
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