Ryan Irvine spoke in a Friday evening session on "Do it Yourself Stock Investment". Ryan Irvine is the President of Keystone. Part of this session had Aaron Dunn as the speaker. Their site is www.keystocks.com. I went because Keystone has given good talks in past Money Shows. It was a long session so I have broken my report into four parts.
If your portfolio is longer than 10 years, you should have 60% to 70% in equity. At Keystone Financial they stress diversification and quality over quantity. If you have too many stocks you are the market rather than being in the market.
The first lesson is to pick a winning strategy. You need a plan of action to achieve a goal. You need a framework for making investment decisions. You need a mindset for consuming and reacting to information. Too much information and too many strategies (growth, value, momentum, short term, long term) can result in overly complicated investing, information overload and poor investment performance. Clear and understandable strategy can provide a focus.
They recommended Boyd Income Fund (TSX-BYD.UN, OTC-BFGIF) on 2008. It is into Auto Body repairs. It is still a good stock. They recommended Brookfield Infrastructure Partners LP (TSX-BIP.UN, NYSE-BIP) in 2011 and it is still a buy as a conservative income stock. Algonquin Power & Utilities Corp (TSX-AQN, NYSE-AQN) in 2012 and it is still a Buy.
The best stocks have a strong profitability and cash flow generation. They are simple and understandable. They have a clear and achievable growth plan. They also have a reasonable valuation and a multi-year time horizon.
Invest in companies that are generating meaningful revenue and earnings from operations. Companies that cannot do this are speculative and are not an investment. People often confuse investment and speculation. The investment model is a company that earns money and reinvests it back into the business. The speculative model earnings money from selling shares but never has generated money to reinvest in the business.
You often get the speculative model in so call investment stocks. If investing is getting into the next big thing then it is speculative. If it does not have revenue and profitability, it is speculative. Until a company can demonstrate feasibility, it is speculative. It is not a lost opportunity; it is just saving money by not investing.
CARP means growth at reasonable price. Cash flow is king. A stock is a piece of a business.
Focused diversification is 8 to 12 stocks selected from different sectors. From this you would get 1 stock that does poorly, 3 stocks that are average, 2 - 3 that do well, 2 will do very well and 2 will be excellent. You should build you position in a stock over 6 to 18 months.
Keystone does exhaustive research. How can you become a great investor? Learn a little bit on every company in the market. There are no short cuts but just hard work. They search high and low and from A to Z in Sedar. They look at every company 3 times a year.
Pick times to sell. If a stock's valuation increases and the stock becomes too expensive. You might rebalance on profit realization. Sell when a stock dominates your portfolio. Sell if a company has deteriorating fundamentals or is missing targets. If Revenue and earnings are declining and it has a negative outlook. Sell if you lose confidence in management.
You do not want to be overexposed in a few or one stock. Sometimes the fundamentals of a company will change. They can change to losing. Ask yourself is this the same company as I bought? You should cut your losses and move on. It is best to take a loss now than hope the fundamentals will change.
Keystone is paid by clients. They do independent and unbiased research. They focus on income stocks with dividend growth, on small cap stocks and on US research.
On my other blog I wrote yesterday about Logistec Corp (TSX- LGT.B, OTC-LTKBF)... learn more. Next, I will write about Trigon Metals Inc. (TSX-TM, OTC-PNTZF)... learn more on Friday, October 20, 2017 around 5 pm
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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
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