“Dear Tom, I’ve
been following your site for a while and have come to relate to the dividend
philosophy.
I have some questions however, that I don’t find
addressed anywhere in your blog site.
I would
appreciate knowing….
1. Do you
ever sell off any dividend stocks?
2. If so,
what trigger/s do you look for to alert you that it may be time to sell a
stock?
3. Do you
only concentrate on dividend producing stocks, or do you purchase stocks for
trading positions?
4. You
speak of currency in Euros and the grammar in your blog texts sounds like you
are from somewhere other than the US. May I ask where you live?“
These are
very good questions and I like to answer them all as good as I can.
1.
My investment philosophy is long-term orientated. Normally, I invest money
into stocks with a good past growth performance. I always look for companies
which have doubled sales over the recent 10 years with gaining earnings growth.
It’s also good when the company have paid consecutive dividends and raised them
over the years. In addition, the company should have made share buy backs in a
significant amount. I love it when the number of outstanding shares decreases
steadily and boosts the earnings per share growth. I don’t plan to sell these
stocks. I like to participate on the long-term growth. This alone could drive
my net worth.
It could happen
that the past performance does not work for the future. Something is wrong with
the management and the business model changes or the environment gets tougher. In this case I do sell stocks
and I also close positions completely. As example: I initiated a position in
Esprit, a global clothing retailer, but I needed to close the position because
my view was completely wrong about the stock. There were some changes in the
management structure and the turnaround does not work as I hoped it should. As
a result I made a 50% loss.
2. As mentioned,
one trigger is that the company in no more on track or something has changed.
Another criterion is that the company’s business environment has developed into
a bad direction which makes it hard to grow. I sold stocks from credit rating
agencies, motor cycle companies, multi marketing level stocks and finally stock
exchanges. Sure they can deliver a good return for the future but I see more
opportunities in other sectors with fewer headwinds.
3. I normally don’t
trade stocks. I follow a buy and hold strategy. I like to be an owner of the
company. Sure this is very idealistic especially when you buy only stocks with
an amount of a few thousand dollars but in my view, it doesn’t matter if you
buy 100 stocks or a hundred million. The business of an investor is highly
scalable and works full-time with a few hundred thousand dollars. Sure, it
mainly depends on your living standard approach.
I am not a swing
or day trader. I don’t judge these ways of making money at the market. They all
have their eligibility and could work if you have a good talent in your trading
niche. For me is this not the right strategy because I don’t know how the
market moves over the next days. It’s like gambling if you buy stocks without
having an idea of how to get a return. You need a clear strategy. I don’t play
with money and I couldn’t lose bigger amounts because I must live from it and
every coin I don’t lose is also a penny I don’t need to gain.
4. You are right.
I’m not an U.S. Citizen. I have my net worth accounted in Euro. This is a
problematic situation because my main investments are valuated in US Dollar. I
lose and gain more money with changes in the currency pair EUR/USD. There are
days on which I have a bigger currency effect than equity contributions. I
always think that I can make more money with currency changes but as a long-term
investor, these effects shouldn’t be important for your asset allocation. As
example, Philip Morris makes all of their sales outside the U.S. but in my
accounts the position is listed in USD. A weaker US-Dollar should boost PM’s income
but decrease my position value; the currency effect will be neutralized in the
long-run. I have hedged around 35% of my assets because I sold short the USD
currency.
It doesn’t
matter where you live when you are an investor and maybe I settle one day to an
Asian country because of the higher growth situation and the higher degree of
economic health. The US-Dollar is still the dominating reverse currency but
should lose strength over the time. The Chinese Renminbi and other
emerging market currencies should be stronger as well as the EUR.
Sorry for my bad grammar but I’m not an English
native speaker. I do this writing not for money. It’s more fun and a nice tool to
stay disciplined.
Nothing is perfect in my blog but I hope you get inspired and my work helps you organize your investment strategy. If I wouldn’t do all this research I would have never reached my current wealth level. Yes, investing is still hard work but it pays off.
Nothing is perfect in my blog but I hope you get inspired and my work helps you organize your investment strategy. If I wouldn’t do all this research I would have never reached my current wealth level. Yes, investing is still hard work but it pays off.
I hope
these sentences helped you to understand of how I work. If not you
can leave a comment on my Facebook-Page. I always try
my best to help others.
Tom
Tom