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How do you select for your companies?

By: Zimbler0 in 6TH POPE | Recommend this post (0)
Sat, 11 Mar 23 3:47 AM | 48 view(s)
Boardmark this board | 6th Edition Pope Board 		Msg. 40883 of 60008
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Fiz > But, getting back on topic, how do you select for your companies?


Zim : I would not mind hearing how others select which equities to buy.

I love companies which increase the dividend every year. I love companies which have a long history of paying out dividends.

What should not be a surprise is that a lot of companies we 'old farts' remember from when we were young and are still in business fit that description. McKormick spices (MKC), Kimberly Clarke (KMB), and Proctor and Gamble (PG), all fit that description.

Another thing I look at is called 'Retained Earnings'. It's on the Balance Sheet. Companies with a lot of money in the retained earnings block look like companies which are making money and can continue to pay out the dividends. (Especially if the retained earnings is getting bigger year over year.)

Mutual Funds?

My 401k is all in mutual funds. Not much choice there, but at least when cashed out it is taxed as ordinary income - not the wild and un-predictable capital gains payouts . . ..

I see mutual funds (now) as a sort of death trap for retirees.

I was heavily invested in stock mutual funds from around 1997 to at least 2003 . . . And the Y2K stock market collapse showed my the disaster they could be.

In 1997, 1998, and 1999 the mutuals was paying out real good. And increasing in value. In 2000 the bottom dropped out of the stock markets and the mutual funds lost a LOT of value. At the end of 2000 they paid out pretty good . . . (seems by law they have to distribute the capital gains and dividends) - apparently they sold some of the garbage early while they could still get something for it then paid it out. 2001 they didn't pay out diddly. 2002 they didn't pay out. 2003 one of them paid out a little . . . (I think they were working off the capital losses.)

And I realized . . . When times was good they paid out good. But when times went bad they might pay out good at the start . . . But they would have had to sell assets at bargain basement prices to make the payouts . . . And then they would not pay out much at all for a while.

Meaning in 2001 - had I been retired - I would have had to sell mutual fund shares at a fraction I paid for them to buy groceries . . . More 'fire sale priced' share sales in 2002 . . . And by the end of 2003 I would have had no shares to appreciate in value.

Another interesting thing about my portfolio. Often enough when my 401K is increasing in value my individual stocks collectively sometimes go down . . . And when the 401K goes down often enough my other stuff goes up. Most of the time I have something going up - and ALL of the time most of my individual stocks are paying out the dividends.

Zim.




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