A dividend hounds approach to value investing.

[Bev]

Thanks Basil,
Enjoyed this one - "Stories are, by far, the most powerful force in the economy. They are the fuel that can let the tangible parts of the economy work, or the brake that holds our capabilities back."

"The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true."

[Basil]

Thank you Bev for highlighting the most important part of that article.
Investors by and large are an optimistic bunch, they want to believe the story a company tells them is going to come true.  The sad fact is that a lot of inexperienced investors only read the Chairman and CEO's story in the annual report, look at the glossy pictures and that's it.  This is analogous to "drinking the company cool aid" without trying to figure out if its going to be good for your financial health.

Every Chairman and CEO wants to tell a good story to impress their investors and justify their pay, its just basic human nature we're talking about here.

Sadly, far too often, the stories told and the earnings per share simply don't line up.  I call this corporate B.S. and its widespread.  In my book companies are either "making results or making recipes"  Recipes are a combination of excuses about past performance and stories about how the future is going to be so much better. 

Management often stir into their recipes a mixture of how their performance by metrics other than earnings per share show tremendous growth, e.g. sales growth, asset growth, in some cases earnings growth, (without mentioning its on a vastly expanded number of shares on issue), ESG accomplishments, health and safety accomplishments, staff engagement and satisfaction, customer satisfaction and so on.  All of these things are important to varying degrees but what's most important of all is are earnings per share growing, stagnant or going backwards.

I would reiterate this from my opening post in this thread.
I put a hell of a lot of stock on past performance, probably 80-90% and 10-20% on what a company says they're going to do in the future..  Have management already built a track record of earnings per share over this treacherous 5 year period in business that impresses me ?  Have they earned my respect ?

I would add that some companies have earned a reputation as a "show me" story where they have obfuscated things and talked so much corporate B.S. in the past, its best to simply ignore their story altogether and put 100% emphasis on past earnings per share.  Until they can prove otherwise with increased EPS, treat them solely on past performance.     OCA wins my Beagle wooden spoon award for being the best example of a show me story.

[Shareguy]

Well said Basil.

[Ferg]

Thanks for the thread Basil and also the link to the article per your post #45.  The author of that article, Morgan Housel, is on the Board of Markel (NYSE: MKL) which is like a mini / early stage Berkshire Hathaway.

I agree with your approach and comments and I want to add 2 more 'rules' or principles I abide by when selecting good stocks and good dividend yielding stocks.

1) Warren Buffett's rule #1 : never lose money...this can't be helped sometimes but keeping this in mind forces me to ignore feelings of FOMO, avoid what I call 'gambling' on stocks, and to do my own research.  I focus on the same things as you.....EPS growth, dividend sustainability, financial health, status of the relevant business sector etc.

2) Warren Buffett said this in a shareholder address in 1997: "Would I be happy buying this stock if the market closed for five years?".  I take this view nowadays.....if I had to ignore a stock's daily SP movements for 5 years, would I be comfortable owning that stock that long?  If the answer is 'no' then either I'm not buying (because that would be gambling on getting out before others) or I'm selling it and replacing with others that I am happy to hold for 5 years.  WB went on to say this: "Because then you're buying a business if you say yes to that. If you don't say yes to that, you may not be focusing on the proper thing."

Doing this has transformed my portfolio and "liberation day" per KW's post provided fantastic buying opportunities.  Bring on another 'liberation day' event please......

But then everything in  moderation, including application of the rules, so I have <5% in 'fun' stuff.

Source: https://acquirersmultiple.com/2024/12/warren-buffetts-mindset-would-you-hold-this-stock-if-the-market-closed-for-5-years/

[HAWKDOG]

Liberation Day was the bottom of a bear market, which started in Jan/Feb and ended in April. 
(Note: market going up = bull, market going down = bear.  % moves are irrelevant, only direction)

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Define it how you will - Liberation day was single event. 

Based on the arrow on your chart you identify the bear market as March 25  to April 25 - that's a correction IMO not a bear market.  Market overreaction which quickly corrected.

[KW]

Define it how you will - Liberation day was single event. 

Based on the arrow on your chart you identify the bear market as March 25  to April 25 - that's a correction IMO not a bear market.  Market overreaction which quickly corrected.

I define it as a bear market as it was a clear technical break down and a change in trend (and it was Feb-Apr, or Dec-Apr if you look at the Dow and Nasdaq).  A "correction" is a price dip that still keeps the bull market intact.  

July to Aug 2024 would be my idea of a "correction".  

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[HAWKDOG]

I'll agree to disagree.



Your chart looks like a 10 month bull market with a few corrections.  up and to the right baby.

Technically speaking bear markets are drops of at least 20%, it was close but don't think we got there.

[KW]

Technically speaking bear markets are drops of at least 20%, it was close but don't think we got there.

Thats not "technically speaking" at all - if you are into technicals.  Its just a random and meaningless number assigned to it by the media, for people who dont understand markets.  It has nothing to do with the trend of the market.  You can have a 20% correction without breaking the bull market run, and you can have a 15% bear market that does. The only thing that is important is whether there is a change in trend.  

I bought stocks at two points - Dec 2023 and May 2025.  Both on the turn from bear to bull markets.  

[KW]

Your chart looks like a 10 month bull market with a few corrections.  up and to the right baby.

Yes, that was my point.  That was a bull market with corrections.  The uptrend was never broken.  As opposed to Feb-Mar this year when it was clearly broken. 

[HAWKDOG]

Thats not "technically speaking" at all - if you are into technicals.  Its just a random and meaningless number assigned to it by the media, for people who dont understand markets.  It has nothing to do with the trend of the market.  You can have a 20% correction without breaking the bull market run, and you can have a 15% bear market that does. The only thing that is important is whether there is a change in trend. 

I bought stocks at two points - Dec 2023 and May 2025.  Both on the turn from bear to bull markets. 

What is a Bear Market?

A bear market is a finance jargon used to describe a steep drop of 20% or greater in an asset from its most recent high, which may happen over the course of weeks or months and may be attributable to many reasons. The term is most commonly used to describe a sustained fall in the level of a stock market index, such as the S&P 500, the FTSE 100, or the Nikkei 225.

[HAWKDOG]

Yes, that was my point.  That was a bull market with corrections.  The uptrend was never broken.  As opposed to Feb-Mar this year when it was clearly broken.

I have been talking about liberation day which was In April so maybe that's why we aren't connecting

[Basil]

Maybe it's a good idea for you guys to start a TA thread so we keep the TA tactics in one place ?

[KW]

What is a Bear Market?

A bear market is a finance jargon used to describe a steep drop of 20% or greater in an asset from its most recent high, which may happen over the course of weeks or months and may be attributable to many reasons. The term is most commonly used to describe a sustained fall in the level of a stock market index, such as the S&P 500, the FTSE 100, or the Nikkei 225.

I prefer to take market definitions from actual traders, not the media or academics.

Jesse Livermore didn't provide a single numerical definition for a bear market but described it as a period when leading stocks fail to make new highs, indicating market weakness, and the "path of least resistance" for prices is downwards.

In other words, when a downtrend has begun.  If you dont understand whether you are in a bear market or a correction, because you're fixated on whether or not its hit a ficititious number, then you're trading blind.  If you identify that you are in a bear market when its only dropped 10% you get to get out in front of everyone else, who is stupidly sitting there waiting for the magic number of 20%.  By then its too late, and you've doubled your losses. 

I'm just here to help others with 25 years of trading advice, not argue.  You can put me on ignore if you dont like what I have to say.

[Left Field]

From LEK on the other channel......

Divi stocks (Craigs Oct 2025) according to craigs dividend projections

Top 10 based on forward 12 months

1. SKT 12.6%
2. SPK 12.1%
3. GNE 8.1%
4. SPG 8.0%
5. HGH 7.7%
6. KPG 7.5%
7. ARG 7.3%
8. PCT 7.2%
9. CNU 6.8%
10. DGL 6.4%

Top 10 based on 24 months out (2027)
1. SKT 12.6%
2. MHJ 12.2%
3. TWR 10.9%
4. SPK 9.8%
5. HGH 9.0%
6. WHS 8.3%
7. GNE 8.2%
8. SPG 8.0%
9. KPG 7.7%
10. PCT 7.2%

Interesting.... no mention of HLG, FSF and a few others ?

[Cod]

From LEK on the other channel......

Divi stocks (Craigs Oct 2025) according to craigs dividend projections

Top 10 based on forward 12 months

1. SKT 12.6%
2. SPK 12.1%
3. GNE 8.1%
4. SPG 8.0%
5. HGH 7.7%
6. KPG 7.5%
7. ARG 7.3%
8. PCT 7.2%
9. CNU 6.8%
10. DGL 6.4%

Top 10 based on 24 months out (2027)
1. SKT 12.6%
2. MHJ 12.2%
3. TWR 10.9%
4. SPK 9.8%
5. HGH 9.0%
6. WHS 8.3%
7. GNE 8.2%
8. SPG 8.0%
9. KPG 7.7%
10. PCT 7.2%

Interesting.... no mention of HLG, FSF and a few other omissions?

The percentage divi is a function of share cost -- Example 1: SKT stayes the same because the share price stayes the same or the divi and the share price rises in unison maintaining the same percentage. Example 2: MHJ wont have a divi in the next 12 months but towards the end of 24 months will issue a divi (if it was sooner, the price would rise to lower the divi percentage).