It really is a breath of fresh air to listen to a sensible individual who has made £2.5 million from the lottery as to how he has invested his money :

http://www.fool.co.uk/money-talk/diary-of-a-lottery-winner-9892.aspx?source=ufwflwlnk0000001

Two trades

I've dumped my LLPC reluctantly. My reason for buying these in the first place was the ords had a good rally and the prefs did'nt move and I think good chance of LLPC paying out next year. These rallied 20% in Nov and with the Ords falling back significantly the last few weeks, I knew it was only a matter of time before LLPC would follow, which is what happened today.

I have no idea what is happening with the banks and I don't think the market does, the numbers look good on the face of it though so I can see myself buying back LLPC in the future and will look to buy ords of banks but I think there is still loads of time before a bull market starts in these.

I put the proceeds into EMG, I want to get a bigger dividend next week and I think these are also very good value.

I also dumped my holding in Sterling Resources again reluctantly, I think these have further to run in the months ahead when Breagh production starts but as things stand adding to my Soco holding makes more sense as I can see a 50-100% upside from here in Soco over the next year, whereas Sterling possibly 50%? And Sterling is up about 95% so far the last 6 weeks which is a good run..

Fwiw imho the markets in general are going higher and the current blip is a buying opportunity. Too much fear and too many people prepared to raise cash and wait on the sides thinking there is about to be another big crash as QE2 ends.

Time will show how wrong they are. The consensus is wrong time and time again.

People will think I'm talking nonsense because price declines in the market's make them feel 'comfortable' to stay in cash and be bearish etc.

But over the coming months people will see that I am actually correct.

The way these events play out is suddenly markets grind higher and the consense get's left behind as they completely miss the bottom and they scrabble to buy in taking the markets even higher. It really is funny how this pattern always repeats itself and it always seem to fool people over and over again.

The commodity weakness is temporary imho, it is my view that commodities/markets will make new highs this year.

For the recod the FTSE closed at 5861 this evening.
(my bolds)

http://www.stockopedia.co.uk/content/isaacs-thread-high-yielding-shares-other-stuff-41086/?comment=276#276

That was 6 months ago this week, I thought I'd make a date in the diary...some of us have diaries that look that far ahead! ;-)

For the record, the FTSE closed at 5,362.94 on Friday evening :0)

What comes next? Mr Isaac Jekyll, or Mr Isaac Hyde?

Best,
JS123

Jseth

FTSE is down about 500 points or about 10% since that post, my timing may have been incorrect but I'd rather be a buyer here then a seller so my bullish stance remains unchanged.

If you bought stocks at 5861 FTSE then time in the market will show you make money...IMO.

In reply to jseth123, post #317

 x

Top 30 best paid managers

Scott - £198k win on the bank job, 4 times winner....Lucky guy. Do you want a financial advisor? :-)

'UK economy may not recover for more than five years'

Fund manager Mark Slater of MFM on why we could be waiting until after 2017 for growth.

What have you learnt from 20 years in the City?

Run profits and cut losses. It sounds obvious, but it is supremely important. Ignore the noise and focus on the fundamentals. Back your own judgment with conviction. When in doubt, sell. And it is a cardinal sin to treat those rare, truly exceptional, growth businesses like other investments you might own.

http://www.telegraph.co.uk/finance/personalfinance/investing/9140062/UK-economy-may-not-recover-for-more-than-five-years.html

Hi Isaac,

Not having a pop, but you should re-read some of the things you write/endorse :

..."... Back your own judgment with conviction. When in doubt, sell....".....

Look at your postings re Soco management that have graced the Stockopedia board.

As a mildly Aspergers type, I am inordinately confused - and then irritated out of proportion - by people and situations that don't play out as originally (and rationally) expected, based on the original inputs.....

I hope you will understand my confusion.

Let's hope for some news tomorrow that will make sense to both of us

ATB

Dividend Investing is the way to go IMO

Largest UK companies boost dividends 16%

Dividends from almost 200 of the UK’s largest quoted companies by market value rose by more than 16 per cent in 2011, making it the biggest percentage increase since the credit crunch, according to stockbroker research.

http://www.ft.com/cms/s/0/f691d0cc-8157-11e1-b39c-00144feab49a.html#axzz1rUVu2B4Z

Dividend Investing is the way to go IMO

Before leaping to that conclusion, perhaps one should consider the implications of this - also from the FT:

Debt expenses are well-covered by cash flows today. But that can change quickly. Second, it makes it more worrying that corporate margins are also near historic highs. Margins closely track revenue growth. And revenue growth is rolling over. Leverage is much less fun with higher interest costs and falling profits.

ee,

I think your arguement of avoiding the HYP stocks is interest rates will rise which in turn will make it more expensive for corporates to fund debt and in turn will reduce their dividends. I don' think the BOE will raise rates for a few years, infact I've recently read they are contemplating more QE.....

When will the Bank of England boost rates?

This is the billion-dollar question, if you'll pardon the cliche. Unfortunately, it's anyone's guess; economists have consistently missed the mark with predictions since the base rate hit 0.5 per cent.

It's pretty safe, though, to say that the Bank of England has no immediate plans to raise rates in 2012. Bank Governor, Mervyn King, repeatedly stresses that low rates are a necessity to kick-start Britain's flagging economy into recovery mode. The theory is that low rates encourage cheap lending. This should translate into growth as cash is fed to small businesses in need (the reality is less clear-cut, as we've seen over the last three years with banks hoarding larger reserves).

 

Enlarge  

 

With the UK expected to struggle to post growth higher than 1 per cent over the next 12 months, economists' latest estimate is 2015 for the first movement.

Vicky Redwood, chief UK economist at Capital Economics, says: 'We think that they could stay [at 0.5 per cent] for another three years.'

She also raises the possibility that the Bank could cut rates to 0.25 per cent, saying: ‘Official interest rates could fall even further.’

Money markets are also used as a guide of the financial world's expectations over base rate. The indications are currently a rise in May 2014 - the earliest forecast for a long time having moved slightly during the week beginning 12 March. These are constantly in flux, though, and change at the smallest piece of bad/good news on the economy.

A poll of leading economists by the Treasury found that most thought it highly unlikely that there will be any movement at all in 2012 - a consensus shared by This is Money - with perhaps only minute boosts until 2014 (see table above).

This is Money editor Andrew Oxlade, who has been tracking base rate for many years in his quintessential rates round-up, says the fragile state of the economy makes it very difficult for any western economy to hike rates at the current time. 'A rate rise still looks a long way off despite a threat of high inflation,' he says

Read more: http://www.dailymail.co.uk/money/saving/article-2116059/ANALYSIS-Should-grab-fixed-variable-rate-cash-ISA-2012.html#ixzz1rXMTYZsM

I personally am waiting for the US Fed to move their rates up and I would expect the UK to follow soon after with gradual movements.And the fed has already said

Federal Reserve says no rate hikes until at least late 2014

http://bottomline.msnbc.msn.com/_news/2012/01/25/10234720-federal-reserve-says-no-rate-hikes-until-at-least-late-2014

 

ee,

Have you looked at TJH 25 year HYP performance? The capital value is up 1400% in that period and the income is up 400%.

http://boards.fool.co.uk/year-end-summary-12525484.aspx?sort=whole#12525484

Have you read The Dividend Investor by Rodney Hobson?

In his book he talks about EPS, Yield, Dividend Cover, gearing, Interest cover & cash flow.

For interest cover Rodney says the following :

Interest on loans is paid before dividends, therefore investors should work out how much cash is left over before pay dividends so we need to work out the interest cover, i.e. how well profits cover interest payments.

This can be worked out by EBIT/ Interest paid

Obviously the cover that is acceptable to a defence stock would be different to say an engineering company where earnings are more volatile.

One can also stress test the above ratio for different interest rate environments to work out whether a company can continue to pay dividends.

4) Consider the value of dividends: “When things are going well and the stock market is rising strongly, the extra returns from dividends may seem relatively unimportant. However, in weaker markets, the return from dividends becomes a valuable contributor to the total return.  Furthermore, the impact of dividends actually becomes amplified over time due to the compounding effect of reinvesting dividends. For example, according to Barclays Capital (Equity Gilt Study 2012) $100 invested in the US stock market in 1925 would have grown to $9,229 by the end of 2010 without re-investing dividends, but to $299,395 if dividend income was reinvested throughout the period. Dividends also have the advantage of being more predictable than corporate earnings because companies strive to maintain their dividends even if their profits are temporarily in decline.”

Funds such as Fidelity Global Dividend make use of the dividend story and allow for a greater diversification of stocks with an equity portfolio, not just by geography but also by industry sector.  

Compounding is the concept of simply earning interest on interest; £100 earning ten per cent this year becomes £110 earning ten per cent the next year which becomes £121 earning ten per cent the next year – and so on. It is the mathematical equivalent of cells multiplying in a Petri dish.

What the above demonstrates is the returns on offer even during times of high interest rates. One is not suggesting investors should pile into any old HYP, clearly one needs to do more due dilligence then simply looking at the headline numbers.

I've held Soco for 8 years. The first few years were great, but the last 5 have been terrible. I knew the score in 2007, either TGD will come in and if it failed the price would drop but with a takeover the price would recover therefore it felt like a sensible bet to take at the time. I did'nt anticpate having to wait 5+ years to get a return though.....That was the fatal error that I did'nt consider properly.

The problem with most investors is they lack patience to sit tight with an Investment, they always feel they have to be doing something when most times doing nothing is the best strategy.

So I ask myself what type of strategy can I sit tight and do nothing, for me it is value investing where I see a discount to NAV and an eventual closer of this gap via the form of a takeover or alternatively seeing the same value gap but being paid a dividend to wait for th gap to close.

Clearly I favour the latter.

In reply to Isaac, post #327

So I ask myself what type of strategy can I sit tight and do nothing, for me it is value investing where I see a discount to NAV and an eventual closer of this gap via the form of a takeover or alternatively seeing the same value gap but being paid a dividend to wait for th gap to close.

Clearly I favour the latter.

Nothing wrong with that as a theory. But the past is the past, and I'm not interested in looking at anyone's historic HYP performance any more than I am interested in looking at my own past LTBH performance. The only thing that matters is the future....

...and I am merely suggesting that the dividend story has recently been "done to death" in the aftermath of the financial collapse and record low interest rates - and a normalisation of market valuations will mean that classical dividend-paying stocks will reverse some of their recent outperformance as people find they can do other things with their money.

ee

In reply to emptyend, post #328

Ok fair enough - I appreciate your views.

So if one wants to make money in the future then in your view what would you say is the way to go?

Buy loads of BG. and LLOY ?

In reply to Isaac, post #329

I wrote a long reply earlier which got lost when the site was down - too late now to rewrite. However, the main view is that I would be focused on company specific growth prospects and recovery opportunities - but probably waiting for a better entry point (though I do have a few BG and LLOY already).

I certainly wouldn't be assuming that the numbers will "tell all" or that one should just aim for high divi payers though - I think the time for that trade has passed!

Isaac,

It takes a few minutes to read TJH's thread on TMF. It took 25 years to produce the data.

One needs to take one's natural temperament into account, before considering a strategy that one is going to adopt, AND STICK WITH.

You are right when you say: The problem with most investors is they lack patience to sit tight with an Investment. Experience, of course, is the best teacher.

Theorising is always a financially safe proposition (ignoring the opportunity cost).  At some time, it's best to stop flitting (intellectually or in practice) between strategies.

While I agree with ee about where we are with the level of company's dividends, he refers to the time having passed for the strategy as a decent trade.  TJH and others might be inclined to say that today is always the right time to start.

We are all to be found somewhere along the risk spectrum, and identifying where that is, is most beneficial.

Buffy

In reply to emptyend, post #325

There is no doubt that dividend paying stocks have had a great run - but they have been buoyed by:

• general improvements in market confidence
• strong margin improvements due to cost-cutting coupled with lower rates of reinvestment of profits in the business
• Strong investor interest driven by a perceived lack of income-generating alternatives

 

I think we can "look forward" to a reversal of all of those factors.

Coincidentally, Lex is this morning making a similar point about valuations, due to a reversal in the recent trend of margins:

With 10-year treasury yields at 2 per cent, many investors may think they have no choice but to buy stocks. But that doesn’t make them cheap.

Quite so.

ee

In reply to emptyend, post #325

....so the question for Tesco (LON:TSCO) (and many other dividend stocks) is "what next?". And I'm not the only one starting to ask.

ee, I know what Tesco has done wrong.

I remember an old management saying which we do not hear these days was "people are promoted to the level of their own incompetence."

I think it was a mistake to promote the man who lead Tesco's greatest recent successes, the development of the foreign ventures, and promote him to be CEO of the whole group. He has not been able to repeat his successes overseas, and they may have lost their growth driver. Tesco should have left him where he has outperformed and accepted that it has reached the achievable limit in the British market.

I do not think the current business plan, to increase staffing costs and have a price war, will work. Profit growth and dividend growth will probably end this year. I think it will be an income buy when the price falls further. 

MD

In reply to Isaac, post #320

Isaac, very useful table of footie managers, thank you.

Next time I meet someone winging about business CEOs' bonuses, I will quote it.

MD.