Message Font: Serif | Sans-Serif
 
No. of Recommendations: 3
I have been using the II service for a couple years now and have been very pleased with the results.

My strategy had been to simply invest in the Buy First picks due to the amount of money I had to invest in this service. Now I am in a position to consider going deeper into the Recommendations. Therefore I need an intelligent way to assemble a portfolio from the Buy section as well. However, I don’t want to buy (can’t afford) all the Buy picks and am wondering what criteria others have used to weed through the Buy list to make their selections.

It seems like there are the MF II Risk ratings and the stock’s Yield to consider. My first thought was to have a minimum Yield threshold for the Low Risk selections, say >4%, and higher Yield requirements for Moderate Risk picks and an even higher Yield requirement for High Risk choices. I also like the information shoobeedoobee posted on the Open Forum about dividend growth rates am likely to utilize this information as well.

Are there specific filters or strategies others use to make selections to filter down the Buy list before purchasing the recommendations?

- AllTooFoolish
Print the post Back To Top
No. of Recommendations: 4
..... Now I am in a position to consider going deeper into the Recommendations. Therefore I need an intelligent way to assemble a portfolio from the Buy section as well. However, I don’t want to buy (can’t afford) all the Buy picks and am wondering what criteria others have used to weed through the Buy list to make their selections......

...Are there specific filters or strategies others use to make selections to filter down the Buy list before purchasing the recommendations?


Hi ATF!

There probably are as many different strategies for building an II portfolio as their are members, with different financial circumstances, goals and risk tolerances....and (hopefully) different long-term financial plans. ;-)

That being said, some tools that one use include how much "Potential Upside" there is ( a column on the "Stock" page ), an absolute minimum dividend level, as well as a minimum dividend growth level ( 5 or 10-year history ). Also, I feel that one should pay attention to sector diversity, never having more than 20% or so in any given sector ( energy, utilities, consumer staples, consumer discretionary, etc.); a tool to use for this is the Industry browser at Yahoo ( http://biz.yahoo.com/p/510conameu.html#jnj )....and never having more than 5% in any one stock ( unless you are an uber-Professional ).


There are tons of due diligence tools out there:

In addition to the Income Investor "Buy First" and "Buy" lists, I often look at the logarithmic charts from the BMW Method after identifying a company I'd like to consider to establish a reasonable buy price:

http://invest.kleinnet.com/bmw1/


And here are some more general DD approaches from other Fools:

http://boards.fool.com/due-diligence-template-29125146.aspx

http://www.fool.com/community/pod/2007/070503.htm

http://www.fool.com/community/pod/2007/070608.htm

And last, but not least, here is a great valuation archive, if you want to get deeper into analyzing stocks on your own:

http://boards.fool.com/improved-fool-valuation-archive-24217...

Hope some of the above helps...if not...ask away!

Cheers!
Murph
II/SPOPS/BigS/ALPHA Home Fool
Print the post Back To Top
No. of Recommendations: 0
I should have added that dividend payout ratio is also an important factor. I like to see it at less than 60-65% for most "regular" stocks...and REIT's and MLP's go by a different yardstick...basically a cash flow measure, and have to distribute most of their cash do keep their unique tax status.

Cheers!
Murph
Home Fool
Print the post Back To Top
No. of Recommendations: 0
I'm new to II after 5 years of HG I've decided to move into more income producing securities. Although I diversify across industries I pay little attention to diversity across market cap. I prefer stocks that are more volatile rather than less so for the most part as volatility provides opportunities if one is patient. I don't believe that volatility equates to risk as risk comes from management, competition, governments and general economic conditions rather than a small float. That being said, a couple years ago I decided to start moving some of my money into companies that would pay some dividends and particularly ones that increased their dividend periodically. Given the recent run up in some of the stocks in my portfolio over recent months I've been lightening up on some of the positions that seem to be ahead of themselves. Normally I would be looking for a correction to reinvest in the same companies but this time I think I'll be looking for more income producing companies. I used HG primarily for new ideas as I enjoy doing my own research and lately I haven't found much to like about the new recommendations at HG. It has become a different service since they started the real money portfolio, and it is still a GREAT place to learn and perhaps my views are changing over time. At any rate I intend to start building some income into my portfolio with dividend paying companies, thus a subscription to II seemed appropriate. I listen to the Motley Fool Money podcast most Friday evenings and Mr. Early seems to have it going on.

My intent is to invest new money to my accounts and at least some of the proceeds from the sales of my current holdings into dividend paying companies. I will be looking for companies that are trading with as large a margin of safety as possible which doesn't describe much right now in my opinion. So I'll likely be piling up more cash until Mr. Market throws one of his big sales. Given the current economic conditions "shaky" and the impending removal of Fed support for the economy in the form of QE2 and negative real interest rates I'm hoping for a nice bear market for a while to provide me with some attractive entry points into companies such as KMB and GEF/b and the buy first companies other than JNJ which I initiated last Friday. Currently my dividend paying companies are BHP FCX JNJ and CL and two MLPs ARLP and BIP. The other 18 companies I hold pay no dividend or a token dividend of less than 1%. I also have a bond position but it is a short ETF as after a 30 year or so bull market in US Treasuries they are now in a bubble and with the FED piling on with their money printing I would expect Treasury rates to begin rising once QE2 is terminated. Negative real interest rates just can't last forever.

I welcome comments from anybody, especially if you disagree with me.

Regards,
Ken
Print the post Back To Top
No. of Recommendations: 2
Hi Ken!

Welcome to II-land, a great place to be...especially in light of the economic/investment environment I see for the next 10+ years ( slower than historical growth in both after we've finished with QE#whatever ).

As to whether your approach is right or wrong for you...well, no one can really say, since everyone has different financial circumstances, goals and risk tolerances.

My advice: if you don't have a long-term financial plan that estimates the number of inflation-adjusted dollars you will need to age 95, then that's where you should start. Once that is in place, you can calculate the CAGR ( compounded annual growth rate ) needed from your investments to meet those goals.

If, for example, that exercise says you need to achieve a 15+% CAGR over the next 20+ years, something has to give ( save more, cut expense level, retire later...or go to Vegas and get real lucky ), because very few investors have achieved that level of return over the long haul. If the CAGR is a "reasonable" one ( IMHO, something in the 5-9% range for the market I see ahead ), THEN construct an investing strategy that will deliver the needed CAGR with the least possible risk ( risk being defined as the probability of running out of money before age 95 ).

Said another way, it's hard to hit a target if you don't know where it is. ;-)

Additionally, at age 64+, I can say without doubt that I would have a much higher net worth if I had invested in good, solid dividend payers/growers earlier, versus swinging for the fences so much for so long.

Another thought for you: if one can get to the point where 100% of their expenses are met by a dividend stream upon retirement, then one is relatively immune from the vagaries of stock market crashes ( so long as you go with companies with solid balance sheets, who have the pricing power to grow dividends as fast as inflation ).

As always, of course, different investing strokes for different investing folks!

Cheers!
Murph
Home Fool
Print the post Back To Top
No. of Recommendations: 1
OH!

One screening tool that you may find helpful to identify candidates that are selling at lower than historical trends is here:

( Both log and linear charts; includes dividends )

http://invest.kleinnet.com/bmw1/

Tons of additional due diligence info ( just put in the stock ticker ):

http://ogres-crypt.com/php/chart-mscf.php

Cheers!
Murph
Home Fool
Print the post Back To Top
No. of Recommendations: 0
Hey Ken!

Welcome to TMF Income Investor Land!

David
II Home Fool
Print the post Back To Top