The headline in last week’s press was one of the funds received billions of dollars on its investment as the company was bought. The normal pattern for a hedge fund is for it to buy a public company, take it private and restructure it. A couple of years later sell the shares to the public which values the company at a higher multiple and the hedge fund and its investors receive a generous return. The other side of the press release was before the fund decided to invest, the fund would have examined dozens of ideas and proposals. The average fund after examining hundreds of ideas, it chooses to invest in 20 of them. 17 of those deals will likely end up losing money. 2 will do reasonably well and one will be the 30 times return plus or the home run. In terms of percentages, it is a 30% chance of success, the issue is no one knows which one is the big winner. The same amount of effort that went into the big winner went into the ones that lost or broke even.

Linking to dividend paying stocks, it is easier to have success if you try for singles and doubles because they are the normal. If you start with companies that pay dividends and have so on a consistent basis, you automatically hit a single or safely. As the companies continue to pay dividends through the economic cycles, the stock will rise and fall a little, but over time because the stock continues to pay a dividend the stock price will rise. Start your analysis with those that pay dividends and you will be further ahead.

There are more questions than answers, till the next time – to raising questions