A very easy method to buy stocks is to use the cycles of the stock market which means when stocks decline in value you begin to look at them to determine if you will buy them and watch as they begin to rise in value on the upside of the cycle. You will hear or read – a buying opportunity, but since most of us do not have unlimited funds we pass on the overwhelming majority of buying opportunities. For the simple reason – it takes research to determine if something is a buying opportunity or not. Jennifer Dowty in an article called Price weakness: to buy or not to buy? outlines the research you typically need to do before you decide to buy.

If you have limited funds, one thing you can do is something like a foundation the writer sits on – it generally does nothing for 6 months or more unless a stock reduces its dividend. Use time for yourself – there are always buying opportunities.

Back to Jennifer’s comments – if and when a stock falls on a day to day basis – first you need to research and assess. Why is the stock falling? is it the entire group? the market? or the stock? If it is the stock – go to the company’s website and read their press releases. Company’s investor relations group needs to write something to explain why the fall in prices. Sometimes it is related to management changes; sometimes to negative reports; sometimes it is related to consumer perceptions or a new government policy but there tends to be something.

Having researched the company, now you can see what the market thinks – is the volume of shares increased? if the company is tied to a commodity – what does is the commodity price doing or not doing?

Eventually you come up with a reason for the decline, then you need to determine is this a long-term reason or short-term. If you determine it is long-term look at other alternatives. If the weakness is short-term and you are very interested in the stock consider nibbling or buying some shares to watch carefully. if you have determined the decline is only connected to the quarter, as the price begins to increase you can buy more and still make heathy profits.

Linking to dividend paying stocks, there are enough dividend paying companies that some will go through cycles, but even if you are wrong and the price declines you are still receiving a dividend. The dividend protects you because one of the rules of investing is not to lose money, try to make it. Staying with dividend paying companies limits the risk.

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

 

 

The stock market has cycles and sometimes the stocks go up and sometimes they go down but there is typically a floor on the downturn. When the stocks go down and if they are worthy to be bought, there are buying opportunities for the stocks will eventually go back up. Peter Ashton of Recognia Inc. looked at which opportunities are there in US Utilities.

He started with a market capitalization of $ 10 billion – this will focus on larger, more established utility stocks.

He then wanted companies over 4 weeks have lost some value.

Earnings-per-share growth is also a key aspect of our strategy, look for stocks with EPS growth rates of 5% or more.

To ensure you do not overpay, the expected forward price earnings ratio needs to be less than 20.

Dividend yield needs to be 3% or more.

Company                                                      Mkt Cap      4 Wk             EPS         P/E         Div

($ Bil)            price perf      Gr Rate                 Yield

Entergy Corp                                        13.0                  -8.9                  14.8         14.1          4.7

PPL                                                         22.9                  -4.4                     5.8        14.4          4.5

PG&E                                                     30.6                   -3.3                   19.2        16.4          3.2

Dominion Resources                       46.1                     -3.1                    9.9         19.5           3.8

DTE Energy                                          16.9                    -1.1                  7.4        19.0           3.2

Avangrid                                               11.9                     -10.1                 22.4       17.9            4.3

Eversource Energy                             17.2                    – 2.0                   5.7        18.2            3.2

SCANA Corp                                         10.2                     -3.8                  5.1         18.1            3.2

Linking to dividend paying stocks, while all these utility stocks pay dividends most of us can not buy all the stocks – unless you buy an index fund. If you want to buy one of them the trick is narrow the field to the best of the best. You will need to do further research to determine what really defines the utilities company as a constant provider of dividends.

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

 

 

Yesterday was the US election and today begins a new chapter under new management, part of the election was what management style do you want to be governed under? Since there is no perfect method to do management, but there is a result if you do it well. If you do leadership well the key is after making decisions are made by the leader do you trust the leader? will you follow him/her? will you risk your job to do the things the leader wants done? If the answer is yes, then you have a good leader. If you the answer is no, then you are looking for some other type of management style. In a recent article by Hugh Latif – a management consultant and author of book Maverick Leadership. Mr. Latif examined a 5 topics of leadership which all leaders need to be evaluated:

Leadership, Management Style, Decision-Making, Negotiation and Communication Skills

Leadership

Clinton – A strong, leader who is tough and resilient but with lots of planning and research. A bureaucrat with extensive contracts, a huge network of influencers and scratch-my-back-and-I-will-reciprocate attitude.

Trump – A strong, tough leader, demanding, who looks at the bottom line with show-me-your-results attitude. He is focused, direct and decisive and favors action over planning. He use whatever means are available to achieve the goal.

Management Style

Clinton – Demanding of her staff, wants to know details and delegates execution but not strategy. Ms. Clinton surrounds herself with influential, experienced people who come highly recommended. When she gives trust she demands loyalty and dedication in return.

Trump – The big-picture manager. “This is what we want to achieve and here are the resources, now do it.” He delegates both execution and strategy and waits for results. Mr. Trump surrounds himself with people hand-picked for their qualifications, but who are there mostly for their performance record and ability to get results. He gives trust but you earn it or are replaced.

Decision-Making

Clinton – The research-and-planning manager who uses her advisers and network to help decide the best route. She decides by consensus, but reserves the right to do it her way.

Trump- Decision making is done by Mr. Trump. He often goes with his gut feeling.

Negotiation Skills

Clinton – Negotiates based on facts and figures and with the help of aides and assistants. The staff are there to help her along the way from A to Z. The team closes the deal – stability, previous decisions and going forward are key ingredients. Focus is long term.

Trump – Staff prepare him and open the door so he closes the deal. The focus is winning and moving on, the short term is priority.

Communication Skills

Clinton- Diplomatic and careful with her vocabulary and speech. The priority is looking professional and showing she in command. Emotions and stress are shown in private.

Trump- Direct, say it like it is and focus on the heart of the matter rather than the packaging. He alienates some his style and choice of words, but behind the closed doors, he is respected and will compromise to achieve objectives. Emotions are not hidden.

Linking to dividend paying stocks, in all companies there are pluses and minuses with each style. Both styles are better for organizations at different times in the organization, although generally if the company is reasonably stable and profitable – the Clinton style works better because of the emphasis on the long term. In a large government some departments need Mr. Trump’s style and some departments need Ms. Clinton’s style which means whatever way the vote was taken both were right and both were wrong. Maybe there is hope after all.

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

 

 

 

 

Today is election day in the US and hopefully you know who is running for President and the down ballot positions. Ideally everyone knows about Clinton versus Trump and each have their own management style and solutions to the problems. In relationship to the problems, a few years ago Michael Moore wrote the book Downsize This published by HarperPerennial, NY, 1996. In rereading the book, it was odd to see many of the same issues dominate the political landscape. What the solutions are to the problems seem to be night and day and the problems remain. The economy has moved from many companies in the manufacturing business to manufacturing somewhere else and when a plants are closed down they effect the community. The more diversified the local economy the less effect, but many manufacturers originally located near other manufacturers and the effect is overwhelming to those communities. What should the people do? where should they go? In a democracy, it is impossible to tell people to move to another community or state because someone in the support system is making some money and they have investments (homes) in the area. While the old jobs are never coming back, others possibly could for there are millions of dollars in infrastructure that are invested and need to be maintained. Even if the manufacturing plant came back, most of it would be automated which translates to the bulk of the jobs would not come back. It seems the problems will be around for many years to come.  What should the government do?

Linking to dividend paying stocks, in some ways dividend buyers are part of the problem and part of the solution. The company originally moves production and blames the shareholders who want to be paid their dividend. Although in reality, the competition for jobs means some states offer way too much not to take advantage of. It is a complicated problem and solution, but it is what it is.  Hopefully if you have a vote, you have voted or will vote today for that is how democracy works and whoever wins both sides will find common ground to offer semi-solutions which will not effect dividend payments.

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

 

 

 

When the Spain conquered Mexico and discovered gold in made Spain the richest country in the world. Not content to take the riches of Mexico, they sent their conquistadors south to another  kingdom that had many riches. The Inca empire controlled the western side of the South America  or the Andes Mountain Range with its headquarters in Peru. The Spanish interested in the riches of the Incas attacked first and captured the emperor – the Incas gave the Pizarro’s rooms full of gold and silver which wetted the brothers imaginations. Similar to most conquerors they were not satisfied and wanted more. After a few years of fighting, and aligning with the natives who felt injustice from the Incas and some Incas who wanted power themselves, the Spanish prevailed in controlling Peru. The Inca empire from an engineering point of view was light years ahead of European knowledge and not understanding it, meant their cities were left to the jungle which overran the cities. 400 years later, people began to look for the lost cities and the rumor of hidden gold. Into the mix comes a modern day Indiana Jones – Hiram Bingham. In the book Cradle of Gold written by Christopher Heaney, published by St. Marin’s Press, NY, 2010 examines how he discovered some of the lost cities of Peru.

Hiram Bingham was raised in believing the natives of any society did not have the capabilities of Europeans or in the early 1900’s those that went to the Ivy League Institutions on the east coast of the US. The schools include Yale, where Mr. Bingham went to and included many children of wealthy families. The choice was business or university research – Mr. Bingham was fascinated by South America and wanted to build up the department at Yale. He would travel the routes of Incas and then lecture about his travels during school year and also try to promote the countries to the future business people. The book is a detective story about the routes of the Incas – going to search for any lost civilization and finding the most famous – the beautiful Machu Picchu. Now days it is visited by 800,000 people a year and most come by train or bus; in Mr. Bingham’s day it was by mule and climbing the cliffs. The Incas carved off the top of the mountain to build a city and along the way terraced the mountain side as the early morning mountain mist gave water to the crops. The sun would come up and warm the earth during the day. The Incas also created vast irrigation systems to move the water from the rivers to the fertile planes (some you may have heard about from the question did man do this or aliens? It turns out many native communities were advance of European communities. The Incas worshipped the sun and many of their communities take advantage of the sun – it seems odd that with no more cheap energy we have to do the same thing as the Incas.

Linking to dividend paying stocks, the analogy is Mr. Bingham brought passion, detective skills, and some money to investigate his theories. He also brought time to investigate all locations. Others could have, but he did. Everyone comes up with a theory of making money on the stock market and it is important to investigate but it seems investing in profitable companies which pay a dividend will allow you more time to follow your passions.

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

Similar to many people trying to figure out the continuing appeal of Donald Trump has taken up more time than normal. Part of the problem is expectation of the leader of the established party – those behind the scenes normally would be more rational in their decision making, have to justify whatever the leader says. When Mr. Trump goes off message or drags up conspiracy theories the party which has benefited from whatever conspiracy has to justify what he means or meant to say or the context of his talk. What are the implications for the country and businesses and the people who live within the borders. On one hand he is an wonderful entertainer and understands the problems very well on the other hand the stakes are very high and his solutions are a little thin, but America is a democracy.

One of the first superstar entertainers was Buffalo Bill Cody, whom many have heard of and a few people have seen. In the book  The Colonel and Little Missie – Buffalo Bill, Annie Oakley, and the Beginning of Superstardom in America by Larry McMurtry  published by Simon & Schuster, NY, 2005, there maybe some understanding of the present day situation. The setting is 1880s and till 1916’s and Buffalo Bill’s Wild West show toured the world because in America how the west was won is still an exciting moment in US history. The show played upwards of 130 stops a year travelling on railroads and ships. In the 1880’s the manager of the Wild West show was Nate Salsbury and the press agent was Major John Burke. Both Annie Oakley and Buffalo Bill understood costume and appearance and in front of the crowds were consummate performers and had that special appeal for audiences.

Mr. McMurtry has very high respect for the shows but was the story also accurate – it turns out Buffalo Bill was like a fisherman and some stories were stretched for public consumption. Somehow the difference between truth and rumor becomes harder and harder to sort out. When Buffalo Bill was ranching and not really liking it, he looked at Wild West Shows which he eventually perfected. He also started one of the first organized rodeo in 1882. If you are interested in the business of Wild West Shows a recommended resource is Sarah Blackstone’s book Buckskins, Bullets and Business. One of the reasons for Mr. Cody’s success was the audience loves the idea of the old west and refuses to take anything critically. For most people it is the legend, not necessary the truth that is important. The legend of American settlers taming the west was given. The legend of Buffalo Bill Cody still lives on in the Buffalo Bill Ranch State Park in North Platte, Nebraska.  It also lives with the Buffalo Bill Rodeo.

Linking to dividend paying stocks, for many companies the legend is more important that the truth of how the company managed to survived and grow to the giant it is. The fact that it is a large organization is credited to the leaders doing the right thing, often you find some did, but many stretched the grey area of the law. The legend is often more important but as owners of the share we tend to be concerned about whether next year the company will be more profitable rather than how the company started.

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

There are two types of research you need to do but most of us focus on the first type. The most common research is of all the stocks trading which would do you buy? the second type of research we rarely do is when do you sell? Besides needing the money? The issue with selling is two fold – what if the price goes down? how much leeway do you give? and what if the price goes up?  Each of these actions are seemingly hard which means it is good to have some sort of rule before you start. In an article in the Globe and Mail Business section Dale Jackson interviewed some people to help you decide When to hit the sell button.

There are many metrics to help you buy and some you can use to help you sell.

If a price goes down 15 to 20% below what you purchased at – you will need to re evaluate the company to understand if the event is a one time thing or it is better to find alternatives.

If the 3 month earnings drops by more than 15%, it is time to find alternatives?

If the stock has gained in price and in relation to the rest of your portfolio you may want to rebalance your portfolio by taking profits off the table. This is the best element and is the easiest decision because you can use the profits to spend or diversify and you know you made a good decision to buy.

Go back to the reasons you bought the stock, does the economy or the company d0 something that changes the reasons you bought the stock? Sometimes when the company makes acquisitions – some you like, others you may not. Sometimes you like companies that use debt, sometimes you do not.

Linking to dividend paying stocks, one of the primary reasons for buying is for the dividend and the long term capital gain. Profitable companies tend to have higher shares in the long term, which means you can wait. Depending on the company, mergers happen and then you have to decide if you want to keep with the new company or find alternatives. There is no end to having alternatives, but with dividend paying companies there is no reason to make the decision right away. You have the ability to take your time.

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

 

Have you every gone to your favorite supermarket or chocolate retailer and looked at the owners of the chocolate companies? The companies make billions of dollars because people love or enjoy chocolate. One of the books written about chocolate is Chocolate Wars by Deborah Cadbury published by Douglas & McIntyre Press, Vancouver, 2010. The author’s name Cadbury means there is an emphasis on British chocolate companies because she is related to the Cadbury chocolate company.

By 1905,  Cadbury, Rowntree, Nestle, Hershey, Lindt, Frys were all producing chocolate products for the masses and all were successful. It takes good management to sustain because things in the world happen. World Wars which affects production and supplies. For a while the biggest American investor in Cuba was Hershey who wanted to control his supply of sugar. He eventually owned the Hershey Cuban Railway, 65,000 acres of land and a town of Hershey, Cuba. Things were going along well for the companies as they continued to make money and try to change the world around them.

Then came Forrest Mars of Mars who began to produce chocolate-coated bars in factory quantities. The other companies focused on solid chocolate bars and only a few brands, when Mars invented Milky Way the industry changed. The challenges of the world changing after WW II and the British Empire changes as countries became independent, including different companies in their home market. As the 1960’s arrive, the founders begin to die or retire, what to do with the companies. All companies founders have a hold on their businesses, when it changes then the company changes. By the 1990’s large multinational companies are looking to expand or grow their divisions by looking at the continual sales of chocolate. Kraft eventually bought Cadbury to strengthen its holding of chocolate companies. Kraft is now called Mondelez International and if you google candy companies the top 100 will show up.

Linking to dividend paying stocks, the chocolate companies changed the use of the chocolate from drinks and hard chocolate to easy to eat and continue with easy to buy, along the way companies expanded and consolidated and still fight for market share. Your choice at the supermarket is still very important to the companies. If your choice is important you can measure how well they are doing while you shop.

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

 

 

If you ask people around the world what do you love to eat? high on the list will be chocolate. Likely if you had children at your door last evening for Halloween, chocolate would be in your house. Have you every gone to your favorite supermarket or chocolate retailer and looked at the owners of the chocolate companies? The companies make billions of dollars because people love or enjoy chocolate. One of the books written about chocolate is Chocolate Wars by Deborah Cadbury published by Douglas & McIntyre Press, Vancouver, 2010. The author’s name Cadbury means there is an emphasis on British chocolate companies because she is related to the Cadbury chocolate company.

In terms of Europe, chocolate was found in Mexico where the Aztecs where great lovers of the bean and the expression “money does not grow on trees” comes from as the Aztecs used the bean as the basis of their currency. From Mexico the use of chocolate comes to the Spanish Court in the form of a drink, it quickly was seen in coffee houses of the day, and you can still buy hot chocolate in your favorite coffee shop. The dominant company for drinking chocolate was Fry’s – the yellow can. They had immediate success and were only interested in cocoa powder. For generations – management asked why tinker with success?

The chocolate bars that most of us have tried and likely eaten in the past year, has a different direction because of cocoa butter. For a long time, the cocoa butter fat from the established processes was 50% and was slowly reduced to 30%. The chocolate manufacturers saw possibilities – two different products – use one part of the bean to make pure cocoa and the other part of the bean to eat and that would be targeted to the masses of people. In England, advertising was beginning for most of commerce was done in small shops. If people saw the advertising, they would ask for it and the grocer would stock the item. At the time, chocolate by itself had a slightly bitter taste.

In Switzerland, the chocolatiers were experimenting with using milk and chocolate together to make a sweeter and smoother bar. It was a struggle to find the correct formula but it was found and the process for chocolate which melts in your mouth was discovered. The key was to find a way to evaporate the water from the milk in such a way that it could be smoothly mixed with the sugar and cocoa fats. Then the next problem was to scale up operations to produce the bars people would buy.

Linking to dividend paying stocks, the above process took over 400 years – the 1500’s to 1905. Chocolate was around, at first it was expensive but as time went by the manufacturers brought chocolate to the masses where more could be and is eaten. The growth of the companies and its sustaining power is what drove the markets. In the early days, there  were many companies but most were smaller scale in size. As the manufacturers unlocked secrets in the production phase this is when they could scale and grow the market. It was then the companies made an excellent investment.

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