The writer recently visited a hospital and picked up a copy of Hospital News and read an interesting story – the discussion was about a patient with Alzheimer’s with a tendency to become anxious and reckless. The solution imposed and likely looking at staff to patient ratios, the patient was constrained. The lady had been at the hospital for some time and it became standard practice. The nurse being new to the job, accepted the practice; but being new was never completely satisfied this was the best solution. Eventually, through getting to know the lady, the restraints were removed and  this to a better quality of life for the patient.

Linking to dividend producing stocks, you may have bought growth funds because it was the accepted practice to buy growth stocks. That is not a bad thing, it is just the evidence points the best way to increase your portfolio is to ensure it is heavily weighted in dividend stocks. These stocks have two methods to increase the value of your portfolio – the dividends and if the dividends are sustained over a number of years, the price of the stock will go upwards too. Management of companies is a tough thing to do, one of the methods which investors can keep management from making too many mistakes is to insist on a continuing dividend flow. If they do this part right, the other parts should be okay. This type of solution will be good for the investor.

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

The writer similar to many people spends most of the time in a small section of the urban city which I reside in. A couple of weeks ago, the routine was broken to see an old landmark which was recently renovated to a new use. When it was an old landmark, the writer had the occasion to regularly go inside, but then I moved to a different part of the city. The building was still there, but there was little reason to go back to that neighbourhood. The writer believes most of do this type of action all the time, but eventually things change, in this case the old building was fixed up to a new use.

Linking to dividend producing stocks, we all have biases both pro and con for companies. A classic example is the  “SIN” stocks which includes cigarette companies. Then either you changed or the people around changed as cigarettes were no longer in vogue. Some of these stocks are worth looking into, maybe they are worth a second look at. Every once in a while, but not too often, it is important to see other perspectives, you can still reach the same conclusions, but at least you would have updated your reasons.

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

Last weekend the hope page of MSN’s business page was 12 things that will or should disappear in the next 25 years. Some of them are already disappearing, as people use electronic devices more and more. Newspapers and magazines were on the list, both are not going disappear tomorrow, but they will likely continue to shrink as people look at them differently. It may mean our homes will be cleaner or less cluttered, or it may mean electronic devices will continue to be less expensive every year, ensuring the content is even more important just the delivery mechanism changes.

Linking to dividend producing stocks, as you read these lists that get produced and they ae just predictions, think about the companies you own. If they are in that business and the business models or margins are changing, ask how is management changing to maintain or increase their margins for the business. If the margins are going down, then it is a really good time to look at alternative investments. Change happens to all companies, the issue is how does the company maintain its margins in the area where it makes its profits? Fortunately on the stock exchanges there are always alternatives or some are better than the others.

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

Last week in the New York Times was an article about the cost of owning a sailboat. If you have been near a marina you have seen many sailboats in the marina. Those that own the boats, love being on the water, and the great majority have traded up. They started with smaller boats, examined the expenses and the time they spend on the water and over time moved up to the size they really want and enjoy. Similarly most people do not buy one home and live there forever. They tend to move 5 times before they settle for a number of years.

Linking to dividend producing stocks, you might ask where do I start? The best place to start is the industry or service which you make a living at. Those companies are the ones you have an “insider” view of how they are doing financially. Next look at your monthly payments, those companies should have many people similar to you making monthly payments – ie the gas, electricity, oil, banks, whoever it is. Next look at your kitchen – what companies dominate your pantry? Food and food distribution tend to have reasonably consistent earnings. Unless you believe you are the exception, many of the things you regularly do, others also do. After determining the starting place, narrow the criteria to companies that have paid a dividend for longer than 10 years. There will still be choice but it will be a good choice when there is no wrong answer..

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

Lawsuits are a wide card for any company, unless the company knows they have done wrong, because it changes the business model. An interesting article was written in Reuters under www.breakingnews.com. In the article, the author writes Apple was not really going after Samsung, but a bigger competitor – Google. Why google? 68% of Smart phones sold ran on Google’s Android’s software and Samsung uses Android. One of the reasons why the high number is Google receives the bulk of their money through advertising dollars which allows for Android phones to be priced less than Apple. Fortunately for Apple, there is high demand for their phone and iphones are priced up accordingly.

Linking to dividend income stocks, when lawsuits come forward with stocks you have an interest always look at the root causes why is the other company suing? Money by itself while a wonderful result is rarely the reason for the lawsuit, competitive advantage typically plays a higher reason.

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

The writer was reading a book called Buried Treasurer (Travels Through the Jewel Box) by Victoria Finlay, Sceptre 2006. The concept of the book is looking at your jewelry box and asking where do those gems come from? what are the stories? why are they considered important?

Within the book are chapters on rubies and diamonds and 8 other stones. Besides history and geology of the stones there are some wonderful images. For example if everyone knows the value of the stones are partially determined by the light the stone displays; how would you ensure that light is used to best advantage. The sellers of rubies in the Mogok Valley put up pink umbrellas to sell their rubies under; your local diamond retailer uses fluoresce lights for you to see your stones. Ideally your realtor wishes to show you homes in the daytime when the natural sunlight shows your the property the best.

To bridge to dividend producing stocks – everyone is all industries tries to display their goods and services in the best natural light, for every good and service has some sort of flaw. The difference with dividend producing stocks as the dividend goes on, the stock price will move up and down. The belief and reality is over the long term, with stocks that pay dividends on a year to year basis, the total return will be higher than buying growth stocks.

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

In many large urban areas the large art gallery has a summer blockbuster show to boosting attendance. The writer does not paint, but one day needs to paint the kitchen,  putting it off for another day, the writer supported the local art gallery. In reality the people are much more interesting than the paintings, for most of them in spite of their  large financial value, the writer would not want to own. The people were interesting, as they moved from painting to painting. The discussions were about the style, the paint, the historical context if known, the perspectives, the subject matter, what do you think was going on when the painter painted the painting? All reasonable questions that can be asked about most paintings. in the show was the occasional painting of a animal or urban setting, that even the children (and older folks) could relate to.

The point of the above, similar to investing, many of the questions are the same no matter the investment. For me great cash flow, dominant position in the marketplace and a dividend increasing every year is a sight to behold.

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

Sometimes you find great research in the most unlikely of places,  the writer was reading The Leaders Guide to Storytelling by Stephen Denning, John Wily & Sons 2005. The book is about how management can use the art of storytelling to make better presentations. Mr. Denning introduced some figures

Only 10% of all publicly traded companies have provided themselves able to sustain for more than few years a growth trajectory that creates above average shareholder returns.

Less than 10% of major innovations in large corporations are successful.

The multi-billion dollar mergers and acquisitions enjoys a success rate of adding value to a company of around 15%.

If you can find a successful company where management does not get too many big ideas, you do not have to worry. The emphasis on the 7 Deadly Strategies is to show management in all industries make blunders which costs investors money.  Not all the strategies are wrong, some maybe good – if the values and processes of the two companies are similar.

One of the prime reasons why the above results happen are yes men.  Many Chairs/CEOs  expects to hear yes to their idea(s) without reasonable discussions (or lots of yes men or few who have a vested interested in not asking questions). The authors of the book Billion Dollar Lessons by Paul Carroll and Chunka Mui recommend on a revolving basis, boards or senior management have a devil’s advocate to ask questions, to ask about what happens if the growth does not continue and to ensure  the what were they thinking? result does not happen.

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

From the book called Billion Dollar Lessons by Paul Carroll and Chunka Mui, Portfolio Books, 2008. The book is subtitled What Can You Learn for the Most Inexcusable Business Failures of the last 25 Years.

The 7th Deadly Strategy is Consolidation Blues. Two or more companies joining together in a mature industry to be a larger force. The message is if the processes and values of the two companies are not similar, it will not work.

Watch out for – when you buy the assets, the company buys the problems of the other company. Be aware of dis-economies to scale because of increased complexity. Most companies believe they will keep all the customers of the company they buy, that is often not the case.

Ames a regional discount retailer in the northeast bought Murphy, Zayre, and Hills stores. Many of those stores did not meet up to expectations and had to be closed. DaimlerChrysler – Daimler bought Chrysler with all its problems – costs stayed high, union problems happened, engineers did not shared technology, management did not want to dilute the Mercedes brand.  Imperial Sugar Company bought others but on a razor thin margin that could not handle debt. People starting eating less sugar, the company deconsolidated. US Airways bought Pacific Southwest and Piedmont airlines to expand their reach. The systems did not talk to each other – more than once the computer systems broke down; labour costs went higher; scheduling pilots was a nightmare because US Airways rather than the pilots looked after it; the rigid hierarchical management style worked good in a mid sized company, not so good in a large one.Standardization made operations less productive.

Due diligence is needed before deciding to buy. (Ames spent one day on the Zayre buy)

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