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General Electric my worst investment ever

Yes it happens even when you think you have done your homework. Financials looked good when I got into the stock a few years back. I thought the conglomerate had some narrow moat attached to it which would be good enough to sustain good business growth. I was wrong, I had to sell all my stocks yesterday swallowing around 1200$ of capital loss. This event is just another reminder that forecasting earnings and profitability is not a science. It also shows how much competent and strong Management can make the difference. For all I know if I had chosen GE competitor Honeywell I would feel much better today. As you can see on the graph below…. one of those woulda coulda shoulda moments 🙂

 

 

GE VS HON1

MY updated annualized returns since 2013

I am very proud of my performance in terms of Total return since 2013. See below

the last 2 lines are the S&P 500 benchmark in CDN$ and US$, line 1& 2 are very recent accounts and it is normal that at this stage of the bull market I don’t get the same returns.

one of my account beats the S&P 500 by over 12% on average since 2013, which is for me a very big accomplishment. It really proves that if you do your homework professionally you can get much better results.

total return since 2013

1 picture to show the pace of tech evolution

This is the picture of the 1st iphone vs the most recent one. Beyond the the parts improvements in terms of performance, one can clearly understand the thirst of the world for better and faster technology to support the exchange of information.

As an investor you then understand that the tech sector has still a good foundation for growth and will definitely see good cash flow progression on balance sheets of large cap companies like Microsoft, Apple, Google etc…

I am myself overweight in tech 🙂

 

iphone 2007 vs 2017

Yield on cost is key to let your winner stock run

yield

When you are able to buy a stock at a fair value with a solid track record of dividend increases, you can end up with very good total return and the concept of yield on cost helps you with that.

Simply put, yield on cost measures the rate of dividend income your original investment earns today. Put another way, yield on cost is essentially the dividend yield based on your initial investment in a stock.

If a company increases its dividend after you purchased shares, you will enjoy a higher rate of income return on your original investment – your yield on cost rises.

Dividend investors like tracking the yield on cost of their holdings to see the power of consistent dividend growth. It is exciting to see an investment literally begin to pay for itself with higher dividend income over time.

Let’s try an example. Suppose I bought 50 shares of Colgate at $55 per share. The stock currently trades at $70 and pays annual dividends of $1.56 per share.The company’s dividend yield would be 2.2% ($1.56 per share in dividends / $70 current stock price).However, my yield on cost would be 2.8% ($1.56 per share in dividends / $55 cost basis per share).If Colgate raised its dividend by 8% to $1.68 per share, my yield on cost would rise to 3.1% ($1.68 per share in dividends / $55 cost basis per share).

Yield on cost increases when a company raises its dividend and decreases when a company cuts its dividend.

The key element in this logic of dividend growth investing is to be patient and let your winning stocks run. Very often investors pull the sell trigger to soon and buy stocks of average quality.

Be patient and let the compounding do the work

In One of my accounts I bought Appl shares at a 65$ cost basis in 2013. Current yield is 1.57% (2.52 $ dividend per year @ 160$/share) , but my yield on cost is amazing !!! it’s a whopping 3.87% (2.52$/65)

 

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