Long Term Investing Valuation and Timing Strategies

I've created this new thread as the discussion was taking the Thornhill thread off topic. I'll see if the existing posts can be moved to here. So please post any further discussion related to this topic here.

Thanks

 

This did it for me, you may also want to have a look at 10 year bond yields at around the same time yields took off in early March 09.
Unfortunately he doesn't write that much anymore, his real name is Ashley Owen director at Philo investments.
His books are pretty handy
So hope you enjoy

Also a week later we where made aware that his fear and greed index had hit bottom.

 

Thanks for that @Intrigued_again. Excellent read. I remember quite sometime ago you posting about Ormond / Owen? but from memory I couldn't find all that much from him. Care to post some other links / material / book titles you know are a worthwhile read please?

Also from memory you're very much a dividend focused investor but invest in direct stocks? I and I'm sure others would very much enjoy reading about your views and stock selection criterea etc. It would be a refreshing change from my ramblings which by now I'm sure are getting repetitive and stale.

Cheers

 

Is this him on Cuffelinks, I read his articles regularly along with other authors on this excellent site:

You searched for Ashley Owen - Cuffelinks

PS: Think this answers my question:
Ashley Owen | LinkedIn

 

And another interesting chart by Owen I remembered now I know who we're talking about:

https://cuffelinks.com.au/wp-content/uploads/AO-Figure1-020415.png

Ah, the wonders of dividends.

 

This were he is now Philo
I should have said doesn't write about the fear and greed index anymore.
His books
Pretty close to what we do Buffettology
Another good site that will help anyone reading the books is Buffettbooks and buy there books.

Another good book is The Warren Buffett way, endorsed by Mr Buffett

 

US shares at new highs, but where’s Australia?

Interesting article above from Ashley

 

Thanks again @Intrigued_again,

Seeing the book covers I now remember getting Ormond's books out of the library years ago. Must read a couple of them again as I've forgotten what was in them.

Buffettology was the only book about him I ever owned. Written by his daughter from memory. When I decided to move away from investing in direct shares I gave this and many more investing / trading books to charity. Should have hung on to it.

But for those interested in direct stocks your suggestions and resources fit in nicely with Thornhill's dividend approach. Thornhill just wants people to get investing asap using the dividend focused approach. The older LICs are an easy way to get started. As knowledge and experience builds one can, if they chose, start investing in direct stocks. Peter has said this on many occasions. That said, it should be noted that Peter doesn't consider himself much of a stock picker.

I've been tempted numerous times to return to investing in direct stocks but I know my weaknesses. I'm too lazy, get too obsessed, all consumed to the exclusion of all else, know I would eventually lose interest again and worry about how my wife (who has no interest in investing) will manage the portfolio of direct stocks if something happens to me. The older LICs she feels comfortable with knowing they require little knowledge and action on her part.

But even for those of us who prefer to just invest mostly in the old LICs a lot of Owen / Ormond's information would appear to be very useful for general investing, personal financial management and as a dividend timing strategy for buying etc. Do you agree @Intrigued_again?

 

In his book 1 million dollars for life, which i read numerous times he suggested one strategy was to use ETFs as the core and the older LICs as satellite. Well worth reading.

 

Hi @Intrigued_again,

Been re-reading some of Owen's articles on Cuffelinks. I came across this one:
Investing against the herd, Part 3, Testing the theory - Cuffelinks

He seems to subscribe to buy low then "sell" high rather than buy low and hold. Looking at the question from a very devoted follower he seemed confused in that this is different to what Owen had written in the past in books and articles etc. Here is part of the question:

@Intrigued_again, do you have a view on that given you're read a lot of stuff by Owen?

A minor gripe from me in relation to Owen's following comment:

This often gets quoted but I find it interesting that there's seldom a mention of what dividends did during this time. It paints a very different picture:

Another interesting article in relation to that crash. The conclusion may be somewhat subjective but quite thought provoking:

 

typical fund manager, he'll say what he needs to say to sell his fund/book etc at the time and quote selected statistics to favour his argument

 

We did receive warning in I think 07’s newsletters about financials that we should considered selling. We did have the calculations done, but as you may be aware we held and still do CBA, as to me it was a LIC and still is at the moment to me anyway.

We also considered long puts, but hay there wasn’t anyone on the other side.

And even when we first bought in 91, though we got a few in the float I always thought that the price would go down from the opening due the government involvement, but in a panic that they would not stop going up guess what there was one really high day in 91 that’s me waving to everyone, stock picker from hell.

It took 2 years before we were in the money capital wise, so we had a fair bit of training prior to any crash. But the dividends went up 51% and I had done a lot of study so I could look myself in the mirror and not blink. I also had the help of an elderly gentleman who had been there done that, as he said who the ***k is going to give you over 10% pay increase every year I owe him and awful lot.

No I'm with you the important thing is not to let too many to the party (CGT ato) but if you can concentrate on the number of shares it’s a completely different game, but getting to that point is no easy task, some people are just not suited to it, but it usually comes down to what they don’t know.

Ashley is able analyse the living day lights out of the markets, but please remember anyone outside of me has an agenda he must perform as he does and is very good at it.

I don’t have to perform, after the 3rd year we were collecting 22% of what we invested sell I don’t think so.

I believe he now is in control of over $9B so I should imagine there is a few nervous nellies in that lot to keep happy.

I’m a long term (forever) type guy I’m sold on it, but if PE’s got too carried away you never know but I think I’d take the option road if that was the case, I’ve been forced to sell twice since the GFC, and there’s also the old buggy whip manufactures I hate to be holding them still.

I suppose it’s never say never, and be careful of rules you set.

But I do not fret every day about them I believe I’ve spent less time on them than you have on your LIC thread which must say I do enjoy, the most time I spend on them is when things look cheap then

 

Great post and Report thanks @Intrigued_again.

He he, yes was amused at your comment about me on the LIC thread. Probably more that I hate analysing companies and keeping track of them. LICs are easy for a simpleton like me. Easy for my wife to understand also given she hates investing. There's really nothing much to do with the old LICs other than tell those silly enough to listen about them. It's really more like socialising.

@Intrigued_again, I'd love to hear your view on this following report by Owen. After others here read it many will be sh*tting themselves and scared of investing in the sharemarket for good:

“BUY & HOLD” OR “BUY & HOPE’’?
http://www.philocapital.com.au/images/researchreports/BuyHoldorBuyHopeAug2012.pdf?phpMyAdmin=0n6odT3,EGip9lBgzXdLgnIEe9f

As a dividend investor not reliant on the capital it's of little concern to me. There'll just be less for others when we kick the bucket. But it does highlight the importance of not following the herd and making bad decisions. Two things in particular: avoid going all in at the top of the market especially with debt and; avoid selling at the bottom of the market due to fear.

Despite what the report says I'm still committed to Buy low and Hold especially with LICs. That said like I_A if the mother of all booms arose I might (maybe?) be tempted to take partial profits especially given there is no / minimal CGT in the Super Pension environment.

If no one is on the share related forums tomorrow I'll know you've read the report .

 

These threads, shepherded ably by @austing is proving to be a great classroom. Fantastic to read differing points of view.

The importance of market timing is also something coincidentally being emphasised more and more in the property forums. Especially by the likes of @MTR . And to her credit, she makes some really persuasive comments; as does the quoted article above.

But @austing ,you have taught me too well. I am staying the course. And yes, my investing timeframe is well over 20+ years. And you are absolutely right, it is the dividends that really keep you in the game.

So yes, you will see me here tomorrow

 

I am still around too the key take away for me is to buy low and stop buying high. Good article to challenge the accepted norm. And maybe for those who have good understanding of the variable impacting the markets, who will be able to time the exit, for me I don't really know when is the right time to sell out, now or in 6 months? It is good to think about the scenarios and what I would do if the market drops by 20%, 30%, 50% and plan accordingly of how much I would buy.

 

Seventh calendar year in a row of rising dividends for the S&P500

Source: Crossing Wallstreet

 

Ok, I admit I only skimmed the report having seen this sort of rubbish many times.

I deliberately posted Philo's / Owen's report here as a teaser to test reader's conviction to the dividend approach and to get the little grey cells working.

Always be alert to vested interest. Plilo Capital (including Ashley Owen) are a mgr and fund advisors etc. It's in their interest to scare / convince their clients who must report performance quarterly etc of the need for their superior advisory services. Maybe that's why in Owen's / Ormond's books (from what I've heard are excellent) which are aimed at the small "personal" investor (and before going into Philo) he encouraged a "buy low and hold" approach. A very different audience. But not having read much of his earlier stuff I can only go on other's comments.

The scariest points he raises in the preceding report is for retirees. He admits that dividend reinvestment will significantly reduce the time required for an investor to regain their original capital after major crashes. But what about the retiree who is drawing on those dividends and hence will be waiting a very long time as Owen states to recover their capital, potentially up to 25 years in worse case scenarios?

A few thoughts:

1. Retirees drawing on dividends are most impacted but covered in point 3. Dividend reinvestment dramatically speeds up recovery of investors capital after a crash. Most Accumulators are minimally impacted.

2. There is no mention of franking credits! Most retirees will be in a no / low tax environment. The Refund of same significantly changes the picture for accumulators and retirees alike.

3. And the blindingly obvious, a CASH BUFFER! I'm a huge fan of the bucket approach. That is, hold enough cash / TD's / direct bonds (no bonds for me) to draw on whilst your capital recovers. I've read a lot of material on this. In the US because of low payouts for dividends and no franking credits the following BUFFER is recommended by some taking age, level of wealth and risk tolerance into account:

CONSERVATIVE ... 6 - 10 yrs
MODERATE ... 4 - 5 yrs
AGGRESSIVE ... 2 - 3 yrs

In Australia these durations can be reduced due the factors mentioned previously.

4. A lot of these studies assume we're all idiots who buy at the top and sell at the bottom.

5. For those of us who've saved well and have more dividends than we can spend it's all irrelevant. Our beneficiaries including charities can fret over whether we could have done better.

That said, Owen does write some interesting stuff. I read his articles regularly on Cuffelinks but didn't know it was the bloke @Intrigued_again was talking about. However I and other readers ocassionally find flaws in his arguments.

Because I only skimmed the report I'm sure I missed some things so I will be interested to see what others have to say. There may also be flaws in my view being nothing more than an amateur investor? Please get stuck into me if you disagree.

But rest assured my conviction in the Thornhill style dividend approach has never been stronger. Fortunately Thornhill and I have both had our portfolios crash tested. I'm sure @Intrigued_again has also. There's nothing to fear .

Not advice.

 

Quote..
But rest assured my conviction in the Thornhill style dividend approach has never been stronger. Fortunately Thornhill and I have both had our portfolios crash tested. I'm sure @Intrigued_again has also. There's nothing to fear

That's one item i agree with the dividend style approach it's never been stronger and will get even stronger once compounding on compounding kicks in from my simple experience..And i have also been stress tested many times during the :GFC: one long term held from 1995 bank asx listed went down from just over from 60$$ into the mid 20 dollar range then from a technical perspective from the mood on wall st and in financial centers around the globe was fairly gloomy,then over 18 months everything went above the 52 week high levels..I'm looking foward too "GFC"mach 2..

 

Following on from the above this might interest some:

See attached PDF of chart taken from the following publication (page 7) which shows the XJO Price index Vs XJOAI Accumulation index to see the power of dividends. And note franking credits are NOT included. Even now in 2017 the "price" index is still well below its pre-GFC high. However the "price + dividends reinvested but excluding franking credits" index had exceeded its pre-GFC high back in 2013!
http://www.dfkhirnnewey.com.au/wp-content/uploads/2015/09/dfk-anz-winter-newsletter-2015-4.pdf

 

Austini

I had read it quite some time ago, and very much have the same opinion as you.

Same bloke wrote this,

“Should long term investors sell when the market is too high? An excessively high Fear & Greed index score is not necessarily a signal to “sell everything”. It is more of a “don’t buy now” signal. For example, I personally don’t like Dividend Reinvestment Plans unless they are at a big discount to the current share price, because of the additional paper-work and record-keeping involved (you end up with dozens of little parcels of shares in each company – each with its own separate cost base which must be adjusted regularly over the years). Instead I generally keep the dividends in cash and invest the cash when the market is cheap. When the market is seriously over-valued I sit on the cash and wait.

Also, long term investors may want to sell some or all or the speculative stocks in their portfolio when the score is high. Speculative stocks can rise much higher than the overall market in the booms, but they invariably suffer far more severely in the down-turns.”

BHP, AGL & Newscorp, not something I would have invested in none have come up in on my radar, and I have a very different view of WBC.

I should have suggested the period when he reported with his use of the Fear and Greed Index, he has since become a fund manager, I wish he still produced those newsletters I thoroughly enjoyed them.

But I do agree that we should watch for structural changes, hence my Buggy whip remark early.

I do have great respect for a lot of his work, and as said there are few that view it as we do.

And sorry I believe he only managers around $4B not 9B as I suggested , but that email he sent was a few years old.