Stock investment resources

Berkshire's 2015 annual report ; http://www.berkshirehathaway.com/2015ar/2015ar.pdf

 

Very informative as usual, essential reading for all investors.

If I was in the accumulation stage of investing I might (ummmm maybe not) be tempted to own BirkshireHathaway. However as a retiree who invests for income to fund lifestyle (without having sell the asset) BirkshireHathaway with its no dividend policy is of no interest to me. Of course I understand the arguments of retaining earnings for growth but I'm personally uncomfortable with my future wealth reliant "entirely" on capital growth no matter how good a companies track record is. I like to be rewarded as a shareholder by also participating in "part" of the income earned by the company along the way. It's income that puts food on the table and funds our lifestyle again without having to realise capital (ie sell off the asset) to do so!

So given our "stocks for income" approach to investing the most important piece of information from Buffet contained in this annual report (and similar comment stated in a number of previous year's reports) is:

So yes I want to participate in this productive growth from the sharemarket over time BUT also want to participate in ever-increasing dividends NOW, not by having to sell great assets to realise income. After all our investing goal has always been to keep accumulating "income producing" assets until the day came when that income would replace having to work (or have choice in the matter). However having achieved this, early retirement is much more to our liking

OK, now you can get stuck into me

 

I consider BRK a deferred dividend vehicle. Wazza has already said that they can see a time when they will not able to effectively deploy all of their free cash and would look to initiate a dividend policy. In the meantime, its a tax free compounding vehicle, receiving dividends from its investments and subsidiaries and compounding far more effectively than could you or I. But I get where you are coming from Austing and respect that. BRK and MKL and our listed MFF are companies that don't pay or pay miserly divs are the only exceptions to my being completely onboard with your position (Divs mitigate agency risk / force capital discipline / are an identifier of strong cash generation)

 

Hi Falcon,

Magnificent response as always. And this may well see you reach your wealth accumulation goal much sooner than we did. What I love about investing is that success can follow many paths as long as it fits with our goals, risk tolerance and psychology.

It would appear that the majority of investors around the world who invest in shares live of capital rather than dividends with the wise maintaining a cash/defensive buffer. Obviously this works well for many. So our dividend only approach is in the minority.

Your approach gives you the potential for the best of both worlds. For better or worse income investing is what has become entrenched in my psychology, from a risk perspective fits nicely and as a retiree meets our needs wonderfully. But is it right for everyone, hell no. If my ramblings are in any way useful to others that is nice to know. But ramblings of my own personal bias and experience with the sharemarket are all they are. Unfortunately each has to find their own way!

 

Hi Falcon,
Thanks for starting this thread. The motivated money videos are awesome, the only thing I didn't like was his commentary of property. He used listed commercial property which I thought was strange. The fact that you can leverage and get huge ROI from residential property should have been mentioned I think.

Apart from that, you can't argue with tax free dividends with very low maintenance fees. I eventually want to sell down a couple of houses and put all the funds into a diversified share portfolio. In the mean time I'm slowly buying shares with some of the money that was going into my offset so that I can learn while doing.

currently holding
SVW and VAS
but I would like to find a good ETF that is for sustainable energy. I just think that the world is going to go more green and these companies will take off.

 

You need to understand that Peter is anti leverage with some limited exceptions, and anti property with the exception of his grudgingly purchased home.I think his portfolio is c.7m net and throwing off piles of dividends so he has done well over the years on a middle manager salary. I think viz. REITs he is quite spot on, in that Industrials outperform over the long term. His assertion would be that industrial shares will outperform residential property over the long term as well (particularly taking into consideration all costs and noting that resi property is extremely "granular"). I'm not making that assertion as I cant see the future, but if I had to take a position I'd probably go with that over the long term.

PS. You will be happy with SVWs recent movements no doubt

 

Yes very happy as i entered at 4.66 I'm going to take the next dividend and then sell and buy more VAS though as individual stocks make me feel like I'm betting rather than investing. I want to read more on this stuff before I start putting real money into it though. But it just makes sense to slowly plug money into it and get quarterly dividends.

I think property is a pretty bad passive income steam and believe stocks are far better for that purpose once you have a sizable portfolio.

 

Signed up for the 'Market Index' website e-mail alerts after it was mentioned in another thread. That particular report was Dividend Focused.

This other one they send out gives a 'consensus' analysis of analyst picks to determine Buy, Hold, Sell recommendations.

Consensus Broker Recommendations

 

https://www.perpetual.com.au/~/media/Perpetual/PDF/Investments/Case-for-Industrial-web.ashx

Found this little pdf that explains my preference for Industrials over materials/resources for long term investing. (Very much the Thornhill school). It's pretty basic but a starting point for further research/thought.

For those that wish to follow this method passively the LICs MLT and WHF are your best bets for a broad based exposure, and both Investors mutual and Perpetual have unlisted industrial share funds (MER around 1%).

 

Thanks falcon. Still reading through some books, thornhill does make a good argument for the industrials from where I'm at. Especially someone looking for a simpleton approach

 

I just bought motivated money yesterday and can't wait to start reading.

I just like how he has a no BS approach, unlike the Rich Dad Poor Dad book where he goes on about setting up multiple passive income streams from businesses.......because it's that easy haha

 

Your chance to learn from the man himself. 7hrs of ranting he puts on at Sydney Uni every few months. Probably the best value seminar you could attend, and he isn't selling anything....

Understanding Investing for Long-Term Gain Course - Courses & Training Sydney

 

Another Thornhill fan.

ESSENTIAL READING FOR ALL INCOME INVESTORS (pay close attention to the charts):

Welcome - Motivated Money

Please I can't stress how important the information is in this brief article! Take this simple approach over time and you are highly likely to enjoy a retirement many only dream about. It certainly worked for us. I shudder to think how much wealthier we would be if we had started out with this approach earlier in life. Fortunately although we started investing this way somewhat later in life higher work income and GFC opportunities still allowed us to retire early with way more income from shares than we can spend.

Also read everything "The Falcon" posts on this forum. His application of knowledge, analysis, passion and discipline to the Industrial Shares Income Approach is very educational for those interested in this way of investing.

Not advice, personal opinion only.

 

Be warned that some are disappointed with Peter's book and presentation. They are expecting to be told what specific stocks to buy and are disappointed that there is little said about this. They are missing the point, it is the "investing approach" that is critical.

From what I have concluded Peter himself is anything but a gun stock picker. In terms of individual companies a significant part of his income comes from the larger Industrials and the rest from sensible diversification across various industrial sectors. Where stock picking becomes more difficult (eg outside ASX Top 100/200) he uses Investors Mutual Small Companies fund. Add to that LICs such as MLT, ARG, AFI and WHF etc (he grudgingly puts up with some Resource component) as a "core" it's one hell of an Income Generating machine. Please note I haven't been to a Thornhill presentation for quite some time so apologies to him if my information is out of date.

Being somewhat lazy nowadays the LICs are the larger part of our holdings plus individual companies mostly from the ASX Top 20 predominantly purchased in gloomier times when their yields are through the roof. Well chosen LICs (including mid/small cap funds) offer much greater safety due to wide diversification but with the trade off being lower yield and NTA premium issues limiting buying opportunities. Hence buying somewhat no brainer larger companies which offer exceptionally high yield especially when they're out of favour is a way to boost overall yield (above that of LICs only) whilst still keeping things simple and easily manageable.

Note, not advice.

 

Thanks again, I will keep and open mind and probably use his framework. At the moment I don't even know what I don't know.

 

Important point. He provides the bones, you will need to put meat on them.

 

Very kind but unwarranted. I am just an interested amateur who gets stuff wrong all the time

 

He he, and you think Thornhill doesn't. I have followed him for a long time and remember the mistakes he openly and honestly admits to, some quite amusing (although I leave him for dead in that department). Especially with selling, hence his advice to himself - "if one gets the urge to sell take a couple of aspirin and lie down until the urge goes away". Same applies to tinkering with ones portfolio which I'm still occasionally guilty of. The beauty of his approach when diversifying sensibly is that one can still make mistakes and do very well, perfection not required for success!

Anyhow I for one will certainly continue to enjoy reading your posts as there is always something to learn. Plus finding discussion about long term share "investing" is rare, 99.999% is usually about "trading". Will be keen to hear about information gleaned from upcoming Presentations (listed funds and Thornhill) that you're attending

 

I've read Peter Thornhill's website and seen some interviews online, and he certainly speaks to me with his income investing approach. I haven't gotten round to ordering his book but will probably do it one of these days.

One thing I haven't found out is if he just owns ASX companies or does he diversify overseas as well? It appears from his website, etc. that he's all in Australia. Which would make sense given his approach to income, considering dividend imputation and higher payout ratios here.

His website has his latest article up, which he posted in the last few days.

 

From what I understand he does have some relatively smaller overseas holdings being UK LICs. But this is due to history rather than a deliberate choice to diversify out of Australia. He lived and worked in the UK before coming to Australia and hence invested there during that time. I assume being a long term investor he decided to hang on to the UK LICs. Otherwise I think he would be quite happy to solely invest in OZ industrials.