Newsletter - September 16th, 2024

Dear Reader,

Attached is a recent list of stocks that passed value screens (e.g. below net current asset value, below tangible equity, etc.) but don’t meet our investment criteria - and our reasoning.

This may help you avoid some ‘value traps’, and stocks that aren’t sufficiently attractive compared to opportunities available today.

For reports of stocks that pass our quantitative and qualitative standards:

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Wealthtrack - Michael Clarfeld

Clarfeld is a successor to Hersh Cohen - a former fund manager of Clearbridge Dividend Strategy Fund (a sponsor of Wealthtrack). Though the interview is a year old, he makes some salient points on dividend investing:

2:45 Independence from the markets

No matter Mr. Market's mood, a portfolio of high-quality dividend payers is appropriate for all seasons. It provides downside protection due to the dividend yield, and participates well in a rising market.

Most importantly, it allows the investor the luxury of an independent mindset - to ignore the market, and exploit it as it suits his book.

5:00 Growth matters

While our focus is primarily on undervalued stocks (free cash flow generation vs. reinvestment for growth - see 17:45), it's important to assess growth prospects, and profitability ratios of the company to determine value. Well-chosen companies can provide growing dividends over time.

10:00 Don't sell the flowers

Clarfeld advises not to sell well-performing stocks (as long as you can). Even if they appear over-priced, the compounded growth generally corrects such overvaluation in relatively short order.

Besides, it's not easy finding winners in the stock market - and there's a good chance of regret when replacing such a stock.

15:00 High payout ratios

High dividend payouts from earnings is an indicator of good shareholder orientation - particularly when profitable growth prospects aren't spectacular.

Stocks tend to sell considerably below their value to a private owner when dividends are cut - sometimes to zero. Though we focus on such apparently undervalued stocks, we also pay attention to past payouts to assess management's shareholder orientation.

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For reports on the best investment values in stocks worldwide:

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Wish you an excellent week ahead.