Leveraging the Work of OthersPosted: October 31, 2016
I am often asked where I get my information, where I start, and what my process is.
The first thing for any investor, regardless of how s/he invests, is to have an Investment Policy Statement, or an IPS. I’ll touch more on IPS’ in a later post, but in a nutshell it describes your investing goals, strategy, how to meausure success, and risk tolerance. Overall, it measures the how and why you invest. I mention this, because one’s investing process is driven by their IPS, and the process in turn drives how and where you start.
As a dividend investor, I try to work smarter, not harder. There are a plethora of information sources out there. The universe of dividend paying companies is huge, and grows even larger when you expand this to income trusts (e.g. REITs), mutual funds, and ETFs. Because the universe is so large, it is challenging to find companies to invest in that meet my specific criteria:
- Companies with strong dividend growth
- Companies which are cheap (by cheap, I mean in terms of valuation, not the actual cost per share)
- Companies which offer a decent yield
- Companies which will help to diversify my exposure to different industries (i.e. not being overly concentrated in one type of company, such as “all banks”)
With that criteria in mind, there are a number of tools that one can use to help whittle down the universe of available stocks to invest in. And once this universe is whittled down, you can start focusing on which companies to take a deeper look at, before pulling the trigger and investing your hard earned dollars. That said, here are some of the tools I use to help in identifying companies to analyze, and hopefully purchase.
- Blogs. I try to read a lot of blogs, but as most readers know, there are many, many blogs out there. It helps to be able to have a shortened list of blogs to peruse on a regular basis. My primary source of blogs is The Div-net, as it is composed of blogs focused on dividend investing. This makes sense, as there are several great bloggers who have already done a fair bit of research on companies to invest in (or not to invest in!). Beyond that, these blogs are a great source of inspiration for my own investment activities, and often help to push me to invest that one extra dollar into my investments.
- Podcasts. I listen to three (four) bogs on a regular basis. These blogs are not all about investing, but they do act as a great source of inspiration for managing money. Moreover, they make the listener really think, which helps when you are doing deep analyses on companies to invest in.
- Market Foolery / Motley Fool Money. These blogs are published Monday-Thursday, and Friday, respectively, and are the podcasts of fool.com. The show features a rotating list of speakers who work at fool.com, and is great for a daily recap of financial events, and an hour long recap on Friday. The host and speakers are great presenters, and I’m often left laughing under my breath on the streetcar home when I’m listening to them.
- Planet Money. While not an investment podcast, Planet Money is a great source of things about, well, money. They cover a breadth of topics, everything from the full process to selling oil (right from pumping it out of the ground, to selling it to a gas station), the odd case of a shopping mall with two different minimum wages, and the investor of the Self-Checkout Counter (who knew that the inventor was a local Torontonian???).
- Freakonomics. I’ve saved the best for last. I love the Freakonomic books, and the podcast is great for a weekly dose of diverse topics on economics. They cover everything to do with incentives, right from why belts are the worst invention ever, to the history of the Nobel prize.
- News. Newspapers, and newspaper websites, are a great source of information. Regrettably, many newspapers how have “pay-walls” around them, so some of the more premium content is unavailable without a subscription. Frequent sites to visit? The Business and/or Investing sections of The Globe and Mail, Yahoo Finance (Canada), and Bloomberg.
- Daily Email News Digests. I subscribe to two daily news digests, which typically deliver an email before 7:00 AM EST so I may read it on my way to work.
- CFA Financial Newsbrief is put out by the Chartered Fianncial Analyst Institute, and is a great roundup of financial and economic events that have occured in the last twenty four hours (or over teh weekend in the case of the Monday edition). Within the email, there are short paragraphs describing the event, and links to longer articles on 3rd party websites such as Bloomberg, or Wall Street Journal.
- Bloomberg Briefs. I actually subscribe to two Bloomberg digests, but they are both different versions of Bloomberg Briefs. If you go to the site, there a variety of daily digests which you can sign up for, for various financial products (ETFs, Bonds), different industries, and general financial and economic news.
- DRIP Investing Centre. The DRIP investing Centre is the heavyweight of all information. On this site, you’ll find the Money Market Dividend Champion lists for both Canada and the US, available in Excel and PDF format. These lists are invaluable to the dividend investor, as they have information going back several decades for each company that pays a dividend in the Canadian and US markets. For my own criteria listed above, I was able to whittle the universe of 700+ stocks down to 15 stocks in less than 5 minutes, just playing with some filters in the spreadsheets. This has saved me countless hours of filtering and searching other websites for the same information. Importantly, it also lists an extrapolated Graham number, which is one of the key metrics I use for measuring the value of a company (e.g. to determine if it is cheap enough to buy). This in itself is a great time saving tool, since it avoids me researching a company, only to find that it is too expensive to invest in!
No investor is an island, and it helps to leverage the work of others! After all, the majority of us are retail investors who are trying to carve out the biggest piece of the pie that they can — and thanks to resource such as those listed above, we can eek out an even larger piece over time.
Onward and upwards!