2017 was a great year for me. As you can read from my latest dividend income report, my YTY dividend Income grew by about 230%. While that´s nothing more than awesome, I got some valuable lessons this year that I wanted to share with you guys.
Buying a so-called “starter position” or “watch post” doesn´t work for me. I´ve done it several times before, and the only thing that can happen is the following:
- The stock goes up, I think it´s more expensive, and I don´t add. It moves upwards even more, and I still don´t add, and after a year I have 70% gain. But, the amount is so small, so my gain is only around $100 to $200. That sucks when you were able to hit the bottom (I´ve done this with more than 10 stocks this year…).
- Or the stock drops, but this doesn´t do me any good or bad. Since the amount is so small, I neglect this and focus on the fundamentals. While this is much better than the point above, it just makes me feel “the amount is so small, so I don´t really care”.
Overall, doing starter positions isn´t something for me. I know many investors use 30% 30% 40% buying strategy, but I think I´ll rather just buy the stock when I think it´s fairly priced, and just add more in the future when the price is fair again. Easy and simple.
Losing money does not make me feel ill or sad. When my portfolio was down 30%, I said “fuck this” and I went to the gym. Then I´m done with my small mental outbreak. Easy and simple. Some story: So, I´ve owned a norwegian software company called Opera for many years (more than 5 years). I bought it at 80 NOK and it went from 120 NOK to 22 NOK.
Why? Several reasons, but currency problems was one thing, late delivery was another. In each report, they said stuff like “We experienced slow growth bla bla bla in this sector, but maintain high conviction that this will get better in 20XX”. Bullshit.
Overall, I held the stock way too long, and now the company isn´t one company anymore, but 4 companies in different segments. I lost more than $6000 on this stock, but I´m very thankful for that. It has made me the investor I am today, and given me a different mentality. Thanks Opera!
Stock prices are a function of earnings and revenue and one should never look at the % when trying to get a grasp of the business. As you can read in my Introduction to Accounting, share price goes up when the company does better. So why on earth would you use the argument that it´s time to sell now because of the simple reason that the company you own makes more money?! Does not make sence at all. Okey, a few times fundamentals shows that the stock is overvalued, but again, most of the time, never focus on the % gain. Never. It´s noise and doesn´t give you anything.
Another point that I want to make, which you can read more about in this post, is that I don´t like growth companies were the fundamentals are ignored. Say NVIDIA and Amazon. I bought Activision Blizzard at around $36 and sold at $53. Once the P/E was around 42 I could not hold it anymore. It was just to expensive. However, how can one say how much Amazon should be worth? I don´t know, so I´ve choosen to stay away from such companies, let the tech funds take care of those posts, and just focus on boring companies.
Tracking your dividend income and transactions (both buy and sells) is a wonderful way to focus on the long-term perspective of our strategy.
To find the best stocks in the world, most of the time, you just need to look at the products you use. Go look at the toothpaste, pizza, yoghurt, computer, wi-fi, bed… You will see that companies like Orkla, J&J, P&G and more of what most dividend investor calls “timely holdings” dominate your product-basket. That´s where you start to look for great companies. Once that is done, just buy regularly when things look fairly priced (I´ll write how I do that in 2018) and you are set to go. It´s pretty easy actually. Just make it simple.
What´s your top 5 learning list for 2017? Anything that changed your investment style? Please share so that we can all learn from each others mistakes.