Cliff,
"Much more in common than differences. But I suppose one other fundamental difference between ADVDX and my strategy is that they are required to mark to market every day to keep score. I don't have to do that and can take a different point of view. But that's another story."
My thoughts exactly.
The interview talked about two subject that we have discussed quite frequently here. The first, asset selection (what to buy and why). The second, money management (when to buy and sell).
In terms of the first subject (what to buy), one difference between ADVDX and I is that dividend GROWTH is so much less important to me then it is to ADVDX. But I see similarities between ADVDX and Josh Peter's view of dividend investing. For example, Josh talks about return in terms of growth, but he isn't talking about share price growth, he's looking at dividend growth. Remember, for him, return is the sum of current dividend plus dividend growth rate.
Jill gave her criteria for smallest dividend she would accept:
"For example, Monsanto, the corn producer, has about a 0.58% dividend yield but we won’t go much lower than that unless we felt that there was a fantastic growth opportunity."
Not me. My yield screen minimum is 6%.
Next, she says that the Alpine team follows closely about 200 stocks. Furthermore: "We have rarely ever had a holding more than 3% of the portfolio. We are diversified in our portfolio so our top ten holdings consist of approximately 20% of the portfolio. We usually keep our holding allocation below 2.5% at the most and the ones that are above 2.5% are generally the ones with a high dividend yield."
Similar to what I do (with individual stocks). But I don't follow 200 stocks!
"To be a good investor, you have to be able to sell things. We don’t fall in love with names and if the story changes, we just sell and move on to find better opportunities."
Good advice indeed!
I was struck by their 30-40% holding in foreign stocks. The reasons were twofold. First, typically higher yields. Next, typically yearly dividend distributions. Which leads to money management.
ADVDX uses 3 techniques (buy & hold, dividend capture, special dividends). I don't do the second or third strategies. Of those last two, the special dividend strategy is the one that troubles me the most (but not enough to avoid going with the Alpine team). The dividend capture strategy is the most straightforward one to understand, and one that generates the most discussions around here.
Basically, dividend capture allows ADVDX management to increase the yield received from a given amount of investible cash by a (theoretical) 50% (for stocks paying quarterly dividends. More importantly, for stocks paying yearly dividends, the increase is 6 fold. That is, if you have 6 companies (typically foreign), each paying a 2.5% dividend, it's possible to 'capture' a yield of 15% from those 6 (15% is 6 times 2.5%).
Finally, there was NO discussion of sector concentration, which seems to be important to some people.
Anyhow, those are a few of my thoughts. I was really struck by the candor expressed by Ms. Evans as to how, and why, they do things.
