Monday, January 23, 2017

Ways I Choose Our Stocks

Finding good stocks to buy can be challenging.  There are so many approaches, so much noise and so much data.   It's tough to sort through everything and narrow the list to a few good picks.

I used to evaluate the recommendation of investment services and letters and try to cherry pick a few stocks.   My success rate was very low.  In fact, more often than not the stocks would go down, some all the way to zero.  Then I tried buying stocks that were once high flyers and were beaten down.  My results were mixed.   Although some stocks were winners and some stocks continued to be losers.

During my retirement years, I've been experimenting with how to better choose stocks.   Here is my latest methods for doing so, which I feel are promising.

  • Borrow ideas from professional managers.    I have managed accounts that are run by proven equity fund managers in three strategies: growth, value and dividend growth.   I like to evaluate their stock portfolio and selectively buy additional shares in some companies.  Since they are putting money into their picks, I can easily evaluate the performance of their choices.
  • Focus on good dividend growth stocks with long histories of paying dividends.  Some of the ideas I get from our managed accounts.  Other ideas I get from articles that I read about Dividend Aristocrats, REITs, and high dividend payers.
  • Focus on stocks in beaten down cyclical sectors that should recover.   Energy is one such sector, since I believe oil and gas will be a major source of energy in my lifetime.  I started buying energy stocks too soon in late 2014, but have recently benefit from the recent recovery.  Biotechs and retail stocks are other sectors I am considering.

  • Finally, I am testing each of my picks by committing to a small position which I can track to determine if the new strategy is working.  So far the results are favorable, but inconclusive since the last eight years have been a bull market.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial or investing advice. Please consult a professional advisor.

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