Tuesday, September 17, 2013

My Watch List

On the Portfolio tab below my portfolio spreadsheet I have my watch list. At first glance its a multicolored miasma of formulas and numbers that instant intuitive as to what is going on. This watch list covers the companies I am currently invested in, were invested in but no longer am, and companies I want to keep tabs on. You can reach a certain point where you are looking at dozens of companies and you can easily forget your past research on them. I've found having a watch list to be incredibly useful and want to go over it with you here.

There are two sections. The Dividend section which measures shareholder return and the Valuation section that covers the price and valuation of the company and its shares.
Each section has 5 fields that have conditional formatting to trigger different colors. Those colors equate to a score based upon my opinion of what is good or bad for each field.
Bright Green: +2
Dull Green: +1
White: 0
Dull Red: -1
Bright Red: -2
From there we add up the points where each section can have -10 to +10 points and a final score of -20 to +20.
I want to repeat and stress that the scoring system is a person opinion and not based on "fact". I feel a 2.5% to 3.0% is an average yield for my goals and what I think a dividend stock should pay. Other investors might feel that a 2% is ok. As everyone should be doing their due dilligence in research and determining what is valid for their own portfolio both can work.

Shareholder Return
Yield: Dividend yield
5/10y Net Share Buyback: The average yearly % of total share repurchased. I try to use the 10 year but if not applicable I will use the 5 year.
10y DG %: The average yearly dividend growth rate. Again, when a 10 year number doesn't work then I use the 5.
DIV/EPS Gr %: The % of the growth of the dividend more then the % growth of the EPS on a yearly basis. Ideally here I want the EPS to grow more then the dividend to increase the chance of a sustainable dividend growth rate. I think too many dividend investors will look at past dividend growth and presume that will continue on. Some of these companies are giving 20%+ growth rates. There is no way that can be sustained forever.
Fwd Payout Ratio: The payout ratio of the dividend compared to the future estimated EPS.

Fwd P/E %: This is a % of how much higher the forward estimate EPS is vs the twelve trailing months of EPS. I want this higher to indicate the company is growing. If its growing then current valuations will improve.
10y P/E %: The % of how much lower the current P/E ratio is lower than the average yearly P/E ratio. If its lower then it might be considered "on sale".
Graham %: The % that the actual share price is below the Graham fair value. Benjamin Graham used several formulas and the one I currently use is Value = ((EPS * (8.5+2g)) * 4.4 ) / Y. Where g = the EPS growth rate and Y = the average 20 year AAA corporate bond rate. He felt that if an investor could get a better return off a company's bond then their stock there was little reason to buy the stock.
FastGR%: The % difference in actual share price vs Fastgraph.com's fair valuation. They use a version of Benjamin Graham's fair value formula and change it based on a few things. It will not always be the same as my own Graham% number.
Tweed#: Norman Tweed of SeekingAlpha.com came up with a quick and dirty way to determine if a dividend stock was undervalued or not. Essentially he believes the yield + 10y dividend growth rate = P/E. I use it as a % estimate for how much the P/E is below this number. Its a way of stating how much a dividend stream is worth.

Looking at my holdings in this portfolio and the total score you'll probably see I go for the higher scores. I use my watch list as a guideline for further research. I do not have any hard rules triggering buys and sells. I would advise against such a system. At the time of this post the railroad company CSX has a score of 11. Seems like a great buy. However what a screen like this cannot reveal is the fact that the majority of their cargo is coal. Personally I feel thats a dying industry and while their current fundamentals look great, I am not so sure we will see their stock grow.

Lastly, it's worth noting I invest in different types of companies. Corporations, MLPs, REITs, BDCs, Royalty land trusts. While they all have similar fields I look at, they do not have the same thresholds as to what is good or bad for the scoring system. They each have different standards. e.g. a 4% yielding REIT is pretty low while a corporation have that much yield would be great. Each section has different conditional formatting rules for what is good or bad.

Some fields update automatically, some I do manually once a month, quarter, or even only twice a year. They will not be current and updated. Please do your own research and due diligence for your own portfolio.

Hopefully that helps explain a bit more my ideas on finding companies and if they are worth spending time on in depth research.

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.


  1. Great post on letting the readers know about your watch list. Thanks again. :)

  2. I have always liked the functionality and simplicity of your watchlist. I remember one of your older posts you made where you let the public have access to a sample one and I messed around with it. I determined PSEC was a much better BDC play for me than TCAP was at the time and have been holding it since.