History shows that investing in stocks is one of the most profitable ways to build wealth over the long term. Unfortunately investing can be like buying fool’s gold, with some stock holdings falling short of expectations. In this week’s digest, AAII staff cover valuation strategies we hope will empower you to take a deeper look at what “quality” means to you.
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Myths and Truths About Quality |
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By Rupal Bhansali
Knowing how to correctly distinguish quality from junk is a prerequisite to generating higher returns with lower risk. When it comes to investing, quality is not black or white but has many shades of gray. Neither businesses nor their stocks come marked with quality labels (unlike bonds, which at least have credit ratings). To understand quality holistically and correctly, you need variant perceptions and unconventional frameworks that go beyond the typical clichés and checklists. In the article Myths and Truths About Quality, Rupal Bhansali debunks some of the conventional criteria that are commonly used to assess quality and presents a contrarian approach to valuation.
Some of the topics covered in the article include:
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Finding investments with a “Darwinian” advantage
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The myths of pricing power
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Strategies to avoid being a complacent investor
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Tangible patents versus intangible know-how
Among the worst possible investment traps is low quality masquerading as high quality. Get new techniques to correctly judge stocks in this enlightening article.
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Stocks With the Highest Shareholder Yield |
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By Charles Rotblut, CFA
One theory of valuation is that a stock is worth the cash it distributes to shareholders. This First Cut column identifies the 20 U.S. exchange-listed stocks with the highest shareholder yield. All 20 are profitable and are expected to be profitable for their current fiscal year. We set an upper limit on the payout ratio at 90% to ensure earnings are in excess of the dividend payment, if one was paid. Since shareholder yield does not require a dividend be paid, we purposely did not exclude non-dividend payers from consideration.
Some of the highlights of the article include:
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Exchange-listed stocks with the highest shareholder yield
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Information on the passing companies’ buyback and dividend yields, payout ratio and more
As always, be sure to examine a company’s financial condition before buying to ensure it is able to continue returning capital to shareholders and otherwise has traits that would suggest a higher future price is warranted.
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Member Question
Congress passed the most significant changes to the nation’s retirement system in more than a decade, the SECURE Act. While the insurance industry lobbied hard for the change, the provision has attracted criticism from consumer advocates. Do you support or oppose the proposed changes made in the SECURE Act?
A) Support
B) Oppose
C) No opinion
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Be sure to vote on this week’s question for the opportunity to offer your insights on our open-ended question. |
Previous Question’s Results
What is your biggest concern heading into retirement?
Staying active/health : 53%
Paying for health care : 20%
Maintaining an income stream : 19%
Saving enough money : 6%
Housing : 1%
Debt : 1%
Poll results are as of 9 a.m. (Central) on Monday. 2,045 respondents.
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