Friday, January 12. I started in the markets more than 33 years ago, in November of 1984. My father gave me a check for $10,000 to get started with. I didn’t ask for it, he just freely gave it to me that day!
Today, having multiplied that original $10,000 many times over, my wife and I live the American Dream in an upper middle-class home and life-style. That’s not to brag, but to state a particular fact. That fact is: With time and an appropriate strategy, with some discipline, real wealth can be achieved in America by means of investing!
I don’t do, today, anything that I did with money back then. The reason is that I never stopped reading, thinking and learning about how money can be invested. I went through a spell where I convinced myself I could trade my way to riches, but learned fairly quickly that I neither have the discipline, nor the constitution for such a thing, and gave that up. I tried to go back to it from time to time, thinking I’d improved, but I had not.
In ’08, I was referred to a book, “The Single Best Investment,” by Lowell Miller. It really fired me up, and we committed to the strategy in it in ’11, nearly 7 years ago now. O’Shaughnessy, from his tome, “What Works On Wall Street,” validated the safe-dividend growth strategy as being one of the very best, by means of his research. Our results have been very good employing it. I thought I’d settled on the best at last, and would simply stick to it for all the rest of our days. But, things are not quite always that easy, as you probably know.
Some years back, maybe it was in ’09, I’d learned of another strategy that I thought made some good sense. Not necessarily better, but good sense in any case. It went like this: Among high-yielding securities, mainly CEFs, ETFs and the like, you buy from among these, take the high-yield payouts, and reinvest them into more shares. You harness a compounding by doing so, ala Miller and his book. I liked it, but felt there was something missing, and couldn’t quite put my finger on it. But, then, a new concept fell into place.
Just within ’17, a friend referred me to a Brett Owens and his site, Contrarian Outlook. He has some associates, and a Michael Foster caught my attention. Between these two, they have a couple of newsletters, Contrarian Income Report, and CEF Insider. What I found to be so intriguing was that these guys scan the realm of high-yield securities and, by their search criteria, determine those which are best managed. This is typically done by charting how these fund managers grow their fund’s NAV. By charting the payout, they are also able to get a take on the quality of management. It can be difficult to generate a high payout and maintain it. This usually requires the deft use of leverage, without incurring too much risk. But, the next thing they do, and I think this is brilliant, is they historically chart the fund’s trading price against it’s NAV, looking for those times when the price discount to NAV appears extreme… and, THAT’S when they issue a buy recommendation!
While the discount is relatively fat, you buy and receive the high-yield payout. You hold until they say to sell, which will be at a time when the price of the fund has significantly closed the gap between it and the fund’s NAV. Simple!
The result, when executed well, results in a high yield payout, as well as a degree of capital appreciation. This can work especially well in this particular manner: If you should sell at a profit, and they have another such opportunity already to go. You can sell for that gain, and use the proceeds to go right into another similar situation, and possibly generate even more high yield income and appreciation! Is this a better strategy than my safe-dividend grower plan? I don’t know, there’s no research to demonstrate that, but, in my mind, I can conceive that it can be.
My strategy is very dependent upon time. Income begins small, and grows more and more rapidly with time. But, it requires the buying and holding of specific securities that you trust will do what you bought them for… for decades to come! In order for that to happen, the company’s business model has to be ‘just the ticket’ for all those future years… and, there’s no real way to be sure of that! This high-yield strategy is not dependent upon time, the high income commences immediately. And, it’s not dependent upon a particular business model being especially successful for many years to come.
The high-yield strategy is dependent upon quantifiable things like the quality of current management, and irrationality of investors, who occasionally drive the price of a high-yielding security to an unusually large discount to NAV; which means you’re buying value, until that value is realized, and the discount gap closes… which need not take decades, or even years, necessarily.
I think the underlying principles and premises of Contrarian Outlook, and their Contrarian Income Report and CEF Insider newsletters, though untested and compared with other strategies, as O’Shaughnessy has done, may be superior to my own. I’m somewhat convinced of that.
Therefore, what I have done, is to incorporate the strategy of Owens and Foster into our portfolio. It has immediately resulted in a huge boost to our portfolio dividend income, as each purchase of these securities buys us, typically, more than five and a half times the income my safe-dividend growers commence to bring to us.
In retirement, I am, and everyone should be, all about INCOME. With the strategy and recommendations of Owens and Foster, via their newsletters, CIR and CEFI, I think that the income they are able to bring to the game… is an absolute game-changer!!!
Got to their site: https://contrarianoutlook.com/ Read what you can, and see if it doesn’t strike you in the same manner it has me. Then, if you would, write and ask questions, and let’s discuss these ideas, and their merits and drawbacks.
Here’s to your successful investing!
Harold F Crowell