General Comments / Chat, page-59

My investing started following Motley Fool stock picks. Realised their advice was quite terrible with all the flip-flopping on their recommendations for Telstra.


Then shifted focus to dividend investing, LICs as well as dividend stock picks - Investing for consistent growth of cashflow. I recommend an understanding of accumulation indices.



Unfortunately dividend investing doesn't get discussed on hotcopper. Although there are better places for discussing that. About 50% of the investing in my super is dividend stocks. Much of the rest in super is ASX300 goldies (intent here is to leverage profits after a strong gold bull run into dividend investments). My speculative investing is outside of super.

Understanding of dividends, payout ratios and earnings growth helped me to appreciate how businesses grow sustainably and has helped my thinking with speculative shares. I like to think where they will be 3 to 5 years down the track. This is particularly easy to do with mining stocks as early on it can be relatively easy to get a perspective of potential scale (exploration targets help). Once there is a resource even without a scoping  studies a formulaic approach and assumptions based on peers can be used for determining production scenarios. Unfortunately too many ASX retailers focus on deposit grade and not the bigger picture of economics encompassing combination of grade, strip ratio, metallurgy/recovery, mining method, processing.

I avoid technology stocks as it is difficult to get a perception of market size. That makes speculation on growth difficult. I found this was easier to do with Biotechs (RAC) as data can be easily found on disease rates and then assumptions can be made about potential market penetration.

Still relatively early days for my investment in RAC. I think I will find it very difficult to invest in other biotechs since finding something else with similar compelling fundamentals will be very difficult indeed.

Management is now very much a focus when I invest in new speculative shares. If they aren't easy to talk to then walk away. The best asset with terrible management will go nowhere fast. Management skin in the game is usually key.