ABOUT

THE SINGLE BEST INVESTMENT
Creating Wealth with Dividend Growth

TABLE OF CONTENTS

Introduction
A typical situation...information everywhere…so many options...is there a simple strategy that makes sense and works?…this book’s goal…impeccable common sense…comfort level…the mind extrapolates…lessons from the field of Behavioral Finance…psychology of loss, psychology of gain…sell too quick?…self control…narcissistic distortions…open your inner eyes...awareness of the inner life... Investors, listen up!…a technique that cuts through the b.s....summing up...

1) The First Hurdle: Say Goodbye to Bonds and Hello to Bouncing Principal
The environment for investors...a bill that never arrives in the mail…maintaining purchasing power…graphical view of inflation and the declines of the dollar…a loaf of bread became a slice of bread… “safe” investments do not outperform inflation…bonds haven't really beaten inflation...bonds, bad…learning to love fluctuations...the risk/confidence equation...banks in the 1990's...easy to hold, easy to buy declines... summing up…

2) The Eighth Wonder: A First Look at Compounding
Harnessing the power of time and growth...compounding is the money that money makes...time is all you need...some magical examples...the eighth wonder...average annual returns...time, patience, and the right kind of stock...a company’s reliable growth shared with owners...summing up...

3) The Single Best Investment: Creating Your Own Private Compounding Machine
The “parts” of a compounding machine...the operator...dividend growth is the hidden key...dividend growth drives the compounding principle...dividends are the truth...management’s signaling device...high returns from dividends alone...dividend growth boosts a stock’s price...reinvestment is behind the bulk of long-term wealth creation...twenty year pro forma...the shares build up and up...an investor’s growth connects to a company’s growth through rising dividends...summing up..

4) The Single Best Investment Strategy Applied
An almost impossibly simple formula...high financial strength...low debt... high interest coverage...moderate reliable earnings growth...credit experts do the rating work for us...dividend history...quality is a management issue...tough times, acquisitions...franchise or niche...real products for real people...high current yield...a better base level quickens the end point for most mortals...some simple ways to project future dividend growth...emphasizing reliability of mature companies...cyclicals are problematic...obvious cases are good enough...summing up...

5) Traditional Valuation Tools
The quest for cheapness is filled with tricks and traps...good relative valuations can give you an edge...price/sales ratio...revenues are the raw material of profit...price/earnings ratio, a slippery concept...remember to adjust ratios to the relevant industry group...book value...cash flow and cash growth...a takeover?...insiders activities...summing up...

6) Does Undervaluation Exist? The Story of the Stock
How can so many stocks be “undervalued?”...undervaluation and arrogance...a story proposal...the story of the stock...a stable, proven marketplace...a growth kicker...solid base of reliable cash flow...consolidation...stock buy backs...a tailwind...can there be bargains?...moderate reliable growth as a story...summing up...

7) Charts Can Help You
Academics call them laughable...the alpha mystery...relative strength studies...technical analysis helps reveal the subjective attitude of investors...the Miller/Howard quantitative technical study...the key item is relative strength...six months of relative weakness...when all is in concert...beware the parabolic...the selling climax...look for the turn...technicals for selling...summing up...

8) A Gallery of Single Best Investment Stocks
An array of various kinds of qualifying stocks, with text pages from Value Line and explanations indicating how to identify and analyze them...for illustration only, not current recommendations ...caveat emptor...

9) How to Hold and When to Sell: Attitude Is Everything
Investing is about character...too many stimuli...the system is an antidote...easy in, easy out; liquidity is a devil...avoid tracking your stocks too closely...let management be your employees... the real estate paradigm, a landlord’s attitude...dividends: always the key... is it in jeopardy? has it gone up in the past year? ...other reasons to sell...summing up...

10) Building Your Portfolio
Asset allocation, today’s buzzword...should you bet on every horse?...classic asset allocations and their portfolio characteristics ...accomplishing the same thing in a single SBI account...“balanced accounts” and bond/stock volatility...industry breakdown of an SBI portfolio...how many stocks?...a 2005 portfolio...equal dollar weighting...a role for cash?...tilting toward higher income...an all-stock balanced portfolio...summing up...

11) “The Rules”
Rules, within a relativistic context...the rules...the expected return rule of thumb...choose the obvious stock---let everything be in gear...

Appendix A: Academic Studies, Historic Backtests, Real-Time Performance
Past history can’t guarantee the future...as the dividend rises the stock price will also rise...value stocks, subgroup of high yield stocks, subgroup of high dividend-growth stocks...firms with lower valuation levels have higher expected returns...value strategies yield higher returns...the tortoise beats the hare...high returns from high yielding stocks...highest yielders outperformed 91% of the time over all rolling ten-year periods...maximum loss half as bad as overall market...dividend growth reduces volatility in addition to increasing returns...signaling by management...studies only confirm common sense...real-time performance...high yield stocks have the appearance of a free lunch...a bit of a mystery...

Appendix B: The Categories of Single Best Investment Stocks
Every candidate must adhere to the “simple formula”...quality elements vary from industry to industry...utilities...seek a growth kicker, as always...REITs...low debt and net asset value not far below stock price, location location location...don’t be a yield hog...banks...seek non-interest income...oil and gas...they’ve eaten all the fish already...major companies...MLPs and pipelines a good play...insurance...sensible diversification...a similar “simple formula”...service businesses...financial services...industrial services...brokers...outsourcers...we’re hooked!...food and “defensives” ...commodity based...rubies and onions in the mud...easy money (we ought to do a study)...bad odors...a true once in a lifetime opportunity will never be offered to you...

Appendix C: Information Resources

A Final Word: The Human Face of Dividends

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