On rare occasions, I have mentioned about my opportunity portfolio. I have never discussed about so far on this blog. Over the years, I have not had any tangible traction on this aspect. My wife tells me that I have failed on this subject. She tells me, I am too slow or logical or methodical to understand what opportunity means. For opportunistic, I have to be like a “hawk” to pounce on it when it comes. Well, I accept her opinion. Why? Because have you ever won an argument with your wife?
When I say, not much traction, what I really mean is, I haven’t focused on it. I haven’t spent sufficient time on it. Opportunity is too wide a definition which could probably include deep value, market timing, downturns, de-listing, arbitrages, buyback offers, etc. In my early investing years, I played with market timing with not much success. Again, I could succeed in few trades here and there, but sustainability is an issue. In my investing philosophy, sustainability and consistency over long term is not negotiable.
So far, my opportunity portfolio has been clueless; do not know what is going on and no direction. It has been starved for any capital allocation. I have been holding two positions as a reminder of my failed market timing adventures. Since last few months, I have been thinking about it and have started dabbling in it.
In my progress update, I mentioned about “reaching critical mass” of dividends. What it means is, the total dividends I receive, have enough mass that I can buy shares of one or two companies every year. Similarly, the income generated from the blog is also at a point, where I can buy one or two companies. That is, I can buy up to four companies with this critical mass.
I have been buying only three or four times in any given year. The portfolio and blog generates enough capital to be re-invested for this objective. Essentially, what this means is, I do not need to allocate new capital from my full time job. I consider this as a milestone. I haven’t discussed about my milestones, but those of who are reading my post or interacted with me, would have gotten flavor of it.
- First milestone was about completing real estate payments.
- Second milestone was completing bond investments which are now on auto pilot. These are no brainer, so nothing much to discuss, right? And there is no glamor associated with them.
- Third milestone was dividend portfolio on which I have working for a while, probably many of them got bored about it. Last few years, I have been focusing on creating a good foundation for sustainable long term growth. Therefore, I have remained fixated on a specific type of objective, i.e. sustainable dividends. I consider reaching a “critical mass of dividend cash flow” as a milestone for me. Like bond portfolio, this portfolio is also on auto pilot. I do not need to allocate new capital to it.
It is time to adapt. If you do not adapt, you rot or get corroded.
I will continue to look for companies with sustainable dividends. I will continue to build and grow my portfolio of dividends companies. But the pace and percentage allocation is likely to slow down.
This year, I am working on slowly widening my focus to include opportunistic companies that I can buy. This would be little different than dividends based companies, or buy and hold philosophy. I can’t put my finger on it, but it would be somewhat based on earnings power based value investing. Here, sustainability of dividends would not be a pre-requisite.
No, this is not going to happen next day or next month. I am sure there are many opportunities out there. But I am not on a buying or selling binge. My core investing philosophy of good business will still remain as is. That is not going to change.
I still need to work out my methodology or the process I am going to use. I need to determine what methods I will follow, what parameters I would be looking for, etc. It is likely to be slow learning process. And when you are venturing into unknowns, it is essential to take baby steps and keep learning from your mistakes.
earnings power, opportunity, value investing