J#15: The Good and the Bad: I was right about my next recommendation but unfortunately the price jumped 33% last week … before I got you in.
Last Thursday reminded me of the opening stanzas of Banjo Paterson’s famous poem “The Man From Snowy River” where he wrote:
There was movement at the station,
for the word had passed around
That the colt from old Regret had got away,
And had joined the wild bush horses —
he was worth a thousand pound,
So all the cracks had gathered to the fray.
I promised you on Tuesday (see journal #14) that I would soon deliver a recommendation that yields a whopping 20%.
Well, unfortunately, the “word had passed around” and my stock recommendation has “got away.” It certainly was worth “a thousand pound(s)” as Banjo Paterson would put it, but “there was movement at the station” as Mr. Market finally took notice of its great yield resulting in the stock price rallying on Thursday from Tuesday’s close. The rally was triggered by the company announcing its latest annual results and dividend.
The stock has pulled back since Thursday’s high of $1.93. On Friday the share price was up 33% from Tuesday’s close. As you are aware, dividend yields are inversely correlated to the price you pay. The cheaper your cost price, the greater the dividend yield you receive.
With the 33% rally, we are,
unfortunately, NO LONGER looking at a 20% yield.
Although the sizzle of a juicy 20% dividend is no longer there (and the accompanying potential for a large capital gain), the company still meets our investment criteria. As at last Friday’s close, we are now looking at a 12% yield. Yes, it would have been great to lock in a 20% yield, but a 12% yield in today’s zero percent interest rate world, it is still a good buy!
Rather than wait until Friday to announce my recommendation, given the run in its price, I thought it best to disclose the name of my recommendation now as the price may yet again rally strongly and our double-digit dividend yield might become a single digit.
The name of the company I am recommending is
Navigator Global Investments (ASX: NGI).
Navigator Global Investments (‘Navigator’) is listed on the Australian Securities Exchange (‘ASX’). I shall provide a full write up on Navigator this week to you.
Blackrock, State Street, Fidelity, and PIMCO are some of the well-known asset management companies that manage approximately USD75 trillion dollars of investments. It is a huge market, with some asset managers having major banking or insurance businesses.
Navigator operates in the same space as them — the asset management business. With USD11.7 billion of clients’ investments, they are relatively small but they are an efficient organization and reward their shareholders well. Navigator has been in the investment management business for 24 years. They operate primarily in the North American market.
Briefly, some key metrics for Navigator are:
We recommend buying Navigator up to AUD1.93.
AUD1.93 is the high Navigator reached last Thursday and is 13.5% from the last closing price (AUD1.70). At this buy up to price, you will receive a 10.6% dividend yield (net of withholding taxes for non-Australian resident tax-payers).
Thursday’s sudden surge in price goes to show, when an investment gem gets noticed by Mr. Market the stock price can really rocket. A graph and table of Navigator’s price movements last week is reproduced below.
Double Digit Dividends Fund
Missing out on 33% of capital gains and locking in a 20% dividend yield is unfortunate. I screwed up. I breached one of my investment tenets — Act Decisively! Please see lesson 3 in Journal#7. When you have reached the conclusion a stock is a buy (or a sell), it is important to do it immediately.
But there’s no way you could have acted decisively on a recommendation I hadn’t published yet, and that’s one of the drawbacks of any newsletter, such as Double Digit Dividends. There is a lengthy lead time from deciding to invest in a potential recommendation to writing up and publishing the recommendation. It can take weeks, if not a whole month. The long lead time exposes us to Mr. Market.
These are some of the reasons I’m considering establishing a double-digit dividends fund for anyone who might like to invest alongside me in my investment picks. A fund can act decisively well before Mr. Market catches on. For a fund, the process is:
- I decide on whether to buy (or sell) a stock.
- I act on the decision made.
- I tell the Fund’s investors about it in my monthly letter.
At the moment, whenever you get my Special Report on a specific stock, steps 2 and 3 above are “switched around” and I don’t enjoy seeing you miss out on huge potential yields because of this.
I have been exploring a few options on where to take Double Digit Dividends in the future and one of them is starting a fund. I cannot emphasize enough how I like to “eat my own cooking” in these journals. Accordingly, I will be putting a significant portion of my own portfolio in this Fund, if it gets off the ground.
There are a number of ways we can structure it. And it would help me to know if there is any interest from you, before locking in any particular path.
My business partner, Tim Staermose, tells me that feedback from potential investors in his African Lions Fund, indicates there is definitely interest in a fund that pays dividend income.
If you have any interest in such a fund, let me know via feedback@double-digit-dividends.com. I answer all emails personally.
And if you have any other feedback or reactions to any of my journals, do send me a note. It feels good to know my readers and I’m always looking forward to hearing from you.
Until my next journal …
Peter