Video of the Week: Think Core, Think Growth


Years of doing research, reading academic studies and working on portfolios (including mine) brought me to this set of rules that enables me to simplify my investing process.

Principle 7 – Think Core, Think Growth

The last part of this 7 Dividend Investing Principles series is all about my portfolio management philosophy. Basically, now that you’re all set, how are you going to build up your portfolio? Personnally, I like having “core” dividend stocks and “growth” dividend stocks. Let’s see what it means exactly!


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00:00 Mike Heroux: Hey, fellow investors. This is Mike Heroux from Dividend Stocks Rocks. I hope you’re doing well today. Time flies, we’re already at the last part of the seven part series about our dividend investing principles. So we’re talking about principle number seven, which is, think core and think growth. What does that mean? It’s more related to our portfolio management philosophy. So throughout principle one to six, we have learned how to create filters, look at important metrics, select the right stocks, write your investment thesis, know when to buy, know when to sell. So we pretty much covered everything there. Now, it’s more about how you’re going to build your portfolio. So, at DSR and my personal portfolio is built the same way. I have a core portfolio which is more in line with the buy and hold philosophy. So we’re talking about companies that met the dividend triangle, so revenue growth, earnings growth and dividend growth. They show strong fundamental metrics. The investment thesis is very strong over there. We’re looking at leaders.  

01:12 MH: So basically, great companies that will thrive not in the next 15 months, but in the next 15 years. So those companies are more sleep well at night. It doesn’t matter that we will not review them, we will still look at them on a quarterly basis. But chances are our investing holding period will be more than 10 years in those cases. So this is the core of my portfolio, roughly 80% of it will be invested in those companies. As I mentioned, dividend growth investor will most likely look at those. But then I like to spice it up the little thing, I like to add some ingredient to my soup. So this is why I have the growth part of my portfolio.  

01:58 MH: So in terms of growth, I’m still looking at dividend paying stocks, but I will be looking at companies that are mostly like falling knives. So this means that the stock price is on that major drop, mostly due to a specified event, some concerns about the market. So it’s just to identify great companies that are being… There’s a market overreaction around it and then the stock plunges. Good example that happened in 2017, late of 2017 is Enbridge, ticker is ENB or ENB.TO if you’re Canadian. So basically, there was a lot of concern about the replacement of Line three.  

02:42 MH: So Enbridge is a pipeline company, so there was a lot of concerns about its ability to finance its pipeline project because at that time they had over $20 billion in projects on the table. And also regulators, so will regulators allow Enbridge to go forward with their projects? So because of that, the stock dropped massively and then I had the opportunity to pick up some shares at a very low price. And then my goal with Enbridge is to hold those shares for a few years, but probably that I will get rid of them as soon as the stock bounces back. When it reaches another like 30-40% growth within a very limited amount of years, then I’ll be able to get out of the market and then cash my profit.  

03:32 MH: So the growth part of portfolio as more an investment horizon for two, three years, sometimes it could be very fast, like a couple of weeks, couple of months. I did a trade on Qualcomm when there was those legal problem with Apple, and then China was suing them. So the stock dropped rapidly and then there was rumors of acquisition by another business Broadcom. So at that time the stocks spiked rapidly, so within three weeks I was able to make a 25% return. I just cash my profit and then I run.  

04:08 MH: So the overall idea here is not to play the day trader, but to be a little bit more active with… You could go as low as 10% of your portfolio. So just buy one or two companies like this. We did it at DSR with Omega Healthcare. We bought it after there were some problems with tenants, and then when a few quarter later it seems to be going very well, we sold it, and then made a hefty profit. I’m doing the same thing with Bank of Ozark, O-Z-K. Similar situation, they published a write-off, major write-off back in October of 2018. And then the write-off was really a one-time event so now in January 2019 when they published their next report, everything was well, the stock just bounces back by 20%. So this is where I put a sell order. A stop sell order basically just saying, well, at one point I wanna plough back my profit, and if the stock keeps going up, I’m just gonna increase gradually the sell stop order, and if it ever drops down because it’s a riskier play, I wanna make sure that I keep my money… That I keep a part of my profit. So, the sell stop order will go through, I will cash my profit and then I’ll move over to another perk.  

05:35 MH: So just… Those were just a few examples of how I did it. Or you can follow me as I manage my portfolio on my blog. So the, I actually post a monthly report of my pension plan account so you can see all the trades that I’m making, and you will see that I really apply the core portfolio thinking for about 90%, 80% of my portfolio and then I play with 10-15-20% of it to get a little bit more growth and make trade a little bit more exciting.  

06:09 MH: So, I hope that you have enjoyed this seven-part series. If you read the whole thing. I’ve created an enormous gigantic article about those seven articles. So, if you rather read than watching me, you can head over towards in the note, at DSR. So, it’s Dividend Stocks Rock, we have our seven dividend investing principles over there, too. And I’ll come back next week with another series, another video about dividend growth investing. So, until then, keep your money invested, cash your dividend and smile, cheers.

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