CW20: Treading Screen
The results of my Custom Screen are in for this week and they are... disappointing haha.
Only 4 names were produced ($DOW $WEC $NRG & $XEL) and, frankly, I don't like any of these setups for this coming week.

All show weak uptrends above EMA/SMA's with no confirmation yet and, most likely, this rise is part of the "chop" expected in Stage 3. Not touching.

Since I don't need to do any DD/FA on these names, I'll use the time to analyze this strategy.

#1: Total output
The total number of leads from this screen has been decreasing recently. This makes sense given the current state of the market (fewer Stage 2 setups). For example, retail stocks ($WMT, $DG, etc.) were part of the output of previous screens showing a weak push for Stage 2 (similar to above) that obviously did not hold.

I've also included $SPY 's weekly closing price on the chart below to see if there was any correlation with screen output (R2 = 0.39).

#2: Potential Return (backtesting)
This is more difficult to accomplish because the screen is only meant to be a starting point (NOT a hands-off algo type strategy). For me to put money at risk, I need to:
  • See a strong setup/entry opportunity
  • Like the company fundamentals
  • Scan for any red flags in the news
  • Assess the sector and macro impacts

But, a wise woman once told me: "Ain't nobody got time for that!"
(Miss the reference? Here ya go!)

Instead, I did a quick check on all outputted tickers and assumed an entry price as the previous week's CLOSE and calculated the average % return using the HIGH of the next week. The assumption of selling at the absolute top is an idealized scenario but can be easily reproduced with your favorite index ETF. Using $SPY for comparison yields:

Across all weeks, the global average return (and stdev) shown above is:
SPY: +1.55% (1.71%)
TreadingStocks: +2.58% (1.18%)

Keep in mind, the TreadingStocks return is the average return of all tickers that the screen produced; this includes so-so setups, companies with bad fundamentals, risky sectors, etc... For a given week, the averages above result from a distribution of the individual ticker performance and this distribution is important to understand and displayed below via a boxplot.

You can see, week 8 in particular had the potential to be feast or famine based on my subjective selections:
Select correct tickers (possible ~20% gain)
Select wrong tickers (possible ~10% loss).... for me, that's a scary bet to make week-to-week

The good news: most other weeks show a more narrow distribution and the vast majority of tickers for a given week had the potential to finish >0%.

Overall, I am pleasantly surprised with the results. Hopefully, with my input, I can help and not hurt these returns over the general market.
Keep Treading!
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I like that when your screen doesn't produce any name you like, you don't force action, and instead spend the extra time analyzing the strategy.
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What to watch for the week of 5/23/22.
Get prepared to take on the market this week by checking out my watchlist. It details some potential catalysts for the week beginning May 23rd. Hopefully this graphic can help you navigate your trading decisions. Feel free to save it for reference, share it in your trade groups and repost it on your social media page. Also be sure to follow me. Good luck everyone! $ZM $SPY $NVDA $QQQ $BIG $DG $BABA $M $BBY
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Irrationality at its Finest
When I find strong financial companies with a track record of stability, well managed, while trading at attractive valuations, I add them to a watchlist to keep tabs. When the market creates opportunities to buy these “like, not love” type of businesses, due to massive over reactions to short-term bad news, I take advantage of it. I’m not big on slim profit margins or businesses that are resource/capital intensive (think Honda & WalMart for example). So Target isn’t the normal type of company I add to my portfolio as a long-term hold; even though valuation, growth, and managerial efficiency are outstanding, and they’re a dividend king, with 54 consecutive years of dividend growth. These contrarian positions, betting against the crowd who thinks Target is only worth 75% of what it was the day before, has proven wildly effective in the past. As long as that drop offers a buying opportunity at fair value or with a margin of safety, and long-term prospects haven’t changed, it’s a go in my mind. On the rare occasion quality blue chips that meet these standards drop 25% in one session, I am taking advantage of the insanity, every single time. The more irrational, the stronger my reaction. These buys are usually meant to be shorter-term plays, 6-12 months, or until the market corrects its inefficiency. Initially I was buying good companies I planned to hold and thought I was getting rock bottom entry level prices. As quality standards have changed, I wouldn’t buy and hold what I once would, but I will take advantage of any opportunity in which I think I can make my money earn more money.

This is not a strategy I developed from any particular source, just accumulated knowledge of human behavior/overreaction in the markets and watching for easy swing trade opportunities. Still, as always, company has to be quality first. A crappy company dropping 25% overnight isn’t irrational, it may be well deserved. But a company like $FB & $TGT falling 25% overnight, due to short-term negatives (IMO meaningless, due to my long-term thesis) makes zero sense. This drop of ~25% left them at very attractive valuations and has created a high probability opportunity to outperform the market, with minimal risk of downside (it already dropped 25% from a price that represented close to fair value). It’s not a one size fits all rule, but after enough time in the market, “irrational” investor emotion/behavior really sticks out. Also helps grasp what is over and under valued and when. Currently, comparing Target to a few “quasi” comps, they look better than $DG, $DLTR, $WMT, $OLLI, $KR, and $BIG on almost every area of comparison. Ollie’s has SLIGHTLY higher growth rates & profitability margins, but falls so short in every other category, it’d be silly to go with them over Target. Of those retailers mentioned, only Big Lots is trading at cheaper valuations. Target looks the best to buy from that short list. I truly don’t understand when a company with 54 years of consecutive dividend increases, has superior 1, 3, & 5 year growth, ROE, ROA, and ROTC, similar or at least adequate profitability margins, and is trading at even cheaper valuations. I’ve always watched $WMT & $DG, due to Walmarts big city dominance and Dollar Generals growth and dominance in tiny rural communities too small for a Walmart. But I’m glad this drop exposed me to Target, seems like a great company to buy into at current valuations supporting P/S <1, EV/EBITDA ~8.5, with 3 year CAGR of 12%-24% in revenues, earnings, and net income. Was even more shocked to see ROE ~45%, ROA ~10%, and ROTC of ~17%. Favorable profits, average growth, exceptional price. Seeing margin of safety from 3 sources ranging from -5%, to -28%, all the way to -68%. These apps weight metrics differently depending on their propensity to favor growth/future prospects or value/past stability; all 3 rarely agree that there IS even a margin of safety.

Bottom line, it was a good company at a fair valuation and dropped 25% over irrational fears of short-term industry headwinds. If you don’t let short-term panic spook you, these opportunities present themselves relatively often.


It was a good company at a fair valuation, yes, based on trailing numbers.
The stock price cratered overnight and that doesn’t make sense, but Target also woke up one fine morning and completely changed their profitability numbers as a business. Both the earnings and stock took a huge shock overnight. So the reaction is justified.

Also, all the metrics you quoted, are projected metrics that we cannot assume to be “true” in the future. What $TGT just demonstrated was that those metrics CAN change overnight. Yes it’s cheap based on estimates, but the market is just saying we don’t like the trajectory you’re on, and we no longer believe in those old estimates. And it did the same thing with $FB and $NFLX.

You can bet on these management teams riding out the challenges and coming out stronger on the other end, but the market is right in holding these companies accountable for the risks they’re facing in the short term.
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Serey Kim's avatar
$1.6m follower assets
$DG Weekly
I have been traveling for the past couple of weeks. Texas -> Florida -> California. Next week, I will be in Chicago, then back in Texas.✈️
During my downtime, I like to take advantage of my free time to share some charts that popped up on my scanner.
$DG popped up on my scanner, and I like the chart. Some of you probably think this is a repeat of other charts I’ve shared and may think it is boring.
GOOD! Trading shouldn’t be exciting every day. The goal is to develop a process you can repeat over and over. It’s supposed to be boring unless you’re trading short-term options like me for some adrenaline rush. 😀
April Purchases - Max the ISA Project
This morning I topped up my portfolio with April's contribution. Purchases include $BAC $VOO $DG $CMG $MA $SBUX $DIS $QQQ $AXP $HAS and three ETFs that tracking High Yield Global, UK 100, and Japanese markets.

The goal for this project, which began in 2022, is to maximise the £20,000 annual ISA limit for tax-free dividend income and capital gains. After 2 weeks of the new tax year, we are 7% of the way there for 2022.
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Q1 Portfolio 2022
As the third month of this project comes to an end, I will share my activity for March. As a reminder to readers, the first year of this project will be a build-out phase until I conduct the necessary research on single stocks I want to own and construct the desired weightings of the portfolio. Interested readers can find more details about this project in "Maiden Post of Reasonable Yield", and the previous two months of updates on my blog.

As a further reminder, this project was born in January 2022, with the goal of documenting the maxing out of the UK ISA annual limit (£20K) each year, with a DGI portfolio

In March, £900 was deposited and invested, meaning a total of £3,335 has been invested this year, excluding the initial £10,000 or so that was allocated pre-2022 to pre-fund the account and kick start this project. Thus, bringing the total value of the DGI portfolio to approximately £15,500. As of April 5th, there is a newly refreshed £20K ISA limit for the tax year, and the goal will be to contribute ~£5K per quarter during the next year.

As the portfolio is currently concentrated in ETFs, the bulk of dividends are weighted towards the end of each quarter. This month, dividends were collected in the sum of £47.89, from the following sources.

At the conclusion of the first quarter of this project, the total dividend income stands at £53.04, and that is now our benchmark from which to compound quarterly, yearly, bi-annually, and so forth. As a reminder, the dividend goal for 2022 is ~£350.

Activity in March

Buying activity in March has been confined to existing positions with a focus on individual stocks. The share of ETFs as a % of the basket is now 67.5%, down from 71.8% in February, and 77.7% in March. Buying in April thus far has included additional shares of Dollar General, Hasbro, Starbucks, and the FTSE 100 Index.

An updated table of the holdings and their relative weightings, value, and returns can be found below.

There are a number of companies on my watchlist (below), and so Q2 will be focused on expanding my watchlist, and locating any potential new entrants to the DGI portfolio. $AAPL $COST $WMT $CINF $MGP $ALLY $O $HSY $JPM. I am also looking to add some broad tech exposure maybe through QQQ ETF. I am not a tech investor, so don't wish to optimise to stock picking in that category.

Company Commentary

Below is some brief commentary on a select few of the names in the DGI portfolio.

London Stock Exchange ($LSEG): The London Stock Exchange (LSEG) had fantastic full-year results back in early March. Revenues expanded to £6.8B (+6.1%), and adjusted EBITA of £3.3B (+8.3%) for a margin of 48.2%. Great cost synergies are being realised, net debt is trickling down ahead of schedule, and a healthy dividend hike of 27%. Free cash flow of £1.4B is expected to increase as the near-term CapEx requirements fade in the coming years.

LSEG's revenue composition has grown in quality after its acquisition of Refinitiv, with 73% of total revenue now being recurring. Still some work to do in terms of tying the two businesses together, however.

LSEG is a company I intend to add weight to at the right moment. I am following the Refinitiv integration closely.

Disney ($DIS): Disney is not a dividend-paying company, and I am aware it may continue to lack yield for the foreseeable future. I agree with management's decision to axe their dividend; partly to free up liquidity during the covid crisis, but also to lean aggressively into streaming, a capital-hungry endeavour. When there is an opportunity to attain attractive ROI on your money and venture into a business-model-shifting tangent, I am all for finding additional firepower at the expense of dividends. The caveat is that I assume Disney pays a dividend at some point in the next 5-years.

The DTC business has been doing well. From 27M Disney+ subscribers in Q1 FY20 to 130M as of Q1 FY22, the remaining subscriber counts (from ESPN+ and Hulu) have grown from 37M to 66M over the same time period. Equally impressive is the geographic dispersion of Disney+ which, beginning with 25M domestic subscribers in Q1 FY20 and 2M internationals, now boasts 43M domestic, 41M international, and 46M Disney+ Hotstar subscribers. Back in Q3 of FY21, Netflix would suggest Disney+ has a 1% market share of US TV time (compared to 6% in YouTube, and 6% in Netflix). While I think it's ignorant to suggest Disney ever competes with Netflix's extensive library, there is a great deal of runway for Disney to run yet.

The resurgance of the Parks & Resorts business (posting record revenues and EBIT in Q1) is another tailwind in itself but catalysed by the fact that the per capita spending of guests has been advancing (above pre-covid norms) despite operating at reduced capacity. Parks & Resorts EBIT margins in the first quarter stood at 32%, compared to 25% across 2018 and 2019. Leaving me to believe it will emerge from the pandemic stronger than it has ever been. As such, I have 3x'd my position in Disney.

Hasbro ($HAS): After submitting a well-articulated proposal to the Hasbro board, Alta Fox was ultimately dismissed by the Hasbro Board. For anyone who follows Hasbro, it would appear the board is not bowled over with their proposals, laid out in their well-researched piece "Hasbro, Let Wizards Go". Alta Fox, who owns a 2.5% stake in Hasbro, was shocked.
When founder Connor Haley caught up with Yahoo Finance he would say: "We've got a world-class slate of advisors. And they are all collectively stunned at the level of entrenchment of the current Hasbro board. I think we went well out of our way to offer a beyond reasonable settlement."But it's not just Alta Fox that is taken aback by Hasbro's refusal to listen to new ideas.

Adirondack Retirement Specialists, a Meaningful Shareholder of Hasbro, had the following statement:

"We were dismayed to see media reports indicating that the current Board of Directors rejected what appears to be a step forward toward adding value for Hasbro shareholders via a very reasonable settlement proposal from Alta Fox. If true, it is troubling to us that the current directors would reject a well-researched 2.5% shareholder’s input and candidates who have records of adding value at a time when Hasbro seems to have lost the market’s confidence. The Company’s shares are at a new 52-week low point, and it has a strategy that has led the business to lag the overall market and its major competitor over the past five years. For shareholders, we insist on a strategy that prioritizes the highest and best long-term allocation of capital and resources. In our view, Alta Fox’s proposal takes shareholders toward that goal. We intend to support the entire dissident slate as we believe that would be in the best long-term interests of shareholders if a contested vote is held at the 2022 Annual Meeting of Shareholders."

I suspect that the momentum for Alta Fox's proposals has impressed current shareholders, will continue to grow, and will eventually pressure Hasbro's board into action. Part of the proposal by Alta Fox was putting forward board members. The 5 proposed members include;

  • A founder and CEO of a publicly-traded tech/software business
  • A CFO who has experienced 5 spin-offs
  • A professional Magic the Gathering player, and seasoned investor
  • An expert in corporate strategy and;
  • An operationally minded former CEO

I think the board can only hold off Alta for so long and am interested to see how this plays out through 2022.

Starbucks ($SBUX): Howard's first act as CEO was to axe the share repurchase component of Starbucks' $20B capital program. Share repurchases were expected to be ~2/3 of the total allocation, and with $3.5B already used, one wonders what the extra $9.5B is going to be used for. He remarked that it would be used to "invest more into our people and our stores" but with CapEx for store count growth already accounted for, I suspect he is actually signalling that the cost of labour is going to increase at Starbucks. No doubt, because of this unionisation battle they face.

Nevertheless, these are short-term (and by short term I mean 2-3 years) headwinds for Starbucks. It may no longer be a vessel for beating the market, but it's still an income-investors delight. With an expected dividend increase coming next quarter, I plan to continue adding whilst the turbulence thunders on.

Dollar General ($DG): A recent dividend hike of 31% was pleasing. Dollar General now pays 55 cents per share in dividends each quarter, up from 42 cents. At 18.1K units (up from 12.5K units in 2015, and 9.4K in 2010), I believe there is still ample room for growth across the United States. Having shown consistent mid-single-digit YoY growth in store count over the last decade, as well as firm revenue per store growth, I can see a future where there are as many as 28K locations across the States before we begin to ponder saturation. In 2010, the average Dollar General store was expected to earn ~$1.4M in sales each year. T

Today, that has advanced to $1.9M, up 36% despite a 93% increase in total units. That tells me this business box model is highly efficient and will continue to be scalable. Whatsmore, DG have shaved ~32% of their outstanding share count over that period and continued to pay dividends. The potential of DG's retail concept stores, Popshelf, which management opined could reach 1K stores by 2025 (currently projected to hit ~200 by end of the year) is exciting. Is a recession coming? I have no idea. Can DG survive a recession and continue to pay dividends? I am confident they can.

Other News

In other news, I expect to be adding ~£5K per quarter for the remainder of the year, meaning the value of this portfolio should reach between £30K and £35K at the year's close. The following year, a further £20K will be invested, and the year following that, and the one following... you get my point. This project will take a number of years before it starts to kick out some meaty dividends, it will also take a number of years before it grows to any reputable size. Such is the nature of Dividend Growth investing. I have other, more active, investments, to keep me busy while I grow this portfolio.

I thank you for following me on this journey. That will be all for this month.
Thank you,
R.Y
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I’m mostly a dividend guy. I’ll have to share a few of my spreadsheets with you. Nothing too detailed, just a nice starting spot. I started with dividends aristocrats, so it’d include kings. Then added metrics that were important to me. The dividend yield (least important for growth, more important for current income), 3 & 5 year DGR, payout ratio, div amount, current price, 52 week low, and 52 week high, consecutive years of dividend increase, industry, sector, and P/E ratio. I really need to add about 12 more columns and have two master spreadsheets. With dividends and without. Because I’m looking at EV/EBIT & EV/EBITDA more now. But I added rules to give best cells Coker’s, for every category. It’s basic; green is go, yellow is slow down, orange a little more cautious, and red is usually a no go. Helps me easily find great dividend stocks with long term stability and track record, good dividend, growth, low payout ratio, double digit DGR, fairly valued, and trading off 52 week highs (I’m value not momentum). Recent addiction was $TROW. $LOW and $CINF we’re a close 2nd and 3rd.
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Early April Purchases: DG, HAS, FTSE 100 ETF
I will have a March Update of this DGI Project coming out next week after I wait for the delay in my end of month dividends rolling into my account.

To kick the new quarter and month off, I have contributed a portion of April's capital into some more Hasbro $HAS, Dollar General $DG, and some FTSE 100 ETF $VUKEF

In Q1, I contributed £3,335 to the DGI project and should be contributing a further ~£5-6K each quarter from here until the end of the year.
Are you supporting Atla’s activist campaign in $HAS at the upcoming shareholder meeting with your votes?
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$DG: "A Low-Cost Operator"
“I believe Mr. Market has some doubts about the company’s ability to grow beyond ~25,500 units and / or questions the sustainability of the business and its economics at maturity. I’d argue the market has held some version of this belief for much of the past five years, which is why the stock trades at a pretty large discount to retailers like Costco. Personally, I think that conclusion has been, and continues to be, too pessimistic.”

Fully agree with this statement as a biased $DG holder. I would argue DG has some history of surviving high inflation environments too. Market doesn't buy it, but I do.
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Dollar General Hikes Dividend +31%
Some great news from Dollar General $DG this morning, they are hiking their dividend from $0.42 per share to $0.55 per share, payable on or before April 19th.

This is the seventh consecutive year of annual dividend increases for the company!
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A lot of people I know are bullish on $DG, especially if we head toward a recession. Any worries about the surprise earnings miss?
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Alberto Wallis's avatar
$8.7m follower assets
Upcoming Earnings Calendar! (March 14th - 18th)
Earnings season is slowing down, but there are still several very interesting companies reporting next week.

  • $DLO - This company is really interesting. Growing quickly and profitably (28% net profit margin last quarter) while solving a real pain-point for companies.
  • $GTLB - Don't know much about this company, but I've seen a lot of people commenting on it lately so I'll keep an eye out.
  • $S - Extremely expensive cybersecurity stock.
  • $FDX - Not interested in investing in the business, but very interested in their outlook for the supply chain and the impact of higher energy costs.
  • $LEN - Homebuilder. Let's see what their comments are on the supply chain + demand for housing in the US.

What company are you interested in?

If you'd like an easier way to track earnings dates, you can automatically sync your portfolio's earning dates to your personal calendar with just a couple of clicks here.

MON:


TUE:


WED:


THU:


FRI:
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