Recently I spoke to Chris, a UK based investor about his investing style, what research he does before buying shares, his views on ESG and much more besides.
Here are his answers to my questions. I hope his experience can help other investors. Thanks very much to Chris for answering these questions.
What kinds of companies do you investing and why?
I have a set of rules I use on The Dividend Experiment and for my own investment choices. These rules have changed slightly since I started investing and I aim to develop these rules further… but some of the rules include making sure the company is a sustainable dividend payer and has a long history of paying reliable dividends. The full list can be found as a video on my channel.
Overall, I would describe the companies I invest in as ‘natural dividend payers’ and that may mean their business model is established and relatively simple, providing predictable revenue year after year or the company is a monopoly with high barriers to entry meaning that government regulation is the biggest threat to earnings.
Another way to describe these companies I aim to invest in would be ‘super boring’.
What research do you do before buying a share?
First thing I would look for are the financials and its likely I discovered the company in the first place through a stock screener with the requirements I set up in the rules. I might use something like Yahoo Finance to view ratios and statistics. After that I would go and look at the investor relations to see the company from the point of view of the management. Following that I would go and see other people’s opinions on the company and where it might be heading in future. It’s sometimes better to take these opinions with a grain of salt, however, and go with your own point of view.
What are your views on ESG investing, is it an important part of how you pick shares?
ESG as a category is becoming popular but it is still new an it still needs some defining as to what exactly ESG might entail. Just as I believe the category of ‘sin stocks’ could be widened to incorporate different types of ‘bad’ companies (things like fast food for example, social media giants etc) ESG may need to be looked at over time to see if these popular trends really as as good as they are being made out to be.
Diving deeper things like wind turbines are hard to dispose of, there are potentially violent geopolitical tensions in regards to rare earth metals used to make batteries so perhaps the ESG label is not necessarily representing what it should be. For that reason ESG has little influence over what shares I choose, although it does provide some indication in regards to market sentiment.
In your own words why do you think dividends are important? How do they fit into your overall investing style?
When you buy a share of a company you are entitled to a share of the profit of that company. You may trust management to use that profit to reinvest to grow the company or to buy back shares in the hope that it raises the price of shares in the market but eventually you will want to get your portion of the company paid to you.
There are two ways to get your entitled profits you can get a convenient sum of money paid to directly as a dividend or you can go back to the market and hope that someone at that exact moment of time is willing to pay you more than you paid for it. Dividends are great in that they pay you regularly no matter what the opinions of other people about your company are, this means you aren’t dependent on other people to get your money at any time. I currently only invest in companies that pay dividends.
How do you find and then pick growth shares to invest in?
Typically I don’t invest in growth stocks but when looking for growth in a company I would look for the following factors.
- Positive financial direction – the company doesn’t need to be making profits now but it should be heading in the right direction
- Management appear competent and great storytellers – growth depends on the company growing as well as people’s perception of the company being positive.
- In an exciting and innovative sector – growth is where you can look for exciting companies as you want them to be taking a bigger market share in future.
What’s the best piece of investing advice you’ve been given or read?
It may be daunting at first, as it takes a long time to grow wealth from investing, however the time will pass anyway so you might as well get started early as possible.
Let me know in the comments or on Twitter tagging @sharewatch100 what you think about this interview and the answers.