My plan is much less formal than that, but it works for me and I generally consider my rules to be strong guidelines rather than absolutes.
Here is one example - typically I want a 3% current yield. Back in December I was looking at two cyclicals, DE and CAT. CAT's current yield at the time was 2.7%, DE's was somewhat below that, about 2.2% as I recall. Both are financially strong companies. Based on current yield and DGR's (DE's 3 year growth rate was 2 points higher).
I selected CAT. I had seen a CEO interview after a poor CAT quarter and was impressed with him and the straight way he talked about the quarter and the actions CAT would take to rationalize costs, adding that when business picked up CAT would be well-positioned to grow profits. I bought on that dip, another things I like to do.
I selected CAT. That has worked out well, with a 23% total return since the purchase on December 9, 2013. To me, this is particularly important give the cyclical nature of its business. It may become a core position but, again given its cyclical nature I am undecided about that. My tendency, though, is to do very little absent a threat to the dividend or the sustainability of acceptable dividend increases.
Here is one example - typically I want a 3% current yield. Back in December I was looking at two cyclicals, DE and CAT. CAT's current yield at the time was 2.7%, DE's was somewhat below that, about 2.2% as I recall. Both are financially strong companies. Based on current yield and DGR's (DE's 3 year growth rate was 2 points higher).
I selected CAT. I had seen a CEO interview after a poor CAT quarter and was impressed with him and the straight way he talked about the quarter and the actions CAT would take to rationalize costs, adding that when business picked up CAT would be well-positioned to grow profits. I bought on that dip, another things I like to do.
I selected CAT. That has worked out well, with a 23% total return since the purchase on December 9, 2013. To me, this is particularly important give the cyclical nature of its business. It may become a core position but, again given its cyclical nature I am undecided about that. My tendency, though, is to do very little absent a threat to the dividend or the sustainability of acceptable dividend increases.