Kevin O'Leary Only Invests For Yield

Interesting... But how many of us on here are 57? Or over 25 for that matter? I'm only 20. I'll stick to growth companies and keep half of my portfolio in mutual funds. Works pretty well for me. SODA is a monster.

Different investing scheme for different priorities. The man already has 300 million, although you always want to grow, at that point and age you want to minimize risk as much as possible. Same does not always apply for people in different age or economic classes. It's really a specific balance for each individual investor, take his investing advice at face value, not a mantra to be used in all situations.

edit: I would like to preface my comment by saying I did not watch the video, I will later when I have time, just going on the blurb of investing advice

Blackhat, you owe me those 38 minutes back.

Waymon3x6:

Interesting... But how many of us on here are 57? Or over 25 for that matter? I'm only 20. I'll stick to growth companies and keep half of my portfolio in mutual funds. Works pretty well for me. SODA is a monster.

That company is such hyped-up shit. Think about it: Do you really see that plastic piece of shit home soda machine going anywhere? Forget the technicals and think about the fundamentals for a minute. All that company does is make soda machines and gay little pods and shit to put in

You think that people who regularly drink soda care about how cost-effective it is (and it really isn't)? They just want to buy a gallon of some gassy sugar water and shove it down their throats. It's a novelty.

Little Engine Would:

Waymon3x6:

Interesting... But how many of us on here are 57? Or over 25 for that matter? I'm only 20. I'll stick to growth companies and keep half of my portfolio in mutual funds. Works pretty well for me. SODA is a monster.

That company is such hyped-up shit. Think about it: Do you really see that plastic piece of shit home soda machine going anywhere? Forget the technicals and think about the fundamentals for a minute. All that company does is make soda machines and gay little pods and shit to put in

You think that people who regularly drink soda care about how cost-effective it is (and it really isn't)? They just want to buy a gallon of some gassy sugar water and shove it down their throats. It's a novelty.

Haha, this made me laugh. We have one in our office, we have one home... my friend has one... see a pattern? Fundamentally, the company is rock solid. Zero debt, double digit growth and they haven't even touched the US (less than 1% penetration rate vs. ~25 in Sweden and other European countries). Samsung is installing the device in their higher-end fridges. The one thing I will agree with you on is cost-effectiveness - I don't give a shit if I save 5 cents every time I drink. But what I do care about is running out of Coke and not having anything around. Who wants to run to the supermarket for a few cans when you can make it right at home on demand?

Those "gay little pods and shit to put in" is actually a genius business model. Google "razor blade business model". Seems to have worked pretty well for the big boys and it seems to be working for SodaStream. Up 140% how are you going to argue against that. People like you have been saying the same shit the whole way. Maybe you should do some more homework before you open your mouth, but I enjoy taking money from people like you.

Waymon3x6:

Little Engine Would:

Waymon3x6:

Interesting... But how many of us on here are 57? Or over 25 for that matter? I'm only 20. I'll stick to growth companies and keep half of my portfolio in mutual funds. Works pretty well for me. SODA is a monster.

That company is such hyped-up shit. Think about it: Do you really see that plastic piece of shit home soda machine going anywhere? Forget the technicals and think about the fundamentals for a minute. All that company does is make soda machines and gay little pods and shit to put in

You think that people who regularly drink soda care about how cost-effective it is (and it really isn't)? They just want to buy a gallon of some gassy sugar water and shove it down their throats. It's a novelty.

Haha, this made me laugh. We have one in our office, we have one home... my friend has one... see a pattern? Fundamentally, the company is rock solid. Zero debt, double digit growth and they haven't even touched the US (less than 1% penetration rate vs. ~25 in Sweden and other European countries). Samsung is installing the device in their higher-end fridges. The one thing I will agree with you on is cost-effectiveness - I don't give a shit if I save 5 cents every time I drink. But what I do care about is running out of Coke and not having anything around. Who wants to run to the supermarket for a few cans when you can make it right at home on demand?

Those "gay little pods and shit to put in" is actually a genius business model. Google "razor blade business model". Seems to have worked pretty well for the big boys and it seems to be working for SodaStream. Up 140% how are you going to argue against that. People like you have been saying the same shit the whole way. Maybe you should do some more homework before you open your mouth, but I enjoy taking money from people like you.

I have nothing to do with the company, so you're not taking my money. But I do see your point to a degree.

Speaking of razor blades, I'm convinces that multi-razor cartridge blades are a giant scam that some people came up with a long time ago and their kids are laughing about it still.

I started using a safety razor and it is a MUCH better shaving experience with less irritation, a closer shave, and less cost per shave. The only place I see multi-blade razors making sense is for women.

He probably really likes diversification given the fact that he sold a scrap of a company for billions (which was probably all his net worth). He was definitely smart to do it when he did and has probably forever vowed to never take on that kind of risk again.

Kevin O Leary is obviously successful, but I'd argue it's not because he is a great investor. He is a great marketer / salesperson.

That's how he makes a ton of money. His whole investment thing is catered for the masses via mutual funds. It was another way for him to leverage his popularity from Dragon's Den and Shark Tank - open a mutual fund, get the public to invest, get a great AUM, and then get a % of that extremely large base.

The general public won't know any better and it's just a normal mutual fund. It had nothing to do with investing for himself and everything to do with how to make money by leveraging his celebrity. It's brilliant, but from a marketing stance, not an investment stance.

West Coast rainmaker:

Here's what a dividend tells me: the company is willing to give back capital. But a dividend is also binding: it ties up cash flows, and the share price will plummet if the company cuts the dividend.

Ideally, I would like to see a company deploying capital on M&A, buybacks, and issuing special dividends, as dictated by the markets. Sporadic special dividends return capital without the company making an ongoing commitment.

Dividends also are a marker of quality businesses - although there certainly are exceptions. If a company is willing to return capital, it must be generating capital. But, it also implies that they cannot deploy that capital more efficiently internally.

I own some dividend stocks. I put together a rather lengthy pitch on ITW in February, a company that has raised its dividend almost every year for 50+ years. But with <2% yields, we've seen everything with a dividend getting bid up to ridiculous levels. I would not buy ITW at $70+ right now. There are just better deals.

And O'Leary's "no more than 5%" rule is ridiculous. I put together a paper trading portfolio in early April - I had 12 stocks in there? And you could easily go lower - look at Mohnish Pabrai. Or Shapiro. Or Greenberg. Or Berkowitz.

...and I just stopped listening when he said "get a MBA"...and then he doubled down on stupid with "learn Mandarin". Despite his success, he sounds more like an upper-middle class suburbanite.

First good response on thread. +1

Who is Kevin O'Leary and why does anyone care about what he thinks about investing?

SirTradesaLot:

Who is Kevin O'Leary and why does anyone care about what he thinks about investing?

He's on that firefighter show on FX.

The thing I like most about O'Leary is that he's a capitalist through and through. His ideas on making government more efficient near the end of that video, although somewhat extreme, are plausible. I have no doubt that they'd work. However, I completely disagree with his investing style.

Not investing in any company that doesn't pay dividends? On one hand, I can see that an investor would like to have the security of some cash flow going into their pocket on a regular basis. But it's like what West Coast Rainmaker said: it implies that the company can't find a better use of that cash.

The 5% rule is bs. I think it stems from his, and most of the investment community's, belief: more positions = higher diversity = lower risk

Sorry to burst your bubble, but (and stats major's can clarify) after 10-12 stocks, adding more to your portfolio provides minimal benefit in terms of diversifying unsystematic risk.

To be honest, I hate talking about risk because the majority of people have gotten it drilled into their head that risk equals volatility, or some derivative of that. And in all honesty, that can't be further from the truth. But, I digress.

Coming back to O'Leary, he's a very passionate and successful businessman who makes a lot of noise, but frankly, I don't think he's a great investor.

SirTradesaLot:

Who is Kevin O'Leary and why does anyone care about what he thinks about investing?

This was the point of the post, you win

West Coast rainmaker:

Here's what a dividend tells me: the company is willing to give back capital. But a dividend is also binding: it ties up cash flows, and the share price will plummet if the company cuts the dividend.

Ideally, I would like to see a company deploying capital on M&A, buybacks, and issuing special dividends, as dictated by the markets. Sporadic special dividends return capital without the company making an ongoing commitment.

Dividends also are a marker of quality businesses - although there certainly are exceptions. If a company is willing to return capital, it must be generating capital. But, it also implies that they cannot deploy that capital more efficiently internally.

I own some dividend stocks. I put together a rather lengthy pitch on ITW in February, a company that has raised its dividend almost every year for 50+ years. But with <2% yields, we've seen everything with a dividend getting bid up to ridiculous levels. I would not buy ITW at $70+ right now. There are just better deals.

And O'Leary's "no more than 5%" rule is ridiculous. I put together a paper trading portfolio in early April - I had 12 stocks in there? And you could easily go lower - look at Mohnish Pabrai. Or Shapiro. Or Greenberg. Or Berkowitz.

...and I just stopped listening when he said "get a MBA"...and then he doubled down on stupid with "learn Mandarin". Despite his success, he sounds more like an upper-middle class suburbanite.

I'd feel more comfortable knowing that the company cares about its shareholders and isn't wasting cash flow on dumb acquisitions when it pays a dividend. Obviously some cash flow is tied up to the dividend, but most mature companies won't have much use for all of its excess cash flow or else it'll just accumulate (ie. Apple). Also, why would a company's stock drop after it cuts its dividend when theoretically, there should be no change? This implies that there is value in a dividend. I'm rather keen on buying stocks with dividends or other solid capital return plans.

Here's what a dividend tells me: the company is willing to give back capital. But a dividend is also binding: it ties up cash flows, and the share price will plummet if the company cuts the dividend.

This is why I also think it's important to not only look at the dividend but also the history of how much it has gone up. If a company routinely increases their dividend (I believe there's a list of companies that have raised their dividends for X # of years out there somewhere), this tells me that a firm is confident in the solvency/profitability of the enterprise moving forward because, as you mentioned, the stock will tank if they dare to cut it. It's not a perfect metric and I'm not an exclusively a dividend-paying-stock-investor, but I personally don't believe that a firm issuing a dividend necessarily implies that they have run out of ideas for what to do with the cash they are sitting on (not saying you said that, person I quoted, but a lot of people think that way).

Do you want to know what a dividend really is? Its a way to stick shareholders with tax liability, while seeming like "hey aren't we great giving these profits back to the shareholders."

HarvardOrBust:

I'd feel more comfortable knowing that the company cares about its shareholders and isn't wasting cash flow on dumb acquisitions when it pays a dividend. Obviously some cash flow is tied up to the dividend, but most mature companies won't have much use for all of its excess cash flow or else it'll just accumulate (ie. Apple). Also, why would a company's stock drop after it cuts its dividend when theoretically, there should be no change? This implies that there is value in a dividend. I'm rather keen on buying stocks with dividends or other solid capital return plans.

Theoretically, yes, there shouldn't be a change when a company cuts its dividend and nothing else happens. And sometimes you are absolutely right: a company may choose to suspend its dividend after doing an acquisition to rebuild the balance sheet.

But there are a lot of yield sensitive income investors. If a company with an income oriented investor base cuts its dividend, a lot will sell. Not because the company is failing (although, again, sometimes suspending a dividend would indicate that). But because they bought they company exclusively for the yield.

In other cases, a dividend can offer price support for a stock. Remove it, and you remove the support. Of course, the company would have to be in trouble already for this to be an issue.

But you are absolutely right. I like management I can trust with capital because, if they're wasting/hoarding it, it doesn't matter if the business itself is great.

West Coast rainmaker:

HarvardOrBust:

I'd feel more comfortable knowing that the company cares about its shareholders and isn't wasting cash flow on dumb acquisitions when it pays a dividend. Obviously some cash flow is tied up to the dividend, but most mature companies won't have much use for all of its excess cash flow or else it'll just accumulate (ie. Apple). Also, why would a company's stock drop after it cuts its dividend when theoretically, there should be no change? This implies that there is value in a dividend. I'm rather keen on buying stocks with dividends or other solid capital return plans.

Theoretically, yes, there shouldn't be a change when a company cuts its dividend and nothing else happens. And sometimes you are absolutely right: a company may choose to suspend its dividend after doing an acquisition to rebuild the balance sheet.

But there are a lot of yield sensitive income investors. If a company with an income oriented investor base cuts its dividend, a lot will sell. Not because the company is failing (although, again, sometimes suspending a dividend would indicate that). But because they bought they company exclusively for the yield.

In other cases, a dividend can offer price support for a stock. Remove it, and you remove the support. Of course, the company would have to be in trouble already for this to be an issue.

But you are absolutely right. I like management I can trust with capital because, if they're wasting/hoarding it, it doesn't matter if the business itself is great.

Another reason for negative price reaction to dividend cut is plain old assumption. People, read uninformed people, assume it means that the company is in trouble. They run to their etrade account and sell, usually well after the pros are out, and this increases the negative reaction. Remember its an emotion market, rationality goes out the window.

heister:

West Coast rainmaker:

HarvardOrBust:

I'd feel more comfortable knowing that the company cares about its shareholders and isn't wasting cash flow on dumb acquisitions when it pays a dividend. Obviously some cash flow is tied up to the dividend, but most mature companies won't have much use for all of its excess cash flow or else it'll just accumulate (ie. Apple). Also, why would a company's stock drop after it cuts its dividend when theoretically, there should be no change? This implies that there is value in a dividend. I'm rather keen on buying stocks with dividends or other solid capital return plans.

Theoretically, yes, there shouldn't be a change when a company cuts its dividend and nothing else happens. And sometimes you are absolutely right: a company may choose to suspend its dividend after doing an acquisition to rebuild the balance sheet.

But there are a lot of yield sensitive income investors. If a company with an income oriented investor base cuts its dividend, a lot will sell. Not because the company is failing (although, again, sometimes suspending a dividend would indicate that). But because they bought they company exclusively for the yield.

In other cases, a dividend can offer price support for a stock. Remove it, and you remove the support. Of course, the company would have to be in trouble already for this to be an issue.

But you are absolutely right. I like management I can trust with capital because, if they're wasting/hoarding it, it doesn't matter if the business itself is great.

Another reason for negative price reaction to dividend cut is plain old assumption. People, read uninformed people, assume it means that the company is in trouble. They run to their etrade account and sell, usually well after the pros are out, and this increases the negative reaction. Remember its an emotion market, rationality goes out the window.

99% of the time, cutting the dividend IS a bad sign though