I’m focusing this year on value investing. For many years now (since losing a boatload in the crash of natural gas stocks starting in 2008) I’ve used broad-based mutual funds. That's gone well and I'll leave those assets where they are. But in the US my aim is to research and invest in what I'd describe as high-yield value stocks. The idea is not at all original. But I think the timing is decent. As interest rates come down high yield stocks today will be more attractive.
I want stocks with low P/E ratios (5-10), but also room for equity growth (i.e., not at 12-month highs). I don’t want small-cap companies so will try and stay with a minimum market cap of at least a billion (but for most way larger). My aim is for over 10% yield, but for great companies, I’ll accept a little less. The business has to have good growth prospects and I'm willing to take some commodity and industry risk. The financials have to be strong (good operating margins). There must be a profit, but most importantly I want strong balance sheets. When I look at the balance sheet I want a stock price that is ideally under book value and I want the debt-to-free cash flow to be a low multiple. That is, I want the company to be able to pay off its net debt fast in the event of a market downturn or commodity price fluctuations.
After the disastrous days of 2008-2011, I'm still gun-shy. But I got back at it recently and will continue to work on it (prayers appreciated), God-willing this strategy will produce long-term benefits for our family (call me if you want my picks as I'd be happy to share them). I know my weakness is to jump at stocks that don’t fit the model (oh, I’ve been so guilty of that in the past and I've even bought a half dozen stocks recently that don't fit the model above just right). I’m also looking for excellent diversification (a major problem with my past approaches was a concentration in one commodity - so I'm aimed at a broad portfolio - my aim is cash flow and stock appreciation, but yield first).
It will be tricky to do this in such a record-high market. But I believe the opportunity is there. The harvest is plentiful. But we have to get to work. If you have ideas on this model please let me know. God expects us to invest well - in the eternal. For we are rewarded according to our faith and good deeds (Revelation 22:12).
A quick thought on 8:47. We need to think hard this breakthrough year about what we truly love to do. Where do we spend our time and our money? What do we listen to? What do we read and watch? Listen to what Jesus said. And note that it was to those who claimed they believed in Him (8:31)! “Anyone who belongs to God listens gladly to the words of God. But you don’t listen because you don’t belong to God” (8:47). Wow. That hits hard. We really do need to walk the walk (Matthew 7:21-23).
Abraham knew the One Holy God, and he obeyed God. Abraham was even called a friend of God (James 2:23). God wants that close of a relationship with us that He calls us His friends. Such a relationship is open today for any believer who is willing to accept God's ring on their doorbell - open the door to Jesus today! But Jesus is clear here that the test of discipleship is faith in action - actually doing what God requires, not what the devil loves. If we are going to convert nations we must first know and obey God ourselves.
Jesus is the Lord of the harvest (Mathew 9:37-38 and Luke 10:2). And Jesus tells us plainly that the harvest is indeed plentiful. I was praying for my community of Lynchburg, Virginia this morning. Even in the Bible-belt many claim to believe yet need to hear, believe, and obey. I am trusting God to bless this community and to bring many many people to Him. And I'm also praying for those in the UK, Canada, and across the globe. What a marvelous time to be alive.
Lord Jesus, may the nations see the power of God in us not because we are boastful, arrogant, and worldly. But because we are Your true disciples, steadfast in exercising the freedom You give us. And because we are Your friends.
Father God, we know You and love You. Help us to understand Your ancient words - ever true. And help us to invest in eternal things this week. And to obey and to truly glorify you by our actions. Amen.
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