investing

I am apparently a clueless idiot and dont know how to invest at all and give up. just gonna put money into VYM on a regular schedule now.

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Gamestop

Gamestop’s price makes no sense. It is selling for $8.62 right now when it has $1600 M cash in the bank. There are ~102 M shares. This means, if Gamestop just distributed all of its cash to shareholders as a special dividend, everyone would get about $16, or almost 2X what the shares currently cost. Gamestop also has an insane dividend of 0.38c per share per quarter which is ~ 17.6% yield. Is this dividend safe? Safe enough. Their payout ratio is 76%. I get that everyone thinks revenue will continue to decline. And it probably will. Who cares? At a low enough price, even a declining business is a bargain. But don’t listen to me, every time I recommend something it immediately crashes in price.

current plan

GME, CVS, and CPLG are all “distressed” businesses with substantial recent price drops that seem to me to be far out of line with real business value and future prospects. As such I am re-allocating capital from other investments to these positions. Too much diversification is just admitting you dont know what you’re doing. I think I understand the value proposition of these three companies well, and have evaluated the bearish case and think it’s overblown. I’m either right or I’m wrong. But if I’m wrong I dont see how, so might as well assume I’m right and act confidently.

CPLG

very low price to book ratio, institutional interest from what I consider “smart money” (Dr Micheal Burry), reasonable earnings growth, high normalized dividend rate, semi-seasonal/fair-weather but still fairly reliable business model, etc. checks most of the boxes for what I like.

My last purchase TLRD got crushed (-25%) immediately after I bought it on reduced earnings guidance. Sigh. But, if I’m philosophically wrong, might as well be wrong big. So this investment is running on a similar strategy. With earnings upcoming soon, perhaps I’m in for another crush. whoopee.

Update: This also got crushed right after I bought it, so I doubled down at $10.30. We’ll see what the long term future holds.

normalized dividend rate

I was glaring at this watchlist of symbols trying to figure out how to compare them and pick my next investment, when I invented what I call the “normalized dividend rate.” How can you tell if Ford paying 6.98% at a 46.15% payout ratio is better than SIG paying 5.45% at a 39.26% payout ratio? The answer involves a personal preference, and basic math. My fairly arbitrary personal preference for mature companies is for them to payout 75% of their earnings as dividends to the shareholders. This is so that they are giving steady cashflow to their owners, plus maintain enough margin of earnings safety to survive headwinds or to take advantage of potential investment opportunities in new products or mergers or whatever. So, all I do is calculate what the company’s dividend rate would be if they paid out 75% of their earnings. This list of stocks was built based on a number of other factors than just basic dividend math, but this normalized dividend rate calculation allows me to be more objective about balancing dividend safety with dividend size. Anyway, here’s the list as of this morning and the rankings.

(by the way I used a mix of company-given earnings guidance for the upcoming year and the analyst estimates to create the “earnings guide” column)

symbol price earnings guide div $ div rate payout ratio forward p/e norm @ 75%rate rank
F 8.59 1.3 0.6 6.98% 46.15% 6.61 11.35% 3
SIG 27.18 3.77 1.48 5.45% 39.26% 7.21 10.40%
LYTS 3.01 0.45 0.2 6.64% 44.44% 6.69 11.21% 4
OSB 27.10 2.7 1.2 4.43% 44.44% 10.04 7.47%
IVZ 18.96 2.36 1.2 6.33% 50.85% 8.03 9.34%
BTI 40.04 3.75 2.7 6.74% 72.00% 10.68 7.02%
KO 45.81 2.01 1.6 3.49% 79.60% 22.79 3.29%
M 23.42 3.05 1.51 6.45% 49.51% 7.68 9.77%
TLRD 11.81 2.2 0.72 6.10% 32.73% 5.37 13.97% 2
CTL 12.46 1.3 1 8.03% 76.92% 9.58 7.83%
GME 11.12 2.55 1.52 13.67% 59.61% 4.36 17.20% 1

As you can see, GME is at the highest normalized divided rate, and so would be my preference for investment. However I already have a substantial investment in them, which I have recently augmented, so my next purchase will be TLRD, assuming market conditions remain similar in the next few days.

OSB

Prices are always shifting but these should be close to correct:

dividend yield payout ratio
F 6.80% 65.22%
SIG 5.85% 47.01%
LYTS 6.31% 43.48%
OSB 4.25% 28.57%
IVZ 6.35% 56.07%
BTI 7.48% 68.00%
KO 3.47% 75.40%

These are all pretty solid companies that are selling for pretty cheap, and offer a consistent dividend. So why not just pick the one with the highest dividend yield and be done with it? Well, you also need to consider the sustainability of that dividend, which is easiest to measure in the payout ratio. So we want a high yield and low payout ratio on a solid company balance sheet. Based on the combination of considerations, I chose OSB out of this list to put my most recent investment in, since it still has a high yield, but a very low payout ratio, so that yield is very “secure.”

A Rant About Authority

Liberal modernity despises authority. Maybe “fears” is the better word? “Authoritarian” is certainly not a nice thing to call someone anymore. Moderns are uniformly unable to articulate the difference between a King and a Dictator. “Patriarchal structures of authority” are instinctively disparaged. “Fuck you, Dad!” might as well be the slogan for every successful social movement since the 1950s. To quote Zippy, modernity reframes all authority as abuse.

Because of our constant conflation of authority with abuse and our subsequent fear of our fathers, our understanding of what authority actually is, why it exists, and how it should work is clouded in confusion. Democracy itself serves as a method of clouding the waters as it makes it unclear who really rules: the people, or the politicians, or the bureaucrats. But, despite all our modern world has done to destroy the concept of authority, it still lives on in relatively functional form in the relationship between parent and small child. We still (largely) recognize that when a father tells his son to clean his room, the child really does need to do it. But why does the child need to clean his room? Because the father has authority over the child. This leads us to our definition of authority (stolen from zippy):

Authority is a moral capacity to oblige a subject to choose this thing rather than that.

The father has a moral capacity to oblige his son to clean the room. If the son ignores him, the son is in moral error, regardless of how much the son does not want to clean the room, and regardless of how much the son does not consent to his father’s right to tell him to clean the room. We see from this example of the simplest, first form of authority in most of our lives that authority is independent of consent. This should shock any liberal, classical or otherwise, unfortunate enough to be reading.

But the lawyer-like pedantic liberals might respond with something along the lines of “Ah, but children are incapable of consent. The cases are dis-analogous. Only sufficiently sober and informed adults can give consent. And to those, authority does require consent.” To which I would sigh in resignation. No, the cases are not different. No matter how sober, informed, or adult I am, I am still bound by uncountably many laws that I did not consent to. These laws really do have binding moral obligation (within their proper scope), and I really did not consent to them. Even if I leave the country in protest, wherever I go, there will be binding laws which apply regardless of my consent. Everyone recognizes that someone who flouts a law just because he doesn’t personally like it is doing something wrong. Even, if they think the wrong is justified for whatever reason (like in the case of civil disobedience) they still realize that there is a transgression.

But, if authority really is independent of consent, then how much of the liberal edifice collapses? What was the War of American Rebellion (Revolutionary War) about, at least in name? Consent of the governed. What was the sexual revolution about? Freedom from the patriarchal restrictions that women did not consent to. What about the modern Campus rape “epidemic” or #MeToo movement? Murky arguing about who consented to what. The whole of liberal philosophy depends on the premise that consent creates morality. “What happens between two consenting adults is no concern of mine,” is the most essentially liberal platitude that I can think of, and my disagreement with it is a fundamental part of my disagreement with all of the society I have been cursed to live in.