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How I pick my investments:

Last updated: 6/15/2025

• My portfolio is generally composed of between 65 and 75 dividend stocks of which about 1/3 are energy (primarily pipelines which do well in any environment), about 1/3 are real estate (mostly REITS which do better when interest rates are low or falling), and 1/3 are financial (mostly BDC's which do better when interest rates are rising or high).  
   
• I also maintain a speculative portfolio, which accounts for less than 2% of my total investments.  In other words, the sum of all my speculative stocks will not exceed 2% of my “core” portfolio.  Whenever my speculative stocks approach 3% of my core portfolio, I sell some shares and reinvest the proceeds into the core portfolio.  There are times when I have zero speculative holdings.  This is "no big deal" to me.

• I never try to predict the direction or change in interest rates, the Federal Reserve's actions, unemployment, or any other economic or political indicator.  Warren Buffett and Charlie Munger never did, and they became among the most successful investors in history.  There is never a bad time to buy or sell individual stocks.

• My goals are for the overall portfolio to generate approximately 8% in dividends and also between 3% and 4% in annual appreciation.  While the portfolio may experience an occasional "down" year, the dividends are typically consistent or growing, regardless of the market's direction.

• When it comes to speculative investments in Bitcoin, gold, or any stocks with low dividends or "penny stock" characteristics:

• Individual investments cannot exceed one percent of all investments.

• The total of all such holdings cannot exceed two percent of all investments.

Lessons from Rida Morwa:

• Rida Morwa’s “Rule of 42,” (Keep your portfolio to 42 OR MORE holdings and trim any holding of 3% back to 2.5%).  (Rida personally holds more than 100 stocks.)
   
• Rida’s “Rule of 25” (live on no more than 75% of your dividends and reinvest at least 25% into additional dividend stocks).
   
• Rida’s RoC Vs. NAV Rule: When it comes to high-dividend stocks, disregard the “Return of Capital” (RoC) metric, as this is merely a U.S. IRS designation that indicates a higher RoC reduces short-term taxation.  Instead, focus on whether NAV (Net Asset Value) has been stable or increasing over time while paying out dividends.  If so, then it is likely that the stock in question is well-managed.
• A corollary to the above: If the percentage dividend is so high that it offsets a minor decline in NAV, then the stock may still be a good investment.

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Lessons from Jim Cramer:

• Bail on bad news: 

• If both the CEO and CFO are unexpectedly “retired “or fired without much notice, or if the company and/or officers are indicted, sell first and ask questions later.

• While indictments are sometimes unfounded, they are correct so often that selling an indicted stock is usually the prudent course of action.
  
  
• Jim has had a career focused on growth stocks.  He thinks 3% is a "juicy" dividend.  My investing philosophy is in conflict with both of those ideas.

When NOT to sell:

• If the fundamental analysis of any given stock has not changed (i.e. the business, balance sheet, and dividend coverage are good, and the CEO and CFO have not resigned due to any legal issues), it does not matter if a given stock is up or down when it comes time to trim. (But all things being equal, “down” stocks are often on sale, and so there are opportunities to buy more unless already at a “full" position.)

• I NEVER use the "stop loss" option when purchasing stock.  During the dot-com era, I experienced multiple "stop-loss" sales when a particular stock received bad news and subsequently missed out on the subsequent recovery.  Instead, the "Rule of 42" protects me even if a holding goes to zero (as seen with Enron, MCI, the original Pets.com, and Lehman Brothers).
  
  
• Did the market crash or is it crashing or is it about to crash?  I sell nothing.  I've lived through multiple market crashes and always made lots of money on the rebound.

How I select my stocks:

• I initially identify most potential investments by reading daily articles and posts from a core team of analysts on Seeking Alpha.com.
   
• I then read posts and articles from a "second tier" of analysts, both for supporting and opposing views.
   
• Ultimately, it is my responsibility to judge whose analysis both makes the most sense to me and aligns with my risk profile.
   
• In my publicly posted portfolio, I credit the analyst whose analysis made so much sense that I made the first purchase.
   
• When looking for investments, I generally ignore mainstream news articles (i.e., CNBC, Bloomberg, The Wall Street Journal, The New York Times, Yahoo Finance, and The Economist).  I do view or read all those sources to stay aware of the world environment, but rarely do any of those sources help me buy, hold, or sell stocks.
   
•     If my analysts describe a stock as investable, but also riskier than my other stocks, I will start with a position of  0.5% (or less,) and over time may or may not add funds until it grows to 1.5%.  Assuming no better news comes in the form of analysis, I may reduce the position if it grows past 1.5%.
•  
• If my reading of analysis by my trusted sources convinces me that a stock is suitable for me, I may invest anywhere between 2% and 3% in that stock, reducing the position any time the stock grows beyond 3%.
   
• Also, within a category, I may reduce a stockholding down to 2% (or even zero,) if a higher dividend opportunity is available for funding.
   
• As Jim Cramer (and others including John Maynard Keynes) have said, “"When the facts change, I change my mind. What do you do, sir?"  In the investing context, this means I am on the lookout for changes in analysis by those analysts who I generally trust.

Balancing the Portfolio

• At least once a month (and sometimes more), I sort the stocks by catergory (column A in my spreadsheet).  If any one category is more than a few points over or under 33%, I will endeavor to buy and sell stocks to get closer to the 33% number.  I do not ever try to guess the direction of the market or a category.  I do not intentionally try to "overweight" or "underweight" my categories.

Weekly reading: My SeekingAlpha.com "core" Analysts whose analysis triggers me to research further:

Seeking Alpha Analysts I mainly read for supporting or opposing views on recommendations by my "core" analysts:

How I use SeekingAlpha.com ratings

• SeekingAlpha.com  (SA) is a website that boasts regular readership by more than 20 million investors worldwide.
• Most stocks have SA ratings in up to 3 rating categories:  "SA Analysts," "Wall Street," and "Quant."
• For the most part, I ignore "Wall Street," and "Quant" ratings as "Wall Street" ratings are notoriously unreliable and "Quant" ratings are for short-term traders.
• I do refer to "SA Analysts" ratings not because they are necessarily accurate (as they contain both analysts I trust and analysts who I do not trust), but indicate how the readers may be steered toward buying.  If a SA Analysts rating for astock falls lower than 3.0, I am careful to hold onto or buy a stock only if further reading shows at least one of my analysts makes a convincing case that the market (in this case) is temprarily wrong and keeping or making a contrarian purchase may be patience well rewarded.

Buying on margin?

• No. A thousand times no. Never. Nada.

Options?

• Only if they are limited and total option exposure is less than one tenth of one percent of the portfolio.
• In practice, rarely ever.
   

By selecting "follow" at the top of any ofthe author's posts, their public articles will be automatically added to your news feed, making weekly reading a breeze.

Just as crucial as Seeking Alpha articles:

• The comments section following every article often contains intelligent discussions between investors and between investors and the article authors.  This is where real education occurs.  It is also a rich source of ideas for new investments.

• I ignore sarcasm, political comments, and cheerleading.  The intelligent posts more than compensate for the crap.
   
• My core analysts will sometimes sell a stock because they have portfolios with fewer holdings than mine and need to make room for a new purchase.  I will often NOT sell at that time as a stock with stable or increasing NAV and a high dividend may still be an appropriate holding for me.

Trimming, Selling, and Rebalancing:

• When a stock is more than $3,000 over its "Max %," I sell enough to reduce the holding to the "Max %."
   
• I'll sell some or all of a stock if a higher-yielding stock in its category (such as Energy, REIT, or BDC) offers a higher yield and is trading below its maximum (typically 2.5%).
   
• I rarely sell a stock completely (with no intention of repurchasing) in any three-month period.
   
• As of this writing, my core holdings are approximately evenly divided between REITs, BDCs, and Energy stocks.  At least once every two months, I calculate if any area is more than 2% higher or lower than the average.  If so, I sell some higher shares and buy more of the laggards.
   
• If I purchase more than 13 stocks in each category (REITs, BDCs, and Energy stocks,) then I will arbitrarily reduce the maximum position value of some or all of the stocks in the category to some percentage lower than 2.5% to keep the entire category close to 33% of the portfolio.   Stocks I consider riskier than others may be arbitrarily reduced to 1% or even 0.5%.

When it is time to buy:

• Typical purchases: As dividends roll in each month, I look at my portfolio spreadsheet sorted by current annual dividend and purchase more of existing holdings where:
• The "Current %" is less than the "Max %" and
• I am roughly maintaining a split of 1/3 for energy stocks, 1/3 for REITs, and 1/3 for BDCs.
• While it is possible to monitor cash balances and make new purchases multiple times during the month, doing so once a month is sufficient.

• I rarely add more than one brand-new holding in any three-month period.
   
• I rarely sell all of more than one holding in any three-month period.