Framework of the investment ideas

Paid to wait stocks | Dividends and capital gains.

This is Paid to Wait, a newsletter of ideas about stocks that pay a (healthy) dividend while you wait for capital appreciation.

The ideas are required to meet following characteristics:

  • Company: The simpler the business the better. We can often find good opportunities in sectors and businesses that are out of favour, in (temporary) trouble, going through a transformation or simply misunderstood by the market. That’s when to place the bets.

  • Dividend: Stock market is unpredictable. Therefore we like to get paid while we wait for good things to happen. A dividend gives us a hint that the business sustains itself and the management is willing to reward also the owners.

  • Valuation: We like to buy good things at cheap prices, don’t we? We rather buy a company at low multiples in order to have room for multiple expansion.

  • Capital gains: In order to achieve superior performance there needs to be significant potential for capital gains. Additionally, we would like that the odds of winning big are much larger than the odds of losing.

  • Catalysts: Finally, there’s ideally several external or internal catalysts that unlock the potential for capital gains.

The framework of the ideas is rather simple. Although in the world of investing value has its meaning slowly fading, the framework comes close to classic value investing coupled with dividends. To put things together, we like to see a good company that pays a dividend. The shares of the company are for a temporary reason undervalued compared to its peers, historical levels and/or the market. Technically and fundamentally there’s potential and high odds for capital appreciation by foreseeable catalysts. These elements give us a simple filter to invest in companies that reward shareholders in two ways.

Please be aware that more often than not the author already owns shares of the company covered in the newsletter.