Adam Mills looks for companies with a long history of strong cash flows and growing dividends.
Adam Mills, 32
Occupation
Math and science teacher
The portfolio
Includes shares in General Electric Co., Coca-Cola Co., General Mills Inc., IBM Corp., JPMorgan Chase & Co., CSX Corp., Manulife Financial Corp., Rogers Communications Inc., Fortis Inc. and Suncor Energy Inc.
The investor
Adam Mills once relied on the headlines for his investment decisions. But he ended up buying speculative stocks and trading too much. So now he relies on his own research.
How he invests
Mr. Mills believes in "holding stocks for a very long time in order to reap the full benefits of compounding and tax deferral." Given this framework, he looks for companies with a long history of strong cash flows and growing dividends. Share buybacks are a plus, too.
A recent purchase was General Mills' "unfairly beaten up" stock. The food-processing giant "is introducing many new products to align with the trend toward healthy living and … I believe they will continue to grow their dividend at a rate higher than inflation," he says.
JPMorgan Chase has "a strong dividend and disciplined approach to buying back its stock [only when it's cheap]." Trading near book value also makes it attractive relative to Canadian banks. Lastly, the improving U.S. economy should push up interest rates, increasing margins on loans.
Rising interest rates will also be good for Manulife because its cash flows and the maturing portion of its bond portfolio will be invested at higher bond yields. The insurer also has operations with significant exposure to "the growing middle class in emerging countries."
Suncor's new management has halted the strategy of growth at any cost and now focuses on utilizing its assets more effectively. They are also more shareholder friendly, according to Mr. Mills, as highlighted by their track record on dividend increases and stock buybacks.
Best move
It was starting to invest early so that "compounding, dividend growth and dividend reinvestment" could power his portfolio.
Worst move
It was the use of stop-loss orders on stocks that should rarely be sold, such as Canadian National Railway Co.
Advice
Start as early as possible. … It's not about "timing the market, but about time in the market."
Want to share your strategies? E-mail mccolumn@yahoo.com