Welcome to our third installment of Invest like the best, our masterclass series of investor profiles. Today we’re taking a look at the Grande Dame of Dividends, Geraldine Weiss who is one of the most famous (female) investors in the world.
Geraldine was born in San Francisco in 1926. Whip-smart, she studied business and economics at the University of California, Berkeley in the 1940s and got interested in investing in the early 1960s. Geraldine dedicated herself to learning as much as possible about investing. She enrolled in night courses and famously read every book she could find on the subject in the San Diego library. Geraldine took her first punt on the stock market in 1962. She and her young family were living hand to mouth at the time, but she asked her husband for some money to buy stocks. Clearly, it paid off.
Unable to find work as a broker because of the rampant sexism at the time – no brokerage firm would even consider her for positions other than a secretary – she set up an investment newsletter called Investment Quarterly Trends (IQT) in 1966. In doing so, she became the first woman to publish a widely distributed stock market newsletter, successfully entering the exclusively male-dominated field of financial advice. When she retired in 2002, she handed over her editorial duties, but she’s still involved with IQT’s overall strategy.
As a financial analyst, Geraldine’s work and interviews have been published in illustrious finance publications such as Barron’s WSJ, LA Times, Fortune, and Forbes to name just a few. Known by names like “The Dividend Detector”, Geraldine co-authored two investment bestsellers, Dividends Don’t Lie and The Dividend Connection. As a lecturer, she’s participated in investment seminars and workshops throughout America, speaking to investment clubs, university groups, and corporations.
Geraldine is a noted authority on blue-chip stocks,n big multinationals that have been around for a long time like Coca-Cola, Disney, and McDonald’s, and the importance of dividends, when a company distributes earnings to it’s shareholders, when determining stock market value.
“Folks who ignore the importance of dividends in making stock market selections are not investors. They are speculators.”
Weiss believes investors should focus on dividends, rather than earnings because it’s too easy to manipulate earnings figures in financial statements. She feels dividends are “real money” and a hallmark of a blue-chip stock. She looks for blue-chip companies that have a strong balance sheet – which implies they shouldn’t have trouble paying dividends in the future. Geraldine also believes in having a relatively concentrated portfolio and thinks that investors shouldn’t hold more than 10-20 stocks. Over the last 30 years, IQT’s top recommendations have returned 11.2% a year, compared to the average investor who saw a return of 3.66%, whereas the S&P 500 had an average return of 6.73%.
Her underlying approach is to focus on dividend yield, which is the annual dividend per share divided by the share price. Using McDonald's (MCD) as an example, on March 18 2019, McDonald's paid a quarterly dividend of $1.16 per share ($4.64 annually). With a share price of $184.97, the dividend yield was 2.5% (4.64/184.97).
IQT use specific criteria to shortlist and assess stocks including collating 25 to 30 years of monthly stock price data to find extreme highs in dividend yield to determine if they are a bargain buy (undervalued stock price) or extreme lows in dividend yield and priced too high (overvalued stock price). Weiss believes that all shares go through cycles of undervaluation and overvaluation and that investors can take advantage of these cycles - buying shares when they are undervalued and selling them when they are overvalued.
“Never is there a better time to buy a stock than when a basically sound company, for whatever reason, temporarily falls out of favour with the investment community.”
Weiss shortlists companies that meet six “blue-chip” criteria:
The dividend must have been increased five times in the past 12 years;
have an “A” credit rating from Standard & Poor’s rating agency;
must have at least five million shares in circulation;
it must have at least 80 institutional investors;
it must have a total of 25 uninterrupted years of dividend payouts;
earnings must have increased in at least seven of the past 12 years.
Companies that don’t meet these criteria are removed from her shortlist.
“Successful investing in the stock market is not brain surgery. Anyone can be a successful investor.”
Her 2019 Picks
Geraldine is all about the blue-chip, but in hard economic times she swears by three industries she sees as safe havens:
Food and drink
“When bad things happen to good companies, it must be viewed as a buying opportunity rather than a bailout”.
She used the name G. Weiss for a decade before revealing she was a woman, due to the initial rejection her work faced. She announced her identity in the mid-70s, once she’d achieved a consistently successful track record.
She’s a competitive bridge player – she’s even played Warren Buffet!
One of her most successful tips was Coca-Cola (whose price rose by 1,285%).
“Dividends don’t lie.”
Why we love her
Besides the fact that she’s completely bad ass, Geraldine really is the first woman of Wall Street and the first to crack the glass ceiling. She believed in herself so much that she funded her newsletter with her own money – $2000. Having begun in 1966, she only started making profits on her investment from 1969, showing that perseverance truly pays off.