F.A.S.T. Graphs Come to Top 40

I am happy to announce that Top 40 Dividend Growth Stocks for 2013: A Sensible Guide to Dividend Growth Investing will contain a significant new enhancement: F.A.S.T. Graphs(tm).

In cooperation with Chuck Carnevale, the creator of F.A.S.T. Graphs, I will be using his graphs, along with Morningstar star ratings, to adopt a new approach to the important step of stock valuation.

F.A.S.T. Graphs visually represent a stock's valuation in comparison to its fair or intrinsic value. The idea is to buy stocks "on sale" when you can, and avoid them when they are overpriced. Here, a picture is worth a thousand words:

On the chart, Johnson & Johnson's fair value is represented by the orange line, what Chuck calls the "earnings justified" value. The black line is JNJ's actual price. As you can see, the black line is a little below the orange line. In other words, JNJ is a bit undervalued at the moment. That makes it more attractive.

F.A.S.T. Graphs have been gaining popularity with Seeking Alpha readers, and you can see why. They are so easy to interpret. In this chart, called the "Estimated Earnings and Return Calculator," Chuck uses the historically common Price/Earnings ratio of 15 to draw the orange fair value line. The year 2012 is based on actual earnings for JNJ. The projections forward for five years are based on consensus analyst estimates for the expected growth rate in JNJ's earnings. You see a slow and steady growth rate of about 7% per year.

Each of the Top 40 stocks will have an image like the one above on its Easy-Rate(tm) Scoresheet. But (as they say on TV), Wait, there's more! Beneath each image will be a link to the F.A.S.T. Graphs website. Throughout 2013, you will be able to click on that link and go view a chart that is up to date as of the moment you click the link. With Chuck's kind cooperation, these links will be open and live all year!

In the coming edition, I have reduced the valuation factors to two: Morningstar's stars, and F.A.S.T. Graphs' charts. Morningstar updates their star rankings throughout the year, and F.A.S.T. Graphs are updated daily. So with just a couple of clicks, you will be able to derive an up-to-date stock valuation throughout the year. That's why I am so excited about this enhancement.

The eBook is proceeding swimmingly. Tomorrow (Saturday) we leave for Florida, to arrive on Tuesday, January 1 (2013!). After we get settled, it will take me 2-3 weeks to update everything with full-year information, double-check the whole eBook, and load it up. So I expect publication some time between about January 15 and January 22.

As last year, the first place that the 2013 edition will be available is right here. I will install a "buy" button here a couple of days before I can update my SensibleStocks.com website.

I will post another brief article when the eBook is available, with instructions on how to order it right from here (the blog site). It will be in the upper-right corner.

Happy New Year everyone!

Dave

2013 Edition Update

I am still on track to publish the 2013 edition of Top 40 Dividend Growth Stocks in mid-January.

Here is the status of everything as of today:

Stocks: My original list of  >500 candidates has been winnowed to just under 100. In December, I will go through the remaining candidates, apply several Easy-Rate factors to them, and try to get the list down to 45-50. I will then fully rate those names in the first week of January (when full-year 2012 data is available) and select the final Top 40.

Text: During November, I worked my way through about 80% of the text, updating it and adding new features and information. The text grows every year. Even as I tighten it up, new subjects and more complete discussions make the overall size grow. Some of the new or expanded coverage this coming year will include:
>> More complete treatment of risk.
>> Better coverage of diversification.
>> Added emphasis on the importance of valuation.
>> Several new definitions in the glossary.
>> Addition of beta as a scoring factor. (Lower beta, meaning less volatility, is better.)

Every year, I agonize over the sub-title. The main title--Top 40 Dividend Growth Stocks--does not capture the full essence of the eBook. Sometimes I think that the most important content is not the Top 40 themselves (as important as they are), but rather the step-by-step investing guide along with the foundational discussions that support the whole dividend growth strategy. At the moment, I have two versions of the sub-title:
>> The Theory and Practice of Dividend Growth Investing
>> A Step-by-Step Guide to Dividend Growth Investing

Last year's sub-title was "How to Create and Maintain a Dividend Growth Portfolio."

Obviously, I want to convey that this eBook is far more than a list of 40 stocks. The text has more than twice as many pages as are used to cover the Top 40 stocks themselves.

If you have any thoughts about the best sub-title, please drop me an email. Thanks!

Regards,
Dave