Have you ever watched stock market investing segments on TV? I used to be impressed that the host would be able to share their recommendation on any stock at any time when asked. I wondered how they could know so much when the world (along with stock prices) is constantly evolving? After joining the industry in 2008, I set out to become an expert and met several very talented investors along the way. What I learned surprised me.

Aurora Financial Strategies recently purchased shares of Diamond Hill (DHIL) for clients in individual stock strategies. We believe DHIL has upside potential of 148% versus downside potential of 37% based on our scenario analysis and price at the time of writing. The company has an identifiable economic moat, quality balance sheet, and attractive margin of safety.

Historically, the stock market has mostly advanced regardless of who is President. Presidents have limited influence on stock market returns. Business cycles and other factors are more important to stock market returns than the President. We seek to invest in companies that can succeed regardless of the political environment.

Economic moats are characteristics that help protect a company’s profitability just as Castle moats help protect people inside. There are 2 stages of economic moats: legacy (existing) and reinvestment (under construction). Companies with reinvestment moats should invest more back in the business than legacy moat businesses. We believe the identification and evaluation of economic moats is an integral part of analyzing a company’s stock.

Economic moats are characteristics that help protect a company’s profitability just as Castle moats help protect people inside. The presence and development of economic moats can help a business have long term success. We believe the identification and evaluation of economic moats is an integral part of analyzing a company’s stock.

Dividends have been a lure for public investors ever since the 1600s when the Dutch East India Company distributed regular profits to shareholders in the form of guilders (Dutch currency). Investors who are looking to maximize returns often shun dividend-paying stocks, mischaracterizing them as low return investments. In fact, those investors are missing out when one takes a historical view of stock market returns. You may be surprised to learn that stocks that pay dividends have outperformed non-dividend-paying stocks over the long run.