William Hill for the last few years has had its advantages and disadvantages as a company to own. As ever, it still has its pluses and minuses. At this point though, it is healthy enough and its share price low enough that downside is limited, upside is possible though I wouldn’t count on it, but its dividend is very good at 5.2%. This makes it a very good income play, with the addition of possible capital gains to boot.
If you want to own William Hill then, it should be principally as an income stock, with any capital gains being reinvested long term. That way if it trends nowhere you’ll up your income, and if it trends lower you’ll up it even more. If it trends higher you can always sell. Bottom line, if you’re 10 to 20 years from retirement, this is a prime gaming stock to own and should reward you regardless of the direction it goes in over the next decade or so, provided you don’t trade in an out and don’t expect any capital gains. They may come, but buying the stock for that is beside the point.
Why only an income play? First of all the stock is prone to extreme swings for a large cap, established company. From 2003 to 2005 shares tripled. Then from 2007 to 2009 they lost 70%. That loss was not just a result of the 2008 fiscal crisis. If it were, shares would have recovered by now and posted new highs. They haven’t. On a long term basis, we are almost exactly where we were 15 years ago in terms of share price. An expert trader able to perfectly time the tops and bottoms would be rich now. The other 95% of us who think we can pick tops and bottom perfectly, would have probably lost money on William Hill long term or at best broken even. The other 5% who are good, disciplined investors, would have bought William Hill, held it, reinvested dividends and been way up by now.
Price movements for William Hill, always a good company but never a spectacular one, teaches us one of the more important lessons in investing. The business is 10% making a fundamental decision before you buy and become emotionally invested, and the other 90% is just controlling emotions that grate against that initial decision after you buy. The same holds now. It’s a good company. It will probably continue its ups and downs. So if you want it, buy it, hold it, reinvest the income and cash out when you retire.…