McDonalds (MCD)
 

To take a play on the "sold at a loss" theme that Mike just showed up in the previous post... Let's use McDonalds (MCD) as an example.

Here is a chart on Google Finance...

http://www.google.com/finance?q=NYSE:MCD


If you click on the "ALL" choice for the chart -- you'll see many "peaks" -- and also many "valleys". If you'd bought at one of the peaks --- pick any one of the MANY -- but in particular lets say you bought your first batch in 1999 and and sold in early 2003....

It is the lack of long term confidence that would have 'cause you to sell... and now look at how big of a mistake that would have been!

Not all stocks have a chart like this... but that is why you need to have real conviction in your choices TO START WITH... this is why you DO NOT buy some recommendation from the clerk at the grocery store when he gives you his "hot stock tip of the day". That will cost you money every time! Why? Because if it so much as hiccups -- you'll blow out of there at the very first chance and then you'll have taken a real loss.

If -- big IF -- you buy stocks in companies that you like - know - understand - are best of breed... then you'll buy MORE of them as the share price comes down and you'll lower your average cost and you'll sleep well at night with the understanding that in the long run - you'll come out a winner.

Investing -- that's the key term here -- takes time -- it takes commitment -- and most of all it takes some research and confidence that what you've bought is "good stuff".

Another example of this might be housing.

The people that bought houses at the peak -- then bailed or failed... they have a real loss... the guys buying them now... they might suffer for awhile.. they might even question why the hell did they do this... but you've got to believe that the prices will come back. When? Who knows? I have no clue. But I gotta believe that this is "temporary" - it's the scale of temporary vs. the longer term. We won't know what temporary was until we have a longer view, and that view needs time to develop. In the meantime - like a dividend paying stock - the renter of the house will pay towards the mortgage - and eventually you'll have a nice investment even if the price never recovers fully.

Housing is strange. Their building by my office (Dublin, ca) 700 to800k but just over the hill (20 miles away) the community of Mountainhouse continues to take it in the shorts (mid 150's)....(talking residentual)

The ability to collect proper rent is in the simple of supply and demand. I just dont see the jobs in the area to substansiate postive cash flow.

I used to like the idea of property (its how my dad made is money in the 80's), but i'm liking stocks more and more.....

Thank you for the education i am continuing to learn reading this thread...

Rentals - whether it's single family or multi - all have one investment strategy in common... someone else is paying your mortgage. In the long run - you should end up with very positive cash flow... even if, in the meantime, you had to replace the roof... paint... and carpet.. and fixtures. At that point - you had a bad tenant - it took you 6 months to evict - and he damaged the place... you're not very happy with that investment. BUT -- If you know that in the long run someone is going to pay off your mortgage and you're going to end up with positive cash flow... You'll fix the dump up - re-rent it - and keep on going. And that's my real point - and Mikes point... You must have a basic belief that you're on the right track and be willing to suffer sometimes for the bigger picture (the paid off mortgage or that trust in the long term chart!).

Stocks are very similar...


If you have one - and it goes south -- you're not very happy... but if you have 10 and some are doing fine - while others are sitting, but are okay - and one of them goes sideways... it's no biggie. There is no loss of capital unless you sell below your cost... so for the time being it's really only a mental challenge to trust your judgement as to why you bought in the first place.

I remind people time and again - when in doubt - go back and research your reasoning. Would you buy the stock again? Do you still think "X" is a leading brand - is it a good company - is the chart good - is the dividend good... Look at the details of the chart and see how many times it's gone UP and DOWN... Right now - you might be in one of those little down squiggles... If everything else is okay (no accounting issues - no legal issues etc) then instead of thinking about selling - maybe you should think about ADDING to your position and take advantage of the dummies that are selling! :woot:

Good no-nonsense stuff as usually Greggers. Like I like to say... "the longer your holding period on something, the less perfect you have to be on the timing at acquisition." Applies to houses and stocks and most/all asset classes.

Those 20 miles from Dublin to Mtnhouse are WORLDS apart, as you likely know.

The bay area RE like most metro areas follow a basic value principle of concentric circles... the further away you get from the center (say, San Francisco in this instance) the less value you will see.

Don't give up on property just because of whatever the current situation is. The fundamentals have been the same since the beginning of time. Thorough analysis, good timing and discipline are your friends.

Right now the biggest problem is a lack of inventory in RE, and add the low interest rates and rising rents, and you have a perfect storm and a temporary seller's market around here. Crazy stuff.

Today will be one of those UGLY days... It's days like today that I look to ADD to my positions.... just nibble... Because a lot of the market will be looking to see what Apple says tomorrow (mostly about europe and china sales).

Here's an issue that people don't factor in --- McDonalds reports slightly lowered profit - why? A STRONG DOLLAR.... Is this a factor in their control? No.. but it will affect their bottom line. Do I worry about this kind of "miss"? No - it's a buying opportunity...

What will happen today is that everyone will look around and look to see what other companies trade overseas -- and start to assume (rightly?) that the strong dollar will be affecting the bottom lines of those companies... that and europe seems to be slipping ever farther down the slippery slope - which will also affect sales.

What do I do on days like this? I watch - buy a little - depending on whether I figure it might go down more etc.. (and it usually does after I buy).. or I just go out to "the shed" and work on some car stuff.

I forgot to finish my "thoughts" on the Ugly Day post.


Remember that as prices (share prices) come down - the YIELD (dividend) rises!


What I want to do is to make money on my money... and that's calculated as a PERCENTAGE -- so if a companies stock is $100 and pays a $10 dividend - that's 10% -- but if their stock falls to $90 then that same $10 dividend is 11.11%


The actual share price per hour - or per day - or this week... really is not as important to me -- AS LONG AS -- I think it will be higher than I paid some time in the future.


Averaging DOWN is when you own 100 shares of something at $50 and you buy 50 more at $45... it brings your average price per share down... This strategy works over time - if you're buying good stuff like we've discussed this last 180+ pages.

So here's what I did today ---

This is NOT a recommendation --- I'm just sharing what I did... don't read into it anything more than that.


I own 4000 McDonalds....

I bought 500 more this morning at $89.25

Then the price kept falling so I put in an order to buy 500 more at $88.25 (a full buck less than I'd just paid... that would bring my average down .50 per share)...

The price started to go back up so I changed my order to $88.50 and got the 500 shares at that price.

I'm just using this as an example of what I do... I actually EXPECT McDonalds to trade lower than this at some point... but since I don't know that - I'll just peck away since I think that these trades will be profitable on a capital basis at some point down the road.

My average cost on this trade is now $88.875

The 4000 I already owned have an average cost of $88.59...so I'll now have an average cost of $88.647

Wake up to the shake up..

On days like this I just do other things.

I personally may not add anything, but I sure won't panic.

I will just fill my Day with other stuff to do...:cheers:

Would be nice if the idiots in Europe could get their chit together.... What a bunch of moroons (pronounced mor roons)...

Let's have high taxes - free everything - early retirement - high debt.... and see how that works out. Oh..... wait.... The USA is trying to copy that very same failed strategy!

McD's will do fine in the long run... they are one of the choosen ones.. bailed out by the Fed and given a waiver from Obamacare mandates.. I think you're safe with that one. :thumbsup:

If you own Apple stock you won't be happy tomorrow!! OUCH!

It goes back to my "priced to perfection" post. I just can't own stocks like that
For this very reason!

Can you elaborate Greg? Since they announced a dividend?

They didn't make the number they thought they would.
I don't own the stock, however I do think it will actually go higher. They missed the expectations cause phone sales were down and they think its cause everone is waiting for the Iphone5 due in the fall.

I see here: http://www.ft.com/cms/s/0/c81ff6a6-d...#axzz21aR6T6Iw

I wish I could buy Samsung anyways

Here's a kind of long article -- but it's a valid discussion to check the pulse of dividend stock investing -- something I've preached (harped on?) for this entire thread.

I like to read articles that might be contrary to my own beliefs - to see if there's something I can learn... and there's always something to be learned.


In the end - the article says we're on the right track.


http://seekingalpha.com/article/7370...g_income&ifp=0

Apple (aapl)
 

A "numbers miss" ---

Having said that -- the miss is a miss of ESTIMATES... which has always driven me crazy. Some guys sit around and GUESS what kind of sales and profit a company is going to do.. and if the company DOESN'T (or does) make those numbers people get all crazy and sell etc.

For a company like this -- a big drop in the share price is probably a "gift" and will allow a nice entry point to a stock that should continue to do very well. They signaled nothing wrong.. sales are good... profit is good...the products are fabulous.

But this is a glimpse into the market when stocks are priced to perfection... if everything isn't PERFECT - they get a huge haircuts in a hurry.

If I had a million in cash today - I'd be a buyer. But since I just bought into another apartment complex... I'll just sit on my hands and watch. :woot:

How's the renting business Greg? With new home sales dropping I bet it's fairly strong.

Great article Greg, I'm curious how much you pay attention to valuations of the dividend stocks you buy? Do you just look at the chart or do you get into P/E ratios and the other ways to determine value and if so what are your prefered tools to use to determine that value?

Well Tony... I'll have to answer this carefully - because the thread is not about "me" -- it's about investing. I use "me" examples because they're real life - and I know "me" and what I'm doing and why I'm doing first hand... rather than making statements about a guy I knew who knew a guy that did "X" once...

So that said...

I have no idea how the rental business is going here in the Great Pacific NorthWET. Seriously -- I have no idea. I'm not in the rental business. That, on the surface, sounds like a smart azz answer... but here's the Investing 102 part.

I'm an investor. As an investor I'm presented with opportunities, and as an investor - it's my "job" to diversify my investments - to make my capital base grow - and to extract a return on my investments. Commercial property - and the income that it can generate - is just one type of investment a guy can make which adds diversity.

So -- when an opportunity to invest in some solid commercial real estate presents itself - I take a look at it. The type I do are LLC's (Limited Liability Company). This particular one is an apartment building but I also have free standing commercial buildings. For the most part they're totally similar.

The way they work is that there is a "general partner"... the GP does all the work. He finds the investment. Ties it up with earnest money and all the other required agreements etc... then he puts out a prospectus to people he thinks might be interested etc. Typically they'll start with previous or current business partners -- so many times it almost becomes a "group" of people that have been investing with this GP over and over... Anyway... the prospectus spells out all the details -- the plan going forward -- how much will be financed - at what rate - and blah blah blah. If you're interested = you let the GP know and they'll offer the shares (this is all spelled out in the prospectus) based on how much you want to invest --- but also --- you have to fill out forms stating that you're an ACCREDITED INVESTOR... which is based on your net worth - your annual income - and your knowledge/experience in investments of this type.

So the long answer to your question -- is that I have no idea about managing rentals - or how the market is doing - or where it's headed etc. What I do know is that this GP has always made me money (going back over 20 years now) - the ROI (return on investment) has always been top notch and that he's into apartment complexes for the long haul. This particular one is 55 shares total (I asked for 12 shares but got only 9) -- with the 55 shares representing a down payment of 50% and a very favorable long term financing rate... It is PROJECTED to have a healthy cash flow (which flows back to the share holders)... THAT is what I'm looking at... because for me - it's just an investment.

I actually own 2/3rds of another apartment complex not far from where I live. I've owned it for maybe 8 or 9 years now. I've never seen the building. Don't care. What I do care about is that it's with a great management company - I get a check every 6 months - and eventually we'll decide to 1031 exchange it - or sell it - or whatever... but again... it's just an investment. :D Just because I might buy General Motors (I don't actually have any) stock doesn't mean I'm going to go check on their buildings or even buy their products... :D I own McDonalds and Coke - and I don't eat there or drink Coke but I know they're well run companies that pay a fair dividend... and generally their stock goes up more than it goes down!

Erik -- I really don't pay much attention to P/E's etc.... but that doesn't mean they're not important.

I have a rather loose version of how I invest. I look for best of breed companies that I know and understand what they do - I check their charts - I look for a balance of growth and dividend - I look to see if the dividend has increased over time - etc.

There's tons of info and criteria etc -- but I really don't get caught up in that stuff much... it can steer you into an investment based on numbers rather than investments you love to own... and I have to like the company FIRST and then the other stuff kinda takes care of itself.

Since I'm an investor rather than a trader... the stuff I own pretty much has normal P/E's etc. So I guess that's why I don't use that as a criteria. I just want to invest in stuff that has a HISTORY of going up in value over time - and that's going to give me income. :cheers:

One of the things I've preached on here is to keep it simple. It really isn't rocket science although a guy can make it that way.

Greg, are those LLC's you invest in or LLP's since they have a General Partner? If you want to get out of it can you only sell your share of the partnership or do all the LP's and GP have to agree to sell the property? If you can only sell your share, how hard is it to sell and find buyers for? As you may recall, I'm in apartments too and seem to have a knack for identifying good opportunities more than I have the cash to acquire them. The manager of mine and I have talked about getting into something like this is why I'm asking. Thanks for all your input.

The reason you must be an accredited investor is the complete lack of liquidity of these types of investments. There is no market for the shares and I can not just sell to someone else. The GP must approve any transfer of the ownership of the shares. The group votes on any proposal to deal with the property i.e., sell vs 1031 exchange. You go along with the group and it's really the GP that makes the decisions - the investors are passive.

I would be referred to as an Investor or Member in the LLC.

This is one of the reasons I like to be a larger shareholder in the group... because then you will be heard by the GP should you wish to have some discussion about "something". :unibrow:


I also mistakenly referred to the paperwork as a PROSPECTUS --- it's really a PRIVATE PLACEMENT MEMORANDUM. I think a Prospectus is for a public company but they're the same for practical purposes.

Today's "market" is why I buy on DOWN days... because all of a sudden the market goes crazy UP.

There's a statistic - and I'll get it completely wrong -- but for an EXAMPLE only -- the statistic says that the market moves UP 10% of it's total for the year on only 2 or 3 individual days. If you miss those days - you've missed a big percentage of the year.

So those numbers are completely wrong but the point is that if you're not "IN" already - then you've missed the move - and the moves come and you're never going to know when that is.

Generally the market will move DOWN 15 minutes after you buy... :lol:

NOW -- THE CAVEAT.... AKA "Warning"

The major difference for me as an INVESTOR has been the mindset rather than the numbers. As an INVESTOR I EXPECT the market to go down - I totally understand that there will be periods when I'm getting my azz handed to me... regardless of how smart I think I might be. These periods might be weeks - or maybe 3 or 4 years! I'm totally prepared for that MENTALLY and CASH FLOW wise.

My point is -- you don't invest money that you are / might - going to need... so that you're not forced to sell in a down period. You need to be able to hold during the down periods in order to get the gains.

I used to freak out when the market went down 200 points -- or most of my investments were RED... and as soon as I'd trim some (sell) the very next day the market would move HUGE and I'd be kicking myself. There was never a "signal" that the market was going to move like that...

Now -- I've learned to keep plenty of cash for living on... and I invest the rest - I get paid those pesky dividends which just seem to keep on coming - and I've learned to buy when stuff goes down. When I do that... I look really smart on the few big UP days of the year.

As long as I'm being long winded this morning ---

Note that you'll look at your account after the close some time today (or maybe even tomorrow) and you should see your Annaly Capital Management (NLY) dividend in there...


But I would also note that on a very nice UP day that APPLE (AAPL) is down - albeit a buck or so -- that to me is a troubling sign for THAT STOCK... and I don't mean troubling in the sense that it's going down or whatever... but it just tells me that there's more SELLERS than there are BUYERS and that's a bit of a sea change. A year ago if we had a big up day - APPL would have been up $50! But now it's going against the grain and is flat to down on a day when Kimberly Clark is UP 2%!

When I see that kind of stuff -- I stay away. While a guy could "gamble" that it's a buying opportunity and get in front of the iPhone 5 release... My thought is that "what if it's a ho-hum" in the market place or just not the block buster people THINK it's going to be. Then it's a stampede for the exits and you get crushed.

I'm writing this as an INVESTING 102 piece only -- I'm not trying to predict what is or isn't going to happen... I'm just using this as an example of what I've lived to see many many times... It comes back to that "priced for perfection" post... and something else that people forget about is that many people have HUGE GAINS in a name like this... and when that happens... you start to think about trimming and locking in some of those gains. If you start to see some of that gain dripping away - you rush to lock them in... which causes the market to go down - which causes more people to want to lock in a gain - so the oldest rule in any market comes into play ---- MORE SELLERS than BUYERS... and even if the company is doing fine -- it's the stock market that dictates the stock price.

Thanks for the insight and perspective on your rental situation Greg.

Woot! good day in the market today.. making up for the last couple down days.

Sieg, have you checked your Sprint stock today? :thumbsup: Well done.

I love this statistic Greg, found a good chart that explains it, check out page 2:

https://content.putnam.com/literature/pdf/II508.pdf

That's a good chart. Makes it rather easy to see what people talk about. I'm glad I'm in for the long run.

:unibrow:

KO showed me some green too! :thumbsup:

Like my brother said, "Its not timing the market, its time in the market"

Thanks Erik --- It's page two of that chart (as you pointed out) that shows what I was trying to say! :cheers:

I had a busy morning and didn't want to spend the time researching to find "proof" for what I was stating - so thanks for bailing me out!

Facebook
 

Are there any Facebook (FB) believers still out there?? If so... I'm sorry. Truly.

So I'm not here to make fun of anyones "loss" - But I would like to use this as an investing 102 "comparison" / "look" at boring old stuff vs. hot new - everyone is going to get rich stuff.

************SINCE IT'S DEBUT means SINCE FB DEBUT so same date to date*****************


Since it's debut - FB is DOWN.... almost 40%

Since it's debut - MO is UP.... 13% PLUS it's paid a dividend

Since it's debut - KMP is UP... 3% PLUS it's paid a dividend

Since it's debut - KO is UP.... 5.67% PLUS it's paid a dividend

Since it's debut - NLY is UP.... 6.37% PLUS it's paid a dividend

Since it's debut - MCD is DOWN.... (ZERO POINT TWO EIGHT) 0.28% PLUS it's paid a dividend

Since it's debut - KMB is UP... 9.48% PLUS it's paid a dividend


I bought into FB on the IPO -- only because I was offered it at IPO price ($38) and when it didn't make everyone a millionaire on it's first day of trading - promptly sold it. It didn't "feel good" then and it doesn't feel good now. Maybe down the road it will prove us all wrong. I hope so for the holders of the shares...but in the meantime I'll continue to collect a dividend and choose to invest in stuff that doesn't churn my stomach on a daily basis.

Some my find this dividend investing article educational: http://seekingalpha.com/article/7526...g_income&ifp=0

GREAT article! thats perfect for Investing 102. *bookmarked*

Thanks Greg. :thumbsup:

07/26/2012 NLY ANNALY CAPITAL MGMT REIT
type: ORD INC DIV REINV.
$85.28

:hail:

When FB was IPOing, I thought I'd have a little fun and sell my terribly-performing Sprint stock back in may. Sold S@$2.35 and bought FB@$38. Now S@$4.27 and FB@$23.47 ....HAHA the legend of the little man on wall st is true!

Don't worry Greg, we're only talking ~$500 in money I have allocated to play... but I sure learned a good lesson a lot more cheaply than a lot of people on Wall St!

Man, starbucks tanked today. Its down $13 from not too long ago. Maybe its a opportunity to buy more? What do you think?

I'm pretty sure you da man on this thread. We're beyond you needing proof to back-up what you say.

Well --- <bowing> --- I thank you very much.... but I still like to be FACTUAL...

BTW --- Being "da man" is EASY when the market is going your way... it makes you look brilliant. What I'm trying to impart though -- is what and how to think when it IS NOT going your way. That is when the rubber meets the road... that is when you invest MORE if possible.... that is when the old sayings come into play -- like "I sleep well at night" etc. Life is great when we're looking at a sea of green numbers....

Just remember to go back and read the thread when the sea turns to red and you're doubting everything you ever thought/bought....