With the baby boomers hitting retirement age, there has to be some companies that are going to benefit more than others. Maybe velcro shoes? :lol: Seriously, drug companies and health care providers have to be high on the list. Who else?

Gwen started at MSFT in 1984 --- in 1986 they went public and her first stock option was 750 shares at $32.50.... at Thanksgiving there was a bunch of fellow 'softies' at dinner and we were laughing at this "gift" -- I said I'd prefer a coupon for a free turkey at Safeway.... Because at the time - MSFT was trading at $30 and this "option" was higher at $32.50....

Man was I dumb!

Okay - just so ya know - that 750 shares - split so many times that it grew into 108,000 with a cost adjustment for the splits @ .11 cents per share.

Did I mention how dumb I was??

I bought Ford the day they were sitting in congress, They didn't have their hand out. I got in at 1.50. Smartest thing I ever did with money, Sold it at 17. And bought it again when it went down to 10..Holding on to that for a while. I like the idea of sharing Ideas and thoughts with other people on here. Everyone could benefit

Greg.......

Thanks again for the insight. It is crazy to think here I am on a car forum and the first thread I go look for is this one. :thumbsup:

When I lived in NYC -- I had a sign on my desk that read "Try not to let the urgent get in the way of the IMPORTANT".

So dang true... we all have the "I wants" and sometimes we let those jump in front of what's IMPORTANT - and it's IMPORTANT to be able to retire and still live etc for a very long time!

I think that's why this thread has taken on a life of it's own so to speak... everyone kinda knows how important this stuff really is... it's just that nobody talks about it. Glad you like it 'cause it is actually kinda fun!

:cheers:

Just wanted to say thanks Greg for providing all of this great information. I've been plugging in and out of this thread. I have never dabbled in this sort of thing and may give it a try.
Forgive me if you have already mentioned but what would be the first steps for someone that is new to this?

First step is to open a discount brokerage account -- I use Schwab which is why I mention them - because it's what I know. I have accounts at many different places but this is the one place that has all the research and info etc that is user friendly. You can (as I do) have several DIFFERENT accounts at one brokerage. SO you could have an IRA as one account - and you could have a separate account for just "savings/investing" - and another one in a joint account with your kids for college savings/investing etc. And a secret one for car parts/track fees... :rofl:

Once you have an account established -- and funded (as little as $500? I'm not really sure what the minimum is) then you can BUY a stock or two stocks. If it's a small amount - say $1000 or under - I'd just buy ONE stock.... and then you can save up and buy another when you have another 500 or 1000. If you have 10,000 to start - then I'd buy 5 stocks @ 2,000 each and so on. If you have 100,000 then I'd buy 15 to 20 stocks/ETF's and you'd have your very own mini mutual fund - but it would be without the "expenses" the funds have and would probably have a better return!

Schwab people will walk you through this process should you require it. You can actually go to one of their offices and use their computers and have someone look over your shoulder should you need it.

If you go back through this thread -- I've given some pretty good names which I've also shown the growth rates (5 year?) and the dividend %'s on. Pick a couple from there - or compare them with similar names. My point all along has been that this is super easy to do and all it really takes is to just get started.

I need everyone on here to get rich like Charley - so I have people to race with in our old age!

EEEEEEEEEEEEEEEHHHHHHHHHHHHHAAAAAAAAAAA

I am very interested in this thread. I mostly lurk on Lateral G and over the last couple of days this is the first thread I have been coming to.

I have been investing in stocks and mutual funds for about 20 years now. I like the idea of working together with other people on investment ideas because many times other people have different viewpoints and it makes you think about things that you might not have considered on your own.

With that being said, I would like to throw out a stock for consideration that I like right now. The stock is Microsoft. I know Greg said Microsoft is dead money right now, but here is why I like it.

I believe it is out of favor and undervalued right now. If you look at a ten year history of revenue growth and earnings growth, it compares very well to any of the high quality stocks that have been mentioned in this thread. For example, the ten year growth rate of net income is 146% for MSFT. As a comparison McDonalds had a 150% increase in net income over the same 10-year period. During the same ten year period, the stock price of MCD has gone up 260%, while MSFT has declined 23%. The PE (Price Earning ratio) is only 9 for MSFT compared to a 15 PE ratio for the market as a whole. MCDs PE is currently 19.

So my thinking is that now is a good time to buy. I have found that chasing the hot stock/mutual fund generally gets you in at the high. I tend to be a contrarian and look for things that may be out of favor but have the potential to come back in favor.

MSFT currently has a 3.08% dividend rate, while MCD has a 2.87% dividend rate. I am mostly comparing MSFT to MCD, but MCD has had one of the strongest runs over the last ten years.

I would like to hear others thoughts about Microsoft as well as any other stock ideas you may have.

Thank you Greg. Just to give you an idea of my current and past investment break down, any time I had money I bought property. I started in 2000. By 2006 had 6 properties and buy gut instinct i immediately dumped two of the most recenly bought and luckily did not take a hit on the last two and lost $150k on the still owned previous which is what i used as a down payment so yes....I took a $150k cash hit.

I'm OK on the others as I bought in pre 2003 and they are rentals.

Now I am stagnet, in the construction business in the Sacramento area, and business is slow. My thoughts were.....well I have these properties I could rely on for retirement.....but in the back of my mind I'm not 100% confident as I would like to put 3 kids through college.

I am going to go back and take notes on all you have shared.......and once again, this site is very fortunate to have you......Thank you.

Woody ---

This entire thread is about THEORY of investing -- not really 'stock picks and tips of the day'.... With that said -- the reason it is NOT that kind of discussion and I've tried to stay away from that is because everyone needs to tailor THEIR OWN investments. If a person buys what someone else said to - and they don't know why they bought it - the first time they look at their account and the stock is DOWN -- they're going to want to sell (at a loss).

So -- if you like Microsoft -- and like "contrarian" investing (like salmon swimming up stream) then that's what you should buy. You'll be happy with it.

BUT since this is a beginners class.... the thread is called INVESTING 102... I've been doing just "basics" -- basic names - basic theory... which DOESN'T include "contrarian investing".

Okay --- I write the above -- because I have to write for the MANY eyeballs that read these things.... I write all my posts that way.

Microsoft has all the right "numbers" except one -- CAPITAL GROWTH -- and it has a HISTORY of that. Look at a chart -- the stock PEAKED in 1999 (December of 1999) and has what appears to be a MOUNTAIN... going almost vertical to the peak and then STRAIGHT DOWN on the other side. Microsoft (MSFT) has the largest "float" of any stock in the entire UNIVERSE... which means -- there are more SHARES available (issued) than any other company. PERIOD. So it takes much more BUYING INTEREST to raise the stock price than any other company (that might have one quarter the number of shares for instance). Add to this the Billy Boy (not a fan) DUMPS 4 and 500 million dollars worth a month.... and he has an ENDLESS SUPPLY (he can sell a BILLION DOLLARS WORTH PER YEAR FOR THE NEXT 50 YEARS). His stock is FOUNDERS STOCK -- i.e., it's never been in the market until HE sells it. So that is NEW SUPPLY. That right there knocks the price down. Look at an insider trading report -- you'll see he's in there dumping dumping dumbing month after month year after year.

PERSONALLY -- I want CAPITAL GROWTH.... AND.... the Dividend. So if you want to compare McDonalds with a 260% capital growth -- and a dividend -- against Microsoft (MSFT)... and that's where you want to put your money... I'd say your investing style is "GAMBLER" because you are gambling that you can swim up stream against a known (historical) tide.. and win. I'll bet against you and I'll buy MO - PM - MCD - KMP etc and at the end of the year I'm going to be richer than you are. :unibrow:

I have a broker (also a personal friend) that handles my bond account. His firm (McAdams Wright Ragen, Inc.) always has MSFT on it's "BUY" list.... and I keep telling Fred -- I'll take 100K in APPLE and you put your 100K in MSFT and get back to me at the end of the year. Just compare the two charts -- overlay them so you can see the two charts on the same chart... you can do this in GOOGLE FINANCE -- MSFT is DOWN 10% YTD while AAPL is UP 20% YTD... Same chart - overlay (compare) McDonalds -- UP 30% -- Compare that with Phillip Morse (PM) UP 35%

Again -- I'm doing this as a "lesson" -- please do not take this personally but I'm using your question to show a bit of research and what to look for and how to compare etc.... So I ask ANYONE -- why would you CHOOSE to put money in what has a history of going nowhere vs a history of going somewhere... UP vs DOWN....

Here's how I'd play MSFT -- because I think it's a LOSER... it's a LOSER in the tech wars in mobile which is where "computing" is going (and it's going there FAST).... I might PARK some money there because I would feel it's safe for a few weeks (I used to use GE for this) and if I played the dividend game I could pick up the dividend and then bail. But I would NOT invest in them hoping against hope that someday they might figure it all out and the public is going to come swarming back in a feeding frenzy and push up their stock.

Remember how the market works -- it takes more people that WANT to buy than people that want to SELL to lift a stock price. You tell me when that is going to happen going forward? In the meantime -- I'd prefer to have my money in something that at least historically looks like it's on the right path... which is going UP not sideways or down.

Greg,

I appreciate your input and that is why I posted. I wanted to get some others viewpoints and maybe some new ideas on how others analyze stocks.

I will try to keep it to a more general discussion in the future.

Thanks

My take is that you have better downside protection with MSFT right now, than with MCD and like you said, they have a similar dividend yield around 3%. Next year's growth rates for revenue/EPS for MSFT are (7.6%/10.6%) versus MCD at (5.6%/12.4%). So, just looking at analyst estimates, revenue is expected to grow a little faster at MSFT than MCD, but margins are expected to grow a little better at MCD (which is likely why people are willing to pay more for MCD via the higher PE). With the large delta in the PEs, MSFT looks like a better investment to me than MCD right now.

Another option (pun intended) but more complex trade, is to look at options. If you are comfortable with options (no, not all options are risky), you can buy MSFT stock and write covered calls against your stock. For example, if you bought MSFT today at roughly $26 and wrote a March 2012 covered call for $26 for $1. $1/$26 / 3 (option expires in ~3 months) x 12 (est annual return) = 15%. This will cap your gains if the stock rises, but also gives you $1 of downside protection. If the stock stays flat, you let the option expire in March and write another option. If the stock rises, your stock will get called and you have to live with the $1 gain. I am not advocating this trade, but just giving you others options on trading.

If you are a beginner, start doing a little research (starting with Greg's awesome list of stocks above) and buy some shares. Do not try to get rich quick and if you are new to trading, do not use margin to buy stocks. Again, just my 2 cents.

I just joined today, and after posting my car on the projects thread, here I am..

Investing and Cars, and Money management, are some of my Passions...

Being the Newbie, I just want to say hello, and I will be commenting from time to time..

Again, GREAT thread. What better , than to help each other with investment ideas, and strategies.

I think I am going to learn more than just Cars on this website...Very, Very Cool.

Merry Christmas and to a even better 2012....

Thanks for the input.

Don't do that. I thought it was a great question!!

I'm posting from my phone or I'd tell you why.

Well this is my first post on this site, I've been a lurker here for a while but James (LS1-IROC) pointed me to this thread.:yes: Just finished reading through it all, very good information, thanks! Right now I happen to be about halfway through the book 'bogleheads guide to investing.' I'm 25 and looking to get an index fund setup soon, I'm just wondering if anyone can offer some opinions on schwab vs vangaurd? Seems like they are both good, should I just pick one and roll with it, or could it be beneficial to have an account with both?

This thread definitely has piqued my curiousity in dividend stocks, now too :thumbsup:

A discount broker is a discount broker -- so just pick one with an office that is handy to you - in the event you want to stop and deposit a check etc -- or need to send a wire transfer -- that kind of stuff.

Welcome aboard!!!:cheers:

Woody --- I thought your question on Microsoft was a very good one -- and I hope you didn't take my discussion of why I wouldn't choose that particular stock as a personal affront - that wasn't my intention.

It was a great question! Many people would love to be able to pick the "next Microsoft"... and still look at MSFT stock as some kind of a "must own". So it was a perfect name to bring up here -- since I've been pounding the desk saying to get into names you know and understand.

I was trying to use that question to put another level of thought process into this "stock picking" business. I really wish MSFT would be the stock that it used to be... but it has had 10 long dismal years of being stuck in the mud. I'm trying to get people that haven't EVER invested in anything -- to start saving and investing -- and I NEED them to buy a little bit of this and a little bit of that, and have SUCCESS! That success needs to be GROWTH in their money (account) AND to see what dividend investing can do for them. Even if a guy only gets a $10 dividend -- that is "free money".

On the way home today - I got a text that said "GO McDonalds"! -- So I called the guy and said "what's up with that" --- well he was all excited because 5 months ago I got him to start investing and one of the picks was MCD -- and he bought at $84 and today it closed at over $100....

He wouldn't be real excited if he'd bought MSFT at @ $25 and it closed today at $25.15


I'll come back to the "This thread is Investing 102".... I want these guys to see some RESULTS.

I've hammered 'em on LOOK AT THE LONG TERM CHART...... because that TREND CAN BE YOUR FRIEND (old dumb saying but it works)... Or "don't try to catch a falling knife" (don't buy a broken stock that is falling just because it used to be "good"). These are all sayings that actually do work. And they're good reminders to me (I use them to myself all the time!).

So again -- my only "lesson" point was -- if I look at a chart of MSFT -- and it's been FLAT for 10 years -- I don't get any good argument that says "BUY IT BECAUSE IT MIGHT GO UP".... That's just gambling. Like standing at a slot machine thinking "My next 20 bucks might hit the big one...."

Me to Mike, sorta like those old EF HUTTON COMMERCIALS

So I can say that this thread has motivated me to look a little bit at the existing investments that I have ..... and I use the word "investments" loosely.

I have a long neglected Fidelity IRA with some cash sitting in cash reserve. As you might guess, my gain on cash sitting in reserve over the past few years has been .000000000000001%. I'm one of those guys who knows absolutely nothing about stocks or invesments; nothing beyond how to log into the account and see my balance. This stuff has always been so confusing!!

So .... due to Greg's obvious excitement about this investing stuff .... I decided to take the time to become familiar with my account. I've been poking around on the Fidelity website, using their research tools and reading their investing info. I decided to use the Fidelity account as my "test bed" for learning the basics. A few days ago, I bought some Nike and McDonalds stock out of my IRA cash. As Greg had mentioned in one post, the stock price immediately dipped into the red and I thought "crap ...... now I've made Greg loose millions!!" But after a day or so, it was back into the positive numbers. (Why does that initial price dip happen??)

Although I realize that it's all "paper", my Fidelity account has increased in value more over the past few days than it did in the past two years. I still have some cash left in reserve, and I've been Google Financing virtually every name that comes into my head ... I've even made up a few acronyms! Eventually I'll spread the cash out into small chunks of stocks that follow the "10 year gain" and "dividends reinvested" rules. Since this Fidelity IRA money is left over from a previous employer IRA that I rolled into another fund, I can't/won't "co-mingle" any other cash into it. And this is seperate from my current employer 401K where most of my retirement money is sitting.

Next up is to get my "emergency/regular savings" up to where I want them, and then I'll look at a seperate brockerage account.

Anyhow ..... thanks to this thread, I've learned a ton over the past week or so. And continuous learning is a life goal.

Thanks guys!!

Welcome Aboard Joel!:cheers:

:hail: :hail: :hail: :hail: :lateral: :cheers: :woot:


And that folks is just how it works - and it truly is just that simple.

Will the account go straight up day after day ---- NO --- It is like a stairway -- up - maybe back a couple - then up - then sideways - then back - then up a little... kinda like our car builds. Eventually we finish. Right?

XOXO to all!

Another thing that I hope everyone will/can begin to see -- when staring at all of these charts and stuff that I've been hammering on..... YOU DON'T HAVE TO CATCH THE NEXT GREATEST, BIGGEST INVENTION OR THE HOTTEST STOCK TIP in the stock market!

This is why I wanted everyone to see names like McDonalds - Kinder Morgan - Phillip Morse etc.... that these BORING old stodgy "names" actually can have some pretty stellar charts! And they can have some pretty darn good dividends!


FORD was a pretty GIANT GAIN... for those with the guts to see the sky wasn't falling and they could see the DIFFERENCE that FORD didn't have to borrow from the government (us) to stay alive... if you caught that (bought that) at $2 and rode it to $10 -- that is a 500% gain!

So let's use this as an example. BE CAREFUL about taxes! If you bought at 2 and sold at 10 -- within ONE YEAR AND A DAY - you'd OWE regular income tax rates on that GAIN.... but if you held it ONE DAY AND A YEAR - that becomes LONG TERM CAPITAL GAINS and is max tax rate of 15%

If it's within the IRA or 401K - then there is NO TAX DUE YET --- that tax is when you WITHDRAW. So hopefully - when you retire - your tax rate is LOWER than when you're working. If you bought that within a ROTH!! Katie bar the door -- those gains are TAX FREE. PERIOD. That's the beauty of a ROTH IRA. Everyone that qualifies should have a ROTH IRA.

:lol: :lol:

There is a little man on the floor of the stock exchange -- the minute you BUY -- he yells at his buddies.... "Bill's in, TAKE 'ER DOWN!"..... and the minute AFTER you SELL -- he yells "Bills out, TAKE 'ER UP!"

Actually --- the down days are to test your faith in what you just "invested" in. When that happens -- go to the "alter of the chart" and refresh your brain by looking at that stellar growth and dividend and see WHY YOU BUY....

If you just gambled and bought something without having done the research... and you never had any faith... then you sold your sole (your shoe sole not your soul) to the devil and he'll eat you alive... and you'll sell at a loss. A few of those and you're out and you've failed. (Just having fun here with the alter and devil stuff). :unibrow: :D

Merry Christmas guys!

Greg is the Lat-g Santa. He has given us all an early Christmas gift that can last a lifetime if we apply the knowledge wisely. Thanks again for your insight into this investing game. :thumbsup:

I was up till 3am the other night going over info, Im rethinking a lot of things now. Once you read the advice and start understanding what you see it makes sense. Everybody that makes a profit is going to owe G.W. dinner at SEMA next year. LOL

Greg may enjoy that alot! And you would have to have been to dinner with Greg to know what I am talking about. ( 6 adults in a Honda Civic after leaving an all you can eat steak house does not look cool btw:rofl: ) It might even qualify as DIVIDENDS?

Just don't blame me when it all goes horribly wrong!!! :(


Remember -- this is all just THEORY.... Good theory - and it does work over time.... but you'll hate me in the down markets we will all suffer! But with those dividend payments -- they're a whole lot easier to take.



Mike -- I still get a good laugh about that "scene" at SEMA every time I think about it! Those times are what good memories are made of! :lol: :cheers:

Remember not to get caught up in "irrational exuberance"! And with the highs will come lows... the market doesn't go straight up. It's more like a dance. Like building a high end build -- a lot of time is spent taking stuff apart!

This is what I just read on one of the websites I visit for market info/news - and I thought it pertinent to post here....

A Santa Claus rally phenomenon usually occurs during last 10 trading days of the year, along with the opening week of the new year, where trading volumes are lighter and there’s a bias to raise prices to “window dress” returns for fund managers.The rally continues into the new year due to inflows of new pension money from 401(k)s and IRAs buy into equities.

The point of this is --- don't forget that oldest of rules... the minute you buy - they will fall... and you MUST remember why you bought - your time frame (really? Was it only a one week time line?) - refresh your brain with a look at those charts... and if you've kept some powder dry - if it's a stock you like long term - BUY MORE it just went on sale! But don't buy more unless it's gone down 10% or more (that's a BIG move!)...

Here's a good look at what DIVIDENDS look like! $4000 invested in two similar companies --- same industry (aka Sector) -- but one pays a higher dividend than the other. This is showing DIVIDENDS ONLY not the capital growth (or loss) if any. I just cut and pasted this chart because I thought it was very interesting to actually SEE the money trail.


http://static.seekingalpha.com/uploa...nan_origin.jpg


The above is just the chart showing the difference in the COMPOUNDED rate of return of the dividends paid. Below is a link to the actual article I stole it from. The discussion points in the article are "in a nut shell" to look for DIVIDEND INCREASES over time - when looking at all comparisons. Both of these companies are "best of breed" - but Chevron increased it's dividend payout % MORE than EXXON -- and over time that made a $1000 difference!

Interesting is all -- you'll learn nothing from it really because it's a HISTORICAL look and is only meant to help you PERHAPS make another investing decision --- the company that historically increased it's dividend or the one that pays higher NOW but hasn't raised the dividend much over time. EITHER ONE IS A WINNER IN MY BOOK BECAUSE YOU WOULDN HAVE AT LEAST BEEN INVESTED IN SOMETHING RATHER THAN NOTHING... :willy: :unibrow: :D

http://seekingalpha.com/article/3159...g_income&ifp=0

Nuts! I didn't get any high div stocks for Christmas. :( :D

GOOD ONE!!
:rofl:

Interesting. I was looking into oil companies as a sector to invest in. Exxon was on that list. I'll check out Chevron too.

My personal gas/oil/energy plays are in KMP (Kinder Morgan Partners) and EEP (Enbridge Energy Partners)... I chose them because of the much higher CURRENT dividend. But remember -- I'm not looking at growth as much as I am for current dividend yield because I'm already retired and live off that stream...

Both the above pay over 6% -- and for me -- that's HUGE.

Can't go wrong with either CVX or XOM, or any of these names in my book. As long as you're DIVERSIFIED.... and we know - like food etc -- people are going to be using Oil/Gas/Natural gas for a very long time (sadly because I'd like to see less dependence on them but that's a different discussion). :thumbsup:

I just overlaid (compared) a chart of these 4 names -- and EEP is the laggard for 10 year capital growth with a paltry 58% -- the other 3 - XOM - CVX - KMP are all 120% PLUS 10 year capital growth.... they are in virtual lock step with each other AND they pay that nice dividend.

I think these 10 year Google charts INCLUDE the dividend as reinvested to calculate that growth rate but I'm not sure. That would actually be the CORRECT way to look at them for pure comparison sake.

Since Greg isn't in the office yet, this article may be of interest to a few of his students. :D

http://seekingalpha.com/article/3153...rtfolio-part-3

Great.... if you want to confuse the hell out of people.
:willy:

It makes sense to me. A car traveling at 25mph but accelerating at 20mph will eventually over take a car traveling at 60mph but only accelerating at 10mph. The question's when will that occur? Depending on each person's current age and desired retirement age, they will need to choose the car that has the correct current speed and acceleration to cross a threshold at the required time. The more time you have, the more choices you have as there are multiple combinations to get you there.

Ok so it's a little more involved once you try to actually choose the stock, but I think the idea/approach is rather simple to understand. It's like you've been saying, start early and it'll be easier.


And for you engineers and math people, please ignore my simplistic and incorrect units associated with acceleration. The concept's the same even if the units are correct :D

Agree with the points -- it's just not Investing 102. I think in order to keep the thread on track -- and to get people to actually START to save and invest... we've all got to keep the message simple and on point.

I'm not ARGUING with Sieg.... far from it. I'm just saying that "concepts" are nice - but usually hard to put into practice. We need to practice walking before we can run... and we need to start out just buying (investing) in simple concepts that can show success. Make it too complicated -- (it's not really - once you're into it - but for this discussion it "could be") and you'll loose people.

I've actually deleted several posts before I submitted them because after I read them - I thought - too much info... too much thinking...

To me - it's kinda like that chart of XOM and CVX --- just buying either one got a good result... 10 years LATER one was better than the other - but who would have known that when they were hitting the buy button? Better to have just bought either one - or a little of both? - and reap the rewards!

In THEORY -- we're trying to show why dividend paying stocks are good investments (not necessarily better than some other particular stock) long term... and that to just get started looking at and understanding your investments, is better than ignoring them. :cheers: