I wish I didn't have to start a post with these kinds of statements - but here it goes again. I'm only using this stock as an EXAMPLE. I'm not saying anyone should buy / sell / or hold it. It's just a current example for Investing 102.
FUNDAMENTAL CHANGES in a company - or bad news about a company - affects it's SHARE PRICE. You must pay attention to this kind of stuff -- and if possible - try to be "EARLY" in your decision making process. You don't want to be the last guy stampeding to the door when someone yells FIRE...
McDonalds (MCD)
HAS BEEN a fantastic money maker for investors for many years. It's had steady growth - it pays a nice dividend - it's a name that everyone loved and trusted. In other words - it was a stellar investment you could count on. History can help GUIDE us in making investing decisions. What else do we have to go on? Your gut feelings - your basic knowledge - and a little research for historical facts and figures... there really isn't anything else. We certainly don't have crystal balls.... or do we??
Hmmmmmmmm......
You've read me preaching about buying companies you understand - the ones that perhaps make products you use... or where you buy gas - or lumber - or tires... whatever. Remember - this is BASIC INVESTING.... so if you're a beginner with "X" amount of dollars to invest. Might as well start out with a name or couple of names you know. McDonalds fits this bill perfectly. That's a good way to begin - or even add to your portfolio. BUT this is only the beginning - it does not let you off the hook for being DILIGENT about your money. IF you're not diligent about your investments... who do you think is going to be? Me? Hell no! Not my job to write daily about what I think <even though I do sometimes>. It's YOUR JOB to pay attention. So with that in mind here's why I write today.
A few months back - maybe even a year or so ago -- I wrote that I was considering selling my McDonalds stake. I don't eat there any more - and when I did / do - it was very disappointing. The food was cold - or not prepared well... the stores seemed to be dirtier than they used to be... Many times I could not understand the employee taking my order (I F'n HATE THAT - this is AMERICA where we speak ENGLISH).... I cut them some slack because historically this was a good company and we had "history" together and it was a base holding of mine. However - I tend to run around the country a bit... and it didn't seem to matter where I was - the stores had the very same slow service - dirty floors or tables - poor food quality. THIS IS A FUNDAMENTAL CHANGE... and I needed to listen to what my guts were telling me. CUT AND RUN. I wrote here that I was selling my stake. I'd had enough --- and more importantly maybe I WAS LOOKING INTO THE CRYSTAL BALL. My brain seems to function just fine (relatively)... and if I'm not a happy customer - perhaps other customers are feeling the same way. Eventually this will affect the sales - which affects the share price!! DOH!! Not rocket science.
Sure enough -- we begin to get reports of same store sales declines... This info only serves to reinforce my crystal ball prediction. That doesn't make me smart - that just tells me what I thought might happen - is happening.
If you always go to Lowe's (LOW) and you suddenly think - WTF this store has turned to crap I can't find what I want - and you get in your car and drive to Home Depot (HD) and you're suddenly happy.... and you own LOW... maybe you better switch it up. Maybe it's your cellphone provider... Verizon (VZ) vs AT&T (T). There's a zillion examples I could drag out here.... Are you an Apple (AAPL) fanboi? Suddenly you find yourself buying a Microsoft (MSFT) laptop instead and loving it. Better pay attention to that if you own APPL shares.
So today I wake up to find this article.... which prompted this post. Now news organizations are writing about "my" feelings. That can't be good.
http://www.usatoday.com/story/money/...part/15908697/
THE ONLY POINT HERE IS THAT YOU SHOULD BE A PRETTY DECENT JUDGE FOR WHAT'S GOING ON.... and this works particularly well if you're buying companies you know and understand and use. If you used to shop on eBay daily and you find you haven't shopped their in months -- stop and listen to that!! It's telling you something you should be aware of - particularly if you own the shares!! USE THIS TO YOUR ADVANTAGE don't toss this valuable info
aside. Use your guts and your brains to help you! We're not always right - but sometimes we can sorta be right - and sometimes we're dead wrong - but it's the only thing we have going for us. In investing - we only need to be right a little more than half the time.
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Okay then -- that brings up another opportunity. Buying the turnaround. This really isn't INVESTING 102... but I'm adding the info anyway.
Let's say you were so brilliant that you sold your McDonalds (MCD) - I have to chuckle at myself here... and you've been out for awhile. Now let's begin to continue to pay attention to the share prices and the news. There may be a buying opportunity when they get low enough and the management starts to right the ship!! Then you'd want to be "early" and try to dribble back in to the shares as they begin to find their footing again. Nobody knows when a company is going to teeter --- or if they can save it --- how long that takes -- what that looks like.... but it's my job to manage my money (employees) and I've got to be constantly on the lookout for opportunity. Sometimes I get it wrong.... and that's why I don't go whole hog into anything. I SCALE IN or even scale out if you're unsure. I've usually lost the most money when I was 100% positive I was so right I couldn't possibly be wrong.... <Buzzer>