Investing 102

[GregWeld]

I know there was some talk about "3D" printing -- and it's investable "growth" in that industry.... Can't remember who was in or out of it... and that's not even a point here. But here is why I can't afford to gamble on this kind of stuff...


The actual company "3D" (DDD) is down 51% year to date.... and now reported "slower growth".....


Remember the discussion about stocks being "priced for perfection" and what happens if they're not perfect plus some? You get killed... The stock was down almost 10% just today.

I can't afford to invest 100K in a name and get cut 50% or 10% in a single day. So I stay away from them. Down 50% YTD kills 10 other names in your account that are all "okay"!


I AM NOT SAYING to not invest in this name - or the industry - I'm just using this as an example of what happens when you buy stocks -- pick a name and pick an industry -- that is in that "priced for perfection" / "momentum" / "hype" stage.

Hell yeah you can hit a home run.... you can also loose a lot of money very quickly. So if you play in this stuff... do so with a very small percentage of your investable assets. Odds are against you. And here's why..... remember me telling you that when the clerk at the grocery store starts talking about all the money they've made lately in "X"?? And that's when you run for the hills!!
When I hear the talking heads all touting "3D" printing (not this company in particular - just the industry in general) and the big stock gains.... that's when it's too late to get in.

You have to be EARLY to this kind of stuff -- not after it's big news. If you bought at $8 and it runs to $80.... you're a winner.... but if it runs to $70 and you jump in - watch it go to $80 and then plummet to $45.... that SUCKS!


I'm not smart enough to know what's ahead -- I can't spend enough time to try to be "out front" of this stuff... So I shy away from it (or similar). By the time I'm aware of the phenomena - it's too late to be investable. It's why I invest in British Petroleum and then just go play in the shed....

[toy71camaro]

Once again Greg, thanks for the extremely helpful guidance you've given all of us here.

Thanks also on the thoughts on what I posted previously about AAPL. I felt that way because I just didnt see/feel the strength of the company at the personal/local level. I dont see people lining up in droves (maybe they will this next time), and I personally jumped ship last year and couldnt be happy. But, its not always personal. lol. Good points from the "other side" to keep my mind in the game, and not just a simple feeling. To whole at the "whole thing".


And that leads me to my next topic to get some guidance on. Which that is trying to decide what stock to "add more" to, since I'm fairly diversified at the moment, and reaching my next purchase limit (for the record, I set aside $ monthly for my ROTH IRA, then when that amount reaches $1k, I then buy something).

So, here's where I stand. I've got the money ready. Do I wait for the sell in May and go away before throwing it in? or do it now. And then, the big question, What to put it in? I've got a few "runners" and a few "trotters".

For teaching purposes, I'll put some numbers along with these to help us/me explain, and see what/how I should be "thinking" about this process. I'm going to "think out loud" here, and see what happens.. lol

My thoughts are around these stocks:

MO: 4.79% div. I'm up 62% total return.
KMB: 3% div. Up 59% total return.
T: 5.19% div. Up 24% total return.

I'm sure all 3 of those are "fine" choices. But, since i'd like to get my overall Div % higher, I'm leaning towards MO and T. MO has a 8% div growth rate avg the past 5 years. T has a 2.4%. MO 5yr Total Return is 210%. T is 80%.

Looking at those numbers.. It seems MO is the obvious choice based on Div Growth and overall growth. Seems MO will surpass T quickly on the Div side. But am I looking at the right numbers? I think the forward look on both stock have great potential.

Edit: Oh, and each of these started as a $1k investment and have grown to what they are now. I'm about to add another $1k to it, almost doubling my position in it.

[GregWeld]

Geez Albert! Posts like this are what keeps me "putting myself out there" and sharing what normally should be personal info. I absolutely love seeing people being successful at this! Good for you!

Two thoughts:


#1 --- A guy MUST remember these big gains (%) when the market is going SOUTH! So --- you have a 62% "gain" --- and the market turns to poop. Then you hear the market is down 20% -- and that's when people SELL. Idiots -- that's when you buy more!! Because it will turn up -- and will then go beyond your 60%. Sell -- and you start buying again when the market is already up 40%. Because it's human nature to sell when down and buy once they figure it's safe to get back in... but we never get that quite right.



#2 --- I like your thinking about adding to the larger dividend payer to bring your average dividend % up. That "cash flow" helps to keep you in the game when the market is crap. It also is a big part of the overall TOTAL RETURN. The larger the dividend - the more support the stock has when interest rates start to rise.


#3 --- There is the unwritten "rule" that an investment shouldn't be larger than 5% of your total investable funds... but frankly - that's nothing but a guide to keep people from piling in to some investment -- that then breaks both their legs. Only let this be a guiding principal but it's not hard and fast. When you're in to names like MO - KMB - COKE etc.... these aren't "risky" assets. These are great companies with long histories of being rock solid. So if you end up with one or two of them at 10% --- so what...

Look at Warren Buffett with most all of his personal net worth in Berkshire... or Bill Gates with most of his in Microsoft... or Howard Shultz with his piled into Starbucks. Hasn't seemed to hurt them much to break that rule. LOL

Originally Posted by toy71camaro

Once again Greg, thanks for the extremely helpful guidance you've given all of us here.

Thanks also on the thoughts on what I posted previously about AAPL. I felt that way because I just didnt see/feel the strength of the company at the personal/local level. I dont see people lining up in droves (maybe they will this next time), and I personally jumped ship last year and couldnt be happy. But, its not always personal. lol. Good points from the "other side" to keep my mind in the game, and not just a simple feeling. To whole at the "whole thing".


And that leads me to my next topic to get some guidance on. Which that is trying to decide what stock to "add more" to, since I'm fairly diversified at the moment, and reaching my next purchase limit (for the record, I set aside $ monthly for my ROTH IRA, then when that amount reaches $1k, I then buy something).

So, here's where I stand. I've got the money ready. Do I wait for the sell in May and go away before throwing it in? or do it now. And then, the big question, What to put it in? I've got a few "runners" and a few "trotters".

For teaching purposes, I'll put some numbers along with these to help us/me explain, and see what/how I should be "thinking" about this process. I'm going to "think out loud" here, and see what happens.. lol

My thoughts are around these stocks:

MO: 4.79% div. I'm up 62% total return.
KMB: 3% div. Up 59% total return.
T: 5.19% div. Up 24% total return.

I'm sure all 3 of those are "fine" choices. But, since i'd like to get my overall Div % higher, I'm leaning towards MO and T. MO has a 8% div growth rate avg the past 5 years. T has a 2.4%. MO 5yr Total Return is 210%. T is 80%.

Looking at those numbers.. It seems MO is the obvious choice based on Div Growth and overall growth. Seems MO will surpass T quickly on the Div side. But am I looking at the right numbers? I think the forward look on both stock have great potential.

[toy71camaro]

Total Return info :

5yr:
T: 80%
MO: 210%
KMB: 168%

3yr:
T: 30%
MO: 76%
KMB: 90%


1yr:
T: -3.8%
MO: 14.6%
KMB: 9.1%


As for the other questions. Adding the $ to either of these positions doesn't put me over the 5% rule for my entire investment amounts. So I'll still fall under that general rule of thumb.

And yes, those % gains/returns I mentioned above are merely paper gains at this point. They'll just help keep me in the green (or closer to it) once the market decides to turn around for a bit. I'm not so concerned about that. I don't have any plans of selling any of them unless something in their business model changes. MO is starting to jump into the e-cig biz, so thats something they got looking forward for them. T announced jumping into the WiFi service on Air Travel arena too, but I dont think that will be as big of a bottom line revenue enhancement like e-cigs. But I havent personally seen the details of the WiFi Air stuff either.

[GregWeld]

Albert --- I like the way you're informed about what YOUR companies (and once you buy stock you ARE an owner!) are doing! Good for you!

Frankly --- I'm glad that everyone is having fun doing this stuff. It is fun - it might not seem like it's all that exciting -- but it can be! And it really doesn't take all that much time to keep track of what the companies you own are doing. That's why I say there's not really a need to have more than 20 -- and that's only if you have big bucks in total. You can track 10 or 15 companies in just a few minutes time. And with BIG best of breed stuff -- you don't need to look every 15 seconds to see if they've hiccuped!

Back in the day when I was trading -- I had to stop and take a breath... you're on pins and needles every second worrying about their performance and what the news is and whether or not it was good or bad and how to trade that info. Funny -- I make more money now doing way less. That has to be a win win right?

[sik68]

Originally Posted by GregWeld

Back in the day when I was trading -- I had to stop and take a breath... you're on pins and needles every second worrying about their performance and what the news is and whether or not it was good or bad and how to trade that info. Funny -- I make more money now doing way less. That has to be a win win right?

Just for fun, I watched the 3-Part BBC series "Million Dollar Traders" on youtube. They take a group of average Joe's and give them trading desks. THEY SUCK at it...they stare at the Bloomberg terminals and drive themselves nuts. By the end, whole group looks like hell. It's definitely a "don't be a trader" reminder. Good entertainment though!

[GregWeld]

Be like Warren Buffett......



"Overall, Berkshire and its long-term shareholders benefit from a sinking stock market much as a regular purchaser of food benefits from declining food prices. So when the market plummets - as it will from time to time - neither panic nor mourn. It's good news for Berkshire."



And this is just absolutely AMAZING.... Berkshire owns 9% of Coke (KO) which is 400 MILLION SHARES.... do the math.... at .31 cents per share dividend they collect...............


ONE HUNDRED AND TWENTY FOUR MILLION DOLLARS PER QUARTER in dividend.... that's half a billion per year in dividends just from Coke!