Investing 102

[ErikLS2]

Great post there Greg! Do you ever use the PEG Ratio? I always look at the PEG ratio, it really helps figure out which of these high growers is cheaper than the other ones based on their current P/E Ratio and expected growth rate (which is subjective of course). You just have to watch what growth rate is used. I always compare PEG ratios from the same source when comparing them, i.e. don't use the PEG from Yahoo Finance for NTFLX and compare it to the PEG ratio for FB on Schwab for example. I try to keep any buys below a 2.0 PEG ratio. Here is a good explanation of it:

https://en.wikipedia.org/wiki/PEG_ratio

[GregWeld]

Originally Posted by ErikLS2

Great post there Greg! Do you ever use the PEG Ratio? I always look at the PEG ratio, it really helps figure out which of these high growers is cheaper than the other ones based on their current P/E Ratio and expected growth rate (which is subjective of course). You just have to watch what growth rate is used. I always compare PEG ratios from the same source when comparing them, i.e. don't use the PEG from Yahoo Finance for NTFLX and compare it to the PEG ratio for FB on Schwab for example. I try to keep any buys below a 2.0 PEG ratio. Here is a good explanation of it:

https://en.wikipedia.org/wiki/PEG_ratio

Erik - I know of the PEG... But when I'm buying this crap I use my gut. Take a NetFlix... I bought when everyone I know is USING it not just when the talking heads are talking about it on TV. I bought Shake Shack because my friends in New York City told me about the lines and the food. I'll be in NYC today and will test this theory myself. I bought Apple years ago after seeing the crowds in their stores at the mall. Went home and bought some.

[WSSix]

Another rule or metric you can use to help compare stocks is the Chowder rule. You'll have to search seeking alpha to find the information. It's fairly simple though. I'll look into occasionally just to give me a proper comparison between stocks I own or may be interested in.

I'm sure there are lots of different methods and ways to compare stocks. You don't have to get ridiculous about it. Just pick one or two that are easy and align with your goals or philosophy and go for it.

[GregWeld]

I think I've said this before --- and I think everyone should have and know how to use various "metrics" for helping to make a judgement call. The only thing I would ADD to this is --- don't let metrics over rule your head/gut. When you're buying risky assets... ONLY YOU can live with the result... and if you let metrics talk you into something you really didn't want in the first place... then when it goes south - you'll tend to cut bait -- and kick yourself while you watch "the one" your really wanted to buy - go ballistic.

Growth stocks don't trade well on "metrics" - they trade on momentum... they trade on fear (fear of missing out and fear of being in front of a train)... they trade on hype... they trade up if the talking heads like 'em - and they trade down if the talking heads don't.

Personally --- I like it when people are buying or talking about buying or using the stuff they produce... and sometimes you miss the first legs up because I want to actually witness what's taking place in the real world. I want to see a two block long line out the door (Chipotle and Apple)... I want to see an actual consumer shift (NetFlix). I don't need to be the first guy in and GUESS with my money. GoPro is selling like hot cakes -- has the lions share of that market... buy after the HYPE left... it's done nothing but drip red ink after it's quick rise. Maybe the market is smaller than the P/E can achieve IDK. Tesla -- they're killing it... the car(s) are fantastic.. it trades at a ridiculous P/E... but all my friends seem to want one. To me - that's a good thing (I don't own it). They have a very expensive build out to be a real mass produced manufacturer and I would expect a ton of hiccups.... FaceBook seems to have real lasting traction. I don't use it - so am not buying it - why? Because I won't know when or if it's going to fade into the sunset.... But I think it's a real company and "everyone" is using it. So I miss out... I'll live just fine. I can't own them all and don't want to.

These are all risks -- take them at your own speed.... be sure you want to live with them while they suck.. because usually this stuff drags you down - and then just about the time you're ready to bail and take the loss... they jump 10 points. Or.... they just drip and ooze and cause your stomach to burn. LOL
Sometimes it's just fun to see if you're right. Just don't be upset when the market hands you your ass, it will NOT be on a silver platter. But man do you get bragging rights when you kill it with one or two.

[ErikLS2]

Well said Greg, I like the feeling I get when I can physically see what's happening. I often wonder what would have happened if I just put a little money into each new thing when I noticed a trend developing, i.e. people buying personal computers, EVERYONE getting a cell phone or listening to music that WASN'T on a CD, hell even the company that made those Baby On Board window hangers probably killed it for a while LOL.

Amazon is what's blowing me away lately, I like never buy anything at the store, except groceries and maybe clothes/shoes that I want to try on first. They sell EVERYTHING! I just ordered a bunch of parts for my boat and these flossing things for kids teeth, on the same order, had it in 2 days, free shipping as a Prime member! Sometimes I even get stuff the same day since they put a fulfillment center in here.

[sik68]

Thanks for the feedback fellas, as well as the metrics you use. Maybe I'm not a 'GROWTH' guy; I'm okay with that

[GregWeld]

Originally Posted by ErikLS2

Well said Greg, I like the feeling I get when I can physically see what's happening. I often wonder what would have happened if I just put a little money into each new thing when I noticed a trend developing, i.e. people buying personal computers, EVERYONE getting a cell phone or listening to music that WASN'T on a CD, hell even the company that made those Baby On Board window hangers probably killed it for a while LOL.

Amazon is what's blowing me away lately, I like never buy anything at the store, except groceries and maybe clothes/shoes that I want to try on first. They sell EVERYTHING! I just ordered a bunch of parts for my boat and these flossing things for kids teeth, on the same order, had it in 2 days, free shipping as a Prime member! Sometimes I even get stuff the same day since they put a fulfillment center in here.

I can only wish that I'd have bought into this retail behemoth! Wow -- anyone that's interested should check out their chart (AMZN) - UP 70% year to date - UP 60% for 1 year - UP 280% 5 year - UP 1128% in 10 years...

I just wish it paid a dividend... because for my own personal investing that's a critical piece of the puzzle particularly given their share price.

[MPM IV]

Hey gentlemen, I received my 1st dividend from Shell today, which was nice to see, but I'm a little confused. I bought RDS.B, and when I looked today I now own a few shares of RDS.A. I'm just curious if anyone knows why that is or what effect it might have, if any. Thanks in advance.