Investing 102

[ironworks]

So I have been looking at some more stocks to pick up to make myself diversified and I struggle to just drive around in my world and know what to pick. Sure I should have picked Chipotle but they don't have a dividend, but there stock really started to sore around the time we started eating there and the line was always 30ft out the front door.

But my question goes along with you last posted, How does a guy find out about the stocks that are good ones that he would never ever know about in his day to day life. Your Alteria (MO) stock I would never know about, the KMI that seems to be a good one. I don't see that stuff and I live in the oil patch since its a pipeline company. I don't think watching all the stock trading shows are really that great.

Currently I find a stock that Think might be growing and I look at it on the long term to see if it constantly grows upward. Then I look at the dividend and make my choice from there. But I'm sure there are way more stocks out there then I will ever know about.

[GregWeld]

This is a great question! And don't think you're alone with this dilemma!


Okay - I know I'll miss something in this response - but you'll get the gist of where we're going with this.

Everyone should make a small list of the SECTORS that make up the US stock market. All you need to do is Google - "List Stock market sectors" to come up with this. Here - this is a link to a list:

http://www.investorguide.com/sector-list.php

From a list like this -- you should pick some of INTEREST TO YOU... not the ones you know absolutely nothing about... start with some that are somewhat familiar to you. Try to get to 7 or 8


From there - you can start to search for the biggest well known names from each SECTOR.... So let's just do a quickie here... let's pick "banking" (everyone does some kind of banking). First thing I'd think about is where do I bank - or what's the biggest bank name around me? West coasters might come up with Bank of America or Wells Fargo... Midwest will come up with some different big regional bank names - east coast will be familiar with a different set of names etc.

Go to Google Finance --- look up the name or two that you came up with... Let's say - since the poster is from California - he picks Wells Fargo. Start typing Wells Fargo in the box where it says SEARCH FINANCE -- when you see the name and symbol come up - choose it and hit enter...

Now -- this is going to bring up a selectable chart --- you can choose 1 day or up to 10 years or ALL.... I always start with YTD -- then I look at the 3 year or 5 year - and 10 year. I just want to see the general direction of the line. If it's flat - or looks like camel humps etc -- I think maybe I'll keep looking...

More importantly here -- if you scroll down just a bit -- there's a list (short) of companies they (Google in this case) feel are "RELATED". If you look at the list of related companies - there may or may not be other companies shown there that you know. I start to look at the ones I know... look at their chart - check out whether or not they pay a dividend - is the dividend increasing (you can see the dividend payouts clearly using the 5 year view on the chart... and you can also see some interesting information at the top of the page to the right of the daily closing price.... you can see the price range - the div/yield - the beta - the P/E etc. EACH TIME you put in a different company name in the search field -- go down and write down some of the "RELATED" companies they show... all you need is two or three to start the process.

What this PROCESS is going to do for you is to lead you to names you're familiar with... and you'll start to look them up and you'll start to get a feel for which ones are "better" than others. Maybe you find CHIPOTLE MEXICAN GRILL -- but realize that at $600 a share - and no dividend -- that's not something you want to put your money into -- but maybe during your search for them - you see JACK IN THE BOX.... and during your peak at JACK -- the related companies shown there leads you to somewhere else.

Here's what I do to shorten the process just a bit. There is a column to the right of the names shown in the RELATED list -- it's titled d/m/y. And there's a squiggly line corresponding to each name. d = day. m = month. y = year. I click on the "y" for year -- and that gives me a real quick look at the trend the line is heading. I skip the ones who's lines are headed down.... LOL

Try this whole scenario searching for ALTRIA (MO) -- you can either type in Altria -- or since we've given you the trading symbol - MO - you can just type in MO...

So to sum it up --- make a list of SECTORS you'd like to research -- then find out what kinds of companies make up that sector... and search one you know - then check out others in the same "related" field and compare them. Maybe you decide you don't want to be in that sector at all ---- but what the sectors do is to help you diversify and broaden your research. You don't want to have a portfolio of all retailers or all industrials just because that's a sector you're most familiar with.

Think about this like if you wanted to know something about football --- you might just Google FOOTBALL -- from there you might see there are leagues - and in the leagues are teams etc. Then you could check out their records etc.

If you have up to 100K to invest - you'd only need 20 names.... that would get you 5% of your investable $$ per name -- and that's what we TRY to achieve. It's harder to do that when you have smaller amounts - but the GOAL is to get to where you have around 5% per investment. Maybe that starts out at 100% in one name - and then the next time you have some dough you buy name #2 -- then you have 50% in each name - next time you add another name - now you're at 33% and so on. Diversity will get you 10 names in 10 sectors -- from there you can circle back and add to or expand.

DON'T FORGET TO CHECK EACH NAMES TOTAL RETURN!! You can do this on Schwab easily.... or perhaps the other discount brokers as well.

Another really good site for checking stuff out is MORNINGSTAR.COM -- go to the main site and then look for "STOCKS" -- click that -- then on the left you can scroll down to find "SECTORS" -- click that and it starts giving you charts of performance by sector. Choose a sector -- and it comes up with a list of names in that sector --- now --- click on the "5 YEAR" and it will sort by the best performance over that period....

I choose FINANCIALS -- then went to the chart and clicked 5 year and MASTERCARD came up as the top performer over the 5 year period... below that was VISA etc then BLACKSTONE GROUP (one I own).... click on the name and it takes you to the info for that particular company -- and then there's all manor of info to click on! Oh hell yeah you'll get lost for sure!! LOL

Originally Posted by ironworks

So I have been looking at some more stocks to pick up to make myself diversified and I struggle to just drive around in my world and know what to pick. Sure I should have picked Chipotle but they don't have a dividend, but there stock really started to sore around the time we started eating there and the line was always 30ft out the front door.

But my question goes along with you last posted, How does a guy find out about the stocks that are good ones that he would never ever know about in his day to day life. Your Alteria (MO) stock I would never know about, the KMI that seems to be a good one. I don't see that stuff and I live in the oil patch since its a pipeline company. I don't think watching all the stock trading shows are really that great.

Currently I find a stock that Think might be growing and I look at it on the long term to see if it constantly grows upward. Then I look at the dividend and make my choice from there. But I'm sure there are way more stocks out there then I will ever know about.

[Woody]

Originally Posted by ironworks

So I have been looking at some more stocks to pick up to make myself diversified and I struggle to just drive around in my world and know what to pick. Sure I should have picked Chipotle but they don't have a dividend, but there stock really started to sore around the time we started eating there and the line was always 30ft out the front door.

But my question goes along with you last posted, How does a guy find out about the stocks that are good ones that he would never ever know about in his day to day life. Your Alteria (MO) stock I would never know about, the KMI that seems to be a good one. I don't see that stuff and I live in the oil patch since its a pipeline company. I don't think watching all the stock trading shows are really that great.

Currently I find a stock that Think might be growing and I look at it on the long term to see if it constantly grows upward. Then I look at the dividend and make my choice from there. But I'm sure there are way more stocks out there then I will ever know about.

I find a good way to learn about new stock investing ideas is through reading seeking alpha: http://seekingalpha.com/

On the home page is a list of the top articles. Just by browsing through some of the articles you will get some new ideas for stocks that you may want to research further.

This website: http://dripinvesting.org/tools/tools.asp has a pretty good list of stocks in the "Dividend Champions" spreadsheet that may give you some additional investing ideas.

The above sites are just starting points to give you ideas. Make sure you do your own research.

[gearheads78]

Originally Posted by Woody

I find a good way to learn about new stock investing ideas is through reading seeking alpha: http://seekingalpha.com/

On the home page is a list of the top articles. Just by browsing through some of the articles you will get some new ideas for stocks that you may want to research further.

This website: http://dripinvesting.org/tools/tools.asp has a pretty good list of stocks in the "Dividend Champions" spreadsheet that may give you some additional investing ideas.

The above sites are just starting points to give you ideas. Make sure you do your own research.

This is exactly what I was going to say. I would look up the user named Chower and read everything he has ever writting there. Make sure to read all the comments at the end of each article and branch off to other posters there. There a lot of smart people that never do an article or a blog but they comment from time to time with great insite. I started with this thread and ended up on seeking alpha and find myself there more of the last year than car sites. I learn something new every time I log in there.

I just wish I started this at 21 instead of 41

[WSSix]

You guys can sign up for email notifications on new topics within the category or about specific stocks from Seeking Alpha. I get them everyday and read through them usually as well. I completely agree the comments after an article are great as well, typically. SA could easily be a forum just like this with the way the comments section usually goes.

[GregWeld]

This is a "behavioral" warning!



I read SeekingAlpha every day as well as many other newsletters and articles etc. Some of the worst investments I've ever made were from reading about the next great blowout investment - get all excited about it and pushed the buy button.

Be very wary of that "type" of investing in yourselves. Once a person finally "discovers" investing - has some success - and becomes enthusiastic... they are looking for ways to stretch their wings. They have a fresh pile of cash and are just itching to put this work.

By NOT having something on the horizon - where they've "pre-selected" the name and then have some time to watch it - read about it - "live with it" a little while leads to the frantic search to get their money to work. All it takes is one well written (even well meaning!) article - and they jump into it (whatever it is).

Don't be a Rob Lowe investor. Make your shopping list... double back on that list and watch and read everything that comes your way on all your names - feel free to modify the list. Substitute or add a name. Stay abreast of the "market" in general... and make certain you have your BASE built on a solid foundation. After you have 20 names... and by the time you've gotten to that point -- then you can buy some outliers... you can jump on an IPO or two... you can broaden your risk. You'll have experienced ups and downs - success and failures - you'll no longer look to the grocery store clerk for investing ideas - you'll be comfortable with your own choices - and why you chose them.

I'll make you this guarantee:

You WILL lose the most money when buying a company that you know nothing about - haven't known about before last week... and didn't "follow" for awhile. When that "investment" turns south -- and doubt creeps in -- and the base in your brain doesn't really get why you bought it in the first place... you'll hit the sell button and lock in a loss.

Why do I say this? Because after doing this for 30 years - I've been there and done that.

I'm thrilled you guys are into reading - and are poking around - and are discussing all this stuff. That is how you learn. I'm not talking about not readying everything you can get your hands on. I'm talking about tempering the new info and not jumping in too quickly. Think about how many pieces of clothing you've bought because it's "on sale" - brought it home - and then never worn it... did you buy it because it's something you've really wanted for a long time - or was it the shiny new thing and it was on sale - but it's blue and you never wear blue...

[GregWeld]

We've discussed IPO's about a million times -- but now that we're coming up to the end of the year - we can start to get some YEAR TO DATE data to see how some of these have done.

Again -- this is not a BUY THIS and DON'T BUY THAT. I don't really want to get this thread into that sort of discussion because it leads to a lack of research and a lack of knowledge about why YOU bought what you did. There's a TON of websites that have that as their goal.

There's been a couple of names discussed here over the last two years. FaceBook (FB) - GoPro (GPRO) - Twitter (TWTR) are three of the big ones. I've personally advised jumping into any of these - and particularly on the IPO... I've said instead to wait and see how they go - and if you still want in - then okay. Keeping in mind this is 102 investing so ASSuming that most don't have a stock pile large enough that they can afford to loose that much. If you're starting out and have 10 grand invested and you lose 1 grand -- that's 10%!! Trust me - it's easy enough to do that just with market swings!


Facebook is UP YTD 47% and since inception you'd have doubled your money. It's been a wild ride with big swings in share price... and this is what I've warned about. CAN YOU STOMACH these $10 swings... if you can't you panic and sell. Hindsight is great - but doesn't help you sleep well at the time.

GoPro is the big winner - being UP 117% Year To Date! But once again -- here's the killer part that EXPERIENCE tells me this is a tough investment! It's seen a high of almost $94 and a low of $53. It now trades at $68 giving you a double IF -- IF you'd been able to buy at the IPO price. Still there was ample time to get in for a month or two after the IPO and you'd still have huge gains. But ask yourself if you'd have freaked out having seen $94 and watched it glide down to $53. Would you have sold out? Would you have really seen this as a long term investment or would you have started to really question this holding? They call that being "a weak hand" on wall street. Weak hand holders lose their asses.

Twitter is DOWN 40% YTD.... and this was the one that everyone was certain was going to be the biggest IPO ever - the next "Microsoft" millionaire maker. I heard this morning that it loses 50 cents for every dollar of revenue. OUCH.

I'll toss another one in.

Alibaba(BABA)is up a whopping 13%.... that's 6 points BEHIND the NASDAQ. In other words - you could have just bought the QQQ (NASDAQ ETF) and made more money.

Kimberly Clarke (KMB) - the toilet paper maker is up more @ 14%... LOL

My point is not that you could have gotten in these and made a gain - my point is more that it isn't going to be easy. Pick the right one and you're golden - pick the wrong one and you suck. Up 100% is fun - DOWN 40% sucks. That's why I don't "INVEST" in IPO's and the more they're talked about the farther I want to be away from them.

[XLexusTech]

Well then you may want you quickly learn something about Twitter....

Speaking as a guy who bought FB during IPO and more below 20 and am sitting pretty ... With FB only trailing JNJ as my best 2014 gainer


Correction my Apple is up 67% ... Because buying low is where all the money is :-)
Just saying.

Ok now adding something meaningful ... Their is more to learning about a company then how it's finances look... You have to learn about the market segment and company vision ... In there might be we're you find companies with upside... Take FB as an example... Many people focused on the perceived lack of revenue strategies ... Opposed to market dominance and technical vision ... Which is why I bought held and bought more close to the all time low $$$$$$

[Flash68]

Originally Posted by GregWeld

Don't be a Rob Lowe investor.

[GregWeld]

I read an article this morning which contained this little snippet as a paragraph...
I talk about this often. Investors damage themselves - the market just moves up and down like waves on the ocean... It's when the investor doesn't understand what they own or have invested in names where their expectations are on the gambling side vs investing - that's when the panic sets in...

I've also taught myself to look at my finances as a WHOLE. I might be down in one or two or three investments - but if as a total I'm up - and I know for a fact that I'll never have every single investment in the green - I'm okay with it.




Any market segment can have some sort of event that even if unjustified fundamentally can still do permanent portfolio damage to the investor whose panic threshold is breached. This is why diversification and emotional control are both so important to long term investing success.