Investing 102

[GregWeld]

If you go back a couple years in this thread --- You've heard me REPEATEDLY state something along the lines of "if your grocery store clerk is telling you about all the money they're making" -- or "if you turn on the talking heads - and all they're talking about every day is..." RUN!! Run away from whatever it is they're talking about as fast as you can!

How many remember the ENDLESS ---- GOLD bugs....


Okay pull up a FIVE YEAR chart of GLD -- a gold ETF.... Then add the QQQ (basically the NASDAQ) and the SPY (the DOW)....



https://www.google.com/finance?chdnp...BYn3jAGdhIL4Cg



I'll let you discover why I post this up. Oh -- and did you notice NOBODY mentions gold anymore. DOH!

[GregWeld]

So -- as I always point out in this thread -- I'm trying to give people food for thought... using real life examples - of which - in order to demonstrate what I'm talking about... it helps to use "an" example. In this case we're going to use Chevron (CVX).


Gas and Oil are in the tailspin of too much product - not enough usage. So it's a war on prices. This is a CLASSIC example of when there's too much of something - the price will reflect that. The old "more sellers than buyers". What happens when it's the reverse? Prices go UP. Given the worlds oversupply of crude oil right now - the US is in a battle of supply against the other producing countries. They'll give their's away in an effort to crush our producers. THEY only have one thing to sell (export).... their lives depend on the price of crude. Tough for them.

So more importantly - let's talk about DIVIDENDS. The dividend on CVX is up to 4.8%!! WHY?? Because the price of the stock has dropped some 22% year to date -- and 33% in the last 12 months!! As the price of the shares decline - the dividend PERCENTAGE goes up. This is fantastic IF and AS LONG AS they can remain profitable and continue to pay out the same dividend!!!

We discussed the P/E of some of the high fliers! Some are 181 ish and higher - or in the 40's and 50's!!! What's CVX at....... 9.7

What I'm pointing out here is the RELATIONSHIPS of these numbers. I'm not saying to buy CVX or any other stock... It's just a learning "item". We don't often get a chance to see this kind of phenomenon in such a short time span!

I picked on CVX -- because typically I like infrastructure plays over say - a producer. The producer has to get his product to market. As do other producers - so I like guys that pump it thru pipes to the other guy (the refiner). But when you see a CVX - which is a producer and a refiner go "on sale" - I start to watch. Remember that we don't want to try to catch a falling knife.... time to sit back - put something on your radar - and let it play out. But opportunity usually comes following the old "blood in the streets" scenario! When NOBODY wants to own something --- that's usually a good time to pick away at it. The world will continue to burn up oil and gas.... and as economies around the world stabilize (as ours has) and demand picks up... there CAN BE opportunity.

I'd like to see CVX get down to where the ratio is like 5% dividend or maybe even a little more... 5.5% or so would be OMG.... At that point I'll start picking at it. LOL

To me - it's like the housing market.... the guys that are killing it now - are the guys with the balls to have bought when nobody in their right mind was willing to buy a house! Now those people wished to hell they had bought a dozen of them!! LOL

Think long term! You might get killed for awhile - but if the dividend payout is worth it - it can work out nicely.

REMEMBER -- I'm not saying to buy "X" or "Y" or "Z" ---- I'm saying to be looking for opportunity and then have the balls to take advantage of it.

[glassman]

I don't understand, i need you to draw it on a chalkboard....

haha...you going to sonoma next weekend? (Greg)

[68Cuda]

Originally Posted by GregWeld

I'd like to see CVX get down to where the ratio is like 5% dividend or maybe even a little more... 5.5% or so would be OMG.... At that point I'll start picking at it. LOL

And BP is at 6.6%... just saying.

[GregWeld]

Originally Posted by GregWeld

I'd like to see CVX get down to where the ratio is like 5% dividend or maybe even a little more... 5.5% or so would be OMG.... At that point I'll start picking at it. LOL

Originally Posted by 68Cuda

And BP is at 6.6%... just saying.

I already own BP....

[GregWeld]

As I sit here listening to CNBC, and the talking heads are all discussing which company has blown up due to earnings - and what company they expect to take over some other company.... It makes me think how in the world anyone could keep up with all of this information. I make it my routine. No kids left at home... I'm an early riser... I've been following, and investing, in the market for 30 plus years... So I open up my account (as is the norm) just to see what's up... and here's what I accidentally notice this morning.

Altria (MO) is a base holding for me... I own 10,000 shares. It's not a huge dividend payer but on my cost basis it pays a larger percentage than if you bought it at today's prices. But here's the reason for today's post...

My 10,000 shares are UP $131,030.00 in VALUE. It pays me $20,800.00 on an annual basis. That's not "huge" as far as dividends go... but what I like about it (the stock)... I never go to sleep or wake up fearing what it's going to do. Yet here it is... UP (over time!) $13 a share (my cost basis is $41.63). And it's paid me 20 grand a year on top of that.

I ask you ---- you see anything wrong with that?? LOL

That's the kind of BASE you need to build... 10 great steady eddies that just silently march ahead. Once you have that base - then you can step up and play with GoPro and Twitter and whatever comes along the talking heads are talking about on todays show.

[SSLance]

I've been back in the market about a year and a half steadily following the Dividend Growth strategy. As of today, MO is my biggest gainer, showing up net 39.2 %. Next closest is a Utility...ES at 9.34%.

I use Quicken to track my investments and it adds my dividend reinvestments to my initial cost basis and calculates returns off of the total, so it doesn't give me a true return on investment if you want to look at just the initial investments and total return. Someday I plan on setting up a spreadsheet to do just that.

Meanwhile, I'm sitting back...watching my investments grow even in trying times and my only concerns are if I should add more in and if so, where.

[GregWeld]

It's like getting your car set up -- once it's set up -- you just concentrate on the driving - not what the car is doing (or not doing). LOL


The biggest thing I think I've tried to get people to understand in this whole thread --- the market goes UP and the market goes DOWN.... Get over it! Get some investments that grow over the long haul - pay you dividends - and you'll be set!

Originally Posted by SSLance

I've been back in the market about a year and a half steadily following the Dividend Growth strategy. As of today, MO is my biggest gainer, showing up net 39.2 %. Next closest is a Utility...ES at 9.34%.

I use Quicken to track my investments and it adds my dividend reinvestments to my initial cost basis and calculates returns off of the total, so it doesn't give me a true return on investment if you want to look at just the initial investments and total return. Someday I plan on setting up a spreadsheet to do just that.

Meanwhile, I'm sitting back...watching my investments grow even in trying times and my only concerns are if I should add more in and if so, where.

[68SS2]

Originally Posted by GregWeld

My 10,000 shares are UP $131,030.00 in VALUE. It pays me $20,800.00 on an annual basis. That's not "huge" as far as dividends go... but what I like about it (the stock)... I never go to sleep or wake up fearing what it's going to do. Yet here it is... UP (over time!) $13 a share (my cost basis is $41.63). And it's paid me 20 grand a year on top of that.

I ask you ---- you see anything wrong with that?? LOL

That's the kind of BASE you need to build... 10 great steady eddies that just silently march ahead. Once you have that base - then you can step up and play with GoPro and Twitter and whatever comes along the talking heads are talking about on todays show.

I have a recently switched to focusing on this type of investing over the 401K plan I have been using since I got out of school 10yrs ago, so I appreciate the guidance.

I understand how to calculate my cost basis mathematically, but it just gets messy with auto div reinvestment over a dozen different stocks each month/quarter. I am doing as others have with keeping a running total with averages in excel. How do you keep track of your investments to know your cost basis is $41.63 per share?
Thanks

[Woody]

Originally Posted by 68SS2

I have a recently switched to focusing on this type of investing over the 401K plan I have been using since I got out of school 10yrs ago, so I appreciate the guidance.

I understand how to calculate my cost basis mathematically, but it just gets messy with auto div reinvestment over a dozen different stocks each month/quarter. I am doing as others have with keeping a running total with averages in excel. How do you keep track of your investments to know your cost basis is $41.63 per share?
Thanks

I know you asked Greg, but here is how I do it. I have a number of shares column, a price per share column and a total dollar amount column in a spreadsheet. The number of shares and total dollar amount columns are input manually. The price per share column has a formula which divides the total dollar amount by the number of shares. Every time I get a dividend or make a new purchase, I edit the number of shares and/or total dollar amount columns and the new cost basis per share is calculated.

You could also keep a running total by adding a new row for each new dividend or purchase and use a summation formula in the number of share and total dollar amount columns. Your price per share column would have an averaging formula.