Investing 102

[MPM IV]

It got quiet in here.

I'm hoping this is a buying opportunity as I'm utilizing money I don't intend to need in the near future.

Since my last post I've added Coke (KO) and Kimber Morgan (KMI) bringing me to a total of six positions. I previously had:

Altria Group (MO)
ATT (T)
Southern Company (SO)
Royal Dutch Shell (RDS.B)

Here is my question for you more knowledgeable and experienced investors. I'm coming to the end of my available funds. RDS has dropped significantly since I invested. Would I be better off creating another position in a different sector, or buying down my price per share of RDS?

I appreciate any insight you gentlemen can provide, but please provide the reason you would do one or the other with your answer.

[96z28ss]

Things are too scary for me I'm selling everything tomorrow!!
Using the money to build my underground bunker.

[GregWeld]

Originally Posted by 96z28ss

Things are too scary for me I'm selling everything tomorrow!!
Using the money to build my underground bunker.

Classic buy high and sell low strategy!! LOL


I know you're kidding - or - I certainly hope you're kidding.


This kind of market is EXACTLY WHY I push the DIVIDEND INVESTING theory! You get paid (or the dividend buys more shares) to hold thru bad markets.


I just posted that I was on a 6 day - very rugged - rafting/camping/kayaking trip in the wilderness..... and what happened while I was completely out of touch? The market had some nasty selloff.... but more importantly three companies deposited over $30,000 in my account (dividends). APU paid me $11,960.00 -- ETP paid me $15,525.00 and KMI paid me $7350.00

THAT is why I urge you to build a base of great DIVIDEND paying companies!!! Did I have losses in the face value of my shares? Sure! But I'm not selling so the value this moment means little to nothing to me. They're MAKING ME MONEY every quarter.

[Vortech404]

Hey Greg,
Let's say COP or CVX or whoever cuts thier
Dividend. Do you sell?

PS nice raise from MO.

John

[GregWeld]

Originally Posted by Vortech404

Hey Greg,
Let's say COP or CVX or whoever cuts thier
Dividend. Do you sell?

PS nice raise from MO.

John

Great question John!

You never "want" to be in a stock that cuts it's dividend.... things have gone from bad to worse in that case - as companies never want to cut their dividend. They only do so to stop the hemorrhaging. Having said that.... Chevron (CVX) would most likely cut their dividend or their stock buy back or both well before Conoco Philips (COP). Chevron would / does have a classic double edge sword going in that they're a driller/explorer (UPSTREAM) and a refiner and retailer (DOWNSTREAM). The margins on refining/retailing can't hold up to the losses of the crude decline (cash machine). They also have huge DEBT service. Their return on average assets has taken a substantial decline... and their margin is only 1.65% as of last "report".... compare that to COP who's balance sheet is actually "worse" -- but they're primarily a crude production / oil field operator. The management there has already come out and made public statements about protecting the dividend. That's a good thing!

Selling is about taking GAINS -- or protecting gains.... once you have LOSSES -- then you either wait it out - or buy more to average down. This is why we invoke the 5% rule. No single holding - even if it went to zero - should hurt you too badly. Either way -- I wouldn't worry about HOLDING CVX or COP. That's the other golden rule -- buy GREAT companies - so you're not worried about them for the long haul.

[ironworks]

Originally Posted by GregWeld

Classic buy high and sell low strategy!! LOL


I know you're kidding - or - I certainly hope you're kidding.


This kind of market is EXACTLY WHY I push the DIVIDEND INVESTING theory! You get paid (or the dividend buys more shares) to hold thru bad markets.


I just posted that I was on a 6 day - very rugged - rafting/camping/kayaking trip in the wilderness..... and what happened while I was completely out of touch? The market had some nasty selloff.... but more importantly three companies deposited over $30,000 in my account (dividends). APU paid me $11,960.00 -- ETP paid me $15,525.00 and KMI paid me $7350.00

THAT is why I urge you to build a base of great DIVIDEND paying companies!!! Did I have losses in the face value of my shares? Sure! But I'm not selling so the value this moment means little to nothing to me. They're MAKING ME MONEY every quarter.

Yeah me to. KMI gave me 1/3 of share....... SWEET

[Vegas69]

Shoulda cashed out.

[MPM IV]

I appreciate the responses. For clarification, I invested heavily in the first three positions I opened which were AT&T, Shell, and Southern Co., so I am a bit out of balance. I do have an IRA which is a mutual fund, but this is my first time purchasing individual stocks.

Greg, I hope you enjoyed your rafting trip. I'm in my early forties, so not as young as I'd like to be.

For today I bought a bit of IBM. I'm patient, and will watch for something I consider a bargain, though not sure what that would be. Three years is pretty short term in my mind, it's the + that worries me!

Thanks again for the insight, and have a great weekend.

[GregWeld]

Originally Posted by MPM IV

I appreciate the responses. For clarification, I invested heavily in the first three positions I opened which were AT&T, Shell, and Southern Co., so I am a bit out of balance. I do have an IRA which is a mutual fund, but this is my first time purchasing individual stocks.

Greg, I hope you enjoyed your rafting trip. I'm in my early forties, so not as young as I'd like to be.

For today I bought a bit of IBM. I'm patient, and will watch for something I consider a bargain, though not sure what that would be. Three years is pretty short term in my mind, it's the + that worries me!

Thanks again for the insight, and have a great weekend.

Hey! I turn 62 this month! Going for Social Security.... LOL



Bargains are RELATIVE! Earnings are what counts - and the forward looking statements companies state in their earnings releases. Higher P/E companies need to have great momentum going forward to show the market they can grow into their high P/E's.

Consumer sentiment turns on a dime -- but the "retail" consumer in the stock market isn't what counts. We're just along for the ride. The big "Institutional" investors are who run the markets. They have deeper insights and connections and have a far better feel for what's going on.

Here's what I always try to remember when the shizzle hits the fan.... for every guy that put his shares up for sale --- somebody else is buying them.

What "WE" have to do is to take a back seat - have a good time horizon - which means five years not five minutes - collect our dividends... and try not to get all schizoid over the latest news or market value. Because after doing this for many years (and I retired 24 years ago) the one thing I've learned is - the market takes a different turn just about the time you're convinced of the direction it's going. You could wake up Tuesday and the market is UP 400 points (by the way - that's not a big percentage number!).

The guy that makes all the money - is the guy that's the OWNER of shares when the market turns UP again - and it will... The weak hand holder that sells at the bottom - he's the loser as the ship blows right on past him. It's like driving a race car -- look where you want to BE not where you are.

[Woody]

Originally Posted by MPM IV

It got quiet in here.

I'm hoping this is a buying opportunity as I'm utilizing money I don't intend to need in the near future.

Since my last post I've added Coke (KO) and Kimber Morgan (KMI) bringing me to a total of six positions. I previously had:

Altria Group (MO)
ATT (T)
Southern Company (SO)
Royal Dutch Shell (RDS.B)

Here is my question for you more knowledgeable and experienced investors. I'm coming to the end of my available funds. RDS has dropped significantly since I invested. Would I be better off creating another position in a different sector, or buying down my price per share of RDS?

I appreciate any insight you gentlemen can provide, but please provide the reason you would do one or the other with your answer.

Not an easy one to answer, especially not knowing how much of each position is in your potfolio and if these are your only holdings. I am by no means an expert but here is how i look at it.

I am going to assume the six stocks comprise your total exposure to the stock market and you are fairly evenly weighted in each position? If that is the case, The conservative approach would be to open a new position in a sector that you do not have a position in. The reason is it will make your portfolio more diversified which will lower the liklihood of one position having a big negative impact on the portfolio and lower the overall risk of your portfolio. You also said that you have a position in KMI which is in the energy sector as well. Buying more RDS would really put you heavily weigted in energy.

You mentioned that you are at the end of your available funds. The only way I would consider buying more RDS was if I knew I had more funds to continue adding to the portfolio with which i could diversify with when the next buying opportunity arrives. I Think it is difficult to remain equally weighted at all times and there will be times when you are overweighted in one position, especially when you are starting out. The important thing to keep in mind is to not get too heavily weighted in one position or one sector.