Investing 102

[GregWeld]

Originally Posted by JKnight

It's only one metric, but the P/E is looking pretty good relative to peers...

I ASSume you're referring to Volkswagon (VLKAY).


Investors will look at the larger picture... and decide whether or not the company as a whole - pimples and all - will be able to recover or not. The issue to me would be -- buying too early and suffering for awhile... while collecting 4%... or waiting for the turn up (if) and perhaps missing it altogether. Yesterday the stock was up $1+..... and that was UP 6.5%

I like to look at the percentages rather than the actual dollar amount.

[SSLance]

I put the theories learned here to another test earlier this week. The wife and I were offered the opportunity to "invest" in a local wine club that is opening a new location. We know the owner, have been members in his other wine clubs in the past, and were invited to a dinner where the new opportunity was floated.

Basically the investment was setup as a no recourse loan, 10% interest paid on the loan, and wine club benefits such as purchases at 10% above cost during the life of the loan.

That is all fine and dandy, but being no recourse I looked hard at the chances the loan will actually be repaid and I jumped back to Greg's rule about how I feel about the actual business. We dropped our membership in his other "club" because the personal feel of the establishment had gone away, a couple of the partners had a falling out and just an overall feeling of not being wanted when visiting the establishment.

If I stopped paying my membership fee in his other club because I didn't like the direction it was heading...why would I loan him a large sum of money to start the same thing only different in another spot?

Thanks Greg!!

[Sieg]

Originally Posted by SSLance

...why would I loan him a large sum of money to start the same thing only different in another spot?

Thanks Greg!!

Because HE needs YOUR money!

[GregWeld]

Originally Posted by SSLance

I put the theories learned here to another test earlier this week. The wife and I were offered the opportunity to "invest" in a local wine club that is opening a new location. We know the owner, have been members in his other wine clubs in the past, and were invited to a dinner where the new opportunity was floated.

Basically the investment was setup as a no recourse loan, 10% interest paid on the loan, and wine club benefits such as purchases at 10% above cost during the life of the loan.

That is all fine and dandy, but being no recourse I looked hard at the chances the loan will actually be repaid and I jumped back to Greg's rule about how I feel about the actual business. We dropped our membership in his other "club" because the personal feel of the establishment had gone away, a couple of the partners had a falling out and just an overall feeling of not being wanted when visiting the establishment.

If I stopped paying my membership fee in his other club because I didn't like the direction it was heading...why would I loan him a large sum of money to start the same thing only different in another spot?

Thanks Greg!!

Good call!!


It's so simple. LOL

[GregWeld]

Frankly --- these down days - weeks, months, or even a year or two... they're good things. We all can hate them. But in the longer run - they'll teach you a lot about who you are as an investor. Patience... buying low instead of when the market is high... Holding rather than capitulating the week before they start the next leg up. Collecting dividends, and having them reinvested which will buy more shares at lower prices... AND when the market turns around, which it WILL... you'll be right back to thinking how smart you were!


Kind of like that old sports intro they used to run --- "the thrill of victory and the agony of defeat".


The key is to learn. Watch and see which stocks suffered the most that you were certain were never going down... and what held it's own... and the reason behind diversity. And more importantly what TIME does for you. Pick a couple of names out that you don't currently own - write down where you think they're headed - and why - and then see if you're right about your 'hunch'. Make a note of when you'd buy them.

We've just talked about Volkswagon -- what's your hunch? It's the perfect name right now to see if you would be right or wrong. You don't have to buy it - just learn from it and see if you can pick the nuggets out of the news - and which way and how many times you'd be a "flopper" on it. LOL

[sik68]

Here's my $0.02 on VLKAY, fwiw.

So far, it has 'only' crashed ~50% since the news was released. The timeline on this recovery is likely very long...it certainly won't be a bounce. So the first opportunity cost question: is there another company to invest in, without the baggage, that could outpace VLKAY?

I'm sure the retrofit of the 09-14 cars will be relatively economical, and the fines will be manageable... I would still be a buyer of their stock if those are the only headwinds they face. BUT the worst thing they did for their business was scare finicky customers. I think their near term sales will be in the toilet (fear) and long term sales will suffer (conquest sales by other brands). The PE will get back to normal... but it will be due to the E.

That says, if it goes substantially lower (another 20%?), I'd think I'd be a buyer.

[Vince@Meanstreets]

Originally Posted by sik68

Here's my $0.02 on VLKAY, fwiw.

So far, it has 'only' crashed ~50% since the news was released. The timeline on this recovery is likely very long...it certainly won't be a bounce. So the first opportunity cost question: is there another company to invest in, without the baggage, that could outpace VLKAY?

I'm sure the retrofit of the 09-14 cars will be relatively economical, and the fines will be manageable... I would still be a buyer of their stock if those are the only headwinds they face. BUT the worst thing they did for their business was scare finicky customers. I think their near term sales will be in the toilet (fear) and long term sales will suffer (conquest sales by other brands). The PE will get back to normal... but it will be due to the E.

That says, if it goes substantially lower (another 20%?), I'd think I'd be a buyer.

I think this down turn will be short lived since heads are getting chopped and Porsche will take the leads for some time. It will drop further as soon as the news comes out on how many vehicles were affected and who was involved. Just this morning they reported that cars overseas had "issues" too.

Good buying long term opportunity sure. Typical over reaction, reaction then recovery cycle with a scandal. For me im a chicken chit investor, I avoid the auto industry because there are so many outside influences that can "modify" the prices.

[GregWeld]

Originally Posted by Vince@MSperfab

I think this down turn will be short lived since heads are getting chopped and Porsche will take the leads for some time. It will drop further as soon as the news comes out on how many vehicles were affected and who was involved. Just this morning they reported that cars overseas had "issues" too.

Good buying long term opportunity sure. Typical over reaction, reaction then recovery cycle with a scandal. For me im a chicken chit investor, I avoid the auto industry because there are so many outside influences that can "modify" the prices.

Autos and houses are "CYCLICALS" == they're boom and bust... I've always avoided both of these. The unions strike -- the sales lead changes depending on who has what car (take the Mustang outselling the Camaro with the latest model)... Like Vince -- I see this as a major misstep as far as management goes -- but that should be shaken to the core... and a company like this should be able to recover. Many Mia culpas... will be offered -- fines paid -- lawsuits settled... and two years from now you'll have forgotten all about this little fiasco (hopefully).