Investing 102

[Vegas69]

With the baby boomers hitting retirement age, there has to be some companies that are going to benefit more than others. Maybe velcro shoes? Seriously, drug companies and health care providers have to be high on the list. Who else?

[GregWeld]

Originally Posted by pw2006

Hey Greg- I have a story as well... I sold some of my apple options back in 2002 to help pay for my wedding/honeymoon/house down payment. The shares were trading for a split adjusted ~$7.40, we now trade close to $400. I don't refer to her as an anchor. But man do I wish I had hindsight!

Gwen started at MSFT in 1984 --- in 1986 they went public and her first stock option was 750 shares at $32.50.... at Thanksgiving there was a bunch of fellow 'softies' at dinner and we were laughing at this "gift" -- I said I'd prefer a coupon for a free turkey at Safeway.... Because at the time - MSFT was trading at $30 and this "option" was higher at $32.50....

Man was I dumb!

Okay - just so ya know - that 750 shares - split so many times that it grew into 108,000 with a cost adjustment for the splits @ .11 cents per share.

Did I mention how dumb I was??

[RECOVERY ROOM]

Originally Posted by ErikLS2

I love the idea of starting a kind of investment club where we share ideas and stock picks. Think we could buy enough of a stock to force the price up?

One I thought of but didn't buy was Ford in 2008-09 when it was like at $2. It was pretty clear they weren't headed for bankruptcy or a bail-out and if you look at it's chart it went to like $18 or so in 2 years, 'bout 450% annual return but there's that hindsight again. Where's that opportunity out there now? Greg, you da man, c'mon now

I bought Ford the day they were sitting in congress, They didn't have their hand out. I got in at 1.50. Smartest thing I ever did with money, Sold it at 17. And bought it again when it went down to 10..Holding on to that for a while. I like the idea of sharing Ideas and thoughts with other people on here. Everyone could benefit

[Musclerodz]

Greg.......

Thanks again for the insight. It is crazy to think here I am on a car forum and the first thread I go look for is this one.

[GregWeld]

Originally Posted by Musclerodz

Greg.......

Thanks again for the insight. It is crazy to think here I am on a car forum and the first thread I go look for is this one.

When I lived in NYC -- I had a sign on my desk that read "Try not to let the urgent get in the way of the IMPORTANT".

So dang true... we all have the "I wants" and sometimes we let those jump in front of what's IMPORTANT - and it's IMPORTANT to be able to retire and still live etc for a very long time!

I think that's why this thread has taken on a life of it's own so to speak... everyone kinda knows how important this stuff really is... it's just that nobody talks about it. Glad you like it 'cause it is actually kinda fun!

[Track Junky]

Just wanted to say thanks Greg for providing all of this great information. I've been plugging in and out of this thread. I have never dabbled in this sort of thing and may give it a try.
Forgive me if you have already mentioned but what would be the first steps for someone that is new to this?

[GregWeld]

Originally Posted by Track Junky

Just wanted to say thanks Greg for providing all of this great information. I've been plugging in and out of this thread. I have never dabbled in this sort of thing and may give it a try.
Forgive me if you have already mentioned but what would be the first steps for someone that is new to this?

First step is to open a discount brokerage account -- I use Schwab which is why I mention them - because it's what I know. I have accounts at many different places but this is the one place that has all the research and info etc that is user friendly. You can (as I do) have several DIFFERENT accounts at one brokerage. SO you could have an IRA as one account - and you could have a separate account for just "savings/investing" - and another one in a joint account with your kids for college savings/investing etc. And a secret one for car parts/track fees...

Once you have an account established -- and funded (as little as $500? I'm not really sure what the minimum is) then you can BUY a stock or two stocks. If it's a small amount - say $1000 or under - I'd just buy ONE stock.... and then you can save up and buy another when you have another 500 or 1000. If you have 10,000 to start - then I'd buy 5 stocks @ 2,000 each and so on. If you have 100,000 then I'd buy 15 to 20 stocks/ETF's and you'd have your very own mini mutual fund - but it would be without the "expenses" the funds have and would probably have a better return!

Schwab people will walk you through this process should you require it. You can actually go to one of their offices and use their computers and have someone look over your shoulder should you need it.

If you go back through this thread -- I've given some pretty good names which I've also shown the growth rates (5 year?) and the dividend %'s on. Pick a couple from there - or compare them with similar names. My point all along has been that this is super easy to do and all it really takes is to just get started.

I need everyone on here to get rich like Charley - so I have people to race with in our old age!

EEEEEEEEEEEEEEEHHHHHHHHHHHHHAAAAAAAAAAA

[Woody]

I am very interested in this thread. I mostly lurk on Lateral G and over the last couple of days this is the first thread I have been coming to.

I have been investing in stocks and mutual funds for about 20 years now. I like the idea of working together with other people on investment ideas because many times other people have different viewpoints and it makes you think about things that you might not have considered on your own.

With that being said, I would like to throw out a stock for consideration that I like right now. The stock is Microsoft. I know Greg said Microsoft is dead money right now, but here is why I like it.

I believe it is out of favor and undervalued right now. If you look at a ten year history of revenue growth and earnings growth, it compares very well to any of the high quality stocks that have been mentioned in this thread. For example, the ten year growth rate of net income is 146% for MSFT. As a comparison McDonalds had a 150% increase in net income over the same 10-year period. During the same ten year period, the stock price of MCD has gone up 260%, while MSFT has declined 23%. The PE (Price Earning ratio) is only 9 for MSFT compared to a 15 PE ratio for the market as a whole. MCDs PE is currently 19.

So my thinking is that now is a good time to buy. I have found that chasing the hot stock/mutual fund generally gets you in at the high. I tend to be a contrarian and look for things that may be out of favor but have the potential to come back in favor.

MSFT currently has a 3.08% dividend rate, while MCD has a 2.87% dividend rate. I am mostly comparing MSFT to MCD, but MCD has had one of the strongest runs over the last ten years.

I would like to hear others thoughts about Microsoft as well as any other stock ideas you may have.

[Track Junky]

Thank you Greg. Just to give you an idea of my current and past investment break down, any time I had money I bought property. I started in 2000. By 2006 had 6 properties and buy gut instinct i immediately dumped two of the most recenly bought and luckily did not take a hit on the last two and lost $150k on the still owned previous which is what i used as a down payment so yes....I took a $150k cash hit.

I'm OK on the others as I bought in pre 2003 and they are rentals.

Now I am stagnet, in the construction business in the Sacramento area, and business is slow. My thoughts were.....well I have these properties I could rely on for retirement.....but in the back of my mind I'm not 100% confident as I would like to put 3 kids through college.

I am going to go back and take notes on all you have shared.......and once again, this site is very fortunate to have you......Thank you.

[GregWeld]

Originally Posted by Woody

I am very interested in this thread. I mostly lurk on Lateral G and over the last couple of days this is the first thread I have been coming to.

I have been investing in stocks and mutual funds for about 20 years now. I like the idea of working together with other people on investment ideas because many times other people have different viewpoints and it makes you think about things that you might not have considered on your own.

With that being said, I would like to throw out a stock for consideration that I like right now. The stock is Microsoft. I know Greg said Microsoft is dead money right now, but here is why I like it.

I believe it is out of favor and undervalued right now. If you look at a ten year history of revenue growth and earnings growth, it compares very well to any of the high quality stocks that have been mentioned in this thread. For example, the ten year growth rate of net income is 146% for MSFT. As a comparison McDonalds had a 150% increase in net income over the same 10-year period. During the same ten year period, the stock price of MCD has gone up 260%, while MSFT has declined 23%. The PE (Price Earning ratio) is only 9 for MSFT compared to a 15 PE ratio for the market as a whole. MCDs PE is currently 19.

So my thinking is that now is a good time to buy. I have found that chasing the hot stock/mutual fund generally gets you in at the high. I tend to be a contrarian and look for things that may be out of favor but have the potential to come back in favor.

MSFT currently has a 3.08% dividend rate, while MCD has a 2.87% dividend rate. I am mostly comparing MSFT to MCD, but MCD has had one of the strongest runs over the last ten years.

I would like to hear others thoughts about Microsoft as well as any other stock ideas you may have.

Woody ---

This entire thread is about THEORY of investing -- not really 'stock picks and tips of the day'.... With that said -- the reason it is NOT that kind of discussion and I've tried to stay away from that is because everyone needs to tailor THEIR OWN investments. If a person buys what someone else said to - and they don't know why they bought it - the first time they look at their account and the stock is DOWN -- they're going to want to sell (at a loss).

So -- if you like Microsoft -- and like "contrarian" investing (like salmon swimming up stream) then that's what you should buy. You'll be happy with it.

BUT since this is a beginners class.... the thread is called INVESTING 102... I've been doing just "basics" -- basic names - basic theory... which DOESN'T include "contrarian investing".

Okay --- I write the above -- because I have to write for the MANY eyeballs that read these things.... I write all my posts that way.

Microsoft has all the right "numbers" except one -- CAPITAL GROWTH -- and it has a HISTORY of that. Look at a chart -- the stock PEAKED in 1999 (December of 1999) and has what appears to be a MOUNTAIN... going almost vertical to the peak and then STRAIGHT DOWN on the other side. Microsoft (MSFT) has the largest "float" of any stock in the entire UNIVERSE... which means -- there are more SHARES available (issued) than any other company. PERIOD. So it takes much more BUYING INTEREST to raise the stock price than any other company (that might have one quarter the number of shares for instance). Add to this the Billy Boy (not a fan) DUMPS 4 and 500 million dollars worth a month.... and he has an ENDLESS SUPPLY (he can sell a BILLION DOLLARS WORTH PER YEAR FOR THE NEXT 50 YEARS). His stock is FOUNDERS STOCK -- i.e., it's never been in the market until HE sells it. So that is NEW SUPPLY. That right there knocks the price down. Look at an insider trading report -- you'll see he's in there dumping dumping dumbing month after month year after year.

PERSONALLY -- I want CAPITAL GROWTH.... AND.... the Dividend. So if you want to compare McDonalds with a 260% capital growth -- and a dividend -- against Microsoft (MSFT)... and that's where you want to put your money... I'd say your investing style is "GAMBLER" because you are gambling that you can swim up stream against a known (historical) tide.. and win. I'll bet against you and I'll buy MO - PM - MCD - KMP etc and at the end of the year I'm going to be richer than you are.

I have a broker (also a personal friend) that handles my bond account. His firm (McAdams Wright Ragen, Inc.) always has MSFT on it's "BUY" list.... and I keep telling Fred -- I'll take 100K in APPLE and you put your 100K in MSFT and get back to me at the end of the year. Just compare the two charts -- overlay them so you can see the two charts on the same chart... you can do this in GOOGLE FINANCE -- MSFT is DOWN 10% YTD while AAPL is UP 20% YTD... Same chart - overlay (compare) McDonalds -- UP 30% -- Compare that with Phillip Morse (PM) UP 35%

Again -- I'm doing this as a "lesson" -- please do not take this personally but I'm using your question to show a bit of research and what to look for and how to compare etc.... So I ask ANYONE -- why would you CHOOSE to put money in what has a history of going nowhere vs a history of going somewhere... UP vs DOWN....

Here's how I'd play MSFT -- because I think it's a LOSER... it's a LOSER in the tech wars in mobile which is where "computing" is going (and it's going there FAST).... I might PARK some money there because I would feel it's safe for a few weeks (I used to use GE for this) and if I played the dividend game I could pick up the dividend and then bail. But I would NOT invest in them hoping against hope that someday they might figure it all out and the public is going to come swarming back in a feeding frenzy and push up their stock.

Remember how the market works -- it takes more people that WANT to buy than people that want to SELL to lift a stock price. You tell me when that is going to happen going forward? In the meantime -- I'd prefer to have my money in something that at least historically looks like it's on the right path... which is going UP not sideways or down.