Investing 102

[GregWeld]

Originally Posted by CRCRFT78

Ok because I believe this thread has provided a lot of good information I am willing to put myself out there and hear what some of you have to say. At this point in time this is what I have in my Rollover IRA (Fidelity):

Stocks
Apple (AAPL) P/E-14.75 Div/Yield-Not listed 10YR-+3788%
Caterpillar (CAT) P/E-14.03 Div/Yield-0.46/2.00 10YR-+256.89%
Disney (DIS) P/E-14.94 Div/Yield-0.60/1.60 10YR-+81.87%
Harley (HOG) P/E-20.28 Div/Yield-0.12/1.29 10YR--28.24%
Nike (NKE) P/E-20.94 Div/Yield-0.36/1.47 10YR-+248.03%

Mutual Funds
Fidelity Freedom Fund 2045 (FFFGX) 10YR--8.63%
Spartan Total Market Index Investor Class (FSTMX) 10YR-+23.73%
Vanguard Total International Stock Index Fund (VGTSX) 10YR-42.13%

The mutual funds I basically picked because of a book I was reading at the time. The stocks I picked because of popularity and brand name at the time. Again, all of this was done when I had absolutely zero knowledge about investing. I'm not happy with HOG and DIS performance and have begun rethinking holding onto those. The mutual funds are also something I'm contemplating selling off to buy into some of the stocks mentioned throughout this thread. I believe I have a high risk tolerance and can withstand the ups and downs of the market. And now that I've got a better understanding I'm wondering if I should hang onto what I have or switch it up. What do you all think?

VGTSX --- Sadly this has a horrible 5 year track record.... and hasn't even had a good track record since the lows of the US stock market (this fund invests in FOREIGN stocks). So it give you DIVERSITY but happens to be a not so hot fund. As you already know. If it was in my portfolio I'd sell it and move on and try to catch up with something (almost anything ) else.

FFFGX -- Again - sadly you already know the story here.... a 3rd stringer... and I personally have never understood a fund that invests in other funds. WTF kind of an investment is that. The fund manager buys other mutual funds that are run by the very same company that he works for. Each Mutual Fund has expenses - and this fund has it's own expenses - so everyone is making out - except you! The proof is in the pudding so to speak.

DIS -- Has a good chart - just increased it's cash dividend - and it's a name you know and isn't' "going anywhere" as in - it's here to stay. It gives you diversity. Steady. Pays a smallish dividend. Nothing wrong with it IHMO


HOG -- IMHO -- this "was" a good stock -- but is a trendy/fad stock. They only do one thing - Harleys.... that "fad" is just that. And the dividend is showing the result --- going DOWN not up. Dividends are directly related to EARNINGS and if you're not earning - you're not paying out. The guys I know that all rushed out to buy Harleys - have all sold 'em - they're 10 years older now than they were when they bought them for the "cool factor". The chart hasn't really recovered from the lows of 2008.

APPL -- I own this stock - and use it to park cash in. There is "RUMOR" (and that's all it is) that they may pay a special dividend due to all the cash on hand. Microsoft did that - in an effort to lift the stock... it failed. Apple is a growth story - but there is HUGE downside risk in this name. They fail to make a quarter - or they fail to have a great new product launch and you get taken to the woodshed before you can hit the sell button. At these prices ($400 a share) you could own a nice steady eddy that pays a nice dividend and have 10 times the amount of shares. So unless you have big money - I don't think this is a very good name for "modest money" accounts. It's priced for perfection (and so far has been perfect) and everyone is LOOKING FOR IT TO FAIL/HICCUP.... They're just holding their collective breaths. Do I think it's going to? I don't know - no crystal ball - I LOVE their products... I own the stock (1250 shares of it!) but I can afford the risk and I watch the market and am nimble at trading.... so I'm on the fence with this name.

CAT -- A good long term play - pays a smallish dividend.... but gives you good international exposure - it's an industrial...and I'd sleep well at night with this holding. It's dividend has increased over time - and it split back in 2005.


NKE -- What could anyone say bad about Nike. Great chart - increasing dividend - great products. Gives you "retail" for diversity.


FSTMX -- So here's why I'm not a lover of Mutual funds -- this fund is made up of great names - biggest holding APPLE (you already own apple!) and top of the line US stocks. BUT -- BIG BUTT -- you're not getting the dividends from those stocks! So you're growth is stuck in the mud and you're not getting the cash either. If you just bought what's in their top 10 holdings - and you got the dividend every quarter - you'd be better off. Having said that - there's nothing particularly wrong with it - but you could duplicate this fund on your own so why suffer their expense ratio? Just look at their top ten holdings - and go buy 'em - heck - you could skip every other name and still probably do better than they have?

[GregWeld]

I couldn't help think about the "big news" today from SEARS (DOWN 27% today).... that they're going to close a bunch of stores and that business sucks.... well DOH!

Here's the way I invest... it's the old "Jeff Lynch" school of investing (he ran his mutual fund - Magellan - this way).... He bought stocks of companies that he understood - and where he shopped etc.

SO ask yourself.... when was the last time you went to SEARS to buy anything? Tools? A refrigerator? A flat screen tv?

I can't remember the last time I was in one.... so it doesn't surprise me that they're not doing well. I'm an "every man" guy. Blue jeans and t shirts... and I shop at Home Depot - Lowes - Best Buy - and a real appliance store when I need something. SEARS never enters my mind.... so I sure as heck would not invest in it.

I'm just saying - that when you look around "your world" - where do you go - what do you eat - what gas do you buy - etc. Are the places clean and well kept? Are they busy? Do you get good service? Are you happy with the products and choices? If so - look up their chart and see how they're doing! Look up the competition and where you DO NOT shop - or don't like - or the places look crappy and see what their chart looks like.

It's fun... and educational.

[realcoray]

Originally Posted by GregWeld

I couldn't help think about the "big news" today from SEARS (DOWN 27% today).... that they're going to close a bunch of stores and that business sucks.... well DOH!

SO ask yourself.... when was the last time you went to SEARS to buy anything? Tools? A refrigerator? A flat screen tv?

I can't remember the last time I was in one.... so it doesn't surprise me that they're not doing well. I'm an "every man" guy. Blue jeans and t shirts... and I shop at Home Depot - Lowes - Best Buy - and a real appliance store when I need something. SEARS never enters my mind.... so I sure as heck would not invest in it.

Last night my wife and I went to Sears to look at ovens. I had a good idea of what we wanted and we found one and wanted to buy it. We could not get anyone to help us to just pay for it. We approached a sales person not next to a customer and he said he was busy and would be for half an hour. We ended up leaving although my wife did try to get someone in the tools area to help, again to no avail.

I would not suggest investing money in a company that makes it hard to give them money as a customer.

[James OLC]

Great thread - thanks to everyone for the great discussion and informative insights. Investing is such a fundamental life skill that it really should be part of a basic high school education.

My two bits and my "ten":

1. The easiest way to consistently and (relatively painlessly) invest is through work. take advantage of your companies retirement plan if you can but resist the temptation to just sit on it - sell what you can, when you can to avoid finding yourself over exposed in the company that you already depend on.

2. Try not to too emotional about your investments... Easier said then done but you have to try. This applies to buying, holding, and selling.

3. Find the balance that you're comfortable with... Decide what you can handle risk/return wise and try to avoid investing with regrets. Like Greg has advocated, over the last year I've "abandoned" most stocks that don't pay a dividend in favor of a low risk, "guaranteed" return.

4. Keep in mind that your broker has his own agenda and it's in his best personal interest to sell you specific stocks.

As I mentioned earlier, I've gone the low(er) risk route and have focused on dividend paying stocks. Long story short.... For 3 and a half years i bought in to my old company's retirement savings plan - they matched my contribution up to 11% - at anywhere from around $7 to $11. When I left they were at around $9.50 and my retirement holdings were almost all in the companies stock. After I left the stock tanked, reaching a low of $4.50 before the company was bought by the Chinese for $10.08 - saving my bacon and forcing me to reevaluate my strategy

Now I hold (not in any order):

Enerplus (TSE:ERF) - oil and gas exploration - pays 0.18 a month while trading at 25.90. Good foundation but not a bunch of upside; the yield makes this one work.

Artis Real Estate (TSE:AX.UN) - commercial real estate - pays 0.09 a month and trades at 14.11. Decent growth but again, the yield carries it.

Student Transportation (TSE.STB) - yellow school buses - pays 0.046ish a month and trades at 6.57. steady growth and a good yield.

NAL Energy (TSE:NAE) - oil and gas exploration - pays 0.07 a month and is trading at 7.90. The dividend cant be maintained at this level and has to come down. The stock price/performance reflects this... I dont like it but I'll take the dividends for now.

Parkland Fuel (TSE: PKI) - local refiner/gas station chain - pays 0.085 a month and trades at 12.86. good yield and is performing well over the last quarter.

Temple Real Estate (CVE:TR.UN) - commercial real estate - pays 0.04 a month and trades at 4.90. good yield but limited upside.

Liquor Stores (TSE.LIQ) - liquor stores - pays 0.09 a month and trades at 15.15. good yield and i understand the market.

Petrobakken (TSE.PBN) - oil and gas exploration - pays 0.08 a month and is trading at 13.02. They overpaid for some assets, got hammered by the market, and put together a solid quarter. The yield is lower than some but they're up 40% in the last month or so...

Mullen Group (TSE.MTL) - oil and gas services - pays 0.25 a quarter and tradex at 19.56. One of my weakest yields but sustainable if not exciting)

Americas Petrogas (CVE.BOE) - oil and gas exploration - no dividend but good growth potential. As Greg suggested earlier, i rode this one up 60%, sold the profits, and hope for another run.

With those I see a decent return on the dividends alone. My upside is probably limited on most and its always painful to watch some run up until exdividend date then drop like a rock the day after but it's about as reliable return as I could find.

[GregWeld]

James -

Nice dividend stream - but DUDE <spicoli style> you need some diversification!

However.... I also understand your trade and what YOU understand... and perhaps you even have an "insiders view" of the industry.

[mpozziCPL]

Greg and James ...

I'll PM you my investments, piddly as they are, as you've got a much better handle on managing this stuff than I do. I'm one of those that hands on to stocks much longer than I should and haven't looked at my 401K in almost 20 years. You mention investing in places you shop and I wonder if Summit and Ross Dress-for-Less are publicly traded ...

Add to this my broker just got popped for a DUI. Weaving, cops lit him up. Tried to run from the cops, blew through a red light, and wisely decided to stop before he got stopped. Didn't look as good on the TV mug shot as he did when we met and I transferred my investments over last spring.

Plan B ...

Mary P.

[Chad-1stGen]

I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...

Reminds me when everyone was day trading and then everyone was in real estate.

Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.

[GregWeld]

Originally Posted by mpozziCPL

Greg and James ...

I'll PM you my investments, piddly as they are, as you've got a much better handle on managing this stuff than I do. I'm one of those that hands on to stocks much longer than I should and haven't looked at my 401K in almost 20 years. You mention investing in places you shop and I wonder if Summit and Ross Dress-for-Less are publicly traded ...

Add to this my broker just got popped for a DUI. Weaving, cops lit him up. Tried to run from the cops, blew through a red light, and wisely decided to stop before he got stopped. Didn't look as good on the TV mug shot as he did when we met and I transferred my investments over last spring.

Plan B ...

Mary P.

OMG! Yeah - that's not going to work out real well.... Drunk AND stupid....

I'll be happy to look at your holdings... It's fun and I enjoy it and always learn something from it.

JUST FYI -- Summit isn't publicly traded - but of course you knew that! I've toyed with buying Snap-on (SNA).... but I missed buying them BEFORE I started building the shed... LOL


XOXO

[pw2006]

Originally Posted by Chad-1stGen

I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...

Reminds me when everyone was day trading and then everyone was in real estate.

Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.

Hi Chad- The stock market has been a little rough the past 10 years or so. The S&P 500 is flat over the last year and last 10 years, with lots of volatility. Interest rates on govt bonds are so low right now, they are not keeping up with inflation. If you were to invest in 30 yr govt bonds to try and get some return (~3%), as soon as interest rates start to rise, your principle will drop (unless you hold them to maturity). Dividend stocks tend to be less volatile, typically drops less when the market falls and rises slower when the market rises, this is also referred to as beta. So, a lot of people are looking at dividend stocks that have a decent yield and less beta than the market.

[GregWeld]

Originally Posted by Chad-1stGen

I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...

Reminds me when everyone was day trading and then everyone was in real estate.

Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.

Well -- the major difference is that these PAY YOU. They're not gambling that the price is suddenly going to double... or that you can trade them daily and get in and out... or borrow cheap money and sell something in a month.

The reason people are coming on board the dividend train is because the dividend percentage is a known calculated rate. When you compare this rate to other "interest bearing" investments - the rates are very compelling. Compared to Bonds - CD's - Money Market funds etc the return is huge... and the only reason they would be BAD is if the stocks go way up and the dividend as a % then would come down. That can happen - but it doesn't take away that long term steady march of dividends reinvested. Historically this is a great way to invest. It's not another get rich quick scheme that just popped up.

So let's put this into real life terms. I own 25,000 shares of Annaly Capital Management (NLY) @ an average cost of $16.88 - it's dividend this quarter is .57 per share. This stock went "ex dividend" on the 27th -- and I will get a cash payment of $14,250.... and I'll get that or similar in another 3 months - and so on -- so that dividend (provided the dividend stays at .57) will pay me $57,000 this year.

I don't care if dividends are the "hot money" or anything else - because that $57,000 per year is REAL MONEY and I get it. Even if the stock goes DOWN -- I still get that dividend - if the stock goes up - I still get that dividend and I'd also have capital growth... but what I L O V E is that check!

The reason I PREACH look at the historic chart -- is because the capital (stock price gains) have been going like this for YEARS.... if not - I don't buy 'em. I can only get a glimpse of the future by looking at the past. There is no guarantee that they will continue - or at what rate - or that they won't go down - but if they have a 25 year history of paying that dividend - I have to go with that. I don't really know what else I could do differently. I can't make any money on CD's... I could buy houses cheap and HOPE they are going up some time (my bet is that they will)... but that takes talent - and work - and involvement etc. I can do my stock and bond investing with my laptop... and so far... it's beating all the real estate I own... and I've been doing it for 30 years. Doesn't make me an expert. And remember -- this is Investing 102 -- not "let's pick the next Microsoft" (been there done that - LOL). We're talking COKE - JNJ -MCD - KFT - etc.....