Investing 102

[GregWeld]

Solid LT1 ---- Just to be sure.... My "sounds cocky" statement is not meant to be directed to you personally. It's a blanket statement. I re-read my post and thought -- hmmmmmm..... that sounds like I'm being mean to him and that's not my intention at all.

[SSLance]

Pretty interesting exercise I'm looking at now. I set up a google finance portfolio based on most of the stocks I've seen mentioned in this thread over the years so I could watch them for a while and get a feel for things as I venture back into this arena.

Given what has transpired the past few weeks, I'm looking at the portfolio now on the "fundamentals" tab, and what is most interesting to me is the current share price column, beside the 52 week high, and the 52 week low. This gives me a pretty good idea of how these stock's share price has reacted to the market conditions of the past year.

Granted, it doesn't take into consideration dividend payouts and I understand that, but this gives me a better roadmap of things I might be comfortable with to take and then go look at the dividend history of those same stocks.

The large majority of them are almost right in the middle of the 52 week highs and 52 week lows, there are some that are still hanging in pretty good though...and there are a few nearer to the 52 week low marks. It also gives a pretty good idea of how large of swings the particular stock may be more apt to go through which is a consideration for those that may not be willing to stomach the larger of the high and low swings of the market.

[SSLance]

One that jumps out to me that I can't explain yet, CVX is right near it's 52 week low while PSX is not far off of it's 52 week high...

In the grand scheme, Chevron hasn't moved a whole lot while Phillips has moved further...yet Phillips is hanging in better right now.

With almost zero research, one has to wonder if one of them isn't more involved with propane and what's going on with that market right now than the other...

Anyway, I have to go make some money at my day job right now. Good luck everyone!

[GregWeld]

Lance ---- There's a term for this! It's called "Paralysis by Analysis".


LOL




Here's how I do it. I owned 12,000 KMP --- I had 3MM in cash --- I noticed that KMP was going ex dividend. It pays 1.36 a quarter. So I bought 10,000 more shares.


All of that took 30 seconds of thought. LOL


I'll pick up the dividend.... wait for the shares to be "positive" - even by a nickel... and I'll sell 5,000.... wait a little longer and sell another 5,000. In the meantime if they sit "lower" -- I'll just hold - because in another 90 days I'll get another 1.36 a share.

[GregWeld]

I've said this in previous posts... i.e., that there is no "new" money. There is a finite amount of money invested... and it just moves around always searching for Return on Investment.


Here's a statement that came out of todays FED regarding their QE (Quantative Easing) purchases going forward... That they intend to only buy 65 Billion next month rather than the 75 to 85 billion they have been buying...


The Fed’s pullback is contributing to a global shift in investments as people who chased higher returns in foreign markets look forward to the return of higher interest rates in the United States.

[SSLance]

Originally Posted by GregWeld

Lance ---- There's a term for this! It's called "Paralysis by Analysis".


LOL

My Dad refers to it as Mental Masturbation...

[GregWeld]

I have a few shares of AT&T (T)... namely 30,000 shares of it... So it's a stock that while I consider it in that "steady eddy" bandwidth... because I don't expect them to suddenly spurt up --- I also don't think they'll drop much either. They pay a solid dividend... that's above 5% and that cushions downside risk.

I do however always keep up with "trends" -- and this is not only fun - but increases my awareness of what and why I'm invested in something. It takes some time - but I love it so no biggie.

I find this article about Apple - and about the cell phone industry which T is a member of very "interesting". As consumers - sometimes we just don't SEE what's happening competitively in an industry. But this article - while about Apple - sheds some really good light on cell phones in general. And particularly about how they're sold etc. What's good for one company might just affect another one negatively or vice versa. In this case -- NOT subsidizing cell phones might hurt Apple - but in the long run might be good for AT&T and Verizon (VZ) etc. Or it might be revenue neutral. Who knows.

I just thought it interesting.




http://www.fool.com/investing/genera...idies-att.aspx

[GregWeld]

Today brings up a good day to talk about stocks that I avoid -- and why.


I avoid stocks that are "priced for perfection"... I've posted about this several times. Stocks that might be fantastic companies -- but they are so loved that everyone wants to be in them - which drives the share prices to levels that are
only sustainable IF * always the big IF * they can maintain spectacular growth. One teeny tiny hiccup -- and BAM! You get slammed.

Examples lately.... Apple.... slammed down $40

Amazon --- BAM! Down $30 today


These are both GREAT companies.... but their share prices have been way out in front with huge expectations of continued greatness.


I avoid LOW END retailers....(Wal Mart etc) actually I avoid anything that's main business is LOW END. Why?

Because the poor folks that shop there are just that -- poor... and they have the least amount of cushion in their budgets to absorb any offsetting cash flow disruption. Such as - a cut in hours worked - higher gasoline prices - higher heating bills etc. It just seems to take less and less "disruption" to have people slam their wallets shut - which of course - affects the sales and profit margins at these type of companies.


I like companies that pay above average dividends and whose customer base is broad based -- and companies that people MUST buy from.

When you see a down market --- you'll see that the companies that pay above average dividends will fare better. Why? Because as the share price decreases -- the dividend paid percentage increases - making them attractive relative to other income assets. It doesn't help your cost basis... if you bought at $35 and the dividend is 5% --- you're still only going to get your 5%... and you'd have a temporary paper capital loss on the books.... but your shares will most likely have gone down LESS than the market in general. So the dividend cushions on the downside... and regardless of what the current share price is - they're still sending you a check.

[Vegas69]

So I have my 10 stocks and I'm getting ready to make my next purchase in a down market. Would you invest in one of your current stocks at a lower price than your initial purchase or buy a new company? My thought was to invest in a current holding. I believe you call that cost averaging? The next question is, would it be one of the best performers or worst?

[GregWeld]

Originally Posted by Vegas69

So I have my 10 stocks and I'm getting ready to make my next purchase in a down market. Would you invest in one of your current stocks at a lower price than your initial purchase or buy a new company? My thought was to invest in a current holding. I believe you call that cost averaging? The next question is, would it be one of the best performers or worst?

Good questions Todd!


So === I personally average in all the time. I added 5,000 shares of Altria (MO) on their "earnings miss". That buy in isn't enough to really bring my average cost down much (I already had 25,000 shares) -- but it makes me FEEL GOOD to buy it down a bit.

Two thoughts on your question of adding to biggest loser -- or best performer...

Examine WHY your loser is a loser.... this is critical to not try to "catch a falling knife" --- so WHY it's down is very important. If it's just down because of general market dipping --- or is there something fundamentally going on you need to be aware of.

Don't fear chasing market performance or growth. There's not a thing wrong with buying a stock or adding to shares when they're up a little. The shares are doing exactly what you wanted them to do - so why would that put you off? That's a rhetorical question.

If you feel you're diversified.... then adding to existing holdings rather than adding a new name can make you more comfortable in a down market... but sometimes if you're still trying to diversify - then the market has created a good opening for you to "get in".

I'd buy when the YEAR TO DATE price is in the 7 or 8% down... Remember that 2013 was far more than just an exceptional market... unlikely to be repeated. So 7 or 8% off "the highs" is a good starting point.

Remember that what is your worst performer this month - can be a good performer by year end. That's where patience comes in to play.