Investing 102

[GregWeld]

Originally Posted by CamaroMike

Just an example that a safe dividend stock can occasionally have a nice run as well.


http://seekingalpha.com/article/2317...r-40-per-share

What happens with dividend stocks that makes them "somewhat" safe -- is that their share price gets supported on the way down -- by the rising percentage of dividend payout.

AT&T (T) pays 5.08% dividend at this mornings per share price... It doesn't take much of a dip in the share price and it's suddenly paying 6%.... That's where you get the downside protection. And even better --- is that you don't need to sell when they're down to earn a return on your investment. Which is why they (dividend payers) become better holdings during market downturns.

WHAT DOES HAPPEN though is that interest rates COMPETE for dollars when the rates are rising... money flows from "other" interest rate paying investments and flow to where there is equal safety with equal or better rates. The problem with attempting to follow this money trail by selling one asset class to buy the "new" asset class is that individual investors are never ahead of the curve. They will sell at the wrong time every time. That's a game better left for the big boys with armies of economists and accountants on their team. They figure it down to the last 1/4% on a daily basis. That's why we just have to become INVESTORS...

That doesn't mean that if interest rates on Muni Bonds etc start to look like they're headed to 6 or 7% TAX FREE --- that I wouldn't lighten my stock portfolio and add some Munis. But you don't do that in your 401K or IRA or ROTH....

[JasonElvisHeard]

Any CFA's in the house?

Weld, I'm sure you know of a few but maybe they are not on latg.

jason

[GregWeld]

Originally Posted by G-Machine Racing

Any CFA's in the house?

Weld, I'm sure you know of a few but maybe they are not on latg.

jason

I don't use any "professional" investment advisors except for Muni Bond investing.

I just don't think they're any smarter than I am... and if it involves THEM making money on my money -- then their interests are ahead of mine.

[WSSix]

grrrr, kind of wishing my MCD stocks were in a different account today. They are some what "locked in" sitting in my Roth IRA. If they were in my simple brokerage account I'd snatch up a few shares right now. Looking at my cost basis over the last couple years of owning the stock, the current share price is lower than every cost entry except one maybe two entries. Would be a good time to buy right now I say.

[GregWeld]

Originally Posted by WSSix

grrrr, kind of wishing my MCD stocks were in a different account today. They are some what "locked in" sitting in my Roth IRA. If they were in my simple brokerage account I'd snatch up a few shares right now. Looking at my cost basis over the last couple years of owning the stock, the current share price is lower than every cost entry except one maybe two entries. Would be a good time to buy right now I say.

I bailed on McDonalds (MCD) - as documented in this thread - and while we are not discussing particular stocks or what to buy... this name can be used as an example of "Fundamental change". What's that? That's a business that is experiencing sales declines or profit shrinkage or declines -- BECAUSE -- Because their business is positioned wrong. I think that is where MCD is right now. I say this because Chipotle Mexican Grill (CMG) just reported 17% sales INCREASE and a profit margin increase - vs - MCD reporting (now for a number of quarters in a row) another sales decline and weaker profit margins. These are both fast food retailers. One is growing - one is shrinking... I don't want to own companies that are shrinking. That's not to say they can't change and or react to market forces... but so far they don't seem to be able to find that magic bullet. There are better dividend payers if you just want to be paid to wait - and I want dividend AND growth (total return). This name doesn't seem to be in the mode to deliver that.... so that means those employees (you investment equals one employee per dollar invested) seem to be on vacation. I don't pay employees to be on vacation.... which means they need to be retrained (sold and buy something better).

Each investment is up to the individual... and I'm not saying anyone should buy sell or hold.... it's just a "way to look at an investment".

[SSLance]

MCD is right back down to where my cost basis is with my current holdings...might have to think about picking some more up myself.

[Vegas69]

Originally Posted by GregWeld

I bailed on McDonalds (MCD) - as documented in this thread - and while we are not discussing particular stocks or what to buy... this name can be used as an example of "Fundamental change". What's that? That's a business that is experiencing sales declines or profit shrinkage or declines -- BECAUSE -- Because their business is positioned wrong. I think that is where MCD is right now. I say this because Chipotle Mexican Grill (CMG) just reported 17% sales INCREASE and a profit margin increase - vs - MCD reporting (now for a number of quarters in a row) another sales decline and weaker profit margins. These are both fast food retailers. One is growing - one is shrinking... I don't want to own companies that are shrinking. That's not to say they can't change and or react to market forces... but so far they don't seem to be able to find that magic bullet. There are better dividend payers if you just want to be paid to wait - and I want dividend AND growth (total return). This name doesn't seem to be in the mode to deliver that.... so that means those employees (you investment equals one employee per dollar invested) seem to be on vacation. I don't pay employees to be on vacation.... which means they need to be retrained (sold and buy something better).

Each investment is up to the individual... and I'm not saying anyone should buy sell or hold.... it's just a "way to look at an investment".

I think American's are finally waking up to the fact that what you eat matters. Chipolte is a solid business model pushing hot buttons with where they source their components.

[ErikLS2]

Originally Posted by Vegas69

I think American's are finally waking up to the fact that what you eat matters. Chipolte is a solid business model pushing hot buttons with where they source their components.

I think this is right on about where things are going. I'm a big organic food, healthy eating kind of person and have been for a long time. Up until recently I would talk about it and people would look at me like I was nuts. Not so anymore,
tons of people are now waking up to what their food contains and so on. I asked a 22 yr old kid at work today if he or his buddies ever went to McD's. He said, "not really, we don't really eat fast food like that".

I go to Chipotle a lot and there's almost always a line to the door and they put up a sign when any of their ingredients had to be sourced from "conventional" suppliers.

[WSSix]

I agree with you guys to a large extent. I do think people are starting to care more about where they eat. What I do worry about when it comes to places like Chipotle is the price. It's expensive to eat there. Is it more of a new fad versus a fundamental change in eating habits? I wonder if they can keep the people coming in the door in the long run. Chic-fil-a seems to be able to and they are fast food. Quality fast food but fast food all the same. Time will tell that's for sure.

Thanks

[GregWeld]

Originally Posted by Vegas69

I think American's are finally waking up to the fact that what you eat matters. Chipolte is a solid business model pushing hot buttons with where they source their components.

100% agree with you here Todd!



RE: Chipotle Mexican Grill and similar stocks that are "priced for perfection" or have HUGE P/E Ratios they MUST grow in to... Just look at Amazon (AMZN) today. This is why - as much as I'd like to - I don't own them. You absolutely get murdered IF -- always the big IF - ANYTHING happens along the way that the street doesn't like. Instantly taken to the woodshed!!

Once in awhile I'll bite on a "big / fast growth" name.... I'll do this is tiny way (relatively) and I'll flip it if I get lucky... sometimes I win - sometimes I loose. I don't mention that stuff here because it's not pertinent to THIS thread. So I'm not against growth stocks and in fact think that you young guy SHOULD own them - because even if they hiccup - if the fundamentals are there - then long term the growth "should be" too. But in the meantime it can be ugly.... so you have to have the guts AND conviction to hold this stuff and or average down (what I'd be doing this AM if I owned Amazon). Just look at NetFlix (NFLIX) when the CEO did a major faux pas... if you were smart enough (do ya feel luck, punk?) to buy that one... I wasn't - but a friend that's on their board did... and he's absolutely killed it!