Investing 102

[GregWeld]

How many of you remember Montgomery Ward? It went away years ago... Now it looks like Sears may be the next old line department store to fold. When I read this headline today.... I thought --- Well.... there's a fundamental change. I wonder how many people have stock in this old line company and they've owned it for 40 or 50 years... and it's possible it goes to zero.

My mother worked at Sears. I used to buy all my tools at Sears. Need a battery? Head for Sears. Need work clothes? Yep - straight to Sears. I remember as a little kid being excited because Grandma would let us go thru the Sears catalog and pick out (scribble? Circle?) everything we wanted for Xmas. I can still picture the pages and pages of the tools... you could buy the 25 pc set or the 1744 pc set complete with tool box. Man I remember dreaming over that bad boy. I still own the very first 3 drawer Craftsman box I bought when I was 13. It holds all my TIG consumables... and it's a little worse for wear... but that box still functions.

Here's my thought for the day. There's winners and losers. There's always going to be winners and losers. Certain parts of town that we remember as the shinning are now places we won't even drive near. Businesses that stumbled and lost their way... Monkey Wards... Sears.... Radio Shack.... Best Buy was almost gone... And there's winners... Amazon? Costco? Many specialty retailers have sprung up that all took a bite out of the "Sears" model. Things change. Be aware of these for investing... you want to be out of the loser and into the winners. Simple changes can power your retirement. Chipotle Mexican Grill vs McDonalds. Is this a fundamental change that lasts? I don't know and I'm not trying to use this post to make a pic one (won?) way or the other... rather I'm saying -- be aware of little changes that begin to add up and affect what you're currently invested in. Look at your investments one by one and examine them and pull your head up and look around you. News? Have you asked yourself - if you were an investor in Sears - when was the last time you shopped there? McDonalds? Did you used to go there once a week and now haven't been for... What? You can't even remember the last time? Is that worthy of paying attention to? Hell yes.

Have your shopping habits changed over the last 20 years? Amazon over Sears? Investing is pretty simple. But you do need to pay attention. Don't be caught owning the crumbling house in the bad side of town just because you were born there.... If the west side is the best side... recognize that and pack your stuff and move. In investing - don't be hidebound. Don't turn in to Grandpa that still holds Sears stock and has no idea that they're maybe the next Monkey Wards.


Just thought of another name that used to be THE STANDARD.... SONY? Used to covet a Sony TV... when was the last time you bought or even looked at - anything made by Sony?

[GregWeld]

I just found another eyeopener... and this is what I'm talking about "powering" your retirement fund... OR NOT!


Run a one year chart of Under Armor (UA) vs LuluLemon (LULU) stock.... I'm not even going to give you the numbers - ya gotta see it to believe it.


You can do this on Google Finance --- pull up the one chart (either company) and then put the other symbol in the "compare" box in the chart... and choose 1Y.

[chichirone]

Originally Posted by GregWeld

I just found another eyeopener... and this is what I'm talking about "powering" your retirement fund... OR NOT!


Run a one year chart of Under Armor (UA) vs LuluLemon (LULU) stock.... I'm not even going to give you the numbers - ya gotta see it to believe it.


You can do this on Google Finance --- pull up the one chart (either company) and then put the other symbol in the "compare" box in the chart... and choose 1Y.

Ok, I have been stalking this thread long enough and if I am going to blame GW for making me filthy rich and selling my cars (HA!) I better participate/contribute.

The charts are crazy insightful. 1 year is plus 90% UA vs. -38% LULU...Yoga anybody? Thanks for sharing Greg! Now check the 10yr chart. I'm not going to describe it but "namaste" to LULU.

[GregWeld]

Originally Posted by chichirone

Ok, I have been stalking this thread long enough and if I am going to blame GW for making me filthy rich and selling my cars (HA!) I better participate/contribute.

The charts are crazy insightful. 1 year is plus 90% UA vs. -38% LULU...Yoga anybody? Thanks for sharing Greg! Now check the 10yr chart. I'm not going to describe it but "namaste" to LULU.

Just trying my best Jay!


As you know - 'cause I've said it enough times in the last 400 pages.... the stocks are only used as real life EXAMPLES.... and the points shouldn't be Sell LULU and buy UA.... The points are COMPARE things -- they're not always what you think. Poke around a bit. THINK!! It ain't hard and a guy can always LEARN just by making comparisons and opening their eyes to FACTS rather than "I think" or "somebody said"....


Makes you wish you'd have put 100K into UA 5 years ago instead of a car???? LOL

[chichirone]

Originally Posted by GregWeld

Just trying my best Jay!

Makes you wish you'd have put 100K into UA 5 years ago instead of a car???? LOL

OUCH! I appreciate the candor and levity!

So here's our thinking...would love your feedback.

Amy and I have the rainy day fund in place. A years worth of cash on hand. We have invested in actively managed mutual funds for over 15 years, accumulating a 7 digit nest egg for longer term retirement. Our current goal is to generate more cash flow for mid-term money for our bridge years age 40-65. Managed growth over 5/10yr horizons with dividends reinvested is something we are very comfortable with. Your comment on it being a personally managed mutual fund resonates with us.

We have been looking at the following dividend stocks. I'd like to get your feedback on my "analysis" based upon share price and dividend yield. I really want to make sure I am looking at these stocks through the right set of lenses. We do not have a high tolerance for risk so the High-flyers don't interest me too much now, but as we build the portfolio, a TSLA or GPRO will become more attractive.

Symbols that interest us are:
KRFT
COP
XOM
F
PFE
MRK
SMG
T
MDT
KO

Our plan is to invest a portion of our monthly revenue, buy shares with the intent to receive dividends over the next 10 years. I am prioritizing the investments based upon yield percent of share price to get started which seems to be a low "risk" option when I evaluate the 10yr charts. I like your strategy of 5% return on the stock performance, reinvesting the dividend, and then building a portfolio that has 20-25 stocks with no more than 5% of the total invested in any one share. Time for you to tear it apart and push our thinking...I look forward to your response.

[GregWeld]

Originally Posted by chichirone

OUCH! I appreciate the candor and levity!

So here's our thinking...would love your feedback.

Amy and I have the rainy day fund in place. A years worth of cash on hand. We have invested in actively managed mutual funds for over 15 years, accumulating a 7 digit nest egg for longer term retirement. Our current goal is to generate more cash flow for mid-term money for our bridge years age 40-65. Managed growth over 5/10yr horizons with dividends reinvested is something we are very comfortable with. Your comment on it being a personally managed mutual fund resonates with us.

We have been looking at the following dividend stocks. I'd like to get your feedback on my "analysis" based upon share price and dividend yield. I really want to make sure I am looking at these stocks through the right set of lenses. We do not have a high tolerance for risk so the High-flyers don't interest me too much now, but as we build the portfolio, a TSLA or GPRO will become more attractive.

Symbols that interest us are:


KRFT

First off -- I'd deem Kraft a "steady eddie"... boring - low growth - increases the dividend - relatively low dividend percentage... but you can take this one to the bank 20 years from now and never loose a single nights sleep.



COP



Connoco Philips is one of the energy plays... It's another steady eddie - sleep well... 171% 5 year Total Return! Can't beat that with a stick! And you're getting 3.62% dividend!



XOM



I'd make a choice here and either hold COP or XOM but not both. COP has been the stellar grower and pays a far better dividend so I know which one I'd choose just off the stats. EXXon's problems could stem from their issues dealing with the Gulf oil spill and that may have held people back from wanting to own it.



F




Ford is a good recovery story - well run now that Bill Ford isn't at the helm... As long as the economy is perking along Ford should do just fine. Look for them to increase the dividend along the way. Good choice. It's powered by a 5 year Total Return of 142% which when you do the math - compare 142% TR to your SMG's 55%... :>)


PFE



I don't like the drug stocks... I can't keep up with who has the latest greatest next gen coming out. Frankly - I couldn't tell you what company makes what and that is something I can't invest in because if I don't actually know what they're doing -- then I don't understand my investment.


MRK




Merck --- Ditto above. If I had to have a big pharma.... I'd have ONE not both.




SMG




Scotts Miracle Grow - I can't even imagine why you came up with this one.... LOL... unless you work there. Dismal 5 year total return of 53%.... pretty low return - and given that it also pays a smallish dividend -- then you're not getting the growth in capital to offset the small payout. I'd find a better one than this. Even you're above big pharma choice MRK had a 123% 5 Year Total Return... and Pfhizer had a 5 year of 118%

In compounding TOTAL RETURN is everything... and there's just a monumental difference between 100% and 50%...




T



AT&T -- is one of my sleep well stocks -- good dividend -- good well run company - slow growth but I use it to get a good dividend and to make me comfortable. 5 year Total Return 69% not good frankly but it's still kicking' SMG!!




MDT




Medtronic is another one I can't keep up with what it is they do... or who the competition is. If you're a Doctor you probably understand them. I wouldn't own it for that reason --- and mostly because of the under 2% dividend. At least it had a 92% 5 year Total Return --- so the growth in share price offset the measly dividend. The problem I have with under 3% payers -- they don't keep up with inflation and it gets worse when the market sucks... I want my dividends to be enough to make/keep me happy when the market is horrible. 1.8% wouldn't do it for me.




KO





Coke is a good well run company. They pay a near 3% dividend and have a 5 year Total Return of 86% -- which in my book is decent -- and enough growth to cover the under 3% dividend. It's also a sleep well stock.





Our plan is to invest a portion of our monthly revenue, buy shares with the intent to receive dividends over the next 10 years. I am prioritizing the investments based upon yield percent of share price to get started which seems to be a low "risk" option when I evaluate the 10yr charts. I like your strategy of 5% return on the stock performance, reinvesting the dividend, and then building a portfolio that has 20-25 stocks with no more than 5% of the total invested in any one share. Time for you to tear it apart and push our thinking...I look forward to your response.

I think you have too many small dividend payers --- I'd shop for a couple that are 5% and have better TR's that a couple of your picks.

In order to diversify -- try not to double up -- i.e. the COP/XOM and the PFE/MRK...


You're to be commended by the way on your already sizable holdings -- I bow to you.

[chichirone]

Originally Posted by GregWeld

I think you have too many small dividend payers --- I'd shop for a couple that are 5% and have better TR's that a couple of your picks.

In order to diversify -- try not to double up -- i.e. the COP/XOM and the PFE/MRK...


You're to be commended by the way on your already sizable holdings -- I bow to you.

Greg, I REALLY appreciate your insight and compliment. This thread is one of the most personally moving reads I've experienced since reading the Millionaire Next Door. Your willingness to share and provide insight to your personal situation, for the benefit to educate others has been incredibly helpful.

The healthcare, med device and pharma stocks are very familiar to me since I've been in the business for almost 20years. Call it my comfort zone. If I read your comments correctly:
1. Select one in the sector and don't duplicate
2. Quit sniffing the fertilizer. HA!
3. Be a little more focused on 5% yield...look for more risk
4. MAKE IT HAPPEN!!!! The first step is to get the Schwab account set up and get rolling.

Your insight is valuable. It is not often that one is wiling to share, educate, and also call bull**** on another's thinking. On another note, is PM and MCO still on your "sleep at night" list? I left these off my list.

[Vegas69]

I agree with Greg, some good names, some others I would wipe off the list. You certainly have the discipline to sock away such a substantial amount. Clearly you have a big income, but that doesn't mean you had to save a penny! Good luck on the sale of your car.

I've owned Pfizer for a year. It's been a snoozer. Always hanging around even. CVS has been a solid performer. They are a drug dealer. ha I picked them as I see the baby boomers consuming more and more pills, unfortunately.

Greg, have you covered your philosophy on International stocks? Picking them to the make up of your portfolio.

[GregWeld]

Originally Posted by chichirone

Greg, I REALLY appreciate your insight and compliment. This thread is one of the most personally moving reads I've experienced since reading the Millionaire Next Door. Your willingness to share and provide insight to your personal situation, for the benefit to educate others has been incredibly helpful.

The healthcare, med device and pharma stocks are very familiar to me since I've been in the business for almost 20years. Call it my comfort zone. If I read your comments correctly:
1. Select one in the sector and don't duplicate
2. Quit sniffing the fertilizer. HA!
3. Be a little more focused on 5% yield...look for more risk
4. MAKE IT HAPPEN!!!! The first step is to get the Schwab account set up and get rolling.

Your insight is valuable. It is not often that one is wiling to share, educate, and also call bull**** on another's thinking. On another note, is PM and MCO still on your "sleep at night" list? I left these off my list.

Jay -- Yeah -- I've shared way too much personal info on here -- but figure WTF -- if it gets one person going on the right track - then I've done good. So I throw myself on the sword for all. LOL


I figured you had to be "in the industry" or close to it.... There is LIFE outside of work you know. Drive up and down the street and look at all those viable businesses that are just waiting for you to be a partner with them.

5% dividend doesn't have to come with risk. AT&T pays over 5% and I wouldn't classify it as risky. Altria (MO) pays 4.66% and that's not very risky... so there's plenty out there.

Philip Morse (PM) pays almost 5%... Both MO and PM are sin stocks -- I like MO because of the booze component... I don't smoke or drink -- doesn't keep me from making money off the people that do.

MCO is Moody's (the ratings agency) and I ASSume you meant McDonalds (MCD). I sold MCD awhile ago based on my belief that they're losing the fast food battle... and that the general public they appeal to has shifted to healthier restaurants. Their sales continue to slip -- and that's a "Fundamental" change I can't sleep with. Their down almost 8% in the last 3 months... that's a nasty dip and I'm glad I've moved on. If it paid a dividend - I'd be in Chipotle Mexican Grill (CMG) versus MCD. CMG is growing and MCD is shrinking.

[68Cuda]

Greg - it will take me a while to catch up on reading all the posts. Good stuff what I have read so far!

Give the rest of you guys some encouragement! My current employer allows us to put up to 90% of our 401 into a "self directed" brokerage. I consolidated all my previous employers accounts and put as much as my finances or the company allows into the account each year. So about 60% of my total savings are sitting in this account as of now. The neat part is that ALL the gains in this account are not taxed until later, so the growth is not hampered. I also put away as much as they let me into our HSA, once I reach a set amount they will also let me self manage the investments in that one. The HSA is really neat in that the money both in and out are tax free. I also expect that health care costs down the road are not going to be lower, so money saved there will probably get used. I have not reached a critical mass on the HSA yet, maybe at some point I will slow down on funding that one.

OK, back to the "self directed" account. Currently has ABT, BMY, CAG, INTC, JNJ, KMB, MO, MRK, NUE, RDSA, VZ, PG, and WM. INTC I picked up 2 years ago, the rest I have had longer. They are all DRIP... Dividend Reinvestment. Between these and my other holdings the average rate of return since I opened the account in August 2006 is about 21%. My investment strategy is similar to the "Dogs of the Dow" strategy (has its own web page), my "secret" is that I do not limit myself to this list or just the Dow index. Other than that, it is dumb simple. When I have some cash, the "Dogs" web page is where I start my search. Must be mid to large cap, must be growing, must be a company that I believe is sound in principal and direction, and then I look for a period where magically that stock is inexplicably priced on the low side. Some of the stocks listed I bought when the dividend rate was 4-5%, I don't recall buying any under 4%.

Oh, my other rule is a personal one. I participate in the company ESPP (employee stock purchase program), but I sell it immediately when I get it and move the money elsewhere. I hold $0 in company stock. I have too much already invested emotionally in the place, I do not need the stock performance souring my mood. Besides, as good as they are, they do not meet my stock picking criteria, the dividend is too low.

I used to have NLY and a few other similar investments in my E-Trade account... returns were great but it was kind of scary, I got out. Went back to the simple stuff I am not inclined to look at so much.