Investing 102

[GregWeld]

Because it's CURRENT and CONTINUING... let's look at an EXAMPLE of a stock vs the stock price.

GoPro (GPRO) came out with an IPO with much hype (by TV talking heads) and fanfare! It has THE NAME - and all cameras that are of the type will forever be called GoPro's regardless of their actual brand.

WE - as sports people - know the name and brand and quality. So accordingly this is all of great interest for us.

Here's where we can learn from the IPO market -- using GPRO solely as an example.

When the market is "hot" and there's too much money chasing too little stock GROWTH... people get all manic (ma ny ick) chasing STOCKS. The latest greatest shiniest new toy is the hot money. When there's more buyers than sellers - the stock price climbs. Many times it climbs for no other reason than it's climbing!! This is where the old adage comes in - if you were a fortunate buyer of the issue - early! Pigs get fat - hogs get slaughtered.

So here's what happens -- some NEWER hot IPO comes out and the money flows out of the hot stock from last week into the new hot stock this week... OR people that bought at the TOP -- begin to see losses and then start to bail. What happens when there's more sellers than there are buyers??? Prices FALL.

LET'S SEPARATE your beliefs that a product or company is the next killer deal -- and begin to understand THE MARKET. The two things are completely independent of each other!

The tricky part for EVERYONE is to be able to INVEST in good companies with a good FUTURE long term -- versus getting caught up in the "hot investment". Some of these issues (IPO's) take flight and never look back. Some of them take flight and then once they leave the nest - find themselves falling to the ground. Some of them just quietly go away. The problem for US as investors is that we just don't know which one is going to be the real deal.

Here's what I've learned to do. I wait. I wait until the dust settles from the big coming out party. I investigate the underlying business.... I don't listen to the talking heads -- in fact -- the more they talk -- the farther I run. That's the first sign that you're in the hype mode! So I wait for cooler heads to come out and talk -- and when they also begin to dissect the DOWNSIDE of the stock but then say they're still buyers.... that's when I begin to take notice. But if the talking heads including guests are all saying "well... it could grow into the stock price" but right now it's a little "rich". PASS! If you still like the story and the company -- you have time to get some shares at far better prices!

I recently bought ALIBABA (BABA). I actually now have a gain in it. But the difference is this. Every talking head has said that the growth going forward should be (SHOULD BE) just huge... and that while it "seems expensive" it's not. Now - if you take GoPro - the talk is dying or dead... it's not even mentioned anymore -- and all have said "it will have to grow into the price". HUGE difference!

BTW -- I bought a whopping 500 shares of BABA. I only bought this little teeny tiny bit and will buy no more. Compare that amount next to my normal holdings of 20,000 to 40,000 shares.

Now -- I hesitate to post stuff like this -- because what I never want on here is for people to do what I'm doing. That's NEVER the point of these posts. What I'm trying to do is to use examples for what they are. Examples. Ways to think. What to watch out for. GoPro might grow into it's share price - BABA might be a huge flop in the US.... IT'S GAMBLING. LEARN HOW TO GAMBLE AND WHAT THE BET IS before you just get caught up in the hype. Open your eyes and ears and learn what to look for... This is a MARKET.. and markets can pick you apart if you're the rookie on a pro playing field.

[AMSOILGUY]

Proud to say I just sealed the envelope and put the stamp on my son's custodial account application for Schwab. He has 1600 bucks to start with. Its been in a CD up until this point. Now we wait. Hes excited, I'm excited, sort of like the blind leading the blind here! I'll be rereading this thread again over the next week until the funds hit his account. Hes 11 so he is getting started 20 years before his old man did.

Thanks for the motivation!

[GregWeld]

Originally Posted by AMSOILGUY

Proud to say I just sealed the envelope and put the stamp on my son's custodial account application for Schwab. He has 1600 bucks to start with. Its been in a CD up until this point. Now we wait. Hes excited, I'm excited, sort of like the blind leading the blind here! I'll be rereading this thread again over the next week until the funds hit his account. Hes 11 so he is getting started 20 years before his old man did.

Thanks for the motivation!

Buy him $500 worth of three different stocks... Toss one in like FaceBook -- or Alibaba -- something like that. He's young and has to take a little risk on at his age.

[GregWeld]

Here's another one of those hot IPO's that are going to blow up right before your very eyes.... Twitter (TWTR). I actually had bought some of these shares early on -- they ran up FAST - and I cut and ran and pocketed a nice profit. Here's why I did that rather than INVEST in it. I found the service very helpful during the big Sun Valley fires last year... but after the fires were out... I couldn't find anything that was of interest to me -- and I certainly don't do anything that's tweetable! LOL

So here's where the Peter Lynch style of investing I've mentioned before comes in to play for INVESTING. I'm pretty damn comfortable knowing I'm mister Joe Average.... and If I stop eating at McDonalds -- and I can't find a reason to Tweet... then maybe others are feeling the same way. Guess what... Twitter reported less usage. SEE!! My guts and my head were telling me early on to listen to what I was thinking and I was thinking this is nothing but kind of a Fad that really doesn't serve a big purpose for me. Dumped the stock. Made some money.

My point isn't that I'm smart - I'm lucky as hell and I know it... my point is that you need to continue to be aware of your own senses... How you feel about a store - a product - the advertising - whatever! Invest in stuff you feel good about using... and if you stop using something and own the company.. DUDE! Time to sell!


For those that don't recognize the Peter Lynch reference -- he was the head of Magellan and grew that into the largest Mutual Fund in existence at the time... He's written many books on investing and you should all read them. One of his early "themes" was to invest in stuff where he was a shopper or was familiar with the products etc. I preach that method here because it works -- and it's easy to pay attention to your own habits and activities. The problem becomes on the sell side --- when you don't listen to yourself and recognize when you're no longer happy with "X". Say if you switched to shopping at Lowe's when you own stock in Home Depot etc. Or you're going to Chipotle and not going to McDonalds -- or you quit drinking Starbucks... or Budweiser...

[sebtarta]

Greg where do you read most of your information? I usually look at the news ticker next to the stock on google, but sometimes it takes you to these sites that make you question how true to their word they are.

[GregWeld]

Originally Posted by sebtarta

Greg where do you read most of your information? I usually look at the news ticker next to the stock on google, but sometimes it takes you to these sites that make you question how true to their word they are.

I pay for a lot of the information I read... and I have multiple investment accounts at various institutions. As such - I have direct contact with people at those institutions. So the answer is -- I have a bunch of different ways I get
info.

Here's something that I get to do that most wouldn't have available to them. Let's say I'm having lunch with one "banker"... and he's telling me about blah blah blah. I shake my head and listen etc. But when I get in the car - I'm on the phone to my other guy... and I'll say "Hey... I was thinking about blah blah blah...." And I'll get another perspective.

The problem with "news" is that it's just that. News. It can be very factual - and it could leave out some pertinent facts. Example. The news headline reads "Obama raises tax rate on dividends to 39.6%"..... Catchy - factual.. but missing some serious details... like the fact that you'd have to have 400+ grand in adjusted income in order for that to take affect. So I never trust one source. Keep digging and see if there's something more you should know. The initial information should only whet your appetite.

By the way --- I have little or no life.... and I've been doing this stuff for 30 years... "Investing" funds everything else I do in life - so it's job one.

[GregWeld]

So here's a couple more of those "priced for perfection" stocks -- which in my opinion has little to do with the actual performance of a growth company...


Yelp! Reports it has 256% growth from the previous quarter -- the stock get hammered! Down 12% in 5 days...

FaceBook -- Huge growth in almost every metric - but not good enough - BAM! Drops like a rock after hours - it's down 10%

What do we learn from this kind of action?? Seriously? What's the take away... the companies have HUGE growth -- they're making money...

You learn that the STOCK PRICE isn't always connected to the actual facts.. and when that price is connected to huge expectations... even if the company does really really well.... YOU GET HAMMERED in the price.

Are these stocks good to buy on the dips? If I was a young man looking for some long term growth -- I'd be a buyer of FaceBook on the pull back. Not much but I'd dip a toe in. THEN WAIT! Wait for them to report another quarter... Never go jumping into the deep end without knowing the depth of the pool! Check it out first...

[96z28ss]

Why do they have pre market and after hours buying and selling?
Doesn't seem fair that they allow this. it should be open or closed.

[GregWeld]

Originally Posted by 96z28ss

Why do they have pre market and after hours buying and selling?
Doesn't seem fair that they allow this. it should be open or closed.

It's fair NOW -- didn't used to be fair -- Used to only be open for high net worth guys and pros... now anyone with a brokerage account can trade pre-market or after hours.

There's many RISKS to trading like this. Most of it is done only with limit orders... and since you can't get a quote - you're basically trading blindly -- and in a very small pond. Meaning not many people around selling or buying. The volumes traded like this are generally very small.

YOU could go out and research why they allow it on the internet. :>)

[96z28ss]

Originally Posted by GregWeld

YOU could go out and research why they allow it on the internet. :>)

Nah! easier to ask you, its not like your busy or anything.