Investing 102

[68Cuda]

Originally Posted by GregWeld

It's a HUGE - make that GIANT - mistake to invest money is the stock of the company you work for... essentially ending up with "all of your eggs in one basket". Ask the folks at WorldCom... or PG&E...or Chrysler... or Conseco... or Enron... or Washington Mutual...


When I say to invest in companies you understand and know... I'm talking about if you shop at Home Depot or Lowe's... or you love your Ford... or use AT&T or Verizon.

Yes, I tell guys at work that all the time! I participate in the Employee Stock Purchase Program (ESPP) which allows you to purchase company stock at a 15% discount quarterly through payroll deduction for up to 10% of your base salary. Each offering I sell as soon as I get it. I work with a guy who was a multi-millionaire on paper before the double whammy of the "dot-com" bust and 9/11. He had his entire savings in company stock and had a large number of options in the 40 dollar range when the stock crested 90 and was headed toward 100. He held on to it all because "everyone" knew it was going to keep going up. Now he is delaying his retirement to try to scratch enough together to be comfortable. The stock did not climb back above 40 until recently and by then most of his big options had expired. In the past ten years the company has not been as generous with the options because the tax laws changed regarding them and they are no longer as attractive for the companies to use as incentive.

I do not work for INTC, but I know the business quite well and we all share the same vendors. Since the business is quite volatile I also have ex-coworkers and people who were my customers when I was a designer at almost every manufacturer in the US. The industry is relatively small. When a company is hiring I will almost always get a call from a headhunter trying to get me or at least give them a lead on someone who needs the job.

[GregWeld]

Speaking of AT&T (T).... it was mentioned above. Here's another reason I love dividend paying investments. They announced a 2.2% dividend increase again this year. Okay -- it's a ONE PENNY raise... to .47 per quarter. Hardly earth shattering. I don't think I'll order a new LSA motor because of it... but these raises - over several years - are what increase your YIELD ON COST (as your cost stays stagnant and the dividend rises) --- and more importantly they help with INFLATION.

The above is NOT about "buy AT&T"!! It's about dividend investing... and companies that increase their dividend over time. Don't discount the importance of these. Inflation - even benign inflation (meaning it's really low) - over time eats away at your ability to live life as you desire if you're not keeping even or better yet - getting ahead of it.

The reason you want your home paid for by the time you retire -- is to keep that cost off the debit side of the cash flow... We all know that we'll most likely be buying less car stuff as we age... Our kids should be well out of college... but property taxes and upkeep - food - insurance - travel expense - these costs rise steadily and you need to be able to keep up. A company like AT&T has demonstrated that it's willing to share with it's owners (yes! That is what you are when you own the shares!) and 2% dividend increases year after year starts to add up 10 years down the road!! In 2010 - the dividend was .42 a share --- now it's .47 per share! WTF is wrong with that?? Nothing!!

In full disclosure, own 20,000 shares of T --- quick math says --- in 2010 I was getting $8,400 per quarter or $33,600 annually. Now just 4 short years later -- I'm collecting $9,400 per quarter or $37,600 annually. That's $4,000 per year MORE for doing nothing excepting holding on. That's a coupe sets of Hoosiers that I didn't used to get. LOL

[Woody]

Originally Posted by ironworks

So I have been looking at some more stocks to pick up to make myself diversified and I struggle to just drive around in my world and know what to pick. Sure I should have picked Chipotle but they don't have a dividend, but there stock really started to sore around the time we started eating there and the line was always 30ft out the front door.

But my question goes along with you last posted, How does a guy find out about the stocks that are good ones that he would never ever know about in his day to day life. Your Alteria (MO) stock I would never know about, the KMI that seems to be a good one. I don't see that stuff and I live in the oil patch since its a pipeline company. I don't think watching all the stock trading shows are really that great.

Currently I find a stock that Think might be growing and I look at it on the long term to see if it constantly grows upward. Then I look at the dividend and make my choice from there. But I'm sure there are way more stocks out there then I will ever know about.

I find a good way to learn about new stock investing ideas is through reading seeking alpha: http://seekingalpha.com/

On the home page is a list of the top articles. Just by browsing through some of the articles you will get some new ideas for stocks that you may want to research further.

This website: http://dripinvesting.org/tools/tools.asp has a pretty good list of stocks in the "Dividend Champions" spreadsheet that may give you some additional investing ideas.

The above sites are just starting points to give you ideas. Make sure you do your own research.

[gearheads78]

Originally Posted by Woody

I find a good way to learn about new stock investing ideas is through reading seeking alpha: http://seekingalpha.com/

On the home page is a list of the top articles. Just by browsing through some of the articles you will get some new ideas for stocks that you may want to research further.

This website: http://dripinvesting.org/tools/tools.asp has a pretty good list of stocks in the "Dividend Champions" spreadsheet that may give you some additional investing ideas.

The above sites are just starting points to give you ideas. Make sure you do your own research.

This is exactly what I was going to say. I would look up the user named Chower and read everything he has ever writting there. Make sure to read all the comments at the end of each article and branch off to other posters there. There a lot of smart people that never do an article or a blog but they comment from time to time with great insite. I started with this thread and ended up on seeking alpha and find myself there more of the last year than car sites. I learn something new every time I log in there.

I just wish I started this at 21 instead of 41

[WSSix]

You guys can sign up for email notifications on new topics within the category or about specific stocks from Seeking Alpha. I get them everyday and read through them usually as well. I completely agree the comments after an article are great as well, typically. SA could easily be a forum just like this with the way the comments section usually goes.

[GregWeld]

This is a "behavioral" warning!



I read SeekingAlpha every day as well as many other newsletters and articles etc. Some of the worst investments I've ever made were from reading about the next great blowout investment - get all excited about it and pushed the buy button.

Be very wary of that "type" of investing in yourselves. Once a person finally "discovers" investing - has some success - and becomes enthusiastic... they are looking for ways to stretch their wings. They have a fresh pile of cash and are just itching to put this work.

By NOT having something on the horizon - where they've "pre-selected" the name and then have some time to watch it - read about it - "live with it" a little while leads to the frantic search to get their money to work. All it takes is one well written (even well meaning!) article - and they jump into it (whatever it is).

Don't be a Rob Lowe investor. Make your shopping list... double back on that list and watch and read everything that comes your way on all your names - feel free to modify the list. Substitute or add a name. Stay abreast of the "market" in general... and make certain you have your BASE built on a solid foundation. After you have 20 names... and by the time you've gotten to that point -- then you can buy some outliers... you can jump on an IPO or two... you can broaden your risk. You'll have experienced ups and downs - success and failures - you'll no longer look to the grocery store clerk for investing ideas - you'll be comfortable with your own choices - and why you chose them.

I'll make you this guarantee:

You WILL lose the most money when buying a company that you know nothing about - haven't known about before last week... and didn't "follow" for awhile. When that "investment" turns south -- and doubt creeps in -- and the base in your brain doesn't really get why you bought it in the first place... you'll hit the sell button and lock in a loss.

Why do I say this? Because after doing this for 30 years - I've been there and done that.

I'm thrilled you guys are into reading - and are poking around - and are discussing all this stuff. That is how you learn. I'm not talking about not readying everything you can get your hands on. I'm talking about tempering the new info and not jumping in too quickly. Think about how many pieces of clothing you've bought because it's "on sale" - brought it home - and then never worn it... did you buy it because it's something you've really wanted for a long time - or was it the shiny new thing and it was on sale - but it's blue and you never wear blue...

[GregWeld]

We've discussed IPO's about a million times -- but now that we're coming up to the end of the year - we can start to get some YEAR TO DATE data to see how some of these have done.

Again -- this is not a BUY THIS and DON'T BUY THAT. I don't really want to get this thread into that sort of discussion because it leads to a lack of research and a lack of knowledge about why YOU bought what you did. There's a TON of websites that have that as their goal.

There's been a couple of names discussed here over the last two years. FaceBook (FB) - GoPro (GPRO) - Twitter (TWTR) are three of the big ones. I've personally advised jumping into any of these - and particularly on the IPO... I've said instead to wait and see how they go - and if you still want in - then okay. Keeping in mind this is 102 investing so ASSuming that most don't have a stock pile large enough that they can afford to loose that much. If you're starting out and have 10 grand invested and you lose 1 grand -- that's 10%!! Trust me - it's easy enough to do that just with market swings!


Facebook is UP YTD 47% and since inception you'd have doubled your money. It's been a wild ride with big swings in share price... and this is what I've warned about. CAN YOU STOMACH these $10 swings... if you can't you panic and sell. Hindsight is great - but doesn't help you sleep well at the time.

GoPro is the big winner - being UP 117% Year To Date! But once again -- here's the killer part that EXPERIENCE tells me this is a tough investment! It's seen a high of almost $94 and a low of $53. It now trades at $68 giving you a double IF -- IF you'd been able to buy at the IPO price. Still there was ample time to get in for a month or two after the IPO and you'd still have huge gains. But ask yourself if you'd have freaked out having seen $94 and watched it glide down to $53. Would you have sold out? Would you have really seen this as a long term investment or would you have started to really question this holding? They call that being "a weak hand" on wall street. Weak hand holders lose their asses.

Twitter is DOWN 40% YTD.... and this was the one that everyone was certain was going to be the biggest IPO ever - the next "Microsoft" millionaire maker. I heard this morning that it loses 50 cents for every dollar of revenue. OUCH.

I'll toss another one in.

Alibaba(BABA)is up a whopping 13%.... that's 6 points BEHIND the NASDAQ. In other words - you could have just bought the QQQ (NASDAQ ETF) and made more money.

Kimberly Clarke (KMB) - the toilet paper maker is up more @ 14%... LOL

My point is not that you could have gotten in these and made a gain - my point is more that it isn't going to be easy. Pick the right one and you're golden - pick the wrong one and you suck. Up 100% is fun - DOWN 40% sucks. That's why I don't "INVEST" in IPO's and the more they're talked about the farther I want to be away from them.

[XLexusTech]

Well then you may want you quickly learn something about Twitter....

Speaking as a guy who bought FB during IPO and more below 20 and am sitting pretty ... With FB only trailing JNJ as my best 2014 gainer


Correction my Apple is up 67% ... Because buying low is where all the money is :-)
Just saying.

Ok now adding something meaningful ... Their is more to learning about a company then how it's finances look... You have to learn about the market segment and company vision ... In there might be we're you find companies with upside... Take FB as an example... Many people focused on the perceived lack of revenue strategies ... Opposed to market dominance and technical vision ... Which is why I bought held and bought more close to the all time low $$$$$$

[GregWeld]

Originally Posted by XLexusTech

Well then you may want you quickly learn something about Twitter....

Speaking as a guy who bought FB during IPO and more below 20 and am sitting pretty ... With FB only trailing JNJ as my best 2014 gainer


Correction my Apple is up 67% ... Because buying low is where all the money is :-)
Just saying.

Thanks for making my point. Which was - you didn't need to GAMBLE on the IPO's to have nice gains.... Johnson and Johnson (JNJ) and Apple (AAPL) and many other tried and true names did as well or better than some of the IPO's.

I've never said DON'T BUY -- my point is more about NEWBS being able to stomach some of the wild rides these TYPES of stocks take you on.

[XLexusTech]

Originally Posted by GregWeld

Thanks for making my point. Which was - you didn't need to GAMBLE on the IPO's to have nice gains.... Johnson and Johnson (JNJ) and Apple (AAPL) and many other tried and true names did as well or better than some of the IPO's.

I've never said DON'T BUY -- my point is more about NEWBS being able to stomach some of the wild rides these TYPES of stocks take you on.

Ok now adding something meaningful ... Their is more to learning about a company then how it's finances look... You have to learn about the market segment and company vision ... In there might be we're you find companies with upside... Take FB as an example... Many people focused on the perceived lack of revenue strategies ... Opposed to market dominance and technical vision ... Which is why I bought held and bought more close to the all time low $$$$$$

No disagreement however I believe long I will make exponentially more on FB then JNJ which I actually bought for the dividend but my timing was optimal...