Investing 102

[GregWeld]

So here's what I was saying about "THE FUTURE" as it pertains to a companies quarterly reports.... and these are - to me - far more important than what they did "this quarter". Because I'm an INVESTOR I want to have a feel for how my dividend is going to be paid going forward... that's what I'm buying - that dividend (earnings) stream...

So HALIBURTON comes out and says this quarter was good - they beat by a penny -- but then say - but going forward we may be impacted because of blah blah blah... Some of that talk is CYA - but some of it is right on the money because they are seeing something they don't like - so expect HAL to open down today and maybe trend down going forward


Here's a cut and paste...


Halliburton Co, the world's second-largest oilfield services company, posted a higher-than-expected quarterly profit and said its revenues would grow faster than oil and gas companies would drill this year.

Still, the company said its costs were rising, and that the industry shift away from dry gas and toward oil and natural gas liquids resources would hit its first-quarter earnings.

"We believe that reduced productivity and increased costs resulting from this relocation will be a short-term disruption for us and that the impact we saw in the fourth quarter will continue into 2012," Chairman and Chief Executive Dave Lesar said in a statement.

[Sieg]

HAL down 3.95% in the first five minutes.........

[GregWeld]

So let's just continue the "102" version of this thread....

Here's why EARNINGS are important -- but those FORWARD looking statements are even MORE IMPORTANT....

Let's continue to use Halliburton as todays example....

They beat on the earnings number - but made that caveat that going forward earnings might be impacted negatively...

When you couple this with a 1.02% dividend... so you don't have that nice "pay me while I wait for things to turn around"... "support level"... suddenly there's more sellers than buyers and the stock price declines.

IF --- it paid a 5% dividend - my guess is the stock would have hardly budged... They didn't say the business stunk - they just said it may have some impact yet they still managed to beat the earnings estimate - so it couldn't be "that bad"... But this is a stock that NEEDS that stock price GROWTH component - and if that's not there to offset that low dividend - then you get what you're seeing today... a decline.

Now -- if you're listening to the talking heads -- then you'll hear the words "it'll need some kind of CATALYST going forward". What they're saying is in layman's terms -- it will need a big business turnaround - or some big new oil field discovery or similar to get it going UP again. There will have to be some big news that will point to some event to get the GROWTH back in the stock price.

[GregWeld]

Since we're in "earnings season" --- I thought I might go out on a limb here and try to keep this thread interesting and make it a little "FUN" for you guys (at my expense - of course).


We own 160,000+ shares of EMC..... Okay - get off your calculators - and I don't own it at ZERO - so no - the math is not going to give you much indication of my profit or loss... for all you know - I have a loss in the stock (the good news is I DO NOT)

EMC reports earnings BEFORE the bell tomorrow (23rd).... let's see what happens to me but let's also use this example for a little "lesson". The lesson is the "law of large numbers".

What happens when you have positions like this -- regardless of the size -- size is relative - and it is why you need to be DIVERSIFIED... THIS IS THE "the law of large numbers". The number of shares multiplied by the share gain or loss - turns into "a large number".

So for INVESTING 102 --- I preach buying DOLLAR AMOUNTS rather than share amounts... because it is easier for you to see and keep track of - it's apparent when $1000 goes to $1250 or down to $900... But what happens is, if you have 500 shares of one stock and only 50 of another - that 500 shares becomes YOUR law of large numbers... a .50 swing gets multiplied by the 500 and becomes a real gorilla (up or down) So you need to be AWARE of that.

Because of prices (share cost) it's almost impossible to balance out an account in the number of shares... and maintain that 5% rule and have diversity. One stock costs $10 so a $500 investment gets you a bunch another stock is $50 a share will get you far less for the same $500 --- but a MOVE in the $10 shares can have MORE EFFECT on your account!

I hope this makes sense.


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WARNING HERE -- I am not allowed to trade EMC because we are considered "INSIDERS" -- as such I have no knowledge to share with ANYONE whether it will be good bad or indifferent...

[GregWeld]

BTW --- I think this thread holds interest because it's like our car builds -- we all get to live AND LEARN vicariously watching these cars go together step by step. It's so much more fun than just going to a car show and seeing a completed car. SO it is in that light that I've shared way too much personal info -- but I think it will HELP people more - and they'll be more interested and learn more when done this way. This is why I've shared my thought process more than just Do this don't do that. It's the thought process that is what you need to "get into". It's like fab work on a car - no two are alike - and it takes seeing someone come up with a solution that might kick up a solution for your own build... something "similar" but twisted to meet your needs.

Hope that makes sense....

[Bucketlist2012]

Originally Posted by GregWeld

BTW --- I think this thread holds interest because it's like our car builds -- we all get to live AND LEARN vicariously watching these cars go together step by step. It's so much more fun than just going to a car show and seeing a completed car. SO it is in that light that I've shared way too much personal info -- but I think it will HELP people more - and they'll be more interested and learn more when done this way. This is why I've shared my thought process more than just Do this don't do that. It's the thought process that is what you need to "get into". It's like fab work on a car - no two are alike - and it takes seeing someone come up with a solution that might kick up a solution for your own build... something "similar" but twisted to meet your needs.

Hope that makes sense....

Greg, Keep it up.. Many more people should be in charge of their future's and Present..

Making Money and keeping it, and growing it, are not just going to happen unless you work at it...

The wolf is always at the door...Wall Street...The Government, Heck, envious family..

So keep it up.. Again I am still figuring it out, But I know a few things.

I am for sure in the game because no ticket, no laundry, so you got to be doing something..

And Dividends are always coming in...One of my wife's favorite words.. Dividends..

Also We talk about money on the good days, and the bad days we know will pass, so we don't sweat them..

I am way longer term that the daily Noise..

[LS1-IROC]

More great info Greg...thanks for doing what your doing. I'm sure there are many guys reading this and learning, not necessarily posting.

I just read an interesting article on the long term outlook on TGT. Any thought there? Seems like it fits our requirements...Not great growth over the last 10 years but they have been increasing their dividend along the way.

[camcojb]

My daughter was given a single share of Disney when she was born (1988). It has split twice (4 to 1 and later 3 to 1) so she now has 12 shares worth about $470. Getting dividends yearly, but very low (1.5% or so). However, that stock was $4.67 when we got it, and is now 12 stocks at $39.31 each. That's a lot of growth I think for 24 years.

Trying to get her interested in investing a portion of her income. My son will for sure, and he's starting a new job when he graduates college that will pay him enough to really invest.

[ErikLS2]

I've always been a tad skeptical of these earnings reports that come out. Now, they do have to follow a set of rules being public companies and all but they are still afforded some flexibility in how they account for various things. So, in my opinion these reports don't tell the WHOLE story many times.

I do think it's wise to watch the earnings reports for companies you are invested in but Greg makes a key point in paying attention to any dividend they pay out. If they aren't bringing the money in, they sure can't be paying it out. It's a lot harder in my opnion to fudge anything here.

Still, I don't think I would pay that much attention to a low earnings report if the company is in a growing or strong industry and there are many other reasons to like them. If anything, I would use a weak period to buy more, as has been said already.

I'm thinking about gambling a little on Bank of America (BAC). It's been very low for a while and like Buffet says, there's no way to know WHEN a stock will rebound, but I can't see them going away totally. Plus, when everyone is fearful of something is the best time to buy it.

[Bucketlist2012]

Originally Posted by ErikLS2

I've always been a tad skeptical of these earnings reports that come out. Now, they do have to follow a set of rules being public companies and all but they are still afforded some flexibility in how they account for various things. So, in my opinion these reports don't tell the WHOLE story many times.

I do think it's wise to watch the earnings reports for companies you are invested in but Greg makes a key point in paying attention to any dividend they pay out. If they aren't bringing the money in, they sure can't be paying it out. It's a lot harder in my opnion to fudge anything here.

Still, I don't think I would pay that much attention to a low earnings report if the company is in a growing or strong industry and there are many other reasons to like them. If anything, I would use a weak period to buy more, as has been said already.

I'm thinking about gambling a little on Bank of America (BAC). It's been very low for a while and like Buffet says, there's no way to know WHEN a stock will rebound, but I can't see them going away totally. Plus, when everyone is fearful of something is the best time to buy it.

We all know you can never time the bottom, and sometimes when you buy into something you know will turn around, you take a hit at first as it bounces, but in the end, most of mine have gone up to where I thought they would go. It just takes the courage to buy at those times..

A few of my good performers fell more when i got into them, but they all did go back up.. The first few days were not good.. but great since then..