My wife likes stock splits, always felt warm when Linear Technology split. It encourages people, although in strictly mathematical terms it's not special.

The thing about to split or not to, is interesting. There is a kind of pride in knowing you've got a thousand shares of whatever instead of 500. It makes you think you're making progress. Or maybe it's just bragging rights. Or maybe it makes it easier for the casual investor to not suffer "sticker shock".

There's another aspect too. If they don't split and get up into, say, the 200s like TNH has done there's that little nagging worry that says, look, if this thing tanks it's got a LONG way to drop. I know that on paper that shouldn't deter as long as the valuation is reasonable, but in that particular case, my "spidey sense" proved right on.

I was real interested in buying TNH mainly because of the dividend and started following it when it was 210ish and even had a buy target of 204 on it, then dropped it to 196.

Care to guess what it sells for now? So, maybe just maybe backing off in large part because it was so pricey was not a bad idea. Maybe for the wrong reason, but it helped prevent a big loss.

On the other hand, had it been 20 instead because of splits, who knows...

I guess the pinnacle of the don't-split culture is Berkshire Hathaway. Pretty cool if you could say you owned a few shares of BRK-A at $172,480 a share. I unfortunately can't say that.

To follow up on what I was saying, there are other recent ones I avoided - TSLA for instance. It panned out, that is, as a good reason to pay attention to the "too far to drop" rule. If they'd split that thing and kept it lower, maybe a different result? Nobody knows, but it'd have been interesting.

I also use the "too far too fast" rule. It can apply to both individual stocks and to the whole market. A beautiful example of it with an individual stock that I've been very interested in is STML. So I avoided it.

You can check out STML and TSLA and see what I mean.

Anyway, regarding "too far too fast", that leads to another pet phrase, "falls of its own weight". And speaking of which, the internet headline this morning was words to effect "Stock prices are higher than they've ever been. Is this another bubble that's likely to burst?".

That kind of talk in itself can cause it to burst. It makes people panicky and do crazy things.

quote:

Originally posted by Shack:
To follow up on what I was saying, there are other recent ones I avoided - TSLA for instance. It panned out, that is, as a good reason to pay attention to the "too far to drop" rule. If they'd split that thing and kept it lower, maybe a different result? Nobody knows, but it'd have been interesting.

Who is buying TSLA? Is it going into our 401Ks, with the blessing of TPTB?

That could be scary.

According to Urban Dictionary, TPTB is a reference "mostly used in cult shows like Stargate, Star Trek, BtVS and the like"...

quote:

Originally posted by Shack:
That could be scary.

According to Urban Dictionary, TPTB is a reference "mostly used in cult shows like Stargate, Star Trek, BtVS and the like"...

Yes, maybe that was a poor choice for a turn of phrase. On the other hand, if you flip down a little further on the Urban Dictionary, it says:

3. TPTB
(1) This acronym represents the Apostle Paul's phrase, "the powers that be." It is from his letter to the Romans, chapter 13, verse 1.

I hope TSLA succeeds and Musk certainly seems to have the Midas touch, but it's too speculative a play for my blood. The only car company I own is Ford (F). Up 76% since I bought it and pays a 2.4% dividend. I'm OK with that.

I'm still scratching my head why my CSCO (+13%)and INTC (+21%) seem so undervalued yet show no real inclination to join in the party.

I'm only up for INTC at about 20ish, not where it is now.

CSCO we waited years for it to come back, and it has, but only somewhat. Personally I've always liked its other namesake better, SYY.

Basically I have though this problem with all the techs (depending on what you call a tech). I'm allergic to stocks whose business or product is not something I can really understand or ever learn enough about to truly understand. It doesn't take long in reading the technical details about computer electronics for my eyes to kind of glaze over, if you know what I mean.

quote:

Originally posted by Shack:Basically I have though this problem with all the techs (depending on what you call a tech). I'm allergic to stocks whose business or product is not something I can really understand or ever learn enough about to truly understand.

This was part of the problem when I bought Twenty-First Century Films; it was a business I didn't understand, which made me a sitting duck.

I agree folks should invest in parts of the stock market they understand.


A good example of that in my own portfolio is Olin (forgot their ticker designation). I bought Olin at $10. It quickly rose to $20, then split two for 1. That brought individual share prices back down to $10, but as all the folks who used to have it at $20 still had $20 worth as after the split they held two shares for every share they had before the split.

So anyway, within months after the split, the new shares were back up to $20 ($22 actually ). At that point everyone who bought in at the original $10 price was then holding $44 worth of stock for each original share purchased. So a person could have sold within about 15 months from the original purchase and made a profit of 340%. I chose not to, and still choose not to.

Why not? Two of their products I thoroughly understand. One is ammunition. They are a major supplier of both the U.S. military and private shooters, and ammo is a great product. You make it, you sell it, and most buyers use it all up. So then they want to buy more (have to buy more in the case of the military). A great, easily marketed product with lots of return customers.

Their other sales item I really like is "Winchester". Olin owns the rights to that name, and everyone who makes anything labeled "Winchester" has to buy the right to use the name and there is only one place they can buy that right. What better kind of product could there be? Zero cost to the seller, and, again, a pretty sure supply of return buyers/users.

They are also a major player (manufacturer) in the world's chlor-alkali market.

To top it all off, Olin pays regular annual dividends, every year.

I still am not getting an edit icon when I post. Makes it impossible to correct typos. For instance in the post above, I accidently type in "$320" where I meant to type $20. A number of other typos in there, and if I ever get a edit icon again, I'll go back and correct them. Until then I hope my posts are understandable anyway.

Shack

I sympathize with you when it comes to Tech. My major concern is always that tech can go obsolete in the blink of an eye. You think vinyl is cool, then it's 8-track, then it's cassette, then its CD, then it's iTunes. Kodak has a monopoly, then Fuji takes a bite out of them, then digital drives them into bankruptcy. While Cisco and Intel have been dominant, I'm not sure they are going to define the future.

Today I was focused elsewhere. Seadrill (SDRL) missed their earnings estimate by $.03 and it knocked 5% off their price, but they raised their dividend about 4.5%. If a person buys now they earn an 8% divided. I've got a big position and they need to rise about 10% to make me want to add to it.

Pfizer (PFE) on the other hand hit my trigger and I added another 100 shares to my holdings this morning.

AC

I liked DuPont (DD) for some of the very reasons you mention. They then got away from ammunition, but I stayed with them as they were best-of-breed in the chemical industry. They remain my 3rd largest holding, I'm up 74%, they pay a 2.9% dividend, so I can't bitch.

I decided long ago to allow much smarter people than myself as it relates to stocks, to invest my money. Pick a great mutual fund company with a good selection of funds that have a superior track record along with reasonable fees and check in every couple of months to see if any rebalancing is necessary. It worked well for me over the past 30+ years. The same can be said for your dentist and primary care doctor. Some things are best left to experts. No shortage of "smart" investors that thought they could outsmart the markets..and ended up with a lot less than they intended to.

True. Very, very true. But with respect to mutual funds if I had a good one, I didn't even look at it excepting the quarterly and year end statements. Looking at it more frequently led to wanting to make unwise changes. In fact, many of the better funds allowed no in and out trading at all or were closed to new investors. They wanted you to let them deal with it, to put it bluntly. Your making money with them was somewhat in the underlying holdings appreciation, but the real money was the yearly reinvestment of dividends and cap gains which gave you more shares. I was content to do that with one for about 25 years, until I found a way I liked better, which was picking them myself. I was doing that on the side and getting better returns. However, one thing I liked about the mutual funds were the ideas you could get from them on companies to look at. Just for that reason I've stayed involved with them on a limited basis.

In other words, it can be done on an individual basis. The problem is what that takes. In my case I've been at it since about 1959. I think Gulf Oil was the first I took a liking to back in those days along with the rails, nearly all of which have long since been merged and no longer exist. The younger ones today wouldn't even recognize their names.

But all the time in the back of my mind there was this strong intense desire to do it myself. And I worked on strategies and tried them out over many decades. And spent countless hours sometimes several hours a day on research (in those days no internet - you did it the hard way - later on fax reports from S&P helped a lot).

Anyway, one day I find myself actually giving tips to the mutual fund guys, and the good part is, they're actually showing interest. And then one day I suggested one to a stock broker (in a brief period when I used full service brokers) and he goes and says, "listen, the sheep aren't supposed to shear the shepherd". I learned from that and never looked back.

And eventually you find or can find that you can pick 'um better than they can. But it takes persistence, endless work and constant probing. Now, I know how that sounds, but darn it, it's true.

Well, then one day you are retired and that's the final piece of the puzzle. You for once have the one thing really needed that was always missing. You've actually got the time to do this the only way that works, to wit, as a business with business like hours and work ethics to go with it and a thick notebook full of countless rules you've developed for going about it, with chapters for each strategy. You also spend countless hours on the phone with the investment company you do your internet trading with, asking countless questions and you make careful notes of all the answers. And you get yourself qualified to buy and sell options. And you also spend considerable time learning tax rules for specialized investments like foreign companies, limited partnerships, royalty trusts etc (foreign limited partnership tax reporting can get sticky). You also ask them lots of questions about their business operations and when you can, go see them in person. On the visitations, I did some of that in my working years for the underwriter's IPO due diligence. That experience helped too.

What I'm saying is, it can be done but not by everyone. You got to want it bad and treat it as a job...

quote:

Originally posted by Woodrow S:
I decided long ago to allow much smarter people than myself as it relates to stocks, to invest my money. Pick a great mutual fund company with a good selection of funds that have a superior track record along with reasonable fees and check in every couple of months to see if any rebalancing is necessary. It worked well for me over the past 30+ years. The same can be said for your dentist and primary care doctor. Some things are best left to experts. No shortage of "smart" investors that thought they could outsmart the markets..and ended up with a lot less than they intended to.

All true enough, but doctors take the Hippocratic Oath, to do no harm. What is the equivalent for stockbrokers (or lawyers, for that matter)?

Tom, Mutual Fund managers are not stock brokers per se. They manage a fund or series of funds for a large group of people and are held to strict fund company standards, unlike a stock broker. Loads of differences between the two....mainly ethical ones.

Shack, yes you are right..it can be done but if not done right you can lose your shirt pretty quickly. 99.5% of the population simply don't have the sufficient time available to do it right and those that take short cuts get a buzz-cut. In addition, even if the time was available most would not be able to comprehend all of the variables that go hand-in-hand with managing not only large amounts of money...but money they really can't afford to lose through a lack of knowledge. As you stated, it took a long time and loads of hours over decades of time to get the confidence you have to handle it. While it may be self satisfying and perhaps slightly more profitable, the wide majority of people are better off investing regularly in solid mutual funds. Very few individual investors actually beat the markets with any regularity and the same holds true with mutual funds. In reality, even the very rich and connected have major share holdings in mutual funds.

Tom....don't get me started on lawyers!

Unfortunately I have one data point to consider when it comes to investing in either common stock or mutual funds. Our daughter died ten years ago at age 27. She left her 401k to her mother. We've done nothing with it except let it reinvest over time. I had encouraged her to be diversified, and to consider good mutual funds because she was not experienced enough to be a good stock picker. After ten years:

Company Common Stock - +7.65% annually
Large Growth Fund - +7.63% annually
Large Blend Fund - +7.60% annually
Diversified International Fund - +7.08% annually
Stable Value Bond Fund - +2.75% annually

The funds all had annual fees that I've deducted from the results.

I'm surprised how similar the results are, but not surprised how low the return is for the bond fund. I avoid bonds for the most part, and have never followed the axiom of shifting from stocks to bonds as you grow older. I consider that ignorant advice.

I think I agree with John Bogle, that for the novice, rather than being either a stock picker or fund picker, just invest in an index fund with low fees, such as the S&P 500 index.

Personally, I've made money with mutual funds, but have done much better picking stocks.

In a way, I consider investing in mutual funds like betting on 8 horses in a 20 horse field. All 8 aren't going to be winners. I've found with a little "common sense" study I can eliminate those duds. A lot of the data and statistical BS is nothing but background noise, eliminate all that wasted time.

I do hold mutual funds my 401k accounts, but in my personal portfolio I've eliminated all but one mutual fund, and stay focused on common stock.

That doesn't mean I'm constantly jumping around trying to catch a hot stock. I own 24 stocks, and I add to those holdings when I feel it is appropriate. I don't look to add any new stocks to my portfolio. Being retired puts a crimp in my ability to invest, but it doesn't stop it.

People that are financially able to invest, but aren't investing in the markets are missing an opportunity.

Finding the time to follow it is a critical factor in deciding between doing it yourself vs funds. And, gaining the necessary learning, experience and self discipline are the critical factors in being successful in doing it yourself. Along with having capital to risk, and being willing to commit to one in a big way but only if you are absolutely certain about it.

Speaking of which, right now at this time each year I find I'm at a distinct disadvantage.

It's called the hunting season.

Getting up at 3 a.m. to go deer or duck hunting and spending the whole day getting back or sleeping over out in some deer camp or duck club is definitely not conducive to making anything in the markets.

Good example was realizing over the last ten days one that I could be trading went up one whole point. Not significant, you say? Well, it went up from 5 to 6 and I knew for a fact it could. You realize the kind of money that could have been made?!?

Anywho, I did get in at both 3.5 and 4.5 so all is not THAT bad...but that's not the point. You're always looking for more and I did miss out on the 5.0. However, some consolation in bagging that 8 point buck I'm having mounted.

At the moment I'm contemplating either buying more long, or to write a covered call on, or just buying a call outright to sell later...

Fed talk caused the market to pop today. The only stock that drew my fire was DOW. I've held a long position for quite a few years, and added to that position today. The dividend isn't great at 3.1%, but I can live with that. My DOW holdings are up 85%, so I'll continue to keep my eye on it. The last two weeks it's been on a tear.

We've got some DOW also, somewhere.

Anyway, I've got the strategies down to these -

Plan A - buy for the long term for the value appreciation. When they're up that's nice, but the down side is, that doesn't help at all with cash flow, because you're already committed to not selling them

Plan B - buy for short term swing trades, for cash generation

Plan C - buy for the dividends, also obviously for the cash flow

Plan D - sell options, ditto on the reason

Plan E - on buy outs, split the proceeds between cash and reinvestment in new stock

Sometimes you find the perfect stock, one that does it all, value plus good dividends. Only a few work that way though. LMT for instance.

In my world, "high dividend" starts at 5%. Ones over that typically don't do much value appreciating and are useful mainly for the cash flow. Once you get 7%+ you're typically in LP, BDC, REIT and royalty trust scenarios. You can have an actual royalty trust, like BPT, or a corporation that does the same thing, like PDLI.

DOW still running higher. I added more this morning.

You know, there's another thing we haven't discussed here. It's mistakes we DIDN'T make, meaning, mistakes we avoided.

STML (bio research IPO, no revenue as yet, but if their product pans out it could be huge) is one that was red hot and rocketing up, and I was sorely tempted, but now it's dropped back to about where it started. Sure glad I didn't get on board.

TSLA is another I was real tempted on. Didn't seem like it'd quit rising and I almost bought it at 175. And you know what it's done since then.

Still another is LUKOY. I almost bit on it when I was buying some oil/energy stocks.

Do you guys have ones you watched and watched and almost pulled the trigger on and are now real glad you DIDN'T do?

quote:

Originally posted by Shack:

Do you guys have ones you watched and watched and almost pulled the trigger on and are now real glad you DIDN'T do?

Ironclad rule: if the broker calls me, I hang up the phone.

There was a late-evening call from an "investment counselor" one year, offering oil-well leases that paid a nice percentage. The hitch was, of course, that the wells have a finite lifetime and when it's up you own nothing. This was a period when the oil prices were headed back down, and the fancy percentage didn't last long. I hung up the phone and I'm glad I did.

While I think there is a future for electric cars for local use (rent a Lincoln or a Cadillac for longer trips), I also think that TSLA is being pumped, with the blessing of our "progressive" administration. I'd be curious to know who's buying it at the current prices, whether it's retail buyers, proprietary trading or 401K-stuffing.

Having a good day. Added to my position in DuPont a few minutes ago. Offshore drillers popping also.

Not a revolutionary concept, but you have to just keep banging away at the market. I've only gone all-cash once, in 2008. It worked out great, but I couldn't time the market again probably, if I tried the rest of my life. Just keep chipping away at it on a steady basis.
http://www.usatoday.com/story/...ing-nothing/4189351/

The only other time I tried to go all-cash was in 1987. I couldn't get through to my broker to bail-out, the crash was so swift and intense. In retrospect, it would have been too late, and a huge mistake to sell. With the advent of online trading it is much easier to make a quick mistake you'll regret later. When in doubt, do nothing.

Watching a few blue chips at the moment. Probably buy a little more before the end of the year.

A rising tide does NOT indeed float all the boats.

That is, not everyone this year has picked winners. You can and will still make mistakes even in a rising market. Especially if you're working on a long list of 'um. There're gonna be some clunkers you landed on.

You just have to use iron discipline in picking them and be committed to waiting out the losers.

But if you think you've spotted an opportunity that everyone has not already piled into, you've got to go ahead and take the chance. Sometimes you just "see" something in one.

And you've gotta closely follow of whole bunch of 'um to find your winners. I've got a couple hundred on my watch list.

Going through them and making notes on buy and sell prices is something I used to do, but dropped it. It's impractical with a long list, because those prices are only temporarily valid. They keep changing. And it's impossible to be revising and up-dating all that. You'd have to do it constantly.

What I try to do is find ones on a run that look like they "have legs", that is, sustainable upward thrust.

quote:

Originally posted by Shack:
A rising tide does NOT indeed float all the boats.

I just wonder, if the economy is growing at 2%, how can the entire stock market go up 20%?

Bought DOW and GE this morning.

I stay with the strategy that has worked for me for the past ten to fifteen years. I don't worry whether the market can or won't hit certain milestones, nor what the Fed is doing, nor what the daily ghost stories from "billionaires", "experts" and "talking heads" say a person should do. I don't care whether a stock of mine is hitting new highs, nor worry how it can possibly go higher. I believe I invest in quality companies, and if they have momentum, I ride them. If they lose momentum, but still have sound fundamentals, I stop buying and hold them.

If you can't remove emotion from the equation, you shouldn't be in the game. Investing is like running a business. It's not a game. It's not a hobby. It's not entertainment. It's deadly serious.

Sounds right to me, good companies will ride out downturns if they're doing something useful in a competitive fashion. The stock market historically grows at 8-10%, falling off periodically when it gets ahead of itself.

What both of y'all said is very, very true. But, where it gets really complicated is when you also need a steady income stream from the stock market in addition to underlying appreciation.

When you're trying to generate really significant cash flow it DOES get interesting...that's where you get into all those other strategies I was talking about.

Speaking of which, I guess I better get back to it. There's work to do today. Visiting here is my form of R&R or taking a break or stress-busting from trading.

I think after the 3:00 market close I'll go sit in my deer ground blind up on that hill overlooking the main food plot till shooting hours are over...

Share appreciation at this point in my life isn't a key factor. Long ago I determined that retirement wasn't going to be a big sack of money that I fed out of until it was all gone. Retirement to me means creating a revenue stream that keeps you from dipping into that sack of money you've saved.

I've done that. Dividends contribute about one-third of my retirement. Nut-cutting time will be when this market turns with a vengeance. If my stocks hold value and continue to pay the current dividends, I'm good. If the market falls 10 to 15%, I can weather that without pain. If for some reason the market drops 25%, or beyond, and companies start cutting dividends, I don't know how much of that I can, or want, to stand.

Stocks only pay dividends if you still own them. If a bear market forces me to liquidate most or all of my portfolio to avoid sustaining heavy losses, I've just eliminated one third of my retirement. That wasn't in my plan.

For now, I see nothing but blue skies, but I have a twenty year horizon, and between now and then, I expect to see the sh*t hit the fan at least twice.

The other unknown is whether in my 70s or 80s I'm going to have the mental capacity to hold my own in the market. I hope, when the time comes, I have the mental capacity to recognize when I can't.

quote:

Originally posted by Kensco:

Stocks only pay dividends if you still own them. If a bear market forces me to liquidate most or all of my portfolio to avoid sustaining heavy losses, I've just eliminated one third of my retirement. That wasn't in my plan.

They aren't losses until you sell. Volatility is a given, the last few years, lots of up and down.

You can't stay at the party too long if the market is in a sustained dive. You have to evaluate the situation quickly, and act fast if you see no bottom.

Normal volatility doesn't even get my attention, but there has been seven bear markets in my adult life.

A bear market starts every 3 to 4 years.

It takes about 6 years for the DOW to recover; meaning it usually takes more than one cycle for the DOW to fully recover.

A bear from here would be a minimum fall from 16,500 to 13,200. The average bear during my adult life wasn't 20%, it was 37%. that would take the DOW down to 10,400.

At 66+ I don't see me clawing my way back from 10,400 to where we are today at 16,500 very easily, maybe not in my lifetime, so I stay focused, daily.

I'm not far behind you in age, but have been burned as often as rewarded by market timing. The temptation is to close my eyes and take the dividends, for the most part. I am curious to see what happens after this tax year passes, as I'd like to reduce some debts with this year's gains.

They're saying it's supposed to be clear sailing in '14, until earnings level off and valuations then start getting too far out in front.

The wild card will be the mid-term elections. If the Dems get total control, look out. Politics is one of the four or so things that can upset the cart. Foreign affairs is another. Interest rates another and there's a fourth...I forget, but it may be the price of oil. Or maybe inflation.

Anyway, on to far more important things. My afternoon after the market hunt the other day. Ever miss a shot? Well, there was this nice buck at about 175, but a tree was in the way. The only shot was a standing off hand out of the ground blind and I had to thread it through vines hanging off the tree. I think the bullet nicked one. So...I'm going back out this afternoon with an axe. That tree's coming down...

Tax time is definitely going to be very interesting for me this year. This is going to be the first time I haven't had an overseas exemption.

Politics (government action) is probably the great unknown for 2014. The Republicans and Democrats both make enough poor course changes to screw things up.

Interest rates and oil work both ways for me. Higher interest rates would help BAC and hurt some of my other holdings. Higher oil would help BP, ESV, HAL, SDRL, and possibly BPL, KMI, and KMP, but hurt some others.

If the children will play-nice in Washington D.C. I think I'll be OK.

The market is basically going sideways to close-out the year it appears. DuPont (DD) did trip my trigger again today, and I bought another 100.

Sounds like you'll be personally affecting the market in DD ..

For me, the tail end of deer season is eating into my market participation. Then we've got geese after that, and then quail still to go. And tree planting in February (I've got 2,000 on order from the state). Then turkey in April along with dove fields to plant.

I was watching turkeys flying Friday while deer hunting, and loving every minute of it.