I recently did make a major change to my portfolio. I sold some stock and raised some cash from CDs to finance a home purchase for my family, where I will live. It was complicated and took advantage of two short sales and a still discounted home price (about 26% from the 2005 new-home purchase price). The result for me, holding the mortgage on the home. So, besides the mortgage, stocks, etc are....
PEP (Pepsico)
WAG (Walgreen)
PG (Procter and Gamble
KO (Coca Cola)
GPC (Genuine Products)
MMM (3M)
ADP (Automatc Data Processing)
HAS (Hasbro)
KMB (Kimberly Clark)
T (AT&T)
SYY (Sysco)
JNJ (Johnson & Johnson)
AVP (Avon Products) 2014 call options
The stock portfolio represents about 13% of my net worth, Gold/Silver about 2%, and CDs, cash and Mortgage (about 85%). And I will be using my investment cash flow to build up my stock portfolio to about 25% of my net worth, depending upon which stock opportunities exist. Also, I continue to hold no debt.
Showing posts with label portfolio. Show all posts
Showing posts with label portfolio. Show all posts
Monday, January 14, 2013
Saturday, January 01, 2011
My Review of "The Drunkard's Walk"
The book, "The Drunkard's Walk: How randomness rules our lives," looks at randomness and really randomness plays a greater role in what happens with humans than people, in general, think. I found the book to be exceptional. Although I have always suspected what the book claims, the book backs up its conclusions with mathematics. Plus, it does it in a fun way, making for a very enjoyable book, also. Although not specifically a financial or investing book, the book really is helpful in understanding such stuff. Some points which I noted are....
1. Human intuition is ill suited to uncertainty since in the 1930's researchers noted that people couldn't make sequences of random numbers nor recognize a random sequence.
2. Sometimes in life things happen which can't be foreseen.
3. The amygdala in the brain is active when making a decision, hence decisions are emotional.
4. Rewards work, but punishment doesn't. The opposite is just regression to the mean.
5. Examples which are more likely due to randomness - Roger Maris/1961, success of certain movies and studio heads.
6. Research has shown that people will assign greater probabilities to outcomes which are described in greater detail, the "availability bias."
7. Arithmetic didn't really exist until the 16th century, hence probability not understood before then.
8. DNA in courts - lab error = 1/11, DNA = 1/1B, so chance of error more like 1/10.
9. The Law of Sample Space - Gerolano Cardano - the Book of Games of Chance - 16th century.
10. The Probability of Points - 2 entities competing.
11. Pascal's Triangle - if need to know # of ways in which you can choose some # of objects from a collection that has a > or = #. Pascal's wager -odds about consequences of a pious life, 1/2 if G-d exists, ie. if pious. Confusing, but discussed.
12. Sweepstakes - cost of mail cheaper than chance of winning. Lottery, odds of winning same as one person dying driving to place which sells lottery tickets, but not advertised that way. Dice and roulette wheel are not perfectly balanced, so some uncertainty, not predictable.
13. The book mentions calculus and how it is composed of 1) a sequence, a succession of elements,b) a series which is the sum of the sequence of elements, and 3) a limit where the sequence is heading. But, in Zeno's paradox, the paradox is resolved because of constant motion, no stops. That's how Bernouli attacked the the relationship between probability and observation - toss a coin 10x maybe 7 heads, toss a zillion times expect 50% heads. Bernouli's Golden Theorem - large enough sample to ensure confidence within a certainty. Too small of a sample = the law of small numbers. For instance 1/3 chance that 5 of a CEO's performance will reflect his ability, so better to analyze his abilities rather than just look at results.
14. Bayes's Theorem is discussed where conditional probabilities. Prosecutor's fallacy/ mistake of inversion - just because A happens then B doesn't mean if B happens A will happen. Examples are SIDS deaths and OJ trial.
15. Understanding and quantifying random error led to a new field - mathematical statistics.
16. Wine tasting influenced by all kinds of things, price, context. Statistical measurements include standard deviation, standard deviation squared = variance. Also the Error Law known as a normal distribution or bell curve - in certain cases can expect certain proportionality of results. But, social physics not all normal, like Pareto principle - 80/20 rule or regression to the mean concept. Brownian motion shows Drunkard's Walk, randomness.
17. Book mentions V2 rocket attacks in WWII and cancer clusters, more due to randomness than predictable patterns. The human need to feel in some control interferes with the accuracy in perceiving natural events.
18. Lorenz's Butterfly effect - just small changes can lead to massive differences in results. Plus, unlike laws of physics, human affairs are too complex to predict. Asymmetry makes things impossible to predict, yet look predictable on retrospect, like the stock market. Also, people failing or in poverty may be more random than predictable.
In summary, a terrific book - will likely change the way a reader looks at things, or if a reader does think that way the book will show the mathematics behind it, in a very readable form. 5 out of 5 stars.
1. Human intuition is ill suited to uncertainty since in the 1930's researchers noted that people couldn't make sequences of random numbers nor recognize a random sequence.
2. Sometimes in life things happen which can't be foreseen.
3. The amygdala in the brain is active when making a decision, hence decisions are emotional.
4. Rewards work, but punishment doesn't. The opposite is just regression to the mean.
5. Examples which are more likely due to randomness - Roger Maris/1961, success of certain movies and studio heads.
6. Research has shown that people will assign greater probabilities to outcomes which are described in greater detail, the "availability bias."
7. Arithmetic didn't really exist until the 16th century, hence probability not understood before then.
8. DNA in courts - lab error = 1/11, DNA = 1/1B, so chance of error more like 1/10.
9. The Law of Sample Space - Gerolano Cardano - the Book of Games of Chance - 16th century.
10. The Probability of Points - 2 entities competing.
11. Pascal's Triangle - if need to know # of ways in which you can choose some # of objects from a collection that has a > or = #. Pascal's wager -odds about consequences of a pious life, 1/2 if G-d exists, ie. if pious. Confusing, but discussed.
12. Sweepstakes - cost of mail cheaper than chance of winning. Lottery, odds of winning same as one person dying driving to place which sells lottery tickets, but not advertised that way. Dice and roulette wheel are not perfectly balanced, so some uncertainty, not predictable.
13. The book mentions calculus and how it is composed of 1) a sequence, a succession of elements,b) a series which is the sum of the sequence of elements, and 3) a limit where the sequence is heading. But, in Zeno's paradox, the paradox is resolved because of constant motion, no stops. That's how Bernouli attacked the the relationship between probability and observation - toss a coin 10x maybe 7 heads, toss a zillion times expect 50% heads. Bernouli's Golden Theorem - large enough sample to ensure confidence within a certainty. Too small of a sample = the law of small numbers. For instance 1/3 chance that 5 of a CEO's performance will reflect his ability, so better to analyze his abilities rather than just look at results.
14. Bayes's Theorem is discussed where conditional probabilities. Prosecutor's fallacy/ mistake of inversion - just because A happens then B doesn't mean if B happens A will happen. Examples are SIDS deaths and OJ trial.
15. Understanding and quantifying random error led to a new field - mathematical statistics.
16. Wine tasting influenced by all kinds of things, price, context. Statistical measurements include standard deviation, standard deviation squared = variance. Also the Error Law known as a normal distribution or bell curve - in certain cases can expect certain proportionality of results. But, social physics not all normal, like Pareto principle - 80/20 rule or regression to the mean concept. Brownian motion shows Drunkard's Walk, randomness.
17. Book mentions V2 rocket attacks in WWII and cancer clusters, more due to randomness than predictable patterns. The human need to feel in some control interferes with the accuracy in perceiving natural events.
18. Lorenz's Butterfly effect - just small changes can lead to massive differences in results. Plus, unlike laws of physics, human affairs are too complex to predict. Asymmetry makes things impossible to predict, yet look predictable on retrospect, like the stock market. Also, people failing or in poverty may be more random than predictable.
In summary, a terrific book - will likely change the way a reader looks at things, or if a reader does think that way the book will show the mathematics behind it, in a very readable form. 5 out of 5 stars.
Monday, September 06, 2010
Portfolio - "Update"
I've done a few things to my portfolio. When a CD came due, rather than roll it over, with interest rates on CDs not as good as dividends for the kind of quality stocks I own, I added more shares of some stocks I already owned and added stocks of Johnson & Johnson (JNJ) and Walgreens (WAG). I added JNJ because it was now selling for much lower than I had previously sold it at and it remains a quality company with a nice dividend which is raised annually, plus it has a super great balance sheet. WAG, I have never owned, but have always wanted to if the dividend was in the range which is acceptable. Now it is, also with a pristine balance sheet and a policy of raising dividends generously each year. So, now with my kind of stocks generally paying more than CDs, stocks now make up about 23% of my assets - higher than my usual goal of about 15%.
Plus, I have sold the shorter term TIPS I owned since they were at a profit and reinvested the funds in longer term TIPS which I was able to buy below par, so I was guaranteed a profit with them, plus they offer protection against future inflation. Plus, some of the profit from the TIPS I sold, I used to buy more shares of the stocks I own.
Stocks are listed in order of largest position to least:
KMB (Kimberly Clark)
PG (Procter & Gamble)
MMM (3M Corp)
PEP (Pepsico)
KO (Coca Cola)
SYY (Sysco)
KFT (Kraft)
ADP (Automatic Data Processing)
T (AT&T)
GPC (Genuine Parts)
BMY (Bristol Myers Squibb)
JNJ (Johnson & Johnson)
WAG (Walgreen)
My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 6% of my assets. Right now I own inflation protected ones (TIPS). The ones I hold are...
2028's
I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.
Plus, I have sold the shorter term TIPS I owned since they were at a profit and reinvested the funds in longer term TIPS which I was able to buy below par, so I was guaranteed a profit with them, plus they offer protection against future inflation. Plus, some of the profit from the TIPS I sold, I used to buy more shares of the stocks I own.
Stocks are listed in order of largest position to least:
KMB (Kimberly Clark)
PG (Procter & Gamble)
MMM (3M Corp)
PEP (Pepsico)
KO (Coca Cola)
SYY (Sysco)
KFT (Kraft)
ADP (Automatic Data Processing)
T (AT&T)
GPC (Genuine Parts)
BMY (Bristol Myers Squibb)
JNJ (Johnson & Johnson)
WAG (Walgreen)
My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 6% of my assets. Right now I own inflation protected ones (TIPS). The ones I hold are...
2028's
I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.
Sunday, August 22, 2010
The "Joseph Oppenheim Kicker Theory" to Investing
For everything in life, including investing, I always look for what I call a "kicker," something extra which increases the chances for success and/or reduces the chances for failure, or just adds something beyond the main goal(s). Let's say you are looking for a job. Maybe one pays less but is located where people come to vacation - with many fun things to do and great weather - I would say it has a kicker. Same with investing. Some investments protect against inflation, some against deflation, but there are also some which protect against both even if the don't offer bigger rewards. This "kicker" is really a built-in hedge or diversification. I like the word, kicker.
For instance, let's say I want an investment which will protect me against deflation, but in case I am wrong and the opposite happens, inflation, then I can also win. This would be different that just buying a hedge or diversifying. Hedging and diversifying are also important tools, however, if one can essentially find the equivalent already built into the investment or decision, that is a "kicker" and in my opinion makes for a better investment. So, in the case of such an investment, like a higher rate long-term Certificate of Deposit (CD) would be a protection against deflation, however if the CD has a low or reasonable early withdrawal penalty, one could always easily exit the CD and open a new one with a higher rate at a minimal cost, if inflation happens and interest rates unexpectedly go up significantly.
Another example. when selecting a stock, first I look at it as I would in buying a business, essentially shares of a company I would like to own completely if I could. So, thinking along that line, I would want a businesss which would do well no matter what happens with the economy. That would lead me to a company providing some kind of low-priced staple or service which people need all the time.
Another example, I always recommend investing in quality assets, be they stocks, bonds, etc. Even though potential rewards might be less than with riskier assets, there is always a premium paid for quality and due to unforeseeable situations, it might be difficult to dispose of a non-quality asset. So, in such a case, I call quality a kicker. Another case, CDs come without paying a commission, again, a kicker. Same with buying a home, look for a kicker -like it can be also used as a vacation home, etc
Sure, some might want to speculate and thereby obtain a greater return if one is right, that is by taking greater risk, but that is where I separate a speculator from an investor and I only want to think of myself as an investor, that is building in some protection while not getting greedy. Greed is not good and speculation and greed seem to go hand in hand.
Thursday, March 18, 2010
Portfolio - "Update"
I've added a position in AT&T (T) to my stock portfolio. The stock pays a high dividend (about 6.5%) and raises it annually. With a PE of around 12 and the price having dropped recently, it was very attractive. Stocks represent about 15% of my investment portfolio.
Listed in order of largest to smallest holdings:
KMB (Kimberly Clark)
PEP (Pepsico)
PG (Procter & Gamble)
MMM (3M Corp)
SYY (Sysco)
KFT (Kraft)
ADP (Automatic Data Processing)
KO (Coca Cola)
BMY (Bristol Myers Squibb)
T (AT&T)
GPC (Genuine Parts)
My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 7% of my assets. Right now I own inflation protected ones (TIPS). The three I hold are...
2015's
2013's
2028's
I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.
Listed in order of largest to smallest holdings:
KMB (Kimberly Clark)
PEP (Pepsico)
PG (Procter & Gamble)
MMM (3M Corp)
SYY (Sysco)
KFT (Kraft)
ADP (Automatic Data Processing)
KO (Coca Cola)
BMY (Bristol Myers Squibb)
T (AT&T)
GPC (Genuine Parts)
My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 7% of my assets. Right now I own inflation protected ones (TIPS). The three I hold are...
2015's
2013's
2028's
I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.
Thursday, November 12, 2009
Portfolio - "Update"
I've added a position in Genuine Parts Corp. (GPC) to my stock prtfoilio. It is a solid auto parts company with little debt and a good dividend, along with a history of raising the dividend annually. I've also added some 2028 US Treasury (TIPS) bonds as added protection against future inflation. Stocks represent about 15% of my investment portfolio.
Listed in order of largest to smallest holdings:
KMB (Kimberly Clark)
PEP (Pepsico)
PG (Procter & Gamble)
MMM (3M Corp)
ADP (Automatic Data Processing)
SYY (Sysco)
KFT (Kraft)
KO (Coca Cola)
BMY (Bristol Myers Squibb)
GPC (Genuine Parts)
My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 7% of my assets. Right now I own inflation protected ones (TIPS). The three I hold are...
2015's
2013's
2028's
I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.
Listed in order of largest to smallest holdings:
KMB (Kimberly Clark)
PEP (Pepsico)
PG (Procter & Gamble)
MMM (3M Corp)
ADP (Automatic Data Processing)
SYY (Sysco)
KFT (Kraft)
KO (Coca Cola)
BMY (Bristol Myers Squibb)
GPC (Genuine Parts)
My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 7% of my assets. Right now I own inflation protected ones (TIPS). The three I hold are...
2015's
2013's
2028's
I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.
Monday, August 10, 2009
Portfolio - "Update"
Other than adding to positions in SYY and ADP because of favorable price points, and renewing maturing CDs, I have kept my portfolio intact. That approach is consistent with my overall approach of essentially having a permanent portfolio subject to managing it. Stocks represent about 14% of my investment portfolio.
Listed in order of largest to smallest holdings:
KMB (Kimberly Clark)
PEP (Pepsico)
MMM (3M Corp)
PG (Procter & Gamble)
SYY (Sysco)
ADP (Automatic Data Processing)
KFT (Kraft)
BMY (Bristol Myers Squibb)
KO (Coca Cola)
My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 7% of my assets. Right now I own inflation protected ones (TIPS). The two I hold are...
2015's
2013's
I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.
Listed in order of largest to smallest holdings:
KMB (Kimberly Clark)
PEP (Pepsico)
MMM (3M Corp)
PG (Procter & Gamble)
SYY (Sysco)
ADP (Automatic Data Processing)
KFT (Kraft)
BMY (Bristol Myers Squibb)
KO (Coca Cola)
My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 7% of my assets. Right now I own inflation protected ones (TIPS). The two I hold are...
2015's
2013's
I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.
Wednesday, April 29, 2009
Portfolio - How to become a "Private Investor".
Calling oneself a private investor is when one earns one's money entirely by managing their portfolio of investments.
There are many ways to become one, like by winning a lottery then quitting one's job then investing the money, or likewise through inheritance or another way by essentially starting with enough money. However, I'll cover the approach which is possible for basically the average person. These are steps which can work. Obviously, it could be possible to skip some of the earlier steps, depending on an individual's circumstances and how one might have altered their life's goals over the years.
1. Start with a goal of wanting to be a private investor. Perhaps, like from childhood, wanting to reach an early stage in one's life where they no longer want to either be an employee or be self-employed which requires running day-to-day actual operations in a business. Another way to look at it, is by owning assets where other people do the "work", per se. This is not much different from owning a business, just one step removed. In fact, Warren Buffett essentially has done that, by buying entire companies, then using the cash flow from those companies to buy other investments -like shares of stock in major companies plus holding other securities. In this case, though, I would envision a child expecting to work at a normal job, but using the cash flow to build up savings and investments in order to no longer need the job. Plus, it is an advantage to have one's job(s), and education leading up to it, serve to prepare a person for such a vocation, I'd say being well-versed on lots of things.
2. Learn that it isn't how much you earn, but how much you spend and save from what you earn, that is important. I have noticed that there basically are two kinds of people, those who never save no matter how much they earn and those who save no matter how little they earn. Sure, there may be a middle road, but rarely. It is a mindset. Obviously, it is the latter mindset which is necessary to become a private investor from humble beginnings, and the sooner one can embrace that mindset the better. What goes along with that is to learn that it really is possible to enjoy life to its fullest, really very simply - public parks, home cooking, using coupons, etc, etc. In fact, it can become a pleasant challenge, in learning how to navigate such a lifestyle.
3. Start early in saving and investing, and reading about investing. Even if you just have just one FDIC-insured CD and one stock, you begin to build up a knowledge of investing. Knowledge and experience are the keys. Let's say one begins as a teenager, by the time the person is in their 30's or 40's, one has maybe 20-25 years of experience and accumulated knowledge. So, targeting perhaps the mid-40's to be in a position to become a full-fledged private investor is certainly reasonable.
4. Then, just follow my post, Portfolio -"Investing Approach". It really isn't very difficult, just requires a mindset and a desire to learn.
Also, it should be remembered that if one has embraced the mindset of being able to enjoy life to its fullest while living inexpensively, one's portfolio need not be extraordinarily large. I do have a blog, "Joseph Oppenheim Philosophy" which does look at some thoughts which might be of help to potential private investors.
There are many ways to become one, like by winning a lottery then quitting one's job then investing the money, or likewise through inheritance or another way by essentially starting with enough money. However, I'll cover the approach which is possible for basically the average person. These are steps which can work. Obviously, it could be possible to skip some of the earlier steps, depending on an individual's circumstances and how one might have altered their life's goals over the years.
1. Start with a goal of wanting to be a private investor. Perhaps, like from childhood, wanting to reach an early stage in one's life where they no longer want to either be an employee or be self-employed which requires running day-to-day actual operations in a business. Another way to look at it, is by owning assets where other people do the "work", per se. This is not much different from owning a business, just one step removed. In fact, Warren Buffett essentially has done that, by buying entire companies, then using the cash flow from those companies to buy other investments -like shares of stock in major companies plus holding other securities. In this case, though, I would envision a child expecting to work at a normal job, but using the cash flow to build up savings and investments in order to no longer need the job. Plus, it is an advantage to have one's job(s), and education leading up to it, serve to prepare a person for such a vocation, I'd say being well-versed on lots of things.
2. Learn that it isn't how much you earn, but how much you spend and save from what you earn, that is important. I have noticed that there basically are two kinds of people, those who never save no matter how much they earn and those who save no matter how little they earn. Sure, there may be a middle road, but rarely. It is a mindset. Obviously, it is the latter mindset which is necessary to become a private investor from humble beginnings, and the sooner one can embrace that mindset the better. What goes along with that is to learn that it really is possible to enjoy life to its fullest, really very simply - public parks, home cooking, using coupons, etc, etc. In fact, it can become a pleasant challenge, in learning how to navigate such a lifestyle.
3. Start early in saving and investing, and reading about investing. Even if you just have just one FDIC-insured CD and one stock, you begin to build up a knowledge of investing. Knowledge and experience are the keys. Let's say one begins as a teenager, by the time the person is in their 30's or 40's, one has maybe 20-25 years of experience and accumulated knowledge. So, targeting perhaps the mid-40's to be in a position to become a full-fledged private investor is certainly reasonable.
4. Then, just follow my post, Portfolio -"Investing Approach". It really isn't very difficult, just requires a mindset and a desire to learn.
Also, it should be remembered that if one has embraced the mindset of being able to enjoy life to its fullest while living inexpensively, one's portfolio need not be extraordinarily large. I do have a blog, "Joseph Oppenheim Philosophy" which does look at some thoughts which might be of help to potential private investors.
Monday, April 27, 2009
Portfolio - "Investing Approach"
My general approach to investing is:
1. Stocks - I want to think of myself as a businessman, that is, only owning stocks of companies I would like to own completely if I could. As such, I would only want to own a business which offers products or services which will always be in demand in good times or bad. Plus, the products or services are top quality ones and the company is recognized as a great one in its industry. Plus, the company must have a sterling balance sheet, preferably with little or no debt. And, like any business I might own, it must regularly return a good income to me by way of a good dividend which ideally the company regularly raises annually. Hence, one is protected, to a degree, against both deflation and inflation. Obviously, the stock would also offer a reasonable chance of capital appreciation, by way of having a business which offers reasonable growth prospects.
Also, key to stock holdings, are that they must be managed, often adding or subtracting to/from positions as situations merit. Plus, although the goal is to hold a stock forever, as one would a business, a serious adverse situation which faces a company could warrant closing out the position in the stock.
As for speculation, the only way I think it is OK is to buy more of a stock I already own or want to own long-term, thinking it might move up for a short term gain, however since it is a stock I already want to own, worst case is that in case it doesn't go up right away, I just have added to my position at what I think is a cheap price. So, essentially it is a win-win kind of bet, especially as I always recommend keeping some cash in reserve - never being in a situation where I am overloaded with stocks. It should always be remembered that deep and prolonged bear markets are always possible, so stocks by their nature do carry risk. However, one other benefit of considering such trades, is that it keeps the investor more current on stock and market situations, thereby keeping one more informed. Staying informed is key.
Plus, I only want to own companies which I think are in moral businesses. Not tobacco, etc. By doing so, I get some additional feelings of satisfaction. Since there are thousands of stocks from which to pick, I don't see that as a disadvantage.
2. Bonds - I only want US Treasury bonds, notes or bills, the safest of safe. Among them, I might prefer, regular ones which pay fixed interest rate or inflation-protected ones (TIPs), as the situation presents itself. Also, GNMA collaterized debt obligations are OK as they, too, have the full faith and credit of the US government behind them. Like with stocks, positions must be managed.
3. CDs - I only want FDIC (Banks) or NCUA (Credit Unions) insured CDs. Also, I prefer ones of long term duration, mostly five year terms. I do consider these CDs as investments since there is a long-term component to them. However, I also like that they serve the dual purpose as being used as savings, since I only want CDs which have low or reasonable early withdrawal penalties. Again, some protection against both deflation and inflation, plus are liquid investments.
4. Gold or Silver - Not an investment, but reasonable to have a small amount as an insurance policy on our currency. Gold, preferably coins. Silver, preferably pre-1965 90% silver coins.
5. Homes - although I don't own any, it is fine to own one's home, as long as one treats it as a consumer item with only a limited investment component, plus I don't recommend having a large mortgage on it. If a person doesn't have the means to buy a home for cash or maybe 50% cash, he/she should rent, in my opinion. Owning a home has a lot of other costs associated with it, like maintenance, add-ons, etc which many people forget to include when considering buying their home. But, if one just wants to own a home because of choice of lifestyle, therefore recognize it is mostly a consumer purchase. As for buying investment homes, I recommend as a rental property only, using little, if any debt, and which produces net profits which would equal or beat CD rates. Plus, remember, that rental properties mean either being a landlord or paying for a property manager. Being a landlord is a labor-intensive business, so I really only look at it as favorable if a really good opportunity presents itself. As for having a property manager, either way, one of the real risks with rental properties is having tenants which severely damage the property. Therefore, investment homes may sound great, but they come with lots of hidden costs, extra time, and worry - and they are not liquid, sometimes they require a long time to sell.
1. Stocks - I want to think of myself as a businessman, that is, only owning stocks of companies I would like to own completely if I could. As such, I would only want to own a business which offers products or services which will always be in demand in good times or bad. Plus, the products or services are top quality ones and the company is recognized as a great one in its industry. Plus, the company must have a sterling balance sheet, preferably with little or no debt. And, like any business I might own, it must regularly return a good income to me by way of a good dividend which ideally the company regularly raises annually. Hence, one is protected, to a degree, against both deflation and inflation. Obviously, the stock would also offer a reasonable chance of capital appreciation, by way of having a business which offers reasonable growth prospects.
Also, key to stock holdings, are that they must be managed, often adding or subtracting to/from positions as situations merit. Plus, although the goal is to hold a stock forever, as one would a business, a serious adverse situation which faces a company could warrant closing out the position in the stock.
As for speculation, the only way I think it is OK is to buy more of a stock I already own or want to own long-term, thinking it might move up for a short term gain, however since it is a stock I already want to own, worst case is that in case it doesn't go up right away, I just have added to my position at what I think is a cheap price. So, essentially it is a win-win kind of bet, especially as I always recommend keeping some cash in reserve - never being in a situation where I am overloaded with stocks. It should always be remembered that deep and prolonged bear markets are always possible, so stocks by their nature do carry risk. However, one other benefit of considering such trades, is that it keeps the investor more current on stock and market situations, thereby keeping one more informed. Staying informed is key.
Plus, I only want to own companies which I think are in moral businesses. Not tobacco, etc. By doing so, I get some additional feelings of satisfaction. Since there are thousands of stocks from which to pick, I don't see that as a disadvantage.
2. Bonds - I only want US Treasury bonds, notes or bills, the safest of safe. Among them, I might prefer, regular ones which pay fixed interest rate or inflation-protected ones (TIPs), as the situation presents itself. Also, GNMA collaterized debt obligations are OK as they, too, have the full faith and credit of the US government behind them. Like with stocks, positions must be managed.
3. CDs - I only want FDIC (Banks) or NCUA (Credit Unions) insured CDs. Also, I prefer ones of long term duration, mostly five year terms. I do consider these CDs as investments since there is a long-term component to them. However, I also like that they serve the dual purpose as being used as savings, since I only want CDs which have low or reasonable early withdrawal penalties. Again, some protection against both deflation and inflation, plus are liquid investments.
4. Gold or Silver - Not an investment, but reasonable to have a small amount as an insurance policy on our currency. Gold, preferably coins. Silver, preferably pre-1965 90% silver coins.
5. Homes - although I don't own any, it is fine to own one's home, as long as one treats it as a consumer item with only a limited investment component, plus I don't recommend having a large mortgage on it. If a person doesn't have the means to buy a home for cash or maybe 50% cash, he/she should rent, in my opinion. Owning a home has a lot of other costs associated with it, like maintenance, add-ons, etc which many people forget to include when considering buying their home. But, if one just wants to own a home because of choice of lifestyle, therefore recognize it is mostly a consumer purchase. As for buying investment homes, I recommend as a rental property only, using little, if any debt, and which produces net profits which would equal or beat CD rates. Plus, remember, that rental properties mean either being a landlord or paying for a property manager. Being a landlord is a labor-intensive business, so I really only look at it as favorable if a really good opportunity presents itself. As for having a property manager, either way, one of the real risks with rental properties is having tenants which severely damage the property. Therefore, investment homes may sound great, but they come with lots of hidden costs, extra time, and worry - and they are not liquid, sometimes they require a long time to sell.
Tuesday, April 07, 2009
Portfolio - "Update"
I've altered my stock positions slightly, by adding a small position in SYY (Sysco). It is the top distributor to the food service industry, has a top-notch balance sheet with little debt, and a good dividend which it raises annually. Good dividend-paying stocks have greater value at this time since interest rates have been so low that CD and US Treasury rates are generally less than those for top-notch dividend-paying stocks. Listed in order of largest to smallest holdings.
- KMB (Kimberly Clark)
- PEP (Pepsico)
- PG (Procter & Gamble)
- MMM (3M Corp)
- KO (Coca Cola)
- KFT (Kraft)
- BMY (Bristol Myers Squibb)
- ADP (Automatic Data Processing)
- SYY (Sysco)
My major asset remain CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home, especially in the areas which were first to collapse during this Housing decline. I also own US Treasuries, about 7% of my assets. Right now I own inflation protected ones (TIPS). The two I hold are...
- 2015's
- 2013's
I like them because they protect both against deflation and moderately against inflation. I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.
Friday, January 09, 2009
Update - Stocks, etc.
Since it has been about 1 1/2 years since I updated my blog, here's my update....
The main reason I created this blog several years ago was basically to track my investment approaches, particularly with stocks, allowing me to reflect on them as times change. So, here we are, a lot has happened, financially, during the last year or so. Well, my approach remains the same. I always want some stock investments, looking at them as I would in owning businesses, albeit just a fractional ownership in them, companies I want to own long term, having products which will likely always be in demand, are in good financial shape and which return good dividends. Plus, I will consider adding or subtracting from my positions as situations present themselves.
Like I said, my stock position remains basically the same, as follows, in order of biggest position to least. For perspective sake, stocks make up about 12% of my asset holdings, and that is about where I always intend to be.
The main reason I created this blog several years ago was basically to track my investment approaches, particularly with stocks, allowing me to reflect on them as times change. So, here we are, a lot has happened, financially, during the last year or so. Well, my approach remains the same. I always want some stock investments, looking at them as I would in owning businesses, albeit just a fractional ownership in them, companies I want to own long term, having products which will likely always be in demand, are in good financial shape and which return good dividends. Plus, I will consider adding or subtracting from my positions as situations present themselves.
Like I said, my stock position remains basically the same, as follows, in order of biggest position to least. For perspective sake, stocks make up about 12% of my asset holdings, and that is about where I always intend to be.
- KMB (Kimberly Clark) - My top holding.
- PEP (Pepsico)
- AEE (Ameren Corp) - I always want a utility and I will swap one for the other over time, the latest swap was PNW (Pinnacle West) for AEE. I did this swap for tax purposes.
- PG (Procter & Gamble)
- MMM (3M Corp)
- KO (Coca Cola)
- KFT (Kraft) - it has more debt than I like so I will probably keep only a smaller position in it. I do like its product mix and top brand names and track record of a good dividend. But, I'll watch it closely.
- BMY (Bristol Myers Squibb) - Although I am wary about drug companies because of litigation risk, I'll go with a small position in it because it pays a good dividend, is in good financial shape, healthcare is something people will always need, might be a buyout candidate, and adds a little more diversification to my portfolio.
My major asset are CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home.
I also own US Treasuries, about 7% of my assets. Right now I own inflation protected ones (TIPS). The two I hold are...
- 2015's
- 2013's
I like them because they protect both against deflation and moderately against inflation (yielding about 3% annually for the 2015's, more if inflation picks up).
I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.
I intend to further update my blog with some investment links which I like, and other stuff.
Thursday, July 05, 2007
Recommended List (Updated)
- KMB
- KO
- PG
- MMM
- PNW (PNW replaces EAS since EAS had just received a buyout offer. PNW now has a higher dividend, which also has a history of raising it annually, and is also a potential takeover candidate).
- PEP (PEP has been on the recommended list before. I only removed it when they announced a new CEO, since that created a degree of uncertainty. I am now comfortable with the new CEO, so PEP is back on my list).
Friday, November 03, 2006
Recommended List (updated)
- KO
- MMM
- KMB
- PG
- MAT
- EAS
I replaced PEP with KO, because PEP has a new CEO, creating risk, while KO for the last 11 quarters or so continues to exceed analyst earnings estimates, along with the fact that KO has a huge 13% stock buyback, which just began 11/1/2006, plus KO has a much higher dividend than PEP. I still view PEP as a great company, and like that it has the blockbuster snack food business, and would consider preferring it to KO, but for now, I view KO as the better choice of the two great companies.
I added EAS because I do want a utility stock in the portfolio. It does meet my criteria of annually raising its dividend and being in a business which people need irrespective of business cycles.
I removed ABT because I worry about the litigation risks relating to their stent business. Plus, I do think drug companies present too much litigation risk, in general.
MMM does have some business cycle risk, but I think it is a reasonably manageable risk. Any portfolio does want some balance, and MMM meets so many of my criteria.
Sunday, July 02, 2006
Monday, September 12, 2005
JNJ update
I am removing JNJ from my recommended list, because of the litigious environment surrounding drug stocks. Besides the general risks, there are specific risks regarding stents. Further, JNJ recently showed they didn't do due dilligence with the GDT acquisition, as GDT has some litigious risk with their products. For now, I will leave ABT on my recommended list, but it is a candidate for removal, just for the genral risk of lawsuits in the industry.
Saturday, July 02, 2005
Recommended stocks
- WWY
- KMB
- PG
- JNJ
- SLE
- ABT
- MAT
- PEP
All these stocks pay dividends, with a record of increasing them yearly. Further, these stocks have products which are immune to normal business cycles. SLE is a special situation, in that it is in the process of reorganizing. MAT, too, is a special situation, which after a reorganization, appears headed in the right direction, with more upside potential, than downside risk.
As with all stock investments, it is best to begin with a modest position, then add or subtract from the position, as the situation presents itself.
There is no special order to the list.
Subscribe to:
Posts (Atom)