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Author Topic: Buy and Hold Stocks  (Read 53143 times)
spork
If you are reading this, I am naked.
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« on: May 05, 2007, 7:59:09 PM »

I thought I'd start this thread because I'm the opposite of a day trader; I like to invest in companies that are going to do well over a very long period of time.  Not "buy and forget," but "buy and hold" because of increasing stock price and/or high dividends (which I reinvest through a DRIP).  I'd like to get advice on how to identify these sorts of companies.  I'll give you some contrasting examples from my own experience:

Pfizer -- bought right before the dot com crash.  At the time it had Viagra and was putting a new antibiotic, Trovan, on the market.  The market imploded soon after I bought the stock, Trovan was yanked, and the dumb-ass executives did a giant merger with Pharmacia (most mergers are bad, not good, for companies -- e.g.,  Daimler-Chrysler).  Not only did I buy this stock at the wrong time, I've held onto it when I should have dumped it long ago.  It's a big drug company, not a start-up dependent on a single product, but stock price-wise it's performance has been flat.

3M and Johnson & Johnson -- bought these a few years later.  Since then 3M stock has increased in value 130 percent and J & J stock has increased in value 70 percent.  The annual reports are very easy to understand and as far as I can tell there's nothing unusual going on.  They're just very solid, profitable companies.
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a.k.a. gum-chewing monkey in a Tufts University jacket

"There are no bad ideas, only great ideas that go horribly wrong."

"Please do not force people who are exhausted to take medication for hallucinations." -- Memo from the Chair, Department of White Privilege Studies, Fiork University
mustbeanon
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« Reply #1 on: May 05, 2007, 9:27:53 PM »

I, too, am the opposite of a daytrader. I have a 15-20 yr horizon til retirement, so I try to go for both good dividends and capital growth. That means, solid companies, mid and large cap; good balance sheets, assets, and book-values (net asset value per share). And a good price, as determined by looking both at PE and at hisotrical charts. And a nice solid dividend history that makes for an overall steady yield curve. My current faves of this type? SWZ, a swiss holding issue; and ORI, Old Republic International. SWZ has a great dividend and is about as solid financially as can bel ORI has a history of splits and a very steady price. I like RBS a whole lot (Royal Bank of Scotland) and also JPM (JPMorgan Chase) but to a lesser extent (if you look in their very elaborate reports, you can discern, after hours with a calculator, that they are a lot riskier than their reputation looks--this last annual rpt put me off them and I am gradually selling it). I also like Hawaiian Electric (HE), solid as a lava rock, and great div history. If there were any way I could buy more Anthracite Capital (AHR), or more Southern Company (SO), I would. Both those slightly riskier but have been great earners for me. IPL is not as good though some say it is coming back.  In transportations I used to be high on MasonDixon corp but not so much now; in related industries I love Host Marriott Corp (HST). Good growth, w/great dividends in the preferred issues and commons to to a lesser extent. There are lots and lots of good, strong compaies out there, rather fewer for decent prices; but still, there is good stuff to be had if you just take your time and look. I really like the research functions on my e-broker's site (TDAmeritrade) but most all brokers have that now. It's fun to learn about. 

But the truth is, Prytania will make a ton more money than someone like me will, and she'll have all that excitement too...
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spork
If you are reading this, I am naked.
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« Reply #2 on: May 05, 2007, 10:32:14 PM »

I own JPM.  What specifically looks risky about it to you?  I have held onto it because 1) the yield used to be fairly high and 2) the stock price has climbed fairly steadily over the last several years.  In my case, the total increase in price has been over 50 percent.  Although the PE is 12-13, it is trading now at $52, $10 higher than its previous peak in 2004.  I agree that JPM's annual report is difficult to understand -- I guess I'm not a hedge fund operator.
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a.k.a. gum-chewing monkey in a Tufts University jacket

"There are no bad ideas, only great ideas that go horribly wrong."

"Please do not force people who are exhausted to take medication for hallucinations." -- Memo from the Chair, Department of White Privilege Studies, Fiork University
spork
If you are reading this, I am naked.
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Posts: 16,148


« Reply #3 on: May 05, 2007, 10:38:06 PM »

According to Etrade, JPM's debt to equity ratio is higher than 70 percent of its peers.  Maybe that's why it's PE is so low.
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a.k.a. gum-chewing monkey in a Tufts University jacket

"There are no bad ideas, only great ideas that go horribly wrong."

"Please do not force people who are exhausted to take medication for hallucinations." -- Memo from the Chair, Department of White Privilege Studies, Fiork University
mustbeanon
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« Reply #4 on: May 05, 2007, 10:44:48 PM »

Spork, that is I think nearly what i was trying to say, but you said it a lot better, and with actual data. To me, it looked like they were way in over their heads, and while the bottom line balances (as ever in any annual rpt), the leverage, the borrowing, looked like a whole lot, in comparison to things like receivables and assets. Tons of outstanding shares, debt instruments. I had no idea it was worse than 70% of their peers; but I am now only holding the preferred issues, JPM-J and JPM-K, so I feel much more protected in it... still, I mean, it is a huge and very reputable company; am I just being too nervous?
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spork
If you are reading this, I am naked.
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Posts: 16,148


« Reply #5 on: May 05, 2007, 11:06:30 PM »

It's a big bank, and it seems to constantly be getting bigger.  It seems to be very interested in acquiring debt operations/instruments -- credit card accounts, home and auto loans.  This is how all banks make money -- through interest on loans -- and of course if a large enough chunk of that debt becomes nonperforming, then the bank is in serious trouble.  In the annual report it says that JPM will probably take a $150 million hit because of sub-prime mortgage lending, for example, but for a bank the size of JPM that's chump change.

What I find difficult to interpret is its other financial services -- asset management, securities, etc.  For example, on page 18 of the annual report it says "Built out the global investment operations outsourcing platform."  What the hell does that mean?

From the very first page of the report, in nicely colored bar charts, it says that earnings per share increased 48 percent from 2004-06, income increased 47 percent, but net revenue increased only 9 percent.  To me that says that a lot of money is coming in but much of it is getting eaten up by operations costs.  Maybe I'm wrong.
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a.k.a. gum-chewing monkey in a Tufts University jacket

"There are no bad ideas, only great ideas that go horribly wrong."

"Please do not force people who are exhausted to take medication for hallucinations." -- Memo from the Chair, Department of White Privilege Studies, Fiork University
prytania3
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Prytania, the Foracle


« Reply #6 on: May 05, 2007, 11:28:31 PM »

Spork, you might try some of the following: Investors Business Daily. Check out their 100 top stock picks, also there's Motley Fools' Hidden Gems. There's Zack's Investment Research, and there's also Gorilla Trades. You can get a free one month subscription to Gorilla trades, and I've heard it was pretty good. If you want to foloow Cramer's portfolio you can get a subscription to it from TheStreet.com. Thestreet.com also has other subscription based things.

I'm too drunk to think of any more tonight. Oh, Schaeffer's--as in Bernie Schaeffer. He does options, but predicats stock options based on derivative movement.
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I'm not a narcissist. I'm just angry and violent.
clean
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« Reply #7 on: May 06, 2007, 12:03:21 AM »

Do you remember The Bairdstown Ladies?  Asside from the fact that they messed up their accounting, they used a pretty good tool.  They were an investment club. 

www.betterinvesting.org

is a website that (once you join, of course) will provide several tools to help people begin to learn about investments.  I use some of their resources in my security analysis and portfolio management class. 

For what it is worth,

clean
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"The Emperor is not as forgiving as I am"  Darth Vader
aardvark
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« Reply #8 on: May 06, 2007, 5:46:59 AM »

While I realize, of course, that some people make loads of money from timing the market-- and I was intrigued by Jim Cramer's recent book on how to speculate for big bucks-- so far I've preferred to load up on index funds.  Boring, I know, but day trading requires a lot of knowledge about specific companies, and I'd rather write book #3 which emphatically is not about companies.  And unless you really know what you're doing with day trading, you'll never manage to offset the transaction fees.

I like Vanguard, with its low expense fees (though I have my ROTH with TIAA-CREF, which, sap that I am, is for sentimental reasons-- I like the idea that they're non-profit and I'm willing to pay somewhat higher expense fees).  I have small-caps, S&P 500, and European indexes with Vanguard, with my ROTH divided among real estate, S&P 500, mid-caps, international equity, and real estate (I prefer my real estate funds to be fully in the tax advantaged account).  (I also have a China mutual fund that returned 40% last year).  Mine is, actually, a "buy and forget" as much as a "buy and hold":  come rain or shine, I put US$3k into the market every month and consider it "dead to me."  I'll use it in 25 years, but for now, I'd rather feel Scarcity every month and just sock the money away into index funds.

Having said that, I am considering buying some Walmart and Procter & Gamble on a dip, with a view toward holding it for a couple of decades through thick and thin.
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spork
If you are reading this, I am naked.
Distinguished Senior Member
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Posts: 16,148


« Reply #9 on: May 06, 2007, 6:22:16 AM »

I like Vanguard's S & P 500 index fund (VFINX) a lot -- I've purchased it several times for my Roth IRA, and it's always performed better over the long term than actively managed funds.  For the last couple years I've had an ETRADE index fund based on the Russell 2000, but it hasn't done nearly as welll as the S & P index, plus it has slightly higher annual fees.

I have a TIAA-CREF account too, with a couple of similar funds plus a real estate fund.

Whenever anyone asks me about mutual funds, I tell them to buy index funds instead.

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a.k.a. gum-chewing monkey in a Tufts University jacket

"There are no bad ideas, only great ideas that go horribly wrong."

"Please do not force people who are exhausted to take medication for hallucinations." -- Memo from the Chair, Department of White Privilege Studies, Fiork University
old_school
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« Reply #10 on: May 06, 2007, 10:57:35 AM »

I like Vanguard's S & P 500 index fund (VFINX) a lot

I tell them to buy index funds instead.

Same here .. this is all for the long term, so I really buy and forget. From my admitted limited understanding indexed funds are a good basic choice, especially if you don't have the time or knowledge to try to outsmart the market. I have neither.

« Last Edit: May 06, 2007, 10:58:33 AM by old_school » Logged

Simplify.
clean
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« Reply #11 on: May 06, 2007, 12:11:17 PM »

It is certainly not a crime to leave the investing to others... those so called "professionals". 

If you are interested, and not everyone is!  there are several easy to read books on investing.  I ve already suggested the link to Better Investing. 

For the easy to read books, I think that Peter Lynch's One up on Wall Street is pretty easy and a good basic start.  The Jim Cramer books Mad Money and Real Money are good too, but if you are looking for a first read, it is Lynch.

Again, not everyone is interested in managing their own money and that is fine.  Those are the people that keep those Chartered Financial Analysts employed! 

Clean
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"The Emperor is not as forgiving as I am"  Darth Vader
angelusnovus
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« Reply #12 on: May 06, 2007, 11:18:54 PM »

I don't know what brokerage firm you go with, but many, for example Schwab, have ways to do easy research on line.  Schwab (whose commissions are quite high, so not too good if you trade a lot) rates many companies on an A to F scale, and also gives a percentile, based on factors that amateurs like myself would never know about: percentage of stocks held by insiders, the ability to fund new capital, the quality of the workforce, recent broker sentiment and things like that.  They also tell you whether Moody's and other rating companies think the company is a buy, hold, or sell.  I'm sure other brokerage firms do the same.

Though I'm a rank amateur who is in for the middle and long run, I've done quite well looking at the various ratings plus graphs of past performance (on bigcharts.com or the like).

Good luck!
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aristotelian
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« Reply #13 on: May 07, 2007, 8:57:24 AM »

I have a small portfolio within my IRA of buy and hold stocks.  My strategy is to have stocks from different industries, and I generally look for 1) established companies that pay a good dividend, and/or growth companies that make a product that I really like.  Using this strategy, my biggest dud has been DELL, I bought at 40 just before their long slide to 25. 

My current holdings are AT&T (up about 30% since I bought, plus a 4% dividend); ING Bank (up about 20% plus a dividend, see other threads on why I like their products), and Endeavor Acquisitions (holding company that bought American Apparel, one of my wife's favorite clothing companies, up about 30% since the acquisition).

I plan to hold my current portfolio indefinitely.
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spork
If you are reading this, I am naked.
Distinguished Senior Member
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Posts: 16,148


« Reply #14 on: May 07, 2007, 9:05:55 AM »


Endeavor Acquisitions (holding company that bought American Apparel, one of my wife's favorite clothing companies, up about 30% since the acquisition).


I think it was Peter Lynch who said that one of the best ways to do research is to hang out at the mall and observe what people are buying.
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a.k.a. gum-chewing monkey in a Tufts University jacket

"There are no bad ideas, only great ideas that go horribly wrong."

"Please do not force people who are exhausted to take medication for hallucinations." -- Memo from the Chair, Department of White Privilege Studies, Fiork University
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