Hello readers. Yes I tend to talk a lot about individual stocks. Why? Because most Financial Advisors won't. They are forced by the companies they represent to not advise about individual stocks, advise on a limited few individual stocks, and they give you almost no information or assistance in how to invest in individual stocks. Yet, they should be in your portfolio!
I advise that 40% of your holdings in your portfolio be in long term invested individual stocks if you have over $200,000.00 in assets in your portfolio and you are in the age bracket of still needing growth in your portfolio. Even if retired, if you have enough in income funds to meet your needs I suggest the same for you. This is the category of which I currently fall into. You should keep 60% in Mutual Funds and Bond Funds which are a lesser risk and should all be 4 or 5 Star funds. An example is PEMGX which is a fund I hold that is a 5 star fund.
It is also important that you weight your investments by sector. Here is the weighted amounts I was given that seem to be working for me so I will share them with you. I really appreciate my friend who is a financial advisor suggesting and giving this information to me. Take 40% of your portfolio and make your own mutual fund using the weights of these sectors. Consumer Discretionary 13%, Consumer Staples 9.40%, Energy 10.40%, Financials 16.10%, Healthcare 11.50%, Industrial 11.40%, Information Tech. 20.30%, Materials 3.50%, Telecommunications 2.40%, Utilities 2%
Can you tweak those percentages. I don't know what my friend that gave me these numbers would say, but I say yes. Why? First I think Healthcare is weighted too low. With good healthcare companies in your portfolio they are not going to let you down. Healthcare is hear to stay forever and people will always be sick. Some of my suggestions in Healthcare would be NVS, RAD, WAG, CVS, RDY and ABT. These are all good quality individual stocks in the sector. I feel there is also room for services such as EBAY and BABA. Personally I am staying away from EBAY for the time being but I rate BABA as a Buy. Personally I was not very impressed by the choices given in the Financial sector that were suggested. I did like EV that was suggested and then I went with my gut and took WFC.
The key to making your own portfolio is being ready to keep these individual stocks for the long term to see and collect the rewards. Most are blue chip and large cap stocks. Not new IPO's and stocks with a short or poor history. You want to find stocks that also have a history of increasing dividends. So you do want the stocks you pick to pay dividends (I balk at that on rare occasion). Maybe they don't pay the best dividends, but they have a good track record of growth and increasing dividends over time. Building your own portfolio can be difficult to understand. For those that do not understand you should consult someone that has done this before or a financial advisor that is willing to assist which are few and far between. But good choices can yield good returns in the long run, but don't think it will make you rich overnight. It does not work that way.
Gus S.
Disclaimer:
Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
Saturday, October 25, 2014
Tuesday, October 21, 2014
Old McDonald's: Quarter Pounder Equals Quarterly Losses
McDonald's, the king of fast food has found itself facing tough times and a tougher market. So what is going on with McDonald's and why a 30% decrease in profits and a continued decline in stock price over the past year. Lets take a look at that together. This is a good lesion to learn not only if you have McDonald's stock in your portfolio but with all the investments in your portfolio, including mutual funds.
Once upon time McDonald's was the only show in in town. Other similar fast food chains could not hold a candle to them. McDonald's was the pioneer in fast food and everyone has followed in their shadow for years and years. But now the competition is becoming greater and greater with many more fast food restaurants setting their sites on dethroning the king of fast food. Over the years McDonald's has had to fight off increasing competition. Use to be Burger King and Hardies were their only competition and they both struggled for market share in the shadows of McDonald's. Burger King has recently restructured which has taken another bite out of the Big Mac and there are lots more players in the game taking away market share from McDonald's.
Is market share woes McDonald's only contributing factor for this 30% decrease in profit and fall in stock price? Absolutely not! McDonald's has made many mistakes at the hands of their cooperate decision makers. McDonald's had a nitch that made them a success. But over the years they have gotten away from their nitch and the basic concepts that made them so successful. McDonald's over the years has tried to "keep up with the Joneses" instead of a basic focus on what they know they can do better than everyone else. They, like many other sit down or fast food restaurants fell into the trap of having a menu to try to give something to everyone and to compete with all their market share competitors offering things like ribs, burritos, fish, salads, chicken, sundaes, etc. And in select regional and foreign markets these choices are even more extended. Such as in Asia offering rice and Asian traditional foods, beer in Germany, burrito's and taco's in Hispanic markets etc.. McDonald's fell in this trap and now they have a menu consisting in an average market of over 145 items. How can anyone make over 145 items better than everyone else? They can't and that is one area of which McDonald's has failed and now it is biting them in the ass because they forgot about the concepts of the basics that made them successful.
McDonald's has in recent years made other bad choices and has been victim of circumstances in foreign markets that were beyond their control and that they were not on top of. They also took chances in hostile markets. What kinds of things am I talking about? How can anyone claim their hamburgers are 100% Pure Beef when they are full of Pink Slime? Remember the Pink Slim? Yes they admitted they used it in their hamburger meat and later stopped using pink slime due to public out cry and a drop in sales. A loss they have never fully recovered from. Over the past year they have also been used as a political pawn by the Russians closing down many McDonald's locations throughout the land which has been explained by the Russians due the United States stand regarding the Ukraine and sanctions imposed up the Russians. So basically they were kind of returning the favor. In Asia there has been the scare of meat used by restaurants, fast food industries and found in groceries to be tainted with bacteria due to mishandling of meat during processing. These two issues have hit McDonald's bottom line including the issues here in their largest market which is the United States, mainly caused by a decline in our economy and the Pink Slime scandal.
So you may ask, where does McDonald's go from here and what should you do as an investor? For the long term investor that has owned stock in McDonald's for many years and reaped some good profits, splits, and dividend growth. Be happy and take a look in another direction. There are many other Consumer Discretionary sector stocks that are better to wander your eye toward. Some of these would be Nordstrom, Inc. (JWN), TJ Maxx (TJX), V.F. Corp. (VFC) which are all looking much more appealing to me right now.
McDonald's needs to pull back and get back to basics, do what they are great at, and not try to keep up with all the Joneses. You can't be everything to everyone and McDonald's has failed to accept that. When they do this and they focus more attention in what is going on in their foreign markets perhaps they will be worth another look at investing my dollar. Until then I think I can find much better choices.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
Once upon time McDonald's was the only show in in town. Other similar fast food chains could not hold a candle to them. McDonald's was the pioneer in fast food and everyone has followed in their shadow for years and years. But now the competition is becoming greater and greater with many more fast food restaurants setting their sites on dethroning the king of fast food. Over the years McDonald's has had to fight off increasing competition. Use to be Burger King and Hardies were their only competition and they both struggled for market share in the shadows of McDonald's. Burger King has recently restructured which has taken another bite out of the Big Mac and there are lots more players in the game taking away market share from McDonald's.
Is market share woes McDonald's only contributing factor for this 30% decrease in profit and fall in stock price? Absolutely not! McDonald's has made many mistakes at the hands of their cooperate decision makers. McDonald's had a nitch that made them a success. But over the years they have gotten away from their nitch and the basic concepts that made them so successful. McDonald's over the years has tried to "keep up with the Joneses" instead of a basic focus on what they know they can do better than everyone else. They, like many other sit down or fast food restaurants fell into the trap of having a menu to try to give something to everyone and to compete with all their market share competitors offering things like ribs, burritos, fish, salads, chicken, sundaes, etc. And in select regional and foreign markets these choices are even more extended. Such as in Asia offering rice and Asian traditional foods, beer in Germany, burrito's and taco's in Hispanic markets etc.. McDonald's fell in this trap and now they have a menu consisting in an average market of over 145 items. How can anyone make over 145 items better than everyone else? They can't and that is one area of which McDonald's has failed and now it is biting them in the ass because they forgot about the concepts of the basics that made them successful.
McDonald's has in recent years made other bad choices and has been victim of circumstances in foreign markets that were beyond their control and that they were not on top of. They also took chances in hostile markets. What kinds of things am I talking about? How can anyone claim their hamburgers are 100% Pure Beef when they are full of Pink Slime? Remember the Pink Slim? Yes they admitted they used it in their hamburger meat and later stopped using pink slime due to public out cry and a drop in sales. A loss they have never fully recovered from. Over the past year they have also been used as a political pawn by the Russians closing down many McDonald's locations throughout the land which has been explained by the Russians due the United States stand regarding the Ukraine and sanctions imposed up the Russians. So basically they were kind of returning the favor. In Asia there has been the scare of meat used by restaurants, fast food industries and found in groceries to be tainted with bacteria due to mishandling of meat during processing. These two issues have hit McDonald's bottom line including the issues here in their largest market which is the United States, mainly caused by a decline in our economy and the Pink Slime scandal.
So you may ask, where does McDonald's go from here and what should you do as an investor? For the long term investor that has owned stock in McDonald's for many years and reaped some good profits, splits, and dividend growth. Be happy and take a look in another direction. There are many other Consumer Discretionary sector stocks that are better to wander your eye toward. Some of these would be Nordstrom, Inc. (JWN), TJ Maxx (TJX), V.F. Corp. (VFC) which are all looking much more appealing to me right now.
McDonald's needs to pull back and get back to basics, do what they are great at, and not try to keep up with all the Joneses. You can't be everything to everyone and McDonald's has failed to accept that. When they do this and they focus more attention in what is going on in their foreign markets perhaps they will be worth another look at investing my dollar. Until then I think I can find much better choices.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
Tuesday, October 14, 2014
Buy, Sell or Hold?
Some are fearing a Bear Market again with the Dow and S&P 500 taking a beating the past three days. But overall the market is still up for the year. I have been telling you since last fall that 2014 was not going to be another 2013. There have been some real bulldogs in the market that have stood tough and are making some good profits. But for most investors with a well diversified portfolio they have not seen close to the gains they saw in 2013.
Historically the months of September and October are the times to buy stock. But as you also know there are always exceptions to the rule. And we have seen more of these exception in recent years. Right now the market is down and correcting. Companies pushed prices too high and now things are getting back down to where they should be and you will most likely see the S&P 500 fall to the 1,700 mark give or take before the correction is over. It is certainly not going to surprise me any if that is the case.
So the question is, do you Buy, Sell, or Hold? I think right now is a HOLD period for most investors. Things are going to get worse before they get better and every expert is saying this and I have said it since 2013 and that 2014 was going to be the year of the Mutual Fund. Now does that mean sell all your individual stock holdings and throw it into Mutual Funds? Absolutely not. But this is why you should have good solid Mutual Funds that help balance out your portfolio. Not only should you have a balanced set of Mutual Funds, but if you have individual stock holdings, those holdings should also be balanced across the various sectors of the market and properly weighted. I say that now is definitely a time to HOLD before making any drastic decisions.
But then you say to me..."But the experts say to buy low and sell high". Well that is true. So when should you buy with the current situation in the market? Well, that is yet to be seen. But I am going to be looking at another 8 to 10 percent drop in the S&P 500 before I consider buying anymore individual stocks. As for Mutual Funds, you should continue to put in your regularly scheduled contributions to your funds.
When to Sell? If you have good quality stocks paying good dividends and your individual stock holdings are well weighted then I am saying to HOLD. If you feel you need to sell any of your individual stock holding then then I strongly advise seeking the advise of your financial advisor. Mutual Funds, don't sell. That is why they have mutual fund managers. They make those decisions for you.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
Historically the months of September and October are the times to buy stock. But as you also know there are always exceptions to the rule. And we have seen more of these exception in recent years. Right now the market is down and correcting. Companies pushed prices too high and now things are getting back down to where they should be and you will most likely see the S&P 500 fall to the 1,700 mark give or take before the correction is over. It is certainly not going to surprise me any if that is the case.
So the question is, do you Buy, Sell, or Hold? I think right now is a HOLD period for most investors. Things are going to get worse before they get better and every expert is saying this and I have said it since 2013 and that 2014 was going to be the year of the Mutual Fund. Now does that mean sell all your individual stock holdings and throw it into Mutual Funds? Absolutely not. But this is why you should have good solid Mutual Funds that help balance out your portfolio. Not only should you have a balanced set of Mutual Funds, but if you have individual stock holdings, those holdings should also be balanced across the various sectors of the market and properly weighted. I say that now is definitely a time to HOLD before making any drastic decisions.
But then you say to me..."But the experts say to buy low and sell high". Well that is true. So when should you buy with the current situation in the market? Well, that is yet to be seen. But I am going to be looking at another 8 to 10 percent drop in the S&P 500 before I consider buying anymore individual stocks. As for Mutual Funds, you should continue to put in your regularly scheduled contributions to your funds.
When to Sell? If you have good quality stocks paying good dividends and your individual stock holdings are well weighted then I am saying to HOLD. If you feel you need to sell any of your individual stock holding then then I strongly advise seeking the advise of your financial advisor. Mutual Funds, don't sell. That is why they have mutual fund managers. They make those decisions for you.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
Thursday, October 9, 2014
Short Term and Long Term Individual Stocks
Hello Followers,
In my last post you are aware I had come to terms that my Financial Advisor and I had to part company due to some repeated issues of which I was not pleased. I met with some financial advisors and they gave me some great information. However, they both encouraged me to manage my own portfolio instead of paying them commissions. They both felt I had the knowledge to do this myself. After thinking long and hard that is what I decided to do. My accounts are now starting to be transferred to Scottrade as I already had a small account there anyway. Having lots of time on my hands and the ability to check my accounts daily made it a little easier what to decide to do. One of the financial advisors has been a long time friend. He is an independent agent with Wells Fargo. If you are looking for a new financial advisor or wish to start investing and build a portfolio, please contact me and I will put you in touch with him.
So you maybe asking, what do I consider to be Short Term or a Long Term Individual Stock and what do these two terms mean to me?
A Short Term Individual Stock is a stock I am going to buy and hold for a short term, take my profits and sell as soon as I see the kind of profits I am happy with out of a stock. I have talked about this frequently in previous posting. What do I look for? Mainly good quality companies of which the company has announced a stock split of 2:1 or more and meets my mathematical guidelines to make it a good buy. Example for a 2:1 split: Current price divided by 2. If less than the 52 week low consider the buy. If above the 52 week low, do not buy. The lower the price from the 52 week low, the better the buy. I then hold until after the split and wait for a nice return on my investment. Then I sell, take my money and run. Looking for the next good deal to come along and repeat. You do NOT do this with all individual stocks in your portfolio!
A Long Term Individual Stocks is a stock that you are going to hold for a long period of time in your portfolio as a solid base, similar to your Mutual Funds. It is kind of like your "homemade" mutual fund of good quality stocks that pay dividends and have a good dividend record. A good dividend record is not necessarily a high paying dividend, but one that has a history of increasing dividends over time and not decreasing dividends over time. Lets me give you some suggestions of these types of stocks. TJ Maxx (TJX), Clorox (CLX), Royal Dutch Shell (RDS-B), Abbott Laboratories (ABT). There are many more. A list was given to me of such stocks, but there are a few others I have added on that list.
Do remember, Short Term and Long Term stocks should only be a part of your entire portfolio...Not the whole portfolio. You need to keep your eggs in more than one basket. You need some good 4 and 5 Star Mutual Funds from different sectors, Bonds, I personally like throwing in a little in some kind of precious metal such as Silver, Gold, Platinum. You should always have a good financial advisor to help you unless you have greatly studied how to invest have done so under the watchful eye of a financial advisor etc. There are many good books out there to read to help you gain the basic knowledge you may lack. Learn how to research stocks and mutual funds. Make some "Mock" accounts like I do on Quicken or other financial program. See how your picks do and if you are on the right track. You need to keep those "Mock" accounts for at least 1 year to get a decent idea how you are coming along and how good your picks have done.
Keep that portfolio balanced and always get the help of your financial advisor if you have a question or are unsure.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
In my last post you are aware I had come to terms that my Financial Advisor and I had to part company due to some repeated issues of which I was not pleased. I met with some financial advisors and they gave me some great information. However, they both encouraged me to manage my own portfolio instead of paying them commissions. They both felt I had the knowledge to do this myself. After thinking long and hard that is what I decided to do. My accounts are now starting to be transferred to Scottrade as I already had a small account there anyway. Having lots of time on my hands and the ability to check my accounts daily made it a little easier what to decide to do. One of the financial advisors has been a long time friend. He is an independent agent with Wells Fargo. If you are looking for a new financial advisor or wish to start investing and build a portfolio, please contact me and I will put you in touch with him.
So you maybe asking, what do I consider to be Short Term or a Long Term Individual Stock and what do these two terms mean to me?
A Short Term Individual Stock is a stock I am going to buy and hold for a short term, take my profits and sell as soon as I see the kind of profits I am happy with out of a stock. I have talked about this frequently in previous posting. What do I look for? Mainly good quality companies of which the company has announced a stock split of 2:1 or more and meets my mathematical guidelines to make it a good buy. Example for a 2:1 split: Current price divided by 2. If less than the 52 week low consider the buy. If above the 52 week low, do not buy. The lower the price from the 52 week low, the better the buy. I then hold until after the split and wait for a nice return on my investment. Then I sell, take my money and run. Looking for the next good deal to come along and repeat. You do NOT do this with all individual stocks in your portfolio!
A Long Term Individual Stocks is a stock that you are going to hold for a long period of time in your portfolio as a solid base, similar to your Mutual Funds. It is kind of like your "homemade" mutual fund of good quality stocks that pay dividends and have a good dividend record. A good dividend record is not necessarily a high paying dividend, but one that has a history of increasing dividends over time and not decreasing dividends over time. Lets me give you some suggestions of these types of stocks. TJ Maxx (TJX), Clorox (CLX), Royal Dutch Shell (RDS-B), Abbott Laboratories (ABT). There are many more. A list was given to me of such stocks, but there are a few others I have added on that list.
Do remember, Short Term and Long Term stocks should only be a part of your entire portfolio...Not the whole portfolio. You need to keep your eggs in more than one basket. You need some good 4 and 5 Star Mutual Funds from different sectors, Bonds, I personally like throwing in a little in some kind of precious metal such as Silver, Gold, Platinum. You should always have a good financial advisor to help you unless you have greatly studied how to invest have done so under the watchful eye of a financial advisor etc. There are many good books out there to read to help you gain the basic knowledge you may lack. Learn how to research stocks and mutual funds. Make some "Mock" accounts like I do on Quicken or other financial program. See how your picks do and if you are on the right track. You need to keep those "Mock" accounts for at least 1 year to get a decent idea how you are coming along and how good your picks have done.
Keep that portfolio balanced and always get the help of your financial advisor if you have a question or are unsure.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
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