I have been reading articles regarding falling inflation rates and how some experts are worried about this. China just decreased interest rates for the first time in two years our unemployment rate is falling, consumer confidence and spending is up. Inflation is falling? Well, not so fast while we look at the big picture.
This is one thing that always burns me about having an economic recession as we have recently experienced for the past six year. Upon improvement to the economy there is very little correction to market prices and cost of living adjustments to the consumer. Meaning, if inflation were truly falling as some experts for some reason fear why are groceries, consumer goods and services, energy cost, interest rate adjustments, utilities and industrial goods etc. adjusting with this so called period of falling inflation? Don't ever expect to see prices again which we had prior to the recession. It is easy for both big and small business to quickly raise prices but lowering them somehow taboo as the economy corrects itself as ours has been doing over the past couple of years.
Lets take a quick look at grocery prices. As of October 2014 the national average price for ground beef 70/30 hamburger is $4.154 per pound. Hamburger prices in 2007 just prior to the beginning of our last recession was $2.372 per pound. That is a $1.79 per pound increase in a 7 year period of time and that is on just one common grocery item. This is a good example of what I am trying to explain to you. I don't expect to see hamburger prices at $2.37 per pound again, but there continues to be a rinse in cost to the consumer that continues to fast out pace the cost of living furthering the gap which makes our consumer dollar less powerful and cost you more money that you cannot save, invest, put away for your child's college fund etc.
The only consumer product we have seen fall in price for the past year is fuel cost. This largely due to over production of oil and a surplus of reserves. We have seen some relief at the gas pumps when filling our cars, but we continue to be taken advantage of in other areas. Airlines companies certainly have NOT lowered prices on airline tickets. In August 2014 I booked a trip to fly to Minneapolis, MN to see my family over Christmas. To book that same flight on the same airlines with the same rental car would cost me over $125.00 more. The airlines companies have done us no favors as fuel costs have dramatically drop for them they have ignored passing on any of this savings to the consumer.
As for the recent fall of lending interest rates in China which dropped them to 5.6% they are still well over our lending interest rate which are in the neighborhood of 3.5%. Housing continues to struggle and new building remains extremely low. Falling unemployment rates are largely related to people accepting temporary holiday employment and drastic under employment largely taking on of fast food jobs and retail employment or falling off the grid as they are no longer eligible to get unemployment, or live in a State that is not counted in the unemployment figures such as South Carolina due to not getting government unemployment compensation for their refusal to pay the amounts required by the state to receive it. So unemployment rates are highly inaccurate right now due to these reasons and others. Consumer confidence and spending is up but for the wrong reason. They "think" things are going to get better and that we are in a period of great recovery and growth while that is simply not true. Our national debt continues to rise vastly with every tick of the clock, our government continues to spend more than it takes in. We give away money, donations, food, and resources to other countries that we currently cannot afford to give, even borrowing money from China so we can give it to another country to help them. Inflation of consumer goods and services are still increasing faster than the cost of living. Bottom line...Inflation is NOT FALLING, it is growing in leaps and bounds both to the consumer (you and me) and for the country we love, the United States of America.
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.
Sunday, November 23, 2014
Monday, November 10, 2014
Stock Splits and How They Work
A family member is wanting to know how stock splits work. So this is the topic we will be talking about today as it can get confusing. Lots of people do not know if a stock spit is a good deal or not. I have spoken about this in previous blog postings, but we are going to review all this again for those that still have questions and our new readers.
First lets talk about why a stock splits. There are many different reason, but the big picture is money for the company. Perhaps they are wishing to generate more money for a purchase, buy out of another company, hostile take over, filling purchase orders, expansions of the company, etc.. Buy splitting the cost of the stock it makes the stock purchase more attractive to potential new buyers. These new buyers purchase the stock at a lower price that they can now afford thus generating money into the pocket of the company of the stock they just purchased.
But what about the old stockholders? Those people that owned the stock for a long time? Depending on the stock spit approved by the companies Board of Directors the old stockholders number of shares will increase by the split value that was approved. Lets look at a common example: Company ABC Inc. has an approved split at 2:1. This means the old stockholders are going to get 2 new shares of stock for everyone they own. Thus if you own 10 shares, you will own 30 after the split. But, those 30 shares are going to be valued at the same price as the 10 shares you previously owned as the price of the stock is going to fall. Then the hope is that the price of the stock is going to be more attractive to new buyers and that they will start buying the stock, putting more money in the pocket of the company and drive up the price of the stock value putting more money in the old shareholders pockets.
Also with a stock that is going to spit, there will be a cut off date established. Meaning if you by the stock before the cut off date the company will split your shares too along with the old shareholders. This is where it begins to get tricky and confusing to many people. How do you know if you should buy stock and take the split? And is it okay to buy after the split if I missed out? Lets talk about this and hopefully answer these questions. Both have the same answer as far as I am concerned. However, with a positive calculation you would have made more money had you gotten in on the split. So you ask, what is the calculation? Well, it is pretty easy and it works for me. I have only lost money one time using this calculation and it was not a lot of money that could not be easily recovered by moving on to bigger and better things. So here is my key to success with a stock split. First, NEVER follow or buy into a spit that is less than 2:1 as you are most often setting yourself up for disappointments. If you happen to own the stock in your portfolio already and it splits at less than 2:1 that is okay, but don't buy into a stock at less than 2:1 upon the split announcement. Any split to a stock already in your portfolio is a good thing so don't get me wrong here. Okay so ABC stock is going to split 2:1, but is it a good buy before the split? Here is how you make the odds most often fall in your favor. Like I said this works for me and other financial advisors like the formula as well. Lets say the stock is currently selling at $100 per share. Look at the 52 week low. If the split will take the price down when it cuts in half to $50 per and is below the 52 week low significantly, this is a good stock spit to buy into before the split. So ABC has a 52 week low of $80 per share, after the spit the price will be at $50 per share. I see lots of room for growth her to even get back up to the $80 per share Low for the previous year. This is a buy for ABC stock. Lets say the 52 week low is $58 per share. Now ABC stock does not look so attractive. The bigger the gap the better the buy potential. Does this formula work 155% of the time? Of course not. But like I said, it is a solid formal and it only has failed me one time and my loss was basically pennies in what the formula has made for me in the past. I sold that one stock at a small loss to invest the money into Apple which split 7:1 and is currently up 36% in my portfolio. I think I made the right choice. Follow the formula and the odds are highly in your favor.
I hope this information about Stock Splits will help out those that need a little more understanding. Do understand this is a basic understanding of how things work.
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.
First lets talk about why a stock splits. There are many different reason, but the big picture is money for the company. Perhaps they are wishing to generate more money for a purchase, buy out of another company, hostile take over, filling purchase orders, expansions of the company, etc.. Buy splitting the cost of the stock it makes the stock purchase more attractive to potential new buyers. These new buyers purchase the stock at a lower price that they can now afford thus generating money into the pocket of the company of the stock they just purchased.
But what about the old stockholders? Those people that owned the stock for a long time? Depending on the stock spit approved by the companies Board of Directors the old stockholders number of shares will increase by the split value that was approved. Lets look at a common example: Company ABC Inc. has an approved split at 2:1. This means the old stockholders are going to get 2 new shares of stock for everyone they own. Thus if you own 10 shares, you will own 30 after the split. But, those 30 shares are going to be valued at the same price as the 10 shares you previously owned as the price of the stock is going to fall. Then the hope is that the price of the stock is going to be more attractive to new buyers and that they will start buying the stock, putting more money in the pocket of the company and drive up the price of the stock value putting more money in the old shareholders pockets.
Also with a stock that is going to spit, there will be a cut off date established. Meaning if you by the stock before the cut off date the company will split your shares too along with the old shareholders. This is where it begins to get tricky and confusing to many people. How do you know if you should buy stock and take the split? And is it okay to buy after the split if I missed out? Lets talk about this and hopefully answer these questions. Both have the same answer as far as I am concerned. However, with a positive calculation you would have made more money had you gotten in on the split. So you ask, what is the calculation? Well, it is pretty easy and it works for me. I have only lost money one time using this calculation and it was not a lot of money that could not be easily recovered by moving on to bigger and better things. So here is my key to success with a stock split. First, NEVER follow or buy into a spit that is less than 2:1 as you are most often setting yourself up for disappointments. If you happen to own the stock in your portfolio already and it splits at less than 2:1 that is okay, but don't buy into a stock at less than 2:1 upon the split announcement. Any split to a stock already in your portfolio is a good thing so don't get me wrong here. Okay so ABC stock is going to split 2:1, but is it a good buy before the split? Here is how you make the odds most often fall in your favor. Like I said this works for me and other financial advisors like the formula as well. Lets say the stock is currently selling at $100 per share. Look at the 52 week low. If the split will take the price down when it cuts in half to $50 per and is below the 52 week low significantly, this is a good stock spit to buy into before the split. So ABC has a 52 week low of $80 per share, after the spit the price will be at $50 per share. I see lots of room for growth her to even get back up to the $80 per share Low for the previous year. This is a buy for ABC stock. Lets say the 52 week low is $58 per share. Now ABC stock does not look so attractive. The bigger the gap the better the buy potential. Does this formula work 155% of the time? Of course not. But like I said, it is a solid formal and it only has failed me one time and my loss was basically pennies in what the formula has made for me in the past. I sold that one stock at a small loss to invest the money into Apple which split 7:1 and is currently up 36% in my portfolio. I think I made the right choice. Follow the formula and the odds are highly in your favor.
I hope this information about Stock Splits will help out those that need a little more understanding. Do understand this is a basic understanding of how things work.
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, November 1, 2014
Buy, Sell or Hold (Follow Up)
Back on October 14, 2014 when the market slipped on the banana peel, I told my readers to "HOLD". Is the market done slipping on the banana peel yet? I do not think so and I am still going to HOLD! Let's talk about why we should continue to hold.
Historically after an election the stock market will dip. It will take a much deeper dip if there are contested results, run off elections, who controls the House and Senate or if there is a 50/50 split in the Senate between sitting Republicans and Democrats. And you think Washington is screwed up now? If the Republicans win the Senate which is predicted we will have a Republican House and Senate and a much hated Democratic President. It will be constant war between them for the next 2 years and not a dam thing will get done or be accomplished. This election can play a big role as to how the stock market will be affected. We have 3 Senate races that are too close to call and very unpredictable (Kentucky, Louisiana, and Georgia). It was just announced this morning that in Kansas it is getting to be a very tight race too with the Republican in danger of losing his seat. If this happens this will be the first time since before WWII that a Republican lost a Senate in Kansas seat to another party. For these election reasons I stand by my recommendation to "HOLD"!
We have also never resolved the issue that the majority of stocks on the market have inflated values that make the market vulnerable for a correction. I thought that we might be headed that way back in mid October, but 3rd Quarter profits pushed the DOW back up well over 17,000. Stocks prices went soring and in three weeks my individual stock holdings are up over 5% higher than when they fell in mid October. I am sure your individual stock holdings did similarly well on this bounce back. But being that the stock market is even more inflated than it was back in mid October when I first wrote about this subject I am again saying to "HOLD".
One thing that I could see and that I could agree with is taking a little money off the table and saving it for the stock markets rainy day. You know that day will come. Here is an example of what I mean and why. I bought shares of Apple (AAPL) about a month before it's 7 to 1 split. It was up 25% since my purchase date. The market took that significant drop in mid October and took me down to like 18%. Now it bounced back bigger than before and I am up over 35%. Being up 35% on any individual stock usually translates into a nice healthy profit. In a situation like this I can see a little sell off and you taking a little money off the table. Sell 1/3 or 1/2. Put the money on HOLD for that rainy day. Use it to revisit in AAPL if it takes a big tumble or reinvest that money into a new stock when the time is right or stick the money in your pocket for a nice vacation...but be prepared to pay taxes on it come the end of the year if you have reportable capital gains. Otherwise do not make any big moves right now, especially until after this upcoming election.
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 after an election the stock market will dip. It will take a much deeper dip if there are contested results, run off elections, who controls the House and Senate or if there is a 50/50 split in the Senate between sitting Republicans and Democrats. And you think Washington is screwed up now? If the Republicans win the Senate which is predicted we will have a Republican House and Senate and a much hated Democratic President. It will be constant war between them for the next 2 years and not a dam thing will get done or be accomplished. This election can play a big role as to how the stock market will be affected. We have 3 Senate races that are too close to call and very unpredictable (Kentucky, Louisiana, and Georgia). It was just announced this morning that in Kansas it is getting to be a very tight race too with the Republican in danger of losing his seat. If this happens this will be the first time since before WWII that a Republican lost a Senate in Kansas seat to another party. For these election reasons I stand by my recommendation to "HOLD"!
We have also never resolved the issue that the majority of stocks on the market have inflated values that make the market vulnerable for a correction. I thought that we might be headed that way back in mid October, but 3rd Quarter profits pushed the DOW back up well over 17,000. Stocks prices went soring and in three weeks my individual stock holdings are up over 5% higher than when they fell in mid October. I am sure your individual stock holdings did similarly well on this bounce back. But being that the stock market is even more inflated than it was back in mid October when I first wrote about this subject I am again saying to "HOLD".
One thing that I could see and that I could agree with is taking a little money off the table and saving it for the stock markets rainy day. You know that day will come. Here is an example of what I mean and why. I bought shares of Apple (AAPL) about a month before it's 7 to 1 split. It was up 25% since my purchase date. The market took that significant drop in mid October and took me down to like 18%. Now it bounced back bigger than before and I am up over 35%. Being up 35% on any individual stock usually translates into a nice healthy profit. In a situation like this I can see a little sell off and you taking a little money off the table. Sell 1/3 or 1/2. Put the money on HOLD for that rainy day. Use it to revisit in AAPL if it takes a big tumble or reinvest that money into a new stock when the time is right or stick the money in your pocket for a nice vacation...but be prepared to pay taxes on it come the end of the year if you have reportable capital gains. Otherwise do not make any big moves right now, especially until after this upcoming election.
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
Making Your Own Mutual Fund
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.
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.
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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