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Learning, Sharing, and Teaching => Investor Alley => Topic started by: ErikZ on May 24, 2012, 01:23:50 PM

Title: Am i missing something important?
Post by: ErikZ on May 24, 2012, 01:23:50 PM
I finally started buying stocks. I examined those that gave dividends, and decided on ALSK

It's the cellphone company for alaska. They had been giving off steady dividends, and then recently decided to  use their profits to upgrade their network instead of paying out dividends. Price has gone down  from 10$ to less  than 2$.

It seems very pessimistic when the reports I've read say that profits have not gone down. I figure they will be paying out normal dividends in a year or two...

Or am I missing something?
Title: Re: Am i missing something important?
Post by: tooqk4u22 on May 24, 2012, 01:52:19 PM
Did a quick search and it seems that the company is pressured for margins as they subsidize Iphones, investing in network upgrades that may turn out being pointless, and competition is increasing with Verizon entering the market.  Net income is supposed to decline 67% YOY. 

Your thoughts could prove right if they hit out of the park with all the efforts, but if you invest in this its a gamble.
Title: Re: Am i missing something important?
Post by: Mr Mark on May 24, 2012, 03:43:26 PM
"RE: Am I missing something important?"

Yes. Don't buy individual stocks. It's gambling.

It always puzzles me why this is news.
Title: Re: Am i missing something important?
Post by: smedleyb on May 24, 2012, 11:18:54 PM
I finally started buying stocks. I examined those that gave dividends, and decided on ALSK

It's the cellphone company for alaska. They had been giving off steady dividends, and then recently decided to  use their profits to upgrade their network instead of paying out dividends. Price has gone down  from 10$ to less  than 2$.

It seems very pessimistic when the reports I've read say that profits have not gone down. I figure they will be paying out normal dividends in a year or two...

Or am I missing something?

You're missing this:  never buy a sub $5.00 stock in a death spiral.  Buy only when the trend is up.   When the stock is .50, $2.00 won't seem like much of a bargain anymore.
Title: Re: Am i missing something important?
Post by: astadt on May 25, 2012, 01:22:51 AM
Im not sure a regional domestic communications company is a great way to go these days... If you want to keep gambling, try something international.

But if you want to be Mustashian... try VYM. Good dividends, low fees with lots of sector diversity.
Title: Re: Am i missing something important?
Post by: ErikZ on May 25, 2012, 07:00:54 AM
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... it seems that the company is pressured for margins as they subsidize Iphones, investing in network upgrades that may turn out being pointless, and competition is increasing with Verizon entering the market.  Net income is supposed to decline 67% YOY.

Ah, yes. The reason they're upgrading their existing network is because Verizon is entering the market. That will definitely cut into their profits as a % of their customers will leave.

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...never buy a sub $5.00 stock in a death spiral.  Buy only when the trend is up.   When the stock is .50, $2.00 won't seem like much of a bargain anymore.
Hm, death spiral (http://www.investopedia.com/terms/d/deathspiral.asp#axzz1vstxynVA)...
How did you find out that they took a loan like that?

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But if you want to be Mustashian... try VYM. Good dividends, low fees with lots of sector diversity.
I checked out VYM and  VHDYX. They're giving out 2.8% and 2.6%...that seems very very low.

Quote
Yes. Don't buy individual stocks. It's gambling.
And all investing is gambling, otherwise, it wouldn't work. I simply don't make enough money to be able to retire in my lifetime if I invest at 2.6% interest.
Title: Re: Am i missing something important?
Post by: arebelspy on May 25, 2012, 07:12:16 AM
And all investing is gambling, otherwise, it wouldn't work.

lol, what?  Is that a troll, or serious statement?

I simply don't make enough money to be able to retire in my lifetime if I invest at 2.6% interest.

Also not true, but yes, a higher yield helps.  But that comes with higher risk, which you're apparently disregarding.
Title: Re: Am i missing something important?
Post by: grantmeaname on May 25, 2012, 07:50:47 AM
Index funds are the mathematically optimal solution to the risk vs. reward problem. If you want to throw a couple thousand into P&G or Alaska Backwoods Telecom Corp., you're taking on much more risk in exchange for a modest boost in dividends relative to a dividend index fund.
Title: Re: Am i missing something important?
Post by: Mr Mark on May 25, 2012, 11:20:32 AM
ErikZ

None of us invest for a return of that. A balanced stock & bond fund [check VWELX]  long term gives a better return with less volatility. But you would also look to spread it around further maybe with real estate, commodities, etc.

Here's the return over the past 10 yrs. If you'd started with 10k, after 10 yrs - even in this decade! - you'd have averaged 6.7% annual return.
Title: Re: Am i missing something important?
Post by: ErikZ on May 31, 2012, 08:00:02 AM
And all investing is gambling, otherwise, it wouldn't work.

lol, what?  Is that a troll, or serious statement?


It's a serious statement. Otherwise the the phrase "Past performance is no guarantee of future results." wouldn't be common and true.

I simply don't make enough money to be able to retire in my lifetime if I invest at 2.6% interest.

Also not true, but yes, a higher yield helps.  But that comes with higher risk, which you're apparently disregarding.

Well I can start out small taking risks, or I can take those risks when I have a sizable nest egg. But I'm not the type of person to be satisfied with just one tactic until I've explored and experienced all my options.
Title: Re: Am i missing something important?
Post by: arebelspy on May 31, 2012, 08:51:54 AM
And all investing is gambling, otherwise, it wouldn't work.

lol, what?  Is that a troll, or serious statement?


It's a serious statement. Otherwise the the phrase "Past performance is no guarantee of future results." wouldn't be common and true.

Why bother investing then?  Why not just throw it all on red?  Or the lottery?

Just because past performance doesn't guarantee future results doesn't mean investing is gambling.  Unless you literally think that Warren Buffet has just gotten lucky year in an year out for the past 40 years, despite astronomical odds.

Sure, how some people do it is gambling (certain types of day trading, for example).  But most people call that gambling, not investing.  That doesn't mean actual investing == gambling.
Title: Re: Am i missing something important?
Post by: arebelspy on May 31, 2012, 08:55:34 AM
Also, since you're claiming it's a serious statement and not just a troll, let's actually look at it:
Quote
And all investing is gambling, otherwise, it wouldn't work.

Investing is - at its core - putting in money into an enterprise with the expectation to make more money than you put in. 

For example, let's say I put $100 in Coke.  I'm investing in that company with the expectation that they will make a profit, and share some of that profit with me, such that I make more than the $100 I put in.

Is there an element of risk?  Sure.  Something could happen such that Coke stops selling.  It seems like a very small risk to me, but YMMV.  Pick something you don't think is risky if you'd like to tweak the example.

That doesn't make it gambling.  I'm investing with the expectation of getting more in return than I invested.  How is owning shares of a profitable company that gives dividends "gambling"?  Because there's a small chance they might fail? 

Title: Re: Am i missing something important?
Post by: Guitarist on May 31, 2012, 11:06:57 AM
To be fair, Erik was responding to someone who said owning indivudal stocks in a company is gambling.
Title: Re: Am i missing something important?
Post by: arebelspy on May 31, 2012, 07:27:41 PM
To be fair, Erik was responding to someone who said owning indivudal stocks in a company is gambling.

Right, and then he claimed all investing is gambling.

The ridiculousness of that statement still flabbergasts me.
Title: Re: Am i missing something important?
Post by: Bank on May 31, 2012, 08:21:12 PM
Unless you're planning on filling out the rest of your stock portfolio with another 14-19 names sometime soon, I wouldn't touch this or any other individual stock.  If you're taking a flyer with some play money that's your business, but it doesn't sound like you are.  Why take on unsystematic risk when you can diversify it away by parking your stash in a balanced portfolio?
Title: Re: Am i missing something important?
Post by: Jamesqf on June 02, 2012, 11:14:00 AM
Why take on unsystematic risk when you can diversify it away by parking your stash in a balanced portfolio?

And why take on all the effort of researching all the individual stocks (an ongoing one, since you have to keep track of how they're doing), when you can just open a mutual fund account?  Unless you actually enjoy that sort of work, the small percentage a good fund will take off the top as management fees is more than worth it.