Author Topic: What If You Just Picked Stocks... An Adventure Story  (Read 44624 times)

arebelspy

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #50 on: May 19, 2015, 10:12:18 AM »
This forum is the best.

And sol is quite a gentleman.
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bdbrooks

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #51 on: May 19, 2015, 11:05:09 AM »
I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know". Humans have almost too many investing biases to count (certainly too many for me to write about in 1 post). The only strategies that I would trust to beat the market are systematic in security selection, allocation, and rebalancing.

First of all, I do not know exactly what your portfolio is, but if you have over 5% of your portfolio in any 1 company then you are playing with fire. I have read plenty of studies on diversification benefits of individual stock portfolios. Once you get to 50 companies (2% per company) there is little gain in adding more companies. Less than 20 is foolish.Personally I would get it up to at least 30-40 (and I would consider that a high concentration).

I think not rebalancing is also a huge mistake. Let's say you started your experiment in 1999 with 10 companies. 4 of your companies went bankrupt in the dot com crash (certainly plausible considering where most people would have concentrated their portfolios). Then 3 more went bankrupt in 2008. 2 more tech stocks "survived" but are virtually worthless. 1 company is doing well and is worth almost 10 times what you paid for it. So you are about "even" (even though the market is higher). However, you now have 100% of your experiment in 1 company. I think that even you would find this dangerous. The problem is that a significant amount of companies from 20 years ago are gone or our almost unnecessary with technology changes. Rebalancing allows you to change with the times for the new and up and coming companies.

I think that an equal weight SP 500 fund may be a good fit for you. It would allow higher exposure to some of the newer companies that may be more innovative and disruptive to our future. The cap weighted sp 500 funds are heavily concentrated it the mega cap companies that have already received most of their growth. Keep in mind that equal weighted funds have a little more volatility than cap weighted funds, but have also been shown to outperform over long stretches.

In summary, even though most people that have commented wouldn't endorse either of our philosophies, that doesn't mean that I would come close to implementing what you would discuss. I wouldn't go as far as to say it is the dumbest thing you could do, but there are some significantly increased risks to what you are discussing.

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #52 on: May 19, 2015, 11:15:18 AM »
This forum is the best.

And sol is quite a gentleman.

+1

brooklynguy

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #53 on: May 19, 2015, 01:58:40 PM »
And sol is quite a gentleman.

We can use the gentlemanliness with which sol negatively reacts to a proposed investment strategy as a litmus test for its inadvisability.  Sol's responses in this thread have been nearly devoid of sardonic subtext; on that basis alone, I conclude the proposed strategy is not only ill-advised, but piteous.

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #54 on: May 19, 2015, 02:25:27 PM »
The OP sounds like my dumb ass in 1999 ;)

I couldn't get enough of those Janus Funds back then.   

thd7t

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #55 on: May 19, 2015, 03:26:56 PM »
The OP sounds like my dumb ass in 1999 ;)

I couldn't get enough of those Janus Funds back then.
That's the disconnect that I've been hoping to describe.  OP is sort of looking at 18 of the top performing companies over the last 15 years and saying "what if?".  A lot of people are countering with a what about the crappy companies (which I agree with), but maybe we can look at the top performing companies from 1985-1999.  Those are the companies that OP is really talking about.  He thinks he's looking forward, but it's all looking backward.

Also, he spends a lot of time talking about buying during the dip and how his stocks are up more over the course of the day or 3-months.  Those are pointless metrics. 

frugledoc

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #56 on: May 19, 2015, 04:37:46 PM »
I'm guessing mr percentage is young, probably in his 20s, going through the arrogance phase most of us index funders did before we eventually got sense drilled into us.

I think new investors need the excitement of stock picking before they learn.  It is quite cool to outperform the best fund managers and feel like an investing God, until you lose.

dsmexpat

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #57 on: May 19, 2015, 04:48:38 PM »
I'm guessing mr percentage is young, probably in his 20s, going through the arrogance phase most of us index funders did before we eventually got sense drilled into us.

I think new investors need the excitement of stock picking before they learn.  It is quite cool to outperform the best fund managers and feel like an investing God, until you lose.
Not me. I bought the damn index fund. It takes a remarkable amount of delusion to credit your hunches as being smarter than the combined resources of the biggest industry on Earth.

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #58 on: May 19, 2015, 06:11:54 PM »
You can’t connect the dots looking forward; you can only connect them looking backward. --Steve Jobs

NICE!

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #59 on: May 20, 2015, 11:24:33 AM »
I'm guessing mr percentage is young, probably in his 20s, going through the arrogance phase most of us index funders did before we eventually got sense drilled into us.

I think new investors need the excitement of stock picking before they learn.  It is quite cool to outperform the best fund managers and feel like an investing God, until you lose.

I didn't need to pick stocks, either. I simply read Random Walk then Common Sense on Mutual Funds, which convinced me that I probably wouldn't duplicate what I read in Beating the Street. Oh, I also took a personal finance class in college where we stock picked and did the monkey dartboard test.

The monkey won. By a lot (+4% vs +20%).

Also, sol is performing admirably in this thread. I'm nearly at wits' end because OP is talking about daily and monthly gyrations in the market (among other misguided thoughts). I think that the literature has pretty much put to bed the idea that day-trading works unless you're a robo hedge fund type...and even then I just read that most underperformed the S&P500 last year, while being considerably more volatile and risky.

OP - note how bdbrooks advocated for a reasonable version of how to beat the market. I obviously disagree and have a ton more questions for him, but this thread isn't about him. Based upon what bdbrooks just said, I think that he/she will probably do close to what the market does. I am nowhere near as confident with your situation - I just hope that you learn lessons cheaply and soon. I think I speak for us all in that we truly do want you to succeed and know why you're succeeding, not just attributing to skill what is better attributed to luck.
« Last Edit: May 20, 2015, 01:05:17 PM by NICE! »

Financial.Velociraptor

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #60 on: May 20, 2015, 01:23:42 PM »
I think I speak for us all in that we truly do want you to succeed and know why you're succeeding, not just attributing to skill what is better attributed to luck.

This.

MrP, I'm one of those rare heretics on this forum who thinks it is plausible to beat an index over a long period of time.  You however, have not given me confidence you know what you need to know to do so (HINT: It isn't easy.)  The indexers are making very strong points and have most of the academic financial community on their side.  I salute them. 

Humility is likely a key trait of individual investors who beat the market.  I have a little (really little) but I 'earned' it by doing stupid a few times before I began taking risk seriously.

Proceed cautiously, sir.

CorpRaider

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #61 on: May 20, 2015, 01:39:09 PM »
As long as you watch expenses (including spreads and taxes) and diversify enough to reduce most of the idiosyncratic risks, you will probably be ok (you can look into the research on how many issues it takes for that, but it ain't remotely as many as 500).  If it will help you hold on in the next bear market to see people buying some Kleenex,  drinking some Coke and buying some UA at DKS, versus seeing the quoted price of VTI, then its probably not a bad strategy for you.  Just mind the costs like a hawk.  Vanguard is going to set a low bogey especially when you factor in the income they make from securities lending.  Just remember, the average investor's return must equal the market's return minus expenses. 
« Last Edit: May 20, 2015, 01:44:51 PM by CorpRaider »

ender

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #62 on: May 20, 2015, 03:54:03 PM »
Humility is likely a key trait of individual investors who beat the market.  I have a little (really little) but I 'earned' it by doing stupid a few times before I began taking risk seriously.

No, consistency is. It's easy to beat the market over a short term period.

But what I care about is not whether you beat the market this year, or next year, or even over the next five years.

It's beating the market over a timeline long enough to be relevant that matters. And all it takes is a few meaningful mistakes to undo all the gains you've made over years or a lifetime of doing so.



forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #63 on: May 20, 2015, 04:45:49 PM »
Humility is likely a key trait of individual investors who beat the market.  I have a little (really little) but I 'earned' it by doing stupid a few times before I began taking risk seriously.

No, consistency is. It's easy to beat the market over a short term period.

But what I care about is not whether you beat the market this year, or next year, or even over the next five years.

It's beating the market over a timeline long enough to be relevant that matters. And all it takes is a few meaningful mistakes to undo all the gains you've made over years or a lifetime of doing so.




I don't know if "beating the market" is so important. Sure, it's great if you know you can do it. But the problem is that no one does. And the only ways to do it are to take risks. Risks that could easily lead to you dramatically underperform the market. If you're buying single stocks, your risk of huge loss grows. No one expected Enron, Worldcom, Fannie Mae, Lehman Brothers, etc, to go to $0. It can happen.

I think what's most important is getting to meet your financial goals with a reasonable level of confidence and the ability to maintain that financial status throughout a very long retirement period. Taking undue risk can really hamper that goal.

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #64 on: May 21, 2015, 03:20:30 AM »
As long as you watch expenses (including spreads and taxes) and diversify enough to reduce most of the idiosyncratic risks, you will probably be ok (you can look into the research on how many issues it takes for that, but it ain't remotely as many as 500).  If it will help you hold on in the next bear market to see people buying some Kleenex,  drinking some Coke and buying some UA at DKS, versus seeing the quoted price of VTI, then its probably not a bad strategy for you.  Just mind the costs like a hawk.  Vanguard is going to set a low bogey especially when you factor in the income they make from securities lending.  Just remember, the average investor's return must equal the market's return minus expenses.

You are the closest to actually pinning me down. I would have extreme difficulty making sacrifices to invest in "some index". My most begrudged investments are my mutual funds that are giving me a >12% return. I mean who could complain about that right? It's easier for me to buy a piece of a company I think is worth while. Im more interest and more willing to sacrifice. Im willing to throw down more. I feel like I own something.

On cost.. Robinhood charges me zero. I see 100% of the gain. I don't feel like Im being suckered by anyone. I am steering away from trading and towards investing. Make no mistake, Im still learning. I know I write a lot. I don't think I have earned any glory. I learn more by engaging in discussion. Im also backed with a pension so probably have a much higher tolerance for risk then most.

Roland of Gilead

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #65 on: May 21, 2015, 09:41:14 AM »
Ok, I have to reveal I am a bit of a hypocrite.   Yesterday I bought 3000 shares of SDLP at $14.02 because I thought it was not tracking the positive gain in oil correctly, and today it corrected to the spike in oil so I sold it at $15.08.   I still stand by my opinion that this is horse track type gambling, but damn it feels good to make $3000 in my Roth IRA in less than one day.

skyrefuge

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #66 on: May 21, 2015, 10:10:27 AM »
I still stand by my opinion that this is horse track type gambling, but damn it feels good to make $3000 in my Roth IRA in less than one day.

Holding those two conflicting feelings simultaneously (the knowledge that I'm doing nothing more than gambling, along with the euphoria that comes from short-term "winning") would scare the fucking shit out of me.

Same as if, after surviving the terror of childhood with two alcoholic parents, I accidentally got drunk for the first time at age 30...and liked it....

Roland of Gilead

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #67 on: May 21, 2015, 10:36:11 AM »
Holding those two conflicting feelings simultaneously (the knowledge that I'm doing nothing more than gambling, along with the euphoria that comes from short-term "winning") would scare the fucking shit out of me.

Same as if, after surviving the terror of childhood with two alcoholic parents, I accidentally got drunk for the first time at age 30...and liked it....

Yep.  It has to be an addiction.  I recognize it but the only thing I have been able to do in response is section off all of my gambling to one Roth IRA.  Our other accounts have been in index funds for the past decade.  I don't even make new contributions to this Roth...I made a deal that if I lose it all, I lose it all with no refills.   Started with $1700 and it is now $74,000, although it was $80,000 last year before I lost a lot in oil.

But anyway, I should not have jumped down the OP's throat so much if my actions are not much better...glass houses and all.

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #68 on: May 21, 2015, 10:42:38 AM »
Ok, I have to reveal I am a bit of a hypocrite.   Yesterday I bought 3000 shares of SDLP at $14.02 because I thought it was not tracking the positive gain in oil correctly, and today it corrected to the spike in oil so I sold it at $15.08.   I still stand by my opinion that this is horse track type gambling, but damn it feels good to make $3000 in my Roth IRA in less than one day.

The market can stay irrational longer than you can stay solvent. In this case you didn't use some crazy leverage or short selling, so your risk was lower, but the point is the same.

How much have you done these kinds of trades? Have you tracked the success and failure vs an index, including transaction fees and bid/ask spreads?

Roland of Gilead

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #69 on: May 21, 2015, 11:04:07 AM »
Ok, I have to reveal I am a bit of a hypocrite.   Yesterday I bought 3000 shares of SDLP at $14.02 because I thought it was not tracking the positive gain in oil correctly, and today it corrected to the spike in oil so I sold it at $15.08.   I still stand by my opinion that this is horse track type gambling, but damn it feels good to make $3000 in my Roth IRA in less than one day.

The market can stay irrational longer than you can stay solvent. In this case you didn't use some crazy leverage or short selling, so your risk was lower, but the point is the same.

How much have you done these kinds of trades? Have you tracked the success and failure vs an index, including transaction fees and bid/ask spreads?

I have not tracked year by year (I could probably try and get the records from E-trade but online they seem to only go back a few years).   I started this account with $1700 rolled over from a 401K at a short term job.  At the time I thought E-trade was cheap and unfortunately I have left it there instead of moving it to a cheaper broker.  Some years I paid up to $700 in commissions on trades.

$1700 in 2001 (it might have been late 2000) and $74,000 today.  Initially a lot of option trading but when I got it up to $10,000 I started doing more covered calls, deep spreads.   I made a ton on Apple poor man's covered calls (couldn't afford the stock but could buy LEAPS and wrote near term calls against them over and over.  Gilead was great to me (although had I just stayed with the Gilead stock I once had in there I would have a quarter million in the account).

$1700 to $74,000 in 14 years...what is that? 4200% return?   About 30% a year compounded?

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #70 on: May 21, 2015, 11:15:50 AM »
Ok, I have to reveal I am a bit of a hypocrite.   Yesterday I bought 3000 shares of SDLP at $14.02 because I thought it was not tracking the positive gain in oil correctly, and today it corrected to the spike in oil so I sold it at $15.08.   I still stand by my opinion that this is horse track type gambling, but damn it feels good to make $3000 in my Roth IRA in less than one day.

The market can stay irrational longer than you can stay solvent. In this case you didn't use some crazy leverage or short selling, so your risk was lower, but the point is the same.

How much have you done these kinds of trades? Have you tracked the success and failure vs an index, including transaction fees and bid/ask spreads?

I have not tracked year by year (I could probably try and get the records from E-trade but online they seem to only go back a few years).   I started this account with $1700 rolled over from a 401K at a short term job.  At the time I thought E-trade was cheap and unfortunately I have left it there instead of moving it to a cheaper broker.  Some years I paid up to $700 in commissions on trades.

$1700 in 2001 (it might have been late 2000) and $74,000 today.  Initially a lot of option trading but when I got it up to $10,000 I started doing more covered calls, deep spreads.   I made a ton on Apple poor man's covered calls (couldn't afford the stock but could buy LEAPS and wrote near term calls against them over and over.  Gilead was great to me (although had I just stayed with the Gilead stock I once had in there I would have a quarter million in the account).

$1700 to $74,000 in 14 years...what is that? 4200% return?   About 30% a year compounded?

Wow, sounds like you've done very well. Although we're ignoring any cost of time you spent on it--let's call it a hobby. Do you think you would recommend others to do this kind of thing? Do you think you just got lucky (say by happening not to hit the downside of some low frequency, but high loss events)? What makes someone who can yield positive returns (in addition to whatever time was required) vs an index?

skyrefuge

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #71 on: May 21, 2015, 11:28:36 AM »
What makes someone who can yield positive returns vs an index?

The devil!! It's the devil giving RoG that power, in an effort to convince RoG to free him from the Roth cage that he's been trapped in! "Look RoG, we've done 30% returns for 15 years, through a market crash, various strategies, etc. It's pretty damn clear by now that it's not luck. You're a genius, and it would be foolish for you to NOT apply your genius to the rest of your portfolio!"

And of course that's the moment that, once freed from his cage, the devil says "LOLOLOL, looks like you just lost 90% of your whole portfolio, turns out it was all luck after all!"

So congrats to RoG for keeping that devil in his cage for as long as you have...that's some impressive determination!

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #72 on: May 21, 2015, 11:49:12 AM »
You had me so confused for a minute, because I associate RoG with RootofGood.  :D
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Roland of Gilead

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #73 on: May 21, 2015, 12:04:04 PM »

The devil!! It's the devil giving RoG that power, in an effort to convince RoG to free him from the Roth cage that he's been trapped in! "Look RoG, we've done 30% returns for 15 years, through a market crash, various strategies, etc. It's pretty damn clear by now that it's not luck. You're a genius, and it would be foolish for you to NOT apply your genius to the rest of your portfolio!"

And of course that's the moment that, once freed from his cage, the devil says "LOLOLOL, looks like you just lost 90% of your whole portfolio, turns out it was all luck after all!"

So congrats to RoG for keeping that devil in his cage for as long as you have...that's some impressive determination!

Spot on.   That devil is sitting there saying "what if you just went ahead and put that $1,000,000 you have sitting in that other account into this same gambling scheme?"  You could be mega rich.   Fortunately the other shoulder has wife, and wife can be a lot meaner than the devil if you piss her off.

But you have pinpointed the highest risk of all if one does not have that wife to battle the devil.  One might think they are smart when all they are is just extremely lucky.

doggyfizzle

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #74 on: May 21, 2015, 03:55:07 PM »
Fortunately the other shoulder has wife, and wife can be a lot meaner than the devil if you piss her off.

My wife doesn't like my all the shares of MO I hold in our taxable account, but then I show her my YoC (>13%) on the first lot I bought in late 2008 and the dividend checks that roll in and she gets over it...

But my choice to go all stocks (except one mutual fund: LEXCX) was more driven to develop monthly income without having to deplete principal or appreciated shares to do it.  I've got 15 companies, divided into groups of 5 on quarterly schedules, that I buy shares in on a monthly basis that's pretty well diversified, reasonably non-cyclical, and has a blended yield between 3.5-4% right now (twice what I'd get from an S&P500 Index Fund):

Group 1 (January, April, July, October):
Altria, Philip Morris International, Coca-Cola (except for the January check, which is paid in December), Kraft, Union Pacific

Group 2 (February, May, August, November):
Colgate-Palmolive, Procter & Gamble, Verizon, AT&T, Abbott Labs

Group 3 (March, June, September, December
Emerson Electric, 3M, Johnson & Johnson, McDonald's, IBM

I know it's easy to criticize the original list at the beginning of the thread as "cherry-picking" winners, but if it's obvious that certain industries have an established set of advantages that limits competition (railroads, telecoms, consumer brands, IP rights for Pharma), it seems to me to be a pretty straight forward task to build a rock solid portfolio.  The youngest company in my portfolio is McDonald's (about 60 years), with the oldest being P&G (started as a candle/soap company in the early-mid 1800s); I think it's safe to say all will be around for a while because they make products or provide services that are essential to both the local and global economy.  Moreover, all are listed in the US and have to comply with US securities laws, which while not perfect, at least allow a casual investor to review balance sheets and cash flow statements to watch for any abrupt changes in corporate performance in a relatively easy manner.  I say if you're willing to be diligent, go for it with a concentrated stock portfolio, or at least go for a 50/50 mix of stocks/funds.

Roland of Gilead

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #75 on: May 21, 2015, 04:14:04 PM »
I know it's easy to criticize the original list at the beginning of the thread as "cherry-picking" winners, but if it's obvious that certain industries have an established set of advantages that limits competition (railroads, telecoms, consumer brands, IP rights for Pharma), it seems to me to be a pretty straight forward task to build a rock solid portfolio.  The youngest company in my portfolio is McDonald's (about 60 years), with the oldest being P&G (started as a candle/soap company in the early-mid 1800s); I think it's safe to say all will be around for a while because they make products or provide services that are essential to both the local and global economy.  Moreover, all are listed in the US and have to comply with US securities laws, which while not perfect, at least allow a casual investor to review balance sheets and cash flow statements to watch for any abrupt changes in corporate performance in a relatively easy manner.  I say if you're willing to be diligent, go for it with a concentrated stock portfolio, or at least go for a 50/50 mix of stocks/funds.

Back on topic, it is not exactly easy to pin down if advantages will limit competition in the long term (or even the medium term).

Kodak was around for over 100 years, once had 90% of the photographic film market, and was a pioneer in digital photography.   Bust

Motorola has been around in some form for over 70 years, pioneered the mobile phone, and rather recently had lost so much money they had to split up and reorg.   MSI currently pays a 2.3% dividend, but went through some tough times.

Nokia was dominant in the cell phone business, but had been around for over 140 years, used to pay a hell of a dividend, and now is only still alive because Microsoft is fucking stupid.

Bear Sterns was a financial titan for nearly 90 years....then bust.

I guess I am saying age and current market domination do not equal guaranteed future investment.

doggyfizzle

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #76 on: May 21, 2015, 04:25:55 PM »
Not age specifically, but more focused on specific industries

Kodak, Nokia, Motorola were tech companies whose revenues stagnated because they produce commoditized technology products ...in photography there was no barrier to entry for Fuji to start selling film in the US, or for digital cameras to be included on a phone.  It's hard to build a new railroad, and nearly impossible to come up with new brands to compete with Coke, Tide, Colgate, or Marlboro.  Same thing with IBM, I know everyone likes to talk about the ultra low-margin "cloud this, cloud that bs," but IBM's enterprise-focus and near global lock on the mainframe market (which drives very profitable sales/software contracts) has been going on for more than 60 years.  It's not to say the companies in my portfolio are immune from mismanagement or stagnation, but companies that produce goods/services that are the "building blocks" of the economy typically enjoy remarkable stable and reliable revenue.

Roland of Gilead

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #77 on: May 21, 2015, 04:35:58 PM »
I am not knocking your portfolio...those are good companies and most are likely to be around for decades or longer.  They pay good dividends but mostly are slower growth now.   Consumers are somewhat fickle...they have embraced fast casual dining with at least the outside appearance of healthy, like Chipotle.   That stock, while paying no dividend, has beat the crap out of McDonalds stock price recently.  Missing it in your portfolio means you have missed those high gains.  This is what an index does, it captures the McDonalds AND the Chipotles.

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #78 on: May 21, 2015, 04:57:56 PM »
But my choice to go all stocks (except one mutual fund: LEXCX) was more driven to develop monthly income without having to deplete principal or appreciated shares to do it. 

What's the point of this goal?

doggyfizzle

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #79 on: May 21, 2015, 05:16:33 PM »
The narrative about "fast-casual" replacing McDonald's (and other less-glitzy restaurants) is far overblown...MCD has grown revenues form 22.7 B to 27 B between 2009-2014, and has produced 30 B in net income for shareholders in that time frame.  While Chipotle's sales growth has been impressive, MCD made more in net income in 2014 than Chipotle's cumulative net income while a public company; I'll take McDonald's any day of the week.  Moreover, MCD can buy back and cancel stock with excess FCF, which allows the stock to appreciate over time even in periods of earnings stagnation (like right now during periods of USD strength).  As far as outperformance, check the 10-yr chart (my benchmark of performance) of MCD vs SPY...and back in 2005 MCD was already the largest fast-food company in the world.

forummm, the goal is to be able to be done with my day-to-day job by 40 if I choose.  My income stream will be recession-resistant, grow annually (all 15 companies have extremely long records of paying/increasing dividends above headline inflation), and satisfy my living expenses without having to worry about sell down principal during stock market corrections.

beltim

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #80 on: May 21, 2015, 05:40:21 PM »
I am not knocking your portfolio...those are good companies and most are likely to be around for decades or longer.  They pay good dividends but mostly are slower growth now.   Consumers are somewhat fickle...they have embraced fast casual dining with at least the outside appearance of healthy, like Chipotle.   That stock, while paying no dividend, has beat the crap out of McDonalds stock price recently.  Missing it in your portfolio means you have missed those high gains.  This is what an index does, it captures the McDonalds AND the Chipotles.

Ironically, McDonalds used to own 90% of Chipotle.

http://www.bloomberg.com/bw/articles/2013-10-03/chipotle-the-one-that-got-away-from-mcdonalds

doggyfizzle

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #81 on: May 21, 2015, 05:47:27 PM »
Yep, although I read (I'll try and find the article) that part of the reason MCD sold out of its position in Chipotle was to remove some "overhang" on Chipotle's stock due to MCD still being the controlling shareholder back in 2006.

AJDZee

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #82 on: May 22, 2015, 01:13:40 PM »
I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know".

Beating the market IS possible - you only need two simple things...

1. OP investing strategy
2. 1.21 gigawatts

Eric

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #83 on: May 22, 2015, 01:23:07 PM »
I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know".

Beating the market IS possible - you only need two simple things...

1. OP investing strategy
2. 1.21 gigawatts

Maybe in 2040 you can walk into a 7-11 and buy uranium, but in 2015 it's a little hard to come by

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #84 on: May 22, 2015, 01:36:59 PM »
I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know".

Beating the market IS possible - you only need two simple things...

1. OP investing strategy
2. 1.21 gigawatts

Maybe in 2040 you can walk into a 7-11 and buy uranium, but in 2015 it's a little hard to come by

<nerd alert> The DeLorean uses plutonium. And garbage.</nerd alert>

I think the flux capacitor is the harder item to come by.

Eric

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #85 on: May 22, 2015, 01:43:29 PM »
I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know".

Beating the market IS possible - you only need two simple things...

1. OP investing strategy
2. 1.21 gigawatts

Maybe in 2040 you can walk into a 7-11 and buy uranium, but in 2015 it's a little hard to come by

<nerd alert> The DeLorean uses plutonium. And garbage.</nerd alert>

I think the flux capacitor is the harder item to come by.

Dammit!!  <headdesk>

Psychstache

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #86 on: May 22, 2015, 01:58:33 PM »
I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know".

Beating the market IS possible - you only need two simple things...

1. OP investing strategy
2. 1.21 gigawatts

Maybe in 2040 you can walk into a 7-11 and buy uranium, but in 2015 it's a little hard to come by

<nerd alert> The DeLorean uses plutonium. And garbage.</nerd alert>

I think the flux capacitor is the harder item to come by.

Dammit!!  <headdesk>

I think <headtoilet> is the key to developing the Flux Capacitor.

frugalnacho

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #87 on: May 22, 2015, 02:02:23 PM »
Whoa, that's heavy.

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #88 on: May 22, 2015, 02:04:01 PM »
If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.

frugalnacho

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #89 on: May 22, 2015, 02:07:50 PM »
If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.

You could make just as much with the sports almanac.  Or lottery numbers.  Or the stock records.  If you possessed any of that information you could quickly become the richest person in history by a wide margin.  Just think if you could have nailed your march madness bracket.  You'd instantly become the most famous and richest person in history, and your wealth and fame would only continue to explode exponentially.

Eric

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #90 on: May 22, 2015, 02:13:16 PM »
I think <headtoilet> is the key to developing the Flux Capacitor.


beltim

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #91 on: May 22, 2015, 02:21:40 PM »
If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.

Well, one could argue that by buying stock, you're interfering in the very process, making it unpredictable a la Heisenberg.  With sports betting, on the other hand, unless your bookie takes action based on your bets, your bets won't interfere with the outcome of the event.

hodedofome

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #92 on: May 22, 2015, 02:26:54 PM »
Recommend OP read http://www.amazon.com/Fooled-Randomness-Hidden-Markets-Incerto/dp/0812975219/ref=sr_1_1?ie=UTF8&qid=1432325137&sr=8-1&keywords=fooled+by+randomness

In order to beat the market over a long period of time you have to have an edge. If you don't know what your edge is, then you don't have one.

------------------------------------------------------------------------------------------------------------------------

Barton Biggs' dad was the chief investment officer of a bank who died early and left his mom a basket of growth stocks that he considered 'safe.' She never sold and just collected dividends:

“was worried about his health and inflation and suspected my mother would outlive him by a considerable number of years . . . So he constructed for my mother a portfolio of growth stocks (and cyclical growth stocks) such as Phillip Morris, Caterpillar, Exxon, Coca-Cola, AIG, IBM, Citicorp. Hewlett-Packard, Berkshire Hatheway, GE, Merck, Pfizer, and so on – nothing very imaginative, but solid, long-term companies you would want to sleep with.  When she died two years ago [circa 2003] at age 95, her cost on many of these positions was actually less than the current dividend.  My mother’s portfolio compounded over 32 years at 17% a year….I figure the purchasing power of her income stream compounded at roughly 12% per annum…..My brother Jeremy and I watched her list intently, and from time to time, we did weed out and replace a few companies that we thought were beginning to falter.”

Compound growth of the S&P 500 during the same timeframe was 11.58% (with dividends reinvested). Fantastic story, but I can bet most of the gains were from Berkshire, Phillip Morris and possibly Coca-Cola. There was obviously no way for Barton's dad to know which company would be a big winner, he just did the best he could. It also certainly didn't hurt that a world class analyst and hedge fund manager (Barton) was watching over the portfolio.

 

iamlindoro

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #93 on: May 22, 2015, 02:28:18 PM »
If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.

Well, one could argue that by buying stock, you're interfering in the very process, making it unpredictable a la Heisenberg.  With sports betting, on the other hand, unless your bookie takes action based on your bets, your bets won't interfere with the outcome of the event.

On the other hand, it being BTTF, as long as you bring something concrete back (eg, a book or a printout) it will change to match the new result. 

PS, we are seriously impressive nerds.

beltim

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #94 on: May 22, 2015, 02:41:32 PM »
PS, we are seriously impressive nerds.

That's at least the second time today someone has said that about me on this forum..

frugalnacho

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #95 on: May 22, 2015, 02:46:51 PM »
If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.

Well, one could argue that by buying stock, you're interfering in the very process, making it unpredictable a la Heisenberg.  With sports betting, on the other hand, unless your bookie takes action based on your bets, your bets won't interfere with the outcome of the event.

On the other hand, it being BTTF, as long as you bring something concrete back (eg, a book or a printout) it will change to match the new result. 

PS, we are seriously impressive nerds.

source?

Roland of Gilead

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #96 on: May 22, 2015, 02:48:00 PM »
If you start making widely successful million dollar stock trades, it is very likely you will be investigated for fraud.   If you just win a few powerball lotteries, it will be taken for granted that you are lucky.

iamlindoro

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #97 on: May 22, 2015, 02:58:15 PM »
On the other hand, it being BTTF, as long as you bring something concrete back (eg, a book or a printout) it will change to match the new result. 

PS, we are seriously impressive nerds.

source?


frugalnacho

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #98 on: May 22, 2015, 03:05:09 PM »
On the other hand, it being BTTF, as long as you bring something concrete back (eg, a book or a printout) it will change to match the new result. 

PS, we are seriously impressive nerds.

source?



Ah.  I was under the impression we had moved out of the BTTF universe and were having a real discussion about our own universe.

iamlindoro

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #99 on: May 22, 2015, 03:07:07 PM »
Ah.  I was under the impression we had moved out of the BTTF universe and were having a real discussion about our own universe.

Never heard of it.  Besides, this line of discussion is less fantasy-filled than the original discussion.