My Investing Notebook
:: Learning from the pros; making decisions on my own. ::
My Investing Notebook
:: Learning from the pros; making decisions on my own. ::
More signs point to a slowdown in real estate: mortgage rates up, inventory up, time to sell up, prices paid (down?).
Reference:Real Estate Begins to Cool by The Big Picture blog
Real Estate Begins to Cool – Follow Up
Related:Rise in Supply of Homes for Sale Suggests Market Could Be Cooling by WSJ (need subscription)
Are we experiencing a housing bubble? Overpriced houses? A lot of speculation. I think so. I think this craziness has to stop sometime — especially in the NJ area. That’s what I think. See what Celia Chen, from Economy.com, has to say about the housing bubble in this article, U.S. Bubble Trouble. She does not say the bubble will burst, but she sees the housing market cooling considerably if the rates move up to 7%. Also, she explains the effects of the bubble actually bursting. Very good article.
I went to a local library right after work today. This has become a weekly activity for me. Why? To read the latest S&P Outlook newsletter, and the latest issue of Value Line Investment Survey. These two newsletters are probably the best you’ll find. No question about it. They’re expensive, though. So that’s why I go to the library.
S&P Outlook (you can try it on-line for 30 days) ranks around 1000 stocks. Each stock has a rating of 1 to 5. 5 is the best (strong buy) and 1 is a strong sell. I’ve been following S&P Outlook for couple years now. I think I’m a better investor because of it. It just gives you a little bit more confidence in a company which you know has either a 4 or 5 rating. S&P Outlook is my favorite stock-picking resource.
I’ve always wanted to see Value Line stocks. Why? Because of the advertisement I receive from them, and also advertisements found in the SmartMoney magazine (which I also like). But over the last couple of weeks (several trips to the library), I’ve started to like Value Line more and more. I’m going to rely on it more from now on.
S&P Outlook gives you a list of good stocks. Value Line probably does as well. You know what I’m thinking. 
If I find stocks that are recommended in both resources, I might do even better. Not to mention the added confidence boost.
Did I find any valuable information from them? You bet, check out my latest stocks “of interest,” below.
Here are the stocks that are “on my radar” now. I am doing a little re-shuffling in my portfolio. My objective is to have 10-15 quality stocks and invest in them regularly. (In addition to the ETFs I hold.)
Walgreens (WAG) » Pharmacy: ($44.1, S&P Rating: 4 stars, Great Value Line rating): Good company to own. Great appreciation potential. Recommended in Value Line as well as S&P Outlook.
WellPoint (WLP) » Health: ($127, S&P Rating: 5 stars): Recommended in Value Line as well as S&P Outlook.
Darden Restaurants (DRI) » Restaurant: ($31.4; S&P Rating: 4 stars): Owner of Red Lobster and Olive Garden is looking exceptionally well. Ready to deliver. Recommened by Value Line, S&P Outlook, and Barrons.
Amgen (AMGN) » Biotech: ($59.3; S&P Rating: 4 stars): I’ve always liked Amgen. I invested in it couple times before and always came ahead. The stock looks good, has good potential. It is recommened by Value Line and S&P.
I just signed up for the I Will Teach You To Be Rich blog yesterday and I’m already finding great stuff: Warren Buffet’s letters. When the greatest investor of all speaks, open your ears. He sees things ahead of everybody else. Read them every year, that’ s my tip.
The Wall Street Journal has an article about personal finance blogs. I subscribed through couple of them with Bloglines.com. Some of them look good, so take a look.
By the way, WSJ.com is my favorite daily newspaper. I read it every day before work. It’s not cheap ($80/year; I pay $40 because I also have a subscription to Barron’s), but it is worth every penny. I like to get my information from the most reliable source.
Here are the stocks that are “on my radar” now. I haven’t been buying lately (only investing in stocks that I currently own — dollar costing, to be exact), but these look good…
Now, after February is gone — one of the worse months, historically — it might be a good time to load up on some stocks. This year, my strategy is to pick big, international companies as the dollar is weak and the economy might cool a little bit. I’m also investing in the following ETFs: SPY, VDE, VGT, VHT, VUG, EFA, EEM.
Citrix (CTXS) » Web Software: ($23.5, S&P Rating: 5 stars): Very good company to own for superior returns. I’m looking to get in. Recommended in Value Line as well as S&P Outlook.
Cisco (CSCO) » Network Gear: ($18, S&P Rating: 5 stars): Very good company beaten down. They will recover. One of the strongest players in the industry. Good long-term investment.
Coca Cola (KO): ($43.6; S&P Rating: 4 stars): International company with strong overseas growth. Beaten down.
General Electric (GE) » Electronics: ($36; S&P Rating: 4 stars): Strong inernational company. Good company to hold. Good price.
Hain (HAIN) » Foods: ($18.9; S&P Rating: 3 stars): This company looks interesting as we move more and more into organic, more healthy foods.
WebEX (WEBX) » Web Communications: ($23.4; S&P Rating: 5 stars): Leader in web communication. Looks cheap. Very good growth potential.
CheckPoint (CHKP) » Security Software: ($22; S&P Rating: 5 stars): Looks cheap. Very good growth potential.
I recently gave a speech titled “Investing 101.” It was for my local Toastmasters club. In the speech, I covered some things that might be of interest to individual investors. I’d like to share some of them, below.
Stock Market 101
What is a stock market? It’s where all public companies are listed and are available to be traded. Public? After a company has been successful and the owners decide to make some big money, they sell the company to the public — investors like you. Once the company is public, the original owners no longer own the company. How do you buy shares of the company? You can do it in a brokerage account, or you can buy the shares directly from the company (some companies allow it).
How does a company go up and down? A company goes up when there are more buyers than sellers. That’s the basic idea. For example, Coca Cola makes the news that they’re going to introduce a Super Cola. People that don’t have any shares in the company want to buy some. However, the people that hold the shares hear the news as well. They don’t want to sell the shares. They’d sell it at a premium. So the new people buy it at a premium and the price of the stock goes up.
Are there any risks in investing? Certainly. There are two types of risks: company risk, and market risk. If a company delivers some bad news, it will go down. Sometimes, sharply. The other risk is when the whole economy is not doing well. In that case, most companies go down. Nonetheless, the stock market has been the single best place to put your money over time.
How I Started It
It all started as a Yahoo game (I believe you still can do it) in college. Yahoo gives you 100K and you invest it anyway you want it. Some of my friends were doing it, so why not try it? So I tried it, and I was doing good. At that time, late 90′s, everything was going up. I remember that once I put money into Oracle, and within months, it quadrupled.
So I decided to open a brokerage account. It was all good for a couple of months. However, at that time, the bubble started to burst. I lost a lot of money. As I looked back, I said to myself that I didn’t know enough about the whole investing process and about which companies to invest in. So I subscribed to several magazines. I started reading. I gaines some confidence. My stocks started to go up again and I recovered most of the money I lost.
I’m still an investor now. I invest regularly. But for the first time, I feel that I’m in control.
My Tips & Strategies
Do I have any secrets? No, no secrets, just tips. First of all, invest as soon as you can. You don’t have to have a lot. Start small: couple hundred is enough.
Invest regularly and put money into the same companies over and over. That way, when the company goes down, you’ll buy more of it for the same money, and you’ll even out when it eventually recovers.
Invest for the long term. If you’re not going to invest for at least 5 years, don’t do it. Just don’t do it. It’s not worth it.
Invest in ETFs and Mutual Funds. ETF, Exchange Traded Fund, is basically a group of stocks traded as one. One good one is the S&P 500 — SPY is the symbol (I have several others). ETFs minimize risks. Mutual Funds? When you invest in Mutual Funds, you’re basically paying somebody to trade for you. One great company — low fees, good choices — is Vanguard.
Brokerage accounts. I use two brokers: FirstTrade.com and Interactive Brokers. I buy Mutual Funds at First Trade (free) and I pay a $1 per trade at Interactive. However, an excellent choice for starters (I’m looking into this too — it would be my 3rd broker), is BuyAndHold.com. BuyAndHold lets you invest as little as $20 per month into a company and re-invest regularly. It’s called dollar-cost averaging and I recommend doing that.
Diversify. Don’t just buy one company and hold on to it. It’s too risky. Spread your risk. Diversify. It’s the key word in investing. Buy several companies, buy ETFs, buy Mutual Funds. Minimize the risk. That’s the way I do it.
If you invest regularly and for the long term, you should do well.
I used to like Scottrade a lot. Where else do you get free Mutual Fund investing? Where else do you get no inactivity charge? No longer at Scottrade, I’m sorry to say. 
Scottrade limited the number of no-transaction mutual funds from 9000 to 900. I found out about this yesterday. For a while, I thought that I might have to stick to the 900 they have. Just wait, Stas. I found out about FirstTrade. You basically get old Scottrade: $7 trades; FREE mutual-fund trading; no inactivity fee. I am switching over my IRA accounts and one other personal account to FirstTrade. (I use InteractiveBrokers as my main account, of course — can’t beat $1 trades.)
Here are the stocks that are “on my radar” now. I haven’t been buying lately (only investing in stocks that I currently own — dollar costing, to be exact), but these look good and might be up for grabs soon.
Note, however, that September has been, historically, the worst month of all.
Advanced Data Processing (ADP) » Business Services: (S&P Rating: 5 stars): This is a good stock, good long-term play.
Applied Materials (AMAT) » Semiconductor: (S&P Rating: 4 stars): Chip stocks are down but because they’re cyclical they’ll bounce back. Applied Materials should do well. Good time to get in.
Cadence Design Systems (CDN) » Software: (S&P Rating: 4 stars): Good stock; cheap.
Car Max (KMX) » Car: Stock that was recommended in BusinessWeek (see article); I think it has a lot of potential. I like their business plan.
Sony (SNE) » Electronics: (S&P Rating: 5 stars): Recommended all over the place: good international player; safe bet; good long-term player. I’m looking to getting into it.
Phillips (PHG) » Electronics: (S&P Rating: 4 stars): Has always had good producs; seems cheap now.
Sybase (SY) » Database: (S&P Rating: 4 stars): Cheap; it will recover.
Sysco [Foods] (SYY) » Food: (S&P Rating: 5 stars): Just look at the stock chart for this market leader. Very cheap. Should do fine.
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