A little thank you to Warren Buffet
 

On December 21st I was looking for a stock to buy with some extra cash, and I liked Heinz, the ketchup company. It's pretty stable and pays a nice dividend, and I've really liked dividend stocks the past few years. So I bought $5,000 worth. It's gone up a couple of percent over the last couple of months, and I've been good with that since that's a very good annualized return so far.

Today it was announced the Berkshire Hathaway is buying Heinz. The stock is up 20% today. Blammo. I sold out my initial $5,000 worth, left the profit in, and I now have $1,200 of free Heinz ketchup stock for two months of investment.

God, I love America.

I'm disappointed to hear that they don't pay dividends in Ketchup.

I'd get out completely myself

Did the same thing myself JEC, Voda phone, Merck, and Wells Fargo. This is over the past two years. On JEC I bought it before the last debt ceiling/down grade bullshit and ended up have to buy more after the drop to average myself out and made over a grand. Then get the heck out.

It's amazing the debt Heinz had.

Democrat in Debt. Duh.

I hadn't seen this yet. The wife owns about 200 shares of HNZ. It's not noon yet, but I'm going to go ahead and chalk this one up as a good day.

I just bought 500 and 100 shares of Arch Coal and Cliffs Natural Resources a couple weeks ago. I've already lost $1500. FML.

I need a good stock to throw some money at....anybody? I'm tired of mutual funds, I need to spread out a little.

Nice.

I've recently invested in a couple of individual stocks opposed to just mutual funds. Hoping my basic valuation proves correct.

I pretty much stick to dividend-paying stocks these days. You make money even if the market is stagnant. You have to work a little harder to diversify, but you can do it.

Slow and steady wins the race.

I enjoy the irony that a person could have gotten rich with ketchup stock today if they'd've invested a lot in it.

That profit you made of the sale of that stock? You, you didn't build that!

I don't think anyone can understand your post.

That's the part I'm most excited about.

I know, sometimes I just want to get aggressive and find that lucky stock. Maybe it doesn't exist right now.

It does exist right now. The problem is that neither you nor I are very likely to be the ones to find it. :-/

I would stay away from Geno's stock. That shit is going to go down like a East Buch freshman.

Why leave the $1,200 at risk chasing the last few pennies on the spread between the current price and the purchase price? If the deal tanks for any reason at all, your $1,200 is going to evaporate fast.

The only guys left in the game at this point should be the arbitrageurs. You're basically betting $1,200 to make, what? About a buck? Current stock price is $72.49 and Buffet's purchase price is $72.50 and you own like 80 shares if my math adds up.

If you have to pay separate transaction costs for each sale then you're really being silly.

IMHO, next time, take the money and run Lebowski.


EDIT: Sorry, don't mean to be Debbie Downer -- congrats! It's certainly a very sweet moment of victory.

Okay, I got my $5,000 back and I just put $2,000 into Carnival Cruise stock. It's down 5% in two days, and all they have to do is fix the engine and hose the ship down. I bought a smidgen of Carnival stock last year after that ship tipped over in Italy, and have made 33% on it in 13 months.

I'm going to explain, and you'll likely laugh at me.

In 1991 and 1992, I bought Dell stock twice when it was a very young company. I was living in Austin at the time, and it wasn't a lot of money, but I was a poor grad student. Both times, I doubled my money, sold out, and thought I was a genius. However, if I hadn't sold, that $4,000 in stock would've been worth $250,000 by the end of the 90s. I was standing in the middle of a gold mine, and I walked out. It. Kills. Me.

So now I have a strategy, and I stick to it religiously. I buy stock in lumps of $4,000 or $5,000. When I get to the point where I've made 20%, I sell out my original share and leave the profit in. That way, if the stock goes down I haven't lost any of my principal, and if the stock goes all Dell I'll still get the upside, albeit in a smaller dose. But I won't completely miss the boat.

I've been using this system for about 6 or 7 years now. The result is that I'm slowly building my own mutual fund of dividend-paying stocks with growth potential that I've hand-picked. It disseminates my risk but also gives me enough concentration that I have the potential to beat the market significantly.

Keep your eyes open, and try to stick to what you know. Buffet famously avoids most tech stocks (and subsequently avoided the dot-com bubble in the early 2000's) because he says he doesn't understand the companies well enough to invest in them. I work in construction, and the majority of my projects are in healthcare. I spend a decent amount of my time in hospitals and talking to hospital executives.

Back in 2009, I looked at all the mandates hospitals were facing (and incentives they were receiving) to go to electronic medical records and upgrade their information systems.

There just happens to be a local company (Cerner) that is in that market. Not only did it present a unique opportunity to root for a local company, I knew a few people who worked there and it seemed to be a very solidly run organization.

I bought about as much Cerner stock as I could afford at that time. As of today, it's up 167%.

That situation is unique in that it all lined up so nicely for me, but it's an example of understanding what you're buying. If you don't know the company, you're not really investing. You're gambling.

Your philosophy is perfectly fine and I don't laugh at you at all, but in cases like this you're basically risking $1,200 for no good reason at all.

There's precisely TWO things that can happen here with Heinz. ONLY TWO.

1. deal closes. You make a buck more than you would have if you'd sold now.

2. the deal doesn't close, and the stock tanks. That second part isn't speculation. If the deal doesn't close FOR ANY REASON the stock will tank.


Given that, you can buy the shares back cheaper if the deal doesn't close so you don't miss your Dell opportunity. Of course, Heinz is to young electronic growth stock what Cassel is to young growing quarterbacks, but I digress...

So yeah, I think you need a small carve-out from your normal rule, and you can even include the caveat that you will buy back in with profits if the deal tanks.

This is a good point. It's a very unusual situation to have a stock jump 20% in one day. I'm wavering. But I don't know, man. The key to having a system is to stick to the system.

If Rain Man was a cat he would be this cat.

http://1.media.collegehumor.cvcdn.co...36be10ab29.jpg

Hell yeah. All that ketchup would go great on a Cheeseburger in Paradise. Love Buffet

I aspire to be that cat. He looks like he's really got life under control.

My 401k are all packaged funds setup through the program.

My roth is where I play with my selected mutual funds & stocks. I wish I could put more than the $5-5.5k per year in there because there are several companies I'd like to invest in. Right now I don't want to do that with my non-retirement accounts.

Only mustard, no ketchup

We own Berkshire as a long term investment. :thumb: Like it.

A or B share? If A, are you looking for a new drinking buddy? :D

I bought $5000 of the stock MJNA after the elections... when Colorado made marijuana legal. Bought it at $0.128 per share. Today, it's around $0.45 a share. :-D

So when do you sell the rest? Whatever is left after you sell and make your money back and have the "free shares" sitting around?

So far, I don't. I sow the seeds of financial growth like Johnny Capitalseed, and let them flourish.

It's been hard to evaluate my system so far because of the turmoil in the markets. I've had a few stocks that have plummeted and a few that continued to grow quite well. I'm not sure that I'm really getting a different performance than an index fund, but it's much more fun.

In total, I've executed this system with 38 stocks. My outcomes are:

Fully executed (meaning that I bought, made 20%, and pulled out the original, leaving only the profits):

7 stocks - Less than the original purchase price (-70%, -10%, -5%, -20%, -1%, -35%, -10%)

2 stocks - Above the original purchase price, but by less than 20%

12 stocks - Continued growing above and beyond the 20% (30%, 50%, 25%, 200%, 470%, 25%, 100%, 110%, 125%, 40%, 30%, 70%)

I think my "sowing seeds strategy has worked here. While I've had a few that tanked, I've also been riding some really good winners.


Not fully executed (meaning I bought the stock, but it hasn't appreciated by 20% yet)

8 stocks - Less than the purchase price
4 stocks - Above the purchase price, but by less than 20%

The eight dogs are hurting me. These are stocks that I bought and immediately lost money on. I've been waiting on them to recover, but several of them were stocks I bought before the crash and they just didn't recover over the past couple of years.

In a few instances, I've doubled down and bought more stock if I see an opportunity. This is where watching my list has paid off:


1 stock - Less than the purchase price
0 stocks - Above the purchase price, but by less than 20%
4 stocks - Above the purchase price by more than 20% (330%, 350%, 50%, 30%)

Do what you want Rain Man, but if it were me, I'd parlay that $1,200 into a nice Carnival cruise for you & the Mrs..

Are the returns listed the return on the 20% non-principal investment (i.e. what you left in there after pulling out your principal)? Do they include the original 20% gain or are they the performance after the initial 20% return?

At what point did you double-down?

The figures I show would include the original 20% gain. So as an example...

I buy 50 shares of a stock at $100 for $5,000.
It goes up 20% to $120 and $6,000.
I sell 42 shares at $120 to get my $5,040 back (roughly), and still have 8 shares that are worth $960.
I then let those 8 shares ride. If I report a 30% gain, it's 30% over what I originally paid, or $130. So at a 30% gain, those 8 shares are worth $1,040.

And of course there are some sale fees and stuff.


I've doubled down on a few stocks. Because I've held most of them for a while, I get a feel for when they seem to be priced low. I did great on the stock for a financial services firm after the crash because I only had my profit in it, so it didn't destroy me when that $1,000 lost 90% of it's value. I looked at the company and it was still doing well, so I bought it three more times on the rebound back up.

I've also bought Carnival when it tanked after the Costa ship problem. I already had the stock, so it seemed like it got hit too hard. I've done it with a couple of other stocks that way too, when they got bad news.

The only double-down I've whiffed on was General Electric. I initially bought it and it tanked 20% and I doubled down, but I didn't know the stock well enough. It then dropped another 20% and has been vexing me ever since.

I should note too that a key part of my strategy is to get dividend-paying stocks, too. If I do that, I see three outcomes:

1. The stock goes up 20% and I implement my system.
2. The stock is stagnant, in which case I still get a 2 or 3 percent return.
3. The stock tanks, in which case I'm hosed anyway, but the dividend at least helps me slowly recover my losses.

Pass go. Collect $200.

The one downside of my system is that it's very, very confusing on first glance. When I open my account, I have several stocks where I've made money off of them, but it looks like I lost money. If I cashed out my initial investment and just left the profit in, and then the stock tanks, it shows the money as a loss, when in reality it's just less profit.

I don't have that problem if it keeps going up, so that's what I shoot for.

Hell I'd buy you a drink gladly if it was A.... It's B. :(

Is it "ketchup" or "catsup"? And how could there be such a huge disparity in the spelling of this tomato-based condiment?

You're not the only one on GE, and you're talking to a guy who has bought into MAYBE 12 or so different individual stocks in his life. I'm starting to do more now, though, just because. Slow and steady wins the race, but it is damn boring. I'm finally at a point where I"m comfortable making fairly small plays on my own, so sure.

But yes, GE was one of my early ones, and it has been a problem for a while. It's finally gotten to the plus side of the ledger, however, thank goodness.

I'm terrible at selling, so I'm probably going to implement your system, or a variant of it. I watched Alcoa go waaay up and then come all the way back down to negative. I think I was up 100% at one point, but now I'm at +3%. Your system seems like the kind of thing I need to enforce some kind of discipline on myself. Otherwise, I tend to buy and hold forever.

But I'm never going to hold onto shares that are up 20% after a merger/acquisition is announced. :p

Your Alcoa example is another reason why I implemented this system. I too have had a few stocks that have had a really good run, and then it frustrated me to see it drop back down. I set the 20 percent threshold because I figure it's low enough that a stock could have a good run and go up that far and then drop back down within a short period of time. If I get that return and then eliminate the risk to my initial capital, then I'm willing to take the risk that it'll cool down if my only downside is losing profit.

The other side of my equation was that, in an Alcoa type of situation, I would buy back the original shares if the price dropped back down to the original purchase price. I haven't had the discipline to do that yet because I've always found another shiny stock beforehand, but in theory it seems like it should work. Ride the stock up, sell the original investment amount high, and then just invest it right back if it goes back down. If it keeps going up you still get a little piece of the action with the profit that you've left in it.

The model only seems to break down when you buy GE and it gets on a train south and never comes back.

Well, I've implemented your plan already. I had Pfizer bought at $17 and it's at $27, or up 55% or so, and I'd arbitrarily decided to sell at $30/share, which it's been slowing climbing toward for awhile. Instead, I have now sold 2/3rds of my shares, which is enough to get my initial investment back, and am holding onto the 1/3rd as a profit play.

Your take the money off teh table approach makes sense. Of course, lately it hasn't been too tough to get a 20% gain on anything if you were buying anytime after the '08 crash...

In a bear market, finding somethimg to go up 20% is a helluva lot harder. :D

Yeah, that's what has made evaluation hard. Looking back, I started this system in 2006 and ramped it up in earnest in 2007 and 2008. I think I might've moved one stock in 2009 and 2010. Brutal, just brutal.

Let me know how it works for you.

Do you track the dividends you receive at all? In theory, if I had limitless time, what I'd like to do is track the dividends I get per stock and that way I'd be able to precisely calculate the "real" return on my investment. That isn't a tool that my brokerage firm seems to have, unless I'm missing something.

But it seems like a heckuva lot of work too. :(

I've been going back and forth on dividends. My account is with e-trade, and with a bit of work you can tell it to reinvest dividends, which seems like it would make total return tracking easier. Apparently you can get partial shares of stock by doing so.

I've held off because I'm not sure how rounding works when you only have $1,000 worth of a particular stock, but I'm tempted to do it. Right now I'm not tracking dividends at all other than just saying, "Hmm, 3 percent per year means I should add..."

It's a bit of a gap, because I have one stock that nominally has just been break even for the past five years or so. It's up perhaps one percent. But it's an REIT and it pays some ungodly dividend, around 8 or 9 percent. So it's actually been a good stock for me. If I reinvested, I'd eventually sell it even if it didn't appreciate, and I can't figure out if that's a success or not. I think it is, but I'm not sure.

Right. The dividends paid ought to be part of the increase in value, I'm thinking. If the company announced a special, one-time dividend equal to 20% of the value of the stock, that's no different than appreciation (other than tax treatment I guess) of 20% really.

You could modify the target to 25% if you're including dividends, so you don't undercut appreciation by selling too quickly if you view the stock as having upside when you buy.

REITs and power companies and sin companies (tobacco) seem good on dividends, overall. I did some quick research online and had some weird results. Companies like Lukoil and some mobile telephone company in Brazil. Could be an interesting diversification approach too, since we're all so US-centric... Of course the risk is higher too. Everyone knows GE and AT&T, but Lukoil?!?

Back in the old days when we didn't have internet trading, I had a broker, and I remember that he steered me away from REITs. He said that the dividends were good, but that the stock price deteriorates rather than increases over time. Something about depreciating assets. However, I've got two REITs now and they both pay good dividends and have held their own on price. They haven't appreciated, but they've held their own, and that's fine when you get an 8 percent dividend.

And by golly, I think you're right. I'm going to start reinvesting dividends. I've been back and forth on that, but I'm going to do it.

I view real estate exposure as important for diversity. Real estate can hold up while other segments of the market suffer. Of course, we're all a bit gun-shy having seen what went down in 2007, so real estate isn't impervious to market forces, but still, it can be very resilent compared to many stocks in certain situations.

Dividends absolutely should be included in your return. Total return = interest + dividends + capital gains + distributions.

In my investments I have the dividends reinvested.

Queer.

I had some stock options that I received as compensation for serving on the advisory board of a start up. I exercised them a couple of years ago. It was a pretty small investment, but the company has attracted $75M in series C investment since then. The start up still isn't generating any revenue, but the paper increase in the stock value would win this thread by a large margin. The chances are this will be a boom or bust investment: it will either grow significantly more than what it has so far or it will be worthless in a few years.

Not that I do alot of VC work, but good luck. The number of busts for every boom is depressing. Even companies that eventually take off sometimes see the early investors get killed. The dread downrounds and dilution that wipe out all that came before the new money (except for management).

Why in the world did you exercise them, unless the option period was about to lapse? Make the 83(b) election, but otherwise, wait and cross your fingers is the normal rule.

But good luck!

They were about to expire.

About the same time they announced the series C funding, they sent me a notice that they were issuing more stock. I assumed that those shares were to provide equity to the series C investors. If I divide the total series C funding by the shares of stock to determine the "market" price of the stock, I do quite well even with the dllution. I'm not sure if that is the right way to look at it or not.

I'm far from counting any chickens but the investors were fortune 500 companies that are leaders in their field. It was a gamble on my part, but it wasn't much money and I knew I couldn't look myself in the mirror if it turned out big and I had passed on it. So far it has done about as well as could be expected but there is still a long way to go.

Interesting article: http://online.wsj.com/article/SB1000...k-Picking+Code

It talks about a 'quality' metric for stock valuation. Basically, trying to look at profit margin instead of net earnings. Nothing new, really, but :hmmm: nonetheless.


I just ran this quickly on a couple of stocks I own to see how they compare and may setup a play portfolio to track results based upon this metric vs. other valuation techniques.

I have a question... I'm currently in Sprint stock and have close to 1k shares before they announced the sale to Softbank. Softbank agreed to pay $7 something /share for 70% of the shares. What does that mean?

Does that mean 70% of my shares will automatically be $7+ when the deal goes through or what?

Sometimes google isnt my friend.

Also.... does anyone play with put or call options? Any luck?

Been researching and thinking about getting in at some point with companies that give a dividends. What are you guys thoughts or experiences?

So you invest your money in the Steelers (Heinz) and not the Chiefs (Hunts)?

:harumph:

So I very briefly reviewed this article.

http://www.digitaltrends.com/mobile/...ver-explained/


Looks like they're buying about 55% of the company's shares for $7.30 each. So there is probably a tender offer going on which you can accept to sell at that price.

If you decline to do so, then after the deal closes you will be part of the 30% of non-Softbank stockholders of Sprint, and the share price will fluctuate per normal.

While the $7.30 offer is out there, I'd expect the stock to trade north of $7.00 certainly. After that, all bets are off and the stock will do whatever it will do.

So question -- do you stick to this even when the 20% increase is within the first year, such that it's a short term capital gain and you're paying taxes at ordinary income rates?

If so, brutal. Don't think I can handle that.

So how does one buy $5000 worth of a stock that costs $152,955.00 per share?

I understand it.

Obama sucks and is the devil.

I bought Berkshire B stock around the time it was first introduced at about 1500.00 a share. Since then, they split the stock 50-1 so more people would buy it. It's now 101.00 a share. Gotta love the Buffet man.

I'm liking Intel right now. I bought 150 shares on Tuesday and it's already up close to $.70.

It's way undervalued, and a $.90 dividend on a < $22 stock is hard to beat.

Because he bought stock in Heinz and not Berkshire Hathaway.

Actually, I've only bought stocks within my IRA, so I haven't had to worry about the tax implications. On my liquid cash I've just done very, very conservative mutual funds with a goal of beating a money market return.

Here's a picture of me on e*trade:

http://cdn.memegenerator.net/instanc...x/27323957.jpg

I bought some FRAN on Monday thinking it was due for a short squeeze. 45% shorts of total float is crazy undervalued. It's already up 9% today and looking like it might explode.

https://www.google.com/finance?q=NASDAQ:FRAN

Damn - everything is up right now but some of my gains are Awesome.

I realize there will be some pullback at some point but the stocks I've invested in at the beginning of the year I like and want to hold long-term. Plus I can't sell yet because I would be taxed over the capital gains rate.

The one "stupid" investment I made about 1.5 years ago just set a new high today (I'm up about 40% overall on it) but I'm just going to ride that one out. The gains thing doesn't factor in there because I bought that one in a retirement account so no taxes on the gains anyway. Oh well..

I'm actually anxious for a pullback because there are a few stocks I really want to buy (and should have 3 months ago) but I don't want to pay the price they're at right now.

Obama and the Feds are watching this thread. Be careful...

So a little over 2.5 years later I sold everything except for 1 holding. We just purchased a house and what was "play money" is now better suited for savings.

Over the time period I had bought and sold a few stocks or some shares of different holdings. I can't complain with the results. The total investment time from my first purchase until today was 966 days and rate of return less all fees was 12.02%.

Still have some incredible (and my total portfolio-best) performing individual stocks and mutual funds in my Roth account. The 401k only includes mutual funds.

:)

If you beat inflation, it's always a win.

Are you sure you are on the right forum? You just admitted to making a mistake.

nailed it 2013 DP!

Great advice!

Warren is good to me. The Heinz thing happened two years ago, and Warren just bought my stock in Precision Castparts a few months ago, giving them a 20% boost. I like Warren.