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Talking stocks, trading, and investing in general

Discussion in 'Business, Careers & Education' started by mikeman, Feb 2, 2011.

  1. idfnl

    idfnl Stylish Dinosaur

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    Wouldn't your comment effect your strategy in general?

    If dividends are going to be at risk with rates, aren't you planning on shifting your holdings?
     


  2. SkinnyGoomba

    SkinnyGoomba Stylish Dinosaur

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    No, why would it? I build cash positions when I'm unsure or feel the stock market has risen very aggressively, I deploy those cash positions as the market falls. I'm not planning to own bonds until they are sufficiently beaten down in price, and I would like to continue holding stocks as inflation rises. Only reason why I would exit positions is if I expect their earnings to take a huge hit, long term.
     


  3. idfnl

    idfnl Stylish Dinosaur

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    So technically going into cash is shifting your positions. I didn't necessarily mean stocks. Is that what you're doing now, then?
     


  4. SkinnyGoomba

    SkinnyGoomba Stylish Dinosaur

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    Absolutely, however, you asked me about strategy previously, strategy does not mean I own certain positions and keep them indefinitely. I have kept many of my positions for a long time with no interest in selling them because I'm happy with them and expect earnings to rise in the long term.

    When I built my current portfolios I decided upon my strategy, which remains constant, and I change positions or add to positions depending on the portfolio and current market pricing. The ones that have a constant cash stream, I will stop purchasing in an extreme 'up' situation, and will then begin deploying again after the market falls a bit. If I feel that the timing is right to sell off some laggards, the timing is usually right in an up market as they too will get hammered in a down market (most often). I do this because it allows me to be, for the most part, reactionary rather than attempting to forecast the future with a great degree of accuracy.

    I prefer dividend stocks because they average down and average up with the market, since they're reinvesting for you. For instance if you owned XOM from $95 in 2007 and hold it currently, the price has not done much in total, but you've collected and reinvested 26 quarters of dividends, which amount to $12.76/sh. Ignoring the gain on each individual dividend reinvested you're talking about a value of $115.35/sh. So, even if you bought at the peak share price in 2007 you're still more than 20% ahead of that currently. I've collected $8.69 in dividends since 2010, and at price of $57/sh that's a gain of $54.28/sh at current pricing, or a gain of about 95%, ignoring the fact that most of those dividends have individual gains tacked to them. In the same time periods the S&P has risen 32% and 85% respectively (2007 to now and 2010 to now), so in the worse scenario it's lagged the S&P by about 12% and in the better situation has outpaced the S&P by over 10%. Eliminate the dividends and it lags the S&P in both cases. Ignore opportunistic buying along with dividends and you're far better to simply buy the market.
     
    Last edited: Jul 5, 2014


  5. idfnl

    idfnl Stylish Dinosaur

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    I'm not sure how you derived that interpretation from my comment. Portfolios should be rebalanced regularly, of course.



    I think where we differ is the constant part. I don't maintain any overriding strategy. At times I'm cash, super conservative, sector heavy, bond fund, momentum/growth, etc. It depends on the market conditions. Also, I tend to run 5 or 6 strategies at the same time, for example about a year ago I started building a biotech segment, but it doesn't have a big impact on the other stuff I hold other than to potentially trim a bit of risk. Most recently were Canadian banks, which have done 14% since initiating Dec 2013 + 4% dividend, solid return of about 18%.

    To me, being so weighted on dividends seems itself rather risky and undiversified. When the climate turns away from valuing dividends, you're exposed if you're not ahead of it.



    I never reinvest. I like having the cash for other positions. Reinvestment is useful to me if you're averaging down, but up? I'd rather look for value and protect the core % of dividend return. You can't predict it easily, so I prefer cash.

    Part of the reason I initiated that post earlier was because I'm not valuing dividends enough so I want to re-balance a bit. I can see there is some headwind with interest rates, but this is a 3-5 year window (or longer) for me and I am happy to average down.

    Interesting side note, 2007? I don't have a single position that old. My oldest position right now is DNKN which I bought at the 2010 IPO, of which I sold all but the profits and kept those as 'free' shares. I was actually surprised by this, I thought I had older positions, but I am out of AAPL and re-bought GOOG a few months ago. Previously, my oldest positions were C, MSFT, and ORCL which are all long gone.
     
    Last edited: Jul 6, 2014


  6. SkinnyGoomba

    SkinnyGoomba Stylish Dinosaur

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    That's where we differ, I don't care if I'm ahead of a change. I would continue down my path of buying when the prices dip, as I'm buying an income stream. If I can buy into and re-invest into income streams for less, I'm happy to do so. To be ahead of a change you would need to be constantly in the minority position which eventually becomes the majority position. I feel I can do that in times of fear and great uncertainly, but to be constantly doing that in all situations is beyond my ability. I also find macro changes very hard to accurately time, since both shrinking and growing trends can last much longer than what rational minds can project, since they are often exacerbated by irrational thinking.

    I don't prefer to average up, but you're plotting somewhat randomly along the curve, so inevitably you are averaging up some of the time. In a regular trading account the dividend adds to your cost basis, even though you did not actually pay for it out of pocket.

    I paid an average price $10/sh for WFC starting in Feb. 2009 buying through to Mar 2009, that was paying .05/qtr at the time, that's 2% at the time, however I expected the income to recover and naturally the price to come right along with it over time. It's currently .35/qtr so the return on that initial investment is 14% each year on the principal. I can't see why I would want to exit that income stream, especially since banks have so long to go before they are once again moving at a very slow pace in terms of upping the dividends annually.

    Say I decided to sell out? What advantage is it? I have to pay cap. gains, taking a 15% hit on my gains ($43 of the price at this point), then go hunting for something that will earn more for me. So I'm going to take a beating of about 12% on the total price at this point, so that I can kill off a good income stream and go hunting for something that may not make me 12%, and may not compete with my current holding over 5-10 years.

    Rather than constantly turn over old positions I prefer to hunt for places to put new money to work and let the old ones do their job.

    The 2007 XOM trade was offered as an example only, the later example (2010) is my actual position.

    Off-hand I'm in six different sectors, some pay heavily in dividends, some do-not, so it's not super concerning for me that they all pay dividends.
     
    Last edited: Jul 6, 2014


  7. jbarwick

    jbarwick Distinguished Member

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    I found a guy on seeking alpha one time that was helping his son invest with a goal of something like $2-3M principal plus a dividend income stream of $100K a year by the time he retired. I lost the blog the guy made about it and searched for hours for it again but lost it in a computer crash so all my links were gone....I love how google/apple save favorites to the account now.

    But I like how SG is doing it. Investing for an income stream is nice and I get the idea behind it. Can dividends get cut again....yes but eventually if the company is sound and it was just some sort of market correction they will return.

    Personally I rolled over my 401k to an Trad IRA since starting my new job. Need to send the check in (why can't funds be wired is beyond me) to Vanguard then it will be an easy rebalance of my portfolio. I asked a question over on bogleheads about rebalancing and was met with advice to only rebalance once asset classes are out of parameters (which they are) but I am sticking to once a year since there are no fees involved in the rebalancing. Still sticking with 20% bonds / 10% REIT / 20% Int'l Equities / 50% Total Market (~40% S&P then 10% extended market for some smaller cap companies).
     


  8. Khayembii Communique

    Khayembii Communique Distinguished Member

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    Just think about it this way, your money is sitting in stocks that could go back to even, but instead you could be investing that money in new winners.
     


  9. lawyerdad

    lawyerdad Stylish Dinosaur

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    YMMV, but personally I think getting investment advice from Seeking Alpha is like looking for dates on Craigstlist.

    A trad IRA sounds like a fine place for an iGent to keep his money. :)
     


  10. stimulacra

    stimulacra Senior Member

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    Had a tactical question.

    Dow is at 17,000 now, starting to feel like stock prices are at a premium and I should shift some of my 401k contributions to cash or cash equivalent.

    Typically I would keep cash equivalents (Bancorp Bank Master Demand) at 1% or 2% and lately it's been at 0% since pretty much everything has been performing so well. I'm starting to suspect there might be a small downturn or correction over the next 12 months and would like to have some cash on hand to take advantage of the next discounting of stocks.

    I'm curious to know what others are keeping their cash allocation within their 401k at? I was kind of thinking 5% or 10% would be a good hedge.

    Thanks in advance!
     


  11. jbarwick

    jbarwick Distinguished Member

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    I don't keep cash in a 401k or other retirement vehicle, it sits in my emergency funds. Timing the market is a gamble so good luck with that.
     
    Last edited: Jul 7, 2014


  12. Khayembii Communique

    Khayembii Communique Distinguished Member

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    I don't know, it's basically just like the internet generally. Anyone can post anything there. Great place for reading competing views and maybe picking up some ideas, but always do your own research.
     


  13. lawyerdad

    lawyerdad Stylish Dinosaur

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    Yes, I agree that's a fair characterization.
     


  14. stimulacra

    stimulacra Senior Member

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    I'm considering that option too, I was always a bit ambivalent about what function cash equivalent serves in a 401k or Roth. I have to imagine most folks would use it as a type of ballast.

    Not really trying to time the market too much, this is for retirement so just trying to make the best long term plays I can based on what I know… back in 2007 I did become more conservative when the real estate market was starting to peak and in 2009 I doubled down on stocks since I felt I was buying them at a discount.

    I'm more of a slow and steady type of guy but after just rebalancing my portfolio, am looking ahead a little bit to see where future contributions for the next year or two could be focused on.
     


  15. GreenFrog

    GreenFrog Stylish Dinosaur

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    When I first first first started getting into investing back in 2012, I read Seeking Alpha and though it was a semi-legit source of news -- well, for news it's not bad -- and opinions.

    But I read the shit that contributors post now and I'm just like.. what in the fuck.

    They're all fucking jokes and cannot be taken seriously.
     


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