Sunday, January 30, 2011

Video: Money Mindset or Consumer Mindset?

Who are YOU making wealthy?

As long as you decide to live in a civilized world, THAT is the best question you can ask yourself, because you make that decision every day.

I was looking for something else, but as I often do, I found a video that makes a great point and makes that point really well.

It's a 2+ minute video, but it hammers home one of the most basic points of investing. You need to adjust your mindset to a money mindset--not a consumer mindset.

The video from Community Dollars addresses the spending habits of many black women. (Disclaimer: I am a white male.) However, the lessons transfers to all of us, regardless of color, gender, or ethnicity.

Making money really is not that hard, unless we don't try that hard to make it a priority.

Here is the video:

Saturday, January 29, 2011

Call Options and Put Options: A Quick Explanation

I hear a lot of people talk about stocks, and they ask about options.

Options can be really cool, but many people do not even really know what they are. Some sort of know.

Let's try taking care of that here.

Wednesday, January 26, 2011

Explanation: Resistance and Support

Have you ever watched a stock price chart, and it seemed like it was stuck near a certain price?

Of course, it really isn't, but when you watch the prices, it feels that way.

Pure fundamental investors HATE any discussion that involves buying and selling stock based on the price patterns. It's illogical, and they're right--to a point.

True technical traders, on the other hand, vehemently insist that the markets are ruled entirely by the price charts. Most of them say that history repeats itself. Of course, even some of the best technical traders admit that's not always true.

Fundamental investors believe that a stock's price SHOULD be based upon the company's fundamental finances and industry position. They're probably right. Prices SHOULD reflect these.


Tuesday, January 25, 2011

Advice: Understanding Risk vs. Reward is a Key to Successful Investing

Any investment carries risk. This is a true statement.

Then again, so does NOT investing, but most of you on here knew that, already. That's why you're reading something like this.

So let's take a look at risk.

When is an investment a "good" risk?

The simple answer is, "When it works!"

There is a better, more practical answer, though.

Monday, January 24, 2011

Video: Price to Cash Flow

I am always looking for new ways to evaluate potential investment possibilities.

I think I ran across one that I will check in more detail. At my first glace, it looks like it might be pretty good.

A lot of people rely on the Price/Earnings ratio, but this video shows an approach that relies on the Price per Cash Flow (Price/Cash Flow) metric instead.

Price/Cash Flow compares the stock price/share (market value/share) to the amount of cash flow/share.

We know that cash is VITAL for a company to maintain its operations. Plus, the price/cash flow is more difficult to manipulate "for the books" than the more popular price/earnings and many other measurements are.

Here is a video with Kevin Matras and Terry Ruffolo from that explains the scanning technique a little better:

Sunday, January 23, 2011

Quick Analysis: Texas Instruments (TXN)

TXN: Texas Instruments

The company sells and designs semiconductors, serving communications, computing, industrial, consumer electronics, automotive, and education sectors. It also designs, manufactures, and sells wireless application processors and connectivity products. Plus, its name is on several handheld retail graphing and scientific calculators.

Recent Range: $15/share – $38/share (Current Price: 33.91, as of close of 1/19/11)
Price/Sales (P/S) = 2.96 (2.70, Industry)
Price/Book (P/B) = 4.00 (3.08)
Price/Earnings (P/E) = 14.3 (15.6)
Gross Profit Margin = 53.6% (58.7%)
Pre-Tax Profit Margin = 31.1% (29.0%)
Net Profit Margin = 21.9% (20.9%)
Debt/Equity Ratio = 0.00 (0.17)
Current Ratio = 3.5 (3.4)
Return on Equity = 30.0% (24.8%)
Return on Assets = 24.0% (17.4%)

Analysis: This company is really well known, and people that I know who work within this field indicate that this company is doing some really good things. However, while the stock price might rise, it is not an obvious buy to me.

Friday, January 21, 2011

Buying or Selling Stock: Another Downside of Market Order

When you buy or sell stock online, you can do this as a market order or as a limit order. (Yes, there are even more sophisticated ways, but for now this will do.)

Market Order: Buy or Sell at the price that the market allows at that moment the order is placed.

Limit Order: Do not buy or sell UNLESS the stock reaches this limit price. Do not pay more or sell for less than this limit.

Honestly, I've bought and sold both ways.

Thursday, January 20, 2011

Don't Fear Taxes - Fear Your Fear

One of my biggest weaknesses as an investor is not following one of my own rules.

Don't let the fear of taxes wrongly affect your investment decisions.

Of course, you want to be aware of taxes. However, I've caught myself SEVERAL times not grabbing the profits from an abnormally quick run upward, because I didn't want to have to pay taxes during that year.

Every time I do that, my fears get answered, even though I don't pay taxes. I just lose on the ability to buy even MORE shares of the stock later. If you know that the price is too high for the moment, it will probably drop in another moment. Grab what you can.

You can always buy more later.

Also, if you have to pay taxes, that means that you have enough profit to PAY for those taxes.

Pay the $25 or so if you have a chance to pick up $100 or so. That STILL means that you have an extra $75 or so that you didn't have earlier. Take that money and run, even if you have to share if with Uncle Sam.

Common sense, right? Not for me or many other investors.

Wednesday, January 19, 2011

Advice: Reduce Angst Buying or Selling Stocks

Someone that I know invests in stocks, and he does really well.

However, he says that the stock market tends to drive him nuts.

He told me about a time that he heard something about a sudden event on the radio, and the first thing he thought to himself was, "I wonder how this will affect the price of XYZ stock."

The second thing he thought to himself is that he's going absolutely NUTS. The event had NOTHING to do with his stock. He was just THAT consumed with his stock.

He asked for some advice on how to avoid that emotionally fueled angst he gets every time he's in the stock market.

Here is what I wrote to him...........

Tuesday, January 18, 2011

Is apartment investing changing? Will it affect the economy?

Lately, I've been hearing that more people (within the real estate investment world) are interested in transitioning from investing in single family homes to investing in apartments.

There are, at least, a few reasons for this.
  • Apartments generate passive income.
  • You only need to worry about the maintenance of one building while still collecting many rent payments.
  • It's getting more difficult to find great investment deals with single family homes--since so many investors are looking for them now. Fewer people are looking for apartments; so theoretically more deals can be found with less searching effort.
However, I just read an article about apartments that might shape--not only apartment investing but also--companies in certain neighborhoods.

Here is the link to the article "No McMansions for Millennials"

It does not address investing; however, I think there are investing-oriented takeaways from this article.

Sunday, January 16, 2011

Video: Warren Buffett Rocks with Geico

For my 100th post, I was trying to figure how to have some fun with it.

I came up with a few lame ideas, but none of them really hit me as "the one."

Then I ran across this video. I think I found a pretty good way to celebrate...with Warren. (He just doesn't know that he's partying with ME. :)

Anyone involved with investing certainly knows the name Warren Buffett and how good he has done with the stocks, but evidently he knows how to market himself and his companies, too.

Here is a video of Geico, a company owned by Berkshire Hathaway. Any guesses who might own THAT big company?

Saturday, January 15, 2011

Fear: Investor Enemy #1

Fear plays a big role for many investors.

An investor's experience can be terrific, but it can be really bad, too.

For most people, the experience is average. Being honest, I'm guaranteed to be right about that, by definition.

However, my goal is to help people be BETTER than average investors.

One way to do this is for me to identify how many average investors think.

Thursday, January 13, 2011

Investment Advice: Keep Your Composure When Your Stock Price Goes Down

There is advice about stock investing that someone gave to me...

If the company is doing the right things and you bought it at a price that made sense, the stock price will rebound, even if it drops. It just might take a while.

I take a look at examples of what I've seen since I started investing in 2008.

Wednesday, January 12, 2011

The Rich Just Keep Getting Richer - Makes Sense to Me!

More than once, I've heard and read the statement that the rich just keep getting richer.

EVERY TIME it is read like a complaint.

First, let's investigate to see whether that's even a true statement.

Tuesday, January 11, 2011

Video: Debt to Equity Swaps Explained

Even if you're not a bondholder and only buy stocks, this could affect you. So read this carefully.

While looking for something else, I stumbled across this video. (Isn't that how most of us find our BEST stuff...when we're really not looking for it?)

This video is narrated by Paddy Hirsch, which I don't know who he is truthfully, but he has a neat sounding English accent (or something similar). That just nearly guarantees us folks here in the US will assume that he's smart.

Luckily, he seems to be right on the money.

In this video (under 7 minutes), he explains how the Debt-to-Equity swaps work:

Hirsch uses an airplane to describe the order of who gets paid first in the event of a bankruptcy and how debt-to-equity swaps work.

Below, I try to explain this concept and use an example to clarify it.

Monday, January 10, 2011

Dividend Paying Stocks – Good Idea?

Different investors vary on whether you should invest in dividend paying companies.

Hint: Warren Buffet is NOT a big fan.

Ways for Companies to Handle Profits – What are dividends?

Before we decide whether investing in dividend paying stocks is a good idea, it might be a good idea to explain what dividends really are.

Sunday, January 9, 2011

Investment Advice #2: Only Invest with Passion

When you have money sitting idly, it can become sort of frustrating.

Anyone who is looking to invest knows that money that is not invested is doing nothing to help you.

Of course, money that is not invested is not hurting you, either (not accounting for inflation).

Actually, it KILLS me when I have money sitting on the sideline. In fact, it kills me so much that more than once I've invested that "extra" money into something--just to keep it from sitting.

This seems to make sense--at first. I mean, how much money can you make if your money is doing NOTHING. That's right! NOTHING.

So is there ever a time that I should NOT invest?

Saturday, January 8, 2011

Fear of Success: Don't let it bite you!

I think President Obama might finally get it!

Throughout the last couple of years, it seemed like every time the stock market started to make a nice rally, either he or someone from his administration would say something to kill it.

He would say something along the lines that we should not get too excited, because the economy is not healthy, yet. He wasn't wrong with his assessment, but he managed things poorly.

Friday, January 7, 2011

Great Advice: Any Investment Type

I was talking to an investor the other day, and I mentioned to him how I was struggling with a stock that jumped much high much more quickly than I planned.

Finally I sold it.

He made a good point by asking my something.

The question...Would you buy the stock (or any other investment) at today's price?

If the answer is, "No," then you probably should sell.

Even if the price rises later, you guaranteed that you got as much money from it as you felt it deserved. Asking for it to even higher yet is just being greedy, and we all know how well THAT works over time.

That's great advice...Take your profit and run. No need to be greedy.

By the way...The stock dropped to almost half of its value during the next two days.

Thursday, January 6, 2011

Take My Advice—I need to begin following it, too

My last post was about paying yourself first—in money AND in action. THAT is really good advice!

However, this is often more easily said than done.

Case in point…

Tuesday, January 4, 2011

Types of Profit - Profit Ain't Just Profit

Remember the old Wendy's commercial in the 1980's when they were trying to make their chicken sandwiches seem better than their other fast food competitors...

When showing a picture of what seemed to be a nameless competitor, the person kept repeating..."Parts is Parts," referring to the so-called fact that all parts of the chicken are the same on a sandwich.

Wendy's; however, knew the difference (so they said). They knew that all parts of the chicken ain't the same.

People roll their eyes, but essentially many people do the same thing when it comes to profit. They'll simply ask, "What was their profit margin?"

Types of Profit

There are different types of profit that reflect different stages of the business:

Monday, January 3, 2011

Quick Analysis: BP P.L.C. (BP)


Oil drilling, refining, and transporting, and it markets and sells gasoline retail.

Recent Range: $27/share – $78/share (Current Price: 44.17, as of close of 12/31/10)
Price/Sales (P/S) = 0.46 (0.86, Industry)
Price/Book (P/B) = 1.55 (1.80)
Gross Margin = 4.3% (27.4%)
Pre-Tax Margin = -2.3% (+11.0%)
Debt/Equity Ratio = 0.45 (0.29)
Current Ratio = 1.0 (1.2)
Return on Equity = -5.3% (+14.3%)
Return on Assets = -1.9% (+7.4%)

Analysis: This company was really a great buy a couple of months ago, but I still think there is more room to grow here.

Sunday, January 2, 2011

Investment Principle #1: Pay Yourself First

I open with a statement that most of us have heard--probably MANY TIMES...

Pay Yourself First

A lot of people ask me to teach them how to invest in the stock market.

The first I ask them is whether they pay themselves first.

Most people look at me like I'm crazy.

What does "paying myself first" have to do with investing?

Saturday, January 1, 2011

My 16 Predictions for 2011 (and Beyond)

Happy New Year!

I know that this picture doesn't have anything to do with investing, but I think it's a cute picture. I have a soft spot for things that make me smile.

You didn't click to hear me explain my picture, you want to know my predictions (maybe not MY predictions but just predictions in general).

So without making you wait any longer, here are MY predictions for 2011 and beyond: