Got Stocks?

[jazz4cash]

.........Well, it's got a low PE ratio (now that it's lost 2/3) AND it's paying over 5% dividend....... .

OK, but is that 5% based on the current (reduced by 2/3) stock price or some other price (i.e. what is your basis in the stock)?

 

[Koolau]

OK, but is that 5% based on the current (reduced by 2/3) stock price or some other price (i.e. what is your basis in the stock)?

I'm not sure at this point it matters what the basis is (except for tax purposes - on the shares outside the 401(k)). In other words, basis or no, it's worth what I can sell it for. On the basis of what I can sell it for, the stuff is making me over 5%. On that basis, it's something that seems (to me) worth holding on to. It has a good upside potential (PE below 10 on a stock that's had a PE over 30 for quite some time) and the dividend goes up a few percentage points every couple of years (since memory fades).

But, since you ask: The basis on the stock in my 401(k) is about 2/3 what the stock is worth, so I'm still "ahead" even though I passed up the chance to make a killing on it when it was worth 3 times what it's worth now. My bad.

The basis on the stock outside the 401(k) may take my accountant to figure. I "paid" almost exactly half what the stock is now worth, but then I had to pay regular taxes and (bloody) SS on the difference between the value at that time and the stock price at the time. Since that time, the value of the stock has fallen by about 35%. My best SWAG is that my basis is just about what the stock is worth without going back and calculating what I paid in taxes/SS.

If you have a take on this that would suggest whether I should keep this stock or sell it (based on my 'basis') I would be interested. I'm thinking simply in terms of what I could make with the money I would free up by selling it. I know my investment "style". I would not buy something more risky and in fact I can't think of anything with better upside potential with 5+% "interest" to put the money in. I'm relatively risk averse - all evidence to the contrary based on my history with this stock. In this case, I was paralyzed by my 401(k) plan back when the stock was worth 70+% of port. Later, I was probably paralyzed by inertia to my detriment. But now, keeping the stock actually seems to make sense to me. If it takes off again, I'm probably going to sell it - or not.

 

[kumquat]

I doubt this will meet with anyone's approval:

25% cash/CDs
25% Index Funds
25% Individual stocks
25% (and rapidly rising) vested, un-exercised options from former mega-corp

 

[traineeinvestor]

Not fixed. Currently individual equities outweigh funds 2:1.

I prefer individual stocks but will buy index funds (i) for markets which I want to invest in but cannot access directly (e.g. China A shares) and (ii) at times when I have spare cash to invest but do not have the time to do the research (I'm still a wage slave) and (iii) to pad out the diversification a little bit further.

 

[Sconie]

Used to be 100%----over the years I have gone completely to TSM type index funds.

 

[missionfinder]

Far less than 1%. Individual stocks for me are not what I consider part of my portfolio. They are part of my play money, for fun, to see where I can score a good return on money I can afford to lose. So far I've only won, but I know individual stocks are a risk and play the game anyway.

 

[BOBOT]

Interesting; so far it looks like most of us are at one end or the other, only a few folks have a roughly equal split between individual stocks and MFs.

Just wondering - is there a correlation between personality type and willingness (or lack of) to "bet" on your own stock picking prowess?

 

[freebird5825]

Mostly funds for me too. Cluck cluck cluck

I do have some very small [-]miniscule[/-] stakes in CELG, HK, and BKR.B just for fun. Less than 3% of portfolio overall.

Total equity allocation = 32% including individual stocks

 

[Gone4Good]

So I'm wondering, what % of your port is individual stocks, and how do you feel about it?

0%, the reasons are many

1) I made a living researching companies, but my employer prohibited me from investing in the companies I covered professionally
2) When you spend 60-70 hours per week researching companies, you tend not to want to do more of it on what's left of your free time
3) As a professional investor, I saw how hard it was to get an edge on the market even when you spent every waking moment tracking a handful of companies and had countless other advantages individuals don't have. What edge do part-timers really think they have?
4) As a professional investor, I saw how poorly the investment decisions of other highly educated and highly motivated professional investors turned out. Why would the decisions of people who spend less time and resources be better?
5) Now that I have the free time and freedom to research companies for my personal account, I don't believe the potential payoff is worth the time and the aggravation relative to what an index fund provides. And besides, what edge does a part-timer like me really think he has?

 

[Lakedog]

Have been 100% individual stocks in the past but over the last few years have moved to mostly ETFs, except for one stock which is around 6% of investments. I do trade a bit with what I consider play money.

 

[photoguy]

Interesting; so far it looks like most of us are at one end or the other, only a few folks have a roughly equal split between individual stocks and MFs.

Just wondering - is there a correlation between personality type and willingness (or lack of) to "bet" on your own stock picking prowess?

Either you believe the statistical evidence that stock picking adds no value or you don't.

 

[DblDoc]

0%, the reasons are many

1) I made a living researching companies, but my employer prohibited me from investing in the companies I covered professionally
2) When you spend 60-70 hours per week researching companies, you tend not to want to do more of it on what's left of your free time
3) As a professional investor, I saw how hard it was to get an edge on the market even when you spent every waking moment tracking a handful of companies and had countless other advantages individuals don't have. What edge do part-timers really think they have?
4) As a professional investor, I saw how poorly the investment decisions of other highly educated and highly motivated professional investors turned out. Why would the decisions of people who spend less time and resources be better?
5) Now that I have the free time and freedom to research companies for my personal account, I don't believe the potential payoff is worth the time and the aggravation relative to what an index fund provides. And besides, what edge does a part-timer like me really think he has?

This should be a sticky...

< %1 in individual stocks for us. Left overs from DRIP programs.

DD

 

[REWahoo]

This should be a sticky...

Sure, but then you have the "I have outperformed the market in 10 of the 11 years I have been invested solely in individual companies" types who refuse to believe they aren't smarter than everyone else.

 

[jayc]

11% for entire portfolio(tax acct, ira, roth). All pay dividends of 4-8%.

 

[jazz4cash]

I'm not sure at this point it matters what the basis is (except for tax purposes - on the shares outside the 401(k)). In other words, basis or no, it's worth what I can sell it for. On the basis of what I can sell it for, the stuff is making me over 5%. On that basis, it's something that seems (to me) worth holding on to. It has a good upside potential (PE below 10 on a stock that's had a PE over 30 for quite some time) and the dividend goes up a few percentage points every couple of years (since memory fades).

But, since you ask: The basis on the stock in my 401(k) is about 2/3 what the stock is worth, so I'm still "ahead" even though I passed up the chance to make a killing on it when it was worth 3 times what it's worth now. My bad.

The basis on the stock outside the 401(k) may take my accountant to figure. I "paid" almost exactly half what the stock is now worth, but then I had to pay regular taxes and (bloody) SS on the difference between the value at that time and the stock price at the time. Since that time, the value of the stock has fallen by about 35%. My best SWAG is that my basis is just about what the stock is worth without going back and calculating what I paid in taxes/SS.

If you have a take on this that would suggest whether I should keep this stock or sell it (based on my 'basis') I would be interested. I'm thinking simply in terms of what I could make with the money I would free up by selling it. I know my investment "style". I would not buy something more risky and in fact I can't think of anything with better upside potential with 5+% "interest" to put the money in. I'm relatively risk averse - all evidence to the contrary based on my history with this stock. In this case, I was paralyzed by my 401(k) plan back when the stock was worth 70+% of port. Later, I was probably paralyzed by inertia to my detriment. But now, keeping the stock actually seems to make sense to me. If it takes off again, I'm probably going to sell it - or not.

I do have a take, but it's purely personal choice, IMO. I have the opposite situation and I'm trying to decide what to do.
A stock that I purchased for $60 with a 4% yield is now trading at $100 and pays the same dividend amount, so the current yield is "only" 2.4%. While I might sell to capture the gain, I won't sell just becuase the dividend payout is 2.4% If I sell, I would try to find another stock that pays around 4%.

 

[bbbamI]

3.89 % individual stock for me.

Just wondering - is there a correlation between personality type and willingness (or lack of) to "bet" on your own stock picking prowess?

At one point years ago I thought I knew what I was doing, so I bought a few stocks. It didn't take long to realize it wasn't much fun, so you can put me in the 'lack of willingness' camp.

 

[bcinvest]

Sure, but then you have the "I have outperformed the market in 10 of the 11 years I have been invested solely in individual companies" types who refuse to believe they aren't smarter than everyone else.

Or you have those who because they can't do it rationalize that nobody can do it.

 

[Onward]

Or you have those who because they can't do it rationalize that nobody can do it.

That's the spirit!

 

[racy]

17% of which 80% is my company stock, stock options and restricted stock. The plan is to get this down to 5% when I retire in 2-3 years. I've had more individual stocks in the past but got burned. One burn with only a few companies hurts. Now I'm an index guy.

 

[Koolau]

I do have a take, but it's purely personal choice, IMO. I have the opposite situation and I'm trying to decide what to do.
A stock that I purchased for $60 with a 4% yield is now trading at $100 and pays the same dividend amount, so the current yield is "only" 2.4%. While I might sell to capture the gain, I won't sell just becuase the dividend payout is 2.4% If I sell, I would try to find another stock that pays around 4%.

I'm glad for you. I wish my situation were similar. Still, this stock pretty much "made" my ER 12 or more years ago, so I can't complain too much that I didn't sell all of it in time. Since I didn't get rid of this relatively small amount, at least I'm so glad that it's paying me to keep it at this point. Though possible, I can't imagine it going much lower as it's always been a growth stock (instead of a value stock as it is now).

Good luck with your stock!!

 

[HFWR]

Or you have those who because they can't do it rationalize that nobody can do it.

Though there's a fair amount of data showing that "most" people don't...

Oh, 0% for me. All funds/ETFs...

 

[Gone4Good]

Or you have those who because they can't do it rationalize that nobody can do it.

What, specifically, is your edge?

 

[bcinvest]

I am about 85% individual stocks and 15% cash.

What, specifically, is your edge?

A ton of experience a good temperament and a broad body of knowledge.

Institutions are not able to get in and out of small companies providing small investors with a advantage on a number of levels. I am not constrained with limits on the size of a position. I have no need to window dress to attract more investment dollars. I don't have to pick my 17th favorite stock because I have too much money to invest. If I have 8 really good ideas I can just stick with the 8. Sometimes I drop to 50% individual stocks and at other times I have 95%. The remaining is almost always cash. I probably average 20% cash.

There is no substitute for experience valuing companies and in depth accounting knowledge.

 

[kumquat]

There are times when individual securities make perfect sense. try this one:

[-]Someone[/-] A Canadian wants exposure to Canadian REITs. There is an index fund for this (XRE.TO, MER = 0.55%). This fund has 13 REITs. How hard is it to buy the components and save the MER? Alternatively, you can but the 4 biggest holdings and have > 50% of the index.

 

[samclem]

Or you have those who because they can't do it rationalize that nobody can do it.

You go to it! Every diligent researcher/valuation specialist/basement accountant and (to a lesser extent) "technical analyst" helps keep our markets efficient and that's what makes profitable indexing possible. If it weren't for millions of people thinking they were smarter than the crowd, the crowd wouldn't be smart and I couldn't get by with tiny ERs and miniscule trading costs. Every low-cost index investor owes a debt to the guys who know they are smarter than indexers. I hoist a mug in your direction and wish you the best!

I also owe a debt to those who buy state lottery tickets and indirectly reduce my state income taxes. I never discourage them--they might win big! The evidence argues against it, but I can never prove they won't win. They want to try, and I want them to try.