How to pick stocks

[target2019]

Yea good job the North Americal Rockwell Coporation is now Rockwell Automation!

Work focus is on a ship system that uses RA PLC. I know nothing beyond the part number. It does look like interesting industrial component.

The stock that stood out for me was Food Fair. In the 1950-1970 period, my mother and grandmother shopped there. The Food Fair chain went bankrupt.

 

[unclemick]

How do you pick stocks to invest in?
How much work do you do before investing and while investing?
How are your returns using your methods?

Thanks

1966 - 2019. Starting with a Dean Witter broker and using broker advice and reading a lot of books from The Intelligent Investor, Dividend Achievers Handbook and Bogle books including The Little Red Book I went from mindset - find the one stock to retire on to psst - Wellesley. Meanwhile back at my dollar cost averaging 401k (1977 - 1993) I mimicked the 60/40 index fund aka 'Bogle's Folly.' Also the New Orleans investors club had great pastry and coffee along with the guest speaker.

Index funds grew to be the big dog on the porch for me. 401k by far beat everything I picked myself adding winners and losers.

heh heh heh - I still do 'a few good stocks' and root for The Saint's in season. My theory it's a male hormone thing.

P.S. Since 2006 my big dog is Vanguard Target Reitrement 2015.

 

[CyclingInvestor]

1) I selected a universe of dividend-growth stocks (about 50 initially, slowly dwindling) around 1993 using Value Line / Dividend Aristocrats with a long history of dividend increases, shareholder focus, good capital allocation, etc. I own stocks from this group that I consider the best values. When any get over-valued compared to others in the group, I switch out. Some years I make no trades, some years several. I have made my most lucrative long-term trades when the market is very volatile and people panic, like last fall.

2) Not much / very little (minutes per month)

3) Good enough to retire at 48 from a programming career

 

[free2020]

I tried picking stocks like others around here have stated and I had my share of winners and losers. I must admit that my approach was akin to throwing darts. Superficial reading, looking for home runs etc. For me you’re not picking stock but entrusting money in a person’s hands. This qualitative aspect is just as important as the quantitative. What’s the motivation of that person? Are their interests aligned with yours? Do they make off your pockets? From these aspects I’ve settled in on Berkshire Hathaway. Fully aware that the future will not be a repeat of the past by way of the massive outperformance over the index.

I do agree stock picking doesn’t work for so many people that you can conclude it doesn’t work at all. Even Warren Buffett is focused on owning whole companies today so he’s no longer the stock picker he once was.

 

[Running_Man]

I do agree stock picking doesn’t work for so many people that you can conclude it doesn’t work at all. Even Warren Buffett is focused on owning whole companies today so he’s no longer the stock picker he once was.

In the fourth Quarter of 2018 Berkshire Hathaway purchased 5.6 Billion dollars in stock, 1.4 billion of JP MOrgan Chase (Avg Price 103 Now 111)
800 million of GM (avg price 39 present 39), 780 million of Travellers (avg price 127 presently 138), 300 million of Stone Corp (average price of 21 presently 35)

 

[free2020]

In the fourth Quarter of 2018 Berkshire Hathaway purchased 5.6 Billion dollars in stock, 1.4 billion of JP MOrgan Chase (Avg Price 103 Now 111)
800 million of GM (avg price 39 present 39), 780 million of Travellers (avg price 127 presently 138), 300 million of Stone Corp (average price of 21 presently 35)

I used the term “focused on “. Berkshire Hathaway’s investee portfolio stands at about $180 Billion of a market capitalization of $500B. Twenty years ago it was over 80% of the company. In every recent annual letter he points that out.

 

[OldShooter]

... My theory it's a male hormone thing. ...

Close. It's a dopamine thing. For some reason evolution has programmed our brains to reward wins with a shot of dopamine. This causes us to be attracted to betting again and, interestingly, the shot means that we remember the wins and tend to forget the losses.

Jason Zweig's "Your Money & Your Brain" is a worthwhile read. If you become interested in the subject, Nobel winner Richard Thaler's "Misbehaving" and Daniel Kahneman's "Thinking Fast and Slow" will teach you more about how we humans handle risk/reward probabilities and other aspects of our economic lives.

 

[Lakewood90712]

Managing a portfolio of stocks and bonds is a part time job with no days off. As others have opined, research and constant monitoring of those companies. Most are not suited ti it.

I am out of equities much of the time. Last time I went all in was 2009. Blood in the streets , capitulation. Per Warren Buffet : be greedy when others are fearful, and fearful when others are greedy. Accurate, but not suited to most retail investors.

If I went all inn after the next market true meltdown, it would be an index fund, not individual equities this time.

 

[Oz investor]

i prefer smaller ( but not tiny ) companies with room to grow , BUT actually earning money and making profits on a regular basis ( not just when there are tax curs and perfect conditions )

these are often boring companies ( and i prefer ones that are low/no debt )

the BIG risk here is they will be acquired by a bigger highly leveraged company trying to impress the share-holders

 

[Oz investor]

Managing a portfolio of stocks and bonds is a part time job with no days off. As others have opined, research and constant monitoring of those companies. Most are not suited ti it.

I am out of equities much of the time. Last time I went all in was 2009. Blood in the streets , capitulation. Per Warren Buffet : be greedy when others are fearful, and fearful when others are greedy. Accurate, but not suited to most retail investors.

If I went all inn after the next market true meltdown, it would be an index fund, not individual equities this time.

stock-picking indeed takes time ( and careful thought ) .. but then i have a fair bit of spare time currently

although i watch the news feeds ( and company announcements ) i like to look at the neglected sectors when buying ( and raging hot sectors when reducing )

while i would consider an index fund ( or a sector focused index fund ) when 'blood was on the street ' i am underweight on many 'blue chip ' stocks ( often avoiding them currently as there is no sensible avenue to grow ) and MIGHT put some focus on them ( when the whole market is beaten up )

would i go 'all in ' .... NO , i would try to cherry pick ( individual stocks ) and continue to use index funds as insurance ( against bad stock selection )

for example you would expect the financials to get routed in a meltdown , but which will be the winners ?? and it takes a brave investor to ignore the financial sector completely

but that extra effort ( and worry ) is often very well rewarded ( even after accounting for the obligatory losses ... because even the biggest companies can turn toxic )

what i DON'T spend a lot of time on is measuring my performance against benchmarks

after researching many LICs LITs and funds .. such benchmarks ( to me ) often look like circus mirrors .. keep looking until you find the mirror that makes you look good

 

[dtbach]

Overall, individual stock picking for me has been a loser. I've picked a number of winners but also some horror stories (Sun Microsystems and World Comm). Easy to buy but "when" to sell is my problem.


If I could do it all over again I'd do 75% S&P 500 index and 25% Total Bond index. I'd have come out quite a bit ahead.

 

[OldShooter]

... Easy to buy but "when" to sell is my problem. ...

I think few believe that it is possible to call market tops and bottoms/aka market timing with any accuracy. So why should calling individual stock tops and bottoms be any easier?

 

[gstillson]

If I could do it all over again I'd do 75% S&P 500 index and 25% Total Bond index. I'd have come out quite a bit ahead.

If I could do it all over again I would do 99% Amazon, 1% cash. No, I think I would do 100% bitcoin.

If you are going to use hindsight, might as well make the most of it.

 

[dtbach]

If I could do it all over again I would do 99% Amazon, 1% cash. No, I think I would do 100% bitcoin.

If you are going to use hindsight, might as well make the most of it.

But my experience can be given to a newbie with good probability. I don't think your example can be duplicated.



I'm sure it was made in jest. Because yeah, I'd love to have said yes to my broker back in 1998 when she suggested it. I recall it was around $80/sh but I just couldn't be convinced that an online bookseller would do well. A hundred shares bought then would be worth about $120K now. Darn

 

[OldShooter]

... A hundred shares bought then would be worth about $120K now. Darn

... and how much would 100 shares of Enron be worth?

 

[dtbach]

... and how much would 100 shares of Enron be worth?

About as much as the 100 shares of World Comm I held because my broker kept insisting they would rebound. . . . .

 

[gstillson]

... and how much would 100 shares of Enron be worth?

Why would anyone with the gift of hindsight buy Enron?

 

[OldShooter]

... my broker kept insisting they would rebound. . . . .

One of life's little mysteries for me is why all these market experts with accurate crystal balls are still stuffing themselves into suits, going to work in what amounts to being a noisy call center, and hustling retail clients. I guess they must be completely selfless individuals, motiviated to freely bestow the wisdom that they could otherwise use to make themselves FI and ER'd. A sort of financial Mother Teresa.

 

[jimnjana]

The investment club I'm in has been around for 35 years. Investing in growth stocks it average annual return is the same as the sp 500 give or take a very small amount. One of the reasons I'm moving my investments to fidelity to take advantage of the zero expense index funds. I also invest in dividend growth stocks. Virtually all of our investments are in roth IRAs. The 5% dividend yield will be invested back into index funds.

 

[copyright1997reloaded]

One of life's little mysteries for me is why all these market experts with accurate crystal balls are still stuffing themselves into suits, going to work in what amounts to being a noisy call center, and hustling retail clients. I guess they must be completely selfless individuals, motiviated to freely bestow the wisdom that they could otherwise use to make themselves FI and ER'd. A sort of financial Mother Teresa.

I've mentioned this in other threads, but will repeat it here. One of my early lessons in investing back in the late 70's was going to the local brokerage at lunch time to see the quote machine. Over time, I got to meet the brokers working there and spend time discussing securities with them. I quickly came to the conclusion that there was absolutely no value in listening to their so-called knowledge.

Even today, when I have someone tell me "My investment adviser told me this was a good company to invest in, what do you think?" I cringe. For all of those people, my only advice (which I try to keep myself from offering as I don't want to have anything to do with their financial affairs) is to invest in low-cost index funds.

 

[copyright1997reloaded]

Why would anyone with the gift of hindsight buy Enron?

I never owned Enron (happily). One of the reasons is that it fell in my "I don't understand" category. If the companies business model is too complex to understand HOW they will make money, stay far away.

 

[Running_Man]

Originally Posted by OldShooter
One of life's little mysteries for me is why all these market experts with accurate crystal balls are still stuffing themselves into suits, going to work in what amounts to being a noisy call center, and hustling retail clients. I guess they must be completely selfless individuals, motiviated to freely bestow the wisdom that they could otherwise use to make themselves FI and ER'd. A sort of financial Mother Teresa.

I often wonder the same thing about passive investors, you'd think they'd be off spending their wealth and time saved on the finer things in life not looking for individual stock boards to claim how wrong everybody but passive investors are.

 

[travelover]

I often wonder the same thing about passive investors, you'd think they'd be off spending their wealth and time saved on the finer things in life not looking for individual stock boards to claim how wrong everybody but passive investors are.

 

[OldShooter]

I often wonder the same thing about passive investors, you'd think they'd be off spending their wealth and time saved on the finer things in life not looking for individual stock boards to claim how wrong everybody but passive investors are.

So you did take your nasty pill this morning, right? Or are you like this without supplements? And you are here -- why?

Nobody's really "wrong" but many are suboptimal. There is about 50 years of statistical data and academic studies to support the thesis that passive is optimal, especially for long-term investors.

Obviously you think differently. Please provide links to the studies and statistics that support your superior strategy. No anecdotes, please. Anecdotes are not data.

IIRC you think the passive story is some kind of plot. If that's still the case please explain your plot theory and, particularly, how two decades of S&P SPIVA studies and S&P Manager Persistence studies have been manipulated. Also please explain how the Nobel Prize committee was manipulated to give awards to academics who you have said are paid to lie and mislead the public.

 

[Running_Man]

So you did take your nasty pill this morning, right? Or are you like this without supplements? And you are here -- why?

Nobody's really "wrong" but many are suboptimal. There is about 50 years of statistical data and academic studies to support the thesis that passive is optimal, especially for long-term investors.

Obviously you think differently. Please provide links to the studies and statistics that support your superior strategy. No anecdotes, please. Anecdotes are not data.

IIRC you think the passive story is some kind of plot. If that's still the case please explain your plot theory and, particularly, how two decades of S&P SPIVA studies and S&P Manager Persistence studies have been manipulated. Also please explain how the Nobel Prize committee was manipulated to give awards to academics who you have said are paid to lie and mislead the public.

I was just tweaking you, you are right that is not too nice, Notre Dame fires got me down. I have nothing against passive investing.