Investments

[Holland]

I work in corporate finance and investing has been my obsession since I turned 15.I have built my education and career around finance and almost all my free money (excluding what I spend on knives :D) goes into my stocks.

My TFSA is full of dividend stocks (banks, utilities, reits, pipelines) that I don't do anything with. The yield is just under 6.5%
One margin account is full of dividend focused ETFs (yield around 4%) and I sell put options on banks, rails, and berkshire hathaway to increase the realized annual gains to ~10-15%
My other margin account is similar to the first, but I am moving towards putting 50% of that account into berkshire hathaway, 1 Canadian bank, couche-tard, and cn rail to sell covered calls and 50% in dividend focused ETFS

[SpyderEdgeForever]

Holland, if I may ask, what are your views on what they call "Penny Stocks" and also, what do you say to people in regards to investments in commonly-used items such as toilet paper and toiletries like deodorants, soap and shampoo and other "needful items"? I ask because I have heard and read where people invest in those things because even in the lowest of market times, they are purchased.

[Holland]

Holland, if I may ask, what are your views on what they call "Penny Stocks" and also, what do you say to people in regards to investments in commonly-used items such as toilet paper and toiletries like deodorants, soap and shampoo and other "needful items"? I ask because I have heard and read where people invest in those things because even in the lowest of market times, they are purchased.

Penny stocks are just a form of gambling/speculating, it's not investing. I dont touch them. You should only buy a stock if you would purchase the entire company and be comfortable keeping it forever. If you buy something with the intention to sell it, you are speculating, not investing.

Those needful items I would classify the same as investing in any commodity. There are worse things to do with your money, but to paraphrase the amazing example the Oracle of Omaha uses is: why buy land when you can buy a farm.

Productive assets will generate cash flow in addition to potential cap gains on the land.

So I wouldnt buy TP when I could do analysis and calculate what I believe is an attractive price for Walmart or costco and then wait for the stocks to decrease to that price and buy.

I like to sell puts on these stocks so I get paid to wait for the stock to drop to my entry price

[tvenuto]

Penny stocks are just a form of gambling/speculating, it's not investing. I dont touch them. You should only buy a stock if you would purchase the entire company and be comfortable keeping it forever. If you buy something with the intention to sell it, you are speculating, not investing.

I recently had this point driven home in a big way. At the end of high school I had some cash left over from my restaurant job. My dad recommended I put it into a stock, and he liked Texaco, which eventually was bought by Chevron (CVX). This purchase was made around 1999. Every year, my dad would get the 1099-DIV and give it to me for taxes but other than that I didn't interact with the stock in any way; for the past 19 years it's been sitting there quietly reinvesting the dividends.

As I've recently been more focused on investing, I've been trying to consolidate and organize so I'm not spread across too many platforms. I took a look at the CVX stock and I was floored! It's worth roughly 10 times my original investment, and generates several hundred dollars per year which get reinvested. Now, it would be a mistake to assume that I picked the perfect company that had smooth sailing this entire time or had a meteoric rise in value. In fact, I just read this article on the gyrations and tribulations that the oil industry has gone through in the past 10 years. The stock has had up and down swings, and is currently about 10% off its high (which was in 2014). The real lesson is that it's a strong company that has survived these gyrations and kept a generally upward trajectory in value and hasn't had to cut its dividend. Pick a strong company, set it and (almost) forget it.

On this topic, I have a few question for Holland, if he doesn't mind discussing:

-GE, that industrial juggernaut, has obviously fallen on tough times. Is this a comeback story? I'm no analyst, but I've read that their current market cap is less than the value of several of their lines of business, which offers some floor. Will our grandchildren know the GE logo like our grandparents did? What are your feelings on this antiquated beast?


-United Technologies is breaking up. UTX will remain as the aircraft business, Otis will spin off as the elevator business, and Carrier will spin off as the HVAC business. What are your feelings on navigating a break-up like this? I stay away from IPOs, but a break up is a bit of a different story. I've done well on the SAIC/Leidos break-up on the strength of Leidos (I used to work for SAIC when it was employee owned and I had some stock when I worked for them). Any thoughts on a break-up like this? Elevators and HVAC aren't sexy but I love the idea of selling and servicing what you sell. As long as humans dwell in cities you'll need elevators and HVAC.

[Holland]

Penny stocks are just a form of gambling/speculating, it's not investing. I dont touch them. You should only buy a stock if you would purchase the entire company and be comfortable keeping it forever. If you buy something with the intention to sell it, you are speculating, not investing.

I recently had this point driven home in a big way. At the end of high school I had some cash left over from my restaurant job. My dad recommended I put it into a stock, and he liked Texaco, which eventually was bought by Chevron (CVX). This purchase was made around 1999. Every year, my dad would get the 1099-DIV and give it to me for taxes but other than that I didn't interact with the stock in any way; for the past 19 years it's been sitting there quietly reinvesting the dividends.

As I've recently been more focused on investing, I've been trying to consolidate and organize so I'm not spread across too many platforms. I took a look at the CVX stock and I was floored! It's worth roughly 10 times my original investment, and generates several hundred dollars per year which get reinvested. Now, it would be a mistake to assume that I picked the perfect company that had smooth sailing this entire time or had a meteoric rise in value. In fact, I just read this article on the gyrations and tribulations that the oil industry has gone through in the past 10 years. The stock has had up and down swings, and is currently about 10% off its high (which was in 2014). The real lesson is that it's a strong company that has survived these gyrations and kept a generally upward trajectory in value and hasn't had to cut its dividend. Pick a strong company, set it and (almost) forget it.

On this topic, I have a few question for Holland, if he doesn't mind discussing:

-GE, that industrial juggernaut, has obviously fallen on tough times. Is this a comeback story? I'm no analyst, but I've read that their current market cap is less than the value of several of their lines of business, which offers some floor. Will our grandchildren know the GE logo like our grandparents did? What are your feelings on this antiquated beast?


-United Technologies is breaking up. UTX will remain as the aircraft business, Otis will spin off as the elevator business, and Carrier will spin off as the HVAC business. What are your feelings on navigating a break-up like this? I stay away from IPOs, but a break up is a bit of a different story. I've done well on the SAIC/Leidos break-up on the strength of Leidos (I used to work for SAIC when it was employee owned and I had some stock when I worked for them). Any thoughts on a break-up like this? Elevators and HVAC aren't sexy but I love the idea of selling and servicing what you sell. As long as humans dwell in cities you'll need elevators and HVAC.

Hey, I don't like providing my opinion on individual securities as I am about as terrible as it comes for predicting short-term movements. But even, if I did, I don't follow those two companies unfortunately. I know GE is a story of getting too big and diversifying far to much into areas outside of there expertise.

For breakups, each situation is different, but the original company's shareholders would only pursue such if it was accretive to them and they were getting a value above the current price.

[tvenuto]

Thanks for the reply.

I would never ask someone to prognosticate a short term move, I think we both agree that if you're tying to time a short term move you're speculating not investing. I'm definitely into investing in strong companies and sometimes that means investing in misjudged and/or overlooked companies. I'll be keeping an eye out on those two cases for sure.

[SpyderEdgeForever]

tv and Holland, why is it so difficult for a person to make a one-time small investment, and then receive enough of a dividend return on that one-time small investment, to live comfortably materially for the rest of their lives? Someone once told me that people who were friends and colleagues of Warren Buffet and Bill Gates had that opportunity and did just that. Is there truth to that?

[Skidoosh]

The best advice I have received has been:
1) There is no way to get rich quick
2) You need to spend money to make money. I've invested in some larger funds that have done well. You need to last through several market cycles.
3) Don't get greedy, don't get scared, be in it for the long haul

[shunsui]

Are you feeling lucky ?

Some interesting names in here:

https://www.dividend.com/dividend-stock ... esc&page=1

[Crux]

I'm slowing buying out Spyderco's stock of knives.