Ideas for Personal Account.

Ladies,

I have just came into a few thousand dollars from a relative's estate...Nothing life changing.

I am going to invest it and looking for a few new ideas in equities. Long only but I am not looking for a 10+ year Long idea but also not looking to day trade to get rich.

Figure a 2-3 year position that will give me some cash to play around with. Was given free chunk or change and would like to turn it into something good.

Serious thoughts only, and please give me why you like it.

Thanks all.

 

What is wrong with the idea of buying a solid dividend stock and holding it forever?

Buy a large US oil company yielding between 3 and 4% and take home $10/month (inflation adjusted) for the rest of your life. Or buy a European oil company yielding 6% and collect $15/month.

Investors hate oil right now, but if you are just starting out, it is a reasonable certainty that you will always need to buy it for the rest of your life.

 
IlliniProgrammer:
What is wrong with the idea of buying a solid dividend stock and holding it forever?

Buy a large US oil company yielding between 3 and 4% and take home $10/month (inflation adjusted) for the rest of your life. Or buy a European oil company yielding 6% and collect $15/month.

Investors hate oil right now, but if you are just starting out, it is a reasonable certainty that you will always need to buy it for the rest of your life.

I would invest in oil also. PBR-brazilian nationalized oil company. A value investment. Near it's 52 week low. Oil's gunna go up sometime, Why not invest in an emerging market?

 

Tip 1: This has to be Facebook. Tip 2: Do not invest money based on stuff strangers tell you on some forum.

To counter everything I've said:

I find this website to a pretty good starting point, if you are not so familiar with other platforms

http://www.vuru.co

Has all the info about a stock in one place, with a very nice, clean interface. Check it out, analyze some stuff and come back to ask for opinion = WIN.

"Every man should lose a battle in his youth, so he does not lose a war when he is old"
 
Spalding Get Your Foot Off the Boat:
Dividend paying stocks will crush you if it's not in a tax advantaged account... wouldn't go that route
See where you're coming from, but still disagree here. Dividends already enjoy tax advantages, including a 15% cap on the tax rate, and if your portfolio has a turnover rate of more than 25-30%/year, they're taxed at roughly the same rate as Capital Gains.

REITs, bonds, and royalty trusts, all taxed as ordinary income, should be held in your retirement accounts.

The big question I have is what is the point of income if you're not allowed to enjoy it? Why buy dividend stocks if they sit in a retirement account and need to get reinvested?

Dividend stocks in a cash account, along with my emergency savings, help form my comprehensive financial safety net. If the bottom falls out of the financial services job market, I tick one box in my cash brokerage account from "Reinvest dividends" to "Don't reinvest dividends" and $XXX gets deposited into my checking account every month. I cut back on my expenses, try to find some part-time work, and those dividends provide a nice long-term cushion on my financial situation. Utility bill? Dividends. Trip to the gas station? Dividends. Rent? Dividends.

The same can't be said for a retirement account. I need to pay a 10% penalty to get the money out. A very large penalty compared to the fairly small (0.5%) penalty I pay on my dividends tax by recognizing the gain every year over 3-4 year capital gains.

Yes, if you would hold Berkshire Hathaway in a taxable account and never sell it until retirement, dividend stocks start to look expensive by cutting your returns from 10%-(15%/40 years) to 8.5%. But most people are cutting their returns from 10% to ~8.6-8.7% anyways with turnover in their portfolios, and a company that respects its stockholders by paying a dividend will probably make up for that 20 basis point after-tax-loss in the long run with better management.

Not sure where you are in life, but having one or two professional gray hairs, I can say where the practice is different than the theory for me and a lot of wall street folks. In theory, you're right; 10% returns beat 8.5% returns, but in practice, it's a lot more fun to get a monthly check in your hands, and you'll be selling your non-dividend stocks every couple years anyways, bringing after-tax returns pretty darned close to 8.5% anyways.

Moral of the story: contribute to your retirement account, but dividends in a cash account make it a lot of fun to save money.

 

Know you said equities but get some Gold as well, and ARNA is worth to be considered. GMCR after Greenhorn crashed it is quite attractive. Leave FB alone.

 

all else equal, for someone in their 20's, i'd encourage a long term time horizon and would strongly discourage using your investment income to cover your bills - the opportunity cost here is huge. scale your bills down so that they can be covered by your after tax income.

for someone with a short-mid time horizon (as given here), regardless of age, the case for dividend paying stock would be arguably lower vol and more predictable cash flows. it's a decent argument, especially for someone as bearish on bonds as i am. my personal advice would be to plow that capital into low p/e stocks with great returns on capital... the fruits of this strategy are well documented and generally realized within ~2 year time frame

 

I am willing to take a risk on a name. I never said I wouldn't want to hold for 10+ years. Just want the flexibility and profits (possibly) after 2-3 years if I need the money and such.

Thanks for all the suggestions. If something goes through the rough I'll remember you all!

Eventus stultorum magister.
 
adapt or die:
It shows how clownish this forum is with half of the comments revolving around Apple. Buy something cheap that you've done your homework on, not something near all-time highs, priced for perfection.

I don't like the outlook right now for equities so I'd look at a physical gold fund or broad market inverse ETF maybe.

As Charlie Munger recently said, civilized people don't invest in gold. As Warren Buffett said, the money to be made in the future will be from cash generating assets, i.e. companies and hence stocks, not gold. Gold has been essentially a ponzi scheme where the players have bought at low prices and tricked others into buying at 1800 an ounce while they sell at that price.

 
adapt or die:
It shows how clownish this forum is with half of the comments revolving around Apple. Buy something cheap that you've done your homework on, not something near all-time highs, priced for perfection.

I don't like the outlook right now for equities so I'd look at a physical gold fund or broad market inverse ETF maybe.

A year ago apple was in the low $300's which also happened to be its all-time high at the date. Hard to know its long term prospects once Jobs' influence on the pipeline wears off but I am very comfortable holding AAPL with a P/E under 15 for the next 1-1.5 years with promising catalysts like Apple TV, a new Iphone, and another Ipad coming out.

Would not be surprised to see apple above $700 a year from now.

 

Dell looks undervalued

^btw nice profile pic sir, i admire your taste in pictures

[quote=rufiolove]When evaluating whether or not to post something on WSO, I think to myself, "would an idiot post this" and if the answer is yes, I do not post that thing...[/quote]
 

Sometimes it's harder to find a catalyst for the stock though, I think that's the difference between finding a really good stock and just any stock. Also, I'd prefer to have a long pitch

 
TopChedder:

Sure, hold on while I take my hours of research I've been doing since 5:30am this morning and years of experience and failing stock picks to compile you a neat little list that other people pay me for.

Invest in an index fund and don't talk to me unless you have something to give me first.

I didn't know you Big 4 boys were getting paid for making investment recommendations.

Under my tutelage, you will grow from boys to men. From men into gladiators. And from gladiators into SWANSONS.
 

Why is this guy getting plastered with shit? He has a valid point, this is a platform of exchanging ideas not asking for other peoples ideas and then potentially benefiting from them monetarily.

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing. See my Blog & AMA
 

MGI - Took a huge dive after WMT announced they're bringing some of their business in house. WMT represents ~ 30% of revenues and the stock was down ~30%. If you listen to the analyst call from 4/17 mgmt says that the business WMT is taking away represents only 9% of net revenues (gross revenues less commissions).

Unlike WU, these guys are growing the topline pretty quickly (high single digits), double-digit ROIC, Reasonable multiple (FCF %. Report earnings on the 29th, which is when I expect mgmt will be able to give a solid update on what the affect will be on the business. My best guess is that it will be fairly minimal and they'll be able to get sales back in ~ 1.5 years. Their other businesses are growing much quicker than the part that WMT is taking away, anyway.

It does have some hair on it - WMT, DOJ and IRS investigations, regulatory and capital concerns, and Thomas Lee Partners and GS collectively own about 70% of voting shares.

Worth a look.

 

FAST - but on a dip (currently at 30x P/E). consistently increasing dividend, great CF characteristics, and because of their distribution network & tenure in the business, not an easy business to break into

COV - somewhat high barrier to entry, and a cash cow. unlike other HC stocks, it makes products that are used and disposed of, so customers have to buy more. also, steadily rising dividend, and a reasonable (not pound the table) valuation

would give more but my clients would kill me!

FD: I do not own either of those for clients (regulations preclude me from trying to buoy my own positions)

 

AMZN - Despite little to no earnings, and some speculative capex, AMZN continues to be the core disrupter in a wide variety of industries. Witness, Amazon Supply as a serious competitor to the FAST suggestion above. Distribution network is unmatched, secular shift towards buying consumer staples online (toothpaste etc.). The slight deflation of the tech bubble 2.0 should create a good entry point - be patient and wait for some sideways trading.

 
Semi-Socratic:

AMZN - Despite little to no earnings, and some speculative capex, AMZN continues to be the core disrupter in a wide variety of industries. Witness, Amazon Supply as a serious competitor to the FAST suggestion above. Distribution network is unmatched, secular shift towards buying consumer staples online (toothpaste etc.). The slight deflation of the tech bubble 2.0 should create a good entry point - be patient and wait for some sideways trading.

What do you mean by sideways trading?

I think AMZN is a great buy and thinking of buying it. AMZN is going announce its "Kindle Phone" which I think will be able to compete in the mid-range market. Just like the Kindle fire does. Rumor also has it AMZN will be launching its own music service to compete against Spotify, Rdio.

I believe Amazon Fresh is going be start expanding to different cities as its pilot has been doing well.

What do you guys of think of LinkedIn? I 50/50 on buying it. I guess after today's earnings we will know where it stands.

What y'all think about Grub?

 

Pharma is always difficult, especially if they drugs are regulated. Think about the possibilities of the product never making it to the end user due to regulators. Potential sound great but at the end of the day risk reward is skewed too much towards risk at this point.

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing. See my Blog & AMA
 

I agree with Matrick, pharma is an industry where you need to have a lot of information about medicine and science. Be prepared to have a very steep learning curve. It is suited for people with advanced medical knowledge or have done a lot of research.

I did an ER internship covering biotechnology (pharma) companies and I would say this is by far the most interesting thing I've done while in college. I was lucky to have a principal who was willing to teach me. I specialized in oncology department (cancer)

One way that it is difficult is that most small companies (Market Cap

i'm not smart enough to do everything, but dumb enough to try anything
 
Best Response

"I agree with Matrick, pharma is an industry where you need to have a lot of information about medicine and science. Be prepared to have a very steep learning curve. It is suited for people with advanced medical knowledge or have done a lot of research."

I agree and dont agree with this.

Agree that having an advanced science degree helps. Disagree because its stupid to invest in something you don't understand. 99% of people in the market probably dont have any advanced science degree, so management should water down presentations and make the risks and science simple. Some companies actually do this correctly. I also think you can learn about biotech investing, ie. its a very catalyst driven business for shareholders.

 

JGW is worth looking at, particularly if it falls further with JLL's lockup expiring this week. Company has a dominant position in the secondary market for structured settlements and similiar payment streams [annuities, lotteries], and this is a profitable niche. There are real advantages to being the largest player in this kind of market, both on the supply side (JGW has access to securitization market given scale while competitors do not) and demand side (spending on advertising is the key to generating in-bound calls...JGW outspends everyone else by a huge multiple, and a new competitor would have to spend so much on advertising to compete that entry into the market would not be feasible).

There are a lot of barriers to proper analysis - GAAP accounting Consolidated is not useful in understanding the underlying economics, management is terrible at explaining results & giving guidance, public data on operations is limited since it was privately held until this past November, there are no comparable companies & data on the secondary struc settlement market is limited. There are also regulatory concerns priced in - it's a controversial business buying struc settlements at high rates - and a CFPB inquiry was announced w/ FY 2013 results. I believe the regulatory concerns are actually very minimal given that all transactions are court-approved.

 

I don't have a model built so I was just looking at reported numbers, but based on those it looks like they had the one loss in 2012 (-$49.3 million) and then losses in 2007-2009 (-$1,071 million in 2007, -$261 million in 2008, -$1 million in 2009). So that's where I was coming from there, but, again, it's not necessarily important that that's been going on.

Re: the EBITDA multiple: Got it. Didn't take that restricted cash into account. I also went and did a rough calculation on WU's EBITDA multiple (was just going off yahoo finance before) and it looks like it may be closer to 8x than 7x (also taking their restricted cash into account).

I agree on WU having less growth potential, but also less risk going forward so I would expect them to have equivalent multiples (more or less), but I might give the slight edge to MGI for the reasons you bring up. Good analysis - I'm going to look into it more when I have time in a couple of days.

 
hiit:

Long YHOO/Alibaba

Why do you say that?

Alibaba has not gone public yet. When Alibaba does go public I plan on buying it for sure.

But why long YHOO? I know Yahoo is a shareholder of Alibaba but will Yahoo sell its shares in Alibaba when it goes public? The WSJ reported that Alibaba revenue is counted in Yahoo earning reports to help boost the company revenue/ net income. And if Yahoo did dump Alibaba wouldn't Alibaba share price go down? Just like TWTR today since the lock-out period is over.

And the four Chinese IPOs this year in the U.S market have done terrible post- IPO. However, Alibaba can be the exception.

 

Clearly I got into a lot of shit (of the monkey variety) for my first post, so let me clarify a few things,

1) You are asking me for stock "ideas". I do a lot of research to find why a company might be undervalued/overvalued. It takes a lot of grind work to go through financials and recent news to get to a theory of where the stock price should be. I'm not just going to give that away because you asked. That would be like me writing a research essay and you asking for me to send to you so you can write your own essay on the same topic using my research. That's just not fair.

2) You blatantly say "I'll give you SB's for ideas" - This means you are willing to "pay" for stock advice. Unfortunately SB's can't pay off my student debt, so if you want serious stock advice, shoot me a PM and we can work something out.

Just a quick warning - it's generally a bad idea to invest your money based off what you read in an online forum.

 

I 2nd the motion to long yhoo until alibaba ipos because the parts of yahoo are worth more than the current market price.

a more interesting idea would be FST. A report just became public on them and it is looking rather attractive. Has to do with a merger and delevering the company. At a p/e ratio of about 3.6 it might be a steal.

 

No comment on YHOO; but dear god don't recommend a company like FST without knowing the industry. No one values E&Ps on P/E, and who gives a shit what their "earnings" are today if they are crushed by a debt burden and with no discernible inventory of profitable drilling locations.

 

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