stocks
How to Find Companies Worth Investing – Part II – Components
In my post, How To Find Companies Worth Investing – Part I, I talked about investing in companies that make the products that you use and love. Now let’s look at companies that help make those products happen.
Let’s say you don’t want to invest in HP or Apple. What about the companies that make the components of their products?
Typical Components Inside a Computer:
CPU – Intel (INTC) or AMD (AMD)
Video card – Nvidia (NVDA), ATI (part of AMD)
Monitor – HP (HPQ), LG (KRX)
There are plenty of excellent companies that you can find that make the bits and pieces of your favorite products. Do a search on google or wikipedia to find who makes what.
Happy trading!
How To Find Companies Worth Investing – Part I
Peter Lynch is well known for saying, “Invest in what you know”. With that in mind, one good place to find companies to invest is the grocery store or mega super store that is the size of a small country. The products that you buy, use, consume and generally can’t live without are made by some of the best companies to invest. List your 5 favorite products and do some homework.
Here are my 5:
1. Tide
2. Starbucks coffee (it helps me write)
3. Coke Zero
4. Doritos
5. Cheez-its
What companies make these products?* A quick search on Wikipedia shows:
1. Tide – Proctor & Gamble Co. (PG)
2. Starbucks – Starbucks Corp. (SBUX)
3. Coke Zero – Coca-Cola Company (KO)
4. Doritos – PepsiCo, Inc. (PEP)
5. Cheez-its – Kellogg Company (K)
That was easy! I now have 5 companies to do my investing homework. On your next visit to the grocery store, check out a few of your favorite products. Who makes them? Leave a comment below and have fun trading!
* These stocks are listed for example purposes only and I do not endorse these companies. Remember to always investigate and consider the risk before investing.
Making Goals & Making Money – Stock Market Tip
I have found that by creating an end goal keeps investing interesting and fun. Your goal could be a vacation, new big TV, pay off or buy a car, or some new expensive item. Having a purpose as to why you invest will help you stay focused. I have found without the end goal I start to lose interest in my portfolio. I would recommend leaving “filthy rich”* off the list, it’s too generic. Make your goal specific and give yourself a reasonable deadline. This tip works best for short term investing, for long term investing make your goal a specific number.
My goal is to pay off my family’s van with my short term stock portfolio.
* I have met a rich person and I have met a filthy person, but I have yet to meet a filthy rich person.
Don’t Be Afraid To Sell – Selling Stocks for Fun and Profit!
A big mistake I made starting out was the idea to not sell. Several books and talking heads on TV said “Don’t sell!” My question for them was always the same, “Why not? Isn’t that how I make a profit?” Fortunately, the TV never spoke back to me.
Yes Virginia, its ok to sell your stocks.
Sell for only two reasons:
1. Take a profit
2. Limit a loss
Unless you have invested in a stock that pays a dividend, the only way to make money from your portfolio is to sell. It took me almost a year to figure that one out (duh!). If the stock is at a point where you are happy with the profit, don’t worry about the “what if”. Buy it again later and make more money. There is no reason you can’t re-buy a stock.
What about the commission?
There is no such thing as a free lunch. You have to pay a commission to both buy and sell. I’ve always made the commission part of my bought price. If the stock was $15 and I bought 100 shares, it cost me:
$1,500 + $14 ($7 buy + $7 sell) = $1,514
Divide that back to the individual stock price ($1,514/100) and I paid $15.14 (that’s my break even number, more about that later) for the stock. Now if the stock goes to $16.15 and I sell, that’s 10% profit ($100). It’s ok to laugh at my small numbers, I’m just a part-part time trader.
What about taxes?
Depending on how long you keep your stock determines how much taxes you pay. When I started out I was worried about paying the taxes. I read in the vast investing books that I collect, you were supposed to keep the stock for a year + 1 day. Bull crap! Really! If I can take a profit ($100, $1,000, $10,000), I’m taking a profit! Dear Uncle Sam is going to always get a cut, why jeopardize MY profit worrying about his cut.
Limit your loss
The stock market can go down, down ,down! And sometimes it can go down, down, down really fast. Limit your loss. Don’t let the sinking ship drown your hard earned money. Just like taking a profit, you can always re-buy later. Keep in mind there is a catch to re-buying on a loss. The IRS will not allow you to offset your gains with your losses if you re-buy a stock in a certain period of time (confusing, yes, more on it later as I figure it out!).
Good luck and happy trading!
Under $10 Strategy
I don’t normally trade stocks under $10 (I have and I’ve made money). The lure of catching that next great stock that rockets from single to double (or even triple!!) digits can be so alluring. So, I finally broke down and subscribed to Investor’s Business Daily’s “Top-Rated Stocks Under $10”. I’m hoping this service will help me pick good under $10 stocks. My opinion of stock suggesting services is simple: Make me money and I’ll keep subscribing.
Here is my strategy so far:
1. Small amounts
- No more than 25% of my cash in one stock. This will limit my risk.
2. Diversify
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No two stocks in the same sector. Diversification is always a good option. This will hopefully keep me from being killed by any bad news for one sector.
3. High Relative Strength (RS)
4. Positive EPS
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For annual and next /last quarters. I’m picky about investing in profitable companies.
5. Volume %
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I want to see activity on the stock. That may be a good sign of a break out and PROFIT!
6. Simple Moving Average going up
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Never invest in a sinking ship.
As I try out this new strategy, I’ll make changes as needed. My goal is to have a strong under $10 strategy that I can use to help increase my portfolio.
As always, comments are welcome!
Investment Website Review — Yahoo Finance
This is a free service offered by Yahoo!. To get the most out of the service is best to have a Yahoo! account which will include free e-mail.
This service offers:
• News
• Stock quotes (opening and closing amounts, 52-week range and day’s range, last trade amount)
• Charts
• Company fundamentals (dividend, EPS, P/E, etc.)
• Investing information (stocks, bonds, ETF’s, etc.)
• Personal finance
• Personal portfolio tracking
Stock research
This is a good resource to research new stocks. Yahoo finance gives current news about the company from respectable sources like the Wall Street Journal, Fools, and Investment Business Daily (among others). The charts have a variety of settings including daily, three-month, six-month, year-to-date and max date ranges. You can compare stocks, show events (stock splits, dividend, etc.), and use a variety of technical indicators (simple moving average, volume, etc.).
Portfolio
The service allows you to create different stock portfolios. You can create one for your holdings and one for your watch list. The portfolio page gives a nice grid layout of your stocks with a variety of information like last trade amount, percent change, volume and details about your shares (number of shares, priced paid, gain/loss, etc.). The downside of this service is that the stock price has a 20 minute delay.
This is an excellent resource to use when you’re getting started investing. I have personally used the service for several years and would recommend it to anyone just starting out.
Investing Tip – Start!
The only way to make money investing is to start investing. If you know nothing about investing then you can begin by learning. Read a book about investing, magazine, website, or listen to an investing podcast.
Subscribe to the RSS feed or check back to my website for reviews on all of these options.
The Purpose of the Website
I am not a professional investor, I am an amateur investor. I have been investing since early 2008. I was unfortunate enough to start investing at the beginning of the recession. I had to learn some lessons the hard way. I hope to share with everyone what I have learned and I hope to help everyone not make the same mistakes I made.
What to expect from this website:
- Articles written for the beginning investor
- Book reviews
- Terminology clarification
- Product reviews: websites, applications, iPhone applications and other blogs
- Helpful quick tips
- Examples of my successes and my failures. I hope this will help everyone to profit and avoid my previous mistakes.
Please subscribe to the RSS feed or check back to this site for future posts.
Disclaimer:
Periodically I will use stocks to emphasize a certain key point in a post. This is not an endorsement of that stock. Any stocks owned by me that are mentioned or products that I am affiliated with or use will be noted within the post. I am not a professional investor or financial advisor. This website’s intention is for educational purposes only and does not take the place of professional advice. Keep in mind any investments come with risks, please research your investments to better understand your risks.
