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11/13/2006 11:29:10 AM

^ What a waste of a post

11/13/2006 11:40:29 AM

ok i'll ask a question.

i've got a fund that was setup for me by my late grandfather. it's invested mainly in mutual funds and recently a financial planner switched some of the lesser-performing funds into a spider fund.

every year i would sell off 2.5% of the fund to live off of when in college, and now that I have a good paying job, I've quit doing that. Should I be taking the earnings off of this fund and reinvesting it in itself, or start working on building up my own portfolio with some of the higher risk stocks? the original fund consistently grows between 9 and 12% annually

11/13/2006 11:43:20 AM

It's ok, Joe. I don't mind...this time...

11/13/2006 11:46:05 AM

IF it were mine, I'd do both. The slower gaining index funds to keep good steady growth + higher risk deals to satisfy my need for greed. I would reinvest what you've already got, plus build up your own portfolio.
I'd probably split it three ways. Reinvest what you've already got back into what you've got, then split your personal income into an index fund and higher risk. I wouldn't put as much into higher risk as the index funds, though. Just my personal opinion...hope it makes some sense.

11/13/2006 11:51:06 AM

CTDC made some nice gains, glad i held onto that one even when it went to shit a few months back

VWO is great - up 18% since i got in a few months ago.

11/13/2006 2:34:05 PM

I graduated in May, have a job, more extra cash than I've ever had, and a mentor advised me to look into investing. My family never messed with stocks so I don't know anything, but I've been reading that Motley Fool website and agreed that I want time and higher than bank interest rates on my side. One thing I still don't get, though: When do stocks actually produce money? Dividends seem to be like 28 cents/year per $40 share, if given at all. I can't imagine people would buy parts in a company that improves itself but never pays its owners. What am I missing here?

11/13/2006 9:12:04 PM

^if the capital is properly reinvested, the share price can appreciate, which is effectively "paying" the shareholders in a different way.

Also, I'd recommend being careful of taking everything you read from motley fool as true, although their general advice is probably of some value. Just be careful when you get emails saying, "top 5 stocks of '06" etc

11/13/2006 9:16:18 PM

Thanks, I'll be careful not to chase after whatever's popular.

Um... again though, it's great when a company improves itself, but why would someone buy the appreciated share price? Where's the payout?

11/13/2006 9:40:43 PM

There's no deterministic answer to that question, but here's the general explanation:

http://www.investopedia.com/university/stocks/stocks4.asp

11/13/2006 10:06:12 PM

I'm not sure I understand your question. You buy a fund at 40/share and hope in 7-9 yrs it is worth 80 a share, and by the time you retire its doubled several times over.

11/13/2006 10:06:37 PM

Okay, let me put it this way: Person A buys a stock at 40/share. The company does well and the stock doubles to 80/share. Person A sells to Person B. Company does well, stock improves to 100. Person B sells to Person C, etc. When does the stock make money for the guy that just keeps it?

11/13/2006 11:06:22 PM

when he sells it

[Edited on November 14, 2006 at 12:04 AM. Reason : which you eventually do, be it 6 months from now or 50 years from now]

11/14/2006 12:02:04 AM

So... basically stocks do nothing, but are for some reason bought for ever-increasing amounts?

[Edited on November 14, 2006 at 1:18 AM. Reason : bought]

11/14/2006 1:16:06 AM

A stock is a share of ownership in a company. A company makes profit and is therefore worth more, so the price of the stock goes up.

11/14/2006 7:05:30 AM

Quote :

"When does the stock make money for the guy that just keeps it?"

Most investors expect price appreciation in the future through reinvestment of profits to benefit them. However, when companies get to peak size and/or a very steady growth rate that is sustainable without substantial reinvestment of profits, they begin to pay most of their earnings out in dividends.

If you look into stock price theory, a stock is valued at a price that is equal to the present value of all expected future dividends into infinity.

Thus, the expectation of dividends in the future is what drives up the stock price. Now, most investors aren't really worried about those dividends, but no one would be willing to pay more for the stock if there wasn't an expectation of future dividends.

And BTW, there are plenty of stocks that do pay healthy dividends that are meaningful. While you're getting used to investing, go read "The Intelligent Investor" by Benhamin Graham. Hopefully you'll know something about corporate accounting, because he discusses it in detail, but even if you don't, there is valuable insight in that book.

11/14/2006 7:42:16 AM

not to mention historically stocks that pay dividends earn higher total returns than those that don't.

11/14/2006 10:28:36 AM

UCTT up 4.5% today


Also, ILMN looks like a steal at 38.35.

11/14/2006 11:20:46 AM

^ Any reason, BD?

11/14/2006 11:33:19 AM

UCTT has a 20 PE and grew 54% from one quarter to the next... so it's definitely undervalued. As for today's jump, I don't see anything specific.

as for ILMN, they make the tools necessary for gene reading. Want to breed cattle for a specific gene or gene matrix? They offer the tools to check. Want to check for a genetic disorder? Same thing.

Aside from the surging revenue, margins and earnings, I like them for three reasons
1. Recession resistant
2. Right technology for a massive and surging market
3. Biotechs will get in favor as the economy falters

The key here is the widening sales base as well as the acceptance by big drug companies such as Glaxo. Now, I'm not quite as savvy with the biotech market as say, ssjamind, but I've been watching this one for a couple of months. The announcement yesterday of their acquisition of Solexa dropped the share price some, which is why i think it's a good buy now.

Prior to last month's earnings, their P/E was 253, and now, it's in the 70's, with the forward P/E in the 30s. I like the sequential growth in addition to the annual growth, as they grew from an annual loss last year to a nice profit this year. If we continue to see this kind of growth, it should be very good for the share price.

11/14/2006 12:17:16 PM

anyone own EFUT?

11/14/2006 2:07:27 PM

Quote :

"If you look into stock price theory, a stock is valued at a price that is equal to the present value of all expected future dividends into infinity."

Thank you. Finally a real answer. But even megarich companies like Microsoft are giving like ten cents every three months per $30 share. Stocks seem to be like beanie babies that poop nickels: they're great to buy and sell when the price is going up, but eventually people are bound to realize they do nothing and stop buying them. Then the last guy is going to be stuck with something worthless (besides the monthly nickel-pooping.)

11/14/2006 2:27:39 PM

that may be the funniest, most misguided analogy ive ever read.

11/14/2006 2:30:48 PM

Thanks, I try. But seriously, I don't see what I'm missing.

11/14/2006 2:37:18 PM

Well, but Microsoft isn't earning just a dime a share (in fact, its dividend is actually .40 a share, but I digress) it is earning much more than that. What is it doing with the rest of it? It is investing in operations that will hopefully earn it more money with the eventual goal of increasing that dividend. So, in your beanie baby example, the thing shits nickels but holds onto some so that in several years it will shit dimes, then quarters, etc.

People are only going to pay for it so long as they reasonably expect the dividend to increase in the future (even if that is in the DISTANT future) and even if they don't explicitly say to themselves "This is valuable because it will increase dividends in 30 years"

11/14/2006 3:39:19 PM

It was not long ago that Bill Gates said Microsoft would never pay its shareholders dividends because they could always find a more productive use of their profits than their shareholders could.

Which at one point was probably true. Now as you see it is giving 40 cents a share.

Owning shares of stock gives you three claims:

1) A share of its profits (through dividends)
2) A vote for the board of directors
3) An annual report

The stock price fluctuates because like bgmims explained, the price is established based on the present value of expected future dividends....


On average I believe dividends usually only account for ~2% of your expected return. The rest of your return will be reflected by the price of the stock.

That beanie baby theory does apply in some cases though. People always think "youtube" or a similar product will become ridiculously profitable at some point in the future. All the speculation pushes the price of the stock up as people demand shares. At some point people realize the product is perhaps not as profitable as they once thought (i.e. it DOES shit nickels) and the stock price realizes a dramatic loss. Think pets.com

This is why investors who like to play it safer look for companies that are more likely to earn slightly higher than normal profits but are not of the boom or bust variety.

Then again you could just invest in a purely speculative stock like the Green Bay Packers that has never produced a dividend in its lengthy history.

11/14/2006 5:14:50 PM

"On average I believe dividends usually only account for ~2% of your expected return. The rest of your return will be reflected by the price of the stock."

dividend dependance is a function of time horizon/risk appetite...older/retired people mostly hold stocks with high dividend yields (i.e. utilities).

11/14/2006 7:14:49 PM

this is a pretty good analysis:

Quote :

"as for ILMN, they make the tools necessary for gene reading. Want to breed cattle for a specific gene or gene matrix? They offer the tools to check. Want to check for a genetic disorder? Same thing. Aside from the surging revenue, margins and earnings, I like them for three reasons 1. Recession resistant 2. Right technology for a massive and surging market 3. Biotechs will get in favor as the economy falters The key here is the widening sales base as well as the acceptance by big drug companies such as Glaxo. Now, I'm not quite as savvy with the biotech market as say, ssjamind, but I've been watching this one for a couple of months. The announcement yesterday of their acquisition of Solexa dropped the share price some, which is why i think it's a good buy now. Prior to last month's earnings, their P/E was 253, and now, it's in the 70's, with the forward P/E in the 30s. I like the sequential growth in addition to the annual growth, as they grew from an annual loss last year to a nice profit this year. If we continue to see this kind of growth, it should be very good for the share price."

i took a quick look at their microarray and gene sequencing platforms, and it seems acquiring Solexa was a solid strategic move. with this acquisition they stand to take a long term leadership position in their space if they keep running a good business.

word on the street is they paid a premium for the acquisition, and but in the long term, its to their favor. there will also be some near term EPS dilution, but later in 2007 and into, that looks like it won't be as big a problem.

the acquisition also seems to be abrupt, and they could see some challenges in integrating the company and bringing out synergies. what will likely happen is that analysts will adjust their eps estimates according to this, and when the company beats revenue forecasts, the stock will jump on growth prospects even though earnings may not be that great. there also seem to be some big players peddling this stock, so that is generally good for price in the near term.

if i had a small pile of cash that i wanted to commit to an aggressive growth play, i would strongly consider this.


[Edited on November 14, 2006 at 7:15 PM. Reason : ]

11/14/2006 7:15:04 PM

Grrr...I tossed some money from my bank account to my scottrade account using their new direct deposit thing...it's going to take longer to do that than it would have to get a certified bank check and deposit that in person. Oh well--just means I have to wait another day or two to invest.

It's sad that I'm moving money from my bank account to my scottrade account just because of the interest; it'll make more just sitting in the scottrade account than my checking account.
BoA checking account: 0.05%
Scottrade: varies, last time it was 2.25%

11/15/2006 10:43:19 AM

stopped out of UCTT 215 shares sold at 13.95.

bought at 13.15, so about a 6% gain.

I've been keeping a very tight 2% trailing stop.

I may move this cash in to ILMN today...

11/15/2006 11:01:15 AM

Stopped out of TRID. 100 shares sold at 20.87

bought at 19.50 -- ~ 7% gain

Bought 123 shares of ILMN @ 40.85

11/15/2006 2:08:29 PM

Official petition to rename this thread **BobbyDigital brags about his stock market transactions***

11/15/2006 2:27:05 PM

I post all of my transactions whether they're a gain or a loss, at the request of some folks many pages back.

If you want to contribute to the thread, feel free. if you want to troll, go discover chit chat.

11/15/2006 2:46:11 PM

i don't see any reason to not post good decisions

11/15/2006 2:47:23 PM

Its like the poker thread, where people only post the hands they won.

11/15/2006 3:36:23 PM

shit, i'll give my recent good and bad buys:

Good
BBY
SFY (Great)
EBAY
HMC

OK
BSY
TGT

Bad
TXN
SNE (let's go PS3)

but this reflects a relatively short term holding

11/15/2006 6:38:53 PM

Hey I even post my bad decisions (RMBS )

11/15/2006 9:25:12 PM

On another note--looks like GOOG is going to be added to the S&P100. Perhaps this'll give the stock a nice bump tomorrow...
edit: Bobby I just looked at EFUT. Holy shit. Would have loved to have that stock...(until today)

[Edited on November 15, 2006 at 9:42 PM. Reason : ]

11/15/2006 9:32:59 PM

Wow...so ridiculous.
http://finance.yahoo.com/q?s=SHLD

Profit jumps and the stock falls 4%.

11/16/2006 11:39:41 AM

Well, the profits were from external investments rather than from retail sales, and sales have slumped, which is the main reason for the dropoff.

more here

11/16/2006 11:56:34 AM

Blah I hadn't read the article yet when I posted that. Someone slap me for being stupid, please...

11/16/2006 12:18:10 PM

Of course, it has to be THIS week that the market picks up on the undervalued STX, a week after I give up on it.

11/16/2006 12:53:46 PM

Quote :

"Wow...so ridiculous. http://finance.yahoo.com/q?s=SHLD Profit jumps and the stock falls 4%."

http://finance.yahoo.com/q/bc?t=3m&s=SHLD&l=on&z=m&q=l&c=&c=%5EDJI

I figure most investors are saying, "my work here is done".

11/16/2006 12:55:15 PM

Hey if you invested awhile ago in SHLD, you can't complain...

11/16/2006 1:00:49 PM

Exactly, but you might think about taking your 20% gains and peacing out.

11/16/2006 1:03:30 PM

Gregor- How's credit suisse??I am leaving jones...might see what fidelity has open as well as some other things

11/16/2006 2:06:02 PM

Did any of you dumb bastards ever sign up for CAPS? I'd like to know

11/16/2006 2:41:33 PM

Quote :

"Hey if you invested awhile ago in SHLD, you can't complain..."

I picked it up at $117 and have been playing with it since. should i jump ship?

11/16/2006 2:58:41 PM

RMBS soars 26%...just after I sell it.

11/16/2006 3:10:39 PM

^better than it falling before you sell.

11/16/2006 6:30:46 PM