So, now that I have hindsight, I can say that my move to buy NFLX again at around 116, before their earnings report, was not a good one. But, I can read my old post and see why I thought it was a good move. What I'm most surprised about is that people are not as lazy as I thought.
It makes me think that it would probably be interesting to try out each streaming company, and compare them all. See if it's worth switching. As of right now, I'm under the impression that all of these streaming companies generally suffer from lack of content.
Which is why I think that NFLX's stock will slowly inch up from its current position if NFLX can keep acquiring content deals, and simultaneously patch up consumer sentiment. I think they should make a big, bold gesture of apology to their loyal customers--a discount, or one-time gift, and make a really great offer to returning/new customers. These verbal apologies are not enough to turn someone around in this market. Marketing and customer relations in the US will be of utmost importance. Expansion to other countries, I think, is a long-term plus, though it may take a few quarters for the profits of this to outweigh the costs. So what is my plan with NFLX now? Well, I will hold on to the stock, maybe for a few quarters and see what happens. No use in selling now. I think the next few quarters will be rough, but there may be an upside to this all...in the long run. I'm hoping there will be. Maybe I should do some research into these companies and see which ones I really think will succeed, then hedge my bets by investing in a few of these companies...I had done this in my first investment in NFLX. I had then invested in CSTR, who owns Red Box. That had worked out well for me...
Wednesday, October 26, 2011
Wednesday, October 19, 2011
What is a Share Buyback?
About 5 days ago, I'm checking the headlines for the stocks that I own. Then, I came across this headline from MarketWatch.com: Hansen Natural Board Authorizes New $250 Million Share Repurchase Program. So I click and read the article because I have no clue what this even means, but it sounds important.
I read the article and still don't get it...Why does a company buy back shares, and what does it mean to me? So I looked it up on Wikipedia...And this is now what I understand...Basically, it means that the company buys back shares that are outstanding and either retires the stock or keeps it for re-issue later. I learned that when a company has profits, it can either pay out dividends to its shareholders (I knew what dividends were because of being an REI member) or it can buy back stock. By reducing the number of shares out there, the company effectively increases its EPS (earnings per share). This, in turn reduces the P/E. I'm guessing this is good for me, somehow, because it first of all indicates that there are profits, and second of all, the EPS is rising. But I'm still a little confused, so I google further.
I find this on investopedia.com: A Breakdown of Stock Buybacks. What I read here makes sense to me:
I read the article and still don't get it...Why does a company buy back shares, and what does it mean to me? So I looked it up on Wikipedia...And this is now what I understand...Basically, it means that the company buys back shares that are outstanding and either retires the stock or keeps it for re-issue later. I learned that when a company has profits, it can either pay out dividends to its shareholders (I knew what dividends were because of being an REI member) or it can buy back stock. By reducing the number of shares out there, the company effectively increases its EPS (earnings per share). This, in turn reduces the P/E. I'm guessing this is good for me, somehow, because it first of all indicates that there are profits, and second of all, the EPS is rising. But I'm still a little confused, so I google further.
I find this on investopedia.com: A Breakdown of Stock Buybacks. What I read here makes sense to me:
You can think of a buyback as a company investing in itself . . . [But] because a company can’t act as its own shareholder, repurchased shares are absorbed by the company, and the number of outstanding shares on the market is reduced. When this happens, the relative ownership stake of each investor increases because there are fewer shares, or claims, on the earnings of the company.
Well, I think this all sounds fine and dandy. I read on.
The article goes on to explain that repurchasing can happen in two ways, a tender offer or an open market buyback. I deduce that Hansen's buyback is an open market buyback, which just means that they buy the outstanding shares at market price.
Reading further, I learn that in addition to rising EPS and lowering P/E, a buyback also will raise ROA (Return on Assets) and ROE (Return on Equity). This makes sense if you think about it. ROA: as cash is used to repurchase stock, this lowers the amount of the company's assets, but the earnings have remained constant. So a smaller numerator over the same denominator = a higher number. ROE: similarly the number of shares outstanding decreases, but earnings are constant, so a smaller numerator over the same denominator = a higher number.
What does this mean? Well, that one motivation for companies to implement a repurchase program could be in order to boost these ratios, to in essence, look better. That seems completely shallow to me.
A second motivation can be for a company to counteract the effects of over-zealous employee stock option plans. This basically has the opposite effect of a buyback by increasing the amount of shares (and therefore affecting all those previously mentioned ratios).
However, there could be a positive motive behind a buyback. Investopedia notes that:
...management many feel the market has discounted its share price too steeply. A stock price can be pummeled by the market for many reasons like weaker-then-expected earnings results, an accounting scandal or just a poor overall economic climate. Thus, when a company spends millions of dollars buying up its own shares, it says management believes that the market has gone too far in discounting the shares - a positive sign.
Now, this sounds spot on. Poor economic climate? Check. Company spending millions of dollars? Check. My conclusion: HANS believes its stock price is too low, and the reaction to this share repurchase should be a higher stock price in the near future. Yay!
Here is the link to the Investopedia article which was written in easy-to-understand terms:
Apple Down 20 Points Today...Why I'm Not Worried
Yes, Apple's stock has fallen about 20 points in one day. The fall in the stock price is because sales of the iPhone 4 during Apple's fiscal fourth quarter fell short of analysts' expectations by 3 million units. But I'm not worried.
First of all, I bought AAPL stock a few times since May 2011, at prices ranging from 301.37 to 366.99. I own 6 shares. On the shares I bought at 301.37, I've already made about $86 per share (if I were to sell the stock at today's current price of $401.82, minus the trading fees).
But the real reason I'm not worried is that ever since Steve Job's passing and the release of the iPhone 4S, I cannot check my Facebook News feed without someone posting something about either Steve Jobs or the new iPhone. And all of those posts are positive. The iPhone 4S sold more than 4 million units in its opening weekend, breaking previous records. CEO Tim Cook says the company fell short of expectations because consumers were holding out for the release of the new 4S model. AAPL reassured investors that they are still expecting strong performance for the rest of the year.
One of the most impressive qualities I see in Apple, from a financial point of view, is that it has no debt. Instead, they've got a load of cash and assets. Its Return on Assets is 27.06% and Return on Equity is 41.67% and its P/E ratio is only 14.5. Because of the strength of this company, it is a good long-term investment. Like everyone else, I'm interested to see how Tim Cook will keep Steve Jobs' legacy going.
First of all, I bought AAPL stock a few times since May 2011, at prices ranging from 301.37 to 366.99. I own 6 shares. On the shares I bought at 301.37, I've already made about $86 per share (if I were to sell the stock at today's current price of $401.82, minus the trading fees).
But the real reason I'm not worried is that ever since Steve Job's passing and the release of the iPhone 4S, I cannot check my Facebook News feed without someone posting something about either Steve Jobs or the new iPhone. And all of those posts are positive. The iPhone 4S sold more than 4 million units in its opening weekend, breaking previous records. CEO Tim Cook says the company fell short of expectations because consumers were holding out for the release of the new 4S model. AAPL reassured investors that they are still expecting strong performance for the rest of the year.
One of the most impressive qualities I see in Apple, from a financial point of view, is that it has no debt. Instead, they've got a load of cash and assets. Its Return on Assets is 27.06% and Return on Equity is 41.67% and its P/E ratio is only 14.5. Because of the strength of this company, it is a good long-term investment. Like everyone else, I'm interested to see how Tim Cook will keep Steve Jobs' legacy going.
Tuesday, October 18, 2011
Updates to 10/17/11 Post on LULU
Hah! Since yesterday, I've already found information and read articles that prove me wrong...or something like that. Anyway, this is a learning experience...
This Seeking Alpha Article by Bob Rubin says:
When buying stock, two common rules are to keep away from very high Price / Earnings ratios, and to keep away from very high Short Interest (the percent of shares that have been sold short). High P/E means a stock probably trades for more than it’s worth. High Short Interest means many people expect the price to fall.
Now, this is pretty much what I had said before, except the part about the high Short Interest, which also makes sense. I learned yesterday that a Short Sale is when a person thinks a stock price will drop, so they borrow shares from a third party to sell at the current price. However, they have to return those shares to the borrower at a later date. So, when the price of the stock drops, the person buys the stock at a lower price and then returns those stocks to the third party. That's how a short sale works...if everything goes as planned. As I'm not really interested in getting involved with short selling, that's the extent of my knowledge with that...
Anyway, Rubin goes on to make the point that in a short sale, if the stock goes up, the short seller still has to buy the stock in order to repay their broker. Rubin explains:
When lots of short sellers get margin calls at the same time, it creates a “short squeeze.” All those short sellers buying the stock force its price up.
Rubin finishes the article, using LULU as an example:
Lululemon Athletica (LULU) makes clothes for athletes. Its P/E is 51.95 and its Short Interest is 16.9%. It's traded above its 200-day moving average for over two years.
Interesting...however, it still sounds like a lot of risky business to rely on a short squeeze instead of real value to drive your stock price up. So...even more so, I'm thinking of getting out of LULU...because you figure at one point, if a stock is inflated, it will pop.
This Seeking Alpha Article by Bob Rubin says:
When buying stock, two common rules are to keep away from very high Price / Earnings ratios, and to keep away from very high Short Interest (the percent of shares that have been sold short). High P/E means a stock probably trades for more than it’s worth. High Short Interest means many people expect the price to fall.
Now, this is pretty much what I had said before, except the part about the high Short Interest, which also makes sense. I learned yesterday that a Short Sale is when a person thinks a stock price will drop, so they borrow shares from a third party to sell at the current price. However, they have to return those shares to the borrower at a later date. So, when the price of the stock drops, the person buys the stock at a lower price and then returns those stocks to the third party. That's how a short sale works...if everything goes as planned. As I'm not really interested in getting involved with short selling, that's the extent of my knowledge with that...
Anyway, Rubin goes on to make the point that in a short sale, if the stock goes up, the short seller still has to buy the stock in order to repay their broker. Rubin explains:
When lots of short sellers get margin calls at the same time, it creates a “short squeeze.” All those short sellers buying the stock force its price up.
Rubin finishes the article, using LULU as an example:
Lululemon Athletica (LULU) makes clothes for athletes. Its P/E is 51.95 and its Short Interest is 16.9%. It's traded above its 200-day moving average for over two years.
Interesting...however, it still sounds like a lot of risky business to rely on a short squeeze instead of real value to drive your stock price up. So...even more so, I'm thinking of getting out of LULU...because you figure at one point, if a stock is inflated, it will pop.
Monday, October 17, 2011
When Considering Purchasing a Stock
In general, I've had the most success buying a stock when it's something I have a real-world gut feeling about. For example, I had been hearing about and seeing Lululemon clothing on all my friends for months before I went into a store myself. I thought, "$80 for pants I work out in???" It bothered my pragmatic side, but I knew I was curious. I experienced how well the clothing fit, how it flattered a woman's body, and then found out that the store also does alterations for free. The branding is strong, customer service/shopping experience is great, and each store integrates local events and classes into their store. Though I am typically a bargain-hunter, I bought into their product, and love to splurge on a nice treat every now and then.
In the case of HANS, I was surprised as I walked down the aisles of COSTCO to see this "healthy" alternative soda in the aisles. I remembered drinking this in health stores as a kid. But what really hooked me was finding out that my favorite soda is also part of the Hansen's company. I like Blue Sky Free because I'm a sucker for soda, but don't want to consume all those empty calories (or harmful chemicals). Well, Blue Sky Free uses Stevia as an alternative to sweeteners like aspartame, so I don't feel guilty about drinking soda. Thus, my interest was piqued.
Getting back to it, these are the types of events or thoughts that trigger my interest in certain companies and their stocks. But I don't buy them right away. I then add them to my watch list and eyeball the stock's performance for a while (for me it can be a few weeks to months) to see if the stock is trending up or down. I also do this because the market as a whole tends to have highs and lows together, so you want to make sure you buy a stock at the right time. It also gives me time to read articles about the stock and familiarize myself with the company. One thing I've learned from waiting and watching, if earnings reports are coming out soon, make sure you buy before the report is out if you think the stock will outperform estimates, because a stock's price will most likely shoot up, especially if the "buzz" on the stock is already bullish.
When I'm watching a stock, I'm reading news stories and articles about it, looking for signs of good or bad news and comparing it to its competitors. Also, I look at a few technical numbers that I've grown to understand. First, P/E ratio...this tells me how expensive a stock is, meaning how much people who are buying the stock are willing to pay. It indicates the relationship between earnings and stock price. A high P/E means that people are really feeling bullish and think the stock is going to perform really well. However, as a P/E moves higher, it also could potentially mean that the stock is overvalued, and that the stock may take a hard fall the next time an earnings report comes out and does not perform as expected.
For example, LULU is at a P/E of 50.0. My opinion is that a P/E around 20 is not scary. At 30, I might still buy it. At 50...I don't know that I would be willing to buy at that point. By the way, AAPL (Apple) has a P/E of around 16.5 and is reporting earnings on Tuesday (I'm just saying I have great expectations for this stock). But back to the point...I still think that LULU is an excellent brand, selling high-quality goods with great customer service and brand loyalty. Even if their products are expensive, I really believe that you get what you pay for. This article on IBD talks about how even though LULU is a top-5 stock on their list, big institutions are selling their stock.
Reading this, I'm feeling mixed. I think that LULU is great, and its stock price was much higher back in July and September, around 60 points ("points" apparently is lingo for "dollars"). So should I hold out for a "good" day in the market and sell soon, or should I hold on for the long run? The company can hardly keep up with demand, it is so popular, and new stores are popping up. Further its Return on Assets is 32.21% and Return on Equity is 38.79%, two numbers that indicate profitability and efficiency. Return on Assets tells us how efficiently the company uses its assets to generate earnings, as it is a measure of how a company uses its debt and equity to generate earnings. So, it tells us how good a company is at turning investments into profits. The higher this number is, the better. The Return on Equity tells us how efficiently the company uses shareholder money, and thus the higher this number is, the better. However, it does not take into account debt, and thus cannot be looked at by itself. A high ROE may also indicate a high growth rate, if a company is reinvesting its profits into growing the company. At some point, I had read that a ROA above 5% and ROE above 10% were a minimum for one investor to be interested in a stock. I don't know how true this is, but regardless, I tend to follow these numbers, since this is a possibly indication of efficiency, profitability and growth.
One last and important number I've learned about. That is Earnings per Share (EPS), which is exactly as it sounds: a company's earnings divided by number of shares. This number is used to calculate a stock's P/E as well. At each quarterly earning report, the company reports its EPS. As far as I can tell, the way to make money in the stock market is to invest in companies that will keep meeting or beating analysts' expectations for EPS.
So what do I think about LULU? I am hesitant to say, since I both believe that this is still a company that is performing really well, yet I am worried about the company losing its bullish steam. However, I think I will hold onto the stock, and see how it performs through the holidays. I think the market as a whole has been down this year, and I'm hoping that future earnings reports and growth will raise this stock price a little further before I sell.
In the case of HANS, I was surprised as I walked down the aisles of COSTCO to see this "healthy" alternative soda in the aisles. I remembered drinking this in health stores as a kid. But what really hooked me was finding out that my favorite soda is also part of the Hansen's company. I like Blue Sky Free because I'm a sucker for soda, but don't want to consume all those empty calories (or harmful chemicals). Well, Blue Sky Free uses Stevia as an alternative to sweeteners like aspartame, so I don't feel guilty about drinking soda. Thus, my interest was piqued.
Getting back to it, these are the types of events or thoughts that trigger my interest in certain companies and their stocks. But I don't buy them right away. I then add them to my watch list and eyeball the stock's performance for a while (for me it can be a few weeks to months) to see if the stock is trending up or down. I also do this because the market as a whole tends to have highs and lows together, so you want to make sure you buy a stock at the right time. It also gives me time to read articles about the stock and familiarize myself with the company. One thing I've learned from waiting and watching, if earnings reports are coming out soon, make sure you buy before the report is out if you think the stock will outperform estimates, because a stock's price will most likely shoot up, especially if the "buzz" on the stock is already bullish.
When I'm watching a stock, I'm reading news stories and articles about it, looking for signs of good or bad news and comparing it to its competitors. Also, I look at a few technical numbers that I've grown to understand. First, P/E ratio...this tells me how expensive a stock is, meaning how much people who are buying the stock are willing to pay. It indicates the relationship between earnings and stock price. A high P/E means that people are really feeling bullish and think the stock is going to perform really well. However, as a P/E moves higher, it also could potentially mean that the stock is overvalued, and that the stock may take a hard fall the next time an earnings report comes out and does not perform as expected.
For example, LULU is at a P/E of 50.0. My opinion is that a P/E around 20 is not scary. At 30, I might still buy it. At 50...I don't know that I would be willing to buy at that point. By the way, AAPL (Apple) has a P/E of around 16.5 and is reporting earnings on Tuesday (I'm just saying I have great expectations for this stock). But back to the point...I still think that LULU is an excellent brand, selling high-quality goods with great customer service and brand loyalty. Even if their products are expensive, I really believe that you get what you pay for. This article on IBD talks about how even though LULU is a top-5 stock on their list, big institutions are selling their stock.
Reading this, I'm feeling mixed. I think that LULU is great, and its stock price was much higher back in July and September, around 60 points ("points" apparently is lingo for "dollars"). So should I hold out for a "good" day in the market and sell soon, or should I hold on for the long run? The company can hardly keep up with demand, it is so popular, and new stores are popping up. Further its Return on Assets is 32.21% and Return on Equity is 38.79%, two numbers that indicate profitability and efficiency. Return on Assets tells us how efficiently the company uses its assets to generate earnings, as it is a measure of how a company uses its debt and equity to generate earnings. So, it tells us how good a company is at turning investments into profits. The higher this number is, the better. The Return on Equity tells us how efficiently the company uses shareholder money, and thus the higher this number is, the better. However, it does not take into account debt, and thus cannot be looked at by itself. A high ROE may also indicate a high growth rate, if a company is reinvesting its profits into growing the company. At some point, I had read that a ROA above 5% and ROE above 10% were a minimum for one investor to be interested in a stock. I don't know how true this is, but regardless, I tend to follow these numbers, since this is a possibly indication of efficiency, profitability and growth.
One last and important number I've learned about. That is Earnings per Share (EPS), which is exactly as it sounds: a company's earnings divided by number of shares. This number is used to calculate a stock's P/E as well. At each quarterly earning report, the company reports its EPS. As far as I can tell, the way to make money in the stock market is to invest in companies that will keep meeting or beating analysts' expectations for EPS.
Friday, October 14, 2011
Why I bought NFLX...again...
I began investing in March 2010 with 3 companies, NFLX, CSTR and SAM. Since that initial buy of 4 shares of NFLX at $69.00 each, I've subsequently sold them at $137.09, bought the 4 back at $150.33, and then sold them again...3 shares at $237.60 and 1 share at $285.76. Is your head swimming yet? Do my actions completely confuse you yet?
Does it confuse you further to know that I bought 3 shares yesterday at $116.36?
First lesson...You can't earn money without spending money...and I don't have much to spend. For most people buying 3 shares of a stock is plain stupid. But alas, this is the money I have handy, and I'm not willing to gamble with my money marked for loans, or a new pair of boots. Anyway, it's stupid to buy only 3 shares of something because those 3 shares need to absorb the $14 in trading fees ($7 to buy, $7 to sell). This means that in order for me to break even, I have to sell NFLX at $121.03. My actions indicate that I believe that NFLX will perform at least to that extent.
In hindsight, I should have bought more shares of NFLX when I first purchased it at $69.00. However, it was my first purchase in the stock world, and I was afraid. I was irrationally worried that my hard earned money would go poof and disappear into thin air overnight. More so, I really didn't understand what I was doing, didn't consider the fees, and just wanted to dip my toes into the water.
What made me sell the final times at $237.60 and $285.76? I saw a lot of growth in this company (online streaming, expansion abroad, savvy deal-making), but the growth in the stock price just seemed too good to be true. It made me nervous that the stock price was going up irrationally, and hadn't I already made enough money? I remembered that I only make money if I walk away from the table when I'm up, and I sold.
Getting back to the point...why did I buy NFLX...again? Well, when it comes down to it, I still believe in this company. They were the innovators in this industry that revolutionized the movie-rental business. Their company had the brains and talent to get it this far, which says a lot. As a consumer, I still have my account with them, post-price hike and post-Qwikster-debacle, because I was too lazy to discontinue and find another company to get DVDs and stream with. I think probably most customers also were too lazy to switch. I forked out money for the price hike, because when it comes down to it, I'm not fully satisfied with the mail or streaming plan alone, and I don't want to give up either. I, like many other "kids" my age, don't have a cable bill and don't have a land line, so NFLX is right up my alley. Without my Netflix subscription and my iPhone, I'd be bored.
Yesterday, I read an article about a NFLX-backed bill that would allow Netflix/Facebook integration. I think the people at NFLX are working hard and are still trying to innovate and improve their product. To a large extent, I trust this company to figure it out and make good money. Most of investing, despite all the technical numbers and analysis, is not rational. My decision to buy yesterday is based on 3 things...1) the fundamentals of this company (the ones that I understand, anyway) still look strong 2) I feel $116 is a good price 3) I like Netflix as a consumer, and I want to keep my business with them.
Does it confuse you further to know that I bought 3 shares yesterday at $116.36?
First lesson...You can't earn money without spending money...and I don't have much to spend. For most people buying 3 shares of a stock is plain stupid. But alas, this is the money I have handy, and I'm not willing to gamble with my money marked for loans, or a new pair of boots. Anyway, it's stupid to buy only 3 shares of something because those 3 shares need to absorb the $14 in trading fees ($7 to buy, $7 to sell). This means that in order for me to break even, I have to sell NFLX at $121.03. My actions indicate that I believe that NFLX will perform at least to that extent.
In hindsight, I should have bought more shares of NFLX when I first purchased it at $69.00. However, it was my first purchase in the stock world, and I was afraid. I was irrationally worried that my hard earned money would go poof and disappear into thin air overnight. More so, I really didn't understand what I was doing, didn't consider the fees, and just wanted to dip my toes into the water.
What made me sell the final times at $237.60 and $285.76? I saw a lot of growth in this company (online streaming, expansion abroad, savvy deal-making), but the growth in the stock price just seemed too good to be true. It made me nervous that the stock price was going up irrationally, and hadn't I already made enough money? I remembered that I only make money if I walk away from the table when I'm up, and I sold.
Getting back to the point...why did I buy NFLX...again? Well, when it comes down to it, I still believe in this company. They were the innovators in this industry that revolutionized the movie-rental business. Their company had the brains and talent to get it this far, which says a lot. As a consumer, I still have my account with them, post-price hike and post-Qwikster-debacle, because I was too lazy to discontinue and find another company to get DVDs and stream with. I think probably most customers also were too lazy to switch. I forked out money for the price hike, because when it comes down to it, I'm not fully satisfied with the mail or streaming plan alone, and I don't want to give up either. I, like many other "kids" my age, don't have a cable bill and don't have a land line, so NFLX is right up my alley. Without my Netflix subscription and my iPhone, I'd be bored.
Yesterday, I read an article about a NFLX-backed bill that would allow Netflix/Facebook integration. I think the people at NFLX are working hard and are still trying to innovate and improve their product. To a large extent, I trust this company to figure it out and make good money. Most of investing, despite all the technical numbers and analysis, is not rational. My decision to buy yesterday is based on 3 things...1) the fundamentals of this company (the ones that I understand, anyway) still look strong 2) I feel $116 is a good price 3) I like Netflix as a consumer, and I want to keep my business with them.
Thursday, October 13, 2011
My first post
The purpose of this blog is to document my thrust into the world of investing. As a 20-something female with mediocre income, faced with the prospects of a variable 1% APY savings account versus much higher-interest student loans, I decided to take my earnings, and my future, into my own hands. Now, as my knowledge of economics is limited to my high school microeconomics class, I know very little about the world of finance. This blog is not about being an expert in investing, but about my lessons learned, my gains and losses, and an openness and honesty about my experience.
I bought my first stock on March 3, 2010. According to where the numbers stand today, I have successfully made more than 30% on the money I've invested since then, including trading fees. I'm really proud of that number, though I know that I may not walk away with this much in the end. As my mom tells me, you can only say that you've made money when you've sold the stocks and walked away. I take this to heart and I think it's a critical point to remember. When to buy, when to sell...I don't know how short sales, options, or any of the fancy stuff works...and I don't know that I ever want to. I'm not interested in betting that a company is going to fail, or getting into matters more complicated. I view an investment as a statement of faith in the future, and I think it means putting money toward something you believe in. By the way, faith (in anything) is always a gamble, with varying odds on return.
I remember that first day, depositing a whopping $2,000 into a new Scottrade account. It was a big moment for me, and I consider $2,000 a huge sum of money. At the time of that first investment, I believe I was making about $19/hour, before taxes (I've since changed my employment situation, though my income is not much better). With the cost of living in Los Angeles and student loans, I was lucky to have had a boyfriend (now husband) to share rent with. So "playing" with this amount of money was scary.
The first stocks I bought were SAM (Boston Beer Co.), NFLX (Netflix) and CSTR (Coinstar). My first lesson in investing was to diversify. Now, I see this as a bit of common sense, especially coming from an architecture background. For example, if the housing sector is hit hard (as it was these past few years) and the only thing you've ever known how to do is build houses...most likely, you're screwed. Why shouldn't the same lesson be true for investing? Whether it's a drought that causes a crop shortage, a fire at a plant, or new competition that comes out of left field, I figure that even though a company or an industry looks strong, you never know what might happen one day to cause a huge loss.
These picks were based upon a few different factors. First, these are companies whose products I use and believe in. And I know tons of other people who use their products too. Further, I think they have staying power, or will be able to stay flexible as times change. Second, it was important to me to think that these were good companies, who maybe gave back to their communities, treated their workers fairly, or cared about the environment. I saw this quality very much in SAM, as they have helped other small businesses with micro-loans. Lastly, I read the latest articles and seeing no "bad" news, jumped in.
Now, I've learned a little bit since this initial investment. I'm still very naive, but those first picks were pure intuition, and I was lucky my intuition was right. I eventually sold my shares of NFLX at $237.60 (bought at $69) and CSTR at $41.50 (bought at $29.65) and still hold SAM at $84 (bought at $49).
Today I hold shares of AAPL, SAM, HANS, LULU, NFLX (bought again today at 116, will explain my reasoning later), T, CPN, TTM, and HTM, in decreasing order of percentage of my holdings. As I actually have "real work" to do, I don't have time right now to go into the details of how I got from that first day to where I am now, including many of the mistakes I've made since then, or the things I've learned along the way...That will have to be another post.
I bought my first stock on March 3, 2010. According to where the numbers stand today, I have successfully made more than 30% on the money I've invested since then, including trading fees. I'm really proud of that number, though I know that I may not walk away with this much in the end. As my mom tells me, you can only say that you've made money when you've sold the stocks and walked away. I take this to heart and I think it's a critical point to remember. When to buy, when to sell...I don't know how short sales, options, or any of the fancy stuff works...and I don't know that I ever want to. I'm not interested in betting that a company is going to fail, or getting into matters more complicated. I view an investment as a statement of faith in the future, and I think it means putting money toward something you believe in. By the way, faith (in anything) is always a gamble, with varying odds on return.
I remember that first day, depositing a whopping $2,000 into a new Scottrade account. It was a big moment for me, and I consider $2,000 a huge sum of money. At the time of that first investment, I believe I was making about $19/hour, before taxes (I've since changed my employment situation, though my income is not much better). With the cost of living in Los Angeles and student loans, I was lucky to have had a boyfriend (now husband) to share rent with. So "playing" with this amount of money was scary.
The first stocks I bought were SAM (Boston Beer Co.), NFLX (Netflix) and CSTR (Coinstar). My first lesson in investing was to diversify. Now, I see this as a bit of common sense, especially coming from an architecture background. For example, if the housing sector is hit hard (as it was these past few years) and the only thing you've ever known how to do is build houses...most likely, you're screwed. Why shouldn't the same lesson be true for investing? Whether it's a drought that causes a crop shortage, a fire at a plant, or new competition that comes out of left field, I figure that even though a company or an industry looks strong, you never know what might happen one day to cause a huge loss.
These picks were based upon a few different factors. First, these are companies whose products I use and believe in. And I know tons of other people who use their products too. Further, I think they have staying power, or will be able to stay flexible as times change. Second, it was important to me to think that these were good companies, who maybe gave back to their communities, treated their workers fairly, or cared about the environment. I saw this quality very much in SAM, as they have helped other small businesses with micro-loans. Lastly, I read the latest articles and seeing no "bad" news, jumped in.
Now, I've learned a little bit since this initial investment. I'm still very naive, but those first picks were pure intuition, and I was lucky my intuition was right. I eventually sold my shares of NFLX at $237.60 (bought at $69) and CSTR at $41.50 (bought at $29.65) and still hold SAM at $84 (bought at $49).
Today I hold shares of AAPL, SAM, HANS, LULU, NFLX (bought again today at 116, will explain my reasoning later), T, CPN, TTM, and HTM, in decreasing order of percentage of my holdings. As I actually have "real work" to do, I don't have time right now to go into the details of how I got from that first day to where I am now, including many of the mistakes I've made since then, or the things I've learned along the way...That will have to be another post.
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