Category Archives: Insight

What’s the Story With Snowflake?

So, yesterday was the first day for the IPO for Snowflake Inc. ($SNOW). I always wanted to try to get in on the ground floor for companies that go public. I figure that they start out small and as they prove their ability to perform and generate revenue their stock price tends to go up. When I heard about Snowflake Inc going public I started following in hope of being able to get in on the ground floor.

The first time I heard about the tentative stock price was when they were talking about it being around $23/share. Seems reasonable. I could afford that. That wasn’t an overly large amount of money and I could come up with a few dollars to buy some shares to try my hand at investing in a company just starting out trading shares. I couldn’t screw up too badly at $23/share.

But the day before the IPO and the day of the share price was scheduled to open at $120/share! What happened? Then when the market opened and I checked how it was doing I found that the stock price had climbed to over $230/share. What?!?!? What did I miss? I can’t understand how the price could have jumped that high. What was the new price based on? Were that many people buying the stock? I read all of the reports and articles about the company but I wasn’t able to determine which factor was the key to driving the price.

So, how does it work? The share prices are based on the company fundamentals up to a certain point and then it becomes like a religious thing and faith takes over? Or is it one of those deals where the big players get in on it early, wait for the share price to peak and then when it starts dropping in price start selling off their shares to insure profits? Is it all big money investors or are there any small investors? If so, are they able to keep up with the trade activity in order to not lose everything?

I’m still new at this investing game so I try to learn whateveer I can so I can better understand the way things work.

Is General Dynamics a Good Stock To Own?

For some reason General Dynamics caught my eye. I looked at it through my criteria filter to see if it would fit within my investment strategy. The first thing I noticed that $GD was paying a very nice dividend payout of $4.40/share. How did this compare to the share price? The dividend yield is 3.03%, which is better than the industry average. So far so good. I wasn’t too happy with the share price of $144.62/share at the time I am writing this. Ten shares would cost me $1446.20 and yield me $44.00. This would give me another 0.30 shares of stock, if the share price remained the same for a year.

I also noticed that the stock was trading at around the mid-point of its 52 week range and the trend looks to be heading down. This stock may go down a bit more. Earnings look strong. As a matter of fact, the fundamentals for the company look very good. The stock looks like it would be a good one to invest in. But for me I’ll take a wait and see approach. I’ll wait to see if the stock price continues its downward journey and wait for a buying opportunity.

Seriously Considering Shares of Intel Corporation

Since the beginning of the week I took notice of Intel Corp ($INTC) stock price. Seeing as my investment funds are limited, I was hesitant in putting this stock on my watchlist. Upon careful review I think that this would be a prime candidate for my dividend portfolio.

What am I seeing? I’m seeing a stock trading at the low end of its 52 week range while at the same time paying out a very decent dividend of 2.67%. That’s something that I look for. Higher dividend payout relative to its share price. Its revenue growth is above the industry average, and there’s room to grow the dividends because it is below the industry average.

So, I’ll add this company’s stock price to my watchlist and see what happens. If the share price drops further than the dividend yield goes higher and makes this stock more desirable for me. I prefer a dividend yield that is high relative to its price. To me it is more important to have a high, sustainable payout per share than just high share price. Dividends are paid on a per share price so I’m interested in picking up as many shares as I can.

I also have certain criteria for choosing specific dividend stocks. As I mentioned before, a high dividend yield. I like my yields around 5% or higher but based on the company, its dividend history and growth, I can tolerate around 2% or higher. If the company pays out a decent dividend payout but the yield is below 2% then I’ll wait for the share price to drop. There are a few companies out there that pay a very decent dividend but their share price is too high for what I would get in dividends, as noted by a low (under 2%) dividend yield. To me that would be like paying a premium price.

When Do I Sell?

I haven’t been investing for that long of a time. I’ve acquired a few company stocks and ETF’s. But my sales have been few. Right now I’m looking for sell all of my Obalon (OBLN) stock because it is one of the first ones that I bought when I was first starting out. At that time I really didn’t have a clear idea of what I wanted to do. I didn’t have a strategy. I bought Obalon and and a couple of others because they were companies that were in the healthcare industry. That was it. None of them paid any dividends and there wasn’t any real growth with them.
After developing my own investment strategy I decided that the money I had invested in those companies could be better used with other investments. I sold the others at a bit of a profit but held Obalon because it was trading under what I paid for it. I decided to wait to see if the price would come back.

When I first started investing I opened an investment account with Robinhood. When I did that I received a free stock for Lyft. I decided to hold that one for a little while. When I was given that share of stock the price was around $42/share. It also wasn’t paying any dividends. I held that stock for a little while and the price dropped down to the low $30’s per share. The stock fluctuated in that neighborhood for a while. I finally decided to sell my share and put the money to better use.

Now I have developed my own investment strategy and I feel confident that I know more than I did when I first started. I now invest in dividend stocks. If a company doesn’t pay dividends then I don’t have a real interest in investing my money with them. Am I missing out on windfall returns? Maybe. But I’m also missing out on catastrophic losses. I’m at an age when I can ill afford to lose money because I don’t have as much time to recover from major losses. Also, if I am going to be investing in a company for the long term then I want to get paid for my time that I am waiting for the stock to grow, thus the dividend payout. The dividend payout is the company’s payment to me for being patient and sticking it out with them.

So, based on all of the above when do I sell my stock? I will only consider selling my stock when either of the two conditions below are met:
1. The company drastically cuts their dividend payout 2 times or more in a row.
2. The stock price increases 200%+.

So far I’ve been lucky in that none of my investments have had their dividend payouts cut. But I will tolerate 1 such payout cut but if they go to 2 in a row, they’re history.

Caution: Ebooks on Twitter

If you’re a new investor trying to learn about stock investing you have probably joined some investment forums/groups and starting following so called “experts” on Twitter. You need to exercise extreme caution when you encounter these “experts” on Twitter. Many of these investors are there to sell you a product, their ebook. Now, I’m not saying that they don’t know about investing because I don’t know enough about them to make that judgement. And there lies the problem. Their expertise can’t be brought into question because they hide behind their Twitter username/handle. The issue I have isn’t with their knowledge or lack of but with their methodology. They’re not transparent. I have no idea who they are. No real name for me to vet and determine if they are someone I want to listen to, spend my money with, or even to invest based on what they say. Why would I want to buy their ebook about investing? I have no idea who they are or what their track record is other than what they tell me with their limited Twitter bio or web page. For all I know they don’t even have $1 invested in the stock market. Anyone can say anything as long as they’re anonymous.

Now there are other authors that I can vet such as Phil Town or Peter Lynch, just to mention two. You can get more reliable ebooks on Amazon for a lot less than what the Twitter “experts” are selling their ebooks for. Don’t be so eager to throw your money away to every Tom, Dick, and Harry on the Internet just because they “SAY” that they’re successful. If you have someone’s real name you can then Google their name to see what shows up. Are they a scammer? Are they a financial professional? We are talking about your money. You want to make sure that you are spending it in the most effective manner.

The same goes for the ones in the Internet that sound like professional financial advisors or lifestyle coaches. They will post tweets either selling their ebooks and/or giving investment advise. They may even post stock recommendations without explaining the reason behind their recommendation. Many state on their Twitter bios that they ARE NOT financial advisors. Believe them. Generally, before I take any investment advice from anyone that wants me to believe that they are a financial professional, be it on the Internet or not, I vet them through BrokerCheck.

So, if you’re just starting out with stock investing you should learn whatever you can before you move into the stock market world. Get yourself a mentor (someone that you know personally and trust who has been involved in investing for a few years) and read and learn from the verifiable experts who impart their knowledge. And there’s nothing wrong with sharing ideas and experiences with others, as long as you’re cautious in doing so.

Pump & Dump

I haven’t been investing for very long but one thing that I find hard to understand is what is the purpose of just posting a message, Tweet, or post mentioning a specific ticker/company without explaining the underlying fundamentals to detail why you’re recommending this stock. All I see is people sending out message that a certain stock is “hot” or other such hyperbole.

The one stock that comes to mind is $TQQQ (ProShares UltraPro QQQ). Around September 2, 2020 I saw someone continually post on a FB group that if people weren’t investing in this stock they were missing out on a “runaway train”. That piqued my interest. I check out the chart and saw that it took a major DIP at the beginning of September. I also saw that it didn’t pay dividends so that stock held no interest for me. But I’m not an expert so I replied to the original poster asking him why he was recommending that particular stock. I felt is was a legitimate question but what I got in response to my question from the poster was a mocking and ridiculing response telling me that I had no business investing if I couldn’t read a chart.

It then occurred to me that the best defense from con-artists is a strong offense. He never answered my question. It also occurred to me that maybe this was someone who had bought a large number of shares at the high end in August and didn’t want to take a loss or wait for the stock to turnaround (depending on how long that would take) and was trying to pump up the stock in the beginner investors groups on FB. Maybe if he could get the knowledgeable newbies to invest in large enough numbers then he could, at best, recoup his losses or, at worse, minimize his losses.

I wrote the poster off as a someone not to be trusted and moved on. A few days later I was notified that some others have posted replied to the original message. To a person each one stated that they had followed the original poster’s recommendation and had bought shares and were now taking major losses. It’s unfortunate that these people took losses on their investments but there’s a lesson to be learned here. You can’t swing a dead cat on the internet without encountering someone recommending a stock investment. But the key is to understand WHY they are recommending that particular stock. Even someone like Jim Cramer will give you details of why he recommends that you either buy or sell a specific stock. He doesn’t just tell you to buy XYZ.

If you are a newbie to investing like me then you should approach each recommendation with extreme caution. Ask yourself some questions like –

  1. Why is this person recommending this stock?
  2. Who is the person that is making this recommendation? What do I know about him?
  3. Does the stock being recommended fit into my investment strategy?
  4. Does the person giving the recommendation give enough information where I can use to find additional information?

To me the 2 key questions are #1 & #2. I find a lot of stocks being thrown around on Twitter but the problem there is the usernames are not the poster’s real name, with minor exceptions. I can’t check them out anywhere to find out who they are or uncover their agenda. I know of Jim Cramer so when I see a recommendation from him I know what is the basis of the recommendation. But when someone who uses a name on Twitter such as “Dividend Hunter”, how the hell am I supposed to know who they are? This also hold true for those on Twitter who are there to sell their investment e-books, But that’s for another post.

But things are a bit different on FB. Normally, people there use a full name and not some ambiguous handle/username. You can at least check out their FB profile to find out the basics about them. You still have to ask probing questions and determine the poster’s motivation. But joining investment groups on FB has its own issues. Again, a topic for another time.

What about Bonds.

As I said previously, I’m a novice investor who is still “learning the ropes” about investing. As I read and watch tutorial videos I learn what I am doing correctly, incorrectly, and how to improve my portfolio.
This last one if the important part. As I was reviewing some information about portfolio management, being a senior who is looking to finally reap what I sow, I was confronted with the analysis that my portfolio needed to be tweaked some more. I was informed that as I got older that I should be invested more in bonds in order to offset and protect my overall investment assets. My current portfolio is all stocks & stock funds. No bonds or bond funds. So, now I need to modify my investment strategy and look to invest more in the bond market without sacrificing my other holdings.

I’m seriously looking at VTIP and VTEB. Again, I prefer funds to individual holdings. Both seem to be good acquisitions; VTIP is trading at $50.92/share and at the high end of its 52 week range. The Distribution Yield for VTIP is 1.57% with an expense ratio of 0.05%. VTIP is rated as low risk along with a below average return rating.

VTEB is trading at $54.74 with the price being at it high end of the 52 week range, also. The Distribution Yield is a bit better at 2.15% while the expense ratio is at 0.06%. VTEB is rated as average risk with a rating of average for returns. Everything else being equal, in my mind, VTEB (Vanguard Tax-Exempt Bond Index Fund ETF Shares) seems to beat out VTIP (Vanguard Short-Term Inflation-Protected Securities Index Fund ETF). This insight is based on my criteria that I use to determine which funds to buy. It may not necessarily be what you would decide. Every investor has to make their own determination and this post just give a general outline of how I do mine.

VHT vs. VGT; Adding a New Sector To My Portfolio

For those that follow my blog and my Twitter feeds, you are aware that my current portfolio is heavy with ETFs, About 82% of my investment portfolio consists of ETFs and the balance of 17% are individual company stocks. Within those ETFs I have the following areas invested in:

  1. Real Estate – VNQ (Vanguard Real Estate ETF).
  2. Energy – VDE (Vanguard Energy ETF)

The other 2 Vanguard funds are concentrated on high value & high dividends across many sectors (VFIAX & VYM).

I would like to add a healthcare ETF and a technology ETF to my portfolio. I am looking at VGT and VHT. Both are pricey by my standards but both are paying decent dividends, and that what I in this for. So, I now have to go through the decision process of which one do I invest in first. I will be investing in both but it’ll be completed over the next few months. I do have other expenses that I am obligated to handle first.

medical caduceus black white outline clipart

I looked at the data for VHT (Vanguard Health Care ETF) via my TD Ameritrade account. Currently the fund is trading at $204.84 per share which is a bit high for my purposes. In looking at this fund’s 52 week range you see that its share price is at the end of the high range. The chart shows the fund’s value is increasing so I doubt that the price will be dropping drastically, barring any unforeseen circumstances. But now for the key question. What about the dividends? VHT has an annualized payout of $2.55/share (a 1.24% yield). If the share price were to drop to the other end of the price spectrum of $138.11 the yield would then be 1.85%. The average 5 year dividend growth rate is 23.01%.

According to Morningstar the risk factor for this fund shows that it’s rated as Below Average and the returns are rated as Average. Both of which are a positive factor for me. Morningstar has the fund designated as a Large Blend fund. The one thing that I am not happy with for this fund is that the Net Expense Ratio is about 0.10%. This is the maximum I would prefer.

The market Return for the funds is 6.39% so far for 2020, For 2019 it was 21.86%. Some of the company stocks that are included in this fund are:

  1. JNJ – Johnson & Johnson
  2. UNH – UnitedHealth Group
  3. PFE – Pfizer Inc
  4. MRK – Merck & Co Inc
  5. ABT – Abbott Laboratories
  6. TMO – Thermo Fisher Scientific Inc
  7. ABBV – AbbVie Inc
  8. AMGN – Amgen Inc
  9. BMY – Bristol-Myers Squibb Co
  10. MDT – Medtronic PLC

cloud computing clipart

The other Vanguard fund that I checked out on TD Ameritrade was VGT (Vanguard Information Technology Index Fund ETF). This fund is another pricey one that is trading at its 52 week high range of $313.59, Morningstar has this fund rated Below Average risk and Above Average return. They also have it designated as a Large Growth fund.

In digging into the data for this fund I find that the dividend payout is annualized at $3.00/share (a 0.96% yield). In screening just for high paying dividend stock with a yield greater than 5%, this fund would not have shown up on my radar. But is still pays a decent dividend even if the share price makes it a challenge for the average person to purchase more than just a couple of shares. The Net Expense ratio is also at the maximum preferred ratio of 0.10%.

The returns for this fund for 2020 so far are 21.33%. For 2019 the returns were 48.61. Some of the company stocks that are included in this fund are:

  1. AAPL – Apple
  2. MSFT – Microsoft
  3. V – Visa
  4. MA – Mastercard
  5. NVDA – Nvidia
  6. PYPL – PayPal
  7. ADBE – Adobe
  8. INTC – Intel
  9. CSCO – Cisco
  10. CRM – Salesforce

I really like both of these funds but I can’t afford to buy both of them at this time. So, I have to make a decision which one I want to buy first. It comes down to 2 factors: a) share price, and b) dividend payout (after all, that’s what I’m interested in). They’re both pretty close in both of these areas.

The final decision at this time for me will be that I will be buying the funds in this order:

  1. VHT (Vanguard Health Care ETF)
  2. VGT (Vanguard Information Technology Index Fund ETF)