Tag Archives: investing

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.

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.

Rule#1 by Phil Town

This is another book that I seriously recommend that you read. The book is called Rule 1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! written by Phil Town.

In this book Phil Town goes through the different calculations and math of determining the best investments that meet your strategy and criteria. He expalins things in terms that anyone can understand. He also explains how he’s used the different calculations and what his criteria is that he used. This book is one that every newbie investor must have in their library.

Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage by Mary Buffett & David Clark

When I first started to invest seriously I knew very little but started to access different article and forums to learn whatever I could. I found very quickly that forums/groups had limited benefits (I deal with this in other past posts and will in future posts), One of the things I did learn was the different books that I should acquire and read.

One of the first books pertaining to investing that I acquired was Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage. This book was co-authored by Warren Buffett’s former daughter-in-law and one of his avid followers.

This books breaks down the different financial documents that are used by public companies to explain the current condition of the company. They also explain what conditions and criteria Warren Buffett uses to evaluate these businesses and how he determines which ones he decides to invest in and which ones he doesn’t. This is definitely one that you need in your library.

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.