Re: OT: DOES ANY ONE KNOW ANYTHING ABOUT INVESTING

Posted by Bill in NC on August 25, 2006 at 20:43:18 from (65.188.155.69):

In Reply to: OT: DOES ANY ONE KNOW ANYTHING ABOUT INVESTING? posted by forklift on August 25, 2006 at 17:53:11:

1. You should read or listen (CD) to "Buffettology" by Mary
Buffett and David Clark. Is a paperback book. Best investing
book I've read and I've read over 50 books in this area. Mary
Buffett is Warren Buffett's former daughter-in-law.
2. I don't recommend mutual funds because they charge fees.
You may not see the fees but they are taken out of the profits or
your investment should the mutual fund have a year when it
does not make a profit. I prefer to buy and hold stocks.
Sometimes it takes a year or two to find a good investment.
3. Don't be in a hurry. Read your local paper, look at local
companies that are traded on the stock market (banks,
manufacturers, real estate management companies, etc.).
Sometimes the best investments are headquartered in your own
state.
4. Look at dividend paying stocks. Most folks getting up in
years want income and invest in dividend paying stocks such as
utilities (water, electric, natural gas, telephone companies).
Write, email or call the companies and get an annual report.
After reading "Buffettology" try looking at the accounting
numbers on the annual report. You can also get 10-Q
(quarterly) financial reports off the Internet from clicking on a
stock symbol on Yahoo finance. This information is free and
open to everybody.
5. Buy good companies when they are cheap. There is an old
expression: "buy when there is blood in the streets". In other
words, when every body is sick and tired of a stock, have lost
money in the stock and yet the company is still a good company
- that is the time to buy the stock. Some oldtimers here on the
board will remember the stock market "crash" of October 1987.
Stocks dropped something like 20% in one day and kept
dropping for another couple of days. Some reporter asked Sam
Walton how he felt about losing something like a billion dollars
in his personal Wal-Mart stock valuation. Sam looked at the
reporter and said: "Hey, it is just a paper valuation. Our stores
are still open, people are still shopping and nothing different
has changed in our business." Two years later his net worth was
twice what it was in 1987. In other words, sometimes good
companies are worth a lot more than what the stock market is
valuing their stock. One example happening right now is Warren
Buffett's company - Berkshire Hathaway. It owns Justin boots,
Clayton and Oakwood Homes, Shaw carpets, Benjamin Moore
paints, Geico Insurance and lots of other cash-producing
companies. Many smart people think the company selling at a
30% discount. On the other hand, there are many companies
that I feel are selling at 20% over their true value. If you buy an
over-valued company, you can lose your shirt when the stock's
price falls back to a proper valuation (when it loses the 20% over
valuation premium). The market is fickle. Investors get scared
and sell their stock. Other investors see their stock price fall
and then they get scared, too. So they sell their stock and pretty
soon the stock's price has fallen considerably. If it is a good
company and you have studied the company and feel it is
unfairly valued, it can be a good time to purchase.

6. Think about investing just as if your next door neighbor
visited with you and told you he wanted to sell his farm to you.
As a farmer, you'd likely know what the property is worth and
what kind of income you could likely make from his property.
The same evaluation principles apply to buying stock. Always be
cautious and pay only what it is worth. Be careful of a stock that
has a high price to earnings ratio. The Buffettology book will
explain how this works.

7. If patience and research are not for you, investing in stocks
will not be a good choice. Whatever you do, don't act on "hot"
tips from friends, stockbrokers, or any jerk that calls you on the
phone. It is better to hold on to your hard earned money and
put it into bank CDs than to act impulsively on other folks
suggestions.

Read "Buffettology". You will be a better judge of land values,
business values and other things relating the financial world all
around us.
Good Luck,
Bill in NC

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