Saturday, November 25, 2017

Portfolio Review

With 2017 winding down, now is a great time to review your portfolio. Look at each of your holdings individually and ask yourself:
·        What reason(s) did I have for making this investment?
·        Are they still valid today?
·        Have there been any significant changes (good or bad) since my last review?
·        If I didn’t already own it, would I still want to invest in it today?
If you find yourself with some negative responses, you should consider trimming the offending positions from your portfolio. They may have been good investments at the time, but there may be better choices now.
Before selling, look at any penalties for doing so. Fees and taxes are worth considering. For example some mutual funds charge if the fund is not held long enough. It may be worth waiting that out. If you’ve made any gains in a taxable account, consider the tax implications. It may be worth waiting until January if you don’t want it to affect your 2017 taxes. Losses can be timed as well.
Once the portfolio has been narrowed down, it should be rebalanced as well. Make a list of all your holdings, and decide what percentage of your total portfolio you would like them to be. Compare that to actual percentages. Consider fixing any large discrepancies. 
Now your portfolio is ready for 2018!

Tuesday, November 14, 2017

Performance Update of our Top 5 Favorite Stocks

How are our Top Favorite 5 Stocks doing?  Below is the current performance, including dividends, since the creation of the Top 5 List on 9/1/2017 through 11/14/2017.

1. WWE: up 24.6%
2. AAPL: up 4.8%
3. F: up 7.2%
4. SHOP: down 10.8%
5. AMZN: up 16.2%

Average of our Top 5 Stocks: up 8.4%
By comparison the S&P 500 (IVV) is only up 4.5%

Go Stockblowers!

Tuesday, October 24, 2017

Dollar Cost Averaging

Have some money to invest, but worried about entering the market at a bad time? Dollar Cost Averaging (DCA) might be right for you. DCA is an investment strategy where you take a sum of money, divide it into equal parts, and invest those parts on a regular schedule regardless of share price. When share prices are low, you are buying more shares. When share prices are high, you are purchasing fewer shares.

For example, let's say you received a bonus check in January for $12,000 and you want to invest it in Company A. We'll break it up into 12 investments of $1,000 each. Let's also assume that there is a drop in share price during the year. The table below shows the purchases that you would make.

Month Investment Share Price Shares Purchased
January $1,000 $50 20
February $1,000 $50 20
March $1,000 $40 25
April $1,000 $40 25
May $1,000 $25 40
June $1,000 $25 40
July $1,000 $25 40
August $1,000 $40 25
September $1,000 $40 25
October $1,000 $40 25
November $1,000 $50 20
December $1,000 $50 20
Total $12,000 $36.92/share 325

As you can see, you would have purchased 325 shares at an average price of $36.92/share. Your shares would be worth $16,250 in December. If you had purchased it all at once, you would have purchased 240 shares at $50/share. In this example, you would be even in December.

However, DCA is not always the right way to go. If share prices did not dip, investing as one lump sum would have produced better results. You are giving up potential profits in order to minimize risk.

Sunday, October 1, 2017

Triple Threat Retirement Investing: 401k vs. IRA vs. Taxable Brokerage Account

In the United States many employers offer a 401k plan as a benefit to employees.  We are assuming that you are already enrolled in a 401k plan, and contributing at least the minimum amount needed to get the full amount of any employer match (if not, check out the New Investors link on the sidebar).  But with limited investment choices and high fees typically associated with 401k plans, should you be contributing more than what it takes to get the maximum match from your employer?  It depends on how much you plan on investing.

After contributing the minimum percentage needed to get the full employer match in the 401k, the next step is to contribute to a Traditional or Roth IRA, up to the maximum allowed.  Both 401ks and IRAs have tax advantages, but the difference is you can generally pay much less in fees with an IRA.  We wouldn’t recommend contributing more than the minimum amount needed to get the full employer match in the 401k unless you will be maxing out your IRA for the year, because the fees really add up over time.  For example, if you contribute $5500 a year to a 401k and have a 10% return each year for 20 years (with additional 1% in “expense ratio” fees), you will have paid over $38,000 more in fees compared to an IRA with the same return over the same time period (assuming 0.04% in fees).  Using the same example, but over a 40 year period, the fees will add up to $500,000 (the balance of the IRA would be $2.4 million vs. $1.85 million for the 401k).  Since 401k plans vary, it’s worth looking at the actual investments available in your plan and the fees associated with them.  You can open your favorite spreadsheet program and calculate the fees that you could be paying based on your own circumstances (fee % in your 401k investments, number of years until retirement, amount invested, etc.).

So if you are maxing out your IRA for the year, should you contribute any additional money to a 401k or just open a separate brokerage account to avoid the fees?  The tax advantage of a 401k needs to be considered.  Using the 25% tax bracket as an example, if you contribute $18,000 to a 401k, it’s like only spending $13,500 of your money due to the tax savings (and $4,500 of the “government’s money”).  So for the same net cost, you can put $18,000 into a 401k or $13,500 into a separate brokerage account.  Assuming a 1% fee for the 401k and otherwise the same performance of the investments, you will still come out significantly ahead with the 401k over a brokerage account.  However if the 401k investments available to you are not so good, you can be looking at a 2% or greater difference due to worse performance and high fees.  In that case, the brokerage account would be better after around 25 years (using 10% returns for the brokerage vs. 8% for the IRA).  Since we’re talking about potentially hundreds of thousands of dollars difference, it really is worth spending some time to perform your own calculations based on your own circumstances.

Saturday, September 23, 2017

Apple: Buy the Dip?

Over the last couple of weeks, people have been buzzing about the iPhone 8 and the iPhone X. However, investors don't seem to be too happy about it. Shares of Apple Inc. (NASDAQ:AAPL) have been dropping from their high of $164.94, closing at $151.89 on 9/22/17. Among other issues, there are concerns that:
  • Customers will ignore the iPhone 8, waiting for the iPhone X instead
  • iPhone X is overpriced (starting at $999)
  • Release date (11/3/17) of iPhone X will push some sales into 2018, especially if there are delays
  • Apple Watch 3 connectivity issues will hamper sales
While there is truth to these concerns, it pays to look at the bigger picture. Apple is a very solid investment - a powerful company with great products and a loyal customer base. iPhone X should deliver strong profits for the company, even if they come a bit later than investors were hoping for. We've been holding Apple for several years now, but the recent drop may be a chance to pick up additional shares while they are on sale. We are going to be watching Apple closely, waiting for the price to stabilize before pulling the trigger.

Monday, September 4, 2017

Happy Labor Day

Happy Labor Day! Today we celebrate the American labor movement and the social and economic achievements of American workers. And how do we celebrate it? By taking the day off! Relax and spend time with family and friends. But be ready for the market to reopen tomorrow!

Saturday, September 2, 2017

Driving Income with Ford

For over 100 years, Ford (NYSE:F) has been innovating in the automotive world. In its early days, the company revolutionized production through the efficiency of assembly lines. Now, there is strong competition both domestically and internationally. To stay ahead Ford must embrace new technologies.

While some considered it a mistake, the switch to aluminum in Ford’s F-150 shows that the company is forward thinking. GM continues to mock them for this in advertisements, but aluminum allows Ford to reduce the vehicle’s weight and therefore improve fuel economy. Pretty soon, GM and other competitors will find that they are lagging behind. In addition, Ford is starting to get serious with electric cars and autonomous vehicles. They are not leading the industry in these areas at the moment, but they are pushing strongly ahead.

Over the last few years, the market has not been kind to Ford. Share prices climbed above $17 in 2013 and 2014, but slowly declined to below $11 last month. They are on the way back up, but the stock still seems undervalued. This presents an opportunity to pick up a great company for a great price, and collect a 5%+ dividend along the way!

Wednesday, August 30, 2017

SHOP 'til You Drop

Shopify (NYSE:SHOP) has been on a tear since its IPO in 2015. The stock has more than doubled in the past year and the company now holds a market cap over 10 billion dollars. You might think that it is too late to get in on this party, but we think there is plenty of room to grow.

What is Shopify? They are an e-commerce company for businesses of all size. They can help with building an online shop, processing payments, tracking inventory, even managing a retail presence. By taking these items out of the equation, the businesses can focus on the products they create. Over $40 billion of product has been sold through Shopify so far and 500,000+ businesses have signed up. Several big names are already on the platform, including Tesla, Red Bull, GE, and Nestle. As the list grows, Shopify will become the leader of the e-commerce world.

Wednesday, August 16, 2017

Old People = Money

With advances in medicine, Americans are living longer and longer. However, this comes with a cost. Alzheimer’s, cancer, diabetes, etc. can require long term treatments. Many seniors will spend years in nursing facilities. Without major reform, expenses will skyrocket. But by playing your cards right, those expenses will become your profits.

Pharmaceuticals will be one of the beneficiaries of the aging population. When they are the only source for a life-saving treatment, the sky’s the limit for what they will charge. (Side note: drug companies make their money on treating diseases, not curing them.) There are ‘safe’ companies like Johnson & Johnson (NYSE:JNJ) that tend to rise steadily and offer a good dividend. Bristol-Myers Squibb (NYSE:BMY) has seen a pullback in the last year and might offer opportunities for future growth. Many of the smaller companies can be very volatile, popping or dropping with the results of a clinical trial. Picking up a pharmaceutical ETF can be a great way to gain exposure without taking on too much risk.

Dividend investors may want to take a look at Omega Healthcare Investors Inc (NYSE:OHI). This company is a REIT that provides leases / mortgages to skilled nursing facilities and assisted living facilities. At the time of writing, they offer a juicy 8%+ dividend. The share price has been coming down from its highs in 2015, which could actually be seen as a benefit for someone getting in now. Be aware, however, that any reduction to the dividend could be disastrous to this stock.

Saturday, August 12, 2017

Bread and Butter

It's no secret - Oprah Winfrey loves bread and eats it EVERY day.  Since Oprah bought in to Weight Watchers (NYSE:WTW) in September 2015, the stock has been hot and rising like a loaf of bread in the oven.  But we have mixed opinions on this one - there's still room to grow and make some dough, but you may get burned.

Tuesday, August 8, 2017

Heavyweight Champion of your Portfolio

World Wrestling Entertainment (NYSE:WWE) has long been a favorite stock of ours. From its strong dividend to its powerful streaming network, WWE can be the champion of your portfolio. There’s been a big push to expand to new markets (specifically India and China). If successful, this will provide the company with growth for years to come!

Friday, August 4, 2017

Welcome to!

Come back over the next couple of weeks as we add content and prepare to be blown away by the success!
-Big H and ‘Stocky’ Steve