This
group is not a study eddie group like the Food stock or Utility stock. When the economy is bad your stock will be
down in the toilet, and when the economy is up it will be floating in the
clouds. Do not be alarmed, when the
stock goes down you buy more stocks with your dividend reinvestment automatic
setting.
In your
stock portfolio you should have at least 5 different stocks in 5 different
sectors. In Consumer Staples you have
purchased a food stock, and in Utilities we have an electrical utility. So next we need to select three of the
following sectors; Telecommunication Services, Materials, Technology, Industrials,
Health Care, Financials, Energy and Consumer Discretionary. If you get one stock in every sector your
risk goes down even more. You have the
most risk in your portfolio owning one stock, as you purchase more stocks in
different sectors the graph line goes from the upper left to the lower right
until it flattens out into a horizontal line running parallel to and just above
zero risk like. You will in effect
become your own mutual fund.
Mark
Twain said "A gold mine is a hole in the ground with a liar on top." So I am going to change that around a
bit. A Technology Company is a company
with a liar at the top. Tech companies
measure eyeballs, clicks, clouds, users and sales growth. Tech companies do not like measuring
profitability and if profitable make pennies a share. Tech hate dividends and love buybacks, they love
to reinvest the profits. Yet buybacks
are at the very best stock purchased at the top of the market to support the
stock price for management so they can get their bonus. The technology itself is mostly hard for you
to understand, yet you must understand the technology inside and out to know if
your company is still in a leadership position.
Stay away. If you must buy one
buy one that has a dividend with a health yield.
The
remaining sectors of Telecommunication Services, Materials, Industrials, Health
Care, Energy and Consumer Discretionary as the sectors for our next
recommendation. I am going to add or
create two new sectors. Commodities and
Agriculture. In the Commodities sector I
am adding are the owners of the commodity; Alcoa Inc. (AA) aluminum, Cliffs
Natural Resources Inc. (CLF), etc. In
the Agriculture you have Deere & Co (DE), Potash Corporation of
Saskatchewan Inc. (POT), etc. Please
make a note that it is everything commodity and everything agriculture the
everything raw materials. Safeway is not
an agriculture sector it is every stock that controls, mines or grows that
commodity, and oil and natural gas are not in the commodity. For my purposes Energy consists only of oil
and natural gas, coal and uranium miners are in the commodity sector.
When
you first purchase your new stock for the first time you should sell an upside
covered call to lower your cost and make a little additional return on your
initial investment. After it expires you
will need to analyze if you want to sell another or just hold the stock.
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