Thursday, December 08, 2016

The Contrary Investor

Looking over my stock portfolio I see my unrealized gains stand at 105%. I’ve held the majority of all the stocks in that portfolio for just about 4 years. That works out to 26% average annual gains. My ten year average is closer to 33% annually. I’m looking right at my financial figures, straight from my broker.
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There was even a Recession in that timeframe, wasn’t there? I mostly bought at the bottom. It’s important to buy stock at that point.

My brokerage does nothing for me but execute the trades I request through a web page. No special advice offered, no strategies suggested. I’m not one of their special customers, though one of their VPs called me to talk about my rate of return last year. Not to offer a job, oh no, just to remark on my rates of return.

Family members know about my investing prowess, but only my mother trusts me to make investments for her. I’m quite OK with that, don’t want siblings all angry with me over short-term losses.

What surprises me is when bankers and brokers do occasionally interview me, once or twice a year, they show no interest in my ability to research and buy stocks. None whatsoever. To a man, and sometimes a woman, every person I meet that works in the financial industry is consumed by commissions on the sale of specific products. They want me to sell funds with high expense ratios, life insurance or steer people to their staff of highly qualified, certified financial planners.

I have friends that work for Merrill, BOA and other big money firms. They tell me fund managers do employ people that do what I do, but I could never land a job as a Quant or Quantitative Analyst. I’m too normal, too earthy, I garden for cryin’ out loud. I spend too much time researching and don’t buy and sell frequently enough. 

The whole lot of them bring customers stunning average annual returns of 5 or 6%, before expenses. Steep losses some years. Meanwhile, back at The Farm, my retirement account gains average 26% a year. No kidding.

Yup, that’s me. I eagerly look forward to automated emails from my brokerage account, telling me such and such a stock has reach a price I like. I started letting computers help me invest in the 80s. Yes, Virginia, there were personal computers and email in the 1980s. I used dividends and returns from stock sales to buy my first IBM PC.

I don’t follow the investing rules you read in the newspapers, except for the one about holding long. I make up my own rules. I stick to certain industries and ignore others. I’ll hold huge amounts, while it grows, then sell it. I’ll put it in a 7% dividend stock for a few ex-dividend dates, waiting for the right time to buy another growth stock. That's called trying to time the market. The investment pros that get 5 or 6% returns advise against doing that. 

I sometimes buy foreign stocks, especially in dynamic India or Central and South America.

I do research sitting on benches in shopping malls or parked in a strip mall lot. That’s part of the reason I own Dollar Tree (NASDAQ:DLTR) and Apple (AAPL) shares. I look at current photographs, and spot trends that the newspapers won’t be talking about for months. I buy those trends before they are trends and sell them high, before the kids have even tired of the fashions or games.

I especially like to look at what certain firms stocks do seasonally, year after year. Stocks charts are simply road maps to desired financial results as far as I’m concerned. When you know a stock intimately, you know how it will respond to industry events, currency fluctuations and commodity price changes.

I dig dividends, I call them proven reserves. But frankly I use dividend stocks as high-interest savings accounts while I wait to buy growth shares at bargain prices. Try getting 7% interest on a savings account at Wells Fargo. Royal Dutch Shell (RDS) will shell out 7% if you hold their shares past the ex-dividend date.

This is how I manage my retirement money. Don’t ever expect to read about me in the newspapers. What I do is not newsworthy like the antics of one President-Elect. By the way, Twitter stock (TWTR), at -53% returns since inception, has never shown up on my my investing radar screen.

About the author: Obviously the writer buys and sells stock shares, including some of those mentioned in this article. He wouldn’t take advice about fishing lures from people that never fish. He assumes no responsibility for what you do with what is written here. Investing involves risks, but buying stocks is not nearly so risky as lottery tickets or casinos. He does not work in the financial industry, they have no interest in stock-pickers like him. Brokers, in general, seem not to care much about annual returns. That’s about all the author does care about in regards to investing. Is there any other reason to invest?

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