Hot Stock Tips!!! Ok, Maybe Not.

Sometime this January, I realized that if I want to retire at a decent age I better get off my behind and do better with my finances. Don’t get me wrong, I think I do pretty well – I max out my 401K contribution, have no credit card debt and try to put an extra 10% on my mortgage each month.  In 2006, I spent around $5,000 attending weddings and when the wedding spending subsided at the end of the year, I found that I had some extra money in my chequing account each month.

So, I started to ask my friends if they had financial consultants that I could use and much to my surprise, most of them told me that they look after things themselves.  Because I have a mortgage, I don’t have heaps of cash to invest and therefore decided to try it out on my own.  At the start of the year, I set up an account and transferred some cash into it.  I asked several people what they were investing in and took that information and did my own research.  From that, I came up with an index fund and an stock to invest in and made my initial purchases.

All this, of course, the week before the big crash in February, as posted here.  The nice follow up on this, is that I am no longer in the red.  So, now five and a half months later, here’s my update.  I started with these two:

  • Kinetics Paradigm Fund (WWNPX): Up 8.47%
  • Starbucks (SBUX): Down 17.71%

And recently bought this (about 6 weeks ago):

  • Darling International (DAR): Up 14.25%

Luckily, I bought a lot less Starbucks than the rest – so overall I’m at a 5.02% gain.  Which is better than my chequing account would do, but I’d sure like Starbucks stock to go back up.  (So get out there and start drinking coffee expensive coffee, you fools!)

My current problem is that I’m getting greedy.  At this start of this, I set some rules for when I would sell my stocks – I would earn 10% (after commissions and taxes) and then get out.  Well, today Darling International went above my strike price by over 15 cents and I didn’t sell.  How do I fight the greed and stay on plan?  And, at the risk of soliciting spam – anyone have any hot stock tips?

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6 Responses to Hot Stock Tips!!! Ok, Maybe Not.

  1. Shannon says:

    We’ve stuck mainly with the larger companies like Caterpillar and particularly United Technologies, which has gone up 134% over 5 years (although it underperformed over the last year compared to the S&P 500). They’re not exciting, but they tend to go up consistently and when they do hit a rough patch, they bounce back. But we also tend to stick with them for the long term (and the lower tax rate on capital gains).

    The other thing we’ve done well with is the E*Trade S&P Index Fund. It tends to perform pretty close to the S&P 500 index.

    I’ve done well with Manulife both on the NYSE and TSE although it too has underperformed this last year compared to the S&P.

    Mainly we look for stocks that that have outperformed the S&P 500 consistently, and that don’t have too much volatility – we don’t like the spiky ones. And although we try to diversify a bit, we find it’s hard to monitor more than a dozen stocks at a time, so we usually keep it to 5-7 plus the index fund.

  2. pat says:

    you should also look at the boring, but lucrative financial stocks…i suggest Royal Bank of Canada – it’s consistently gone up over the 5+ years I’ve owned it , and has a healthy 3% annual dividend too, which also adds up.

  3. Mama T says:

    Also, you might also consider whether the company is nice or not. This is a good site for research on the performance history of companies.
    http://www.business-humanrights.org/Home

  4. pat says:

    10% gain is really tiny for derivatives. If you’re in the derivatives market for a 10% gain I would consider re-evaluating your risk to return ratio unless you have some special insight going on, your portfolio may be assuming much more risk than would be worth a 10% return. If you do have some special insight, now would be a good time to start a hedge fund.

  5. Shannon says:

    Since you reminded me, and it’s been a year or so since I last did it, I did some homework last weekend.

    My criteria are generally:
    P/E 1
    Profit margin > 10%
    Market cap > 1B
    Offers a dividend

    Then I go through all the stocks that returns in Yahoo’s stock screener, and rule out any that have not beaten the S&P 500 in the last year (preferably two years).

    My current short list has Canadian Imperial Bank of Commerce (CM or CM.TO), Metropolitan Life (MET), Danaos Corporation (DAC), Nationwide Financial Services (NFS), McDonalds (MCD), Charles Swab (SCHW) and McGraw Hill (MHP).

    We ended up buying the Danaos (most likely for the short term) and CIBC. I’ll keep you posted :)

  6. Shannon says:

    Hah, I lost some tags.

    P/E less than 25
    PEG greater than 1.
    Profit margin greater than 10%
    Market cap greater than 1B
    Offers a dividend