Today’s article is going to be a quicker one. I’ve been attacked by the allergy monster over the last couple of days. When I’m not sneezing, I’m just trying to get a breath of air in.
I feel like I’m falling behind on everything and with this being the last week of school for the kids, there won’t be much catching up next week. Some blogger dads were talking about what they wanted for Father’s Day and I think everyone universally said the same thing, “Some time off!”
Today, I wanted to do something that’s a little controversial – review stock picks. I’m a big believer in index funds. It’s the “Laziest” path to wealth. For many people, investing advice can be as simple as just keep buying up shares of Index 500 ETF stock. I’m a little more diversified, but that’s my general investing philosophy as well…
… except that I like to have some fun too!
I can’t shake the idea that there are people out there who bought Amazon at $3 a share and are enjoying it at $1700 a share now. How can that feel anything less than awesome, right?
I know that I’m not going to find the next Amazon. Even if I did, I’d probably sell it at $6 and collect my sweet 100% return – while I miss out on the $1700 per share gains.
That doesn’t stop me from taking a little side money, looking for some big companies that aren’t doing so well, and investing with the hope that they’ll double my money. Every now and again, I write an article about stocks that I think could do just that.
Let’s review and see those stocks have done:
Five “Bargain” Stocks to Consider Buying Now
I wrote his on August 24, 2017. The dates on my articles reflect the last time they were updated, so it’s easiest to use the first comment date as a guideline for when the article was written.
The stocks I picked at the time were: Under Armour, IBM, SNAP, Chipotle, and Twitter. They each has some kind of sad story to tell. Under Armour had the death of retail. IBM had years of no growth. SNAP looked like it was going to lose to Instagram. Chipotle had people getting sick from their food. No one knew how Twitter was going to grow or make money.
Besides their sad story, they had two things in common, they were household names and I didn’t see them folding up shop any time soon.
Here’s what their performance looks like:
| Stock | Symbol | Invested | Price Then | Shares | Price Now | Value Now | Growth |
|---|---|---|---|---|---|---|---|
| Under Armour | UAA | $1,000.00 | $16.68 | 59.95 | $25.73 | $1,542.57 | 54.26% |
| IBM | IBM | $1,000.00 | $140.50 | 7.12 | $131.46 | $935.66 | -6.43% |
| Chipotle | CMG | $1,000.00 | $307.00 | 3.26 | $687.40 | $2,239.09 | 123.91% |
| Snapchat | SNAP | $1,000.00 | $14.00 | 71.43 | $13.51 | $965.00 | -3.50% |
| TWTR | $1,000.00 | $16.89 | 59.21 | $36.48 | $2,159.86 | 115.99% | |
| $5,000.00 | $7,842.17 | 56.84% |
I think it would be safe to say that Under Armour, Chipotle, and Twitter were home runs while IBM and SNAP were flops.
Actually, I don’t view IBM or SNAP as big flops. IBM has paid out around a 5% dividend during that time, which isn’t factored into this pure stock price view. SNAP would get under $5 a share. I loaded up at around $6 and change and today have seen it double. It’s one of my most successful stocks.
I had personally already loaded up on Twitter stock at around $15. So while the price did get to around $47 and has been off of that for awhile, I am comfortable with it in the mid-30s.
Finally, I did buy Chipotle almost as soon as I published the article and sold it when it doubled. I never bought Under Armour, but thought about it as it went very low before doubling to today’s stock price.
With a total performance of around a 57% gain over nearly two years (plus dividends), I feel like these calls would have worked out well.
Sky-high Market? Seven Value Stocks to Consider
This was a fun article, because it was nearly exactly 1 year ago on June 10th. I started it off by explaining it was our “summer hole”, which is the time when the kids get out of school, but camp hasn’t started. That gap is getting easier to manage as the kids get more self-sufficient at ages 5 and 6, but it was tough when they were very little.
For this article, I was looking at a stock market that had reached new highs. I was concerned that valuations were just out of control. Some of these valuations came from big tech stocks. I thought it might be safer to move to old school stocks with a solid history of paying big dividends. There was no expectation of hitting a big home run here, because these consumer staple stocks aren’t likely to experience incredible growth.
The stocks I considered a year ago were: GE, Colgate-Palmolive, Johnson & Johnson, Proctor and Gamble, IBM (again), AT&T, and Disney. Here’s a look at how they performed if you invested $1,000 in each. Remember that these are mostly big dividend paying stocks and those aren’t included in this simple formula*.
| Stock | Symbol | Invested | Price Then | Shares | Price Now | Value Now | Growth |
|---|---|---|---|---|---|---|---|
| GE | GE | $1,000.00 | $13.11 | 76.28 | $9.90 | $755.15 | -24.49% |
| Colgate-Palmolive | CL | $1,000.00 | $61.71 | 16.20 | $73.20 | $1,186.19 | 18.62% |
| Johnson & Johnson | JNJ | $1,000.00 | $120.83 | 8.28 | $136.90 | $1,133.00 | 13.30% |
| Proctor & Gamble | PG | $1,000.00 | $74.69 | 13.39 | $107.42 | $1,438.21 | 43.82% |
| IBM | IBM | $1,000.00 | $139.46 | 7.17 | $131.49 | $942.85 | -5.71% |
| AT&T | T | $1,000.00 | $31.78 | 31.47 | $32.10 | $1,010.07 | 1.01% |
| Disney | DIS | $1,000.00 | $102.36 | 9.77 | $136.74 | $1,335.87 | 33.59% |
| $7,000.00 | $7,801.34 | 11.45% |
In the last year, the S&P 500 has returned 1.73%, so 11.5% returns plus dividends is much better than I expected.
The only stock you really wanted to avoid on this list was GE. Guess which stock I bought the most of? GE! What buzzard’s luck! Due to some dollar cost averaging, I’m not down that much, but they also cut their dividend to a penny.
I also bought Proctor and Gamble, but I ended up selling it after it went up around 15% or 20% soon after I bought it. Since I invest in retirement accounts, I don’t care to hold for long-term capital gains. I also still hold IBM, which just keeps paying that dividend.
I’m most surprised by Johnson and Johnson being up over the last year. I thought the lawsuits from the baby powder buried them.
I’m kicking myself for missing out on investing on Disney. I mentioned a year ago that their Disney+ service is going to be big. However, I got wrapped up their mess of an ESPN division. I also didn’t have cash on the sidelines and didn’t feel strongly about selling other investments to buy into Disney.
Lessons to take away from stock picking
It’s difficult for me to reconcile stock picking. On one hand, I know it is better to index. On the other hand, it seems like I generally do pretty well. I’m not sure this is enough of a sample size to say that for sure though.
Also, I know that I sell my winners early, so even though P&G might be up 44% above, it wouldn’t have been that way for me. At the same time, I have loss aversion, so I continue to cling on to GE hoping that some day it will return my love.
I’d like to hear from you in the comments. Does this review of all (good and bad) the stock picks over the last couple of years convince you? Did I maybe get lucky?
* Maybe someone can suggest a better tool that includes dividends in the comments?
I bought some individual stocks back in the 90’s, oh the fun. I did pretty well with my IBM, KMart, SW Airlines. Then the company I worked for planned an IPO and since Morgan Stanley was handling it I moved my money to the, and got talked into selling most of my holdings and buying into “internet” companies. I still remember being told, don’t worry about PE, looking at FPE(future PE). Every company they talked me into buying sunk like a rock.
Regarding IBM. I’m in the same business, and unfortunately it’s turned commodity, who can do it cheaper. IBM has tried to keep up, moving as much work offshore as possible, but in the process gutted many of their areas of expertise. I hope they recover, just not sure if they can.
I bought IBM largely based on the Watson technology. I was inspired after the Jeopardy win. However, now that I know more about the dynamics of the buzzer, I don’t think it was a fair match. I’d almost say it was fraudulent. It’s really something that I hadn’t thought about before now.
I’m like you… I would never hold a stock long enough to benefit from the homeruns. I’ve seldom held a stock past a 50% gain. So if I’d bought Amazon at $3, I would have sold it at $4.50.
I used to sell too quickly too. I had Amazon at some point and sold it off when it made some money. Now, I mostly buy and hold. It’s way easier for me to own a solid stock for the long term.
That’s a nice list. I wish I got Disney last year. They gained a lot recently.
I pick a few stocks too, but most of our investments are in index funds. I think about 20% is in individual stocks.
Overall, it sounds like your picks did well. Nice job.
our individual stock portfolio has doubled in value since early 2016. i bought a motley fool subscription for ideas back then and and 3-4 stocks that have more than tripled. the holdings are in this post if you’re interested. https://freddysmidlap.com/2019/05/08/portfolio-update-may-6-2010-shopify-shop-carries-the-day/
I’d have no idea where to start picking individual stocks. I just don’t keep up on business news enough to be savvy to what would be a good investment. If/when I start investing in something other than retirement funds, it’ll almost certainly be an index fund just so that I don’t have to take on the mental bandwidth associated with researching companies and the scariness of guessing which companies will do well.
Those are some impressive picks!
I know Ben Graham in “The Intelligent Investor” advised folks to keep 5% in a speculative fund for this activity so they didn’t feel the need to make rash choices with the rest. Seems wise to me. I’ve done that and it keeps my paws off the rest.