Sion's How To Invest Thread [Everything you need to invest properly and much more...]

Sion · August 2011

Im gonna skip diversification & go into the themes of WallStreet Jargons & Insider Buying....

Wall Street Jargon & Common Mistakes (IPOs, mutual funds, technical analysis/beta , trends, past performance, terrible investments/hot stocks)

-- on wall street nobody gives a shit for tomorrow they live for the moment, they do this also in order to be competitive and also b/c of that 'on the go' attitude prevalent with brokers. In investing you HAVE to discipline yourself to wait. As I said some 80-90% of ppl on wallstreet DO NOT beat the markets. And thats typically because of 3 things - they buy what they dont understand, they overpay for businesses or invest for the short term.

WallStreet is also in favor of wallstreet NOT the shareholder so its important u understand some things:

Lets start with IPOs....

IPOs: these are often nicknamed "insider's private opportunity" , "it's probably over priced" and other names lol. WallStreet pays a lot of money to dudes to go out and promote a co. thats having an IPO. For IPOs the company going public gets in touch with a merchant bank (like JP Morgan, Goldman Sachs, Morgan Stanley, Bank Of America, Citigroup, Wells Fargo or whoever) and then the merchant bank will get in touch with an insurer. The merchant bank is being paid to assess the business, to make sure everything is proper and to act as a broker on the stock market and reach out to investors in order to raise cash. The insurance companies, get on board because in case the merchant bank can't sell the shares they underwrite them and will find someone else to buy those shares. The objective of the 3 parties is to make profit. Most ppl buy into IPOs b/c they sound sweet on paper (OMGZ Twatter just went public I want in !!!!), u can buy it in its starting stages and with a magical wave of a wand the price will bolt. The thing is, the 3 parties involved dont sell the businesses at reasonable prices they sell them at gross markups so that they can make a huge profit from the public (& also so that the co. going public can raise cash to reinvest). They aren't entirely bad tho, in 90% of most cases its not uncommon for a co. to shoot up some 40-150% maybe more in a single day of being listed, I suspect that facebook will probably see something like that when it goes public. The thing is these prices dont last for long, the hype of the business dies down & so does the price. There are ppl in wallstreet who specialize in jumping in quick & get out for a quick buck but I dont recommend this form of speculation cuz it always turns into "ill sell it wen it goes up a few more bucks I know theres more growth" SMMFH.

Buy Hold & SUFFER !!!! Invest now fuck the long term !!!! - this is common jargon too & alot of people say this. From Bay to Wall Street. Value Investing is not just a method its a philosophy & its grounded in PURE common sense. Mathematics, theories & things of that nature change but common sense will always stay the same. Value Investing is the cornerstone of all investing & its idea is simple - u want to buy something for less than its worth & hold on to it or sell it. Essentially all ur doing is buying something thats worth more than it appears to be & ur doing that to also give safety to ur investment (ideally if the co. goes bankrupt & must be liquidated then assuming u bought below book value ud get the difference b/w what its really worth & what its selling for). People were saying this after the recession of 2008 when stocks FELL to all time lows in March 2009, the thing is so did everybody else, if they had held on tho they wouldve regained most of their lost profits.

Technical Analysis - This is like the story of the emperor's new clothes.... technical analysis is a pseudo science.... & every technical analyst knows this they just deny it cuz the math is so good. U cannot look at a chart & dictate whether or not a company is a good business or a bad one nor can u use "trends" in stock movement to tell if a stock is worth is invest in & u also cannot use that to tell whats going to happen in the long term and for a very simple reason - as I said b4 the stock market can fluctuate for many reasons & those fluctuations could have an adverse affect on a stock's performance which would make it appear as it does on a chart. It does not reflect anything that the business is doing. Ask urself this: if u were a record exec & eminem became a free agent and some dude shows u a chart of Eminem's sales ud see that theyve been on the decline from a charts perspective, that dude would say - "dont sign (invest) in Eminem, hes falling off he did 12 million on his 2nd album but his recent one only did 5 million hes done" but if I showed u his bank account, tallied up everything he sold, his artists he signed, his label, the royalties on his albums, movies, etc. itd paint a far different picture. In this example u could see that the climate for sales in music have changed but that hasnt changed the power of the eminem brand to make money. This is the problem with technical analysis & no matter what any tech analyst says ill put money on it they cannot find one not even ONE billionaire tech investor or successful tech analyst (if i can find it in my old notes i can show u the performance of novice investors, pros, value investors & tech analysts and how they compare to the S&P the shit is sad LOLOL).

Steer clear of technical analysts on stocks, u dont need math to tell u wat stocks to invest in. Yo it still baffles me that they still teach that shit in school SMH.

Sion · August 2011

Diversification: This is an interesting topic & im not against it but I will give some clarity as to how it should be done. Im sure many of u have heard the saying 'dont put ur eggs in one basket'. Now theres many different ways around this. For example, a lot of the times ppl will invest into an index tracking a segment such as banking or oil hoping to profit from the whole thing rather than try to find just one. Theres nothing wrong with doin this but I dont recommend it, for reasons that not all companies in one sector are good or cheap/safe for that matter. In terms of how it affects ur portfolio, if u buy for example 5 technology companies & 3 stagnate, 2 drop & only 1 rises, that can have a HUGE impact on ur portfolio's returns, in the case of the example it would be lower. MOST rich ppl got rich off of one thing that they poured their energy into, granted on the stock market u cant really RUN the business but u can still find great companies & dumb all ur cash into one stock & still make a fortune. For a long time I used to pick individual stocks & pump lots of money into one co. I would make sure that it was selling below book value, profitable (had consistent earnings), had a good competitive advantage & most importantly - a company I could understand. As crazy as it would seem to an amateur they could never understand WHY I was able to SHIT on the S&P and Dow. The real reason is that almost all if not most managers will hold as much as over a hundred stocks in a portfolio, most of them they overpaid for or worse lol. Those companies fluctuate & most fall (its hard as hell to find 100 great companies UNDER book value), and this is why a lot of managers will show terrible results on the business channel they always ask to focus on their 4-5 BEST stock picks LOL, they never let u see their overall returns on a portfolio (this is another reason why I dont trust brokers). In my portfolio I dont have more than about 12 companies in client funds I usually dont buy more than 10 companies I keep it nice & small, I only buy the best & the safest companies. Most ppl should follow this format, Warren Buffett himself even claimed that a person should hold no more than 6 companies.

Back to diversification if ur gonna do it do it more cleverly, put money into bonds, real estate & other types of asset classes that ensure ur principal will be safe. Dont try to buy out sectors of the overall market, u can find individual stocks that meet the criteria I laid forth in my early posts & invest in those and for the most part u will be safe IF u find ur not that type of investor then pump ur money into bonds & an index fund or ETF that tracks the overall S&P 500 and Dow 30.

For more on Diversification just watch this from 1:45 u may not even have to read what I posted.

Start thinking Globally Now - the US only makes up for half of the total stocks in the world but elsewhere there are bargains too, many co.s even in america have to grow internationally in order to grow at fast paces (& in some places to even grow at all). Dont just pidgeon hole urself in the States, look at other markets, such as the Canadian, Swiss & Euro Stock exchanges. There are lots of bargains all over the world u just have to be willing to find them. There are risks however, some countries like Russia, China & Brazil dont have good property rights for international investors meaning - there have been cases where economic travesties occurred and shareholders who bought shares in Asian, Russian & Brazilian co.s got wiped out and its not uncommon either. Off the top of my head countries with good economic policy & gov't are Canada, Australia, Switzerland, Norway & India. Those are great places to start looking. Peep my stock picks thread to see some international companies that are definitely worth grabbing.

I told one poster on here to buy a Swiss insurance company called "Swiss Re" sure enough homey saw some great returns not just from the company but from the strength of the currency growth too & I'm pretty sure he bought it in swiss francs too, meaning that the U.S. dollars he spent for Swiss Francs jumped too. In the long term the Swiss Franc is gonna be worth a lot more than the USD & if homey still has his money in that co. I recommended then he's gonna be eating very well.

"The Bosses Are Buying"

When execs start buying shares - u should too : whenever share prices are down sometimes ull hear news that management is buying up its own shares (in the M&A reports handed out every 3 months they sometimes say this). More often than not, when this is occurring usually something big is going to happen. Maybe the unveiling of new technology, possible acquisitions or an earnings beat, etc. Whenever management starts buying their own shares u should too. However dont get too pulled into the dynamic pay attention to the principles above, u never want to pay too much for shares so make sure uve got a margin of safety or are paying a reasonable price b/c sometimes the execs lose too. If u want to find out whose buying what u can call the SEC, the co. ur investing in OR just look online, im not sure what yall use but out here i can go to the TSX.com (toronto stock exchange) type in a co. and theres a list that shows all the most recent large purchases of stock by executives within the company. Now this is NOT INSIDER TRADING, u are NOT an insider & u can see what top executive is buying what, how much & when of his own company buying going to the company's website & downloading the PROXY STATEMENT.

****if you do this keep in mind the principles of buying below the dollar****

Sion · August 2011

Watch these vids:

This is very helpful....

Part 7 is highly important

Sion · August 2011

There's about 10 or 11 parts to the Warren Buffett vids I posted. The last 2 are very important, nigga breaks down why Coca Cola, McDonalds & more are sooo successful & will remain that way for generations to come....

Idi Amin Dada · August 2011

hahaha this shit's gonna take Towers to the next level. Fuck a porsche, we talmbout lambos.

traestar · August 2011

Sion, what are your thoughts about this article about diversification:

The Illusion Of Diversification: The Myth Of The 30 Stock Portfolio

http://www.investopedia.com/articles/stocks/11/illusion-of-diversification.asp?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+stockinvesting+%28Investopedia.com+Headlines%29&utm_content=Google+Reader#axzz1WTYJcLDZ

black caesar · September 2011

C'mon keep this tread going Sion. We need some more financial nuggets of wisdom homie...

it's me bi***es · September 2011

black caesar wrote: »

C'mon keep this tread going Sion. We need some more financial nuggets of wisdom homie...

..........................................

traestar · September 2011

black caesar wrote: »

C'mon keep this tread going Sion. We need some more financial nuggets of wisdom homie...

it's me bi***es wrote: »

..........................................

Have to cosign on that

But I will say this to ya'll tho, definitely wrap your mind around the How to Articles, "Investing for Dummies" book, Investopedia, Morningstar.com. For those starting out in investing, definitely start strategizing how you are going to invest and diversify. Also start reading those Kiplinger, Money magazines too.

Sion · September 2011

traestar wrote: »

Sion, what are your thoughts about this article about diversification:

The Illusion Of Diversification: The Myth Of The 30 Stock Portfolio

http://www.investopedia.com/articles/stocks/11/illusion-of-diversification.asp?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+stockinvesting+%28Investopedia.com+Headlines%29&utm_content=Google+Reader#axzz1WTYJcLDZ

I agree with the overall premise of it. I think its a good blueprint for someone to read b4 stock picking, I think for most ppl it'd be helpful for them to just stick to index funds that track the overall market in order to exploit great market opportunities. LOL @ them exposing Cramer.

I havent forgot about yall Im working on these 4 columns that I will write up on:

- The Margin of Safety (the most important principle of investing)
- My list of new companies to buy selling at steeep discounts (I have about 40 something stocks to post) & there will also be international stocks added
- A deeper analysis into long term investing
- Discipline & Investing

I'll also write up about my current analysis of the economic environment in the U.S. & for those wondering I'll post up why I think U.S. banks are far better buys than our Canadian ones right now.

traestar · September 2011

Here's an article displaying 9 Dividend Stocks With A Low P/B Ratio

http://seekingalpha.com/article/293293-9-dividend-stocks-with-a-low-p-b-ratio?source=feed

Sion · September 2011

traestar wrote: »

Here's an article displaying 9 Dividend Stocks With A Low P/B Ratio

http://seekingalpha.com/article/293293-9-dividend-stocks-with-a-low-p-b-ratio?source=feed

This is impressive.....

I've been on Hudson for a while. They're a very well run bank. Good consistent earnings too.

Yo the fucked up part about this list is ERIE, when this article was made it was at 0.59x book value a discount of 41%..... today ? it's worth 4x that..... that means given the amount of shares out at that price it was about 9-13$ a share & today its worth 75$ a share..... fuuucccckkkk.

Stancorp is impressive

Cincinnati is nice too. Very little debt & consistent earnings - no deficits.

Crazy thing is I got Conocophillips when it was around 41$ a share. Just yesterday I sold a chunk of shares tho. I'd have held on to them if they werent splitting into two. Prolly shoulda held on to them tho.

Thats a great list fam. The only one I wouldnt touch on there was Courier the rest are all great buys.

traestar · September 2011

sionb55 wrote: »

This is impressive.....

I've been on Hudson for a while. They're a very well run bank. Good consistent earnings too.

Yo the fucked up part about this list is ERIE, when this article was made it was at 0.59x book value a discount of 41%..... today ? it's worth 4x that..... that means given the amount of shares out at that price it was about 9-13$ a share & today its worth 75$ a share..... fuuucccckkkk.

Stancorp is impressive

Cincinnati is nice too. Very little debt & consistent earnings - no deficits.

Crazy thing is I got Conocophillips when it was around 41$ a share. Just yesterday I sold a chunk of shares tho. I'd have held on to them if they werent splitting into two. Prolly shoulda held on to them tho.

Thats a great list fam. The only one I wouldnt touch on there was Courier the rest are all great buys.

I think I see why you're staying away from Courier

....I'm sorry wrong analysis

When I check these stocks, more importantly dividend stocks, I'm always looking at the dividend per share paid to see how much they would be paying out quarterly.

black caesar · September 2011

I'm not letting this thread die.

traestar · September 2011

Its good man, again I constantly read new articles about trends and stocks that are of notice

DaFifthElement · October 2011

This gotta be the dopest thread on the IC. Even an ignoramus could understand how Sion Laid it out. Buy bonds guys im telling you...buy bonds and hold on to them for dear life!
My Grandma has bonds from the late 50s to the 70's and what was bought for like 2 grand is worth over 70 grand now.

whatevathehell · November 2011

lets say someone has a couple thousand in capital loss.., does that mean a bigger return for tax time...the only good waY I can look at this.

EmM HoLLa. · November 2011

American Airlines parent companies stock AMR.. Has slid to fuckin $0.32 the gambler in me is ready to put $1000 down.. If that companies stock rebounds after this bankruptcy proceeding to lets say $40 a share... You walk away with $130k..

Somebody talk me out of this.. PLEASE!

[Deleted User] · November 2011

EmM HoLLa. wrote: »

American Airlines parent companies stock AMR.. Has slid to fuckin $0.32 the gambler in me is ready to put $1000 down.. If that companies stock rebounds after this bankruptcy proceeding to lets say $40 a share... You walk away with $130k..

Somebody talk me out of this.. PLEASE!

I'd say put ya grand down and forget thinking about it .... American Airlines has been through this time and time again .

Sion · November 2011

EmM HoLLa. wrote: »

American Airlines parent companies stock AMR.. Has slid to fuckin $0.32 the gambler in me is ready to put $1000 down.. If that companies stock rebounds after this bankruptcy proceeding to lets say $40 a share... You walk away with $130k..

Somebody talk me out of this.. PLEASE!

American Airlines is going bankrupt fam. Why would you buy a porton of a company that cant afford to stay liquid (profitable) ? I think if u buy it when they go into bankruptcy they'll prolly shoot the current shares to zero & then just reissue new shares. Leaving ur 1k at 0. Cuz lets face it they cant pay back shareholders anyways. There's a smarter way to go about shit like this. But they owe several billion dollars & haven't made money in 3 years. They cant even sell themselves to pay their debt their broke their too.

See for urself....

http://tmx.quotemedia.com/financials.php?qm_page=66228&qm_symbol=AMR:US
http://tmx.quotemedia.com/financials.php?qm_page=21008&qm_symbol=AMR:US
^^^ they're 3.9 billion dollars in the hole....

But if ur the hardheaded type that has to touch the stove to know if it's hot then by all means go ahead.... i'd suggest reading the proxy statements you can d/l from their website to find out what exactly are the details of this bankruptcy protection & what will happen to the shares afterwards. Buying stock in a bankruptcy proceeding is never a good idea. That's like giving a dude who owes 3x his worth who makes no money 100k & telling him to pay u bank when he's already broke.

BoYBe$T wrote: »

I'd say put ya grand down and forget thinking about it .... American Airlines has been through this time and time again .

Thats the nature of the airline industry and the main reason why i dont invest in airline companies. & if u look at history every time it's happened shareholders got wiped out and at the end of the year they get a "we're sorry it won't happen again" note. Then it happens again LOLOL. I see Airline stocks as the hoes niggas try to turn into housewives, u buy into it hoping it will turn around & u stay cuz uve invested so much time (money) into it LOLOL.

Sion · November 2011

Emm check the company website to see if they've issued a statement. Some companies will just reissue new shares to current shareholders. If I had seen AMR a couple months ago I would've told u to short it then u wouldve seen enuff money to buy urself a new car in cash. I highly doubt that AMR would reissue new shares to current shareholders but u never know. They dont give a fuck about shareholders tho and theres a 5% chance they'd ever do it.

I wouldn't buy AMR if I were you. You can buy far better companies with 1k & get a nice profit over a short (or long) period of time.

EmM HoLLa. · November 2011

Thanks... Yo Sion I knew you would come in here and give me some solid advice.. I will be in contact with you over the next few months. I am trying to get into the stock game on a low level to learn.. Then dive in.. The market is Robust.. I know there is money to be made if you know what you are doing...

Sion · November 2011

EmM HoLLa. wrote: »

Thanks... Yo Sion I knew you would come in here and give me some solid advice.. I will be in contact with you over the next few months. I am trying to get into the stock game on a low level to learn.. Then dive in.. The market is Robust.. I know there is money to be made if you know what you are doing...

Alright cool cool.... just let me know when you're ready. Btw the Dow shot up 400 points today....

TANGLUNG · December 2011

Hey Sion, is there a minimum amount of money that you think would be a good starting point for investing?

Sion · December 2011

TANGLUNG wrote: »

Hey Sion, is there a minimum amount of money that you think would be a good starting point for investing?

No not really. It really depends on what brokerage service your using. Some places charge between $20-$30 per trade. Others like Questrade charge $5 per trade. If you have a brokerage service where u pay very low commission fees per trade then it doesn't matter. You could start with $1000 or more than that.

I'd recommend probably starting with about $1000. But before you invest ask yourself what u can tolerate, what are ur goals & how long u plan to hold on to a share in a business. Stuff like that can really go along way & help ur money manager decide how to invest on ur behalf.

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Sion's How To Invest Thread [Everything you need to invest properly and much more...]

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