Last time we saw the food sector in general. The conclusion was that at least at this point in May 2015, the valuations are high. The volatility is there. So this will be in the basket for now and I will revisit it when the sector is down or the market is down. In general, I would list food sector in the basket made of sector ETF + a few stocks that one is really comfortable holding into while emotions sway as the food industry is the most visible industry out there.
Beyond food industry, one encounters the tech industry a lot. The apple, Google, AT&T phone industry, internet companies and social media are easy to spot. Like the food industry, they too are volatile but a bit more entrenched and have a stronger stability factor.
So I will create some portfolio - along the strategies .. such as bi low .. which will be a basket of stocks which I would buy only when they are in a low market. Think 2009. Another set of portfolio would be the zing list. This is something that I have done in the past too and used this list for trading frequently or with in a medium term. I think this is a good strategy on a high market like now. Though a more efficient one would be to just stay put for now.
Meanwhile, the core portfolio compromising of stocks that are essentially a good one that you would hold for a long time, would be more like blue chip stocks, or maybe part of DOW or top S&P 100 stocks and so on. Though, belonging to such indexes by themselves mean nothing. C and BAC were also part of these when they tanked and were eventually removed from these indexes. Wonder where these indexes would be had these stocks not been removed.
A big reason I moved many of these materials from my personal blogs and notes to online blogs was to benefit the gen X and millenials and also more veteran stock traders as they could see the thought process, the evolution of the strategies over time and the ultimate evaluation. This is of course ongoing and it becomes difficult to keep track of various strategies and it is better if one sticks to one that one knows and more comfortable with. Rather than chase every existing or hot strategies of a moment. That is what is the key take away from more established investors out there. I dont believe in just buying indexes and then holding onto them. One has to sell them at some point. Just buying and selling indexes might be a lame exercise and I will do a testing of this one later down in the blog post. We have to essentially run a Monte Carlo simulations of the various scenarios.
Meanwhile, some of the stocks that come as evergreen for me is like Fedex or UPS. The reason being that it is a simple market, dominated by just two at the moment. There are some tech startups which are striking to develop their own services. Chief among them is services like Uber or Lyft. If these somehow evolve to change to a short distance to medium distance courier service and when combined with the likes of Amazon and other local or national services with huge warehousing capabilities, we are looking at something that will give a strong competition for the likes of Fedex and UPSes. Easier said than done though as both these companies straddle Transport sector as they own aircrafts!, are global, can be categorized as a tech company apart from being the monopolized players in a saturated US market with extensive infrastructure and real estate holdings. Further they have very nuanced offerings like photos and printing amongst others. There are some emotional satisfactions in previous encounters in Kinkos too.
So dualities like FDX and UPS with tilt more towards UPS as they have a stable dividend is a good deal. Same exists with other dualities such as HD and LOW or CVS and WAG and so on. Some of the retailers like WFM and KG could almost make that list. Point is take the top 2 or 3 and then stick with it. This is easily spotted in more matured and saturated markets such as the shipping services where Fedex or UPS operate but more difficult in other sectors such as say technology. Technology tends to be more diversified and though there are lines where Google and Apple are head on with each other, there are also integrated services where they are co-dependent. So I would stick to more neater categorization for now. Which also pretty much means that all these stocks in addition to the utilities and REITS will stay put in the may 2015 list for now.
TGT and WMT are the other stocks that shall also remain in the list. An interesting one is the COST .. as there are many costco followers out there just like some of the regional chains such as the wegmans/krogers/ralphs or trader joe kind. It is a good business and a standout has been the relatively low pay that the top executives take. Speaking of which, is there a service out there which lists down the companies with lower ceo pay or executive pays? Some has to do with passion for work than just more options.
MO is a standout and is an interesting holding stock. Though I am against cigar smoking I think most of these firms are just holding firms and pay rather pretty good dividends. Against MO we have PM, RAI and LO and a bunch of others with pretty decent dividends. I would put them in the bilo list given the high pe now and lower beta rate. These are core stocks once the market goes down.
Same with COST/TGT/WMT for now.
Disecting MO and abbot labs further, notice the random 50% drop in these stocks in the past. What to do in such cases? The more I dwelve and introspect about the markets and my experience with it, the more the realization occurs that it is not about a set of stocks but rather how you react to it that determines the outcome. At least to some extent. You can select a basket of stocks based on emotions, facts, numbers, statistical values, pure revenue and potentials, small town values, global appeal, entrenchment of said firms in a more developing country story or how well they are perceived in a particular sector or in the US. But a significant factor is also the behavioral dynamics of the investor. How much fees factors in .. in terms of commissions. How much does the time factor in .. what else could have been done during this time. The opportunity costs and so on. How would you react if the stock simply tanks and keeps tanking? What will you do if it keeps raising and raising? Is there any point in this? Or should it just emotionless and a math condition that a 20% uptick triggers a sell while a similar downtick triggers a buy? Would those models have fundamentally hold on when doing backtesting? Many instances says no. It depends on the gut. How much does a human truly discriminates between gut and emotion? Why need emotion beyond a point?
Back to baskets of stocks, Gilead seems to be the google of biotech industry. Which also means volatility. Same can be said of Abbot of which I am not aware much of but seems to be a bell weather in its industry similar to what JNJ or Pfizer does.
A good source to find the CEO pay is
Pretty nifty database with up to date numbers but if one goes by this most S&P 500 firms are going to be tough to get into justifiably. Most executives make a ton of money and some do okay work .. in the case of US, I think it is pretty much stick to the regulations and don't try something outsized or radical .. as long as one stays within a group, one should be fine.
Philosophically speaking, it mutes down the need for such exhaustive research and emphasizes the ETF or index fund line of thinking. Another justification to have the ETF or indexes as core of your portfolio in addition to cash! For individual stock picking, pick a few and focus on the behavioural analysis of yourself and how you are going to adhere by self laid out rules. So what does one do mainly? I guess focus on one's own career and own a home/rental business and then own stocks/bonds mix via index funds as well as individual holdings but most importantly own your business. It could be anything from patented ones to any ideas or trade secrets or in these days something with huge data and scale which are managed by a software. But essentially, own a business. You may not want to be involved in it full time and want to do the nuts and bolts of it and then act as an adviser but it is essentially your own business is what will set you apart from the rest.
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