Hi WEagle,
Believe me you have a lot of company on those problems.
Rule # 1 stock has a dividend.
Nice rule, the stock has no debt or little debt. High Debt is relative to the sector in which it operates. Phone companies , Utilities all historically carry more debt. Their business is often an oligopoly, and their service is needed, If they have no debt and/or low debt for their sector, do they have a plan to put those assets to work in another sector?
As you watch a stock for a longer term, you get a feel for how it ranges in price. So when it gets low your buy enough to allow the sale of your highest cost basis. if it ranges up to where that trade can be a small profit, or at least a breakeven, peel of the high cost segment and lower your cost basis. I track this almost every day.
While watching your holdings. be familiar who is in the copmany's peer group. (from 10K report) If a peer pays a better dividend,than your stock consider selling 50% of the no dovodend stock and then buy the peer that does pay a dividend.
While holding 280,000 shares of Cohu, I watched AMATY,and TER drop below the price Cohu was trading at. When BRKS deopped below Cohu's price, I sold 55,000 shares of Cohu and turned it into BRKS. Both had no debt and Cohu paid24 cents a year and Brks paid 40 cents per year. BRKS was in the middle of taking the semi equipment earnings and building an innovative bilogical storage services with technology they had gained fro buying a cryogenic cold pump. They use their robotics and cryo pump cooling imto pharm staora of every lot ever made. The fact that nio human ever touched the sample was a huge selling point. They grew fast but it took them 2-3 years to build the new business. During that time , they broke even and lost small change as they internally funded the new lif sciences division. Long story short, I started selling at 60 and last sold my last share at 115. My cost was 10.06 and it was a 6-9 yrar hold . So having a loss, with a turnaround story is a great way to get in cheap. one or two of those and you've boosted your family's wealth buy several generations of saving.
Love a dividend and watch a company's peer group and upgrade or swap out if you find similar stock with a better dividend of cash horde.
My favorite stock to buy is a dividend Aristocrat that is not growing but has low debt relative to its peers.
I sold puts on KMI for years as it ranged from 13 ish to 16ish. I started slow and would go oout in time 6-9 months. Every 3 months I'd go out 9 months and have two tranche, then 3 tranches, then out into January of the next year. Determine the dividend yield minimum you need fpor your account and wait for it to explode in put premium during the clx reversals.
I took me a while to get comfortable with the decay of put premium Take it slow and get some experience of the rie and fll of put premium based on the fear of the market.
At about the same time I was learning Don's CLX and getting comfortable with that. So that era was a 5-7 time period.
New rule now: Only sell puts when bottomspotter is active. Then sell puts where the net purchase price (if assigned) exceeds your needed dividend yield.
Never sell more puts than what you have cash for (including the dividends that will come to you before expiration of the put. NOTE TO FILE. Puts can be assigned early before the put's expiration. If your needed yield is 6% and the net prchase price that gets your needed yeild sell 10 puts -1000 shares at that strike price and let time decay do its thing. Once you are 60-90 days out drop 1-2 down in strike price and double down with 20 puts at a lower strike price. It levers your account, but almost always it is free money.
Huge corrective waves will assign you a lot of stock when they happen. Once again that cash build and future dividends will get you out of that jam.
Rule # 2: Never sell a put on a stock you really don't want to have. Always like the stock and how it treats its shareholders!'A portfolio that yields 6 percent is a double in 12 years.
Compound a 6% dividend payer with 8-9% put premium that expires annually and you are on a double,and you are diubling in a bit over 5 years.
That kind of term, can keep your attention and is very satisfying, while taking a relatively low risk.
Do that with a barbell approach. Half in dividend Aristocrats and half in tech shares with large cash balances. The cycle of semis/equipments require firms to have large cash balances (For lasting thru peak to valley.) I have always liked chip stocks and their equipment makers , as my view of tomorrows world is MORE AND MORE CHIPS! Plus their cycles are quicker for recovery.
Good questions and diversification can both be too few and too many. There just a refewer stocks outthere these days.
When you find a stock you really like, get a LOT of it. Such that when it hits an impulsive wave, you have a wealth defining moment for your family!
Sorry about typo,s I have to go get my fixed flat tire.
Bob |
