Heavenly’s picks, a summary

Hello to our blog readers 🙂

Jeremy was looking over my portfolio recently and thought I should comment on my holdings.

Last year, I decided to try my hand at investing by starting out with the ‘fake stock market’ as I call it, started an account with Marketocracy, but soon found their system to be very laggy with processing orders, so I decided to just follow up with my portfolio on Yahoo finance.

My methods of choosing stocks are mainly:

  1. Do I personally use their product?
  2. Do I love their product?
  3. Do they offer a dividend?
  4. Take a look at the company’s charts over the past few years to get a rough estimate of when the low points are, to obtain a pattern of when to buy in.

My first purchases were back in October of last year, (as some may speculate, usually a good time to buy in when stocks usually take a hit), started with 10 shares each of Walmart at 44.89, Hasbro at 28.65, and 20 shares of Silver: SLV at 133.87.

At the beginning of November, I grabbed 10 shares of our favorite hot dog, Nathans at 16.55.

At the beginning of February, I grabbed 15 shares each of Burger King at 26.01, and Kohls at 44.68.

Last month, I grabbed 10 shares of Petsmart at 19.17, 20 shares of Pepsi at 21.01, and 20 more shares of Nathans at 15.17.

This month so far, I’ve grabbed 20 shares of Ebay at 31.69 upon news of JetBlue using Paypal in their payment options, and also grabbed 20 shares of Yum brands this morning at 38.38.

As of this posting, I’m up over 13% overall… not too shabby for dabbling. 🙂

Full Disclosure: I do not own the following stocks mentioned above at the time of this article

Monitoring and Adjusting Our Portfolio

Over the last couple months I have spent a lot of time monitoring and adjusting our investments as the market has been so volitile and uncertain.

I trimmed back on anything financial or related to financial.  For example I sold positions in Goldman Sachs, Morgan Stanley and Discover.  I also reduced or sold some positions that have appreciated a lot and where the companies are really over-valued at this time, over-valued stocks are most likely to be knocked down.  If this happens with some stocks we hold, I will most likely be a buyer again once they are at under-valued price.

I would suggest now is a good time to be more defensive.  Stocks like Berskhire Hathaway, Pepsi, Johnson and Johnson, Proctor and Gamble, etc. are good and safe investments right now.  Silver is also a good bet with the rapidly declining dollar over the last few months.

Full Disclosure: I own shares of Pepsi, Berkshire Hathaway and I hold investments in bullion silver.

A Defensive Investment for Uncertain Times

Berkshire HathawayWith the Dow, Nasdaq and S&P 500 all hitting new highs on a regular basis, I’m starting to get more defensive in my investing.

While my goal is to always seek out the best investments at the lowest cost, when the market begins to look like it could be peaking and getting ready for a fall I want companies that will most likely survive the fall with little damage or may even thrive in a market pullback or even a recession.

Usually, these kinds are companies are diversified conglomerates and consumer staples such as Johnson and Johnson, Pepsi, Altria, Kraft, or GE as no matter what happens to the economy people will continue to eat and buy the everyday necessities that these companies provide. Also, these kinds of companies have much global exposure, so if things are bad here in the US, their international operations will pick up the slack.

However, there has been one company that I’ve always considered, but never pulled the trigger to buy and now it just feels right and that company is Berkshire Hathaway, the company run by billionaire investor, Warren Buffett. Not only is Berkshire Hathaway a diversified conglomerate, but it has interests in many consumer staples. There are also many other reasons to like Bershire Hathaway. Here are a few…

  • A very long record of steady growth.
  • The most successful investor ever, Warren Buffet, running the company for only $100,000/year. A real bargain! Much better than what you would pay a mutual fund manager, but with the similar benefits of buying into a mutual fund.
  • Management’s pay is tied to the performance of the stock, meaning that they have a strong interest in seeing the stock increase in value.
  • Management has had a long history of honesty, integrity and frugality.
  • Berkshire’s holdings are strong and divisified.
  • Berkshire’s main business of insurance, which includes Geico (of which I am a customer), produces large floats (which is the cash remaining of insurance premiums paid after all claims are paid). The float is used by Buffett to purchase more great companies.  The best part about the insurance business is it’s a business where the customer pays and hopes to never receive it back!
  • Buffett is great to picking great companies with distrissed prices. So, any downturn in the market will provide him more opportunities to make great deals.
  • As mentioned earlier, when there is market downturn, investors usually sell riskier investments and put their money in safe investments such as Berkshire, which should automatically increase the price of the stock as demand increases.
  • And best of all, Berkshire is currently undervalued! The stock is currently undervalued by 5-12%, by conservative estimates.

The negative about Berkshire for a lot of people is that the actual cost per share is quite high. Berkshire Hathaway Class A shares go for $108,351.00 and Class B shares go for $3,604.30. Buffett has chosen to not split the shares because he wanted real investors to own share, not traders.

This also helps keep the price stable. He did introduce the Class B shares a while back which does make it more affordable. The only real difference between the two is that Class B shares don’t have voting rights and Class A shares can be converted in 30 Class B shares, but not the other way around. This keeps the price ratio 1/30 most of the time.

There are other companies that are similar, where the CEO runs the company in a similar manner as Buffett runs Berkshire. These are Sears Holdings, Leucadia National Corp, and Markel. All three have well known investors running the company that seek to increase revenue’s by reinvesting excess revenue generated by the core businesses. They also invest in a similiar fashion as Warren Buffett and seek to emulate Berkshire in various ways and their prices per share a lower than Berkshire.

I currently have all three on my watch list and am waiting for a good entry point.

Full Disclosure: I own shares of Pepsico, Altria, Kraft and most recently I initiated a position in Berkshire Hathaway (Class B shares).  Also, I am a Geico customer, which is fully-owned by Berkshire Hathaway.