Stock picks

I mentioned in my last post that I purchased some GM stock last year. I have never made public my stock picks in the past, so I decided this might be a good time to explain.

I'm not a big believer in buying individual stocks and in fact, I'm not sure I'm a believer in mutual funds. The former bears more explanation, the latter, well, it's just not time to discuss that now. With individual stocks, you put a lot at risk. One of my MBA professors said that a stock's value represented the market's opinion on future value. It's sorta like taking a vote on how good you think the company will be 5 years down the road. And if you think voting is the right way to determine value, take a look at our presidential elections over the last several cycles: Reagan, Bush I, Clinton, Bush II, Obama - I think the word "fickle" applies.

So if you assume the market is fickle, individual stocks are scary. However, I decided several years ago, that I could afford to invest a small amount of money in individual stocks. My first attempt to beat the market was by buying Palm stock. I was impressed with the product, they were way down in price and I thought they were making some good technical and marketing decisions.

After about 2 years, my value was up about 50%. I saw some folks using Blackberries and decided to sell. Timing on the buy and the sell was not perfect, but who can argue with 50% over 2 years.

My second attempt at stock picks was a company named Ahold. Years ago, Ahold moved into the U.S. by buying the grocery chain I worked for, Bi-Lo. They had grown since that time and reached a peak. Then they hit some accounting scandals. When I chose them, they were making several corporate decisions to restructure and to sell Bi-Lo. To make a long story short, there were some good days and some bad days, but I made about 100% over 3 years. Again, no one can argue with success.

My goal has been to pick stocks on companies that are down, but have a solid product and a decent plan. Then hold the stock for at least 2 years. Don't try to time the entry or exit to the best day, but choose a "season" when it's low to enter and a "season" to exit when it's high.

In August of last year, I chose GM & Ford. I did this because I thought they were "too big to fail" and the government would bail them out. They did, several times, but finally, the downward momentum killed GM. Ford is up about 30% from where I got into it and I think it will go on up. I'm not sure it will go up enough to recoup my GM loss.

My fundamental mistake here was buying not what I thought was a stable company, but based in what I thought the government would do. I should have remembered the word "fickle" (see above).

I should also point out that this is not a pump-and-dump blog. You won't see other stocks mentioned here, at least not daily. I won't try to convince you to sell or to buy. If comments show up about the latest greatest thing or something "they" don't want you to know, I'd strongly advise you to ignore them or at least investigate before you make a decision (I typically don't edit comments out, but may if needed). I just wanted to share my experience and see/hear your opinions...

Misc topics and random thoughts

Camping trip was great. I took about three short hikes. The first one was on a trail I hadn't seen before, part of the Palmetto Trails to Jocassee Gorges. It's a 12.5 mile hike, I did a small part of it, but was expecting visitors, so headed back. From what I can see, it's a good hike but not real scenic. The second hike was along the Carrick Creek. On this hike I was accompanied by my three year old grandson. We hiked for about 20 minutes, took a 10 minute break, then hiked another 10 minutes before heading back. The hike is supposed to last about an hour, but with his short stride, I'm sure we didn't go half way in 30 minutes of walking. The last hike was back along the Palmetto Trail, but he was tired so we didn't go far.

All in all the trip was great. Two nights in a tent, far from everything. I'll post more about it later.

While I was gone, GM announced bankruptcy. I haven't blogged about it, but last August I bought some shares of GM on a lark. This was back in early August, before the bottom fell out. My theory was that the government would bail them out and the stock would go up. They did get a bail-out that month and the stock ticked upward for a day or two, then the credit market fell and, well, it was a lark.

I don't mean to imply that I backed the bail-out. I think it was a bad idea. But I really didn't think the government would let them go bankrupt. Who knows what will happen now. Maybe I'll blog more about that later too.

This past weekend, an abortion doctor was shot and killed. Make no mistake, this was murder. The conservative blogs that I read agree. The doctor has been called a killer (and I agree with that), but it doesn't make his murder any less of a murder. His (alleged) killer has been arrested. He deserves a fair trial, but assuming he is found guilty (and I see no reason why not), he should probably face the death penalty. It was simple pre-meditated murder.

GM CEO steps down

Most everyone knows now that the CEO of General Motors stepped down, or rather was asked to step down. Seems that President Obama and his administration didn't approve of the current restructuring plan and he had to go.

This may be the right move for GM. Given the money that the American taxpayer has already given GM, this may have been the right move for the taxpayer. But at this point every CEO needs to be afraid. Especially CEO's who take government money.

You may think you have nothing to worry about, but I would ask, who is the CEO in your family? If the CEO of GM is at risk, so is the CEO of your family. And especially if you're taking any government money. That includes Social Security of course. And it also includes any tax deductions (look what's happening to charitable contributions in the current plan). In fact, just by breathing, working and exchanging dollars for goods (groceries), you depend on the government for some things. And now the government is saying that if you don't do it their way, they can fire you, take over your management and run your business.

Yep, all CEO's everwhere need to be very afraid. We should all remember Proverbs 22:7

Equal pay

I'm reading a book called "While America Aged" with a subtitle of "How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis." (long subtitle).

Ok, it's a little biased. But can you guess who is GM's #1 supplier? To which other company does GM pay the most? You might be thinking a steel (or aluminum) company. You might be thinking an auto parts company. Maybe the company that makes interior carpeting. Windshields and glass companies. If you guess any of those, you'd be wrong.

GM pays Blue Cross Blue Shield more than any of those companies. And they're competing with Toyota which doesn't have the same cost structure. There's more to it than that, I've got more reading to do. And after seven LONG chapters describing the problems in PAINFUL detail, there will be a conclusion, 20 pages titled "The Way Out."

But something struck me very strange today while reading, waiting on a plane to take off (1 hour on the runway is no fun). In New York City, sanitation workers went on strike because their pension plan wasn't as rich as police officers' plan. After all, the reasoned, they were uniformed employees too.

Now I believe everyone should earn a livable wage. And yes, sanitation workers are part of everyone. But if supply & demand applies to products, why can't it apply to workers too? How many people can be a police officer? It takes a good bit of training and some amount of education (at least high school, in some areas a college degree). How many people can be a sanitation worker? In a city near me, they let prisoners do it (which bothers me, but that's another issue). Training is minimal, education less. No degree required. Seems that the supply of sanitation workers should be high, and the price (wages, etc) should be low.

Now don't get me wrong, I don't aspire to be a sanitation worker. I've seen what they do and frankly, I don't want to do it. I'd rather pay someone else to do it instead. But if the sanitation worker's salary ever tops mine, I would seriously consider switching careers.

More from the book as I move along in it..