iNVESTING for the Long Run..

Iamgold - IAG - Investing in a busted bubble

2016-05-11T21:55:00.002-07:00

Market bubbles go from boom to bust in what can be a couple months or a couple years. This is how my story starts with IAMGOLD Corp. It is March 2014 and I'm selling one of the hottest tech companies of that time (AAPL) and buying IAG.? You can read about it here.

What gave me inspiration to sell apple and buy IAMGOLD came down to my belief in bubbles and the market imperfections created during bubbles. When the bubble is going up, the market is overstating the value of the business, when the bubble has burst, you can find some very nice companies on sale.

It was in May of 2013, 3 years ago today, and I wrote about shorting gold and buying put options on what was gold crashing down to a low level. The returns were great on the downside as I held my short options and capitalized over 200% in short time. After the dust had settled I looked at the companies left in the ruins by over excited investors and bad market timing. One of those companies was IAG. IAMGOLD Corp. This company was beat up and selling very cheap to its assets. I started buying IAG at $3.84 a share, sold put options and eventually purchased more at a price of 1.90 when the puts were actually in the money. My expectations were that IAG would appreciate and I would keep the 20% premium generated by the put options. Yet the market had other plans and I accepted the ownership of the stock at actual cash value of $1.90. This was not part of the plan, but a deal is a deal and I had decided at $1.90 it was a deal. This would mean I was buying at less than 50% book value and buying the company less than assets. (hard to do now days)

It was a roller coaster ride. IAG went as low as $1.15 a share, barely above penny stock valuation and has roared back to $3.84 a share today, which is back to the valuation I originally purchased but a huge upside to buying at $1.90 a share. IAG is now my biggest investment holding. As I look back AAPL would have appreciated 22%, while IAG has appreciated 33% in total at true cost. Investing in busted bubbles seems to produce some very wild rides yet without a doubt can produce great returns for those strong at will and willing to buy at the bottom. Don't get me wrong, some bubbles never come back. Tulips or Beanie Babies any one?

Does buy and hold really work? Really..

2016-04-12T22:22:00.001-07:00

We've heard it before, investing is a losers game. Is it similar to heading to Vegas and putting it all on black knowing the odds are against you but yet your urge to win and win big keeps you betting against the odds, or can it be similar to black jack that with enough training you can count the cards and some how make the odds in your favor?

You get pulled in so many different directions in investment because everyone wants your money and a piece of the pie. Penny day trader makes millions in months! (Let him show you how) Automated system guarantees earning. (Only $40 a month) Newsletter proven to outperform the market 10 to 1! ($2995.00 Annually) Find the one stock that will deliver a win for years to come! ($59.00 Subscription) Microsoft, Facebook, Google fear this company sure to deliver the next revolution! ($129 a year) Yet the legendary investor Warren Buffett states to simply invest in an index fund with the top 500 companies. Easier said than done. Take it from some one who reads Berkshire Hathaway investor letters, has read the biography and yet still refuses to do this simple index fund investment. Well this is kinda of true. I have an account in which I have followed the legendary investors simple instructions of investing in an index fund. Yet my urge to be Warren Buffett and win like Buffett keeps me searching for bigger gains in all my other investment accounts.

Buy and hold, so simple and yet so hard. In the intelligent investor Benjamin Graham states the easiest way to buy low and sell high is simply to have an account of 50% bonds and 50% stocks and every day on your birthday realign the investment amount. This will undoubtedly allow you the ability to sell high and buy what ever security has dropped at a better bargain. I personally give this advice to everyone who come to me for investing advice. Buy 50% S&P 500 index fund with a low maintenance cost and 50% Bond fund I proudly state. Yet I do not follow this advice because I believe I can tolerate more risk, yet why risk it? The urge to win and to win big keep haunting the every day investor and myself.

Does buy and hold really work? Really? So far I would have to say yes. Yes, investing in great companies and holding seems to work. I have copied my portfolio in my website www.insomniacinvestors.com for sometime now. Time has proven my investment strategy needed changing from actively trading, to buy and hold by looking for a great company and reaping the dividends to buy more companies. All the greats have done it, they find people who are smarter than them and hire them to do a job. Henry Ford was called ignorant and yet he created Ford Motor Company bringing together smart people and challenging them to create something never created by giving them the resources to do it. Is this not what we are doing, funding smart people to create material wealth for us?

How about if I told you in my buy and hold accounts you will find many investments with 100%, 200%, 300% and even more in returns. I simply purchased at one point and waited years later to see these choices pay off. 16.3% annualized returns on simply what I would call duh choices. They simply make sense. Does 16.3% annual return work for you? If it does, than buy and hold works. It really works.

Now don't get me wrong, it didn't start with buy and hold. This strategy was born as a result of measuring my account vs an account I setup for my daughter who is now 5 about to be 6. You see I figured I could manage my account actively and make big gains, which I did sometimes. Investing in Netflix before the split at 29 a share. It would be up well over 2000% now, yet I settled for a mere 900% return on as I liquidated part of my position and then watched it go down to only a 320% return as I liquidated the rest. So does actively managing work? Sure, but not as good as buy and hold. Watching both portfolios seemed to illustrate one thing, you can sleep better, invest less time and have better gains by buying great companies run by great individuals. You become Henry Ford, maybe not the smartest person in the investment community but the one that produces the best results.

How do you count the cards and win in investment? Counting cards is so easy in black jack yet so hard to follow, you add 1 when you have a cards between 2-6 and subtract 1 for 10-A. The higher the count the better chance you have to win or let me rephrase, the lower the count the better chance the dealer has to take your hard earned train riding American dollars. The more you trade the better it is for the dealer in the investment world. Card counting in the investment world is simply counting the number of trades you do, the higher the count the more likely the dealer will win. The reason my daughters account kept beating my trading is because every investment was designed with an 18 year goal in mind. The company had to be top notch and had to be making money and with the idea it would be around in 18 years. Here is the list of the companies under this buy and hold mentality for your review. Some of the names are not the original names as companies were purchased because they were great companies. Seems like buying 50% stock and 50% bonds is sure way to buy low and sell high, yet if we are not going to follow this simple advice at least let's keep the count in our favor by trading less and buying great companies with an 18 year or more horizon.

Thank you, here are the tickers.
AAPL
MCD
LLY
XOM
IBB
TAP
SBUX
ESRX
GOOG
GOOGL
TWC
ANAT
ATVI
DIS

Feel free to run a 6 year chart on the investments above.

Freshly brewed for years to come.

Two years after making a ridiculous goal.

2014-06-15T23:10:00.001-07:00

Two years ago I made a goal, my investments would returns 25% a year for a total return of 50% growth after two years. Today has marked over the two year mark and I failed in my attempt by a total of 8%. It was a crazy goal and one that halfway way through the two years seemed way out of reach. During this experiment, I was my worst enemy.. Here's what I got out of it and what I've learned about my investment style..

The choice of the stocks were sound and I kept doing a cardinal sin of mine, I continued to sell the investments too early. I owned GOOG, AAPL, ANAT all which I reduced positions after gains only to see them rise even more after my reduction.

Jan 2013 I reduced my position of ANAT by 75% after a mere run up of 10%.. only to see ANAT rise from 79 to 117 currently. This move again was a little too soon in nature and I missed out on a big run, here's the kicker though, I purchased AAPL with the funds which had returns from the low 400's to now 650's after split adjusted pricing. The returns would have been just about the same and I spent an extra $14.00 for it.

October 2013 I reduced my position of GOOG by 25% after a run up of 46% locking in some gains... only to see GOOG split and rise from 880 to 1100+ after stock split adjustment. missing out on an additional 36% gain. Luckily I only reduced my position by 25%.. After reducing GOOG I purchased ARCO which is the McDonalds of South America.. Arco has produced a lose of 7% a difference of over 42% after adjusting for dividends.. The reason for reducing GOOG was my over exposure to tech and GOOG is currently bringing a high P/E premium. Will ARCO payoff, we'll have to wait till after the world cup to see.. Currently the answer is no..

March 2014 I reduced my position of AAPL by 50% after a run up of 22% locking in some gains.. Only to see AAPL split and rise from 442 avg buy in price to over 638 after split adjusted price plus dividends... missing out on an additional 17% gain plus dividends. After reducing AAPL I purchased IAG an investment in the protection side. This gold stock has been beat up and spewed out and seemed like a great play on gold moving forward. Now remember, I think investing in gold is silly but investing in the business of mining I do not believe is something as trivial as people use gold for many things outside of investing. IAG has produced a gain of 13.5% a difference of a little over 3% compared to holding AAPL.. Again bad choice of selling too early although I feel it is easier for IAG to double in the next few years compared to AAPL. AAPL was my biggest investment and I reduced my position because of over exposure to tech and higher premium on P/E. Will IAG payoff? Only time will tell.

So those were my investments I sold too early on. Let's see how they compare to my other choices throughout the last 2 years..

April 2013 , my first sale was ARO.. The business deteriorated after the CEO left and I pulled the trigger less than 1 year after purchasing. This was a lose of approximately 36%. This move proved to be a wise one as ARO continued to perform poorly and the stock has paid the price for its lack of business earnings during the time. I felt this company was heading south quickly and took immediate action based on earnings. ARO fell from 13.50 were I sold to now at 3.42 a decrease of an additional 75%. After selling completely out of ARO I purchased NOV which has increased 15% plus split into two companies giving an additional 10% for a total gain of 25% a difference of 100% among the choices. I really made out like a bandit and my decision was sound.

April 2013 I also reduced my position in JNK by 50% and completely sold out of VCO. VCO I took a lose of a couple percentage points and now it would be up 2%. This move proved to be a wise move as 4% return would have been very weak compared to the market. JNK I sold for gains of 10% and would now be up an additional 4%, again completely trailing the market. After selling completely out of JNK and VCO I added to my position in AAPL which has increased 52% a difference of 48%. Again moving dead money out and buying a better asset.

June 2013 I reduced my position in gold puts by 50% and completely sold out of the position by September. The returns were 333% on the positive, during this time I saw much volatility in gold and thought it would be wise to buy puts in a fast weakening gold market. The decision proved to be very profitable one. I purchased ARCO which as I discussed above has produced negative returns since that time. Still quick and great returns for what I thought was an insurance policy.

August 2013 I closed my position in JNK and locked in gains of 9.9% for a short time. I held cash for 6 months and purchased NLY afterwards for a gain of 7.5% after dividends for a difference of 5%, this again proved a good sell.

Jan 2014 I reduced my position in DB and locked in gains of 10% and then completely closed my position in May an entire 2 years from original purchase for a 0% gain. DB business deteriorated and earning dropped, this bank has proven to be my one company I can not guess right as I've purchased 3 times and have lost money on it twice and let gains dwindle once. I feel it can be a winner but it's proven to be outside of my realm of understanding. After selling completely out of DB I purchased WFM which has gained a quick 10% while DB has continued to decrease 6% a difference of 16%. Whole foods finally dropped to a valuation I felt I could pay and it's a company I've had my eye on for 2 years!!! I'm excited about WFM's future.

In May I also reduced my position in V by 23% and locked in gains of 76% and used the earnings to purchase WFM and BND. As mentioned above WFM has gained a quick 10% while BND has gain 2%. V during the time has increased 1% a cumulative difference of 5%. I have purchased BND as I feel the market has reached a point where it's much harder to find companies selling below intrinsic value.

That sums up my two years and my 42% return during that time. During these last two years my performance was enough to best the DOW by over 13%, best the S&P 500 by 2% and tie the Nasdaq. Warren Buffett is right, why not just by a S&P 500 ETF and not worry about anything. At the end of the day I feel I could have outperformed the market if only I had not sold my winners and waited to see a deterioration of earnings vs basing it on multiple of P/E. Then again the market is on a tear and I'm positioned for a correction holding defensive stocks like BND, MCD, NLY, IAG.. Thank you and let's see what the next two years has in-store for us.

"I started a career with Jeep and left Honda behind"

Signs of the end of the Bull Market - Are we there yet?

2013-12-04T21:39:00.002-08:00

With the incredible run the stock market has had lately and the financial news outlets touting the return of the retail investor, is this the sign of the peak of a bull market?
This a tricky question as it pertains to market timing and I believe you just can not time peaks and valleys. All you can do is look at real earnings, dividends, and price ratios. How can you quantify the billions of emotional decisions created by billions of people many times of day? You can not!

So what makes the end of a bull market. Here are the things I've started to look for and believe will be the turning point on the market, plus a stock that has delivered 76% returns in a little over 1 year.

1. The return of the retail investor. Here is a great chart showing how many US adults are invested in the stock market. Although this is not a sign of a bull market it really states if you have people in the sidelines ready to buy more stocks based on usual trends or if everyone who normally buys is all in..
http://content.gallup.com/origin/gallupinc/GallupSpaces/Production/Cms/POLL/-fij1vs34ucogevz2skdya.gif
-Based on this chart the data states you have more room to grow and the stock market might continue to rise because only 52% of US adults own stocks and the addition of these final 8% of the population will appreciate the stock market even further. This # loosely resembles what might be people now seeing stocks as risky or simply waiting for it to drop a bit in order to jump back in. The fact that unemployment has been so high for so many years may simply mean that the extra 8% is simply not in any kind of investment period as they have no economic assets.

2. The quality of issues doing well have horrible fundamentals.
-I believe this is a key detail to a bull market and sign of things to come. The worst of the fundamentals are and the better the issue performs the more optimism you have in the market. This optimism is what creates an inflated price for companies without the right reasons. In my short decade of investing I noticed how oil stocks boomed so far up they seemed they would never fall again, and then bam, down to the gutter. We saw the rise of internet stocks in the 90's only to fall sharply after people ask "how much did I pay for this company?" It was only $20 a share but they forgot to check to see that they sold 1 billion shares and they've never earned a dime in earnings. Do you see this kind of mania now? I see it in some like Pandora, Amazon, Twitter, Tesla, and what ever the next fad will be. Many of these are tech companies but you also have 3d printing craze and bitcoin craze going on. Are you a buyer of these companies or are you the one wondering who's buying this stuff?

3. Price to earnings ratio.
-Historically this has been the top sign of an over inflated stock. A stock selling for over 20 P/E with low growth is not a good investment. A stock selling for over 20 P/E is not a good deal unless it keeps growing at an astronomical pace. But don't forget a growth area will get competition quickly as others try to capitalize on the opportunity and this creates the beauty of competition. Out of all the bull market signs this is usually what worries me the most. I have a tendency of picking great companies, buying them cheap, and just waiting. The problem is that the companies I purchased cheap are now selling at much higher multiples. Here is a perfect example for you. I won't say the name of this company until the end. I purchased this company when it was selling around 17 P/E. Here is the growth rate.

Year	Sales	Net Income	EPS
12/2008	21,795.55	4,226.86	13.31
12/2009	23,651.00	6,520.00	20.41
12/2010	29,321.00	8,505.00	26.31
12/2011	37,905.00	9,737.00	29.76
12/2012	50,175.00	10,737.00	32.46
Growth Rates	23.18	26.25	24.97

Pretty good find when you can buy this stock for under 17 P/E with super growth ahead and behind it. Now here is how its price ratio measures now.

Date	12-mos Rolling EPS	Dividend	P/E Ratio
09/2013	34.81	NA	25.16
06/2013	32.57	NA	27.03
03/2013	33.58	NA	23.65
12/2012	32.46	NA	21.79
09/2012	31.92	NA	23.64
06/2012	33.74	NA	17.19
03/2012	26.52	NA	24.18
12/2011	29.76	NA	21.70

This stock is now selling for 28 P/E and it's safe to say it will continue to grow. The million dollar question is whether to sell or not too sell. This company referenced above is Google and its recent 76% rise in a little over 1 year. I have many stocks like this that are now selling at multi-year high compared to earnings. I have reduced positions on some, sold covered calls on others, and simply feel like the market is getting a little ahead of its self.

So currently we have 2 out of 3 occurrences that may justify the end of a bull market. We do not have retail investors in droves like in 2007 and 1999, but we do have not very good companies selling for extraordinary valuations with no real earnings, we do have many stocks selling for multi-year highs. This may mean it is time to maybe not reinvest the dividends but wait for a better buying opportunity and be a little patient with our funds.

What do you think is a sign that it may be time to reduce positions? Plus another question to ponder on. If you only had one stock you could invest in the next 5 years which would be your favorite value play right now? I'm having trouble finding cheap stocks at the moment.

Growth or Value investing..

2013-10-22T21:23:00.002-07:00

It has been a few months since I really felt the actions or situations of the stock market required any kind of writing. The S&P 500 just hit an all time high today and it has been a little hard to find cheap stocks to invest in. Usually my writing is about a stock I find to be priced cheap. Well you don't find too many of those out there right now.

I've got to be honest, it's a little nerve wrecking seeing some of the valuations out in the market. Seeing NFLX come out with earning and get real close to a valuation of $400 a share or a better way of seeing it from an investors perspective, it reached a market valuation of close to 23 billion dollars. This valuation for a company who's made 620 million dollars of net income from 2008 to 2012 combined. Even if you added all the years together into one, the valuation would be rich. Please do not get me wrong. I invested in NFLX twice, once for me, and once recently in a friends account which doubled his portfolio in a little under 1 year. The question is not whether NFLX is a great company but whether it's worth 23 billion dollars considering it makes 120 million dollars a year average on net income?? This valuation to me is in the edge of a major bubble.

Currently my portfolio is up over 30% since May of 2012. My personal goal has been to grow my portfolio by 50% in a two year period and to do this without any leverage and minimal risk on my side. How do you minimize risk? Well you do that by buying cheap of course.
2013 has been in autopilot and I've done minimal tinkering with the ole portfolio.

In 2013 I've done a total of 6 purchases. I purchased AAPL in two orders and now AAPL is my biggest investment and has returned 17.22% gains plus dividends in under 10 months as I was buying in the mid 400's because the company was selling cheap. One of the things I've noticed about buying cheap is, when the media is saying only negative things about a company even though the #'s do no match the buzz, it makes for a perfect investment.
"Here's the post when I originally purchased AAPL
http://www.insomniacinvestors.com/2013/02/one-year-has-gone-by-and-not-one-stock.html

I purchased Gold put options in February and sold completely out of them for a 500% Return. My investment in put options was more of a protection against market drops. Gold itself seemed to be a bubble ready to burst when you are driving around and seeing people standing around with "Sell us your gold" signs. That's just an obvious sign of things to come or a bubble. Remember the real estate bubble?? It seemed even the maids were selling real estate.
"This is where I started posting on Gold Put options"
http://www.insomniacinvestors.com/2013/05/market-activity-nov-aapl-anat-gld-jnk.html

I purchased NOV National Oilwell Varco in April of 2013. It has returned 23.33% in only 6 months period plus dividends. This was a company selling for 27 billion when it earned over 2 billion in net income in just 2012. See what I mean by Netflix having a crazy valuation? NOV is a great company in my hometown of Houston and if it pulls back, I will probably add to my position as long as the business continues to function as effective as it is now.
"NOV May discussion- very short"
http://www.insomniacinvestors.com/2013/05/market-activity-nov-aapl-anat-gld-jnk.html

My newest investment and one I will be adding to the spreadsheet on this site is ARCO. Arcos Dorados. Arcos is a play in the Latin American countries with a tie back to the United States and I purchased it in two orders. Arcos is McDonald's largest franchiser in Latin America and as a long time McDonalds share holder it seemed a logical and known way to invest in an emerging market. Arco has appreciated 5.76% plus dividends in a couple months.
"I have not written a post diving into this investment but with the world cup around the corner and McDonald Corporation being a major sponsor, the future looks good for ARCO."

So I've done a little selling also outside of the Gold Puts. Here they are below.

I lowered my GOOG position as it is currently trading at 27.33 P/E and this area to me is considered a heavy on the valuation side. I believe in the company for the future but felt it prudent to reduce position by 1/3. GOOG has appreciated 67.82% since I wrote about it and added it to my portfolio.

I have also sold covered calls on DB Deutsche Bank as I felt the 8% return on the covered calls plus the 10% appreciation if it gets called at the strike price is a good sale point for the stock. It would reduce my position by 1/2 if it strikes and I would gain a minimum of 20%. The stock itself is up 16.66% since my original purchase in 4/29/13

That's it. Nothing more in this buy and hold world of mine.

So the title of this post is Growth or Value investing. As I've continued to look into my investment style I have noticed a particular trend in which of my stocks do the best. It seemed that buying a growth stock during a time of negative media attention, GOOG in the middle of the China debacle, Visa during the debit card fee circus, or even Netflix during the financial crisis has proven to be the most rewarding investment type. I've bought stocks that I found to be cheap but without the growth they just languished in obscurity or depreciated dramatically like ARO - Aeropostale did. The feeling to me is that a good portfolio needs to consist of buying growth stocks during a lull as at a value price or below its intrinsic value. This will be my mission going forward. Finding growth stocks selling cheap. Have you checked out ARCO yet??

"Arcos Dorados recently won 6th place as one of the best places to work in Latin America" You don't get that here in the US.

Microsoft down - Google down - Apple ?

2013-07-18T22:13:00.001-07:00

It's been an interesting day today, one worth writing a little bit about. Back on the 12th of June I was a little upset about how Microsoft kept botching releases and how they are basically handing the competition the win and wrote a little bit about it here. http://goo.gl/Xh6v3 So I decided it seemed like a good day to buy put options on Microsoft as an insurance for Google earnings coming out. Wait that doesn't make sense, why would buying put options on Microsoft be an insurance on Google's earnings? Simply the fact that if Google didn't deliver a great quarter then definitely MSFT wouldn't either. Guess what, I was right. But guess what again, my strike price didn't hit by a nickel!! hahaha ole greedy didn't want to pay too much for those options and I missed out on what would have been an easy 30% return on those options over the course of a few hours. Life finds a way..

So what was the catalyst, as they say in CNBC, which made me finally make up my mind on buying puts on Microsoft? Interestingly enough listening to CNBC this morning the reporter mentioned people piling into MSFT to get a nice yield. This brought to mind a great quote.

“More money has been lost reaching for yield than at the point of a gun.” –Raymond DeVoe, Jr
Lovely quote and ah so very true. How long will it take those who purchased Microsoft today chasing yield to make up for the loss they incurred by the end of today?

This brings us back to GOOG, what happened? How in the world did they miss analyst expectations by so much?? It all comes down to two things, Motorola and mobile advertising. But please note the analyst had gotten way ahead of themselves and Google was selling at a multi-year high on P/E so the expectation of the stock depreciating was there for me at least, thus the put options on MSFT I was chasing. Here is a nice chart form Nasdaq.com - Going into earnings today GOOG was at 27.1 trailing P/E, as you can see not selling at its cheapest level there. When did I buy this thing anyways?? Ok just checked and originally purchased in May of 2012 when it was selling somewhere around 16-17 p/e. Buy stocks like you buy your steak, when they are on sale!!

Date	12-mos Rolling EPS	Dividend	P/E Ratio
03/2013	33.58	NA	23.65
12/2012	32.46	NA	21.79
09/2012	31.92	NA	23.64
06/2012	33.74	NA	17.19
03/2012	26.52	NA	24.18
12/2011	29.76	NA	21.70
09/2011	29.35	NA	17.55
06/2011	27.73	NA	18.26

I was impressed with the results and think Google has a ton of momentum going forward. Chrome Os, Android, Glass, Fiber, Maps, Youtube, and MOTO X just around the corner. As mentioned earlier in the year my weakness as an investor has been selling too early so I'm keeping this one for a while, even though I saw it priced pretty high. With the incoming product and momentum this company is a keeper. Microsoft on the other hand.. I'm not so sure about..

Microsoft just has the Blackberry feel and I'm not trying to put them down either as I've always been a fan of Microsoft.. If you look back at Blackberry they were making lots of money and growing there business but they were not making product people were passionate about anymore. What happens when people do not want your product anymore or people aren't calling it crackberry anymore?? Well just pull up a Blackberry 5 year chart and you'll see for yourself.

Here's the skinny on investments for the last month.

AAPL: is my largest holding now, as I mentioned earlier I put my money where my mouth is and I've been buying AAPL in the low 400's. Let's see what earnings tell us in the incoming days.

GLD: purchased some put options and closed out 50% of them recently. 500% return in a few months on shorting gold, not a bad decision. I'm still packing some put options and will sell in the incoming months.. you can read my rant on gold here http://goo.gl/ERomU

That's it!! no more action, purchased more Apple and sold 1/2 my gold put options, see what I mean about investing for the long term being boring. I will be buying a Latin American play in the coming months but it has not happened yet as the price level I prefer to purchase it at has not hit.. Good luck!! What's your favorite value play for 2013 by the way??

Do these Google Glasses make me look dorky?? Of course they do but I like them!!

Did Microsoft just shoot itself on the foot in EDD?

2013-06-12T20:49:00.002-07:00

I started writing this a few days ago but never could finish.

-First you must know I have been a windows user since it was a DOS based system using commands to navigate the hierarchy of files. In 2009 it seemed like investing in MSFT was a wise decision and it has in fact delivered better returns than my Google investment. The stock has appreciated nicely and it pays a nice dividend. Fast forward 4 years and now the future for Microsoft (softy) looks a little bit murkier.

I can easily think of many things in the last few years Microsoft has dropped the ball and assisted the competition in gaining ground. These I believe are huge mistakes.

Windows: The once leader and OS of choice is now confronted by Linux, Apple, Chrome OS, and of course we have the release of the current debacle, Windows 8. Microsoft is basically giving its competition a hand on catching up.. I mean really when people are paying to downgrade their system back to the older version of your product, you've got a problem!

Mobile: When the current iteration of windows mobile came out, it felt out dated out of the gate and Apple and Android already were in the position to dominate the space. This I believe will be the end of the reign of Microsoft as html 5 will allow all OS to work equally as good in its space. When you are supposed to be the leader in software and you represent 5% of the phones, you are in trouble!

Explorer: The once dominate browser may have been surpassed by Chrome (depending on the sources) and without a doubt has been surpassed by Chrome outside of the US. What went wrong. Well lets just say people got tired of the screen going white and the constant freezing... How many times did Explorer need to crash on you before you had to throw in the towel!!

XBOX 360: so wait a minute, the XBOX one was just announced and you are going to write it off before it comes out!.. Why, yes I am. As a long term Xbox user and player I can not help but notice that the price point is too high. I can see Steve Ballmer deciding on the price point."If Apple can sell Ipads for 499 we can offer an entertainment system for 499 with no problems as our product is better and has a better core audience!" Actually he may be right on the core audience but the same core audience will dog you to no end when you break their hearts. Plus the much higher price point compared to the competition and the fact that TV's are now starting to be smart Tv's eliminates the advantage of an XBOX being an entertainment system. Listen, I'm a fan of Xbox, I can easily afford an xbox one without it hurting my pocket book one bit, I also look for value and it is not a DEAL. It's a deal breaker.. If a guy who can easily afford an Xbox, who buys games and doesn't play them, thinks its too much money than it probably is too much damn money for a toy?? The ruse that apple uses to sale Ipads is that it is not a toy but a connection to possibilities. You will fill it with apps to provides substance and not waste.. Hahhahah. I remember the first PC's were tools that changed the world but for most they were the most expensive deck of cards they ever owned. (remember solitaire?")

"The Entertainment and Devices Division posted revenue of $2.53 billion, an increase of 56% from the prior year period. Adjusting for the recognition of revenue related to the Video Game Deferral, the division’s non-GAAP revenue increased 33% for the third quarter. Xbox LIVE now has over 46 million members worldwide, an 18% increase from the prior year period.
"
With 46 million members and some paying members would it not have been wise to make the Xbox one cheaper than the competition knowing you would get a monthly milking out of the consumer? This is where Steve is going wrong, he's not being a pig, he's being a hog, and we know hogs get slaughtered. Microsoft is a great company with many great products but when you start the negative feel not even a great product can save you from the onslaught that is called perception. Here's your foot, go ahead and shoot it now..

I may switch my long to a short in the coming days, I may not until I do a bit more research, the decision isn't made yet..
What are your thoughts on the mojo surrounding Microsoft??

Sell in June and Go AWAY!!

2013-06-04T13:21:00.000-07:00

Is it sell in June and go away or buy in June when you see affordable? What the media tells you is that you are supposed to sell in May and go away but what about those dividend pay outs, and taxes?! The purpose of this blog initially was to help me determine where my weaknesses, my strengths, and my errors in investing came from. During the last few years without a doubt I have pinpointed some of my weaknesses, a strength of finding great values, and sometimes letting boredom overcome my better judgement as you will see in the options thoughts below.

Selling to early seems to be a pattern for me. I see it consistently in my investments, the research is done, I find a great bargain and then sell out of it a tad to early. Thinking back of what would create this effect, it's probably rooted in the 2009 crash. Remember not selling because of the "hey your young" mentality, and seeing a big part of my portfolio go crashing down has an effect on a young man. Of course it feels like I sell early because the stock market has continued to rise and any investment I found a little to pricey or simply not up to par with my expectation, has been sold. Had the stock market come crashing down it would seem like I sold at the right times and I would have immediately been labeled a genius. The reality is I've only recently been reallocating funds and as I write this I'm 20% cash, 10% Bonds, the rest is all equities. (rounded)

Going back to selling to early, this is an interesting observation because as young investor who really doesn't need the money shouldn't I be the character type that buys and only sells when he hits the Jackpot? Isn't that what you should do as a young investor? In the coming months, even as I'm shaking in my boots because of the new market highs, I will be slower to Sell! Sometimes you just have to look at the data and work on what could be a potential fault. Let's see how this works out for the next few years.

Ok, so going into to the boredom category, I have a question for you!! Have you ever used covered calls and naked puts? How did it work out? The more the market climbs the harder it seems it is to find a cheap investment, so instead of selling or buying at these levels it would seem prudent to sell a put and get income out of a rising market. If it goes down you bought a good company for a good price, if it continues to rise, you were an insurance company for someone else and got paid for it.

How about covered options, I see some options pay up to 10% a year to write a covered call plus a 10% or so markup on the stock for a total of 20% return. This would provide nice cushion if the stock market goes down, and provide a nice selling point if the market continues to climb upwards. Yes I'm writing about selling a stock even after writing about not selling early! But we are talking years here, not months, days, or minutes like you see on the tube. An example would be Google currently selling for $860.00 a share for a January 2014 $940 options covered call would pay $3420 to you now. If the stock sinks to 828 you would be even, if the stock appreciated up to 939 or anything in between you would get to keep the funds, and if it goes to $1000 you sold at 972 but you got into the game of selling high. In actuality you are putting a sell for $972 when the stock is barely at $860 months in advance. What are your thoughts on this? Has anyone done this successfully, or does this strategy leave you with under-performing stocks while the winners get called?

So naked puts is another option that seems to be a no-brainer. I'll use one of my real trades as an example. I wanted to buy 200 shares of NOV, but not at current levels, I felt more comfortable 10% lower. So you normally would put in a buy for 66, if it strikes you bought the company on the cheap. Why not sell a put option to buy at 66 when it pays you over $1060 for putting in your order, let's say it goes down, you would have bought it anyways and now you actually purchased it at $60.70 instead of $66. If it goes up you made $1060 because your research told you it was going up. The only other no-brainer in this type of investment is not to overextend your account and only sell puts if you have enough cash to cover were the investment go down to $0. Does anyone do this with much success??

Thanks..
In the last few months I've closed out 100% of my position on VCO and reduced my JNK by 50%. My biggest holding now is JPM

Why hasn't McDonalds split its stock?

2013-05-08T20:33:00.001-07:00

Well life can humble you sometimes. I'm writing this a few years after expressing on how confident I was about MCD splitting its shares. You can see the post here.. http://www.insomniacinvestors.com/2010/12/mcdonalds-corporation-will-this-stock.html

My initial thoughts in 2010 have proven wrong so far. Now a few years have gone by, and without a doubt McDonald shares are selling above the usual share price which would have sparked a split in the past. This situation has me intrigued with another question in mind and one to consider from another perspective. Why hasn't MCD split considering it would have split in the past? Here are some of the reasons which may be in consideration for McDonalds or any company.

Cost: Splitting shares adds cost as you pay a small fee per outstanding share. You have the added legal fees of writing up the split, redoing the financials, trading cost and other cost. Let's say for argument purposes that the cost is only $10,000, That's a lot of Value meal sales, and in a business like McDonalds where they watch the pennies, why spend the extra amount when you don't have the need. I don't doubt splitting shares has a bigger cost than 10k and so the savings probably is more.

Investors: Do you believe McDonalds wants traders or investors buying shares? I believe the Warren Buffett effect has everything to do with finding fellow investors and avoiding speculators. By keeping the share prices high in theory you reduce the volume count and the volatility of the stock. If you are a trader, volatility is where you make your money, if you are an investor, long term growth is the be all. Real investors are not buying a stock based on whether it is a $10 stock or a $1000 stock, they are buying based on ROI, P/E, Book Value, FWD P/E, EBITDA, revenue, and other financial information. As an investor I choose steady growth over volatility any day of the week. This I believe is the main reason McDonalds has not split its shares.

Ego: Although Buffett states he never split Berkshire stock because of the kind of investor it brings in and the type of investor it keeps out, never forget about ego!! Ego is what makes a person say I ran the company when the stock hit $100 or as in old Mr. Buffetts case, "$100,000". I can see the pride a CEO would exude about hitting new highs and simply looking down on the competition and seeing it nowhere near its mark. It is the Mt.Everrest effect. Let's climb to the top so we can say we did it. How high can you go! Ego plays a part in every persons decision and lets not forget a company has ego of its own.

Benefit: From a traders perspective the initial jump created by a stock split is a money making proposition. From a company perspective you just added a small jump to your stock but it usually means bringing in more fidgety investors and/or misinformed investors who believe a $50 stock for a company means it is cheaper than a $100 company when a $50 stock can be worth billions more. Usually the added effect and the so called confidence effect last only as long as your next few quarters of earnings. The benefit is very small, temporary and doesn't add long term value for the companies shareholders. It comes down to adding cost and creating no real value by splitting now days.

Past: Before discount brokers you had to basically buy stocks by the 100's or pay a premium to invest in smaller amounts, this has changed and the old benefit of keeping stock cheaper for an investor has gone away.. Now it can cost $5 for a trade of 100 shares, 10 shares or even 1000 shares. You no longer need to keep the stock in the $40 to $50 price range many companies of old preferred to keep stock prices at so people could afford to buy 100 shares. In the past a stock split was a good thing, now a high price is something to beat your chest about. Look at Goog, AAPL, or BRK.A for example.

So there you go.. Just a few reasons why MCD might not ever split its stock again, the benefits of old have diminished and the benefit of finding real investors has increased. Of course this usually means tomorrow might be the day MCD announces a split!

A picture of me and my daughter in front of American National Headquarter.

(My daughter is a shareholder of the company and I have been a share holder since after IKE took the stock down to almost nothing)

Market activity - NOV - AAPL - ANAT - GLD - JNK - GOOG - ARO

2013-05-06T23:34:00.001-07:00

Today was a big decision day, I've always had this inner battle of making my blog public to those people around me or simply being anonymous to those around me about my investment interest and capital growth. The year is 2013 and I've decided I'm pretty proud about what I've been able to learn and improve on towards investing. If someone I know finds my blog and ask me questions, I can proudly share my passion with them. Do you know what this means? I've connected my blog to my facebook and google plus page, this is actually a pretty scary thing.. I find not being anonymous a little intimidating because of what people may find out about me but ultimately it might open up conversation with people I know about investing.

All of last year I made very little movement on my portfolio. This year I've made a few more but feel like I'm being to active and should just lay back and relax a bit. Here's basically the breakdown on my activity.
Reduced position on ANAT - American National
Purchased position on AAPL - Apple
Reduced Position on JNK - Junk Bonds
Purchased Position on GLD - Purchased put Options
Sold out Position on ARO - made money on in the past but gave some of it back this time around. .
Purchased NOV - National Oilwell Varco

Currently sitting on
8.33% Cash
8.33% Bonds
3.33% Options
80% Equities

Last time I wrote on my AAPL purchase and my reduction of ANAT you can go here to read more about it.. http://www.insomniacinvestors.com/2013/02/one-year-has-gone-by-and-not-one-stock.html

I'll start on Google. This company is coming out with fantastic products and a lot of buzz surrounding Google Glass. As of this morning Google surpassed MSFT on Market valuation. This doesn't actually surprise me. As a long time windows user I feel almost forcefully pushed out of the windows environment and feel Google keeps making products I want to throw my money at. Not a great thing for Microsoft to be battling the cloud services, tablets, OS, Search, Game Consoles, and phones. Microsoft this time around just doesn't inspire on any of those fronts. With Glass coming out sometimes later this year and many people awaiting the "one more thing" from Google I feel Microsoft is going to stick with litigation as its major weapon instead of innovation... and yes I stole the phrase from Steve Jobs. Google really has many good things going, Plus, Android, Chromebook, Chrome, Search, and add in the fact people want to work for Google and you have a winning combination.

JNK - Junk Bonds have been on a tear and although I reduced my position it is simply a diversification move as I feel the moment it turns it will be as Buffett states "the shot heard around the world" but frankly it could be many years before it turns and I have been collecting a nice dividend and appreciation for the last year. Not overly worried about JNK at the moment as the current improving economic state means the companies who pay into these bonds are less likely to fail and to continue paying up dividends. I enjoyed my monthly payments of dividends from this investment and will continue to look forward to more payments in the future.

ARO - Aeropostale, you broke my heart. I invested twice in this company.. Once for a 60% appreciation and once more for a 35% depreciation.. Ultimately this business under new management has deteriorated instead of improving and I simply ran out of patience and didn't like to see the continued under-performance. It was time for us to cut loose and move this capital to better companies.

GLD - I can write 50 pages on why investing in Gold is silly but will stick to the fact that I believe Gold is a bubble and it will come crashing down as all bubbles eventually do.. I like putting my money where my mouth is, so I purchased PUT options and they appreciated very nicely. Over 200% in a few months time.. I have not sold out as I'm still waiting for the music to stop and have invested in these puts as a protection against market swings. I believe if the market drops you will not find a place to hide and that includes gold bugs, so a little protection and being short something is not a bad thing, right??

ANAT - American National has been on a tear since I reduced my position and seem to have exited prematurely. Although I'm enjoying the appreciation I would have much preferred to enjoy it while it still was my single largest investment ever.. Now it is just a normal part like the rest of the equities. No worries, life is good and I'm happy to know I was right on my assessment of the company, if not wrong on the exit strategy. Now Visa is my largest hold.

AAPL - I'm sorry people but it'g going to be an Apple-Google world. I believe these two will be going at it for many years to come.. Apple will focus on premium brand items and making money for developers while Google will focus on low cost and saving consumers money.. Which strategy will be successful?? Well, probably both.. I felt compelled to invest in Apple while it was selling so cheaply compared to earnings and feel confident it will get its mojo back if not simply just take Windows business away.

NOV - My new equity purchase is one of the last value finds out in the market. This sounds crazy but I gotta tell you many of the companies are selling for a hefty premium and only very good growth will bring them down to what I consider investing area.. As the market has appreciated some of the companies were left behind, National Oilwell Varco is one of those companies.. It has a low P/E and is poised to grow its earnings as the oil industry finds a new high in the coming years. Plus being from Texas I like the fact this company is right here in my hometown of Houston. I'll write more in-depth on my next writing. Until the next sleepless night, have a great one..

"Let's go dig it up across the planet and then store it underground"-said a genius.

Is investing in Apple a good idea?

2013-03-25T21:22:00.000-07:00

I mentioned earlier this year, being a long term investor is boring because you don't really get to dig deeply into every percentage or minuscule price change. You don't have the privilege of going crazy when the market goes up by 100 points or drops by a 100 points. The life of a long term investor revolves around you telling yourself you did a good job picking a company to invest in and sticking with it until you see the business getting better or deteriorating over time. Basically investing in buy and hold is boring!!

Here's a recap:In February I wrote about reducing my position in American National and buying a little known company named Apple. This investment move has proven a mistake in the short run but remember my investing style is a marathon.

Here is what has happened to American National in the short run.. Since I last wrote in Feb about reducing my position American National Stock has risen with many Insurance companies. (Anat) This is more of a industry movement and you see companies like AIG on the move also. Apple on the other hand has moved down and now is up a mere 1% compared to American Nationals 10%.. This is something as a long term investor you see often. You see something you choose for the long run, not do anything in the short run while something else may shoot up.. Remember I didn't sell my entire American National position as I still feel very comfortable about the company, so I'm profiting from this rise. I've heard the term "money you miss is money you lose." This is OK especially when it comes to diversification considering American National was my biggest single investment until recently.. If you must know my biggest investment now is JNK Junk Bonds and had been my 2nd biggest investment for the year until my recent decrease in ANAT. So why in the world would anyone sell American National for a bad apple or a falling knife as it's known in the investment world?

I believe what I see and the numbers do not lie; recently I went to a few Starbucks in the area and looked around.. I heard a rumor that young people were no longer using apple products.. So I went where the young people go and guess what I saw? A bunch of young educated punks using nothing but Apple products, in fact I only saw one person with a non Apple.. So what in the world are people talking about? If Apple is no longer cool someone forgot to tell the young college students sitting around drinking $4.00 coffees. As I sat there and enjoyed my smoothie, (I own Starbucks stock in my daughters account) I had the feeling that it's not that young people aren't buying Apple products, it's the fact that Apple products are so good people are not in a quick trading cycles like the PC's.. Those PC's start feeling old the moment after you start putting your own touches after you turn them on for the first time. 1 month later and your PC feels much slower than the day you brought it home.. (Not like my Chromebook which I'm using now) The reality is Apple products are so good people don't feel like they have to buy newer ones right away. It's a double edged sword for Apple, make a great product that is durable, it's so durable people keep them for a long time without upgrading. Bad business or good business? If you're in IT you've learned the whole make a crappy product and then sell and charge up the ying yang for servicing it. Well Apple is not getting the benefits of making a crappy product but if history has taught us anything it's that companies with long term vision will usually outlast those with short term views. In the long run I believe a quality product is a much wiser road than a constant replace business. So why am I buying Apple now? Simply the fact that it is selling cheap to what I believe the future earnings of this company are going to be.

I leave you with this question and answer.. How much would you have if you had invested with Apple 5 years ago at a much higher multiple to earnings and whole less money in the bank?? I'll put it this way; the dow jones would have earned you a healthy 21.9% plus dividends over 5 years. This would have given you a nice 6% appreciation or so a year.. Not bad considering I just received a High Yield Savings offer for .85%.. Apple has appreciated 246% plus dividends, so let's just leave the dividend out for this purpose.. The Apple computer tipping point has hit the PC market and the odds are in our favor for this stock to continue to rise to a more historical multiple of earnings. Am I 100% certain Apple will rise? NO, no one knows the future. Am I confident Apple will rise over the coming years? Yes.

One year has gone by and not one stock sold.

2013-02-01T12:20:00.000-08:00

Wow what an interesting year 2012 proved to be, I didn't sell one single stock in 2012, after all I am a buy a hold investor. The best part is the nice appreciation my portfolio experience. This is a wonder considering I constantly see in articles and news clips how buy and hold is dead, yet here we are. As agreed I started measuring since last May and the portfolio is performing fantastic.. In fact out of the 10 stocks purchased all are up except for one.

Yes it has been a fantastic run for the market in general but without a doubt since re-calibrating last May it's been a watch and collect business. Since last May the DJI has gone from 13,200 to about 13,800 where we stand now. This is an increase of about 5% yet my portfolio has appreciated 12% since the date. I have to admit this year I have decreased my ownership of American National Insurance Company. (ANAT)

Why would I reduce ownership in such a great company now that it has gone up you say? Well that's a simple answer, with Anat going up it has lost the main reason for me investing in it. To me Anat is a safe haven equity which I believe is similar to cash and it pays a great dividend, once the equity rises in value it loses it's safety net of being super cheap. As it sits near its 52 week high I felt it was wise to pull the majority out. Look American National is still selling cheap but not as cheap as before.. So what in the world are we to do with the funds freed by our recent decrease in position?

Enter Apple. As I reduced my position in American National I have moved the funds to a company selling cheaper than Anat as P/E and future earnings. I wrote a post on why I would choose Google over Apple back in April of 2011..
http://www.insomniacinvestors.com/2011/04/if-had-to-choose-between-apple-and.html

If I had bought Apple I would be up 32.17% plus dividends but I would have taken the high road. (The stock went much higher but has come down as I thought would happen due to decrease of expectations.) Google on the other hand would be up an astonishing 30.23%!!(sarcasm) As you can see both would have been pretty good investments resulting in over 15% a year growth in appreciation. I always put my money where my mouth is, so I purchased Google last time and now sit in a 25.59% appreciation but I purchased it in May of 2012 as I described in my previous post. I have constantly thought about the whole Apple vs Google vs Microsoft battle wondering who has the upper hand and I feel Microsoft will be the big loser of this battle with Google and Apple coexisting like Target and Walmart. Google will be similar to Walmart full of cheaper product selling much more than the competition while Apple will be similar to Target, more about the experience than the price.

So here we are now.. Will we enter a new bull or start a pull back? The question I believe is unanswerable but the idea of being prepared for both is not such a bad idea.

What has happened with McDonalds and American National Insurance Company

2012-12-04T07:18:00.001-08:00

It has been an interesting year in 2012. The stock market has performed great at times only to come back and retake those gains, but throughout all of 2012 dividends have been paid on MCD and ANAT. These two stocks have recently taken a dip only to bounce back. The life of a buy and hold investor is so boring in the long run but amusing in the short run.

McDonalds has recently taken a dip because of slowed growth and currency disadvantages, not to mention a new CEO taking over. Yet the company recently increased it's dividend by 10% to nice .77 per quarter and has continued it's repurchase on its shares. So do we now sell this investment because of the recent drop in stock price? First I have to say a resounding, NO. This is a great company that is now selling really cheap compared to earnings. At 16 X earnings this a great opportunity to collect a fatter dividend, explore buying more if it continues to drop and just wait to see what this new CEO brings to the table. The current events bring back memories of "The Intelligent Investor", right now people are voting the stock down but in the long term the weight of this amazing company will outlast the votes. It's all about the earnings, dividends, and numbers. Emotion plays a part in the short run and this company has not sold this cheap compared to earning since August of 2011 when the Dow Jones was under 11,000. It doesn't make any sense to sell this stock. Thinking of this investment as your own business would you sell your business for less right when they give you a raise, have less shares outstanding, and are the leaders in fast food service? Nope. Would you buy more? That is the question for the heart or the mind..

Panera Bread oatmeal - McDonald Competitor

American National had a dramatic drop and now has regained most of the loss. This investment has basically stayed flat for most of 2012 but when you consider the high dividend yield it has performed much better than if it were cash in hand or sitting under a mattress. When the stock dropped I put in a buy for $63 a share, which never struck. The idea of buying more of this company and reaping the dividend reward for years to come had me excited. Again this is a company that has been around over 100 years but has a new COO. I'm starting to see a major trend here. New leaders equals mostly a down stock especially if the last guy did a great job. What is it going to take to make American National move beyond it's range of 65-75 for the upcoming years? I believe this is a simple answer, higher interest rates! Will we ever get higher rates or will we stay with low rates similar to Japan? I believe we should see higher rates but then again who knows, I'm not in the predicting business, I'm in the collecting business.

Google vs Apple vs Microsoft or not?

2012-11-06T21:13:00.003-08:00

The Apple vs Microsoft battle has been on again off again for many years. The first computer I ever got to work with was a nice Macintosh with big floppy disc. This nice machine, with the proper programming and lots of patients, could draw amazing pictures on papers using letters and symbols. Once I had the opportunity to get my hands on a laptop it had had to have the newest Windows 3.1 installed. Yet event then I would venture into the world of DOS and I could navigate through that beautiful black screen with efficient speed and proficiency. Microsoft was onto something, the shell system and the user interface was such a pleasure to work with compared to what was out there. It was truly a revolutionary jump for the consumer,(I know you could find similar outfits in the enterprise world) and when windows 95 came out it put the nail in the coffin for apple.(or so we thought) You could still find Apple products but it was definitely for the fans and for those who wanted to draw on CAD and use photoshop.

From 1995 to I would say even now Microsoft has run supreme. Maybe now they are not the most valuable tech company but they are by far the most used OS. From Jan 1995 to December 2000 Microsoft delivered investors a growth of over 1400%. I wasn't old enough to invest in the stock market in 1995 but I was voting with my dollars for who I believed to be the winner in the incoming years. Could you imagine seeing Microsoft today delivering growth of 300% a year for the next 5 years? Neither can I. During the meteoric rise of Microsoft the captain of the ship was Bill Gates. Bill stepped down from the CEO position in January of 2000. This may seem meaningless considering Microsoft continued to rise in the stock market but of course, that did not last long. Ballmer has delivered solid performance for the company but the stock has gone nowhere during his reign. Why has Microsoft has not been able to grow it's shareholder value beyond its dividend? Well simply because they let in a new player.

Google enters the Arena. Google has grown up to dominate the industry in a new front. It was Microsoft and Apple who fought the battle over the Pc industry but the internet war is on and Google is winning. Amazing how a simple idea of having a search box in the corner of your browser would be a deciding point of a billion dollar company. Google currently has something over both Microsoft and Apple, they have the captains that created the success of the company still working for the success of the company.. All three Eric, Sergey, and Larry. These guys are real good, in fact I would say Google is blessed to have three visionaries and not just one. This is where I believe Google excels over Apple and Microsoft. With Steve Jobs no longer deciding the vision of Apple, the company may fall right back to what it was without Steve. With Bill Gates now focused on giving his money away :-) through his foundation, Microsoft doesn't have a visionary leading the company. Basically Google has three visionaries, while Microsoft has Ballmer and a retired Bill Gates, and Apple has Tim Cook who's first move was to build a smaller Ipad in which the founder said was not good idea. Is Tim Cook a visionary? He might be, but he's no Steve Jobs.

With the current release of Metro and Windows 8 I believe Windows has opened up opportunity for the competition, Apple has a ton of momentum but I wouldn't be surprised if its only temporary, and Google has Android, Youtube, Chrome, Google.com, and Chrome Os. Hewlett Packard continued to do well for some time without it's two founders but if you look now, it doesn't look so good for Hewlett Packard. From an investing stand point all three companies are fantastic companies but we are looking for good investments, not just good companies, so this leads us to continue to believe in Google over the competition because of its leadership vowing to stay together until 2024, it's ability to think different, and because the competition is losing its strong hold on its consumers. Do you see Apple gaining 600% without Steve Jobs at the helm? I don't think so. Do you see Microsoft gaining 600% with Ballmer at the Helm? I don't think so. Do you see Google gaining 600% with the same leaders and philosophy? Now you see how it makes sense.

Here is a picture of what was supposed to be an android phone. The interesting thing is I believe Google showed this phone to Apple board as a joke. Something a company lead by a couple of young punks would do.

Sometimes even the great make big mistakes

2012-08-14T07:30:00.000-07:00

It's 2008 and Warren Buffett spots a great company selling for below intrinsic value, this Houston based company is poised to capitalize big on the continued demand for energy. The problem with his decision is that oil demand did not continue to increase but fell like a bottle rocket from its peak in the incoming months.. ConocoPhillips (COP) delivered a nice paper loss of 1.5 billion to the wise investor known for buying low and selling high.. Yet here he was 1 year later with the biggest paper loss ever delivered to Berkshire Hathaway and its sea of investors. The most interesting part of his purchase to me was not his lost, as sometimes you will lose, but the fact that his biggest loss was an investment in which Warren has many times stated he doesn't like to invest in. Warren has specifically stated he doesn't like to invest in commodity ridden investments as they can be very unpredictable. Yet here he was investing 7 billion dollars in a commodity driven company and experiencing the push created by the heard mentality that only a commodity driven investment can deliver.

One of my better investments in my young investment career was investing in (COP) while Warren was selling I was buying low. 1 year later I was selling high.. I had gotten one over on the greatest investor to ever live. (At least that was my thinking, I got a moral boost and had acted on one of the investments that got me hooked.) You see I read why Warren had invested in ConocoPhillips and he was right, his timing was wrong but he was right on his analysis. Even today I'm confused why Warren sold low, although I believe he just decided he made a mistake investing in a commodity business and with all the great values just asking to be bought around 2009 he found he would be better off selling low and investing in his comfort zone. (non commodity business ventures)

I think back to this experience and this earnings season I experienced some Warren Buffett Conoco moments. CSH, DB, and ARO were 30% of my investment portfolio and I had invested in them based on my thinking that retail demand would rise, Europe would get better, gas would go up increasing demand for payday loans and these companies were selling cheap.. Thinking back to Warrens investment timing I have learned that sometimes your analysis may be right but your timing may be wrong as was the case in these 3 investments. Cash America is suffering from overselling because of a modest outlook, ARO the same and Deutsche Bank was all about timing. Europe was not at the edge of recovery as I expected but going into more turmoil, throw in a couple scandals and you have 35% loser stock. Looking deeper it's easy to see the investments are good ones but the timing was off, looking forward 5 years I can easily see each of these investments going higher as they return to a more favorable position. Warren taught me something in 2009 and even continues to teach me today, investing based on a year by year is too short of a horizon and you have to think longer term.. The old saying is true, Investing in the short term is like a voting machine while in the long term it is a weighing machine.

Today I have something that gives me a huge advantage over most investors including Warren Buffett, this advantage is something I know someone like Warren would give his entire fortune for, the advantage of youth. I can almost see Warren offering his billions for just an extra 20 years or in my case it could be another 70 years If I don't drink Cherry coke, eat a lot of See's candy and go to Dairy Queen every opportunity I get. Learning from ones mistake is a big part of life, learning from others mistakes is even better.. Good luck and good investing.

Mid Year 2012

2012-05-27T07:24:00.000-07:00

I have been away for awhile working on two other business adventures with the purchase of real estate and running another business. Now that I have diversified my income base and cash flow is great, I have comeback to this market..

This current economic state is very interesting.. You have good news out of the United States, terrible news out of Europe, OK news out of China, and then the rest of the world.. The question that beckons, Is this a good time to invest in the stock market? I have jumped in feet first like a kid at a swimming pool, simply because I believe if you just look at the value of a business you can decide whether the business merits its current price..

Here are the business I currently purchased and why..

ANAT: This is an old favorite for me.. The stock is selling cheap and the business is a cash cow.. Recently American National has been suffering from lack of growth but so have many insurance companies.. The reality comes down to the price this business is selling for. Currently selling for a price below 50% of book value and paying a trailing dividend of 4.5% this business is selling cheap.. It has done a great job growing book value, keeping cost under control (even as it continues to diversify it's business to different locations), and most importantly make a profit during some of the harder times for insurance companies with this new era of low interest rates.. The biggest news has been Ferdinandtsen moving to vice president of the board and Pozzi now moving to the COO position.. I have met Ferdinandtsen in person and he is a very smart man, I don't know too much about Pozzi but will know more as times goes by.. This stock may hang around in the 70's for a while but during that time expect to get paid a nice dividend.. I'm confident in due time the share price will start to rise as ANICO continues to deliver solid performance. (This is currently my biggest holding in my portfolio)

JPM: JP Morgan Chase has been a company I wanted to buy into since I understood how integral it is to the American business world.. The share prices have recently taking a beating do to the mistake in derivatives by the "London Whale" trade. I don't know who's idea the trade was but I can tell you they screwed the company bad, especially in a time when James Dimon was pushing for looser rules for the financial system. I'm sure Mr. Dimon was thinking about either murder or hiding under a rock but this Harvard graduate is a great leader and I believe this allowed the company stock to come down to price that would be a great purchase.. Currently selling for only 7.5X trailing earnings, 6.5X forward earnings, under book value, and under 10X net income as a whole, you can't pass this one up.. This stock may go down to the 20's in the short run, if this London Whale trade becomes a bigger problem, but I believe James Dimon will get it under control quickly. This company is as solid as a rock, has great management who took a risk and lost, and a steal at this price..

V: Visa Looking for a growth story? While the general public gets to lose their shirts on Facebook let's look at a real business with a huge network of people whose network makes money off every transaction and doesn't rely on a consumer clicking a banner ad.. Visa is currently trading under 20 P/E and is a growth stock.. I can see owning this stock for many years to come.. The moat surrounding this business is the size of it's network.. This card is taken in about every business in the United States and has huge growth potential outside of the US. Expect Visa to continue to grow. These guys just need to stay out of court and they'll be home free.

JNK: Yes this is a Junk Bond Fund.. With the economy picking up,(and I feel it will continue to get better), these junk bond companies are safe from all falling under.. This is a pretty spread out fund having many company bonds.. With this play I plan to collect a nice yield providing cash flow and an increase in appreciation also.. Most of these bonds are rated BBB or under so they seem risky but I can afford a little risk and again feel it is diversified enough that the yields are safe in the years to come...

MCD: McDonalds is a value menu stock. This cash flow machine has a safe dividend and I don't foresee Super Size Me 2 or any other such film causing harm again. This company had lost it's way during the late 90's early 2000's but it learned from its mistakes and now is an effective machine going at full force, focused on growth. Selling for only 17X trailing earnings this business has the safety of size, reputation and need. Here is a link to its split history and appreciation if you want to kick yourself for not buying earlier.. http://www.insomniacinvestors.com/2010/12/mcdonalds-corporation-will-this-stock.html

GOOG: I don't remember which investing legend said, "Invest in businesses you like and see". Well Google is this business. I like the way it runs its business, I like how they continue to focus on leading the way instead of being part of the herd mentality,(think Hewlett Packard), and most importantly I feel it's selling for a cheap price. At only 17X trailing earnings and a growing earnings 23% for the last 5 years, it seems like a good time as ever to jump into this innovative machine. The purchase of Motorola Mobility for its patents and hardware is hurting this stock in the short run, in the long run I believe Google needed to do this to survive the courts. What a sad state we are in with lawsuits at the moment.

2011 has passed and 2012 comes full steam ahead.

2012-01-04T22:45:00.000-08:00

With 2011 now behind, I can look back and see it was a great year for investing and look forward to a great 2012.. I moved my portfolio around to better position an upswing in midyear, a decision that proved to be very profitable.. Even though some of my decisions did not gain as much as I wanted them too, and in some case they went down, I have learned to take my winners with my losers. It was a roller coaster of a ride and I sold some long term holds and even readjusted my portfolio to take advantage of the momentum created in the midyear crisis.. Loaded up on Visa, McDonalds, Transatlantic, Aeropostale, Google, dumped 30% of my Deutsche Bank and Skechers. All in all, these adjustments led me to close the year up over 20%. This was helped greatly with my Aeropostale investment I made midyear. ARO appreciated over 70% in a few short months and I sold the position at two different times with an average gain of 60%. This was the company that pushed my portfolio way into the positive, but now here comes the bad news..

So here are my recent moves.. I keep it simple when it comes to trimming my portfolio, I just sold 50% of my entire portfolio down the middle and sold 100% of the losers to offset the capital gains from my sales for tax purposes. My loser stocks were Skechers and Deutsche Bank. I continue to be a sucker for these two companies as I believe they have a good future ahead and may appreciate greatly.. Maybe, just maybe, I'll get suckered into buying them again. (Please note: I'm not a tax expert or a stock expert I just believe investing is simple, You buy a company when it's selling cheap and sell it when it's selling high) Please visit my portfolio page to see my holdings and sales.

I share this blog not to gloat, or to give people advice, but as a learning tool to help me remember my decisions and my mistakes. I share some of my personal information and wealth information with the hopes that you don't know me personally as I prefer to stay anonymous and only hope these writings help anybody who crosses by them. Investing has become my hobby.. I have a real job that pays me very well and don't plan on leaving it any time soon. If you want to ask me a question leave me a comment and I'll happily answer any question you may have. If you believe my blog sucks, that's OK too. If you have an investment idea or a blog you would like to share. Please leave me a comment.. I'm a ravenous reader and love to read everything and anything.. Thank you and good luck in 2012.

REIT what are they and why are they a value?

2011-12-01T21:24:00.000-08:00

I have spent the last 2 hours looking at financials. One REIT I believe in particular is low risk, has growth, and is selling pretty much for tangible book value. I will dig in a little more and post later. My last REIT I invested in although it didn't deliver stellar #'s it did deliver double digit yearly returns. (RWT) Now I have my eye on one but I must do more diligence to decide whether I should buy and post. (I want to go see how they maintain properties here locally they own...

Redwood trust (RWT) by the way has cratered since I posted and sold. RWT looks very cheap now but I worry about the long term for Redwood Trust.

Aeropostale investing, is it catching a falling knife?

2011-11-18T21:23:00.000-08:00

ARO truly provides an interesting history in investing. ARO went public in 2002 and it had its usual IPO ride, going up only to fall down and take every believer down with the stock. Going from $8 to under $2 before the end of 2002 provided a wild ride for any new investor to what would become a billion dollar company just a few years later.

Aro finally found footing in 2002 after dropping over 75% from over $8 to under $2, after the great fall, it proceeded to rise to over $14 a share in under 3 years. This rise was a 700% return for those brave enough to jump into what seemed to be one of the riskiest investments available. Yet if you look at its history based on financial results you would have noticed that the price actually became very cheap and ARO was a great value at $2 and not such a great value at $8. So where are we now compared to the history of this companies stock price relative to its earnings?

In ARO's first year it had over 100 million shares outstanding. From 2007 to 2011 ARO has grown revenue from 1.4 billion to over 2.4 billion, It has reduced outstanding shares from 116 million to a little over 80 million shares, and grown earnings per share by an average of 29% per year from $0.88 to $2.49. Basically this company has performed great even though its stock has gone NOWHERE! ARO has just traded in a range, but in 2011we got an over correction and the stock dropped to under $10. This stock has become cheap again, maybe even back to the same value level it found itself in 2002 before it had a nice run of 700%.

Here is the deal, This stock price can not remain at this level if it continues to grow even remotely close to its historical growth! Saying it will go up 700% would be silly, but I believe that it will rise; Maybe not 700% but even if it is only 70% in the next couple years, that would be good wouldn't it? Trading for a small multiple of EBITDA this companies stock has a lot of potential and now has stores found in most malls all over the US. The margin of safety is high with its price relative to earnings and the potential is even higher with its history of growth.

I have been buying ARO with an average price of 10.18 a share and will own for sometime to come.

A value is a value is a value!

2011-10-12T10:04:00.000-07:00

What a time to be an investor!! Yes the market is jumping up and down and your earnings may be down for the year but this opens up values.

I have made a few adds to my investment portfolio lately. Here they are below.

My newest addition is ARO, GOOG, added position in SKX, TRH, MCD, and purchased a building.. Yes I was sitting in a huge amount of cash and decided my cash would be good to buy a building during this time as a value investor, which brings me to my post..

The 30% I was in cash like investments, I figured would be best invested in future cash flow and as of this writing the building I just purchased already has a full fledged tenant and will produce a ROI of 15% above what my loan payment, insurance, and taxes are. The best part is that not only is it providing positive cash flow, it pays for itself and a little more, with this in mind the ROI will be close to 25% a year if everything goes right and the building is paid for in full in 20 years. Talk about being a lucky and an opportunistic investor.

Should you buy only stocks at a value? I believe as an investor you would be limiting your opportunities if you only looked at stocks and stocks alone. Values are found outside of the stock market, whether it is in real estate, bonds, businesses, or yourself through higher education.

I am undecided on whether I should add my new building as part of my portfolio of investments as you see on the top of my site. I believe it is important to measure all investments performance and compare them relative to each other. Thus the dilemma is created based on knowing that each one will have good times and bad times.. History has shown us that just when you think one investment may never drop the complete opposite happens and lower performing investment become the best performing. High flyers fall hard and zeros become heroes, isn't this value investing at its simplest description.

I recently closed ALL of my NFLX position. Netflix is a great company, but as I wrote a few months ago about the future turbulence, never did I think the CEO would create such a mess for himself and his company. Had I known what was ahead I would have sold 100% of my position at 280 and not just 30%. With three major mistakes, raising prices, coming out with a half ass apology, and then another. The harm done to the goodwill of Netflix may take years to rebuild. My decision to sell had more to do with the lack of direction the company is taking and its self destruct nature at the moment. This also brought to mind a Warren Buffett philosophy. A good business to invest in is a business that can raise prices and people will pay it. Well Netflix didn't fit the bill. (although I believe if Netflix had just raised everything $2 across the board we would be talking about how great this company is) I sold all of my position for a 320% return on investment. Netflix was originally purchased in 1/07/2009, so you can see the annual rate of return was awesome. The returns were awesome, I have no regrets, and I hope the CEO gets his house in order. If NFLX returns to a value I feel is cheap I may revisit but till then let's look elsewhere for great values.

Thank you for reading and I hope you find yourself surrounded by opportunities and luck.

Adjusting my portfolio.

2011-08-28T21:01:00.000-07:00

I write these post for those people who come by this blog and to help me remember and adjust my way of investing.. During the writing of this blog I learned a few lessons and have kept track of my decisions. With the way the market has been changing, I have recently adjusted my portfolio much more. I have gone from buy and hold to more of a buy, hold, and adjust.

My new method is not about buying and holding the same investment forever but about investing for the long run and adjusting my portfolio in a way that best meets my opinion of the future. Most of my investment are still held for years at a time.

here are my recent changes.. You can see all of my changes here.. http://www.insomniacinvestors.com/p/portfolio.html

I recently sold 30% of my Netflix investment.. Selling at 271 a share. The gain was 900% from my original investment. The reason for selling was more a tax move. I believe netflix will be very volatile in the near future.. I actually sold in order to pay capital gains tax on long term gains and am looking for a short term adjustment. I repurchased shares at 221 and have actually reduced my initial cost by selling high and buying low with Netflix's own gains..

I recently sold my Visa options for the actual Visa stock.. The options gains were 58% in only 9 months. I purchased the options during the months Visa was very volatile due to the debit card ruling.. I now believe the stock is safe to own and we want to take advantage of the dividend payment and not lose the time factor options have. Visa continues to be my biggest investment and it has appreciated 11.13% while the market has declined 1.39% during the same period..

On 7/29/11 I sold 30% of DB to hold in cash..(Maybe I should have sold 100% but hindsight is 20/20) Now I have reinvested those funds by adding to my MCD position. MCD delivers solid earnings, great dividends, and a high margin of safety.. Riding out a European bank right now is a hairy roller-coaster ride.

I did a cardinal sin with my L Investment (Loews). I let a big gain become a small gain.. I was guilty with NE (Noble) of the same crime as the market went up and came crashing back down, but both paid dividends and the gains were measly, but that is much better than a loss. I am 15% cash at the moment though I'm actively looking for another buying opportunity..

Currently my interest is in GS, MS,BAC, BRK-A, KSS, ROST, and ANAT once again.. All of these seem discounted and at great value..

found this interesting video on diversification..
http://www.marketwatch.com/video/asset/cuban-on-investing-diversification-is-for-idiots/233AE43E-9DA3-40A3-8F6B-9DC23DD82BEF#!233AE43E-9DA3-40A3-8F6B-9DC23DD82BEF

Is RWT Redwood Trust a good value investment?

2011-07-21T21:20:00.000-07:00

First let me say I just sold all my Redwood Trust Inc $RWT positions. Redwood trust was part of my value portfolio for 7 days short of a year.. Although I could have held the stock for a few more days I had not reinvested the dividends so the gains were minimal and with the uncertainty going forward with the fed it could have proven a disaster; and still may prove to be a disaster when the Fed starts QE3 or what they are calling stealth QE3.

Redwood trust is a good REIT, it just faces a lot of challenges, some of these challenges I waited patiently for close to a year to see if they were handled in the federal government level but it seems the government is doing just about everything and anything to keep the private sector from becoming the dominant force in housing. They are artificially keeping the rates down, introducing more regulation.. In fact as I write this only 12% of the 400 expected Dodd-Frank rules have been introduced. The results and affect these rules will have in banking and financial companies like Redwood Trust are really an unknown at this moment. With all the new rules these private MBS holders my be left holding an unwanted bag of securities. Here is a link to a good article on Dodd-Frank

http://www.marketwatch.com/story/one-year-on-most-dodd-frank-changes-still-to-come-2011-07-21

At this moment with the market continuing to climb higher and higher the risk also climbs higher and higher, With that in mind although I feel RWT is a good investment I just don't feel it is a great investment and right now we only want to hold on to investments that have a low risk-high reward characteristics. RWT is the kind of company whose stock will depreciate with the market but not appreciate when the market moves up and cash may be better used for investments that can return higher reward when a correction happens. To put it simply no one wants a stock that will drop when the market drops but may meander around the same price range while the market rises. It's time to remove some risk from the table, For those who aren't value investors; yes the higher the market goes the higher the risk goes, the lower the market goes the lower the risk.

Why is Netflix expanding so quickly?

2011-07-13T22:04:00.000-07:00

Do you think Netflix (NFLX) stock has risen quickly? Well it has been by far the best investment I have ever made. The stock has appreciated 916% in under 5 years.. This kind of appreciation would be great for 50 years, let alone for under 5 years. In this day in age of rapid movement, where a company can go from hero to zero in just a few years time(RIMM, NOK, HPQ) growth and earnings go hand in hand, and when it's your time, you have to go. You have to go quickly because the other guys are planning right behind you. I think this is the reason for Netflix's grand plan of rapid growth..

"You snooze you lose.." This phrase can be so true in business and more in the technology world, even in investing, waiting for a perfect entry. Without a doubt the board of Netflix feels that if they don't move now they will lose their chance to maximize their control of the online movie community.(Globally) The one chance to be the dominant player in a new field, a field that could be around for a very long time.

For some reason some major players believe the CEO of Netflix is a real smart guy.. This new guy in the digital field is now on the board of Microsoft and Facebook, two of the biggest names in business and consumers.. (If you think Facebook is not in business, you are way wrong!!) With the CEO being on these boards will it open up a gateway to a direct link for Netflix to go on let's say the next windows operating system as an integrated feature bringing the desktop ever so closer to the living room and not just the office?? Or how about Netflix movies playing on your facebook page as you see your updates? It is no secret, people now watch tv while checking their facebook.. So the questions becomes why not integrate facebook and tv? Why not bring in a netflix player on your tv screen within facebook.. Both riding the success of each other to a higher level.. Facebook hitting the big screen and Netflix hitting the social network with the biggest player in town.

Netflix will grow, might even grow hated by those few consumers who jumped in early and took advantage of some very low pricing. In the end, Netflix has really big potential! Even more now that it has the scale of size, two great partners, and the advantage of being a trend setter. With the new pricing of 7.99 and 15.98 just released you will see some consumers change in how they view Netflix so expect big swings in the near future..

Update on what happens when a stock gets added to the S&P 500

2011-06-28T01:09:00.000-07:00

Back in December of 2010 it was announced, Netflix (NFLX) would get added to the S&P 500 list and New York Times would get be removed from the coveted listing. It has now been over six months and any real big effect would now be represented in the stock price.. Since the announcement Netflix Inc has appreciated over 50% while the New York Times Company has depreciated 7%..If you were to base expectations in just these two stock the results look very skewed and it seems being listed in the S&P 500 adds a huge positive, although I believe it has to do more with the fundamentals and growth of the business. Here is the original article I wrote back in December..

http://www.insomniacinvestors.com/2010/12/what-happens-to-stock-when-it-gets.html

One stock does not tell a story, so when it was announced in January that Noble Corp (NE) would be added I made a note to reference back. Since the announcement Noble Corp. has appreciated 4.9% in total.. This total is less than the jump it originally had of 6.2% the day it was announced they would get the privilege of being on the S&P 500 index listing. The S&P 500 has appreciated about 0.5% since that date, again the new listed stock outperforming the general market. Here is the original article I wrote back in January on Noble corp.

http://www.insomniacinvestors.com/2011/01/what-happens-when-stock-gets-added-to-s.html

In the end I have to quote what I believed when I started following these three stocks and effects of being added and subtracted from the S&P 500, even though both Netflix and Noble Corp have outperformed the S&P 500 since announcement by a substantial amount. "Overall it is my opinion a stock will benefit from being added to the index and will suffer by being removed in the long run because of the way investors invest money into index funds. It is no secret people invest directly into an S&P 500 index fund expecting it to be a direct representative of the overall economy. "

Noble Corporation provides offshore contract drilling services for the oil and gas industry worldwide. As of December 31, 2009, it operated a fleet of 62 mobile offshore drilling units, including 13 semisubmersibles, 4 dynamically positioned drillships, 43 jackups, and 2 submersibles. The company also offers labor contract drilling services, and engineering and consulting services. Noble Corporation was founded in 1921 and is based in Baar, Switzerland.

The New York Times Company operates as a diversified media company in the United States. It operates in two segments, News Media Group and About Group. The News Media segment comprises the New York Times Media Group, the New England Media Group, and the Regional Media Group. The New York Times Media Group comprises the New York Times, a daily and Sunday newspaper; the International Herald Tribune, a daily newspaper; NYTimes.com; Baseline, Inc., an online subscription database and research service; the New York Times Index, which produces and licenses the New York Times Index, a print publication; Digital Archive Distribution business that licenses electronic archive databases; and the New York Times News Services Division, which transmits articles, graphics, and photographs from The Times, the Globe, and other publications to newspapers, magazines, and Web sites, as well as owns interest in Epsilen, LLC, a hosted online education solution. It also distributes content on other digital platforms, including mobile applications, social networking sites, and reader application products. The New England Media Group includes the Boston Globe, a daily and Sunday newspaper; Boston.com; the Worcester Telegram & Gazette, a daily newspaper; and Telegram.com. The Regional Media Group consists of 14 daily newspapers in Alabama, California, Florida, Louisiana, North Carolina, and South Carolina, as well as related print publication businesses. The About Group segment consists of the Web sites of About.com, ConsumerSearch.com, UCompareHealthCare.com, and Caloriecount.about.com. Additionally, the company holds interest in a Canadian newsprint company; Metro Boston LLC, which publishes a free daily newspaper in the greater Boston area; quadrantONE LLC, which is an online advertising network; New England Sports Network, a regional cable sports network; and 50% of Roush Fenway Racing. The company was founded in 1896 and is headquartered in New York City, New York.

Netflix, Inc. provides online movie rental subscription services in the United States. The company offers its subscribers access to a library of movie, television, and other filmed entertainment titles on digital versatile disc (DVD). Its members can get DVDs delivered to their homes and can instantly watch movies and TV episodes streamed to their TVs and PCs. As of December 31, 2009, Netflix served approximately 12 million subscribers. It also partners with consumer electronics companies to offer a range of devices that can instantly stream movies and TV episodes to members' TVs from Netflix. The company was founded in 1997 and is headquartered in Los Gatos, California.

LInkedin IPO presents an interesting scenario.

2011-05-25T20:11:00.000-07:00

I have to admit; I didn't invest during the dot-com bubble, although I would have bought some of my favorite stocks during this time, had I had the money.. The reason for not investing during this boom and bust time is a simple one; I was young, broke, and fresh out of school. Now as I see the new bubbles forming, the hope of getting in early on a huge climb can lead many to invest in high risk companies like Linkedin.. Now notice I didn't say bad company or anything negative about the company itself. The risk is in it's valuation not in the company..

One of my favorite Benjamin Graham quotes is "People forget to ask how much" Lets just say you didn't know what either one of these companies did..

Think about these hypothetical questions..
"You have a company that has a product that has been around for generations, just about every restaurant in the country, if not "every" restaurant has, and makes billions.. This company is known to just about everyone in the planet.. How much would you pay for said company? Would you pay up to 12 x earnings or would you pay 20 x earnings."

Now imagine you have a company that produces a technology that gets people together.. It only make 8 million dollars a year.. Technology changes all the time and people go with the flow.. It may be the thing in a few years or it may not, all depends on what happens with competition.. Would you pay 12 x earnings or 1000 x earnings for such a company??

Maybe you guessed it, the top company is Coca Cola now trading at 12 x earnings.. The company is massive in reach and impossible no to see all around.. The second company is Linkedin a new and up in coming company selling for over 1000 x earnings.. Would you pay for something that sells for 1000 times more than what it is worth or would you pay for company that is renowned around the world for 12 times its earnings.. Truly amazing when you ask how much..

Interestingly enough I have a Linkedin account. I don't really use my account, although I accept certain invitations here and there. I wouldn't buy the stock (unless it was cheap)but I don't mind using the free service.. Don't forget to ask how much folks! You wouldn't buy a car for 1000 times its worth and it doesn't make sense to buy a company (stock) in the same manner.

Looking for an investment idea?
Buy KO, MCD, BRK.B, V, GS, YUM, L, XOM.. These companies make money and at the end of the day when the dust settles, that's what matters!!