# How do you choose your stocks?



## THE_UNIT (Feb 25, 2011)

Curious to know what everyones techniques are to picking stocks? Do you take advice from professionals on tv or have inside sources? I personally haven't picked any yet but i have been planning out a strategy. I am planning on waiting until there is a good dip in the market and invest in oil and uranium after doing more research of course. I am 22 years and new to this forum. If anyone has any advice i'd be glad to take it in!


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## hypo (Aug 11, 2010)

The advice you get from mainstream media (magazines, tv, radio) should only be taken as a starting point. By the time the recommendation goes over the airwaves, the news that generates the tip is already stale. You still need to spend considerable time doing due diligence if you want to make an informed investment. 

Using inside sources for information is illegal; just because rich people do it doesn't make it right.

If you're an investment newb, the best investment you can make is to educate yourself and become financially literate before you do anything with your money. Start out with Investopedia and the finance/investing videos from the Kahn Academy. Read the commonly held recommended books on finance and investing.

If you're putting your money into the market without true confidence in knowing what you're doing, you're speculating, not investing.


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## humble_pie (Jun 7, 2009)

i write stock symbols down w waterpruf felt marker on those small plastic chips used to seal bread & milk sacks - one symbol per chip - & run em through the washing machine with the laundry. If any survive, i buy.


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## Financial Cents (Jul 22, 2010)

I try to avoid what most talking heads are talking or writing about.

In 100 words:

Instead of listening to them, I buy companies that have an established, consistent history of paying dividends. After reading a bunch of investing books, which I encourage you to do so, you'll find there are only about 30 companies worth buying in Canada that fit this description (maybe less). You can narrow your investment list from there. You'll find a couple of Canadian banks, pipelines, energy and telco companies are the foundation for most dividend-investor portfolios.

I think this would be a great book to get you started.

http://www.mhinvest.com/sbi/sbiindex.html

Happy reading,
My Own Advisor


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## humble_pie (Jun 7, 2009)

the only prob with this approach cents is that it rules out all the energetic emerging growth companies who are wrapped up investing in their own business strategies & therefore don't pay out divs.

stable old-growth dividend payors also tend to be sleepier stocks. Like big lumbering elephants. But a beginning investor who intends to be serious about learning will want to keep an eye on a beautiful antelope or 2, if only to watch how they play.


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## 14dmoney (Jan 20, 2011)

Based on the replies so far, how many stocks should you hold in a well diversfied portfolio? I am guessing around 20-30 is the minimum...


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## Larry6417 (Jan 27, 2010)

Have you considered buying an EFT instead? Keeping track of 20-30 companies is quite a bit of work (assuming you read the quarterly reports etc.).


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## Argonaut (Dec 7, 2010)

Everybody is different as far as numbers go. 10-15 is where I'm at. Instead of picking more companies, I'd rather add to my current positions. You should have a number of stocks that are your favourites, right? Why choose your 16th favourite stock if you can top up on your 4th? One can only be so diversified.


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## OptsyEagle (Nov 29, 2009)

14dmoney said:


> Based on the replies so far, how many stocks should you hold in a well diversfied portfolio? I am guessing around 20-30 is the minimum...


Yes and No. 30 stocks is too many to follow and any less is probably too risky. What I do is put a large portion of my investment capital into ETFs. About 40% in ETFs. Another 40% or so go into those big blue chip stocks that if bought and held, is probably not much different then an ETF, but I still like owning them. I do try to buy them when they are a little out of favour. For example Manulife might be an example of this, as opposed to an Enbridge which is probably a little over-loved (higher priced). Then the last 20% or so goes into about 5 stocks that I research exhaustively, watch like a hawk and expect doubles, triples and 10 baggers on.

So although I probably own 100s of stocks, when it is all added up, I only need to watch closely, 5 or so.


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## 14dmoney (Jan 20, 2011)

I am just thinking that if you pick 8-10 large cap CDN dividend stocks and 8-10 large cap US dividend stocks and supplement that with ssome small and mid-cap or emerging market picks then you have at least 20-30 stocks.

Maybe a good compromise is to pick the individual CDN stocks and then use ETF's for the other sectors?

Oops! Looks like Optsy Eagle just answered my question before I posted this clarification of my query ; )


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## KaeJS (Sep 28, 2010)

Depends on how much money you have to invest.

If you have $30,000 in the market, how are you even going to purchase 10 stocks altogether? You can't. Especially not if they are large caps.

If you were to buy 100 of TD, 100 RCI.B and 100 of MCD, thats $20k spent right there. And you hold (basically) the smallest position anyone can hold in a stock without messing around with partial fills.

I currently hold 1 ETF, and 3 individual stocks.


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## phrenk (Mar 14, 2011)

- Invest in stocks that have proven cash flow generation capabilities. Speculation stocks, especially commodities and pharmaceuticals are extremely volatile and should be off limits if you don't understand the business model.
-Find analyst research report on your brokerage site if they are available, learn the different methods of valuation (DCF, multiples), very insightful and will help you understand who is cheap relative to its peers. Always do additional diligence, don't rely on the reports, they are a complimentary tool.
-Always look for the stock that has been punished severely by the market. The market is irrational at times, and this can lead to great opportunities if your timing is good. Examples : Manulife, RIM. Nokia is also a recent stock that i am pretty sure will rebound in 6 months.
- REITs are also great, with a dividend yield of 4-7%, and a cap appreciation range of 1-3%.


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## Argonaut (Dec 7, 2010)

KaeJS said:


> If you have $30,000 in the market, how are you even going to purchase 10 stocks altogether? You can't. Especially not if they are large caps.
> 
> If you were to buy 100 of TD, 100 RCI.B and 100 of MCD, thats $20k spent right there. And you hold (basically) the smallest position anyone can hold in a stock without messing around with partial fills.


You have this backwards. The less shares you buy, the easier it is to fill the order. Especially with large caps. I've never had a problem with filling orders, and I almost always buy based on dollar amount and not share numbers. 35 shares of CNR, 86 shares of BCE, etc.


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## KaeJS (Sep 28, 2010)

Argonaut,

Maybe I should have made it more clear. Obviously, you are right. If the stocks are liquid (and as such, large caps almost always are) then the less shares you buy the easier it is to have them "filled".

I was thinking more along the lines of commissions and not necessarily that you will have a problem filling your orders. For example, your 35 shares of CNR is something I would probably never purchase, just due to the fact that after paying a $5 commission to buy and sell, you'd only make $25 after the stock increased by $1 (excluding the dividends it pays). Nothing against CNR, but I just dont see why someone would buy smaller amounts and pay more commissions to own more stocks. Unless you are that set on being as diversified as possible.

This also depends on what you are doing with your investments. CNR is usually bought for longer term positions. In which case, buying 35 shares is fine if your goal is to hold it and soak up dividends. If you are actively trading, I don't think 35 shares would get you far, unless you are buying something like AAPL or GOOG. But once again, 35 shares of GOOG would cost you a tiny fortune.

I try to buy at least 100 shares, but I have bought RY in increments of 60, 15 and 25 in order to get 100 due to the fact I didnt have enough capital at that time.

And I always buy based on number of shares, and not dollar amount.


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## hboy43 (May 10, 2009)

humble_pie said:


> stable old-growth dividend payors also tend to be sleepier stocks.


What is wrong with sleepier? Did I not read recently that the 25 year compounded return for the Canadian banks ranged from something like 13 to 16 percent, BNS being best?

Some sleepier stock, some return. (With apologies to Winston Churchill).

hboy43


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## Argonaut (Dec 7, 2010)

Kae,

Well, like you said I'm one of the ones with a ~$30,000 portfolio, so I'm not going to be buying 100 shares of CNR and have it take up 25% of my entire holdings right away. One set of dividends covers the commission front and back anyways, so I'm not too worried about that.

On the first topic, I choose equities based on looking at stock performance, fundamentals, everyday observation, and a bit of researching on what the talking heads are saying. Basically just pick companies I would like to be an owner of. I'm a big fan of "toll-booth" stocks; ones that collect regular cash flow and give some back to the shareholders. Something Warren Buffet said along the lines of pick a company that even a monkey could run, because some day you may have one running it.


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## daddybigbucks (Jan 30, 2011)

THE_UNIT said:


> Curious to know what everyones techniques are to picking stocks? Do you take advice from professionals on tv or have inside sources? I personally haven't picked any yet but i have been planning out a strategy. I am planning on waiting until there is a good dip in the market and invest in oil and uranium after doing more research of course. I am 22 years and new to this forum. If anyone has any advice i'd be glad to take it in!


I used a variety of ways over the years. I presently have a spreadsheet that i designed. I put in numbers from their balance sheet, cash flow and income statement and in the end, it spits out my "Buy" stock price.
If the current price is under my "buy" price, I usually buy in. 

Its been very accurate and very profitable for me over the last couple years.


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## Causalien (Apr 4, 2009)

I first start with names in industries I understand
Then I do Fundamental analysis on it
Then I do Technical analysis
Finally I practice trading it over the span of one year Sped up using simulator
If I made money in the end, I invest.

For each strategy I trade at most 10 different companies. So I can focus my attention


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## humble_pie (Jun 7, 2009)

hboy please compare 12 yr chart for bns to 12 yr chart for rim.

or even compare 12 yr chart for snc, a favourite of yours, to 12 yr rim.

what do you see ?

lol.


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## HaroldCrump (Jun 10, 2009)

humble_pie said:


> hboy please compare 12 yr chart for bns to 12 yr chart for rim.
> 
> or even compare 12 yr chart for snc, a favourite of yours, to 12 yr rim.
> 
> ...


Why does it have to be either/or?
Why can't it be both?

I personally do not understand this constant value vs. growth debate.
Just as I don't understand the trading vs. investing debate.

I think one needs both the slow, steady companies like the banks, utilities, telecom services etc. as well as volatile but high velocity sectors and companies like technology, mining, energy, etc.

At the same time, I'm personally not in favor of analyzing, holding and monitoring scores of stocks in the portfolio - one is better off with an ETF in that case.
A few selected picks in a few selected sectors.


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## humble_pie (Jun 7, 2009)

i never said either/or.

look at the thread harold you'll see hboy getting uptight about some bank record or other.

as for balanced portfs, i have a beaut.

the washing machine did it.


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## HaroldCrump (Jun 10, 2009)

Sorry, I didn't mean to direct my post at you (although I quoted your last message).
I meant in general why do so many folks always look for either/or.
We don't need to fit ourselves into nice little pigeon holes like "day trader", "speculator", "long term investor", etc.

Regarding your stock picking methodology, I'd like to know where you bought that washing machine - I'd like one like that please


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## humble_pie (Jun 7, 2009)

U R quite right we should never squish ourselves into pigeonholes. 

optsy has a good point upthread when he says get a lot of good-quality no-brainer stuff on board. He likes etfs, i like banks, but in the end it boils down to the same thing. Most of the big steady div payors will be in this group.

then concentrate time & energy on the small number of stocks that are truly interesting. These are rarely big div payors. Save & except for my fave energy company of course, which i won't mention again or i shall be accused of flagrant pumping ...


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## warp (Sep 4, 2010)

KaeJS said:


> Argonaut,
> 
> Maybe I should have made it more clear. Obviously, you are right. If the stocks are liquid (and as such, large caps almost always are) then the less shares you buy the easier it is to have them "filled".
> 
> ...


KAEJS:

IM not trying to tell you what to do....but,

A quick glance at your 2001 trade sheet you gave the link for shows, after a quick glance, that you have already paid almost $300 in commissions , and its only the middle of march.
As well I see some interest margin charges.
Also there will be taxes payable on these trades if you are lucky enough to have made a profit be years end

With a $30K portfolio these costs will eat you up over any long time frame.

My suggestion is that you trade less..pick a few stocks you like , and hold them,,,or buy a couple of ETF's and dont look every day/

The brokerage firms LOVE guys like you!
Frequent trading is a losers game.....even if you have had some short term luck.

Again,,,this is just a thought, derived from my experience, and what Ive seen many times before. As grown-ups, we all do what we think is best.

In any case..good luck.


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## hboy43 (May 10, 2009)

humble_pie said:


> hboy please compare 12 yr chart for bns to 12 yr chart for rim.
> 
> or even compare 12 yr chart for snc, a favourite of yours, to 12 yr rim.
> 
> ...


No idea, don't care. The 12 year chart of my net worth is however splendid. That's the only chart I ultimately care about, not if I hit the RIM ball out of the park. 

I'm not smart enough to find the RIMs of this world. In fact I don't personally see the slightest utility to their products. Why in heavens name would I want to be reachable 24/7? If anything, having a landline is too much connection to the world for my liking. 

That is your space and have fun with it. Presumably you are getting wealthy in that space. Good for you.

I am perfectly happy to hold banks and SNC. I understand loaning money. I understand building infrastructure. Both these businesses create products that have a utility that I understand. They have both been splendid decade plus performers if one is happy with only 15% PA. I happen to be happy with that. Delighted in fact. Perhaps delerious. 

Anyone else happy when they can make 15% PA for decades at a time on "sleepy" companies, or am I alone?

"Some chicken, some neck."

hboy43


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## warp (Sep 4, 2010)

Sorry..that should read 2011 trade sheet...(NOT 2001)


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## humble_pie (Jun 7, 2009)

hboy aren't you the guy who chops his own wood & lives like thoreau in the country.

if so you're a person i really admire a lot.

why are you suddenly grinding your axe, though. Picking on my use of the word "sleepy." Tch tch. What would you have me say. happy? sneezy ? dopey ?

i like bank stocks too. No need to get smart-assed about yours. I will now resist an unkind poke at rustic ageing a.s.s. in droopy long johns.

as a matter of fact i have some bank stocks, as i've posted here, that have been in my family for nearly a hundred years. They've probbly returned at least 15% per annum. I'd ask the great-grandfather, except he's asleep in the cemetery.

ps re snc. Div yield is lo. One might consider a partial switch to up-and-coming genivar in same sector. It's unheard-of, but div is higher & 3rd world relationships are being carefully nurtured. No prisons in libya.


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## bean438 (Jul 18, 2009)

Financial Cents said:


> I try to avoid what most talking heads are talking or writing about.
> 
> In 100 words:
> 
> ...


You beat me to it.


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## bean438 (Jul 18, 2009)

humble_pie said:


> the only prob with this approach cents is that it rules out all the energetic emerging growth companies who are wrapped up investing in their own business strategies & therefore don't pay out divs.
> 
> stable old-growth dividend payors also tend to be sleepier stocks. Like big lumbering elephants. But a beginning investor who intends to be serious about learning will want to keep an eye on a beautiful antelope or 2, if only to watch how they play.



Thats the whole point of Millers book.

We are after dividend GROWTH companies. Yes they are elephants, but once the you allow the dividends to grow year after year, as you ignore the latest greatest hot growth stocks that invest in their own growth.

Plus with dividend growth investing the idea is to live off the income they produce, and not have to sell anything when you need the money.

Everything works, not everything works all the time. I like dividend growth investing. It works for me, makes the most sense to me.

I think the main thing is to pick an investment approach and stick with it no matter what. Its when you jump ship to another "style" that you get into trouble because what ever you are jumping into is doing well and about to tank.


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## humble_pie (Jun 7, 2009)

yes, we all agree.
everybody is on the same page.
definitely.


quote:

_" ... You'll find a couple of Canadian banks, pipelines, energy and telco companies are the foundation for most dividend-investor portfolios."_

quote:

_" ... optsy has a good point upthread when he says get a lot of good-quality no-brainer stuff on board. He likes etfs, i like banks, but in the end it boils down to the same [low-maintenance] thing. Most of the big steady div payors will be in this group."_

quote:

_" ... Everything works, not everything works all the time. I like dividend growth investing. It works for me, makes the most sense to me."_


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## KaeJS (Sep 28, 2010)

*warp*,

Thanks for your input.

Yes, I have paid a lot in commissions. However, stocks are volatile. There are certain stocks I am holding for the long term (like XIU, TD Bank and McDonalds) but this has been a recent change in my "investing personality"

I noticed this about my spreadsheet earlier, so I totally understand what you are saying.  But, I do like to take risks, or grab a quick $50 if I know I can make it in a same day trade.


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## J3ff (Mar 20, 2011)

*Hahaha...*



humble_pie said:


> i write stock symbols down w waterpruf felt marker on those small plastic chips used to seal bread & milk sacks - one symbol per chip - & run em through the washing machine with the laundry. If any survive, i buy.


I thought this quote was hilarious...hahahahaha!


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## Homerhomer (Oct 18, 2010)

KaeJS said:


> *warp*,
> 
> But, I do like to take risks, or grab a quick $50 if I know I can make it in a same day trade.


How do you know you can make money in one day? What would be your percentage of being right for one day trades if you don't mind me asking.

Thanks


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