I just bought a whole bunch of stocks. For years I kept my money in cash out of fear. It took me a long time to research my stock options. At first I tried to diversify into as many segments as I could. I got oil stocks. tech, medical, food, industrial, banking, and more. But, then I started to see what Warren Buffet liked to invest in. After all, he is the best investor in the world according to me.
Finance my boy!
He did not diversify so much. He had more than 35% of his money in the financial sector with considerable holdings in IBM, and other big blue chip industrial companies. He had a little oil, and a negligable amount in medical and utilities. Basically, his strategy is to put 92% of his money into seven or eight stocks he likes, and then have a tiny percentage in two dozen other stocks which were diversifications.
Diversification?
I also agree that diversification is over done. It is better to put your money in good stocks. It doesn’t make sense to put your money into risky sectors like airlines or unstable sectors like auto manufacturing. I even had medical sector stocks that just didn’t perform. So, I sold a lot of stocks and bought more Wells Fargo, IBM, Coke, and other stocks that performed well for the last 100 years.
It takes coordinating
I’m a conservative investor, and not very well informed. But, I noticed that some of the stocks I just bought were part of mergers. A merger can drastically affect the profitability of a stock as well as its ticker price. When companies come together, there is a lot of coordinating, new computer systems, and logistical matters that could take years to work out. The idea is that there will be more efficiency after a merger. I hope that is correct.
CBI’s merger
I purchased several hundred shares of CBI. They had acquired another company, but their profits were nil after that for two quarters. I was thankful a few days ago when I saw modest profits during the first quarter of 2016. If a stock doesn’t make money, the ticker price could quickly go down the drain if investors lose confidence.
Sudden Debt
I also noticed that Whole Foods (my favorite market), Mastercard, and Visa had all acquired some huge new debts over the last year or two. Why do these companies suddenly need so much money? What are they doing with it? It leads me to have doubts. Whole Foods credit rating went down the drain after they borrowed so much. My worry is that they might have some new financial leaders who will bury them in debt. These wonderful companies could eventually sink in debt after a decade and become worthless after being household names for such a long time. I will continue to watch their equity ratio stats as that is one of my most important stats in my stock picking algorithm. If the debt continues to grow, I’ll sell at a loss if necessary. But, let’s hope for the best. I don’t know what they are doing with the money. I’m just disturbed that there is a sudden change!
Summary
The face is that when you purchase stocks, you really don’t know who is in charge of these companies, or what stunts they are going to pull. If I were recommending stocks to a friend who doesn’t know much about the market, I would tell them to stick to huge conglomorates with very conservative business practices such as Coke, Pepsi, IBM, Wells Fargo, Kraft-Heinz, or Proctor & Gamble. I believe these companies will thrive while most of the others will eventually crumble. You might get rich slow, but your money will be safer with these six picks than most others!