May 13, 2023
I'm an advocate for "buy and hold" investing, meaning if you are making an investment it should be for a long period of time before selling. However, you may need to cut a position due to a company's failure to turn a profit or dependency on bending public policies to their favor. This was the case with LYFT, based in California, the battleground of workers rights that shifted over the years as ridesharing went mainstream.
I saw a game-changing service to society helping people get where they needed to go. I also moonlighted as a LYFT driver for a few months in 2017, seeing first-hand how they onboarded drivers. LYFT filed an IPO in March 2019. I had $2,600 to invest and wanted a piece of those huge ridesharing profits that were going to happen someday. In retrospect, this was too speculative of an investment. LYFT was growing riders, but profitability hadn't been proven yet. Being in my 20s, I was just starting to invest and eager to start buying stocks with the extra money I had.
I paid $65 per share for LYFT shortly after its IPO (Initial Public Offering) in 2019, under the IPO price of $72. Another lesson from this trade is that it more risky to buy an IPO close to its debut in public trading. But I couldn't resist so I put it on LYFT shares.
Another thing I learned from holding LYFT stock is to consider the risk of political impacts on your stocks. In the case of LYFT, they and UBER were typically involved in regulatory battles with the state of California over the classification of their drivers in the past 10 years. Are rideshare driver independent contractors? The debate continues. And each time it blew up on the news, I looked at those shares and thought... I signed up for this? Court battles. A questionable public image and an unprofitable business to boot. Having tried LYFT's rideshare services myself, I thought their culture was strong and they'd be a leader in a promising new industry. We'll see if they ever make it.
source, Bing: https://www.bing.com/search?q=lyft+stock
They closed around $8 per share yesterday. My investment? Within the first year, I was already down considerably and endured several painful earnings reports. They were nearly profitable, but then were hit hard by pandemic lockdown. I sold out from 2021 to 2022, selling each share at a loss. 90% of the shares were sold in June to October 2021 near the end of the most recent bull market. Only with hindsight, can I now say I feel strongly it was the right call. If I had left the money there, I'd be sitting on $375 in market value in Lyft and over $2,000 of unrealized losses.
I sold the position incrementally, ranging from $38 - $63 per share. I sold my last 5 shares at $38 per share in Feb. 2022. Having cleared the position, I now know from experience, there are times when you should cut your losses. In total, I limited the damage to $546 lost and re-allocated the remaining $2K to other investments.
Looking at LYFT in 2023, it's down 89% over the past 5 years, unprofitable with a real possibility of bankruptcy. Recently, the founders have stepped back from operating the company. They're also low-key saying they're open to a buyout. Maybe they will turn it around, but I'm no longer on the hook for a few grand if they don't. I now try to buy companies that have already established profitability and growing. This is my LYFT story, may we all stay away from such investments and realize quickly if we've miscalculated.
May 11, 2023
A market of stocks reminds me of a school of fish. They swarm in the same general motion, sometimes using their collective to protect each individual fish with natural deception. Some of the fish are stonger than others, use their competitive advantage to survive and help the other fish. But if a fish becomes too weak, it gets eaten. Same with stocks.
In January 2022, the stock market was bubbling up together in a cash injected, inflation-fueled blow-out. Then the direction of the tide shifted. After pulling back strongly into summer, a brief respite in July before getting hammered even more, with a possible bottom reached in late December. Warren Buffett once said, "Only when the tide goes out, do you learn who has been swimming naked." It's the weaker companies burning through cash struggling to survive. They get metaphorically eaten. Thankfully, stocks are starting to bounce back. It's now a "stock picker's market" or so I've heard. If you bought anything in December, you're probably up a decent amount on the investment. In a few cases, my new positions and DCA buys from within the past 6 months are up 80%. Of course, I'm still down 30%-60% or [gasp] more on too many positions. Regardless, I tend to buy and hold with an option to sell at breakeven if I don't like the company's power structure or earnings reports. I can wait a long time and intend to do so with all my stocks. Sidebar: did you know whales can live up to 90 years? They're probably good investors.
Like fish, stocks valuations are loosely tied together, especially at an industry level. If prices go up a lot, they'll probably reverse eventually. If they recently pulled back hard, there is a better chance for growth at a reasonable price. Sometimes you have to load up when a stock is down over 20% in a single day. When all hope is lost, yet another regression but this time upwards after you bought it if you chose well. It's not always going to work out, but lowering your cost average is generally considered a good idea in investing.
Nevertheless, no one really knows what the market will do. The stock market's short-term direction is about as random as a school of fish. When the market regresses to the mean and sells off: buy the fish that is consistently makes the right moves. It has these characteristics: quickly acquires customers and keeps them, protects or grows their product profit margin, survives economic drawdowns, socially responsible and guides earnings appropriately. That's a catch!
Apr 22, 2023
This post summarizes ways that I keep tabs on the companies I'm holding in my investment portfolio. I tend to hold stocks for a long time, regardless of stock price movements. It helps to see the whole picture, industry, customer mentality and metrics like free cash flow and profits. These are ways I try to glean insights into a company's future potential or lack thereof.
Here are 10 ways I keep up with my stocks:
- Use a Charles Schwab investor checking account to buy assets + make trades.
- Watch CNBC for free in the Charles Schwab mobile app.
- Track dividends received in Charles Schwab account.
- Use Google Finance to manage watchlists and monitor daily prices. Schwab also has a watchlist but I prefer Google Finance's UI for watching short term price movements.
- Observe the company "in the wild".
- If public, visit the company and observe what you see. Is it a well run operation? Are customers happy?
- Note the frequency you see people choosing the company's products day to day.
- Bonus points if you are the customer, you know intimately what value the company is creating.
- Earnings calls: listen to the call live or most companies post the call transcript online.
- Read investing blogs and books from the greats. I subscribe to my followed blogs via an RSS feed. Here are a few I recommend:
- Monitor sentiment with Twitter and Reddit. Read the Twitter cashtags for individual stocks and browse social media for overall sentiment monitoring. Beware there are emotional posters with an agenda, opinion or position that may contradict yours. I find it useful for gaining a sense of general feelings about the market or shares in a company.
- Use finance Python libraries, like ffn to see more complex financial calculation about a stock. I wrote in depth about the endless tools you can apply for financial calculation here on my other blog.
- Talk to people about their investments. What are they investing in? What's working for them? What are they excited about? They have a perspective that differs from yours that exposes you to a new concept or industry.
Mar 20, 2023
In March 2023, I achieved a new milestone of passive investing. Since beginning in 2018 with approximately $15,000 in savings, I've accrued a six figure portfolio of funds and stocks with a "DCA and buy and hold" long term mentality. I did this by holding a full time job and earning multiple pay increases along the way.
About 50% of my retirement funds are in a managed employer match 401(k) with a different bank. My primary bank is Charles Schwab. Most of my self-directed IRA is collecting dividends with Schwab index funds (SCHB, SWPPX and SWTSX) and MSFT. My self directed IRA has a smaller weight of non-dividend growth stocks also. In my taxable portfolio, the core dividend earners are stocks like MSFT, NKE, AAPL, F and NVDA.
Additionally, 3-5% of my investment portfolio is committed to cryptocurrency assets. After buying incrementally from December 2020 to 2022, I now have market value exceeding $5,500 staked in Ethereum. Approximately 60% of my crypto portfolio is in ETH, followed by 25% Bitcoin, which does not have a staking protocol. Over the past 7 months, my staking rewards netted me $12.48 per month by my calculations.
Passive Investing Income Breakdown
Stock Dividends: $38/month
Ethereum Staking: $12.48/month
Combined, they add up to a investment income of $50/month and counting with time. Hold dividend stocks and index funds. Stake Ethereum, if you can handle elevated risk that surrounds crypto. Then again, with the recent banking shakeout, maybe a more decentralized store of value is intriguing. Find a job or start a business, keep saving and reap the rewards of investing. This is how I achieved a new level of passive income. In both, their dividends are automatically re-invested.
This post and all posts on this blog are not financial advice. All investment decisions have personal risk and you should assess them thoroughly before taking any financial actions.
Jan 09, 2023
Volatility is scary because when a stock thrashes down, it hurts pretty bad. Investors need to set aside their emotions and ask themselves, "Has my thesis about this company changed?". If you still have conviction, the market's volatility has created a possible buying opportunity.
It sounds simple put into words, but observing the market in real time never goes so smoothly. Your perceptions of a "bottom" or a stock's range can be way off. Volatility is an opportunistic investor's friend, and a timid or inexperienced investor's foe. However, even a seasoned pro can get it disastorously wrong and get wiped out by a falling knife. Make volatility your friend, but be careful!
Dec 14, 2022
Gains tend to happen quickly in a short time. This is a reason to hold onto those shares a little longer. That sudden unpredictable catalyst might be around the corner.
When a stock moves, it can happen after years of stagnant price action. Don't miss your gains by exiting at the wrong time. If earnings are heading the right direction, the gains will come.
Nov 28, 2022
Corporations value humans, until times get tough. Then they start to cut.
I thought they were less brutal, deploying strategies so feudal. Employees are just a line item to them.
What's good for the company? They'll land on their feet. They don't care about a human in the balance sheet.
Oct 08, 2022
I can't shake the feeling that we are being toyed with by invisible forces. First, a disease is manufactured and propagated. Then, a response to the disease is conceived. It includes locking down society and subsidizing the people with printed money.
This is all a tidy narrative for companies to retrofit to their own needs. A cycle of boom and bust is synthesized in the name of the greater good. Employers now have a reason to fire their employees and raise prices of their widgets. Stocks suffer because it's going to be difficult. Everyone knows a recession is coming!
Fear mounts. Worries pile up. The Federal Bank must curb inflation. They need to raise interest rates on borrowing money to get this nasty inflation monster under control. Now it costs more money for people to take out a loan and buy houses. Companies don't give raises. Inflation of consumer staples eat into our salaries. "The recession is coming!", they said.
In summation, we have a (natural?) phenomena, seized by world governments to extend their power in the name of protecting the people. Stocks go down for now. That's ok as a long term investor. However, I can't get over the idea that is all humans, all the way down. Humans doing human things: scheming, reacting and seizing an opportunity to claim the sky is falling. All along, fat cats padding their own pockets at the expense of their fellow man!
Do you think a recession will happen? Is it already happening? Or is it only our reaction to the idea of it? I, for one, find it amusing how humans can be so sure they know what is coming and what has already happened. I'm a skeptic! This recession is bullshit.
Sep 08, 2022
I have enjoyed Josh Brown's perspective as the market thrashed the past few years. A CNBC regular with razor sharp takes, I think I heard him recently say something to the effect of "check your expectations".
I agree with many things Josh says, but especially with this sentiment. Stoics know that by checking our expectations, we can better regulate our perception of what is happening with our investments. Consider lowering your targets for ROI and just relaxing your expectations in general.
Sep 02, 2022
The goal of this post is to find a layman's idea of what a stock's "intrinsic value" means. Intrinsic value is often praised as a claim to why the market price of company should be higher. What does that mean?
Checking Investopedia, the top hit on Google, "There is no universal standard for calculating the intrinsic value of a company... Typically, investors try to use both qualitative and quantitative to measure the intrinsic value of a company, but investors should keep in mind that the result is still only an estimate." - Investopedia, https://www.investopedia.com/terms/i/intrinsicvalue.asp
The next hit, Corporate Finance Institute offers a "Net Present Value" based formula, along with net cash flow, interest rate, etc. So it seems that the mathematics of instrinsic value calculation are sound, but the weighting of possible future outcomes is where an an analyst is more of an artist.
https://corporatefinanceinstitute.com/resources/knowledge/valuation/intrinsic-value-guide/
In essence, intrinsic value is a mathematical model an analyst creates by weighing projected outcomes. There is no standard for producing an intrinsic valuation of a company. I find this somewhat amusing, because before when I heard the term intrinsic valuation, I assumed there was more to it. Such as a formal methodology that is carried out. However, like all future prediction models, they are subjective and sound more like a guess to me. I will be sure to take these instrinsic value calculations with a grain of salt from now on.