The Recession IS Over, I think. At least that is what I am being told. The truth is people aren’t really sure, which is ok. That is the problem with the economy, it is such a dynamic system, that no one can reliably say it will go one way or another. However, that is the one thing that makes the markets such a wonderful place to place a wager where the odds are really in your favor.
I turned 30 last year, and I made a promise to myself. I said, “I will try to invest in stocks, rather than mutual funds, as an experiment to see if I can make it work.” My investment strategy is simple, and it tends to put the market in my favor, but it isn’t for those without a bit of patience. WARNING: I am not a day trader, I never have been a day trader and I never want or will be a day trader. If you thought I would help you get rich quick, then you can stop reading now. If I knew how to do that, I wouldn’t write about it. I would just do it.
So here’s the strategy. Do your homework, learn the terminology, and invest where you believe growth will come, not where it already is. A great case would be my purchase of Microsoft. Now I’m not rich, so I bought 10 shares of Microsoft in May for 19.77 and 10 shares in June for 23.55, both in 2008. I bought them because I believed that Microsoft was at a low point, and with Windows 7 coming, I believed it would rise. On 12 January, Microsoft closed at 30.07 a share, giving me a 39% gain on investment, after commission fees, but including dividend reinvestment. 39% annual gain isn’t bad, but the year isn’t out yet. I likely will never sell this stock, just because I like it.
Next up, Union Pacific. I had heard the Warren Buffett was planning on buying a huge chunk of Burlington Northern Santa Fe, a railroad company in the US. Now, when I looked at it, the per share price was close to $100 a share, but Mr. Buffet’s team had said that they had faith in the development of the railroad industry over the coming months. I agree that as the markets and economy recover, transportation will play a big role. My problem is that buying anything for $100 a share would be problematic; I would only be able to buy 6 shares. Not exactly noteworthy. I looked at a replacement and found Union Pacific. Any growth from Burlington would also translate into growth for Union Pacific. I bought 10 shares of UNP for 58.81 a share and crossed my fingers back on Nov 3. On 12 January, the stock closed at 67.39, a 13% jump after commission fees are factored in.
My current pride and joy is up next. I spent some time refining my research process, what to look for and what I liked. I love the idea of real estate investment trust funds, or REIT. I love this because with the markets down, and the housing crisis, in my opinion, the weaker of the herd have been shed. That leaves a lot of growth over the coming years. I also love dividends. What I look for is a company with a low price per share compared to earning per share, or P/E. I then look for companies that showed positive earnings per share in the last quarter. I then look for a combination of a low price and relatively high dividend. My perfect mix would also include a company with a dividend re-investment plan, more or less like compounding interest for those who hold their stocks long term.
I found an REIT that includes all of those criteria in NRF, Northstar Realty Finance Corporation. I bought this stock in December and paid on average of 3.33 a share. I dropped in enough to pick up 250 shares, which maxed out my funds available to me for my stock purchase experiment. In the New Year, they have been taking off. On 12 Jan, the stock closed at 4.39, at 27% jump after commission fees. I love this stock and I love how it has been beating the market by constantly rising this year. It won’t last forever, but I can live with that. Their lowest dividend payment in the last few years has been 10 cents a share. With that money, I would see $25 a quarter, which in turn would be reinvested to buy at least 5 shares at today’s market price.
Am I worried about a few days down? No way. Long term growth is expected, and in fact, my IRA and military TSP have both been given additional money a month in the New Year. I don’t follow the “movers and shakers” on Wall Street, I think their guess is as good as anyone else’s, but I did read a story once about Warren Buffet. I mention him a few times here, but I have neither worship nor ill will towards him, he’s just a successful guy. He made a statement, though, in the article which has stuck with me since, and I paraphrase here, Buy when everyone else is selling, and then never sell. If for no other reason, I like him for that statement alone.