Tuesday, January 31, 2006

Poor Poet's Stock Picker

"Without guidance, people fall, but with many counselors, there is deliverance." Proverbs 11:14.

My husband told me that he was surprised I wasn't a Republican, because I worked so hard for every penny I earned, between my day job, writing workshops, tutoring, and various and sundry other side creative professions I might take on.

And, in a way, I thought it might not hurt to think like a Republican after all, i.e. start investing in the stock market. But it was still important to act as a good Democrat would, i.e. invest in socially and environmentally responsible companies.

First of all, I thought of Mr. Money Bags of Monopoly fame. He invested in real estate, railroads, electric companies and waterworks. So I invested in railroads (hauls more and uses less fuel doing it than airlines and trucking companies), the electric industry (not using coal power, but solar power) and waterworks (water utilities that do good things like filter and distribute potable water). Real estate? I bought my own home instead of rented. But stock-wise I chose a cement company that received an environmental consciousness award and a builder that received a governmental contract to help rebuild New Orleans.

Along the way I listened to audiobooks about Warren Buffett's philosophies, watched Jim Cramer's Mad Money tv program, created dummy portfolios which I tracked on Yahoo Finance and Zacks.com, and read e-mails and articles from The Motley Fool.

Some of Warren Buffett's guidelines include:
-- Choose a company that is the leader in its field, or better yet, has a corner on the market (i.e. Apple Computer's iPods) Jim Cramer would concur.
-- Don't invest in companies that sell on price or discounts. Avoid airlines and auto manufacturers. Today's headlines will also reveal this.
-- Choose a company with a hefty Return on Equity. Something like 17 percent or better sounds good.
-- Choose a company that doesn't have a lot of debt and has a sizeable cash flow (I can't say any of the railroads are here, though).
-- Here's the easiest one. Use your eyes. Look at the company's chart over the last year, three years, five years. If it's on a steady upward slope, you're onto something (check out Hansen Naturals or Franklin Electric) on Yahoo Finance.

And my tip of the day: listen to the advice of many counselors, including yourself once you get the hang of it. It beats picking a stock based on the advice of just your Uncle Harry. ◦
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2 comments:

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