When I was a young lad, my dad would let me “buy” stocks through him by looking at ticker symbols in the newspaper. I’d pick out names I liked of the penny stocks—most of which are now out of business. I was always eager to get the next day’s paper to see if my stock(s) had gone up or down.
My college degree is in Finance, mostly because it’s always been an interest of mine. I almost became a stock broker after graduation, but the interested brokerage ultimately decided that they didn’t want to pay $5,000 for my certification. It would have been a very different (probably worse) path than the one that lead me to write Mini Habits!
As I’ve gotten older, I’ve gotten better at picking winners through other means besides liking their name. When I first started this blog (when it was called Deep Existence), I actually doubled my money several times over with risky tactics such as swing trading stock options. The only issue was that I’d double my 2-5 thousand dollars, use the money for rent and food, and have to try to do it again. I wasn’t saving money because I had no income and well, I turned the stock money I made into food (I literally ate my profits!).
It goes without saying that you should do your own investing research and make your own decisions, but I thought I’d share a few of my thoughts on investing.
Never Buy Individual Stocks? I Disagree.
I’ve read this from a lot of professionals, and the idea behind it is that you won’t likely beat the general market. Most professionals fail to do that, so the logic is there. Only about 30-40% of mutual fund managers beat the general market.
There are two factors that make you and I a little bit different from them.
First, they are managing billions of dollars, and that changes how they invest. They’re not going to put 50% into one stock. But if you have an extra few thousand dollars that you want to take a chance on, you can absolutely put it all into a single stock (knowing the risks associated with doing that, of course).
Second, every person has individual areas of expertise—their interests. If you know an industry inside and out, you could have a slight advantage over the average investor in that area. In other words, you might be able to predict with say, 60% certainty, how things will turn out. If you pick 60% winners, and some of them are big winners, you’ll do just fine!
I’ve been a gamer all of my life, and I bought Nintendo stock after they announced the Wii console. It was a good move, as the Wii went on to become the 5th best selling game console of all time.
Like many others, I’ve loved watching movies my whole life, and I bought Marvel stock after I saw the first Iron Man. They were bought by Disney soon after, causing the stock to soar.
The gains from individual stocks can be 20 to 50% or more in a matter of days, weeks, or months, not necessarily years as it would take for the entire market to do.
I know nothing about Etsy. But someone who did know something about it (being a buyer or seller on the platform) could have bought the stock in January 2018 and tripled their invested money in one year! There are probably a lot of people out there with great knowledge of Etsy and no investment knowledge that missed out on a potentially life-changing opportunity.
Fundamentals Also Matter… A Lot
From that angle, stock investing almost sounds too easy. That’s because there’s at least one other critical component to it. Financials. Does the company make money? Are they in debt? Is it manageable? Are they priced fairly given their growth potential? These considerations matter a lot, and it’s a big risk to invest without knowing the basics.
Tesla is an interesting stock. It seems like such a no brainer “this is the future” stock. But when you look at their financials (they hemorrhage money) and valuation (they lose billions of dollars and are priced like competing companies that make billions), it makes the stock look a lot less enticing. Time will tell if they eventually live up to the hype or bite the dust, but they’re a great example of why brand name and outward appearance isn’t everything.
If you had bought TSLA a year ago, you’d currently be down about 30% on your investment. Meanwhile, the market is up sharply in that time. There you can see the risk in trying to beat the market with a “stock of the future,” but in this case, there was a good reason for the stock being down, one that could have prevented people from investing in it a year ago.
General Market Investing? Still a Good Idea!
All of this being said, my top holding is ticker SPY. That’s an ETF (Exchange Traded Fund: think of it like as a basket of stocks that trades as one stock) that mimics the S&P 500. So, a big chunk of my investment money is the general US stock market itself. I buy a small amount of it every month.
But while my S&P 500 investment is up 8% overall since I started buying it, the rest of my portfolio is up an average of 33% in the same time frame. Notably, my investments in Match Group (up 126%) and Amazon (up 89%) have outperformed considerably.
There’s much more to be said about investing strategies and considerations. If you have savings or a nest egg or disposable income and want to grow it, I recommend reading a book to understand the stock market. When I started out, I read “The Neatest Little Guide to Stock Market Investing” by Jason Kelly. It’s an excellent beginner’s guide.
My Favorite Stocks for the Next Decade
At the moment, my top two holdings are…
Disney (DIS)
One of the things great investors look for in companies is a large moat to protect them from competitors. Disney has that in spades. Their theme parks are the best in the world, and while they do have competition, it’s not a serious threat to their core business. Even as Disney continues to increase their prices, park attendance continues to rise. Their theme park revenue gives the company a solid and predictable base of revenue.
Disney also has the movie business. Disney’s Marvel acquisition in 2009 was, in a word, genius. Disney’s core business, whether we’re talking theme parks or movies, is intellectual property, and there is no hotter IP right now than Marvel’s Cinematic Universe (I saw Endgame on Sunday and it was amazing!). Endgame obliterated the world record movie opening box office, and with broad critical acclaim, it’s not likely going to let up.
Disney’s movies fuel their theme parks, merchandise sales, and soon-to-be streaming service, Disney+. For example, some of the plot lines in Endgame are said to lead into TV Series for Disney+. Take a look at the future Disney+ offerings, by the way, and you’ll get an idea of just how much content Disney owns. With their recent acquisition of 20th Century Fox, their war chest is absolutely brimming with quality current and classic favorites. They are a rare company with powerful cross generational appeal.
Disney’s entire business structure is synergistic, their creative teams are dominating cinemas, and I recently learned that they’re only using 1/4 of the land they own in Orlando! They’ve got room to grow in every sense of the word.
Disney is killing it right now, and I really like their chances to keep it going.
All that, and despite their current stock run, their stock is still conservatively priced. With a trailing PE ratio of 19, they aren’t priced as a growth stock, but that’s exactly what I think they will be in the next few years. The worldwide phenomenon Avengers: Endgame alone will create a surge of enthusiasm for Disney’s various offerings now and in the near future.
Match Group (MTCH)
Online dating is the future, whether we like it or not. It was inevitable that technology would change the way we date, and here we are. Match group owns Match.com and Tinder, among other dating sites. They are not immune to competition, but they are the clear market leader in a segment that will continue to grow.
Kids these days are practically born with cell phones. That’s a big reason why the stigma of online dating has diminished and will soon be forgotten altogether. This has been my best performing stock pick of the last four years and I think I’ll be comfortable holding it for another decade or three.
There are other stocks I like and own, but DIS and MTCH are my top two holdings at the moment. I should mention that I plan to hold them for many years, which makes short-term turbulence a non-factor. When you make any investment, and it changes in value, ask yourself if your basis for investing in it has changed. In some cases, like game-changing news, it might. In others, like a market overreaction to short-term problem, it might not.
Finally, if you don’t want to take the time, energy, and risk to invest in individual stocks, go with an ETF like SPY that tracks the S&P 500. Not only will you get a negligible maintenance fee of 0.09%, but you’ll beat 60-70% of mutual fund managers that charge you up to 2% for their market-losing services.
Disclosure: I own shares in SPY, DIS, and MTCH. Do your own research and invest at your own risk. Consider diversifying by time, too. I always have cash on the sidelines in case of a stock market downturn or crash (a great buying opportunity!).