Should I Buy Blue-Chip Stocks Right Now?

moneypile

I received this question recently from one of my readers:

“hi tim, i love your articles. i have a question for you. With the dow at >15,000 how aggressively would you buy exxon, pg, jnj etc. would you buy 100 shares then wait for a pull back? Thanks, manoj”

Hi Manoj. When we make investments, one of the best weapons we have in our arsenal is the ability to make each investment one at a time. The fact that the Dow Jones is trading above 15,000 (or whatever figure might be dominating the headlines) says little about the valuation specifics of each company. For instance, Aflac typically traded at 250-400% of book value, and 15-25x earnings, before the financial crisis hit. Nowadays, the company trades at 100-170% of book value and only trades at 7-9x earnings, despite the fact that Aflac’s portfolio is now of higher quality than it was

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Royal Dutch Shell: The Perfect Stock For Your Roth IRA

shelloil

Tucking away high dividend-paying oil stocks in a tax shelter like a Roth IRA is one of the most underrated ways that an investor can accelerate the journey of turning an income stream into an income gusher. Companies like BP, Conoco, and Royal Dutch Shell that give investors a 4-5% starting dividend yield that typically grow over time can be a surprisingly effective way to build up your nest egg.

Let’s take a quick look at what can happen if you use a company like Royal Dutch Shell to augment your nest egg. Right now, Royal Dutch Shell trades at $70 per share and pays out a $0.90 quarterly dividend. On an annualized basis, that means you will receive $3.60. I went to Subway yesterday and I ordered Chicken, Bacon, and Ranch footlong that cost a little over $7. Well, if I owned a mere two shares of Royal Dutch

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Why Republic Services Stock Is A Mini-Microsoft

Beginning around 2002 or so, Microsoft founder Bill Gates began to systematically liquidate his immense Microsoft fortune, selling as much Microsoft stock as he could each day without having a material impact on the stock price of the company that he founded. The proceeds of Gates’ stock sales poured into his investment holding vehicle, Cascade Investment Holdings, LLC, that has long been managed by Michael Larson.

Although Larson is believed to exercise considerable autonomy over the investment selections, I pay close attention to the investments that show Bill Gates’ thumbprints.

One such investment was Republic Services (RSG), the waste collection company, which Cascade purchased during the Great Depression for a price of under $20 per share. Larson gobbled up Republic Services stock like it was a tray full of Skittles, at one point giving Gates’ holding company a one-third stake in the entire business.

Why the Read the rest of this article!

The Parents of America’s Wealthiest One Percent

An interesting phenomenon in the United States is that, outside of those living in true poverty, nearly all other individuals self-identify as a member of the middle class. Teacher earning $3,500 per month as part of a Teach For America or related program immediately after graduation? That person identifies as a member of the middle class. Pulling down six-figures annually as mid-level investment banker? Identifies as a member of the middle-class.

Small business owner who earns $75,000 per year? Rightly identifies as a member of the middle class. Small business owner who grows that business to earn $300,000 per year? This person now identifies as a member of the middle class who happened to have a successful year.

That is significant.

Why don’t individuals classify themselves according to their economic reality of their earnings? If you are bringing in $15,00 per year, you are not middle-class, you are in the Read the rest of this article!

Milton Freidman: Work Ethic and Pursuit of Wealth

Milton Freidman observed that Americans usually self-describe as individualists but it would be more accurate to describe Americans as a family-oriented culture. He pointed to the self-sacrifice that parents often make on behalf of children, which would not make sense unless you valued your children more than yourself.

“You know, the thing that is amazing, that people don’t really recognize, is the extent to which the market system has in fact encouraged people and enabled people to work hard and sacrifice in what I must confess I often regard as an irrational way, for the benefit of their children. One of the most curious things to me, in observation, is that almost all people value the utility which their children will get from consumption higher than they value their own. Here are parents, who have every reason to expect that their children will have a higher income than they ever Read the rest of this article!