In the last week of January and early part of February a company made most of the financial news because something was different. The company was Game-Stop which jumped from $20 to over $450 settling in somewhere between $200 and $300. It is a good story and involves short selling and panic buying to cover shorts and margin calls and generally most of the things dividend paying investors stay away from, however it is an interesting story.
With some of my dividends, Blackberry stock was bought – while 95% of the stocks in the portfolio pay a dividend, it is good as an individual to have some possible turnarounds giving the correct market conditions and management decisions. There is hope in buying a stock which is out of favor for very good reasons, but the company does have potential good assets to build. It was a very pleasant surprise one day the stock jumps into the $30 range and having the good graces to sell most of the holding.
We buy stock for dividends and some capital gain, when the capital gain comes, there is the possibility of selling some of the stock and lowering you cost to own it. If the stock doubles and you sell 50%, essentially the other 50% cost you nothing, because you took out your capital. You can hold the rest for as long or as short as you wish. If the stock falls it is okay. Having said all that, it is difficult to sell under an easy capital gain. Is there more to come? will you leave money on the table? those are all good decisions to have to make. The other side is if the stocks falls, do you hold? do you cut your losses? Experience helps makes the decisions, but easy gains feel wonderful, because the market has reaffirmed your homework and decision making abilities.
In the past month, the WallStreetBets on Reddit website and if you have not checked it out, you should look through it. There is a lot of banter, but there has always been a lot of banter in the watering holes or bars around Wall Street. What’s hot? What’s new? What is the investor who makes a lot of money doing with their money? what sector? can you ride along. The decisions around quick and fast money are not new and they will be around as long as you can make money in any market.
The huge focus on Game-Stop caused the rest of the market to focus on it and shares were sold to buy Game-Stop on the way up and down. Fortunately or unfortunately momentum traders are always trying to find the next thing. Maybe similar to me, one of the stocks you own that was out of favor will be in the next round of momentum traders sights. Remember many companies on the stock market are tied to commodity prices, when they rise those stocks connected to the commodity prices rise to, which ones you buy is the homework you need to do.
Linking to dividend paying stocks, in the long term investing in profitable companies which pay a dividend and can raise the dividend has proven to be a very successful way to increase your wealth over time. It allows you to sleep well at night and worry about people rather than stock market prices. Having said that, it is nice to make a quick dollar which allows you to buy more dividend paying stocks to reinvest, do nothing, spend or make larger donations to causes you support.
There are more questions than answers, till the next time – to raising questions.