Companies I Bought and Not

When you choose companies to invest in, first, know what you know. You can`t know about everything and buying stocks you don`t know about seems rather foolish. If you don`t know anything about palladium, and the only reason you buy it is because it is going up, it is already too late. If you`re clueless about drugs, messing with pharmaceuticals is like asking to be pushed into a swimming pool. So what do you know something about? I look at areas I know something about and find out which ones in the future might go up and which ones are not doing well and might go down. That is where I start. And then, look for insights into the market. What follows are examples of insights that I have incorporated as themes in my investment choices.

As an example, the world is not making anymore land but the world is making more people. You can only squeeze so much out of an orange. In the same way, the available land can only make a finite amount of food. So new things have to happen. Companies that make fertilizers and chemicals are going to get richer and food is going to be more expensive. You don't need to be Warren Buffet to find out that companies in these fields are going up in price.

So I did a dogs and stars review and put a couple in my portfolio a year ago and they're doing just fine. Then, I set up a Globe and Mail watch list. This is one of Canada's national newspapers with a slant towards business. I also do the same in my investment brokerage site. And I can track the stocks as easily as can be as all the news announcement in these companies are all there.

Big 3 car manufacturers got into a right mess. Everyone saw it coming even them.One of the big three actually did something about it and so while the other two died and rose Lazarus like with government help, the one spent two years designing new products that people actually wanted. You didn't need to be a genius to buy Ford at under 3 bucks (it even went down to $1 for a short time) in the full knowledge that it would have to shoot itself in the foot to miss being the biggest winner.

When I know I am taking a risk, I only invest money I can afford to lose. And I monitor the stock news. When I know, it is doing well and it is still down, I add more. When I get a little gain, I sell some and hold some. As I can't know everything about the market, I sell the risky ones (penny stocks) when I get some profit. I can't have my stomach churning all the time.

Months ago, everyone talked about mining and construction. Commodities were flying. Well, who builds the equipment who makes mine works and support heavy equipment in construction? If your little brain doesn't come up with Caterpillar and Kohmatsu and Deere, then, you've been living in your basement too long. There's no genius in it. It's just simply thinking.

China is growing really quickly. I don't know anything about the Chinese stock market but who do I know that sells stuff in China? Total no brainer. YUM, Caterpillar, GE, Cummins, McDonalds. I bought this and have been driving the Chinese dragon without having to leave my very conservative pony.

So, what about really complex areas that might grow but I don`t understand details to buy into individual companies? Well, an ETF is not a bad way to go in some of these. You can buy and sell ETF's in the stock exchange just like any other stock and you can hold a whole basket of mining, banks or food or high flying manufacturers or high risk country stock exchange. Here is an example. India has to grow. It is insanely complex even the Indians don't know what is going on. So, I look at an ETF that had in it, some names I recognize like TATA and Mahindra and Infosys. So I bought ZID and took profit when it went up. It is down now as the Indian economy is being plagued by the price of onions but once it stabilizes, it will be fine. For some risk takers, this is a good opportunity. For the risk-averse, take your profit and find somewhere else to camp it.

I read an article that showed how in emerging economies, the new middle class really love name brands. And they are just feeding the economy. If you don`t have the money for a BMW or a new mansion, at least you can show you have the money for a zippidoo watch, a coach purse or a pair of Guccis. Imagine what is gonna happen over the next ten years with these brands.

Or how about make up? Imagine when half a billion women make the transition from home made goose grease to Bobbi Brown, L'Oreal, Shiseido or some of the P and G products. It's going to happen. No one on earth can stop it and you don't have to be a genius to own a piece of the action. So, look into companies with very popular brands that the growing middle class in emerging countries will go for.

Ok, and here is another way. Really good companies pay dividends. That means every year, they're paying up to 3 or 7 percent of the stock you own in cash payment to you. Look at Bank of Montreal, National Bank or JP Morgan or the Big Blue. These are about the low risk stock you'll ever own and even if they're slow growers you're gonna get a solid return every year.

Guess what...the world will need thousands of new commercial aircraft in the next few years. Who is gonna build them? There are only two big builders in the world. Boeing and Airbus. There are lots of little guys, too, and they natter around the ankles of the market like Embraer and Bombardier but really if you don't own Boeing, your body maybe alive but your mind checked out last year.

Here's another rule I follow. Never listen to CNBC or Bloomberg or the assorted doofi who write investment columns for anything other than comic relief. They're so focused on individual pimples that they can't see the entire head is about to fall off. Don't listen even to me. Know your stuff. Don't let anyone panic you. Learn and with enough knowledge, just sit back and beat the pants off the market.