A pox on this Dow 4000 BS - I'm Buying.

[Zeno]

I'm buying General Electric and Home Depot (thank you Pokerbabe for the tip). I checked out the companies and all is good. Rosy in fact - growing, paying dividends up the butt, stock splits, cash flow, good management, good leverage (I do not know what that means really but it sounds soooo gooood I thought I would throw it in), P/E great, all those debt ratios and other numbers that I looked at in the annual reports etc. and etc. and etc. I should add that these are longer term investments. I may hold on to them for many years.

I also purchased Barron's "Dictionary of Finance and Investment Terms". Being a scientific type, I have to have definitions. I can now look up just about everything that I see of the gobble-d-gook in the reports.

By the way, is the up front propaganda in the annual reports of any use? - or is this jargon-laced writing to be read only for laughs? Please advise. Thank you.

I need to find maybe one more stock and also one bond fund. I have to invest in a bond fund. All the books say diversity is key. Then I buy land. Up near where Ray Zee lives. /forums/images/icons/grin.gif It hear it is a nice place to be. /forums/images/icons/smirk.gif

-Zeno

[Ray Zee]

Zeno, you need two more stocks. dont buy home depot. stinks. they have few people that really know anything in there. they also dont have enough cash out people just like k-mart. so it takes too long to get in and out. plus the majority of stuff is second line junk. also i had them bid some big jobs for me and their bids were always higher than local lumber yards. they even admit it but say they will beat your best bid. but its not something you can do as thats unethical and if you do it more than once the local suppliers will stop working with you. maybe they had a good idea just like k-mart but they expanded too fast and cant keep up with any quality service. they went for quantity of stores. i see them hurting in a few years or less and i am sure of this. same thing i saw with k-mart and shorted the stock. soon i expect to short theirs, especially if interest rates rise a little. its not like k-mart in the beginning as their prices were cheap. home depot is about or close to the smaller hardware stoes on most things, they just have a bigger selection.

[Wildbill]

Whatever you do, don't read annual reports. Look at the numbers if you wish, but forget the writeup. Ever imagine a company saying "don't buy us, we have no future" or "our business is tough and we are going to lose our ass for a couple of years"? Of course not. Besides annual reports are about 4-6 months old once you get them. 10-K and 10-Q reports are better as they have the same numbers and a much better discussion of what went on. You can get them in many places online. Key thing though is to only look at the past so much. What a company did last year or the year before isn't what you buy them for. You buy them for what you think they will do for you in the next few years. If you are basing a decision on what happened before you are opening the door for trouble. After all there are some pretty and impressive Enron annual reports out there that look wonderful. Unfortunately stock selection isn't all that easy. Its good you have a long-term view of it, that will do you a lot of good as you won't be the typical investor down on a stock for one bad quarter. Just think though of what the reasoning is that you think a company can do to improve on what you see in their reports. That is where you get more enlightened stock selection for the long run.

[adios]

"By the way, is the up front propaganda in the annual reports of any use?"

Probably not. I do like reviewing the financial statements and the notes attached though.

"I need to find maybe one more stock and also one bond fund."

There are a lot of open ended and closed ended bond funds. Are you in a taxable or tax deferred account? If your in a taxable account you might be interested in some closed end bond funds that have tax free payouts whose symbols include:

MHF, OIB, OIC, VKA, APX, MHF 7+% tax free yield.

MYI is a closed end tax free fund that has all AAA rated which pays about 6.8%

VOV pays about 6.8% tax free I believe.

NUV pays about 5.6% tax free.

Read up on all of them to see which would suit you the best. It would be silly to buy any of these in an IRA account though. I'll get back to you on some other bond funds. ACG is one that has a good yield but is trading at a premium to NAV. I wouldn't buy it but it has really hung in their and actually gone up in value over the last 6 months. There are a lot of closed end taxable yield bond funds. You might be interested in high grade corporates now.


Also I would recommend something of a financial flavor although GE might fit the bill. Here's a couple that combine both stocks and bonds that you may find interesting.

First one is First Financial Fund symbol FF:

"First Financial Fund, Inc. (the Fund) is a closed-end, diversified management investment company. The Fund's primary investment objective is to achieve long-term capital appreciation with the secondary objective of current income by investing in securities issued by savings and banking institutions, mortgage banking institutions and their holding companies. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry or region. The Fund invests in long- and short-term securities, which include banks and thrifts, mortgage and real estate investment trusts (REITs), loans, preferred stocks and other investments."

They recently went x-dividend (look it up in your book) with a distribution of about 20% for the year.

Another is American Capital Strategies symbol ACAS:

"American Capital Strategies, Ltd. provides financial advisory services to, and invests in, middle-market companies. It is also principally engaged in providing senior debt, subordinated debt and equity to middle-market companies in need of capital for management buyouts, including employee stock ownership plan (ESOP) buyouts, growth, acquisitions, liquidity and restructuring. On August 29, 1997, the Company became a non-diversified, closed-end investment company that is regulated as a business development company (BDC). On October 1, 1997, American Capital began operations so as to qualify to be taxed as a regulated investment company (RIC). As contemplated by these transactions, the Company materially changed its business plan and format from structuring and arranging financing for buyout transactions on a fee-for-services basis, to primarily being a lender to, and investor in, middle-market companies.

ACAS, a buyout and specialty finance company, invests in senior debt, subordinated debt and equity in middle market companies in need of capital for growth, ESOP buyouts, acquisitions, management buyouts, liquidity and restructuring. For the nine months ended 9/30/02, revenues rose 43% to $106.1 million. Net income totaled $4.3 million, vs. a net loss of $312 thousand. Results reflect higher interest and dividend income from securities and improved operating margins."

ACAS has a dividend yield of about 12%. Both stocks come highly recommended from people I have a lot of respect for in their knowledge of securities.

[Zeno]

Thanks Ray. Much of what you say makes sense. I have not been in a home depot for about 2 years but on reflection I understand some of the things you pointed out. And yes, I remember from the annual reports that they really are increasing the number of stores very quickly. I think I'll hold off on the Home Depot purchase. I will buy GE and then pick another stock or two.

-Zeno

[Zeno]

Thanks Tom for all the information. Taxes. Ugh. I like the idea of the tax free bond funds and will look into them over the weekend. I did look at American Capital Strategies - it is trading at 21.56. They have a number of companies that they "invested in" and I checked out the company web page, and morningstar reports etc. They just "purchased" a defense related company and have quite a few manufacturing type companies. The P/E ratio is high but this number is hard to judge sometimes as it should be compared to a historical baseline or to similar type companies, right? It is easy to get lost in all the ratios/terms etc so sometimes it seems like I am spining my wheels. Part of the learning curve I am guessing. Anyway I have a lot of research and learning to do. The dictionary is becoming a useful investment! /forums/images/icons/grin.gif

-Zeno

[Zeno]

Thanks Wildbill. I sense that I am getting sound advice about all this and I appreciate the input and information. And your right - I am investing in the future, which is always unpredicable, especially in the short term. I'll keep that in mind.

-Zeno

[snakehead]

I was in a home depot in scottsdale the other day, and they had self-checkout scanners, like you will find in some supermarkets. this relieves the need for so many cashiers. of course, it will probably be another decade before this technology makes it up to montana...

[Ray Zee]

not really. we have it in some places. but you still need to go to a cashier or stuff in bills in this machine which takes forever. but the probelem is that too often things are mismarked or not and you have to wait. but it may be the wave of the future. but the bottom line is that in a hardware or lumber yard you need people that can help you out, and not just $6 an hour bodies.

[adios]

I don't own ACAS myself. I'd be remiss to say that there is also a significant bearish group on ACAS who are short a significant number of shares. The ACAS bears say that the privately held company assets that ACAS has are valued too high. I don't own it myself and was hoping for a better price. I believe that they do have a lot of non cash charges so the PE may be misleading. Hopefully I'll get around to sharing more insights into it. Also there was a pretty decent debate regarding ACAS and I'll post the link if I can.

[mikelow]

Good luck! I think the markets were reacting to Bush's sacking of his economic team. Good luck on his replacements.

Slowing economy and sluggish earnings growth will keep stocks in check.