Picking My Poison

There are more kinds of stocks than there are colors in a box of crayons. There are low priced and high priced stocks. There are stocks that can be held for income, and stocks that can be held for growth or speculation. There are stocks that are very risky, and there are stocks that are boringly safe. What kinds of companies will I own?

The type of company which a person is interested in buying is a reflection of that person's view of the purpose of investing. It may be helpful once again to visit the story of the beginning. God had created people, and gave to them His first instructions.

1. be prolific in order to fill the Earth with people,and,
2. exercise absolute control over the Earth to maximize its production for the benefit of the people.

Each person must come to grips with his or her own level of submission to those two tasks. My own response to the the charge leads me to invest in companies which produce goods and services, and most specifically, goods and services of the types which I find myself using in the course of life. Utilities, manufacturing companies, food production, pharmaceuticals, transportation; all these sectors are comfortable in the sense that I feel myself to be providing benefits to other people.

Where a company is located is also a matter of interest. When I invest in a company, I provide it with operating capital which allows it to expand operations and ultimately provide jobs for other people. If I feel a higher level of concern for the people of my own nation than for people in far off places, i will tend to invest in more local companies.

The type of return and the long-range goal of my investing will determine whether I choose stocks which tend to grow in value in and of themselves, or stocks which pay out higher percentages of the company profits in annual dividends. A determining factor in choosing a stock will be its price history over a period of several years. If I wish to speculate -- gamble if you will -- by trying to buy low and sell high, the dividend history of a stock will be of less interest than its price history. If I wish to maximize an income stream from my investment, the ratio of the dividend to my purchase price will be a more important factor.

So, then, some general guidelines which I have formulated for my own holdings:

1. The investment must be morally sound. I will not invest in products or services which I feel do not contribute to the betterment of my society. Shares in casinos or cigarette companies are not even on the radar because of their records of destruction of human lives. Neither are insurance or finance companies, since those entities generate their profits through fear and usury. You might be shaking your head at this point, since those kinds of companies frequently offer the highest rates of return. I reserve the right to judge the righteousness of my own investments, and pay the penalty for my judgment.
2. The investment must pay a dividend. If I am to be an owner in a company, I want it to make a profit, and when it makes a profit, as an owner, I feel entitled to my part of that profit. Dividends can be tricky; the higher returns often are a sign of higher risk.
3. The investment must be affordable and such that downward changes in price are not likely to cause excessive mental stress. I choose cheap(er) stocks for two good reasons. The first is that if two stocks are paying the same amount of dividend annually, but one is half the price of the other, the rate of return for the lower price stock is twice that of the higher. Simple math, but often ignored. The second reason has to do with the volatility of the stock market and the possibility of being forced to liquidate a position in a down market. If the price of a stock declines, say 30%, I will lose far less of my initial investment in X shares of a cheap stock than I would in X shares of a high flyer. I am loathe to spend more than $40/share. While some of my stocks are currently trading in the mid-$70 range or above, I bought them at about $40, and I will not buy any more of those stocks while they remain so expensive (although I will probably let the dividends be reinvested).

So what do I own at this time? What I am about to tell you is not to be considered a reliable guide to making money. You are about to view my idiosyncrasies, and if you attempt to duplicate what I have done, you may loose your shirt (along with the rest of your clothing). Thus, in order of my capitalistic meanderings:

AIVSX - The Investment Company of America. This is my only mutual fund, originally recommended by Mark Novkov. I hold it simply because it has sentimental value. It is also growing, and if you take pleasure in watching trees grow or racing turtles, this one is exciting. It does seem safe, though.

D - Dominion Resources, Inc. My natural gas supplier finally convinced me that I should buy its stock and get back some of my heating bill money. As the price has gone up, the dividend yield percentage has shrunk a bit; it is now a hair over 2%. Still, winter comes once a year to this corner of the globe, and I see a future for furnace fuel far into the distance. I bought it in late 2008; it was at about $35 then.

SJM - I originally bought Smuckers at $42.24 per share, a steep price for me, but since we drink Folgers coffee, eat Jiff peanut butter, and bake with Crisco, it seemed like the right thing to do. While it pays $1.92 annually, it traded over the last year from $60.46 to $80.25, and if it wasn't for the Folgers, I probably would have sold it. I can't justify spending any more money on this one; it is now too risky for me.

PFE - Pfizer was not purchased because it produces Viagra. At the time I bought it, it was paying a 32 cent quarterly dividend, or about an 8% return. When the dividend was cut to 16 cents, the price plummeted, but it is now back up to 22 cents, with a current return of about 3.6%.

KMB - Kimberly-Clark makes Scott toilet paper. 'Nuf said. What goes in, must come out; there will always be a need for toilet paper. I bought a few shares at $58 and cannot justify buying more at today's prices, but the dividend is hefty enough to register about a 3.5% return.

WIN - Windstream is a telcom stock. I was driving around Geauga County, seeing Windstream Cable vans everywhere, and decided to buy. My initial 100 shares were purchased at $14.21, and over the last year it has traded in the range of $10.76 to $14.40. The dividend, however, is $1.00 annually, or 7% on my initial investment, and being in a DRIP, it has grown to the point where if I had to sell it, I would likely break even on my initial principal. If I hold it and let it grow, it will, in a decade or so, be a handsome income stock. As of September 24, the dividend return is just over 9%.

FE - FirstEnergy is an electrifying stock. Yuk-yuk-yuk! Hey, same idea as Dominion, here. I have to light my bulbs, I may as well pay myself for the favor. Paying about 5% now.

CAG - Conagra Foods makes ACT II popcorn, Hebrew National hot dogs, and Swiss Miss cocoa. Gotta have it. Returning roughly 3.5%.

LYTS - I purchased 100 shares of LSI Industries at $7.26; it pays 20 cents annually for a 2.75% return on my initial investment, and roughly 3.5% at current prices. However, it is in a Dividend Reinvestment Program, and over the last year has traded in the range of $5.85 to $9.61. It is a park-and-forget stock. I bought it because I was intrigued with the electronic billboards that LSI makes. Besides, it's an Ohio company. Have to keep the neighborhood employed.

RPM - Rustoleum Products, anyone? Another neighborhood business, paying about 3%.

GRC - Gorman-Rupp Company. Hmmm. I bought this to show solidarity with my son-in-law. Have to keep him employed. Good thing this stock did a 5 for 4 split soon after I bought it. Still under water, and only paying about 1.4%. HOWEVER. It has some strong points, like almost zero debt, and a huge market for its industrial pumps. Tortoises belong in every portfolio. It was purchased for the long-term, though, and is (to me) a prime example of the idea of exercising the Genesis 1 requirement.

FTR - Frontier Communications is another communications holding, bought initially at $5.95 and paying 75 cents annually, or 12.6%. It has had a 52 week range of $5.33 to $9.84 and is being held for income. Although the quarterly dividend was cut to 10 cents, it is still putting out over 8.5%.

ALSK - Alaska Communications. What? Yep, a cheap dividend stock. Looks like a loser, but when something is this cheap and paying 8% - 9%, you buy lots and hang on. Besides, they nearly have the wireless spectrum cornered in Seward's Folly. I can live with this risk.

DOW - The Dow Chemical Company. Better living through chemistry. I'll buy that. I did. Paying about 4%.

OLN - Every feller needs his Winchester. Buying this was an American thing to do. Besides, it pays about 3.5%.

TNK - Teekay Tankers is a company for us oil speculator types. Of course, all we do is fill up the big tubs and sail them from place to place. As long as the return is in the 10% - 13% range as it has been this year, I'll anchor some money here. This is one where the dividends have outweighed the loss in principal over the course of the year.

NM - Navios Maritime Holdings is a Greek owned bulk carrier with a huge modern South American terminal. Somebody has to feed the world; we deliver the food. And other stuff. They were a cheap buy, and the dividend is about 6%.

CSX - Well, I couldn't afford the Reading or the B&O, so I bought CSX since it was cheap and had a cute internet commercial. It is paying about 2.6%. The graph for this one shows why being a day trader is a sure cause of heart attacks. In this rodeo, you get on and hang on. We will always need our choo-choos, and I will probably buy more of this in the future.

I see only one legitimate and constructive way of "occupying" Wall Street. Buy stocks.