The first lesson in investing is “only invest in things you know”. Sometimes it is tempting not to follow this advice as the grass always seems greener on the other side. This mistake usually doesn’t work in your favor, as you can see by my worst 2011 investment, which did not meet the criteria of “invest only in things you know”.
For my 2012 picks I’ve taken a different approach. Why not invest in companies that are involved in my life events?
If I’m buying a new car, that usually means that I have done some research about the car industry as a whole, the product they sell, etc. Therefore in 2012 if I make any major purchase (like buying a brand-new Ford Mustang GT) I will purchase some of the company’s stock (NYSE:F) along with it.
12 Stock Picks for 2012
January: During the month of January I will be completing a refinance with Citibank (I’ll leave it to Kevin to discuss the topic of fixed vs. ARM mortgages). Along with this refinance I will be purchasing some stock of Citigroup (NYSE:C)
February: In February, I shall take my lovely Boo out to a fancy Valentine ’s Day steak dinner…well, actually a fancy fish dinner, but you get the point. Since there is a beautiful Mitchell’s Fish Market near my house I will stop on by to pick up some shares of their parent corporation Ruth’s Hospitality Group (NASDAQ:RUTH)
March: Time to remodel the bathroom. Have you ever wondered why all houses in the US are made out of wood? Is there a magical wood mine hidden away in the mountains where they mine wood ore and refine it into bathroom 2x4s? Yes there is: Plum Creek Timber Company (NYSE:PCL)
April: April marks the one year anniversary of the Asus Transformer and hopefully the release date of the Asus Transformer Optimus Prime which I can then purchase to upset Kevin. Where would I purchase such a monstrosity? From my favorite online retailer, Amazon of course (NASDAQ:AMZN)
May: The month of May sounds like a great time for a bachelor party…in Vegas (Kevin’s note: I hope he has a prenup by now). Since the hangover destination of choice (Caesar’s palace) is private, I’ll take a gamble on the next best Casino company in Las Vegas Sands (NYSE:LVS)
June: Of all the wedding related events, setting up the gift registry is the one I’m looking forward to the most. Also, I’m expecting something huge from my good friend Kevin, maybe from Bed Bath and Beyond (NASDAQ:BBBY)
July: The birthday of this great country should only be celebrated with beer out of a can with an American flag on it. There’s no more patriotic drink than something from Anheuser-Busch InBev (NYSE:BUD)
August: Like any good last minute shopper, August will be the time to buy “my precious” (that’s a wedding band for non-LOTR nerds). Thanks for digging it out of the ground New Gold (NYSE:NGD)
September: A wedding is really just an excuse to overspend on a vacation that you could typically never rationalize spending money on, and that’s exactly what we are doing. You are welcome Marriott (NYSE:MAR)
October: “How much did the cake cost!!!” I hope Pizza Hut still has that $5 pizza deal, otherwise it looks like we are eating leftover wedding cake for the month. I’ll be eating a lot of meals from Pizza Hut, Taco Bell, KFC, and other restaurants from Yum Foods (NYSE:YUM)
November: Flu season…time to get my flu shot. “Excuse me nurse, who makes make this delicious concoction that you are injecting into my arm every year?” Of course, GlaxoSmithKline (NYSE:GSK)
December: December 21, 2012 decidedly marks the end of the world. In order to outrun those zombie hordes (or heat my aluminum foil lined basement) I will be stocking up on some gasoline from my local gas station; British Petroleum (NYSE:BP)
Invest in What You Know
This investment approach of buying stock in companies where you buy products has several advantages and disadvantages.
The biggest advantage is that if the company has a product/service that you would buy, chances are that many other people are buying it as well. Therefore the company is here to stay and reap profits for at least a little while.
The biggest disadvantage is that most of your daily purchases likely involve big conglomerates which are often too large and diversified to create the returns that will enable early retirement.
However, if you are looking for a slow and steady returns and want to pick your own stocks (without looking through too many detailed financial statements) this seems to be as good a strategy as any.
Important to note that ALL ideas, thoughts, and/or forecasts expressed or implied herein are for informational and entertainment purposes only and should NOT be construed as a recommendation to invest, trade, or speculate in the markets.
No consideration of the company’s fundamentals?
The Hoff may or may not have done a review of these companies’ financials, but this article is not geared towards the technical investor, so a review of financials would be meaningless to the target audience.
I would like to reiterate, however, that this is just a list of 12 stocks that one person likes. This is not a recommendation to invest; this is just for entertainment purposes.
Can you keep track of all these stocks? I find that if I own more than 10 stocks, I don’t pay close attention to them. That’s why I’m going mostly with mutual funds/ETF. Good luck. I like AMZN, it pulled back quite a bit over the last few months.
My only worry about AMZN is their entry into the tablet market. I’m not terribly impressed with the Kindle Fire, and if they don’t put out a good 10″ tablet then I’ll be really worried.
Ewww! I hate Citi stock. Losing my shirt, ugh!
You should have bought LVS like a year ago. It was dirt cheap… Then again, everything in 2009 was dirt cheap.
I love YUM! Taco Bell!!
Your stock picks are well diversified. That’s they way to do it, in my opinion. In it for the looong haul!
I disagree with your assessment that investing in large conglomerates wont let us retire early. Yes, they aren’t sexy, and they won’t give you the big gains and losses of their small cap, high-beta cousins, but many are perfect for dividend growth investing. Once you get your retirement portfolio into the $100-150 thousand range, you might do well to begin looking at building a small dividend core of stocks. Idealy, when I do retire, I want to have about $450,000 invested in about 42 dividend paying stocks (Aristocrats, Contenders, Champions, ect.) If I were to do it today, I could generate about $20,000 a year in retirement income and never touch the principle. A good start on retirement income, and great capital protection so I won’t outlive my money.
I have begun building my core already, I am long, KO, COP, INTC, PG, O, JNJ, SDT. Although SDT will probably be cut sometime in the 2025 timeframe, as it is a royalty trust and will eventually expire.
Happy stock picking
And also long NJR. Its not really a large conglomerate, but pays a nice dividend, and has been going up for years, which is more than I can say about most of the mutual funds I have been investing in.
Investing in what you know, and sometimes use, is a great concept. I’m wondering if you’re really going to purchase those companies at that time? Why wait? Just wondering…
Invest in what you know is solid. I drink beer, therefore I hold ABV (or BUD). 🙂
Also like your description of PCL as a magical timber mine.
This seems like pulling random stocks out of a hat and telling people to invest in them. On the plus side there seems to be a lesson about diversifying your portfolio here.