Individual stock tip

[Hank]

Disney theme parks are taking quite a hit, but I suspect lots of households are going to use Disney+ to weather the storm of school shutdowns.

[jfoxcpacfp]

why would you care about the dividend yield?

Investors include that as a measure of long-term ROR, right? No dividends, higher growth + the obverse (generalization). What am I missing?

[jacoavlu]

Investors include that as a measure of long-term ROR, right? No dividends, higher growth + the obverse (generalization). What am I missing?

Total return should be what matters.

[jfoxcpacfp]

Total return should be what matters.

Aren’t dividends part of the total return? Or are we saying the same thing?

[hospitalistquack]

Silly question as I just haven't had time to read enough about individual stocks yet with this whole new financial journey.

What is the reason people get excited now about buying stocks like AAPL (div yield 1.3) and DIS (div yield 1.8) at this discount? CCL and RCL have >10% div yields, but maybe that only reflects the dirt cheap stock price and doesn't matter? Let's assume coronavirus just disappears today and the market slowly starts coming back up over months, years, whatever. AAPL was ~300/share this year prior to the virus, and is now $242. DIS was ~145/share for this year prior to the virus, and is now $95. The cruise lines (RCL, CCL and NCLH) were 3-5x this price at the beginning of this year. If I bought $10k worth of shares from Apple right now, I'd get 41 shares, which selling back at $300/share would get me $12k (net $2k). $10k of DIS right now would get me $15k when it got back to $145. $10k of RCL or CCL or NCLH would get me like $30-50k. Even if Apple and Disney bounce back in one year and the cruise lines take two years, it's still a win. Obviously there's the risk of a cruise line closing and losing all the money, or buy-outs or mergers or something, so I get that this plays a role. But what makes something like AAPL or AMZN so attractive to buy on discount when you won't even double your money for a very long time, whereas the cruise ships could potentially quadruple your money in that same amount of time. I get that AAPL could be a stock that people "want," but what value is there in having a stock that you "like" other than the potential for much bigger growth ($35 in 2010, $300 in 2020)? It's not like I get a free iPhone every year if I own AAPL stock.

Is it the dividends? Or the much higher likelihood of Apple and Disney surviving while cruise lines are much higher risk to go under? Is it the promise that Apple could be $1000/share one day (like how it was $35 in 2010), whereas the cruise ships will likely never have that kind of growth? I don't only specifically mean the cruise ships, please feel free to substitute airlines or whatever else is 1/3 to 1/4 the price right now that it was in the beginning of the year. VOO was ~300/share at the same time as AAPL and is now $218 (cheaper than AAPL), so why not that ETF? Slower growth?

This is just a question for understanding –– I'm not looking to get rich quick, time the market, saying dumping tons into cruise ships is a good idea, etc.

Thanks.

[Perry Ict]

Good question. I'm not sure I have a great answer for you, but my opinion is that, generally, people invest emotionally. When other people are running for the exits, it just doesn't feel like a safe investment, even if there is nothing fundamentally wrong with a company and it's essentially a bargain price. It's the instinct of wanting to run with the herd. That's why I find value investing (which is what I try to do) so difficult, because it sort of goes against human instincts. On the other hand, there might be real risk with trying to buy at a bargain, for example a company could be on sale because there is a chance of bankruptcy. But generally, I think many of the price fluctuations are more sentiment driven (or at least some degree of an overreaction) rather than based purely on fundamentals.

[ShredtheGnar]

Silly question as I just haven't had time to read enough about individual stocks yet with this whole new financial journey.

What is the reason people get excited now about buying stocks like AAPL (div yield 1.3) and DIS (div yield 1.8) at this discount? CCL and RCL have >10% div yields, but maybe that only reflects the dirt cheap stock price and doesn't matter? Let's assume coronavirus just disappears today and the market slowly starts coming back up over months, years, whatever. AAPL was ~300/share this year prior to the virus, and is now $242. DIS was ~145/share for this year prior to the virus, and is now $95. The cruise lines (RCL, CCL and NCLH) were 3-5x this price at the beginning of this year. If I bought $10k worth of shares from Apple right now, I'd get 41 shares, which selling back at $300/share would get me $12k (net $2k). $10k of DIS right now would get me $15k when it got back to $145. $10k of RCL or CCL or NCLH would get me like $30-50k. Even if Apple and Disney bounce back in one year and the cruise lines take two years, it's still a win. Obviously there's the risk of a cruise line closing and losing all the money, or buy-outs or mergers or something, so I get that this plays a role. But what makes something like AAPL or AMZN so attractive to buy on discount when you won't even double your money for a very long time, whereas the cruise ships could potentially quadruple your money in that same amount of time. I get that AAPL could be a stock that people "want," but what value is there in having a stock that you "like" other than the potential for much bigger growth ($35 in 2010, $300 in 2020)? It's not like I get a free iPhone every year if I own AAPL stock.

Is it the dividends? Or the much higher likelihood of Apple and Disney surviving while cruise lines are much higher risk to go under? Is it the promise that Apple could be $1000/share one day (like how it was $35 in 2010), whereas the cruise ships will likely never have that kind of growth? I don't only specifically mean the cruise ships, please feel free to substitute airlines or whatever else is 1/3 to 1/4 the price right now that it was in the beginning of the year. VOO was ~300/share at the same time as AAPL and is now $218 (cheaper than AAPL), so why not that ETF? Slower growth?

This is just a question for understanding –– I'm not looking to get rich quick, time the market, saying dumping tons into cruise ships is a good idea, etc.

Thanks.

To make APPL even less appealing, a lot of their “growth” came via stock buy backs. I bought several hundred shares of RCL in the last few weeks. I’m pretty sure there will still be cruises when this is all over.

[Max Power]

To make APPL even less appealing, a lot of their “growth” came via stock buy backs. I bought several hundred shares of RCL in the last few weeks. I’m pretty sure there will still be cruises when this is all over.

This is good thinking...

FUN and SIX are real good ones right now also... they crashed much further than the market overall based on ridiculous fear factors. The parks all have minimal skilled staff, minimal upkeep, and real estate that will be around to make money next summer... and besides, they probably won't even be shut down all of summer 2020. SEAS or the cruise and airlines are more risky plays due to more high paid staff, but they could pay off as long as the shutdown isn't prolonged. Disney is complex since they are much more than just a park/resort nowadays, but probably not a bad buy.

...a lot of the "hot stock tips" are just the usual suspects like DOW giants that are undervalued: 3M, Google, etc. Indexes work too of course. The only "bad" buys are Kroger and Walmart and the things that have gone up lately. Anything and everything will be up to all time highs by 3rd quarter, so just get what you like on sale. When you combo a market crash from the biggest public health over-reaction of all time and inflation from trillions and trillions printed. Unless you are buying companies that go belly up, you are going to do fine.

[Hank]

AAPL is pretty much the same thing as APPL, right?

[nephron]

I was looking at Apple. It's PE ratio is still 20 with a dividend of 1.27% despite a drop to 251 from a high 327. I think that it's price with the drop is around where it ought to be valued, if not lower if there is a large recession. People will not want to upgrade their phones for a while if there is a prolonged recession. I think that they are close to max on their growth. I also think that their supply chain is going to be more expensive even they had an uptick in demand given all the disruptions in China.

[nephron]

I don't see the cruise industry going anywhere soon. People usually plan for cruises some 6-12 months in advance. Between all their cancellations currently and the drop off in the number of people who will ever be comfortable going on a cruise in the near future, I would anticipate a prolonged downturn in the industry.

[jacoavlu]

I don't advocate individual stock investing. But if I did, it would seem to me that giving much thought to the dividend yield of a company is a waste of time.

Apple paying little or no dividend is Apple keeping their cash instead of distributing it out to shareholders who may then have to pay tax. If Apple is keeping cash then I would assume their competent management feels that they can put the cash to good use. Perhaps investing in a future product, or research, or a new manufacturing facility, or whatever.

This is Warren Buffett's philosophy with Berkshire. He doesn't pay a dividend because he feels like he can make better use of the cash within the company.

Dividends are simply taxable distributions of company cash. There is no magic.

[xraygoggles]

In normal times, betting on certain sectors or companies is usually not advised.

But this is not normal times, so it may be worthwhile. For example, it's almost a certainty that the hotels, airlines, and cruise industries will be bailed out by the govt. So those companies will bounce back. I'm personally buying a combination of stocks and call/LEAP contracts on some of these companies.

For the larger companies like Amazon, Apple, Microsoft which are ~1T valuation, they will not double realistically. So might be better to just buy the tech sector as a whole. Like IGM, VGT, FTEC etc.

[nephron]

I just looked up Seaworld stock. It has fallen from a recent high 36 dollars earlier this year to a 8.74 giving a PE ratio of 7.95. I think that they would do well once this virus business is over because most of their park is outdoors so people may be more inclined to congregate there vs some of the other more tightly packed parks.

[Perry Ict]

I don't advocate individual stock investing. But if I did, it would seem to me that giving much thought to the dividend yield of a company is a waste of time.

I generally feel the same. I've followed some some supposed experts who were believers in particular companies, and even they get burned. There's no way for an amateur investor, even a fairly knowledgeable one, to know everything that's going on behind the scenes at these companies. I prefer to use funds of sectors (or countries) for targeted investing, that way you offset some of the risk with what can happen at one company. If you're a value investor, you can still find numbers like average PE ratios and such in these funds.