Bunting’s Laws of Investing

[comlb]

From Brett Arends- full article:
www.marketwatch.com/story/12-stock-investing-rules-for-the-next-40-years-2012-11-30?siteid=rss&rss=1

summary:
1. Sell stocks of companies that announce huge acquisitions, that overdiversify, or that spend a fortune on a lavish new headquarters.

2. Avoid stocks where management picks fights with analysts (or, by extension, hedge funds). See Overstock.com in 2005; Netflix in 2010.

3. Watch out when executives start selling a lot of stock — regardless of plausible-sounding excuses. Top execs in homebuilders, mortgage underwriters and Wall Street dumped billions before the 2008 crash.

4. “Run a mile” from all stocks in an industry going through a huge investment boom: Massive overcapacity and consequent collapse is inevitable.

5. Steer clear of investing in manufacturing companies. Their industries are usually plagued with extreme cycles of boom and bust, overcapacity and slumps.

6. Pay little attention to economists or market gurus.

7. Mistrust all mathematical trading formulas as well — they invariably fail just when you most need them to work.

8. Look for companies where the insiders are buying lots of stock.

9. Look for companies generating a lot of cash — a great sign of sustained outperformance.

10. Look for companies which have monopolies (or near monopolies), and those which manage to take out their main competitors.

11. Remember you are buying businesses, not just stocks. Pay close attention to the quality of the business, and especially the quality of the management.

12. Look for companies which have earned the trust of consumers, and which have very strong brand names.

[chang]

Nov 20, 2022 13:21:22 GMT comlb said:

summary:
1. Sell stocks of companies that announce huge acquisitions, that overdiversify, or that spend a fortune on a lavish new headquarters.

It always irked me that Dodge & Cox had a picture on their homepage of their headquarters overlooking San Francsico Bay.

[chang]

Nov 20, 2022 13:21:22 GMT comlb said:

5. Steer clear of investing in manufacturing companies. Their industries are usually plagued with extreme cycles of boom and bust, overcapacity and slumps.

This one is a little broad. It could preclude pharmas (where I am overweight) and consumer goods companies like Nestle, Unilever, P&G, etc. There are many wide moat, low beta, profitable, dividend paying, blue chip companies in these categories.

[steelpony10]

comlb ,

         Although I’m out of individual stocks viewing them as to risky now for a retiree and to pass on to heirs, those points are spot on. That juggling act led us to indexes, VTI being the main one.

[retiredat48]

What an impossible task...all based on investing in individual stocks.

How about this over-riding RULE FOR THE NEXT 40 YEARS:

Do not invest in individual stocks!

Mutual Funds/ETFs/CEFs...tried and true for many. Best for average investors...or investors who are working and cannot devote the full time needed to search for these "great companies". And for investors with 401.Ks, typically more than half an investors equity savings, which do not have individual stocks available to invest in.

Just think of how much time is wasted searching/investigating a stock, and then not investing in same.  If I had a dollar for every hour spent by the average investor doing this, I could have retired two years earlier!

Disclosure: I have not bought an individual stock in over 50 years...gave that up after a few years in late sixties. Turned out OK for me.

R48

[bb2]

13. Apple excepted.

[comlb]

“This one is a little broad. It could preclude pharmas (where I am overweight) and consumer goods companies like Nestle, Unilever, P&G, etc. There are many wide moat, low beta, profitable, dividend paying, blue chip companies in these categories.”

I would look at consumer staples as non-manufacturing, the companies you name include some of my very favorites and one thing that makes is so is lack of cyclicality. Manufacturing introduces other issues, you may have a point that it is too close to pharma. Nick Train another over three decade successful investor has a few simple rules- never buy a company that makes anything out of metal (I would agree except Apple here) and if it tastes good, buy the shares (Unilever is an over 20 year top holding for his fund).

[chang]

Cigarette manufacturers stocks have been rewarding LT. Big divvies, remarkably low beta and they hold up during inflation. I’m still thinking about getting some BTI, but I’m late.

I’m just a little bothered by the fact that the product kills its consumers. Minor detail.

[Deleted]

9. Look for companies generating a lot of cash — a great sign of sustained outperformance.

This along with moat, great management, increasing revenues all bode well.

[FD1000]

Nov 20, 2022 17:50:54 GMT retiredat48 said:

What an impossible task...all based on investing in individual stocks.

How about this over-riding RULE FOR THE NEXT 40 YEARS:

Do not invest in individual stocks!

Mutual Funds/ETFs/CEFs...tried and true for many. Best for average investors...or investors who are working and cannot devote the full time needed to search for these "great companies". And for investors with 401.Ks, typically more than half an investors equity savings, which do not have individual stocks available to invest in.

Just think of how much time is wasted searching/investigating a stock, and then not investing in same.  If I had a dollar for every hour spent by the average investor doing this, I could have retired two years earlier!

Disclosure: I have not bought an individual stock in over 50 years...gave that up after a few years in late sixties. Turned out OK for me.

R48

+1
Easy, one of the best rules for most investors.
If you really want to buy single stocks, take 10% of your money and buy a max of 5 companies and hold for 2-3 decades, just for fun and maybe you will hit a home run. I have friend that invested $3K in 10 companies in the early 90s, 9 didn't do much, but MSFT exploded.

[Chahta]

Nov 20, 2022 13:21:22 GMT comlb said:

From Brett Arends- full article:
www.marketwatch.com/story/12-stock-investing-rules-for-the-next-40-years-2012-11-30?siteid=rss&rss=1

summary:
1. Sell stocks of companies that announce huge acquisitions, that overdiversify, or that spend a fortune on a lavish new headquarters.

2. Avoid stocks where management picks fights with analysts (or, by extension, hedge funds). See Overstock.com in 2005; Netflix in 2010.

3. Watch out when executives start selling a lot of stock — regardless of plausible-sounding excuses. Top execs in homebuilders, mortgage underwriters and Wall Street dumped billions before the 2008 crash.

4. “Run a mile” from all stocks in an industry going through a huge investment boom: Massive overcapacity and consequent collapse is inevitable.

5. Steer clear of investing in manufacturing companies. Their industries are usually plagued with extreme cycles of boom and bust, overcapacity and slumps.

6. Pay little attention to economists or market gurus.

7. Mistrust all mathematical trading formulas as well — they invariably fail just when you most need them to work.

8. Look for companies where the insiders are buying lots of stock.

9. Look for companies generating a lot of cash — a great sign of sustained outperformance.

10. Look for companies which have monopolies (or near monopolies), and those which manage to take out their main competitors.

11. Remember you are buying businesses, not just stocks. Pay close attention to the quality of the business, and especially the quality of the management.

12. Look for companies which have earned the trust of consumers, and which have very strong brand names.

13. Also a sell a company that buys naming rights to a professional sports stadium.

Think FTX. The ultimate waste of investors equity.

[win1177]

Nov 20, 2022 19:30:26 GMT @slooow said:

9. Look for companies generating a lot of cash — a great sign of sustained outperformance.

This along with moat, great management, increasing revenues all bode well.

Agree! Moats should be criteria #1, IMHO. Rising revenues, good management, management holding/ adding/ buying stock ids another indicator. You also have to be careful with “diversification”, that it doesn’t become “deworsification” (GE, etc.).

Win