June update


It’s hard to believe that it’s been nearly 3 weeks since I wrote anything in the weblog. I’ve been staying busy, primarily working on finance-related activities. After 24 years of working at HP, I decided to take an early retirement package and left the company a few weeks ago. I was ready for a break and felt that the offer was good, so now I’m in the middle of moving money around and organizing my finances. Yesterday I computed the basis for HP stock that I had accumulated over a 23 year period that had undergone 3 splits and 2 company spinoffs. I had been dreading that excercize, but in the end, all the numbers added up and it wasn’t too painful. Thankfully, the HP Alumni association had a spreadsheet I used as a starting point that kept track of the price of HP and spin off stocks all the way back to HP’s IPO. I realized that if someone had the foresight to buy $1000 worth of HP stock when it went public in 1959, today it would be worth well over $600,000 in a combination of HP, Agilent, and Verigy stock. Unfortunately for me, I didn’t get started that early .

A while ago I experimented with purchasing individual stocks and experienced pretty good gains, even though I had a few of my stocks lose most of their value. Having picked those losers led me to wonder if I had the temperament for purchasing stocks individually. It seemed too much like gambling. In retrospect, even with those losers, my net gains were still over 20% a year, and so I couldn’t complain too much. I decided that if I were ever to try investing in individual stocks again, I’d do a much more thorough job of analyzing the companies. The worst kind of investing is where you buy a stock after hearing a ‘hot tip’ from some dubious source about a company that is ‘about to explode.’ Often times, the company implodes instead. I can see by the amount of ‘pump and dump‘ spam email I get that it must still be popular to speculate in companies with no real earnings. Now the spam messages don’t even make any pretenses about the company having any potential, instead tacitly inviting investors to engage in a game of the greater fool theory.

I’ve heard several horror stories about people who are suckered into handing over control of their money to seemingly trustworthy individuals only to be cheated, sometimes out of their entire life savings. Fortunately, I’ve not had this experience myself with investment counselors, but it’s certainly not for lack of trying on their part. I used to get calls from boiler room operations promising “30, 40, or 50% annual returns” but I never took the bait. I even had a guy tormenting me with voicemails every night at home, eventually resorting to insulting me with comments such as ‘anyone with a modicum of intelligence would be able to tell that this is a great investment’. Yeah, I want to give my money to someone who would talk to potential clients like that… I will never buy an investment from someone trying to sell it to me over the phone. Anyone ‘selling’ you an investment probably does not have your best interests in mind.

Lately I’ve been reading investing books and studying a lot of companies using analytical tools geared toward value investing. I would never have the temperament to be a day trader but I do plan to have a more active role in investing now that I have the time to do it.

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