Investing in individual shares

MaxiRobriguez

Not a recommendation request, I know the (generally correct) rule of thumb is to avoid single stock investing and just stick to funds.

However, for those of you on the forum that do pick up individual stocks, I'd be interested to hear why you do it, what your situation is in terms of age, goals etc, what criteria/fundamentals you look for when choosing to buy and indeed sell and how/when you got started.

Also - the key question - have you outperformed/underperformed indexes?

Flobberchops

I'm really in no position to give an informed answer but it seems to me that the risks of individual stocks are overstated (Coca Cola, Microsoft, et al aren't going bust any time soon) and the security of funds is similarly debatable (Woodford!).



Working in a bank I often see my older customers paying in dividend cheques, suggesting "buy company stocks" was considered unremarkable and solid advice at one time, but it's a practice that seems to have been abandoned by younger generations.

eskbanker

Flobberchops wrote: »

Working in a bank I often see my older customers paying in dividend cheques, suggesting "buy company stocks" was considered unremarkable and solid advice at one time, but it's a practice that seems to have been abandoned by younger generations.

But there's an element of confirmation bias in that observation - the shareholders in Thomas Cook, Carillion, Enron, etc, are hardly going to come into your bank to tell you of their misfortune, and the same applies to those whose companies don't pay dividends....

ColdIron

Might work for UK listed equity, though you have a research task on your hands even if you limit yourself to FTSE All share companies. US/EU listed shares much the same but with some extra complexity. But what will you do about Japan, EM (China, India, South America etc), Asia Pac? How about other assert classes? Govt/corporate debt, property, infrastructure etc?

jamei305

Kodak is a good example, a household name corporate that gradually did everything wrong: http://nightowltrader.blogspot.com/2011/09/rise-and-fall-of-eastman-kodak.html

itwasntme001

I have quite a lot in single stocks and i am in my mid-30s. Own stocks like amazon, google, microsoft, fevertree, roku, alibaba, cisco systems, jp morgan, tobacco stocks and many others.


Some have done really well and others not so well. But overall i think i have outperformed even the best active funds. But i know a lot of it was luck rather then skill. I am now focusing more on funds rather then stock picking but i plan to hold the single stocks long term as i genuinely believe in them.


Some have done incredibly well (Roku, msft, amazon) and others like tobacco, which i have held the longest, had at one point shown a significant return but unfortunately i did not sell and i have given back all my returns so am breaking even on those.


I am of the opinion of making your own luck, so why not invest in single stocks, as long as you are aware you could be wrong. But that is no different to picking an active fund, although you would (presumably) have spent quite a bit of time picking the single stocks compared to picking active funds. Otherwise it really is a punt with single stocks.

MaxiRobriguez

itwasntme001 wrote: »

I have quite a lot in single stocks and i am in my mid-30s. Own stocks like amazon, google, microsoft, fevertree, roku, alibaba, cisco systems, jp morgan, tobacco stocks and many others.


Some have done really well and others not so well. But overall i think i have outperformed even the best active funds. But i know a lot of it was luck rather then skill. I am now focusing more on funds rather then stock picking but i plan to hold the single stocks long term as i genuinely believe in them.


Some have done incredibly well (Roku, msft, amazon) and others like tobacco, which i have held the longest, had at one point shown a significant return but unfortunately i did not sell and i have given back all my returns so am breaking even on those.


I am of the opinion of making your own luck, so why not invest in single stocks, as long as you are aware you could be wrong. But that is no different to picking an active fund, although you would (presumably) have spent quite a bit of time picking the single stocks compared to picking active funds. Otherwise it really is a punt with single stocks.

Nice one, what made you pick those companies at the time of purchase? What sort of research and confidence did you have in your choices?

itwasntme001

MaxiRobriguez wrote: »

Nice one, what made you pick those companies at the time of purchase? What sort of research and confidence did you have in your choices?

Reading seeking alpha mainly but my main criteria as follows:
- strong moat in areas that have high barriers of entry
- strong leadership in the company
- proven ability to generate revenues and can foresee margins to improve enough and/or maintain high enough level of margins
- try to find businesses that are relatively recession proof
- ability to reinvest cash-flow back into business (not share buybacks) is also very key



Does not always work out of course. And easier said AND done in a bull market. True test will come in a recession.

itwasntme001

I should add that i do not stop looking at the company after i buy it. I continue to monitor its progress via company websites, seeking alpha, profit news, other news etc.


Not doing so is just simply a buy and hope strategy.

Afraid_of_Kittens

I used to own shares in manty companies.

I looked for upward growth increase in revenue and profit and steady dividend yields and steady share price increase.

Sold all my shares - stuck everything into Stock and Shares ISA and passive index tracker funds.

Some examples of shares I owned.

XP Power

https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/SG9999003735JEGBXSSMM.html

Howden Joinery

https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB0005576813GBGBXSTMM.html

Experian

https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B19NLV48JEGBXSET1.html

Trifast

https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB0008883927GBGBXSSMM.html

SSE (a gamble but high yields)

https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB0007908733GBGBXSET1.html

SAGE

https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B8C3BL03GBGBXSET1.html

eskbanker

Afraid_of_Kittens wrote: »

Sold all my shares - stuck everything into Stock and Shares ISA and passive index tracker funds.

In the context of this thread, it would probably be illuminating to share your thought process as to why it seemed right to shift from individual stocks to funds (and passive trackers in particular)?

Seems to me that many (maybe most) who buy into passive trackers do so because of not having the time or inclination to devote to researching individual companies to a sufficient degree of rigour, so it would be informative to hear the rationale of someone who used to do that but changed tack....