The Stronghold of My Portfolio– General Electric $GE
I’ve outlined several stocks thus far and several strategies, but one that I plan on rolling out to you in the next few weeks consists of a pie chart of categories (called the Cash Pie) that outlines how I think you should diversify your portfolio, right now, at this moment, heading into mid-2012. Then I’m going to take THOSE categories and break them down into individual stocks to provide both examples and suggestions.
Everyone’s investing strategy is unique. A person who is ancient and withered (55+) and nearing the end of their frail and wrinkled lives has a much different strategy than a young, tight skinned, glowing college blonde bombshell. But the Cash Pie will bond us all together.
So my post today is perfectly timed, as tomorrow on Friday, April 20 th, 2012, General Electric $GE, the mega conglomerate and ‘pseudo-mutual fund that isn’t a mutual fund’ reports their earnings. Initial reports state that we’re not going to see a home run, but more like a single…or a single who advances to second on an error. That’s ok by me. If you invest in GE, you are investing for the long term. It’s an American company that has been here through thick and thin, and barring absolute zombie apocalypse, will always be here. In the Cash Pie I mentioned earlier, it falls into the STALWART BEAST category:
STALWART BEAST STOCK: A solid company that doesn’t plummet nor jump…it lumbers forward. It has a good dividend (which should be reinvested), which then compounds over and over so that you’re earning dividend value off of previous dividends. Examples of these Stalwart Beasts: Wal-Mart $WMT, Target $TGT, Coca-Cola $KO, Johnson & Johnson $JNJ, etc. Most of these are considered blue chippers.
Let’s break this down so that even my dumbest daughter could understand (she’s matriculating at Texas Tech right now if that tells you anything). Pretend you have 100 shares of General Electric on June 20, 2011 (a record date for the dividend payment) and your assumptions are: dividend is $.17/share and price is ~$18.00, etc., etc.,
100 shares = June 20, 2011 ($1,800)
100.94 shares= September 19, 2011 ($1,817)
101.89 shares= December 27, 2011 ($1,834)
102.85 shares=February 27, 2012 ($1,851)
So after less than a year, you have 2.85 FREE shares of GE, and (in our model) it’s a profit of $51.30—and that’s ignoring its constant upward trend. Now play this model with 1,000 shares. Then play it with 10,000. And I get it…BLEGH, NUMBERS! But let’s focus on the important part of this example: FREE MONEY.
It’s the beauty of those Stalwart Beasts. For the most part (except in dire, dark times), they steadily climb. After I had started investing in the meat of the recession, I’ll never forget that my 80-year old father-in-law at the time (Herb, Chuck, Doug?) told me, “There will be a time in your future where you will brag to your children that you bought General Electric at $6.00 a share.” Well, children, I’m bragging. The stock constantly kisses $20 today, and will one day be back to its prime at $35+. So now let Uncle Cash tell YOU: “Son/Daughter…there will be a time where you will brag to your children that you bought General Electric at $20.00 a share.”
Because as long as I’m investing and putting money in the market, I will continue to stock up on General Electric. I’ll buy it at $10. I’ll buy it at $20. You’ll even see old Uncle Cash buying it at $30 and beyond.
Read more of my musings At The Money