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iamnik77 (90.99)

To Buy or Not to Buy



October 09, 2008 – Comments (6) | RELATED TICKERS: GME , KO , TPR

So about three years ago my dad gave me $10,000.00 of his own money to invest for him. Fast forward to today with all of these news bites about the financial destruction of the world and my dad decides now is the time to check in on his investment. He was expecting a 30% loss but was pleasantly surprised by a 20% gain. I give a lot of the credit to the Motley Fool because, in addition to various books I have read about investing, the Fool has made me a much more intelligent investor after reading what must be hundreds of Fool articles.


My dad, feeling relieved, felt confident enough to send another $5000.00 for me to invest on his behalf. This last week I have sunk almost all of that $5000.00 into stocks with fairly easy to understand business models, consistent earnings growth, attractive price to earnings ratios, and more cash than debt. I too am afraid of an epic 50% drop in the market. But I am not capable of calling the bottom and agree with Warren Buffett that, ten years from now, we will look back at this time and see that we could have made some very good buys. So, what, you ask did I invest these funds in?


Gamestop (GME): Video game retailer with fat earnings growth and a PE of just 15. It also has the same amount of cash as it has debt. People think that video game sales will slump but the xbox 360 just lowered its console price, the game libraries for the new systems are growing,  when it comes to buying things they want (other than cars and houses) people will do what they want to do, and video games are as addictive as soda pop.


Microsoft (MSFT): Practically zero debt with a mountain of cash. This is one healthy company and it grows earnings well. The PE is historically low on this company. It should do quite well from here.


Coca Cola (KO): A rather boring choice but it historically rarely dips below its current valuation, grows earnings at a nearly predictable rate, and pays a 3% dividend. It also has no debt issues.


Coach (COH): It's home and car purchases we have to worry about, not things like $200.00 purses. Most people will still be able to cough up $200.00 dollars for things that they like. All women I know absolutely love this company's products despite the huge profit margins it makes on the merchandise. No debt issues with this company either. It grows earnings at a healthy rate and the market strangely thinks that this gem deserves a single digit PE.

6 Comments – Post Your Own

#1) On October 09, 2008 at 12:35 PM, russiangambit (28.78) wrote:

I wouldn't buy GME and COH now. The latest paradigm in the market is that retailers are going down witht the consumer spending and people will short them left and right, whether right or wrong.

Just a month ago retailers were soaring because oil was going down. And somehow it was supposed to translate into profits for them.

The market logic usually is too simplistic , but you have to go with the flow, you cannot fight the market.

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#2) On October 09, 2008 at 12:41 PM, givmeabreak (29.16) wrote:

"Most people will still be able to cough up $200.00 dollars for things that they like".

What economy/world do you live in/envision coming?


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#3) On October 09, 2008 at 1:17 PM, awallejr (30.35) wrote:

I like KO an MSFt longterm.  GME might be dicey because a 15 PE in a bear market is actually high but kids ten to spend recession or not.  Not sure about COH, I suspect the trend is CHEAP first, style second now.

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#4) On October 09, 2008 at 1:48 PM, anchak (99.91) wrote:

I wouldn't touch COH - its more discretionary than you think.

Check the crowds.....last time I saw a fair amount of people in the shops ( from outside, I was sitting down for my daughter to eat her icecream) about 10 mins not a single sale - people are simply looking at it with yearning eyes I think

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#5) On October 09, 2008 at 2:39 PM, 9ballkid (< 20) wrote:

kmb try kimberly clark they sell everything we need and will use regardless of where our ecomony is heading toilet paper paper towels medical supplies all the above and they pay a dividend too how great

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#6) On October 13, 2008 at 8:47 PM, iamnik77 (90.99) wrote:

Many are worried that people will stop buying Coach merchandise and video game supplies at Gamestop because of a recession. Thank you, anchak for the bit of info about what happened inside an actual Coach store. This is the kind of info that helps tilt the scale for me when everything else looks good on paper.

Even though I invest and follow the stock market, I happen to be of lower middle class socioeconomic status. I am in school to become a high school math teacher and in my city will probably only make $33,000.00 annually when I start teaching. It so happens that my friends are on the same economic tier that I am (the exception being that they don't know the least thing about stocks). What I am noticing is that they are still making $300.00 purchases of things like video game systems and $200.00 purchases of coach purses. So long as these friends of mine keep their jobs, many of them don't feel any different during recessions. As long as they see no difference in their paychecks, we won't see any changes in their spending and consuming habits. Many Wall streeters feel the pain of recessions because of their involvement in stocks but as the country song says, my friends "are too poor to know" we are in a recession. These Wall street people don't have friends of my socioeconomic status so they have trouble feeling the pulse of the majority of Americans.

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