To Buy or Not to Buy
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.