Hey, FPF followers, this is James, the nerdier and less handsome half of Fit Pro Financial. I wanted to let you know of some of the investments I made today in my general Vanguard long-term investment account (not my trading accounts). These aren’t buy/sell recommendations. These just outline my general thought process regarding investing. I treat my long-term investing similar to my stock trading in that I have a rationale behind why I’m making an investment or trade. And that rationale isn’t something like, “because it’s cheap!” Sometimes stocks can be cheap for very good reasons (i.e., the company is failing), no matter how expensive it was in the past. Remember, Washington Mutual was a cheap stock that only got cheaper until they went into receivership. A lot of investors get burned when they buy stocks simply because they look cheap.
I think very carefully about not only long-term potential and upside, but also the risk involved.
Here’s what I bought today:
- ALK (Alaska Airlines). Like all airline stocks, Alaska is trading at very depressed prices. I’ve seen some people want to buy airlines just because they’re cheap. However, airline stocks may also be very risky investments because some may not be in a good cash position to weather this storm. Some of the bigger airlines have very high cash burn rates. ALK is a smaller airline, but they are in a better cash vs. debt load position than the other airlines and have successful reduced their cash burn rate. Currently they have successfully reduced their cash burn to $260 million per month (anticipating getting it down to $200 million by the summer) and have $2.9 billion in cash and cash equivalents (about 11 months at their current burn rate). Also, relative to the other airlines, they’ve put more profits into shoring up their cash position rather than buying back stock. Thus, I feel they present a better long-term risk/reward opportunity versus the other airlines. Plus they’ve historically been a well-run company and as a bonus they’re a local Seattle company (I live in the Seattle area).
- COST (Costco). Really not much to say here. They’ve historically been a very well-run, solid company. As a bonus, they are also local to the Seattle area.
- DIS (Disney). Disney’s currently trading at depressed prices. Park closures have really hurt them, but they’re a solid company. At some point, the parks will re-open. Given their history as a solid company, I think there is a very good long-term risk/reward potential here.
- VGHCX (Vanguard Healthcare Fund). This fund has historically performed very well, with an average annual return of 16% since its inception in 1984. Health care is not a cyclical industry and demand and innovation are always high, so I feel it makes for a good long-term investment. I have a good chunk of my retirement accounts in this fund. The risk here is that it’s a fairly narrow sector.
The information in this post is subject to our terms of service. Any information or tools provided are for informational purposes only and do not constitute financial or investment advice. Investing involves risk and you can lose all of your initial investment. Consult with a financial professional.