Last month I began a series on what stocks I’ve been buying via the Robinhood app. I intend to keep updating my interactions with my investments in the app. So first, let’s see how I’ve been doing.
So far I’ve transferred and invested $219.28 into the Robinhood app. At the end of July, my balance was $223.13. That’s an increase of $3.85. Up is definitely the direction I want to go, however, $4.72 of my balance consists of the free stock (which happens to be CHK or Chesapeake Energy) I’ve received. Sadly, that means I’m actually down a whopping 87¢. Sigh.
How I Choose
To recap, here’s how I choose what stocks to buy:
- Stock price must be affordable - under $100, maybe even under $50. This is because Robinhood currently does not support buying fractional shares.
- The company must be a company I believe in - in terms of growth, ethics, technology, innovation, etc. So, no Wal-Mart, no tobacco companies, etc.
- There is a slight preference to companies I use.
I’ve been paying a bit more attention to three metrics, two of which are normally available via Robinhood. The two that Robinhood tells me are the price-to-earnings ratio and the dividend yield. The third I’ve been paying attention to is actually these two multiplied together: if you multiple price/earnings by dividend/price, the prices cancel out and you get dividend/earnings. This is important because too high of a dividend over earnings ratio (also known as a dividend payout ratio) is unsustainable and can indicate problems in a company.
price dividend dividend -------- X -------- = -------- earnings price earnings
Let’s look at an example where it might be a problem. One of the stocks I’ve bought is GameStop (GME). According to Robinhood’s website, as I write this, their PE ratio is 297.00, while their dividend yield is 9.37%. if you multiply these together, you find out that they’re paying out a crazy 2,783% of their earnings in dividends.
GameStop is an odd example. Their earnings have dropped a lot recently, and thus their PE ratio has skyrocketed. It’s feasible the last time they paid out dividends - which is typically what a dividend yield is based on - the dividend payout ratio wasn’t that crazy.
Now, let’s look at a much more reasonable example. Verizon’s (VZ) PE ratio is 6.96 and while their dividend yield is 4.41%. This means the dividend payout is a much more reasonable 31%.
Now for the part that you’re here for. The stocks I bought in July 2018 are:
- SPI Energy
The first four of these are dividend-paying stocks. The last one is a risky “penny stock” that cost me 40¢.
Ally is the same online Ally Bank that has savings accounts with an interest rate of 1.80%. Honestly, if I only cared about dividend yield, I would’ve been better off to put my money in an Ally savings account since their dividend yield is less than that at 1.37%.
I have student loans I’m paying to Navient, so I figured that I might as well get some of that money back by owning the company.
I don’t currently own a Nokia phone, but my first phone was a Nokia (hello nostalgia) and I’m pretty sure their basic “dumb” phones are still the most popular phones in the world. They do make some smartphones, and I may look into those if I ever get another phone. My old Samsung Galaxy S5 is still chugging along, so I don’t need to replace it yet.
GM? Well, I drive a Chevy, and for some reason, I’m partial to GM. I guess it was just an emotional buy. I did buy Ford last month, though. The reason I bought Ford before GM is simply because Ford was cheaper.
I’m starting to play with (which probably means lose money with) options. I didn’t do much last month except buy one option.
I bought a $6 put for Fitbit at 11¢ a share. I ended up selling it for 12¢ a share;
What does that mean? The put means I had an option to sell 100 shares for $6.00 if it expired and FIT was less than $6.00. So, if FIT expires at $5.00 a share, that means I sell 100 shares of FIT for $6.00 that I am able to buy on the market for $5.00, netting me $1.00 a share. Since there are 100 shares, you multiply that by 100, which means I’d net $100. Minus how much I paid - 11¢ a share at 100 shares means it cost me $11, I would have made $89 in this hypothetical scenario.
Except this hypothetical scenario didn’t happen. I sold my option for a penny more than I paid, meaning I made a dollar:
$0.12 * 100 - $0.11 * 100 = $12 - $11 = $1
When the option did expire, FIT was at $5.75. If I had kept the option, I would’ve netted $25. Minus my $11, that would’ve been $14:
$6.00 * 100 - $5.75 * 100 = $0.25 * 100 = $25.00 $25.00 - $11.00 = $14.00
I guess I should’ve kept it. ¯\(ツ)/¯.
I’ve already bought some more options this month, but I’m doing horrible. I’ll fill everyone in on next month’s post:
Last Month’s Stock Picks
To recap, here are the stocks I picked last month in June:
- Plug Power
- Helios and Matheson Analytics Inc.
- General Electric
They’re all doing okay, especially compared to that second one: Helios and Matheson Analytics Inc. (HMNY). HMNY is the parent company of MoviePass. They did a 250-1 reverse stock split. I had only bought 10 of their stocks for around 50¢ each. This meant that my 10 stocks turned into one of their new stocks since every fractional share of the new stock was turned into a whole share. I should’ve sold it immediately when it was around $12 or so, because their stocks are right back at only a few pennies a share. Again, ¯\(ツ)/¯.
This money is money I can afford to lose - when I buy any stocks, I automatically assume a complete loss, at least as far as my budget goes.
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