Tuesday, January 3, 2012
Stocks to Hold on to Forever, and the Lessons of Toyota
A solid, dividend paying stock can be held for a long time, forever if you so desire. Super investor Warren Buffett has a portfolio that includes blue chip investments like Coca Cola, Exxon Mobil, Wal Mart, IBM and Intel. But, the stock market is unpredictable, and even a company that seems rock solid can have problems. Years ago, people saw GM and Chrysler as forever stocks, but they saw rough times and had to be bailed out. About five years ago I figured that Toyota (TM) would be a wise investment. The stock was over $100 per share, the balance sheet looked good, and it paid a decent dividend. Then came the recalls and the tarnished reputation of a company known for selling quality, worry-free vehicles. The company experienced supply chain challenges in the wake of Japan's typhoon. The stock is now at about $67 per share, about half the price at which I purchased it. But, Toyota has had ups and downs in the past, and I feel that things will turn around for the company. It is a good investment over the long term. Some would probably say that now is a time to buy, when it is low. It might be. Stock investing involves risk, and without a crystal ball, who knows what the future will hold. Buy low, sell high is the cardinal rule of investing, and if there is hope that a turnaround will happen, it's best to ride out the storm. Buy high, sell low would be a mistake. But, some may say if only a stop loss order was executed, the loss would not occur. I can see that argument, but on the other hand, a loss (or a gain) does not happen until a security is sold. The 52 week range for Toyota is between 60 and 93 dollars per share. So, at $68, it is closer to its bottom than its top. The dividend yield is still quite good, at 1.4%. But, this is down from its 5 year dividend average yield of 1.8%. Analysts on Yahoo finance rate it at a 2.7, which is neither a buy nor a sell recommendation. With the uncertainty in the European markets, things are unpredictable now for investors. When markets overseas hiccup, US markets do too. It's truly a global economy.