Pride Goeth

Reason #6: At $50 a tank, may as well share in the profits.

In early October I bought some Chevron at $82.10 per share. The thinking, such as it was, went like this:
1) The world economy appears finally to be recovering.
2) Dollar prices of commodities and raw materials are likely to rise faster than during previous recoveries because of U.S. government policies, i.e., record deficit spending coupled with loose money, which are the classic ingredients for inflation.
3) Oil companies that control reserves should do well. Profits will go up because of (1) and may be turbo-charged because of (2).
4) If the recovery falters, a stock with a reliable dividend should limit the downside. [Chevron's dividends are currently $2.88 per year, which is a 3.5% yield on an $82.10 investment. If a double-dip recession causes interest rates to stay low, 3.5% would be an attractive rate. I didn't see the price falling by as much as $10 to $72, which would make the dividend 4%.]
5) Chevron is one of the few non-tech large companies that has stayed in California. Support your local employer!

By mid-January CVX has risen to $93 and has outperformed the market as well as AAPL and GOOG, both of which I also own. I'm content to hold, but it's no longer a screaming buy.

Lately I've been able to spend a little more time managing my modest stock portfolio. Although its performance has gotten better, I have to guard against thinking that the improvement is due to skill and not dumb luck.

When people ask me what stocks to put their money in, I shake my head and keep silent, my own investing mistakes fresh in memory. (I have enough problems with my own portfolio, don’t make me feel responsible for yours.)

When I turn 65 near the end of this decade, if I'm still working because I have to, then we'll know it wasn't skill. © 2011 Stephen Yuen