Twitter (TWTR) stocks dropped by 13% today after the stocks were downgraded from neutral to overvalued by Macquarie Capital on Friday. Twitter stocks closed at $63.75 Friday, which is still way up from their IPO price of $26 and opening price of over $45 back in November.
What does this mean for you?
You should avoid twitter like a plague. Shares of twitter are extremely overvalued for a company that has yet to turn a profit. In addition, the price to book ratio and price to sales ratio are 56.5 and 61.7 respectively, compared to industry averages of 5.7 and 7.4 in those same metrics. While the company has a bright future, you should wait for the share prices to come way down before you even consider purchasing a stake the social media network.
As the markets climbed to record highs today, I enjoyed pretty nice gains on my portfolio as we head into the holidays. Since I began investing in August I have enjoyed some pretty significant growth in a short period of time. Overall my portfolio is up about 7% as I continue to put a portion of my paycheck each month into the market. My biggest gains have been on Apple (AAPL) and 3D Systems (DDD), which have been up 19.09% and 18.67% respectively. In addition I have made 6.7% on my Ebay (EBAY) position in only 10 days and another 9% on Silicom (SILC) in only 6 days! Everything is going great!
But wait a second, didn’t mom always tell you if something sounds too good to be true than it probably is? As the stock markets soar higher and higher, there is speculation that we are due for a downturn eventually. Whether that is in a few days or months or a year from now, nobody knows. Sure experts and analysts can pretend to predict when the economy is going to boom or bust, but ultimately no one ever really knows how the market is going to behave.
Due to this uncertainty, I am going to diversify my portfolio more over the next few weeks in the event the market does eventually drop. Following Benjamin Grahams recommendations for investors, I will invest at least 25% of my portfolio in bonds. By investing in bonds I can help hedge some of the risk that comes with the stock market. If the markets drop, I won’t experience a big of losses as a result. If the markets continue to expand, I will miss out on some of those huge gains, but a least I can sleep a little easier at night knowing that not all of my investments rely on the stock market.
My plan is to research some Bond ETFs and figure out which ones I think are best for me. Many of the ETFs have dropped quite a bit in the past year, and I believe I can get some real bargains by investing now. I will chronicle my research on Bond ETFs and post about them here and hopefully I can help you diversify your portfolio as well!
One fairly dependable sign of the approaching end of a bull swing is the fact that new common stocks of small and nondescript companies are offered at prices somewhat higher than the current level for many medium-sized companies with a long market history.
– Benjamin Graham from The Intelligent Investor
Recently I read a post on http://creativelypaid.wordpress.com and the author mentioned something that peaked my interest. The author wrote a post about how investing in a company is similar to voting with your stock and how you should invest in companies that make a positive impact on the world. There have been sources that indicate that the World’s Most Ethical Companies from 2009 have grown at a rate nearly double that of the S&P 500.
Being the curious person that I am, I decided to dig a little deeper and do some research myself. My first task was to identify companies that treat their employees great. Companies that treat their employees right tend to have happier employees, and this rubs off on their customers. One such company that I can think of off the top of my head is Starbucks. Starbucks gives employees great benefits, such as stock options, a pound of any Starbucks coffee a week (or other goodies), health insurance, and 401(k) plans for their employees. While these perks do cost Starbucks a pretty penny, the benefits are completely worth it. Studies have shown that Starbucks employees are actually friendlier than local coffee shop employees as illustrated below:
“It was clear that the baristas were on a first-name basis with many of the customers, were familiar with their regular orders, and knew significant personal information about them,” the study says.
Read more: http://www.businessinsider.com/starbucks-friendlier-than-local-shops-2013-8#ixzz2nJyGUcr7
With that being said, I got a listing of Fotune’s 500 Best Companies to Work For from 2005 and took the publicly traded companies from that list and looked at their total returns since December 31, 2005 through December 12, 2013. One thing I will note is that some of the companies that were on the list that were public are no longer public (mainly because they were purchased by other companies). Without further ado, here is a chart I compiled of returns:
|Dow Jones Industrial Average
|Average return of Best Companies to Work For
As you can see, companies with happier employees tend to have better returns than those of the market by almost double! Think about next time you make your investment decisions!