BennyEast.Com/Blog The official blog of Kenny West

Costco

I received a dividend a couple days ago from Costco.  I had decided to purchase some shares a little bit before the Ex-Dividend date because I'm fairly certain it's a pretty decent investment.  I now have to find 2 more stocks to get into after selling for a small profit two other companies I was in.  So far this year my realized gains are still beating my dividends, although my next dividend from Simon Property Group will inch that dividend number closer again to my realized capital gains and pretty soon I'll have to trade again... and again.... and again.  Got to keep that number up just like in a video game.

I'm also trying to nab 300 free trades from my broker.  If I transfer in a specific amount of money they will give 300 free trades.  That would be awesome because commissions do count against my final realized capital gains number.  Hopefully that promotion will still be available by the time the amount I need to transfer in to my account becomes available to me from the various estate and trusts things that are all happening at the moment.

I actually started using the pro version of the trading platform since I now make enough trades a year that they notified me I can have access to that.  Oh goodness.  It's amazing.  The charts and technical analysis features are gravy.  I LOVE the whole realtime thing.  During the trading hours of 9:30 to 4pm they give you realtime stats and price changes.  As well there's real time news and trading signals.

It's kind of crazy how powerful it is.  In the trading world the more information you have and the better analysis tools you have at your disposal, the better trades you can make.

Now my trading strategy still relies on long-term holds.  So I'm mostly just "browsing" at this point.  I have been making test trades, or hypothetical trades with larger amounts of money, like in the 100k range.  This is something I'm very interested in.  Day trading in lots of 100k.  OR perhaps 50k.  I also might do something where I use margin trading so if I put down 100k I can actually buy 200k in shares.

Hypothetically let's look at a stock like Campbell Soup...

This is a strong stock, it holds well, it's in a bull trend, people aren't likely to stop buying Campbell Soup tomorrow.  It's not hugely effected by commodity prices like oil stocks have been.  In fact, most of the water, utility, and food stocks have been capturing my attention lately.  Cheap things.  TJ Maxx... Domino's pizza just hit an all time high.

Everyday stuff is what I like.  I don't care much for the over the top future sci fi innovation.  I want things like Costco.  I want everyday people buying everyday stuff.

Back to Campbell Soup:  http://stockcharts.com/h-sc/ui?s=cpb

If you look at that chart, as of Feb 26, 2016 (obviously if someone is reading this in the future the chart will have changed, and who knows, Campbell Soup could be out of business, or bought up or merged)...

You can see it's holding strong even into 2016 when the overall market is down.  There are two spots that I'm interested in...

The 50 day moving average pull back in January...

And the 200 day moving average pull back in November....

Both of those spots were opportunities to buy in and then hold.  Now, let's say you took that 100 grand and you bought shares at the 50 day moving average pull back in January.  Then you sold a little while later.  Let's go with a purchase of 52 dollars per share.  Then lets sell at the next point of resistance at 56 dollars a share.  SO we buy let's say, 2000 shares, which is 104 thousand dollars... then we sell those 2000 shares at 56, about a month later.

That's an income of, drumroll please...

2000 x 52 dollars a share = 104k

2000 x 56 dollars a share = 112k

Pretax/precommission/pre fee profit?

8 grand.

You have to pay short term cap gains taxes and there's commissions and fees which are not much at all... mostly it's the taxes that you eat it in (see what I did there?  Eat... Campbell... Yep).  But even if you lost half that profit to taxes... 4 grand for two mouse clicks a month apart?  And you spend the rest of the days in January on a beach in a tropical climate?

Yep.

Or more my style... Sit around and make music/work on books all day.  Which is my dream.  Trade stocks... Make music, make books.  Use the stock profits to fund books and music... and eventually make movies.  I suppose once the music/books/movies start all making money...

I'd probably give up the trading.  So it's a means to an end really.

Obviously I'm making these trades hypothetically at this point because I don't yet have that capital available to me... But we're looking at a scenario like this in my future.

For now I'll stick with my very small trades.  My last two stock sells this past week I only made about 25 and 30 dollars from the first and second one.  Plus, I got in right before the Ex-Div date so I was able to capture a dividend on each one as well.

I don't know if I'll EVER be able to trade in the 100k lot range.  Just because.... I don't think I'd sleep for the time that my money was in the market.  I mean, yes I can say I'm 75 or 90 percent sure this stock will trend in this or that direction....

But there's always variables in the market.  There are always events that you just can't see coming.

That's why the number one rule is diversify.

What I might be more inclined to do is a day trade where I enter and exit my position on the same day maybe even within an hour or two.  This way I KNOW my capital is safe in cash.

We'll see.  Only time will tell.  I just have to continue to trade on a smaller scale and trade my successes and failures and make my decisions based on a data driven analysis.

Oh by the way, if you had leveraged that Campbell soup bull trend month long swing trade at a 2 to one and borrowed 100k against your 100k you put down?  You'd have a 16 grand return in one month.

Of course you have to pay the daily margin fees... But those are fairly nominal at that level.

For now, I'll just hold my Costco shares and collect the dividend and hope that their loyal customers continue to shop there, if this is any indication, I should be in good shape... http://ktla.com/2016/02/26/amid-sharp-increase-in-state-gas-prices-drivers-line-up-for-cheap-gasoline-at-socal-costco/