600% Returns and Apologies to Annaly
Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Progress Report: Nameless, faceless coward emerges from Mother’s basement and the “Ellen Show”, long enough to comment on “challenged” investing practices. Also, Cypress Semiconductor mentioned 1/13/12 at $17.25 per share, just over $18 currently (intraday, 2/8/12).
Recently I was afforded the opportunity of numerous call-outs regarding a certain REIT which apparently so overwhelmed me with the amount of coverage, I felt the need to opine about it for a single page of rambling nonsense. One courageous individual felt it necessary to question my ability as a home trader, forcing me to consider wearing a helmet and a mouth guard prior to executing any future trades. Far be it from me to talk "negatively" about a real estate investment trust that is not subject to federal corporate income tax on taxable income because it pays 90% of said income to shareholders. Why not follow 100% buy recommendations and countless articles of undying love for the company?
Within the delicate genius of the individual’s meaty comment, they somehow managed to provide just the right amount of inspiration and motivation for me to pull out all of my stock coverage, using 14-year charts. Unfortunately, those are all on my IBM mainframe and the CRT is out, only displaying one thin line of light horizontally across the 15-inch tube. As fate would have it, I cannot give the 12 of you my entire list of stocks that have given investors over 600% returns in that time span.
To the 6 of you that know me and still hold a razor-thin slice of respect for me, even if it’s merely out of pity or concern, you know how dear I hold those juicy nuggets of information involving, “If you had invested $10,000 14 years ago in stock XYZ, you would have an inordinate amount of money, provided the stock wasn’t Razorfish.” So allow me to dip my overcooked crow of Annaly Capital Management (NYSE: NLY), in some barbecue sauce and humbly state that if you had invested $10,000 in the stock in December of 1997 at a share price of $7.66, you would have a 122% gain, and that’s without considering reinvesting dividends (obviously it would be closer to that 600% figure). I could not possibly be happier for you, even if you happen to be an angry, blog-reading misanthrope. But your 13% dividend yield is dependent upon the amount of taxable income. It could go up, it could go down.
Fire up the time machine, let’s go back and scoop up some stock, right? Sorry, my time machine doesn’t exist yet, and if it did it would run on liquid nitrogen and I gave the last of what I had to Demi. But returns are relative to the point of initiation with a stock and the share price, and the stock’s current price, or the point of closing the position and the stock price at that time. You dictate your returns when you purchase the stock; it's not the overall historical performance of the stock.
If any of the 3 of you that are still reading this has done any lick of homework, I am sure that you are familiar with the phrase, “Past performance is no guarantee of future returns.” I was merely giving a comparison of two relatively high-yielding stocks, one that gets considerable coverage, the other, not nearly as much. Even though I am a challenged investor, I have enjoyed almost 100% gains with Linn Energy (NASDAQ: LINE), over the course of the 2 years I have owned it, and I happen to think I will enjoy a decent amount more. Linn has consistently increased their annual dividend, from $1.15 annually in 2006, to the current annual payout of $2.76. There was no increase from 2008 to 2009, but an annual payout of $2.52 for those lean years is still pretty robust. If you choose to jump in at these levels, I wish you the best, I truly do. If you choose to direct your hard-earned dollars elsewhere, I hope you enjoy equal, if not more, success.
So rather than roll out a list of holdings not named “Apple”, where I have personally gained over 600% returns in less than 14 years, thus sounding like a money manager pumping you for a subscription to my bountiful basket of stock picks, let me just say that if a mere mortal who doesn’t know the definition of “yeild return” can do it, so can you. So I formally issue an apology to the 9 of you that were so offended with my “bashing” of Annaly Capital Management, a 13% dividend yield definitely has a place in any portfolio, and for those of you that own the stock, I wish you nothing but continued success. And my sincere, heartfelt thoughts and prayers go out to CEO Michael Farrell and his family, hoping for a speedy recovery.
Motley Fool blogger Kyle Metivier has a long position with Linn Energy and does not own shares of Annaly Capital Management. The Motley Fool owns shares of Annaly Capital Management. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.