Purple Chips book - the royal blue chip stocks

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ps56k
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Purple Chips book - the royal blue chip stocks

Post by ps56k » Fri Aug 16, 2013 2:15 pm

Just happen to see a video blurb on Yahoo Finance - Breakout -
http://finance.yahoo.com/blogs/breakout ... 59058.html

and there was some author with a book about investing into the high end blue chip stocks - Purple Chips -
http://www.amazon.com/Purple-Chips-Winn ... 1118294491

Classic concept with specific attributes to look for in long time winners -
stable EPS, consistent growth over long term, large cap to weather storms, etc...

I think I have seen a similar concept referred to as the Dividend Astrocrat stocks - for high divs -
Some of my stocks in my Schwab trading account are part of this... McD, IBM, JNJ, PG, etc....

The question in my mind, wether it be stocks, mutual funds, index funds, bonds, etc -
.... are the attributes of measurement of the recent past (say 10yrs to include the financial abyss)
the same for measuring the future ??
OR -
.... is there some new attribute, element, or consideration such as globalization, that needs to be added to the metrics
to sort out future Purple Chips of stocks, mutual funds, index funds, and bonds ?
Last edited by ps56k on Fri Aug 16, 2013 2:51 pm, edited 5 times in total.

The Wizard
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Re: Purple Chips book - the royal blue chip stocks

Post by The Wizard » Fri Aug 16, 2013 2:17 pm

Are these purple chip stocks supposed to be winners in the FUTURE or just the PAST?
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SpaceCommander
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Re: Purple Chips book - the royal blue chip stocks

Post by SpaceCommander » Fri Aug 16, 2013 7:15 pm

There is no magic formula to know the future, but I believe this concept merely refers to wide moat blue chip stocks of the highest quality. Think Exxon Mobil, Johnson & Johnson, Coca Cola, et.al.

While no company is completely bulletproof, somehow I'd bet that regardless of what the future holds, companies like these will find a way to make boatloads of money.
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Re: Purple Chips book - the royal blue chip stocks

Post by Ged » Fri Aug 16, 2013 7:33 pm

SpaceCommander wrote:There is no magic formula to know the future, but I believe this concept merely refers to wide moat blue chip stocks of the highest quality. Think Exxon Mobil, Johnson & Johnson, Coca Cola, et.al.

While no company is completely bulletproof, somehow I'd bet that regardless of what the future holds, companies like these will find a way to make boatloads of money.
Don't you think that might already be factored into the prices of these stocks?

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JoMoney
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Re: Purple Chips book - the royal blue chip stocks

Post by JoMoney » Fri Aug 16, 2013 7:46 pm

This is not a new strategy. This sort of strategy has lead to "bubbles" in stocks that fit a certain profile.
During the 1970's the Nifty-Fifty was essentially the same strategy http://en.wikipedia.org/wiki/Nifty_Fifty
It's referred to as "Favorite Fifty" in Bogles's Telltale Chart speech https://personal.vanguard.com/bogle_sit ... 20626.html

There is no "set it and forget it" strategy or formula that beats the market long term. If it started showing good results over the short term, rest assured everyone would rush in and squeeze any value out of it until it was not only long gone, but way over priced.
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Re: Purple Chips book - the royal blue chip stocks

Post by YttriumNitrate » Fri Aug 16, 2013 8:08 pm

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Re: Purple Chips book - the royal blue chip stocks

Post by JoMoney » Fri Aug 16, 2013 8:31 pm

So when a company has been on a growth-spurt so long they can't breathe they turn "Blue", by the time they turn "Purple" I would be afraid they're about to keel-over :shock:
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Re: Purple Chips book - the royal blue chip stocks

Post by SpaceCommander » Fri Aug 16, 2013 11:20 pm

Ged wrote:
SpaceCommander wrote:There is no magic formula to know the future, but I believe this concept merely refers to wide moat blue chip stocks of the highest quality. Think Exxon Mobil, Johnson & Johnson, Coca Cola, et.al.

While no company is completely bulletproof, somehow I'd bet that regardless of what the future holds, companies like these will find a way to make boatloads of money.
Don't you think that might already be factored into the prices of these stocks?
Absolutely. That's why you can't hardly ever pick up those stocks on sale. You need to pay up for quality, which lowers your investment returns. A top quality company doesn't necessarily mean above average returns. It's all about valuations. If you can pick up those stocks at fire sale prices, I'd say back up the truck!
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Re: Purple Chips book - the royal blue chip stocks

Post by JoMoney » Sat Aug 17, 2013 12:23 am

SpaceCommander wrote: Absolutely. That's why you can't hardly ever pick up those stocks on sale. You need to pay up for quality, which lowers your investment returns. A top quality company doesn't necessarily mean above average returns. It's all about valuations. If you can pick up those stocks at fire sale prices, I'd say back up the truck!
That seems to be a big part of Warren Buffet's strategy. He's had a knack for picking up the ones that come back to glory, and avoiding the ones that are in a death spiral. The question is, how good do you think your valuation ability is at predicting future returns, and how long can you sit around in cash waiting for those opportunities. Buffett has acknowledged that many of his errors have been of "omission" because he wasn't willing to pay the current market price. It's also interesting to see how he moves in and out of stocks, despite saying his "favorite holding period is forever", he does trade (just slowly) and with uncanny results.
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Re: Purple Chips book - the royal blue chip stocks

Post by nisiprius » Sat Aug 17, 2013 2:26 pm

SpaceCommander wrote:If you can pick up those stocks at fire sale prices, I'd say back up the truck!
a sale of merchandise damaged in a fire; also : a sale at very low prices. How do you know they haven't been damaged by the fire?

The Yahoo article begins "Everyone knows investing in blue chips for the long haul is the way to make money in stocks." Really? Everyone?
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Re: Purple Chips book - the royal blue chip stocks

Post by SpaceCommander » Sat Aug 17, 2013 11:14 pm

nisiprius wrote:
SpaceCommander wrote:If you can pick up those stocks at fire sale prices, I'd say back up the truck!
a sale of merchandise damaged in a fire; also : a sale at very low prices. How do you know they haven't been damaged by the fire?

The Yahoo article begins "Everyone knows investing in blue chips for the long haul is the way to make money in stocks." Really? Everyone?
I had to grin when I read this, but there's a serious issue here too: what's the difference between a high quality blue chip on sale and a value trap? I don't think that's an unanswerable question, but it's really directed toward those who play the stock pickers game. I don't think that describes most on this board. :)
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Re: Purple Chips book - the royal blue chip stocks

Post by Valuethinker » Sun Aug 18, 2013 3:05 am

SpaceCommander wrote:There is no magic formula to know the future, but I believe this concept merely refers to wide moat blue chip stocks of the highest quality. Think Exxon Mobil, Johnson & Johnson, Coca Cola, et.al.

While no company is completely bulletproof, somehow I'd bet that regardless of what the future holds, companies like these will find a way to make boatloads of money.
The half life of quoted companies is something like 30 years, and has been getting shorter it appears (without seeing any research).

Think of Kodak, Polaroid, DEC, half the pharmaceutical companies (yes merged, but the industry has big problems). I would bet half the market cap of the tech sector won't be there in 20 years (Blackberry anyone? Nokia? Sony not looking too healthy).

Think GE v. Westinghouse. In the 1960s, basically they were very similar companies. Westinghouse is now gone, GE was the world's largest company, is tarnished but also still a player. Exxon is the only one of the world's publicly quoted oil companies still in the top 10 world producers. The 7 Sisters are slowly dying-- brave thing to call 100+ year old companies that have dominated the 20th century, but the National Oil Companies (contracting directly with the likes of Halliburton and Schlumberger) are slowly displacing them.

I think what this really is is another form of 'low volatility' investing.

Google etc. *will* make boatloads of money. But which of the candidates to do that *will* actually do that is very uncertain.

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Re: Purple Chips book - the royal blue chip stocks

Post by Beagler » Sun Aug 18, 2013 12:26 pm

SpaceCommander wrote:... That's why you can't hardly ever pick up those stocks on sale....
You're right. Recalling the post-9/11 stock market dips, IIRC did provide a buying opportunity: XOM went from $41.24 to $35.83; JNJ dropped from $55.82 that month down to $52.24; KO dropped a little from $25.10 to $23.40.
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Re: Purple Chips book - the royal blue chip stocks

Post by nedsaid » Sun Aug 18, 2013 2:43 pm

If you own the broad Total Market Index Fund, you already own these.

In Mr. Bogle's book on Common Sense Investing, he showed that the top 25 stocks in Market Capitalization were 26.3% of the Total Stock Market and 33.5% of the S&P 500. So a Boglehead already owns a big helping of these.

So relax fellow Bogleheads, those of us that own the broad indexes have the purple chips, the blue chips, and even the red chips!!

I like Doritos myself.
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Re: Purple Chips book - the royal blue chip stocks

Post by nisiprius » Sun Aug 18, 2013 2:50 pm

[Jocular post removed by poster, in response to Nedsaid's suggesting it could be considered in bad taste].
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Re: Purple Chips book - the royal blue chip stocks

Post by nedsaid » Sun Aug 18, 2013 2:57 pm

What a bunch of bulloney> :D
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Re: Purple Chips book - the royal blue chip stocks

Post by nedsaid » Sun Aug 18, 2013 3:15 pm

Nisiprius, I was not at all offended. You had a brilliant post. Please repost it. It really illustrated the Wall Street marketing and how ridiculous it is. It was a funny post.
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