Ask the Fool
Q: Is there a limit to how many shares of a company can be bought?
A: Yes, because companies don’t have unlimited shares.
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They issue a certain number when they go public via an initial public offering (IPO), and they may issue more later, via secondary offerings.
You could buy all the shares on the market, but by doing so, your sudden demand for the shares would drive up the price.
Once you own 5 percent of a voting class of shares, you’ll need to file a report alerting the Securities and Exchange Commission.
Remember, too, that a company may have only a portion of its value in shares trading publicly.
Q: I want to invest in the stock market, but I don’t have a huge pile of money. Is there some rule of thumb regarding how much I should invest when it costs me $7.99 per trade?
A: It’s good to aim to spend no more than 2 percent of your investment on commission costs. So if you’re spending $8 on a trade, you should be investing at least $400.
Superinvestors Warren Buffett and Charlie Munger recently held forth at their Berkshire Hathaway annual meeting in Omaha. Here are some paraphrased nuggets:
On analyzing companies:
Warren: We think of businesses, not stocks. … Over the years, we’ve come to understand certain businesses. … We estimate what the place will look like in five to 10 years. Sometimes we don’t know; for example, auto companies. We’ve watched that industry for 50 years, but we don’t know what will happen in the future.
On knowing your limits:
Warren: Stocks will do well over time. You just need to avoid getting excited while other people are excited. Don’t pretend to be a professional. If you are an amateur investor, you have a logical option to buy broadly into American business over time (via index funds). Don’t overestimate your own abilities.
Charlie: I think knowing the edge of your own competency is important. If you think you know more than you do, you’re in trouble.
(For more, read Buffett’s letters to shareholders at www.berkshirehathaway.com.)
The Motley Fool Take
Stock in Deere (NYSE: DE) has averaged annual growth of 14 percent over 30 years, and it seems to have plenty of room for further growth.
Up more than 20 percent over the past year, Deere has been benefiting from strength in the agricultural industry in recent years.
It has faced some headwinds from the slowdown in China’s growth, but other developments are promising.
Global harvests of soybeans are expected by some to rise to an all-time high, pushing world crop inventories to new records, while corn inventories are seen rising to decade highs, too.
Deere is facing growing competition from Japanese rival Kubota.
But Deere remains compelling.
It recently paid a 2.2 percent dividend yield, and has been upping its payout by about 15 percent, on average, annually over the past five years.