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Thursday, June 30, 2011

5 Classic job hunting tips that never went out of style

I decided to take a detour on my blogging adventure to write about a topic that is relevant for far too many Americans these days, many of which are friends and family, job hunting. This topic is not directly related to my previous articles but since it involves income and a persons ability to save, invest and support a family, I think it isn't too far off topic.

Over the course of my career I have had the opportunity to take part in dozens of interviews, both as an interviewer and an interviewee. I have noticed a significant change over the past decade in the observance of common customs and courtesies surrounding the interview process.

I think during the boom times when unemployment was at 5% or lower, job seekers became complacent. It was easy too become a passive job seeker. The Internet provided an easy way to apply to position or simply post a profile with a resume and let recruiters and employers find you. Common customs and courtesies seemed to have eroded because separating yourself from the pack wasn't a requirement anymore. Those times have come and gone and they may not be back any time soon. Unemployment is still near 9% years after the worst of the financial crisis and job growth has been slow. There are more college graduates flooding the talent pool each semester and experienced and educated people have been laid off and are willing to accept lower tier positions that they may not have considered in the past.

Here is a list of 5 classic interview tips that are still relevant and maybe more so now than ever.

Dress the part (even at a job fair)

I've been to job fairs in which 30% of the job seekers are decked out in their very finest flip flops and t-shirts. If you want an interview, DRESS LIKE IT!! While clothes don't make the man, they do say something about the amount of effort you put into your job search and that may correlate to your work performance. Employers don't have the time to get to know you. They have to rely on superficial evidence to weed out candidates. Don't give them a reason to doubt your considerable desire to work for them.

Smile

I have been on both sides of the desk at interviews and let me tell you, it is OK to smile. In fact, it is more than OK. Interviews are generally a high pressure situation.  Smiling makes you appear comfortable, calm under pressure, approachable and friendly. Moreover, you may find that it actually boosts your confidence. Interviews needn't be clinical and serious. A well written resume illustrates your experience and expertise but can't effectively communicate your personality, social aptitude and enthusiasm. That is what the interview is for and a smile is a great start.

Customize your resume

Employers want to think that you only have eyes for them. You wouldn't recycle a love letter from an ex-girlfriend with your new lady love, right? Guys.....right? If you are struggling to answer, let me help you. Of course you wouldn't. Don't do it with employers either. Ensure that your resume matches the job description, skills and experience requirements as closely as possible without exaggeration or falsehood.

Effort is important. Taking the time to customize a resume is a way to show the employer that you are willing to go the extra mile.

Be prepared

If you get called in for an interview be prepared. Bring copies of your resume  (I recommend at least 4), recommendation letters (no more than two) and past performance reviews. I have gotten a lot of positive feedback on my "candidate packet". I take a standard navy blue folder, staple a cover sheet on the front that lists the position title, requisition number, company name (and logo if you can find one online), my name and the date and time of the interview. On the inside (left pocket) I provide an index. In the right pocket I provide a copy of my resume, a recommendation letter, a customer feedback letter and 3 years worth of performance reviews.

Remeber, effort is important. This will take you 10 minutes to create but can leave a lasting impression. It shows you are thoughtful, organized and willing to work for what you want.

Write a thank you letter (maybe two)

Within 3 business days of your interview be sure to send a thank you letter to everyone that participated in the interview. Thank them for their time and consideration and remind them why you want the job. This is your last chance to make an impression so if you walked out of the interview and thought about things you should have said, now is your chance.

If you find out later that you did not get the job I recommend writing a second letter to the hiring manager. Again you should thank them for their time but also solicit feedback. Reiterate your desire to participate in this particular line of work. Ask for any feedbacks or notes from the interview the hiring manager may have and is willing to share. Ask if the hiring manager would recommend a particular experience, training or education to pursue that will better prepare you for future interviews. In my experience, only 1 in 10 hiring managers will provide feedback but that feedback is nearly always invaluable and can be the first step to establish a lasting business relationship. You may not have been selected for this job but your persistance may be rewarded with a future opportunity working for the same employer.

Saturday, June 25, 2011

Picking Stocks: For Beginners

If you read my last post  you may have a few ideas for stocks you might like to own. If not, you can check that post out here. So, you have an idea for a stock but how do you know if it is a good one? Here are a few rules for beginners that will help you separate your good ideas from the bad ones.

Go with what you know: Being intimately familiar with a company, its products or services is crucial for the beginning investor. The incite gained by being a customer is invaluable and can make up for a lack of financial education to some degree. Let's look at McDonald's (Ticker Symbol: MCD). You have probably been to McDonald's a few dozen, if not hundreds of times over the course of your life. If you haven't think of a fast food chain that you have.

You would notice if the prices went up or the customer service went down. You can probably identify when a new item is put on the menu or an old one removed. You might have tried the new item and have an opinion or heard opinions from your friends and family about the new item. You probably noticed that quite a few McDonald's are selling specialty coffee now and it is pretty good. Many McDonald's stores have been renovated to look more upscale. You probably drive buy one or more McDonald's on a weekly basis and would notice if they were shutdown. You can probably list at least 5 competitors and have an opinion on why McDonald's is better or worse than they are. Wow, after looking at all of that, you seem like an expert, don't you? Furthermore, you have friends, family and co-workers that have incite that you can leverage by having a casual conversation.

For example, I was talking to a family friend today that works as a mail carrier. He told me that at one point a couple years ago a few of his co-workers were discussing the huge increase in the number of Netflix envelopes they were delivering. That is a pretty good indication of that the company was doing very well.

Understand the business:
This is an expansion of the first rule but it is important and distinct enough to warrant a few paragraphs of its own. When I say "understand the business", I don't simply mean knowing what a company sells. I mean understand how they make money. For instance, movie theaters make most of their money in concessions. Tickets sales largely go to the studio that produced the film. The extra $3 (or so) that you pay for a 3-D movie might go the 3-D technology company (but not necessarily).

You should also understand what sets them apart from their competitors. This rule is why I avoid pharmaceutical companies. It isn't that they are not profitable companies, I just don't understand why Merck is any better than Pfizer. I do have a pretty strong opinion when I choose an airline though. I can explain why I prefer Southwest Airlines (Ticker Symbol: LUV) over every other domestic airline.

You should also think about who a companies primary customers are. This will help you understand what events (global, national, regional or local) might impact a stock. For instance, we are currently experiencing extremely high unemployment. Certain companies actually benefit from these conditions. For instance, Monster Worldwide Inc (Ticker Symbol: MWW), is the company resonsible for Monsters.com, the website that assists job seekers find employers and vice versa. Discount stores are another industry that does well in tough economic times, companies like Walmart (Ticker Symbol: WMT).

Go with established companies: I always recommend folks new to the stock market choose companies with a history of success and a solid brand name. Companies like Walt Disney (Ticker Symbol: DIS) or Coca Cola (Ticker Symbol: KO) This does not guarantee success (nothing really does) but it will help you avoid companies that that don't have staying power or are fads or fly-by-night operations. These are companies that have been around long enough to see difficult economic times and have survived or even come back stronger. They have made mistakes and recovered. They are mature, stable and generally return cash to their stockholders in the form of a quarterly dividend.

SIDE NOTE: Stay away from penny stocks (stocks priced under $4.00).

Thursday, June 23, 2011

Power to the people!

Finding a good stock isn't nearly as complicated as you think it is. No, really. I mean it. You know far more about picking stocks than you realize. You are a consumer. You interact with dozens, maybe hundreds of products, services, and companies on a weekly basis. You have family, friends and co-workers that talk about products, services and companies daily. You know what you like, you know what they like.

That is a pretty good start when you are considering buying stock. It isn't enough but it gives you a place to begin your research. In later blogs I will take you through my process for that deeper research but for now lets keep it simple. Here are some questions you can ask yourself that can lead you on your search for a winning stock;

  • What product or service just seems to be everywhere? What product can you not leave the house without seeing? Coke, McDonald's, IPads and IPhones (Apple), Amazon Kindle (I'm a big fan by the way).
  • What marketing push worked on you? Domino's pizza admitting that they were selling an inferior product and promising to fix it won me over. I was intrigued. I had to try it and I have to say, I like the new pizza. I hadn't eaten a Domino's pizza in over 5 years but I am a regular customer now. Apparently, a lot of other people felt the same way. Domino's Pizza's stock (Tiker symbol: DPZ) is up over 80% since last August.
  • What company consistently delivers a quality product, service or experience? 10 out of 11 Pixar movies have been #1 in the box office and all of them have been extremely profitable. The only reason Tangled did not make it to number 1 was because a Harry Potter movie came out the previous week. Pixar was purchased by Disney (Ticker Symbol: DIS).  
  • What product or service do you abslutely love? For instance, when I am booking a flight I always fly Southwest (Ticker Symbol: LUV) if there are seats available. They generally have the lowest fares, they don't charge to check a bag and I think they have great customer service. Chances are, if I feel that way about them many other people do to.   
  • What product or service can you not imagine living without? or said another way, what product or service has changed your life permanently? There are certain products or services that change the way we do things forever. For instance, the internet, cell phones, credit cards, DVR, GPS, streaming video (Netflix) etc. Finding the leader in these segments of industry might be a pretty good start.
Finding a winning stock isn't about crunching numbers and watching CNBC 12 hours a day. Its about recognizing the impact consumers (you, me, your friends, family and co-workers) have on individual companies and the stock market as a whole. Where we decide to spend our money decides which companies succeed and which fail. We, the middle class and below, power the stock market but too few of us participate in it. If we want to close the gap between the rich and the rest of us, we need to leverage all of the tools available to us. 

So, hopefully I have gotten you to start looking around, thinking about your own habits, experiences and interactions with companies and their products and services in  a new way. If you have time think about the questions I posted above, try jotting a few companies down over the next week or two. I will follow up this post with one that will get into the next layer of research.

Sunday, June 12, 2011

What is the Stock Market?

The Stock Market can be an intimidating place. The recent financial crisis which decimated so many people’s retirement accounts is still fresh on everyone’s mind. Economists and Financial Experts are all over the news talking in jargon that 90% of Americans don’t really understand. They use acronyms, terms and ratios that are confusing and overwhelming. It makes the Stock Market seem inaccessible at best. I have heard people commonly refer to the Stock Market as gambling (my wife is one of them) or a fool’s game. Many people have told me that the Stock Market is a game for the rich, that lower and middle class folks don’t stand a chance.

I am trying to dispel some of those misconceptions because I believe the best way for someone to claw their way out of the lower or middle class is by taking advantage of the Stock Market. It can help you put your kids (or yourself) through college. It can ensure that you can live comfortably in retirement or help purchase your first home. There are risks. I won’t deny that but there are simple ways to minimize them. It is far easier than it looks but it is not intuitive. You need someone to walk you through it, someone that can translate the jargon and explain financial concepts in simple terms.     

Let’s start from the beginning;

What is the Stock Market?
The Stock Market, for the most part, is a secondary market. That means that when you purchase a company’s stock you are not buying it from the company but from someone else. You are buying stock second or third or 23rd hand. Stocks for the most part are used goods. Think of the Stock Market like a giant swap meet but instead of crafts, clothes and used furniture people are haggling for stocks, bonds, mutual funds, commodities and other more obscure financial products.

What is a Stock?
Each share of stock represents a miniscule portion of company ownership. Many companies have sold millions or even hundreds of millions of shares. When I write that you own a portion of the company I do not mean that in some abstract sense. You literally own a portion of the company. You have voting rights (each share is a vote) on company matters. You can attend and be heard at company shareholders meetings. Some companies even give you a cut of the profits called a “dividend” for each share of the company you own (I will write about that in great detail another time). All of this participation is strictly voluntary.

So why own Stock?
The goal of every company is to make money for the owners. As a stock holder, that’s you. Ever considered opening a business but decided it was just too risky. Maybe you just didn’t have enough cash on hand to make it happen. Well, why not just buy into a well established company with great leadership and a product line that anyone born after 1975 can’t seem to live without; Apple (AAPL). Or how about a fast food company that has stores in 119 countries world-wide but is still an American icon; McDonald’s (MCD).

These two companies are highly respected organization and while their stock price may go up and down over the weeks, months and years the general trend is up and they will be around for a long, long time. It is important to remember during those down days that you do not gain or lose money until you purchase and then sell your stock. It may worry you to the point of giving you hives but you are not out of the game until you sell.

SIDE NOTE: I would suggest that any new investor stick to this type of large, well known, highly established companies that would make headlines if they were in trouble. I am not saying it is a fool proof investing plan or a plan at all really but you will avoid a lot of risk by simply choosing companies that you know and are familiar with. I mean, if a few of McDonald’s near you boarded up their windows you would notice.

How does owning stock make you money?
There are two primary ways that a stock can make you money. The first way is stock appreciation. You have probably heard the phrase "buy low, sell high" before. It refers to buying stock at one price and selling it at a higher price. It is a very simple concepts that we all are familiar with but it is easier said than done.

The second way a stock can make you money is through a dividend. A dividend is basically profit sharing. The company distributes cash to its owners based on the number of shares they hold. The distributions generally happen four times a year (quarterly) at a set annual rate. For intance, Windstream Corporation (WIN), offers $1.00 per share, broken into quarterly distributions of $0.25. This is often represented as a percentage of the stock price called the dividend yield. Windstream's price is currently about $13.00 a share. To get the yield take the dividend and divide it by the stock price and multiply it by 100 like so: ($1.00 / $13.00) X 100 = 7.7%. That means if you purchase the stock at $13.00 a share and you keep it for a year you will earn a 7.7% return without selling the stock.

SIDE NOTE:  Dividends can be altered or suspended at any time. Buying a stock with a dividend does not guarantee the yield. Also of note, this percentage changes as the stock price changes. If the dividend stays the same but the stock price drops the yield increases.    

What is a Bond?
When you purchase a bond you are purchasing debt or in more familiar terminology, you are loaning money. There are many kinds of bonds. You can buy them from the United States Federal or State governments, another country’s government or a corporation. Bonds have far less risk than stocks but the potential for reward is capped by the interest rate. Just like any loan, when a bond is purchased it has an interest rate and a specified duration. For instance a 2 year treasury note right now will earn you around a 2% guaranteed annual return (unless the US government collapses). Stocks do not come with a guarantee but the potential gain is unlimited. Most bonds do not really come with a guarantee but the risk of a government or company defaulting on a loan is generally pretty remote because the impact is to the company or governments well being is often catastrophic. The more likely a company or government is to default the higher the interest rate they will offer for their debt.
What is a Commodity?
In a word, Stuff. Commodities are everything from oil and gold to coffee and grain. This stuff, or more often the paper contracts that represent the purchase or the option to purchase this stuff is bought and sold daily.

What is a Mutual Fund?    
A mutual fund is a collection of stocks, bonds, commodities and other financial products crafted and managed by a financial professional. When you buy shares of a mutual fund you are purchasing a portfolio of financial products that when combined are supposed to meet an objective. An example of a common objective would be to match the performance of a particular index, say the S&P 500. That portfolio is not static. It is professionally managed which means the mix of stocks, bonds, commodities etc can and often will change. The point of a mutual fund is for a bunch of individual investors to pool their money together so they can achieve a level of diversification they couldn’t on their own. They also have access to investment products and opportunities that are only available for larger investors. The down side of course is that there are fees associated with the professional management.         

I managed to avoid discussing the mechanics of purchasing stock or methods for stock valuation yet again. I am starting with baby steps so that this can be a comprehensive resource for all levels of traders. Trust me, I am as anxious as you to discuss the nuts and bolts of stock valuation. I hope you found this primer helpful. I will spend more time on all of the topics discussed above in the future so if I did not get to your specific question, come back at a later date (or you could ask me by commenting below).