The Jon Sanchez Show

10/25- Defensive strategies for individual stocks

The risk of individual stock ownership was exemplified Wednesday and today. I am referring to McDonalds. But does that mean we should avoid individual stocks in exchange for baskets of equities such as mutual funds and Exchange Traded Funds? Absolutely not. But what it does mean is we need to have defensive strategies in place.

Broadcast on:: 25 Oct 2024
Audio Format:: other

It is Ryan Seacrest here. There was a recent social media trend, which consisted of flying on a plane with no music, no movies, no entertainment. But a better trend would be going to Chumbakacino.com. It's like having a mini social casino in your pocket. Chumbakacino has over 100 online casino style games, all absolutely free. It's the most fun you can have online and on a plane. So grab your free welcome bonus now at Chumbakacino.com. Sponsored by Chumbakacino. No purchase necessary. VGW Group. Voidware prohibited by law. 18 plus terms and conditions apply. - It's a pleasure to be with you. I am flying solo this Friday evening. Mr. Gaunt has the evening off or afternoon. So welcome to all of you. Got a great show lined up for you this afternoon. Lots of different things we're going to be talking about. It's a Friday, so we kind of bebop around and just talk about a lot of different things. I'll give you some things that are on my mind. But then we're going to get down to a very interesting topic. You know, this was a week. It was a strange week. That's the best way that I can summarize it. It was a strange week. Kind of, you know, if this was Halloween week, I would say we're going to blame, you know, the full moon, even though the full moon just left us. But I would blame the spookiness of Halloween or something on the trading activity of this week. It was bizarre. We had a lot of strange things happen this week. We had bond yields going through the roof. We had mixed corporate earnings. We had summer corporate earnings that were phenomenal like Tesla. And then we had others that were terrible. We had an E. coli breakout on Wednesday with McDonald's. And then we got more news about it today and that hammered the stock and drove the stock market down. We had a lot of things going on. A lot of cross-currents, as we like to call it. But overall, was not that bad of a week at all. Considering we did finish the week in the red for the major indices other than the NASDAQ. So a lot of things we're going to be talking about. But my focus tonight is going to be defensive strategies for individual stocks. You know, the risk of individual stock ownership was absolutely exemplified of what I just said a moment ago in regards to McDonald's on Wednesday, right? Everything's going along fine with the market. Everything's good. And then all of a sudden things began to fall apart. Tuesday night, I guess it was. Tuesday night, of course we learned right after Tuesday afternoon, I guess, once again, correctly dimension. Tuesday afternoon is when we learned of the E. coli breakout with McDonald's. Stock started selling off very heavily in the after-hour session, continued in the overnight session. Then it opens on Wednesday and it was all she wrote. Stock plummeted, what were we? Down 20, 21 bucks right around there. Did we get a little bit of a rebound on Thursday, yesterday? And then things were starting to do just fine today. That was until the CDC came out and said, ooh, guess what? A lot more people got sick than what we originally told you. And then the stock sold off, drug the market down with it, and that's how we finished up the week. So it's amazing again, there's a reason I wanna focus on individual stocks. It's amazing again how a stock of great prowess, like a McDonald's or any of the other major blue chip stocks that we follow and many of us invest into. It's amazing how they can drag the market down or they can propel the market higher. So what we wanna focus on this afternoon is the following. Because of this risk of individual stock ownership, especially in this volatile environment that we find ourselves in, does that mean that we should avoid owning individual stocks in exchange for something like a basket of equities, i.e., a mutual fund, i.e., exchange traded funds? Well, the answer is absolutely not. There's great advantages of owning individual stocks. But what it does mean is that we need to have defensive strategies in place if we are gonna put individual stocks in our portfolio. And I'm gonna explain the strategies as well as, of course, wrap up the week on Wall Street for you this afternoon. So let's get down to today's trading activity. Pardon me for one moment. I gotta make an adjustment on a microphone one second please. Last to myself out, there we go. All right, now, what happened today? So today, things started off on a pretty positive tone. You know, we actually, let's go back to yesterday. Yesterday was a decent day, as far as the NASDAQ and the S&P. That was a little bit under pressure yesterday, finished down 141, NASDAQ was up 139 S&P rose 12 yesterday. So we had some momentum going into it. Pre-market session looked great. Dow features were up triple digits, NASDAQ features were up triple digits. Looked like today could be a bit of a relief rally. Well, that was again, until this news came out from the CDC that I'll share with you in a moment about McDonald's. And it also coincided with a very slight uptick in bond yields. And this was the other headwind that we faced this week. It was a headwind that this market was moving almost lock, stock, and barrel with whatever the 10 year treasury yield was doing. Treasure yields started to move up, market went down, and vice versa. But let's go back to the McDonald's situation. Like I said, things were going just fine until the CDC came out. Now, let me kind of give you an idea of what happened. So first of all, McDonald's finished as the worst performing stock in the Dow Jones Industrial Average of the 30 stocks, okay? Now, the stock finished down right now in the after hours, or this price includes the after hours, $9.03 loss, 2.99%. Opened at $301 and finished at $292.55. The stock is down pretty substantially from the beginning of the week or mid-week, on Tuesday when we found out, of course, what's happened. With a C. Coli breakout. So, again, very rough week for the stock overall. But what happened today, we kind of thought this situation was going a bit in the memory bank. Everyone, you hadn't heard a lot about it. I've yet to see any analysts that have really come out and say, this is gonna have a major impact on the stock. The stock, as far as the earnings and overall performance. Like I said, it was like everything just kind of got brushed to the way side. But that was, again, up until today when this news of the CDC came out. So, here's what the CDC had to say. So, listen closely if you are a McDonald's fan. They said the deadly E. Coli breakout linked to the quarter pounders has led to 75 cases now in 13 states. So, that is significantly larger than, I think, originally we were told 10 cases, one death, and just a handful of states. Now, they continue to investigate, obviously. So far, the outbreak has led to 22 hospitalizations and one previously reported death of an older adult in Colorado. Now, out of 61 patients with information available, 22 have been hospitalized, and two people have developed a serious condition that can lead to kidney failure. All of the 42 people who were interviewed by the CDC reported eating at McDonald's while 39 people reported eating a beef hamburger. Now, this is something that's new, and again, one of the reasons the stock sold off so heavily and drug the Dow down today. Because remember before, there was originally when the news broke, and I shared it with you on Tuesday afternoon or on the show, it was all about the onion side of it. There was, no mention that I saw it, at least. Maybe I'm wrong, but there was no mention that I saw that the hamburger side of it was involved. And we all know that you can get E. Coli from Hamburg or any other type of meat. But now we're learning that 39 people, like I said, ate the hamburger also. Those with infections raged between age 13 and 18, according to the CDC. The agency reiterated that the number of cases of the outbreak is much likely higher than what has been reported so far, that a CDC added that the outbreak may not be limited to the states with the related cases. That's because many patients do not test for E. coli and the recover from an infection without receiving medical care. It also usually takes three to four weeks to determine if a sick person is part of an outbreak. So the stock is down overall about 7% since we got that announcement after the market closed on Tuesday. Again, number of cases, dramatically smaller than what we're talking about now. Now, health officials, I'm sure many of you are aware, but I want to bring this to everyone's attention. And there's a reason I'm spending time talking about onions and hamburgers with you on a financial show. Health officials are closely examining the slivered onions used in the quarter pounder as a likely contaminant. McDonald's has instructed restaurants in the affected areas to remove the slivered onions from their supply and has paused the distribution of that ingredient in the region. Now, they have expanded the number of McDonald's stores that they're saying either people got sick at or there's no longer distribution going on there. And now Nevada's included. Originally it was not. So the stores in Colorado, Kansas, Utah, Wyoming, as well as parts of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico and Oklahoma have temporarily stopped using quarter pounders slivered onions and beef patties, according to the CDC. Company called Taylor Farms, which is right over the hill in the Central Valley. They are the supplier of the slice onions and the company removed from the supply chain. It should recall on four onion products due to the potential E. coli contamination. Burger King Pizza Hut KFC Taco Bell, they've all pulled the onions from the select restaurants in response to the outbreak. Federal agencies are continuing to investigate the quarter pounders beef patty as a potential culprit. Around a fifth McDonald's US restaurants are not selling quarter pounders now. McDonald's spokesperson on Wednesday said that it's too early to tell if the outbreak is having any effect on traffic to its restaurant. Yeah, I would love to know from many of you. Have you stopped going to McDonald's because of this? It's an interesting one, right? Well, the company's expected to report the earnings on Tuesday, I believe it is. And of course, the company should share some more details with investors about the situation and what type of impact it's having on foot traffic and don't think it'll have any impact on earnings numbers. It'll obviously because the numbers are gonna report on Tuesday for the previous quarter, which is well closed. So this is what prompted me to wanna have this discussion with you this afternoon in regards to defensive strategies for individual stocks, right? McDonald's is a great company and they will overcome this. They absolutely will. There's no doubt in my mind. But this just shows, and this is what I have told investors from the first time I ever met with an investor 35 years ago. And I said, look, individual stocks are great. Many times individual stocks will give you a better return than package products. And when I say the term package products, I'm referring to ETFs and mutual funds, okay? You can control the taxation, right? You can't really control it, especially inside of a mutual funding. It's a basket of stocks. You're in no control over the buys, the sells, and therefore the capital gains distribution. With an individual stock, you get to control when you buy or when you sell, and therefore you control your taxation on there. But inevitably, something happens with an individual stock. I mean, we've all seen the headlines from the CEO getting caught having an affair and they're booted off of the board and lose their position. I mean, a product going wrong or something like a restaurant stock where a E.coli outbreak or some other type of foodborne virus is initiated. So there's always risk there. And what I'm gonna try to accomplish with you this afternoon is how do we minimize that risk? 'Cause we wanna win individual stocks, but at the same time, we wanna minimize that risk. And so we'll cover that in detail. Some more market movers for you. When we come back, let us turn it over to Kristin Snow for the first time of this program, this fine Friday afternoon. How you doing, Kristin? Likewise. Welcome back to the John Sanchez Show on News Talk 780K, which helped me Friday to all of you. We finished down 260 on the day of 0.61% loss. Our closing level was 42,114. The NASDAQ, again, of 103.58% closing at 18,00518. And I apologize if you caught my closing report, I said we closed it a record. No, it wasn't a record. What I should have said was an intraday record. That's right. Intraday, we hit 18,690, 18,690. About 172 points higher than where we closed that. So that tells you what kind of session we had. Nearly a 300 point gain at the best level. But again, touching a new intraday high. And the S&P was quiet for the day, just a two point loss to finish at 5,808. On the commodity side, we gained 2.2% on oil, 71, 97 a barrel. Gold prices, they were modestly higher, $5.70, 2007, 54, 60. And those stubborn bond yields moving up once again, a three basis point increase to 4.23%. All right, now told you it was a crazy session. A lot of that attributed to McDonald's. You're up to date on what happened there. And again, our topic we're going to be discussing after the bottom of the hour break is defensive strategies. If you own individual stocks, what happens if you have a stock in a portfolio like a McDonald's, where something just out of the blue happens, how do you protect yourself against that? Those are the type of things I'll be going over with you shortly. Now, on the economic front today, we had the release of the durable goods for the month of September, down 8/10 of a percent. Don't know what durable goods are. Hey, let me explain them. They're really simple. It's a manufacturing report. These are big ticket items with a life expectancy greater than three years. So they throw things in there like jet airplanes, automobiles, washing machines, you name it. It's all mixed into the report. So we like to watch this report, give us a feel for what's going on the manufacturing side of the economy. So once again, down 8/10 of a percent, prior number was a increase of 6/10 of a percent. So this was a pretty significant drop there. So you're talking what, 14 basis point differential from what the previous month. So, you know, watch that one closely. We need the manufacturing side to be strong. Then the final report of the day was the University of Michigan consumer sentiment number. This is a survey of thousands of households asking how they feel about their jobs, their spending habits, so on and so forth. You want to get a reading, you know, towards 100. There's no magic number, but that's kind of the bogey. Reading came in at 70.5, which historically is a very strong reading. And that was an increase from 68.9. Big takeaway from that report was that the consumer confidence number has increased for three consecutive months despite of the election uncertainty. Which again, a lot of people start to feel very uncertain as we've mentioned many, many times on this show. They're just uncertain about their jobs, their economy, their portfolios, you name it. We hear the discussions all the time that people are having. So, yeah, like I said, a pretty strong report. Okay, now, rising yields, as I said, 4.23% was our close, up three basis points for the day. It has been a tough week as far as bond yields are concerned. Again, if you own bonds, they went down this week because 16 basis point increase on the 10-year treasury. As we had a discussion with Corey and Dwight last night in regards to the impact on mortgage rates and so on, so forth. Wall Street again has now become very sensitive. In the past couple months, at least, we haven't really cared if we would go up a couple basis points on the yield, down a couple basis points. Haven't really cared. But you know, folks, if you look at this chart of what's going on in the 10-year yield, it is now something that is of great concern for many investors and for the overall stock market. Once again, as we discussed yesterday on the show, this bond market is telling us completely something different than the stock market, right? The bond market, as I always like to say, is the driver of the bus, the economic bus, and the stock market investors, we are the passengers. So you gotta pay very close attention to what these bond traders are doing and what they feel about things as these yields begin to drive up and then comes the discussion of what the Fed gonna do. So kind of bring you up to date. I didn't see the Fed Fund futures contract data today, but as of yesterday, just a smidge, I think it was 90.2, was the probability of a quarter percent cut at the November Fed meeting. So that one's pretty much certain, as of this point at least, still a little wishy-washy come December, 'cause remember, that's what everyone was kind of picked on, whether we were gonna get another cut of a quarter percent in December. But like I said, the data right now is just not real accurate, 'cause I think a lot of it's gonna be depending upon who's in the White House, which we will know, of course, who's gonna win by the time that December meeting rolls around. Now, the other factor driving the market this week, unlike I said, it was an okay week, but as far as the NASDAQ was concerned with that uncertainty record high today, but it turned to the other major averages, and it was kind of tough. The Russell 2000, the little guys, the small caps, lost 2.99% for the week. S&P was down 0.96, Dow lost 2.68, and the NASDAQ up 0.16. So the other factor driving the market performance this week, again, earnings. We are in the heart of earnings season, so I wanna give you a little update on what's going on there. Now, of the S&P 500 companies that have reported so far, this is as of this morning, approximately 74% of the companies have beaten earnings expectation, but they're blended earnings growth rate. Well, now what does that mean? Well, that's where we include the reports that have already come out, as well as the estimates for those that are going to be released, is about 3.4%. That is short of the Wall Street estimate of 4.2%. So the growth rate of companies, the growth rate of just the companies themselves that have posted is only 3.1%. So you see, we're starting to see a slowdown in the earnings side of things with corporate America. Now, this data, I wanna caution you on this before you get upset. This data could change dramatically next week, after next week. And why do I say that? Because we have a number of the major technology names, the Googles and so on and so forth of the world that are gonna be reporting them. If those numbers are good, this number could definitely change. So this is where we set as of right now. Tesla had a great week. I had some pretty decent earnings numbers. I had a little miss on revenue, but deliveries and earnings per share, et cetera, well above expectation. Stock was strong again, $7.65 gain, 2.94%, closing at 2.6813. Now, Lee, well, you know what, I'll save it to when we get back. I wanna talk about something else in regards to the election. We get a lot of questions in our firm in regards to historically, how does the stock market perform before a presidential election? Now if you're like me every day I wake up and I can't believe that we're so far through the year, it's just, you know, that old saying, the older you get the faster time goes, absolutely comes true. But I can't believe here we are, October 25th, we got the election just a couple of weeks away. And man, oh man, things, it's just gonna be unreal as far as volatility and excitement, you know, to see how this whole thing pans out. It's gonna be historic by all means. So when we come back, I wanna touch on, how does Wall Street do the week before the presidential election? I think you're gonna be pretty impressed with this data. And by the way, it's pretty good data. Give me that little tidbit there. Let's turn it over to Jack Saban. He's got news traffic and weather. Hey, Jack. Welcome back to the John Sanchez Show on News Talk 780K. We'll help you Friday to all of you. Once again, we lost 260 on the Dow. Well, 103 declined on the NASDAQ and a two point loss on the S&P 500. All right, how do the markets fare the week before a presidential election? I got some great data for you. But first, let me remind you, hey, tomorrow, yeah, I've got decent weather here. Head on over to my friends over at SNW Attractor. If you've got projects to do around the homestead, they've got the tractor that will get the job done tirelessly for you. The Coyote Tractor, the big mean orange machine that will last you for so many years. And incredible financing. Don't forget, 0% for 84 months on select models. Standing the crew can put together a package for you and make it so very affordable. How do you find them? Well, they're located at 4880 East Nile Lane in Carson City. You can go online at snwattractor.com, check out their inventory, et cetera. But the better yet, just give them a phone call, 882-1225, go on down and they'll put together an incredible Coyote tractor package. Don't forget, we've got hunting season honest right now. Pick up an incredible side by side. We've run the heck out of ours daily. And it's just an absolutely amazing machine. I just can't say enough. All their products are, they're just absolutely incredible. All right, now, let's get down to how the stock market does the week before an election. So obviously, that is next week. So I want to mention this to you. Next week's gonna be the full week before the election. Of course, the election will be the following Tuesday. So how does the stock market perform before a presidential election? So I did a little digging for you. Put together some data. So here we go. The S&P 500 has seen a medium gain of 0.76% the week before the presidential election. 0.76% gain. The week of the election itself, the broader index has seen a medium gain of 0.56%. But that's just again, the median, you know, where we kind of put it all together and then we average it out now. Let's get down to some of the more recent 'cause it's not quite the same. Let's go back to Biden's win over Trump. The full week before the election, the S&P 500 lost 5.64%. But as Jason and I always say, once that election's over, regardless of who wins, there's a breath of sigh among investors. It's like, okay, maybe my candidate didn't win, but at least I don't have to worry about it anymore. And the markets tend to do pretty well. So in that same time period, November 3rd, 2020, the full week before the election, again, S&P lost 5.64%, the week of the election. So that'd be the, what, Wednesday, Thursday, Friday, the market rallied 7.32%. Let's go to the previous election. Trump's win over Clinton. The week before the election, so this is November 8th of 2016, week before the election, S&P lost 1.94%. The week of the election, 1.3%, or went up 3.8%. Then we go to our next one. Obama's win over Mitt Romney. This is November 6th of 2012. The week before the election, kind of flat, up to 0.16%. But the week of, down 2.43%. Now, correct me if I'm wrong, 'cause I am not a political guy by any means, but wasn't that the time period where they could not give us the count, right? Remember the final count? We didn't know what it was. So I'm thinking that's a reason that this market dropped, or that market dropped 2.43% the week of the election. So keep that in mind, because again, many think that that same scenario is gonna pan out this time. All right, so now we go back to 2008. Obama's win over McCain. The week before the election, the market rally, excuse me, the week before, pardon me, the week before the election, Obama's won over McCain. The S&P rally 10.49%. Now, before you get excited, remember that magical year, 2008. That's when the world was coming to an end in investors' minds, right? We were in the midst of the financial crisis, brokerage firms failing, banks failing, insurance companies failing, so that is why this thing rallied so hard. There's nothing like that ever before. So 10.49% the full week before. Then once the election was over, that week of, down 3.9%. Bush's won over Kerry back in 2004, week before S&P rose 3.15. The week of, again, of 3.18. Bush's won over Gore, 3.41 the week before, negative 4.26 the week after. Or the week of, I should say. Let's see, let's go to Clinton's win over Dole, back in 1996. S&P rose 0.41% the week of, or excuse me, the week before, and the week of 3.84% gain. Back to 92, Clinton's won over Bush. S&P rose 1.1% the week before, and a 1% gain the week of. Two more to go. Bush's won over to caucus. Ooh, now we're going way back in history, 1988. S&P lost 0.80% the week of, or sooner than the week before. She said, "Can't get it right." And then the week of down 3.04%. And finally, we go back to 84. Reagan's won over Mondale. The full week before S&P gained 1.29%, the week of 0.11%. So if we average all those numbers together, again, the median, full week before in a presidential election, S&P rises 0.76%, and the week of, the median is 0.56%. So anything goes, like I said, I mean, man, oh man, if we go back to Biden over Trump, again, the week before, down 5.64%. So we just don't know what it's going to happen. I mean, that's just the bottom line. No one knows. And again, this time, as I always say, hate to say this, but this time it is different because we know what each candidate stands for. We know their past, we know what they do. So I don't know if that's going to create a little bit more calmness in the market, because again, kind of know both. But, wait, next week's going to be amazing. On top of all the earnings and economic reports, so get some rest this weekend. All right, let's get to our topic. We're running out of time quickly here. The risk of owning individual stocks. So what defensive strategies do we need to be thinking about? If we have individual stocks in our portfolio, the reason again, I'm bringing this up if you just joined us, McDonald's, right? The stock got hit pretty bad this week with the E. coli news, and then CDC came out today and announced again more people got sick than they originally told us, and that stock just sold off once again. It looks like it's recovered a little bit here, about five cents or so in the after hours. But finished the day down a little over $8, about 2.97% with the worst performer of the doubt. So, love owning individual stocks, but they come with risk. Now, what do we do to mitigate that risk? Well, let's go through this. Okay, so, first thing we need to think about when we own an individual stock is we have market risk. Like any investment we own, we have market risk, but of course, it's magnified when we own individual stocks. So, of course, we can see the market risk as following. We see the stock price fluctuate due to changes in the overall stock market. We've got economic downturns. We have, as we're dealing with right now, interest rate changes. We've got global events. All those can lead to broad market declines impacting individual stocks. Now, remember, as I go through this, let me pause for a second, as I go through this, compare and contrast this of owning an individual stock to a package product. Again, a mutual fund and ETF where you own hundreds of stocks, right? Okay, so, there's our market risk of owning an individual stock. Now, here's the real gist of it. My second point, company-specific risk. Let's think about McDonald's, okay? That is a company-specific risk of owning an individual stock. But under that category can follow a lot of different sub-categories. Poor management, i.e. Boeing. There's another one that we dealt with this week when the union did not ratify the contract, right? So, you got poor management. A company may have legal issues. They may have declining financial performance. There's Boeing, again, that, of course, can negatively impact the company stock price. And unlike a package product, diversified investment, individual stocks are much more susceptible to these risks than, again, if you owned hundreds of stocks in a package product. The volatility, individual stocks can be so much more volatile than the broader market indices, both on the upside, and that's the great thing about individual stocks, but, of course, on the downside. We can see sudden price swings that can lead to significant gains or significant losses. I mean, look at Tesla's performance this week, right? I didn't see anybody's report indicating that the company was gonna have a strong earnings report and how wrong they were, 'cause the stock just rocked it all week long. But, of course, we've seen many others where just the opposite happened, where all of a sudden we started to see weakness and, boy, Wall Street does not tolerate. They don't care, it is always safe. Like, we're in the heart of earnings season. Wall Street does not really care so much what happened in the past. You know, maybe 20, 30% of the stock's performance. Wall Street looks for, excuse me, is the earnings guidance. What is the company predicting is gonna happen in the future, right? That's hard to do. Even companies see suites. They have a hard time predicting economic conditions and specific performance of the company going forward, so it's kind of a best-guess scenario. Once again, a package product, you don't have to worry about that. Number four, lack of diversification. I shared a story. I think it was on Monday when Jason and I were talking about the stock market, and I'll share it just real quickly again. One of the hardest things I ever dealt with as a young broker, I was in Bakersfield, and I had a lot of oil executives as clients. And when an oil executive would come in, especially ones that got an early golden parachute package, you know, to retire earlier, they had a lot of company stock. And in this story that I shared on Monday, and I'll do it again, at a Chevron executive, the guy who was, you know, early 50s, maybe 55, I think it was 53, and got this great package. Literally, they were offering them 500,000 to get out the door. They were going through a round of layoffs. And a lot of his 401k was purely in Chevron stock. And I sat down with him and I said, you know, are you ready and willing to retire? I know he's forced upon you. And I said, we have to diversify. You've got almost all your net worth in Chevron stock. And he literally looked at me and he's like, I can't, I can't do that. I said, why? And I was young, so I didn't really understand. And he said, I said, why? He goes, John, you don't understand. He goes, this stock has paid for my kid's college education. It paid for the down payment on our house. And he started going through major financial life events that that stock paid for. So it's very easy to fall in love with an individual stock. And therefore, the end result is we don't have diversification. So be very careful about lack of diversification if you own individual stocks, especially if you've worked for the company. We all know what happened within Ron, where many of those employees had everything in that. And then the company fails and there goes everything. The last point before we go to break is the liquidity risk. Now, individual stocks, what's great about them now, especially for you, you don't have to pay us brokers at commission anymore. So you don't have that problem, but you've got liquidity issues, right? Some stocks, not your major blue chips, nine times out of 10, you're always gonna have liquidity there. But if you buy some of the young low price stocks, I'm not gonna mention that word penny stock. You can have, and if you have to sell quickly, you have to make sure there's liquidity, right? Even some names that may be up and coming, and we run across this a lot, a name will all of a sudden be running up and everybody's talking about it at cocktail parties and barbecues like, oh my God, I wanna buy that stock. Well, you don't have to look at what's called the float, meaning how many shares are outstanding. You gotta look at the volume, so on and so forth, because I've seen many times a stock will just run like crazy because there's not that many shares trading. So it doesn't take a lot to influence the stock on the upside. So you jump into it, you buy it, and then all of a sudden something changes and you need to sell it, there's no buyers on the other side. So always look at what their liquidity risk is when you own an individual stock. Dropping up with Kristen Snow, she's in the right net traffic center. Kristen, wrap us up, please. Welcome back to the John Sanchez Show on his stock 780KOH. All right, we're talking about individual stocks, some of the risk of owning them. Again, big fans of them, but you just gotta be careful when you own individual stocks as we learned with McDonald's this week. All right, now, let's just hammer through the rest of my list here very quickly. So touch on this somewhat. The emotional bias is another risk that we have owning individual stocks, right? As I mentioned in my story, you can be emotionally attached to it. I want to go a little bit further. We also have the ego situation. It is much harder, let me tell you, speaking from experience, it is much harder to sell a stock that is down in value than it is to sell a package product. Again, mutual fund exchange traded fund, that is down in value. Why? Because we get emotionally attached to individual stocks, right? We fall in love with the company, the management. Like I said, maybe it's done well for you over the years, so on and so forth. You really don't get much of an attachment to package products, but people get emotionally attached to individual stocks for various reasons. So be careful about that. Dividend uncertainty, many times we want to own individual stocks because they pay a dividend, right? Well, guess what? Companies can run into cash flow problems, they reduce or they eliminate the dividend, and therefore that impacts the stock performance many times, and therefore impacts why you originally bought the stock. So just be very careful about that side of it. So how do we really implement some type of defensive strategies? Well, again, diversification is the name of the game. Owning 10 stocks is not diversified. Owning 10 stocks in different sectors of the economy, that's diversification. So be very careful about diversifying to minimize the risk. Dividend paying stocks, well, the dividends are being paid, those can really buffer you, of course, when things start to go down. You stop-loss orders, again, the automatic sell triggers, there's trailing stop orders, things like that. You can hedge with different types of derivatives, avoid overvalued stocks, that's another big mistake people make, and then always, always, always, understand what you're investing into, and make sure that companies have strong balance sheets, good management, so on and so forth. And again, over time, things will, of course, usually pan out pretty well for individual stock owners. And the last bit of advice I have for you, limit the leverage, don't go on margin to buy stocks. That is so risky, you'd never, never, never wanna do that. All right, we got a busy week ahead, get some good rest this weekend, and we will be back with you on Monday. God bless, have a great weekend. You've been listening to the John Sanchez show, Newstalk 780, KOH. This program was sponsored by Sanchez Wealth Management. The material in this program was intended as general information only, and should not be taken as specific investment tax or legal advice. None of the information on this broadcast was intended to be a solicitation for the purchase or sale of any security. Further information is available by contacting john@sansheswealthmanagement.com or 775-800-1801. John Sanchez offers securities and advisory services through independent financial group LLC, a registered broker, dealer, and investment advisor. Remember FINRA SIPC. Securities offered only in states, John Sanchez is registered in. Sanchez Wealth Management, LLC, and independent financial group, LLC, are unaffiliated entities. ♪ Ch-ch-ch-chumba ♪ Looking for excitement? Chumba Casino is here. Play anytime, play anywhere. Play on the train, play at the store, play at home, play when you're bored. Play today for your chance to win and get daily bonuses when you log in. So what are you waiting for? Don't delay. 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