Stock advice needed

[Nitemare]

Taking a part-time job with a large company and they will let you allocate up to 20% of your paycheck for stock purchases...

What they do is purchase the stock every 6 months. They will take the lowest price(start of 6 months or final price) and purchase it with a 15% discount.

The stock is pretty much a sell in most major publications, but still you are guaranteed 15%, so this is still a no brainer, right?

 

[FeathersMcGraw]

Depends if there's a hold or lockout clause in the plan. Some company stock purchase plans don't let you sell the stock right away, or will prevent you from participating in the plan for some period of time if you sell the stock within a minimum holding period.

 

[Nitemare]

Originally posted by: FeathersMcGraw
Depends if there's a hold or lockout clause in the plan. Some company stock purchase plans don't let you sell the stock right away, or will prevent you from participating in the plan for some period of time if you sell the stock within a minimum holding period.

No vestment period. The stock is yours as soon as it is purchased

 

[DaveSimmons]

> No vestment period. The stock is yours as soon as it is purchased

Yes, but are you allowed to sell it immediately or must you hold it for six months or a year? 15% off a stock that drops 20% after you buy it might not be a Hot Deal.

Do they have any other retirement-plan choices, like a 401k with mutual funds?

 

[Nitemare]

Originally posted by: DaveSimmons
> No vestment period. The stock is yours as soon as it is purchased

Yes, but are you allowed to sell it immediately or must you hold it for six months or a year? 15% off a stock that drops 20% after you buy it might not be a Hot Deal.

Do they have any other retirement-plan choices, like a 401k with mutual funds?

401k has a 3 yr vestment period. They match 1.5 times the first one percent then 50 cents on the dollar up to 6 %

 

[GasX]

if you sell it immediately, you have to pay short term capital gains - ouch

If the company is going down the sh1tter, it is buyer beware. If the company has good long term prospects and its STOCK is in the sh1tter, it's a home run.

 

[DaveSimmons]

Originally posted by: Nitemare
401k has a 3 yr vestment period. They match 1.5 times the first one percent then 50 cents on the dollar up to 6 %

Hmm, 50% gain on fairly safe mutual funds is a better bet than 15% gain on one stock, at least if you think you'll be working there for 3 years.
Or is the stock purchase done out of your 401k contributions, so you get the matching and the discount?

 

[flamingelephant]

Are you working for Home Depot? Sounds alot like their plan. I did it when I first started there... bought about 1000 worth of it at 21, sold at 36 2 months after the plan ended... no brainer.. you are guarenteed 15% As long as you can afford not to have the money right away

 

[Zenmervolt]

It's a really stupid move, from a diversification standpoint, to buy stock in the company that you work for. Almost all of your income is already coming from that company in the form of a paycheck, and that's dependant on the company's health, which means that if anything, you should be buying put options on your company's stock (i.e. options in which you make money if the stock drops in value) to counteract some of the risk.

That said, if the stock can be sold immediately and you're getting it at a discount, of course you want to take advantage of this, it's a riskless arbitrage profit opportunity. As long as there's not a clause demanding that you keep the stock for a certain period of time, it's a golden opportunity. Though to be honest I can't fathom why a company would do something like that unless they were trying to issue new equity on the sly by issuing it at a discount to employees instead of issuing it on the market since an open market new equity issue tends to cause a price drop if there is already existing equity outstanding.

ZV

 

[Blain]

If the company looks good for a long term hold...
1. Set up a self-directed IRA account...
2. Buy the stock at the discount (taking possession of the certificates)...
3. Deposit the certificates in your self-directed IRA account.

You get the stock on the cheap and start investing for the future.
If the stock really takes off, you can always sell some or all of the shares you have in your IRA.

If the company doesn't look good even for long term holding... forget about the stock purchases.

 

[Nitemare]

Originally posted by: DaveSimmons

Originally posted by: Nitemare
401k has a 3 yr vestment period. They match 1.5 times the first one percent then 50 cents on the dollar up to 6 %

Hmm, 50% gain on fairly safe mutual funds is a better bet than 15% gain on one stock, at least if you think you'll be working there for 3 years.
Or is the stock purchase done out of your 401k contributions, so you get the matching and the discount?

It's apples and oranges. I can do both, neither or just one of them.

The corporation has over 50 billion in assets so I doubt if it will go bellyup any time soon.
For diversification purchases I also have a 401k with my primary employer(Van Kampen Emerging Growth) as well as a Roth IRA and 2 other mutual funds. I know I won't be able to retire off my part-time job's 401k or stock purchase plan, but at least they do matching and give stock discounts.

My main job has nice $$$, but virtually no savings perks. It allows you to invest up to 15% of your salary into a 401k of your choice(List of about 15 Mutual Funds), but does no matching and it isn't a publicly traded company yet.

 

[zillafurby]

i dont know how your thing works, but can you do this, ideentify when the stock will be bought, and short a CFD on the same stock, and close out when you get delivery of the shares?

 

[Nitemare]

Originally posted by: zillafurby
i dont know how your thing works, but can you do this, ideentify when the stock will be bought, and short a CFD on the same stock, and close out when you get delivery of the shares?

It's not that bad of a company that I'd short the stocks. It's just soft of been hung around the same price for a few years.

 

[Svnla]

Here are a few tips: don't put all your money in one stock, diversify, long term investment, slow and steady investments. Are those good tips? Yes they are. Why you ask? Those tips are from Peter Lynn and Warren Buffet, two of Wall Street legends.

 

[Hector13]

Originally posted by: Nitemare

Originally posted by: zillafurby
i dont know how your thing works, but can you do this, ideentify when the stock will be bought, and short a CFD on the same stock, and close out when you get delivery of the shares?

It's not that bad of a company that I'd short the stocks. It's just soft of been hung around the same price for a few years.

he is not suggestiong being net short the stock. He is telling you to hedge your long position to the shares that you "own" but can not actually sell yet. For instance, say that on the last day of your six month period the stock is $100, but you can't sell yet as you have not received delivery of the actual shares. If the stock drops between then and when you can sell your shares, you take a loss. If you short the stock at the $100 value, then you are guaranteed your 15% profit (and no more or less).

I'm not sure why you would want to use a CFD instead of shorting the stock itself -- a CFD is a swap agreement (and technically, I don't think you "short" a CFD, you just buy a CFD that gives you the short return). You could also use put options to get a similar effect.

In any case, while this is all good in theory, it won't work from a tax perspective and your company may also have rules against doing just this.

 

[Hector13]

Originally posted by: Svnla
Here are a few tips: don't put all your money in one stock, diversify, long term investment, slow and steady investments. Are those good tips? Yes they are. Why you ask? Those tips are from Peter Lynn and Warren Buffet, two of Wall Street legends.

This question has nothing to do with long-term investing.. it has to do with taking advantage of an ESPP (employee stock purchase plan). No one is advocating investing all the OP's money in his firm.

 

[Hector13]

Originally posted by: Nitemare
The stock is pretty much a sell in most major publications, but still you are guaranteed 15%, so this is still a no brainer, right?

NO this is not a no-brainer. ESPPs are very tricky and can cause huge tax implications for you.

Read this.

ESPPs are treated like stock options and can thus have taxable capital gains that are much higher than any profit you make.

Having said all this; if you can definitely sell the stock RIGHT after the 6 month period (ie, no blackout period, no 1 week transfer perior, no nothing), then I would definitely do it. Also, does your company stagger the 6 month periods for employees or does everyone get the stock at the same time? In which case you and everyone else at the firm will be selling on the same date?

And check out this thread at fatwallet as well.

 

[Michael]

If you can sell the stock right away, the ESPP is a good way to make quick profits.

If you hold the stock for less than a year, you'll have to pay taxes as if it were ordinary income, but the profit potential is still very good.

If the price goes up during the period, it is very easy to make more than the 15% discount as profit.

Michael