October Activity and Investing Goals

October activity has been limited to reopening a small position in CVX at $118/share. AAPL has some serious positive momentum into the holiday season; I may reopen a position there.

What are your specific investing goals? Are they changing every day, depending on what happened that day? Or do you know that some parts of your life will not change and invest with that in mind?

Some people cannot define their goals beyond "I want to be rich". It is hard to make a specific detailed plan based on such a general goal. In my case, I want to generate safe stable income when I retire for myself but more for my family. I would like to generate $20k in dividend income from companies that have never cut their dividend. I don't believe this is realistic so I will get as close as possible. This means growing the portfolio fairly quickly but without too much risk since I do want to sleep well at night. I will be 51 in a month and have a few years of work left. By specifying what exactly you are trying to do by investing, you are now more able to take the specific GOALS and use them to come up with a PLAN. Without doing this, you are kind of like a day trader....gee, I hope I make some money today in the market. But by doing this, you will understand that market variations need not create a panic and rush to the exit door; you will have clear thinking and a cogent plan to implement with your holdings regardless of pullbacks or dips, in fact you will view dips as rare opportunities to increase your high quality holding which you have worked hard to acquire and collect at bargain prices all along. To summarize;

My Goal-generate $20k/yr income in retirement by investing in companies with a safe and growing dividend. At 4% yield, this would require a portfolio value of 500k. This is not realistic, therefore I will get as close as possible while minimizing risk.

MY Plan-Research and acquire stock in companies with a history of growing earnings and dividends. Companies on the CCC list are good candidates.
Establish a core of 5 companies that are not to be sold unless there is a fundamental change in their business such as a dividend cut or several years of missed earnings. These 5 companies are the anchor of the portfolio.
Add 10 or so businesses that follow the rules I have defined earlier regarding payout ratio, pe ratio, dividend yield and other metrics. One or 2 of these may be faster growers, smaller in size or market cap, younger in age, lesser dollar value per share (~$10 or so), with more rapidly growing earnings and dividends.
Specific buying and selling rules are available upon request.

What is your goal? What is your plan? Comments welcome!

September Activity - volatility

We are looking at a volatile time period with Syria, Bernanke successor rumors and bond buyback tapering. I intend to do as little as possible to my portfolio. A portfolio is like a bar of soap-the more you handle it, the smaller it gets. This would be a great time to reread and refine the business plan/mission statement you wrote for your investments -

I close with the following discourse lifted from the pages of an SA article by one of my favorites, Todd Johnson;

Five stocks CAT, KO, MCD, PG, XOM  that have performed very well over the last thirty years were examined and found to have performed well over the last thirty years.

The question I'd like to have the answer to is: how did five typical stocks that had performed well over the thirty years ending thirty years ago perform in the next thirty years?

Might they have included Polaroid Land, NCR, GM, and other blue chips? 
 
 
 
@Victor ... >>> Might they have included Polaroid Land, NCR, GM, and other blue chips? <<<

I have studied this extensively! Those companies were not dividend growth companies, they were simply companies that paid a dividend. That's a huge difference!

I focus on the dividend growth, and it's the dividend growth that will provide the clues as to whether a company is in financial trouble or not.

When you have a company raising the dividend 7 to 9 percent every year, the cash has to be in the bank.

When a company that used to pay a 7 to 9 percent increase every year, drops to 3 to 4 percent and the payout ratio rises, there's your caution sign! Time to monitor.

If the dividend growth goes lower or the company freezes the dividend, then it's time to sell. The company may not go under, but I won't give them a chance to either.

Maintain the historical dividend growth patterns or it's time to move on. It's as simple as that.

I have the success formula that NEVER fails.

High Quality + High Current Yield + High Growth of Yield = High Total Return.

If one of the criteria to that formula is missing, time to consider selling.

August Activity - Arena Pharm, COP, PSX and XOM

Arena finally came alive and popped 8% yesterday. The sales numbers are coming in for Belviq and they are average but it is still very early. Patience is the key here. I believe we are looking at a huge upside and only a limited downside. I am holding until at least December but probably for years beyond. Just wait til the ads hit TV and the web..... 

Since COP has divested its refinery operations as PSX, it has now basically become an upstream E&P company and not an integrated oil company. It's share price (and to some xtent its value) is tied more closely to the price of oil and natural gas. This is riskier than before. I have held it as a core holding up to this point but I am now rethinking it. I want my core to contain stocks with safe and growing dividends from companies with huge competitive advantages and large moats. I intend to add an integrated oil major into my core holdings-probably XOM or CVX. I have a put in on XOM at 87.50 in September.

I close with the following excellent statement from SA;

I personally think DGI is a good method for do it yourself investing. The approach is logical, relatively simple, and at SA the interested investor can find sufficient information to do a workmanlike job without going crazy. Read some DVK, get the CCC list, subscribe to Fastgraphs and Morningstar, don't put all your eggs in one basket, listen to Chuck Carnevale about not overpaying, then work, save and invest. It will greatly improve your odds of having money when you need it.

July Activity

Bought 10 shares of AAPL at 419. Sold LINE at a loss due to SEC inquiry into it's accounting practices-prices continue plunging after I sold. Sold some puts and a covered call on BMY.

Here's an interesting quote from 'The Intelligent Investor' followed by a statement by the article author;

Graham writes that the typical investor "would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other person's mistakes of judgment." Zweig expands on this: "If, after checking the value of your stock portfolio at 1:24 pm, you feel compelled to check it all over again at 1:37 PM, ask yourself these questions:
· Did I call a real estate agent to check the market price of my house at 1:24 PM? Did I call back at 1:37 PM?
· If I had, would the price have changed? If it did, would I have rushed to sell my house?
· By not checking, or even knowing, the market price of my house from minute to minute, do I prevent its value from rising over time?"
This is the crux of the "Oh, cool," dogma. Tell me the market is crashing. I really don't care—all it means is that right now, a bunch of people got freaked out and threw away money. It means some lady in line at Chipotle opened up her eTrade App and unloaded a few hundred shares of GM right then and there. That means she lost. And when I get back to the office and buy GM at $24—value investing at its easiest—well, that means I win.

June Activity

The markets went on a wild ride after Bernanke's statements at the FOMC meeting. Today the Dow pulled back 350. Is this an over reaction by the crowd or will there be more? Buying opportunities are starting to appear and this is no time to get emotional. Hold your keepers and buy more if the price gets in the buy range. For your shorter term stocks, use options-in a down market, sell covered calls to get some income as long as you are willing to part with them. Core stocks may approach a buy-JNJ, PG, COP, T, MCD, KO but I'd wait for the return to an upward direction. I am looking at CAT and XOM at the moment and have put options on them.

May Activity - interesting times ahead

Sold and repurchased AAPL, lowered cost basis by $6 a share and collected dividend. I'll continue using trailing stop loss on AAPL as I ride it up and down the range it is in. Covered call expired on ARNA, received premium. Cash secured put expired in LINE, received premium. Opened put on CAT, strike price 82.50 in June.
Watch ARNA, June 7 release of Belviq followed by preliminary sales numbers. ARNA also has off label prescriptions possible for Q for diabetes. Other drugs in pipeline for pain relief and alzheimers. ARNA is a keeper for now and probably for a long time-lots of good things possible there including a buyout from one of the big pharmas.
LINE took a dive after some bad press from Barron's-loaded up on the dip. I will now do some covered calls on LINE after the price recovers. It is an upstream MLP, upstream meaning it does exploration and production of oil and gas. This is different than a midstream which does transportation and storage (like KMP, which we own). Midstreams are more predictable and less prone to commodity price change effects. I plan on selling LINE thru calls and picking up MMP or EDP which are midstreams that also have no general partner so they keep all of their profits. BTW downsteam MLP's exist and they do refining-there are only a few of them. The oil majors are entering this entire space.

What if....? and March/April activity

I was reading my favorite financial web site and going over the commentary that followed an article from a favorite author. A civilized but pessimistic investor asked the doomsday scenario questions that dog all of us from time to time; what if American prosperity is at an end, what if there is a depression and no recovery, what if permanent recession is the new normal? Here is a link to the entire article and comment thread-

http://seekingalpha.com/article/1339941-the-dirty-secret-about-the-1929-stock-market-crash


I just received an options assignment for GE, 200 shares. I'm glad-it looks reasonably valued and they have a projected 10% dividend increase in the immediate future. PE~15, P/B<2, 3.35% dividend, 220B market cap, RSI~35-to me these are good numbers. GE is an industrial that manufactures turbines and jet engines, medical devices and appliances and a conglomerate-they recently acquired Lufkin to increase their oil, energy and drilling services space. GE Capital is their financials which they may spin off. They beat estimates and still took a 4% beating yesterday-ripe for a comeback.

I sold off SPLS and F. I'll re enter on F if it pulls back. Still waiting for ARNA release, using options on ARNA to generate capital. I sold both a call and a put on it-put just expired. Put on XOM expired. CAT looks interesting at ~80.