February Activity

The dip we just experienced in the stock market may not be over. The 2008 pullback lasted over a year. I recently added to CVX, JNJ and COP-too soon (but still at fair value). Now I wait. If the pullback continues I will continue adding slowly; these additions just keep increasing my income! Is JNJ or CVX going to cut their dividend? No flipping way! That is why I own them. It doesn't matter how much the market pulls back. It would take an apocalypse to cause the likes of JNJ to cut their dividend.

Buy stocks that pay you for holding them. 

It doesn't take alot of skill to buy XOM at a good value and then do nothing.

Year End Wrap-Up, Rebalancing and Review

This year has been a decent year for investments in the stock market. Most notably our yearly dividend income has gone from around $1500 to about $2210. This is an increase of $710 and if this rate is sustained for the next 4 years, I will have attained $5000 of yearly dividend income at age 55 - $1000 more than I had set as a goal last year at this time. The plan which was layed out is being executed and it is WORKING. Now it is a matter of continuing to execute the plan. Merry Christmas and Happy New Year - see you next year!

November Activity and AAPL

I have been in and out of AAPL for about a year. I recently purchased 10 shares at 525 and immediately sold a put to get 10 more at 500 which lowered my cost basis to 515. I'm glad I did. AAPL appears to be breaking out even before the China Mobil announcement which will bring some 700 million more customers and another bump in share price. Then there's the holiday sales which played into my buy decision.

This is an amazing deal at a time when the market is at all time highs and even fair deals are getting difficult to find. STRONG BUY.

Other recent action-purchased 100 CAT@84, immediately sold covered call @86, CAT lowered guidance, sold at 84.20, collected premium on call. Sold put on DE@82.50.

Happy Thanksgiving to all!

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.