May Activity - goodbye ARNA

Well, I couldn't take the pain anymore of watching my portfolio get dragged down. After ARNA missed estimates by .02 the stock plummeted some 12%-this after a month of TV advertising and another accumulation on my part. This is the only stock I've owned that has consistently been a solid nonstop loser. My emotions got the better of me and I dumped the stock. It will be a long time before I do that again-invest my hard earned money in a speculation. It is a relief and almost worth the loss in dollars to be rid of it.At least I derived no income from it in the form of dividends-my dividend income stays the same.

Onto bigger and better things. I am about to have CSCO called away and that is ok with me. I am going to take the funds and look closely at a few on my watchlist-KMI, ED, OHI. I am looking forward this next few weeks and will post when changes are made.

April Reading and Research

I plan to read Morningstar, S&P outlook and Valueline regularly from now on for buy and sell ideas. A useful book that is now on my wish list is Paul Wagner's "The Duly Diligent Stock Investor"

http://www.amazon.com/dp/0615708714/ref=wl_it_dp_o_pC_nS_ttl?_encoding=UTF8&colid=3RZ0426V93W98&coliid=IK6JLANKC97AG


The classic investment texts are great (Jeremy Siegel, Ben Graham) but here is a concise book that just tells you how to methodically put together a watch list and then evaluate the list to narrow down the companies. I really want to read this book.

Thanks for stopping by... 

April Activity - trading advice

Picked up some AT+T at 32.50, sold a put for 32 which expired, collected premium. Here's some trading advice, your mileage may vary on this but for me it works....

•  Don't buy at the open, but it is ok to sell at the open. Price action is too weird with the opening frenzy.
• Use a limit order when purchasing stocks that trade with low volume, have big news that affects price, have a big spread between bid and ask price and that you definitely know you want to purchase at that specific price. If you use a market order you will get whatever price is in effect at the moment the transaction occurs-it could be not what you think given the conditions listed above.
• Sell a put option if there is a stock you'd like to own at a specific price but would be ok if you lost the opportunity because the price went up before it hit the strike price. You'd then collect a premium anyway.
• Sell a covered call if there is a stock you already own that you would be ok with selling if it hits a certain price but that you also would not mind continuing to own if it does not. Again, you collect a premium if it never hits the strike price. 
• Use a limit order when selling stocks that trade with low volume, have big news that affects price, have a big spread between bid and ask price and that you definitely know you want to sell at that specific price. If you use a market order you will get whatever price is in effect at the moment the transaction occurs-it could be not what you think.
• Use a market order on stocks with high trading volume, high liquidity, low bid/ask spread (these conditions are the opposite of those listed in the 2nd list entry above) and when you are absolutely positive you want the buy or sell transaction to occur at or within a few cents of the current price.
• Generally, find any excuse you can to not trade; a huge mistake especially for beginners is to overtrade, churn their portfolio and pay excessive transaction fees. Let time do the work-you are getting paid to wait if you are an investor collecting dividends on large cap stocks. I have gotten impatient, traded when I should not have and lost money as a result. If your companies are solid, the current price is irrelevant unless you are a swing trader.

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!