Friday, August 31, 2012

Recent Buy

This afternoon I bought 40 shares of Harris Corporation (HRS) for $47.05 per share.  After commission my cost basis is $47.25 per share with a YOC of 3.13%.  I missed my limit order yesterday by $0.01 which is very annoying.  Luckily it wasn't a huge difference in YOC.  I'll be able to get their next dividend payment which goes ex-div next Wednesday.  These shares will add an extra $59.20 in annual dividends with an extra  $29.60 coming in this year before reinvestment.  I'm hoping that the market will sell off some next week prior to some big news out of Europe and that I can buy more into HRS before the ex-div.  My entry price is selling at a 14.35% discount to the average fair value that I calculated in my stock analysis on HRS.  I'll update my HRS stock analysis soon now that another fiscal year for them has passed.  The Harris purchase increased my overall YOC from 2.39% to 2.44% and my non-ESPP share YOC from 2.99% to 3.01%.

Sunday, August 26, 2012

Income Replacement

I made a spreadsheet that will calculate the time needed for income replacement through dividends.  The share price is an irrelevant column as you can change the starting price to whatever you want and it doesn't effect the calculations.  It was easier for me to think about how to set up the spreadsheet by using the column.

Friday, August 24, 2012

Recent Transaction

This afternoon I decided to buy back the September $26 put option. I was torn on whether to buy it back or not because I was getting a solid entry price the way it was set up. I should have let it go the way it was but I got a little caught up with how much it had changed over the week. I had to pay a total of $133.98 to buy back the put option. I received $40.01 when I sold the option so to close out the position it cost me $93.97.

Wednesday, August 22, 2012

Recent Transaction

On Tuesday, I decided to sell another put option on Intel. This time it was a $26 September 22, 2012 Put Option for $0.48. After commission I netted a $40.01 option premium. Here's how the option can play out. 

(1) Option expires - I received $40.01 in option premium on $2,600 to cover the put, that's a return of 1.54% over 32 days which is an annual return of 17.55%.

Sunday, August 19, 2012

Archer Daniels Midland Stock Analysis

It's been a while since I've post a stock analysis so today we'll look at one of my recent buys from last week, Archer Daniels Midland (ADM). Archer Daniels Midland closed on Friday, August 17th at $26.17.

Company Background:

Archer-Daniels Midland Company procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. The company’s Oilseeds Processing segment originates, merchandises, crushes, and processes oilseeds, such as soybeans and soft seeds, including cottonseed, sunflower seed, canola, rapeseed, and flaxseed into vegetable oils and protein meals. It offers crude vegetable oils, salad oils, partially refined oils, oilseed protein meals, natural health and nutrition products, specialty food and feed ingredients, cottonseed flour, and cotton cellulose pulp for the food, feed, energy, and other industrial products industries. This segment also operates fertilizer blending facilities. The company’s Corn Processing segment converts corn into sweeteners, starches, and bio products. Its products include sweeteners, starch, syrup, glucose, and dextrose. This segment also produces alcohol, amino acids, and other specialty food and animal feed ingredients; corn gluten feed and meal, and distillers’ grains; vegetable oil and protein meal; and citric and lactic acids, lactates, sorbitol, xanthan gum, and glycols. The company’s Agricultural Services segment buys, stores, cleans, transports, and resells agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice, and barley primarily as food and feed ingredients, and as raw materials for the agricultural processing industry. Its transportation network comprises truck, rail, barge, port, and ocean-going vessel handling and freight services. This segment also processes and distributes formula feeds, and animal health and nutrition products; and procures, processes, and distributes edible beans. In addition, the company offers commodity brokerage services; and cocoa liquor, cocoa butter, cocoa powder, chocolate, as well as writes crop insurance.

DCF Valuation:

Analysts expect ADM to grow earnings 10.00% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter. Running these numbers through a DCF analysis with a 11% discount rate yields a fair value price of $45.16. This means that at $26.17 the shares are undervalued by 42%.

Saturday, August 18, 2012

Option Summary

Since I made the buy-write of the 200 shares of BAC yesterday, I figured it was time to give an update to all of my option moves thus far.

Open Option Positions:

Open Option Positions
Date Sold Option Type Underlying Expiration Date Price Number of Contracts Premium Received Less Comm.
2/2/2012 Put BAC Jan 17 2014 $1.73 1 $164.32
8/17/2012 Call BAC Oct 20 2012 $0.50 2 $98.43

Friday, August 17, 2012

Recent Buy

This morning I performed a buy-write of 200 shares/2 call options for Bank of America (BAC) expiring on October 20, 2012. The reason I went the buy-write route is that you can save on commission by executing them together rather than separate. Let's get into the trade. I purchased 200 shares of BAC for $8.10 per share with a commission of $7.95. I also sold 2 $8 strike call option contracts for $0.50 each with $1.57 in commission. It cost me $1,627.95 to purchase the 200 shares and I received $98.43 in the premium from selling the 2 call options. That means the total trade cost $1,529.52 for a per share cost basis of $7.65.

Thursday, August 16, 2012

Coca-Cola 2 for 1 Split

Coca-Cola's 2 for 1 stock split finally went through this past Friday, August 10th. Of course this does nothing to the value of your position as it doubles the amount of shares you own but halves the value of the shares and, most important to me, the dividend. So everything is pretty much still status quo with it comes to KO. Management's thought process for the split was that it would unlock shareholder value since the shares were trading in the $60's when it was announced and traded up to the high $70's leading up to the split. By halving the share price, it's thought that more investors would get in seeing as how the stock is now cheaper. Of course we all know that's not true as the relative value is all the same. The stock split made KO my first investment that has returned over 1 full share in dividend reinvestments so far, although it's really at 0.796 shares instead of the 1.592.

Wednesday, August 15, 2012

Intel Put Option

With Intel closing at $26.27 on Wednesday August 15th, it appears that the $25 August 2012 put option that I sold back in July will expire yet again unless the share price takes a 5% hit between now and end of trading Friday.

Intel Put Options
Put Option Premium Return (%)
$25 July 20 2012 $45.01 1.80%
$25 August 17 2012 $38.01 1.52%

Tuesday, August 14, 2012

Recent Buy

Earlier this morning I made 2 purchases. I bought 35 shares of Archer Daniels Midland (ADM) for $25.73 per share. My YOC for this position is 2.70% based on the current $0.70 annual payout. I also purchased 35 shares of Walgreens (WAG) $35.85 per share. My YOC for the WAG shares is 3.05% based on the current annual dividend of $1.10. Both Both companies are dividend champions with 36 and 37 year streaks of dividend increases. Over the last 10 years they have raised their payout by 13.0% and 18.9% annually. I'll be getting the next Walgreen's dividend payout in September but shouldn't be getting the Archer Daniels Midland seeing as how the ex-dividend date was today. The ADM shares will provide an extra $24.50 in annual income while the WAG shares will provide an extra $38.50.

Thursday, August 9, 2012

Net Worth Update - July 2012

July was a great month for my net worth with almost an $8,300 increase. A lot of that came from my savings and another good chunk came from the stock market rising. For the month I contributed around $1,250 to my 401k plus another $630 from the company match. I also set aside another $1,000 for my ESPP and had a great month of saving from my take home pay with $6,800 being saved. I'm looking forward to August bringing some lower expenses and hopefully getting a chance to deploy some more of my money that's currently sitting in my brokerage and Roth IRA accounts. While that would probably meaning a less than stellar net worth increase it would be worth it in the long run.

Wednesday, August 8, 2012

Tuesday, August 7, 2012

Recent Sell

Today I sold out of my position in SORL Auto Parts, Inc. I knew for a while that I should have just closed the position but I purchased shares when I first started investing thinking that they would turn into the next worlds largest auto parts manufacturer and turn my measly $350 investment into wealth beyond imagination. When I bought the shares I figured the market was just a crapshoot so why not throw some money that way. As you can tell I've now decided what kind of investor I'm going to be and have actually done quite well, I just wish the stock market would have a good pullback so I can get better entry prices. I figured it was time to go on and sell despite their earnings announcement next week to make sure that I can get the loss to write off against my short term gains from my option selling. All in all, I found a great way to turn $346.95 into $190.05 in less than a years time. That's not exactly the best way to go about investing. Now I can put that money towards a much better opportunity. That's one more lesson learned, thankfully it wasn't a really expensive one.

Friday, August 3, 2012

Income Update - July 2012

July was a pretty good month for my spending. My income was up higher than normal again which is great because it just adds to my savings amount. My minimum expenses for July went back up due to me forgetting that I'm paying my wife for things a month after they're due since I'm gone so much. That's worked out best for us. So I had a debt service payment that I still owed her which caused the majority of the increase. Minimum expenses ended up being $1,598.27 for the month and when you back out the debt service that drops down to $1,368.47, which is good to see. Total expenses for the month came to $1,665.66. Of course that also includes the debt payment so that will be coming down. My potential retirement income dropped this month due to only 2 stocks paying out dividends to me for a total of $15.77. This covers a whopping 0.98% of my minimum expenses for July. My financial independence income rose despite a pretty big drop in the 30 year US Treasury rate thanks to a whole bunch of savings this month. My FI number is up to $124.48 which covers 7.74% of my total expenses for July.

Thursday, August 2, 2012

Dividend Update - July 2012

July wasn't the best of months for dividends with only 2 stocks in my brokerage account and 1 stock in my Roth IRA making payouts. July did bring 1 new position, Emerson, and 1 addition to a current position, in McDonalds. The two purchases will add a total of $126 to my annual dividends before any increases.

Dividend Income 2012
Company Dividend Amount Shares Purchased
EOG Resources (EOG) $0.68 0.007
AT&T (T) $9.05 0.245
July Total $9.73
2012 Total $227.92

Roth IRA - Dividend Income 2012
Company Dividend Amount Shares Purchased
JP Morgan (JPM) $6.08 0.171
July Total $6.08
2012 Total $50.58