Thursday, June 26, 2014

Semi Recent Buy and Two Recent Sells

Whenever I make a new purchase for my portfolio I feel it's only fair to get a post written giving all of the juicy details. I want to be as transparent as possible with my journey to reach financial independence through dividend growth investing. Being open about the moves I make allows for better discussion with all of you and helps spread ideas around as well as letting me create my own "investing journal" to chronicle why I purchased a company in the first place and that way I can revisit if something changes and make the decision on whether to continue owning the company or not.  I normally try to get these posts out within a day or two but between work and being sick I've had very little energy the past week and a half.  I'll quickly run through these moves and give my thought process on each one.

First let's handle the purchase.  On June 12th, I purchased 18 more shares of Johnson & Johnson (JNJ) for $102.55 each.  After commission my per share cost basis came to $102.99.  Based on the current annual dividend of $2.80 these shares will have a yield on cost of 2.72% and provide $50.40 in additional dividends.  I had already owned just over 32 shares of JNJ with a per share cost basis of $93.43 so this lot increased my cost basis by 3.67%.

This wasn't an ideal purchase but I'm sitting on a lot of capital and really wanted to get some of it put to work in the markets and in turn working for me.  So I figured one of the best places to invest is in one of the highest quality companies that you can think of.

Now let's go over the sales.  First I sold 20 shares of Lorillard (LO) for $62.41 per share.  After commission I received $1,240.22 in proceeds from this sale.  Not bad considering my cost basis was just $802.34 so this was a solid 54.6% gain.  I still own approximately 30 shares of LO which is about 60% of my original stake in the company.  This sale decreased my annual dividends by $49.20.

The reason I sold about 40% of my position is that I'm still a little worried about the FDA potentially banning menthol cigarettes.  Lorillard is relatively expensive compared to the other tobacco companies like PM and MO and with the markets in general being relatively expensive I decided to take a little bit off the table from this position.  Lorillard's share price shot up not that long ago after talks about RAI and LO joining together.  If LO's share price retreats to a better value position I'll probably add to my holding in the future.  I really liked how they were first to jump into the e-cig market and picked up the market leading Blu e-cig.  E-cigs will continue to take market share away from traditional tobacco products and having the market leader there is going to help offset declines to LO's core tobacco business.

Later that same day I also closed out my position in Bank of Nova Scotia (BNS).  I owned 20 shares and sold them for $65.50 per share.  After commission I received $1,302.02 in proceeds from this transaction which is about a 8.4% gain since I initiated the position back in December 2013.

Investor psychology.  That's the whole reason I entered into my position in BNS.  Around the end of last year a lot of my fellow bloggers were purchasing the Canadian banks and I jumped on the bandwagon.  I didn't do my research before making the purchase and didn't do my homework with keeping up with the company.  For some reason BNS just didn't really stoke my fires although with their dividend record they should have.  I took it as a pretty telling sign that when the share price declined about 8% that I still didn't want to do my homework or add more shares.  If I had truly done my homework that would have been a great opportunity to average down my cost basis.

I'm looking forward to putting the proceeds from these sales to work as well as my additional capital.  I currently have about $12,700 in cash in my brokerage account and another $19k or so needing to be transferred over.  So there's a lot of capital ready to be deployed and the companies I'm interested in with a slight pullback in share price are PG, DE, TGT, IBM, T, and V.  I've linked to the most recent stock analysis for each company. There's plenty of others on my watch list but they would need a little larger decline in price.

My FI Portfolio's forward 12-month dividends are now at $4,387.65.  This is 87.75% of the way towards my goal of $5,000 by the end of 2014.

I've updated my Portfolio page to reflect these changes.

13 comments:

  1. It makes sense to sell positions that you don't feel good holding. I sold part of my INTC position for the same reason on Tuesday and used the cash to grow my position in IBM. You have solid stocks on your watchlist! I'm also following TGT, IBM and T closely in addition to AFL and couple Nordic shares. V's low yield keeps me from initiating a position.

    Thanks for sharing and hope you are getting better now!

    ReplyDelete
  2. PIP,
    My eyes go towards JNJ, T, PG, MO in this type of market. Because if you are going to pay a fair or overvalued price for a stock, it may as well be a tried and true dividend grower. I'm dripping into PG and considering adding some to my wife's IRA where we have some idle cash. Been watching JNJ too, but can't bring myself to pull the trigger. I did buy some GIS yesterday on the dip and felt good about that.
    -RBD

    ReplyDelete
  3. I feel your pain JC. I'm also sitting on too much cash, and it's getting uncomfortable. Thanks for keeping us up to date on your transactions. As always, I appreciate your (nearly brutal) honesty. Have a great day
    -Bryan

    ReplyDelete
  4. JNJ is a good buy. I am looking to initiate position in JNJ though the high price keep me from doing it. Hopefully the stock pulls back a bit for me to get in. I am also looking to increase my position in PG and also looking at MCD and WFC as well.

    ReplyDelete
  5. I been buying CB, BAX, KMB with new capital

    ReplyDelete
  6. I like your sells and buy! BNS has had quite the run up and valuations are high. Would also be good to sidestep into another Canadian bank with better value like NA or LB. Always good to add to JNJ as its a great core stock.

    Good Day and Grind On!

    ReplyDelete
  7. I like your sell of LO, but I look at it a little bit different. If a stock has a terrific run, I like to sell 40% or so. Then the remaining 60% is like playing with house money.

    I invested the rest of my idle cash in GE and HPQ as they pulled back.

    I recently purchased TGT and T. I am holding them just waiting for the dividends.

    I am watching IBM and some financials TMP, CINF for future purchases. Consumer staples are a little too pricey right now.

    ReplyDelete
  8. I have been eyeing JNJ for a little while and can't seem to pull the trigger. I have a hard time buying something at highs. Instead I have increased my positions in IBM, VOD, GE, WMT

    ReplyDelete
  9. Thanks for sharing...of the stocks you are eyeing, I think IBM and TGT offer the greatest value at current prices. I think the dividends appear to be secure and I like the growth potential of both stocks. AFFJ

    ReplyDelete
  10. Pursuit,

    Makes sense. I sold off half of my position in LO a little while back after the run due to my concerns about menthol regulation and the valuation. Holding the other half because I still really like the company's long-term prospects, sans any regulation issues.

    I'm currently eyeing V and IBM. It's a tight race. IBM is the better value, but V will probably see more growth.

    Best wishes!

    ReplyDelete
  11. I also cut my position in LO recently as well, I felt it was getting overpriced for the risk I was taking on. For the first time in a long time, I've been finding value in technology names, although even some of these companies have risen a lot in just the last month.

    ReplyDelete
  12. It sounds almost too crazy to even say "I'm sitting on too much cash," but I know exactly what you are saying. This has been our collective problem for a while now as we seek places to put our money to work. Overvalued stock market by many measures doesn't help the cause nor does sitting on cash earning half a percent or less. There are still relative bargains in the market. Just have to look out for them. My June purchases have been in the financial sector. That's where I feel some decent value can still be found.

    ReplyDelete
  13. I almost made the plunge with the e-cig trend way back when. I always felt I didn't know enough about it since I didn't smoke. How many stocks do you own on average at any time?

    ReplyDelete