One Piece At A Time | Week Ended 1/31/2020
My investment strategy has changed a bit now my that my brokerage firm, as well as most others out there, have moved to ZERO commissions. I had typically tried to purchase in dollar amounts that put commissions at 1.0% or less. I've always wanted to implement, at least partially, the dollar cost average method but commissions prohibited me from pursing that. However, now it's very feasible and reasonable to do so.
My focus has always been on quality businesses, but the problem was typically buying shares at good valuations, often I had to settle for good enough. The longer that I've been investing, the more that I've come to realize just how powerful hitching your investment wagon to great companies can be. That's why I've shifted my focus to dollar cost averaging to build up my positions; because the larger your purchases the more attention that needs to be paid to valuation and vise versa.
I'd still prefer to do larger scale purchases, but the problem is that quality businesses don't often trade at good valuations. In general valuations aren't exactly cheap; so I'll just keep building up my stakes in great businesses.
January saw a pretty big slow down in my dollar cost average purchases until the last week. Volatility came back into the markets as coronavirus or impeachment or whatever fears started to whipsaw market participants.
That volatility also sent some of the businesses that I wanted to add more of lower and in turn allowed me to dollar cost average a few more shares into my control.
I made 13 different dollar cost average purchases last week with all but one coming in my main FI Portfolio. The purchases included 7 different companies.
All told I invested $1,725.42 last week and increased my forward dividends by $41.62. That's good for an average yield of 2.41%. The purchases in my FI Portfolio carry a starting yield of 2.51%.
Altria was the best true value purchase that I made last week with an EV/EBITDA ratio of ~11.1x. The 5-year average yield for Altria is also just 4.41% while my 2 purchases yield 6.76% and 7.23%, respectively. Based on dividend yield theory Altria's shares have ~53% and ~63% upside, respectively.
The "worst" value purchase was definitely Visa; however, I still expect a long runway for the business as well as its dividend growth. How many businesses could report 10% year over year revenue growth and that be a disappointment?
3M was probably one of the better value purchases; although admittedly they are going through some rough times. Given the solid business and history I'm willing to give them some time to get things moving in the right direction again.
My FI Portfolio's forward 12-month dividends increased to $7,972.39 with my FolioFirst dividends at $101.15 My Roth IRA's forward dividends remain at $651.38 while my Rollover IRA's dividends increased to $2,377.37. My taxable accounts can expect to produce $8,073.54 over the next year with all accounts providing $11,102.29.
Are you doing more dollar cost averaging now that most every brokerage firm is at $0 commissions? What do you think of my purchases from last week?