One Piece At A Time | Week Ended 2/28/2020
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.
The markets turned sharply lower to close out February and while that really hurt the portfolio balances, it did open up an opportunity for me to put more cash to work. Despite the choppiness of the markets, I also received 4 dividend increases during the week despite the sea of red across the markets. Turns out that focusing on the dividends rather than share price is less hazardous to your wealth!
I honestly didn't realize that I'd put nearly $14k to work last week primarily in my Rollover IRA where I had a good chunk of cash on the sidelines.
I put a total of $13,880.60 to work and increased my forward 12-month dividends by a total of $164.24. That's just an average yield of 1.18%, but I believe the quality of these businesses is quite high.
With the markets having a steep selloff last week, actually the quickest drop from a 52 week high to a 52 week low in history, that drug most of the businesses that I wanted to own down with it. The S&P 500 was down 8.4% for the month which is a pretty staggering amount.
The 52-week high isn't exactly a great barometer of value, but it does give you a reference point even if it's not that useful. I had already updated my valuations on most of these businesses within the last 6 months and they are all looking much more enticing now with the pullback.
On average my purchase was made at 15.8% off the 52-week high which I'm pretty comfortable with all things considered. I fully expect more pain as the global supply chain could be disrupted for quite some time, especially if we haven't even reached the worst of the corona virus issues. However, I also realize how much in the short term turns out to be just noise in the long term and many of these companies all have big tailwinds behind them whenever things do get righted.
The valuations on most of these purchases are nowhere near bargain basement levels which is why I'm glad to still have some cash on the sidelines. However, they all seem reasonable when combining quality of the business with the higher growth prospects for many of the companies.
Looking forward to this week some of the companies I'm looking at adding to my positions are Altria ,Cisco, 3M, Pepsi, Ross Stores, Disney, Pfizer as well as the companies that I added to last week should the selloff continue.
My FI Portfolio's forward 12-month dividends increased to $8,054.73 with my FolioFirst dividends at $101.86 My Roth IRA's forward dividends climbed to $663.39 while my Rollover IRA's dividends increased to $2,558.12. My taxable accounts can expect to produce $8,156.59 over the next year with all accounts providing $11,378.10.
Did you make any purchases during last weeks stock market decline? What businesses are on your radar to add? Do you think the selloff will continue or is the worst of it behind us?