Monday, February 3, 2014

Raiding the Piggy Bank

With the recent pullback, I decided to move some money out of my emergency savings/house purchase/home furnishings account. Reviewing my finances, I felt like I could pull some money out of this account without harming my ability to have more than enough for a potential down payment on a house once my condo sells while have money left over for emergencies or furniture or repairs, etc. With the carnage of today, I think the market is likely to have a bit more follow through, at least, to the downside but I went ahead and made 2 purchases today, 2/3/2014, as I am seeing more value in the DGI space than I have seen since I started last summer. I do not consider myself a market timer and am not worried about trying to catch the bottom. I figure if I keep buying, some purchases will be near market bottoms and some near tops with many in between but my progress will be steady. Having decided that I could afford to release some savings reserves left me with only one difficulty? Deciding what to buy with my limited funds.

To add new positions or take advantage of a chance to average down? That was my first question. I decided I had enough for a normal size buy ($1500-$1600) and a smaller buy so I decided to average down with the small purchase and add a new position.

When looking at current positions, there were 3 positions I felt offered compelling opportunities to average down. These were MCD, PEP and PM. While I think all three are good values, it was an easy call. I added 15 shares of PM at $77.20 this (2/3/2014) morning. Really wished I had waited until the afternoon but who knew PM would fall nearly $2 more and approach a 5% yield. My previous purchase was at $83.50 so this was just over a 7.5% discount to my original purchase price and I was very happy with the first purchase. I am now overweight PM with 34 shares which is approximately 11% of my DGI portfolio. The purchase adds $56.40 to my forward annual dividend income.

With my PM purchase complete, I now turned towards making a new purchase for my DGI portfolio. I had quite a few positions that I was really liking and even looked closer at F as I think it is a downright steal at $14.50 but it isn’t DGI material, at least not yet. As they day went on, I focused on 4 companies and then 2. They were CVX, GIS, JNJ and KO. I want all of these in my portfolio and I am not sure which is the best deal at current prices. It seemed like I could not make a right or wrong decision and I hope all of these continue to remain at the same or better prices for as long as possible. Ultimately, I felt KO and JNJ were the most ‘must have’ positions and I set out to get the best possible price. I wanted KO at $37.30 but pulled the trigger on JNJ at $86.85 mere minutes before KO hit my price. I purchased 18 shares of JNJ at $86.85 this afternoon (2/3/2014) which adds $47.52 to my forward annual dividend income. JNJ has a 3.04% yield at $86.85 and I expect a dividend increase next quarter (June payout). Getting KO or JNJ at 3%+ yield is something I consider an attractive opportunity.

What do you like better here, JNJ or KO? Are you buying now or waiting for further downside?

5 comments:

  1. Good morning RJ. I would like to add to my core positions in both JNJ and KO, but I need a little further downside. I could be wrong, but it looks like this sell off is building into something more meaningful (15% maybe). Who knows, but I am watching KO and JNJ, as well as CVX, UL, MCD, and GIS. Have a great day

    ReplyDelete
    Replies
    1. I agree that this feels like it has more room to fall and I will keep scraping together more capital if it does. That said, there are some key core positions I haven't added to the portfolio yet so I want to be sure I take advantage of this sale in case it ends faster than I anticipate. JNJ was a start, now crossing my fingers I can get more :-)

      Delete
  2. I'm looking to average down with a small purchase in PM. I almost have to since it's down 11% from my purchase. JNJ is a great company and I wish I could add more to it as well. I wish I had a bit more cash reserves but there's just not a lot left in the tank without pushing the rental property purchase back at least another month. Like the buys here.

    ReplyDelete
    Replies
    1. Yeah, I just started my DGI investing and its been mostly slim pickens with the strong markets but many great DGI companies are now at or near 52 wk lows and while not everything is a crazy bargain (PM is though in my opinion) there are much more reasonable valuations among companies that I want to make the core of my portfolio. Lack of capital is the only problem and it will become more glaring as this downturn continues. Of course, enough capital and I would already be financially independent!

      Delete
  3. JNJ is a great buy at this price, but I am still holding back before I add to my position. Waiting to see where the market goes from here before I pull the trigger.

    ReplyDelete