Saturday, June 29, 2013

Business Plan and Q1 2013 results

Around Christmas of 2012, I decided I needed a business plan.  This would include my goals, as well as my stock selection requirements, and some rules to live by.  Simply put, my plan's goal was to achieve 10% total return and 10% income increases year over year, and end up with greater than $2.5M in dividend paying businesses in 30 years.  I started 2013 with $68,437 and would contribute $400/mo, investing in a minimum of $1k increments.

My portfolio is broken into 3 pieces - dividend growth stocks, growth stocks, and speculative stocks.  The allocation split at this point in my life is 75% dividend growth names and 25% growth/speculative (spec names are limited to 5%).  The dividend companies I buy must meet certain criteria, including an S&P rating of BBB or higher, minimum yields (eg. 4% for telecoms/utilities), consecutive positive annual returns and a chowder ratio of 10% annually.  The growth portion requires P/E's less than 25, min expected growth rates, and potential to be expand growth globally.  Speculative names simply require a catalyst that could double or triple the stock in 2-3 years.  There are selling rules as well which include dividend cuts or dividend growth declines below a certain % for dividend stocks.  For growth stocks, I sell if a stock is overbought/bubbled, or my thesis doesn't play out and I cut losses.

Now lets begin with my portfolio at the start of the year.  I owned the following dividend names coming into 2013: T, BUD, CSX, CVX, MAT, MCD, MFA, PFE, PM, VOD and WMT.  I also held the following growth stocks: AAPL and ATRS, as well as spec names: ACTC, AMRN and PSTI.  

Trades for Q1 2013:
1/1   - sold 8 PSTI covered calls           - 80 premium (these expired in March)
1/23 - bought 5 AAPL shs @ 453        - cost 2275 (added to dividend growth portfolio)
2/1   - bought 1100 ATRS shs @ 3.75 - cost 4125 (added to existing holding, target 20% of portfolio)
2/12 - sold 72.5 NLY shs @ 14.95       - amt 1074 (sold to 0, dividend cut below min requirement)
2/15 - bought 400 ATRS shs @ 3.55   - cost 1430 (added to existing holding, target 20% of portfolio)
2/19 - sold 30 T shs @ 35.45                - amt 1053 (trimmed position to 4% target weight)
2/20 - bought 20 OXY shs @ 85.40     - cost 1718 (added new position to div growth portfolio)

Performance for Q1 2013:

 Total Monthly YTD Port vs. Port vs.
Month End  Value Units Port. NAV  Perf  Port. Perf SPX Mnth SPX YTD
Jan-13 70,630.65 530.50 133.14 2.61% 2.61% -2.44% -2.44%
Feb-13 72,742.97 551.91 131.80 -1.00% 1.58% -2.12% -4.64%
Mar-13 75,411.23 554.94 135.89 3.10% 4.73% -0.50% -5.32%

Port Divs Income % Inc
Yield Paid Change Inc/Dec.
0.56%  422.86  35.15 9.07%


401K     401K Total       Total
Balance     Perf. Retirement       Perf.
101,087 5.68%  171,717 4.65%
101,538 0.45%  174,281 1.49%
103,613 2.04%  179,025 2.72%


Notes:  my performance in my dividend growth names was sound, but the growth/spec piece was dragged down by AAPL being down 17% in January, as well as AMRN being dragged down because of the lack of a buyout or NCE status.

That's it for Q1.  I'll list the Q2 trades and performance in the next few days after my dividend income numbers for June are available.


Friday, June 28, 2013

A Recap of the Last Four Years

Let's talk past history and more specifically, mistakes I've made.  I started investing in the market in 2009.  That was one year after I spend a big chunk of my savings buying a house - 10% down - 4br house for a single guy.

Mistake #1 - buying a house.  Today that house is worth 12-13% less than what I paid for it.  I am renting it out and desperately need to refinance as it costs me $700 out of pocket a month.

In 2009, I decided to start investing in stocks - specifically dividend paying stocks.  Let's move quickly through my successes.   I didn't have a formal plan, so I was just trading, or investing without a goal and thinking I was smarter than I was.

Victory!
a) Javelin Pharma - this was buyout play that was recommended from an analyst friend, Myriad ended up agreeing to buy them and I sold at a 37% gain.
b) HD, VZ and MO - these were all dividend plays that were up nicely from 2009 to 2011.  I sold to rotate into other names - T and PM, for example.
c) Visa - Visa was a growth play on electronic payments.  I got in right after the IPO and road it up to the 85.  I should have held, but the dividend wasn't high enough.  Obviously this was a mistake in hindsight.
d)  MCD - McDonalds was always a favorite of mine, and I sold a chunk in 2011 because I was overweight and needed to send some cash overseas.
e)  WMT - Walmart is the same story as McDonalds, I was simply overweight the name and decided to trim back.

Now the mistakes.

Mistake #2 - Holding British Petroleum after the spill.  My decision to purchase the stock wasn't necessarily bad, it was the lack of foresight to see the dividend cut and stock drop following the spill. Lesson learned,  sell a stock when a major disaster hits and the legal troubles are just about to begin.

Mistake #3 - Exelon was a purchase I made chasing yield. I wanted a safe utility and ignored the facts and trends.  The stock price declined and eventually I sold, but not soon enough.

Mistake #4 - Obagi was purchased on a buyout hunch.  The business was growing but it would have been a better fit for a larger company that could absorb their product line.   I expected to hold this for a year but sold out in 5 months when the price dropped more than my liking.  The company subsequently was bought out 4 months after I sold it for 30% over my purchase price.  Lesson learned, have conviction in your purchases.  In this part of my portfolio, I need to be certain of my reasons for purchase and holding.

The important thing to learn here is that one must have a sound plan and should stick to it.   Since the end of 2012, I've created a business plan to which I will adhere.  Prior to that, I was just buying and selling this and that based on casual research.  Below is a summary of all my casual trades.  In the next two blogs, I'll review Q1 performance and trades followed by Q2 performance and trades.   I'll also share a summary of my business plan in the coming post.

Purch Initial
Sales Date Shares Price  Cost   Sale Date   Sale Price   Amt   Divs Paid  Gain/Loss  % Return 
OMPI 7/30/12  130.00 15.348  1,995.24 11/9/12  12.18  1,584.00  -    (411.24) -20.6%
FCX 9/9/11  25.00 43.00  1,075.00 10/4/12  40.75  1,018.75  28.12  (56.25) -5.2%
MJN 9/6/11  20.00 68.50  1,370.00 10/4/12  72.65  1,453.00  28.40  83.00 6.1%
HAS 5/15/12  30.00  36.00  1,080.00 9/18/12  39.00  1,170.00  10.80  90.00 8.3%
WMT 8/20/10  20.00  50.20  1,004.00 6/20/12  68.15  1,363.00    359.00 35.8%
MFA 9/6/11  30.00  8.00  240.00 2/13/12  7.52  225.66    (14.34) -6.0%
GT 8/3/11  200.00  15.13  3,026.00 10/28/11  15.11  3,022.40  -    (3.60) -0.1%
MCD 5/21/08  17.00  59.50  1,011.50 8/31/11  91.06  1,548.02    536.52 53.0%
ABT 12/8/09  31.09  52.91  1,645.07 8/30/11  50.94  1,583.72  79.96  (61.35) -3.7%
VZ  2/12/09  112.65  29.35  3,306.79 8/23/11  35.52  4,001.33  305.36  694.54 21.0%
MO  8/31/09  223.13  18.70  4,172.73 7/29/11  26.40  5,890.63  455.07  1,717.90 41.2%
V 3/19/08  100.00  65.76  6,576.20 7/1/11  86.97  8,697.00    2,120.80 32.2%
ATVI 10/16/09  200.00  12.25  2,450.00 12/2/10  12.14  2,428.00    (22.00) -0.9%
EXC 10/28/09  52.46  47.68  2,501.52 10/8/10  43.15  2,263.65  106.82  (237.87) -9.5%
ETP 10/26/09  53.12  43.53  2,312.20 6/7/10  44.31  2,353.75  136.84  41.55 1.8%
BP 11/30/09  30.00  57.00  1,710.00 6/2/10  37.00  1,110.00    (600.00) -35.1%
HD 11/3/09  71.06  25.09  1,782.57 5/17/10  35.37  2,513.39  32.42  730.82 41.0%
JAV  10/16/09  1,200.00  1.60  1,920.00 4/12/10  2.19  2,628.00    708.00 36.9%

Sunday, June 23, 2013

A Bit About Me

Where to begin?   How about a little about me and what my goals are from now until retirement.  I'm a early 30s financial services guy - not so much the guy behind the guy, but maybe something close.  I work on Wall Street, actually 5th Ave, but who's fact checking.  I went to school in Maryland and graduated with a degree in finance, and consider myself fairly financially savvy.  Since graduation, I had this stupid notion that I should save and buy a house... so I did.  A single guy living in a 4 bedroom house in the burbs, what could be better... or worse.

But wait, this is a financial blog, what does the house have to do with anything?  We'll get there.  Fast forward to 2009 and I started investing casually.  I say casually, which is really code for without a strategy or plan.  But hey, I was contributing regularly to my 401K, right?   In the next post, I'll go over the past 4 years of my investment history, which definitely lacked structure.

Goals!  My primary goal is to retire by 62 with enough income to live very comfortably, most likely in Sydney, which is where my wife grew up. I spent a year there recently and fell in love with the people, country and pretty much everything but the cost of living.   Back on topic, I am aiming to accumulate, at minimum, $2.5M in income producing assets, whether it be equities or real estate.  I'm somewhat old school in that I believe one invests in companies to own a piece of the business, more specifically to help them grow and pay their owns dividends as a reward.  Fair disclosure, I do have a chunk of my portfolio in trading names - short term ideas and biotech's.

Two final, and important, notes regarding my stock choices for all future blogs.  First, working for a financial company, I have to pre-clear all my trades and the approval is only good until the market closes.  I regularly get denied, so I can't invest in exactly what I want 20-50% of the time.   Secondly, I have a minimum one month holding period.  That means I have to be very careful about my conviction in the shorter term portion of my portfolio.  For example, I wanted to trade SODA early May when it dropped below 50, looking for a bounce back to 55 or 60.  My trade wasn't approved til later in the day when the stock was at 53.  I gave up on the trade at that time even though the stock is up another 20 one month later.