Stock Trades Update and Market Thoughts (July 07, 2015)

by FI Fighter on July 7, 2015

in Stock Investing Thoughts, Stock Portfolio Updates

japan10

There’s an old saying — “Sell in May and go away…” As a Buy and Hold investor, I’m not one to really follow that type of advice, but I ended up going down that route (essentially) this year…

It was never by design, but as I alluded to in previous posts, my rationale for selling out of most of my stock positions was to build up a more robust emergency fund in the event of a major market pullback (or crash).

Currently, there’s a lot of turmoil in the air this summer, with Greece and its potential Grexit out of the Eurozone getting the most mainstream media play. But there’s more to it than that… You’ve also got Puerto Rico showing signs of insolvency and China experiencing a massive stock correction, with the Shanghai Composite Index selling off over 30% since peaking on June 12

From CNN Money:

According to Bespoke Investment Group, China’s stock markets have now lost $3.25 trillion. To put that in perspective, that’s more than the size of France’s entire stock market and about 60% of Japan’s market.

Yikes! That’s some seriously scary stuff right there… So far, it’s already been one EVENTFUL summer… to say the least…

Latest Trades

The following provides an updated table with all of my most recent trades. Since the last update, I’ve gone ahead and liquidated my holdings in Toronto-Dominion Bank (TD) and Coca-Cola (KO).

I sold TD for a small profit of $156.13.

I sold KO for a loss of $142.55. In total, I collected $150.20 in dividends (2 payouts) and call options. Essentially, you could say I broke even on this position.

Here is the full summary:

Stock_Trades_06_22_15

Year-to-date (YTD) I’ve collected $2,746.83 in trading income.

Looking Ahead

Originally, my dividend growth trading strategy was to keep an allocation of about $15,000 in the portfolio, spread out across 3 different companies. I wanted to keep trading periodically to collect some additional income.

Well, with the recent market downturn, it looks like my plan has been put on hiatus… Currently, I own positions in the following stocks:

  • Union Pacific (UNP); 50 shares purchased at $103.40/share
  • Norfolk Southern (NSC); 52 shares purchased at $96.60/share
  • Walmart (WMT); 65 shares purchased at $76.04/share

I’m down and in the RED pretty substantially on all three stocks. So, as a part of my backup plan (by default), I will have to resort to being a traditional dividend growth investor (which I’m perfectly comfortable with)… Quite simply, because I probably won’t be able to exit out favorably any time soon, I will have to just kick back and collect dividend checks…

With my Alibaba (BABA) holding, I’m down over $7,000, and this stock just keeps on bleeding (down another 4% at $76.95/share as of this morning).

It looks like I will have to be even more patient with that stock…

Market Thoughts

The markets have mostly traded sideways this year, but it looks like the market pullback that most dividend growth investors have been longing for has finally arrived.

I’m not sure if we’ve yet reached “back the truck up” territory, but many stocks are looking ripe for the picking.

Global uncertainty tends to have that kind of impact…

I don’t have a crystal ball so there’s no way for me (or anyone else) to know what lies ahead. And although I feel like the market valuations certainly look far more attractive now than when I sold out of my positions (mostly in May), I’m going to remain a little more patient and wait to see how everything unfolds…

In other words, I still don’t feel an immediate urge to jump back into the markets.

With that said, I’m still keeping a watchful eye on the stock market, as I do see a lot of developing “bargains”. Oil and energy are down big; the Vanguard Energy ETF (VDE) has shed over 28% in the last year. The best-of-breed integrated majors like Chevron (CVX) and Exxon Mobil (XOM) are looking increasingly more attractive by the day (with dividend yields now sitting at 4.5% and 3.5%, respectively).

Oil and energy may still have ways to fall, but these prices look like a complete steal relative to where they were just one short year ago. Last summer, I vividly remember when CVX was trading at over $130/share and analysts were clamoring that it was a SCREAMING BUY! So, if you were contemplating a purchase back then… Looks like you’ve got a wonderful opportunity to add now and perhaps even further into the near future!

In addition, the mining industry has got to be the most hated sector of all right now. Junior mining stocks like Market Vectors Junior Gold Miners ETF (GDXJ) are down over 46% from year-to-year. It is very interesting to observe that in spite of all the global unrest that exists, gold and silver and other precious metals are stuck in a persistent downtrend. When the SHCOMP is down 30% in less than one full month and Greece banks are going on “holiday” (I can’t believe they are actually calling bank shut downs that!), should the price of gold and silver really be setting new 52 week lows?

The price of silver is down another 5% this morning… WOW!

You know what they say about buying low and selling high… Right now, there sure looks to be very limited remaining downside left in precious metals, with potentially limitless upside potential. Precious metals reached an apex back in 2012, and have been in bear territory ever since.

Perhaps, there’s one last blow-off bottom in store before the start of another secular bull run?

 

In any case, things are starting to get interesting in the markets!

 

Happy Investing!

 

What do you think? Are you loving (or hating) the latest market pullbacks? Buyer, seller, or standing on the sidelines? What stocks are you watching carefully?

{ 16 comments… read them below or add one }

1 Income SurferNo Gravatar July 7, 2015 at 8:58 am

Mr Market is a fickle one, isn’t he Jay? I added to my position in BHP Biliton (BBL) today at $37.03, and have a buy at $91 on Union Pacific (UNP)……but generally I’m keeping my powder dry. Prices are about 10% from my price target on several of the companies I want to buy…..Fastenal, Travelers, Nestle, Unilever, etc

Days like today make me very glad that I have been so patient and held onto so much cash. Now if only this is deep enough that I can “back up the truck” as you said.
-Bryan

Reply

2 FI FighterNo Gravatar July 7, 2015 at 10:48 am

Bryan,

Thanks for sharing your watchlist! BBL has been getting crushed and that is one stock I’m watching as well.

That’s a great entry point on UNP as well; I hope you get a chance to add in that range.

I hear you — When the market turns, it moves on a dime. Always a good idea to have some dry powder ready as you just never know when a great opportunity will arise.

I’m tempted now, but will remain patient as I believe the worst is yet to come.

Cheers!

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3 Income SurferNo Gravatar July 7, 2015 at 3:46 pm

Thanks for the kind words. Agreed, we should get better prices in the future. Happy hunting!
-Bryan

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4 Financial SamuraiNo Gravatar July 7, 2015 at 9:37 am

I wonder what happens to all the dividend investors and dividend investor bloggers if markets get crushed further?

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5 FI FighterNo Gravatar July 7, 2015 at 10:49 am

Sam,

I imagine not much different from what will happen to most investors, whether you invest in stocks or real estate or whatever…

If the market gets crushed, almost everyone will feel the pain to some degree. With dividend investors, you rely on the passive income, and with illiquid real estate, you need cash flow to keep you afloat.

But a crash will shake out the weak hands… And days like this are a good reminder why we need a back up plan and lots of reserves handy.

All the best!

Reply

6 Dividend Growth InvestorNo Gravatar July 8, 2015 at 11:22 am

Financial Samurai,

Dividend investors and dividend bloggers did just fine during the last recession.

In fact, I would say that the performance during the next decade of a dividend ETF such as VIG, SCHD or SDY will beat the results of the offerings of those Sliced Investing hedge funds you have been touting so much on your site.

Reply

7 Roadmap2RetireNo Gravatar July 7, 2015 at 10:00 am

Good positions you own there, FI. I just added a bit more to my pipeline (IPL) stock. Will be looking to add more to my portfolio as the market keeps trending down.

Thanks for sharing
R2R

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8 FI FighterNo Gravatar July 7, 2015 at 10:53 am

R2R,

Thanks for stopping by! Days like today are a good opportunity for investors to pick up discounted shares and keep growing the passive income.

Yup, dividend investors should be gearing up now as the market looks like it’s ready to turn… It will be very interesting to observe how the Shanghai situation unfolds… Panic selling might have already ensued had it not been for government intervention.

When the local hairdresser is giving out financial advice, I think it’s safe to say we’ve reached a market peak…

Cheers!

Reply

9 FI FighterNo Gravatar July 7, 2015 at 10:56 am
10 No Nonsense LandlordNo Gravatar July 7, 2015 at 8:07 pm

Compare any of your stocks to the S&P. Then compare the portfolio results. Then, subtract any taxes and commissions.

I would guess the S&P outshine all.

Sell Alibaba and buy FXI. Take the tax loss harvest and you still have China. Or just go with a USD stock. China is headed lower yet.

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11 george puckNo Gravatar July 7, 2015 at 8:49 pm

S&P hasnt done much this year. I am well ahead of it in my largest accounts.

I dont know that I would touch FXI. Too much going on over there imo to be invested. $41.96 is the price I see quoted, will be interesting to check back.

If you are looking for dividends, and dont mind the paperwork of a LLC, might look at ETP in a non retirement fund. I mean its sitting at a 7.6% dividend that I think is safe. Especially if you have a long time horizon.

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12 FI FighterNo Gravatar July 8, 2015 at 7:29 am

Eric,

I like the idea of selling for tax loss harvest and I might do that towards the later part of this year. For now, I’m content with holding since these funds are speculative “play” money and not something I need access to immediately.

In any case, lesson learned. I speculated and got burned with this stock… But I’m glad I didn’t put all my eggs into this one basket.

Thanks for the tip on FXI.

Cheers!

Reply

13 FI FighterNo Gravatar July 8, 2015 at 7:32 am

George,

Thanks for the tip on ETP. Lots of high yielders in energy that are trading with attractive yields at the moment.

I’m probably going to remain on the sidelines with my popcorn ready, watching this spectacle unfold.

I believe there will be a better time and place to get back in, although it is already tempting now.

All the best!

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14 george puckNo Gravatar July 10, 2015 at 5:04 am

You may well get a better better price, and with all of the issues with China, Greece, Puerto Rico, I dont blame you for sitting on the sidelines with some popcorn.

I will say that I think the market misprices the pipelines at times when it lumps them in the ‘energy’ sector. ETP, KIM etc make their money on throughput. And almost every pipeline in the country is fully subscribed with long term contracts. IE not much risk to the dividend.

The net is they are much less tied to the price of crude than they are interest rates. ETP and KMI really are more like bond proxies.

If the fed does end up delaying the rate hike, I would suspect both especially ETP will go up in price.

I personally own some KMI and view it as a core holding.

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15 Retire29No Gravatar July 8, 2015 at 10:23 am

Most dividend stocks, because they’re seen as income-producing tools, trade inversely to interest rate expectations. This is why my Dividend growth portfolio is down about 4.5% since February, while my regular portfolio is still up a few percent.

The amount of DGI stocks that are compelling is immensely long. The REIT space (O, STAG, HCP, OHI, WPC) Energy (ATW, NOV, XOM, so many others) have tons of very attractive opportunities. BBL is one that most DGI players love, and its trading for an absurd price.

Only time will tell how prescient these buy-at-the-bottom decisions are.

Eric

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16 TawcanNo Gravatar July 10, 2015 at 6:26 am

China and Greece are making life interesting aren’t they? I think we’ll continue seeing volatility which hopefully would introduce more buying opportunities for long term investors. For now I’ll continue executing our investment strategy.

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