Portfolio Update: New Addition (CMI and KMI; October 11, 2012)

by FI Fighter on October 11, 2012

in Stock Portfolio Updates

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Today was a busy day. In between balancing work, and the playoffs (amazing comeback by the San Francisco Giants!), I managed to find time to scoop out the stock market and make two new purchases. As some readers may already know, I’ve been eyeing Cummins (CMI) for at least a month now. Earlier this month, I initiated a position with Caterpillar (CAT), but was strongly debating over which industrial giant to go with.

As it turns out, CMI continued its decline in price, and I felt now was a good time to initiate a position. I bought 17 shares of CMI at $86.50/share. Many other dividend investors have also been eyeing this stock, and Dividend Growth Machine recently published a nice quantitative analysis showing how CMI is currently undervalued:

http://dgmachine.blogspot.com/2012/10/stock-thoughts-cmi-vs-cat.html

Just like last month, I found more than one attractively priced stock to purchase. Kinder Morgan Inc. (KMI) is another one that I’ve been wanting to add to the portfolio for some time. Kinder Morgan is the largest midstream and third largest energy company in the US.

During this recent downturn in the market, I’ve been looking for opportunities to land discounts on quality companies upon hearing any “bad news”. This was the case with such recent purchases such as: NSC, INTC, CAT, CMI, etc. However, this was not the case when it came down to initiating a position with KMI today.

Instead of looking for “bad news”, I simply focused, instead, on finding a quality holding at fair market value. I purchased 43 shares of KMI at $35.10/share. Although I always want to find bargains and items on sale, sometimes you have to pay full price for high quality. This isn’t always a bad thing either; Coca Cola (KO), Abbott Laboratories (ABT), and AT&T (T) are just examples of Core Holding stocks that have been surging since the beginning of the year. If we only focused on adding stocks when they are heavily discounted or reach 52 week lows, then we just might never even have the chance to get in on these companies.

Frankly, I would rather pay fair price for KMI at these levels then to deem it too expensive and miss the boat completely. As many other dividend bloggers have pointed out, Richard Kinder has a history of being generous to shareholders – it’s probably best to side with him (he owns 23% of KMI). KMI has increased dividends in 4/5 quarters. Management has even communicated their plans to raise the dividend over 12.5% annually until 2015, and 10% long term:

http://kindermorgan.com/investor/presentations/0412_Salient.pdf

I definitely do not want to miss being a part of that!

***Update***: KMI dropped 2.54% after hours. Could this be due to Goldman Sachs releasing additional offerings which is depressing the stock price? If so, this seems like it would present another strong buying opportunity. I will check again tomorrow morning. In the meantime, I’m transferring additional funds, just in case. I may add to my position tomorrow morning.

 

 

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{ 6 comments… read them below or add one }

1 JC @ PassiveIncomePursuitNo Gravatar October 12, 2012 at 5:15 am

Great buys there! I picked up some CMI yesterday as well. I need my paycheck to hit my account so I can start transferring funds over to my brokerage account. There’s some pretty good deals right now. I hadn’t seen the KMI pullback after-hours yesterday. I might be adding to that position this morning. It’s probably either KMI or INTC.

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2 FI FighterNo Gravatar October 12, 2012 at 7:28 pm

JC,

Wow, it looks like we have both been eyeing the same exact stocks! Just like you, I got in on CMI, CAT, and KMI.

Today, I was looking at both KMI and INTC. I guess I have trouble making up my mind when faced with tough decisions, because most of the time I end up just buying both. So, I got some more KMI and INTC. Lots of good deals floating around these days.

Cheers!

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3 Dividend Growth MachineNo Gravatar October 12, 2012 at 5:55 am

Nice purchases and thanks for the mention! CMI and KMI are great additions to both of our portfolios. I would love to increase my positions on further pullbacks, but it will have to wait until the start of November when I have new capital. However, the delay will give me a chance to fully digest the earnings reports later this month, so it could work to my advantage if a new opportunity arises at the end of the month.

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4 FI FighterNo Gravatar October 12, 2012 at 7:33 pm

DGM,

Yeah, I’m real pleased with being able to land both CMI and KMI at fairly attractive prices. I got some more KMI today as I simply could not resist the drop in price.

Looks like you hauled in some quality purchases this month! KMI, CMI, and INTC are all favorites of mine. And just like you, I’m also going to have to wait until November to make any more purchases. I’m out of bullets, haha. Hopefully November will be an even better month to go shopping.

Best wishes!

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5 Dividend MantraNo Gravatar October 12, 2012 at 5:03 pm

FI Fighter,

Great purchases here and glad to have you on board as a fellow KMI shareholder. I think Uncle Richard will treat us well!

You just grew your portfolio significantly all in one swoop with quality holdings. Feels great to see the Fund grow and see the compounding effect start to really take hold.

Best wishes!

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6 FI FighterNo Gravatar October 12, 2012 at 7:40 pm

DM,

haha, I’m glad to be on board and looking forward to Uncle Moneybags Richard throwing some change our way!

Yeah, it’s been a very busy month so far. Lots of new purchases added to the portfolio. I managed to get most of what I wanted from my wishlist, so I’m content until next month. Looks like you’ve been busy too, and landed some bargains with LO and KMI.

After a slow Summer, things are starting to get more interesting.

Happy hunting!

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