Portfolio Update: New Addition (NSC; October 24, 2012)

by FI Fighter on October 24, 2012

in Stock Portfolio Updates

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As it so often seems, each time I post an update on my Watchlist, the market takes an unexpected twist, and I have to revise my gamplan. Since adding shares of Abbott Laboratories (ABT) and Air Products and Chemicals (APD), I’ve been honing in on: McDonald’s (MCD), IBM (IBM), Genuine Parts (GPC), Coca-Cola (KO), and considering adding more ABT and APD.

Although I still believe the companies mentioned above are starting to become attractively priced, I found an even better deal today. Norfolk Southern (NSC), saw its shares slashed by 7.45% today, after earnings were reported. NSC reported Q3 earnings of $1.24/share, which beat projections by 1 cent, but were 27% lower from Q3 last year. Total operating revenues were down 7% year over year.

One main concern for NSC was that coal shipments were down 16% and revenue from coal shipments were down 17%. This problem, however, is not isolated to just NSC, but also affects other railroad companies. Still, the market is very near-sighted, and once the bad news spreads, the analysts’ downgrade, and the market sells-off.

Here is A Forbe’s article, suggesting that NSC has now been oversold:

http://www.forbes.com/sites/dividendchannel/2012/10/24/top-10th-percentile-ranked-dividend-stock-nsc-becomes-oversold/

As a long term investor, I don’t panic over the short term news. In fact, in many ways, I welcome it. Missed earnings are usually some of the best times to add more shares of quality companies. Since I try to practice what I preach, I added 40 shares of Norfolk Southern (NSC) to my portfolio at $61.68/share.

I put in a limit order early in the morning, so missed scoring the shares at the bottom today. With the market, you never know. Sometimes it dips early morning and then recovers throughout the day. Other times, it just keeps plunging down further and further. Still, I got in at a much better deal than I did the last two times around (this is the third time I’ve purchased NSC in the last two months), so I’m not complaining. Long term, it shouldn’t matter anyway.

With the yearly bonus deposited into my brokerage account, I now have some more ammo to fire. Hopefully even better deals will emerge. As always, best of luck, and happy hunting! Things are getting interesting!

 

{ 14 comments… read them below or add one }

1 The StoicNo Gravatar October 25, 2012 at 2:45 am

I was on the buying side with you on this one. I’ve not had a chance to post about it, but I opened a position in NSC for 100 shares at 61.25. Like you I didn’t get it at its low for the day, but I think we both did well on the prices we paid.

Cheers

Reply

2 FI FighterNo Gravatar October 25, 2012 at 9:55 pm

The Stoic,

Nice buy, and at a great price too! After this purchase, my total shares is also right at the 100 mark. Unless there is another major pullback, I think I’m more than sufficiently allocated in railroads for the time being.

Hopefully this purchase will pay off for us big time in the long run.

Take care!

Reply

3 JC @ PassiveIncomePursuitNo Gravatar October 25, 2012 at 5:04 am

I was busy with work and driving much of the day but when I finally got a chance to check on the markets I saw the big drop for NSC. I almost picked up some more but I didn’t get a chance to check out the report so I didn’t buy in the blind. Sometimes doing nothing is the best option. If it remains deflated this morning then I might be picking some up to average down my position. Great buy though, I still like the railroad industry a lot.

Reply

4 FI FighterNo Gravatar October 25, 2012 at 9:59 pm

JC,

You’re right, sometimes it is for the best to not take immediate action. I have to learn how to do this b/c often times I get too anxious to add shares when I see a good deal.

For NSC, I tried to read whatever news I could find quickly before heading off to work. Since I didn’t find anything that suggested any major trouble, I went ahead and made the purchase.

Best wishes!

Reply

5 Dividend Growth MachineNo Gravatar October 25, 2012 at 7:09 am

Nice purchase! If only I had the cash to do the same…

I will have some new capital in early November, but given that NSC is already a large position for me, I will probably invest in something else (at the moment, I don’t know which stock).

Reply

6 FI FighterNo Gravatar October 25, 2012 at 10:01 pm

DGM,

There are lots of good deals right now. As I’m typing this, I see that AAPL just released earnings, and missed, which has been a rarity for them. Maybe the market dips some more tomorrow.

There will probably still be good value in the market once November rolls around. I’m sure you’re anxious to put that capital to work.

Happy hunting!

Reply

7 Average Dividend YieldNo Gravatar October 25, 2012 at 7:20 am

Nice buy. I’ve been looking at railroads for sometime now and noticed the drop in NSC. I haven’t pulled the trigger yet. In the past, procrastination has turned out to be my biggest enemy. I’m working on it. I started a new blog and would like to add you to my blogroll.

Reply

8 FI FighterNo Gravatar October 25, 2012 at 10:05 pm

ADY,

NSC shares climbed back up slightly today, but it looks like you still have time to catch it at a great price. Even if you were to get in now, you would still be doing so at a lower cost basis than me.

Procrastination can be a good thing, and if you want to put a positive spin on it, you could call it patience. I’m kind of the opposite, and too impulsive. So, that’s something I need to work on 😉

Good luck with the blog and thanks for the add!

Cheers!

Reply

9 All About InterestNo Gravatar October 25, 2012 at 7:45 am

Great Buy! I had a trade on NSC yesterday that I just posted on my blog. I didn’t buy additional shares but I sold another Put option. To me it looks great here long-term and like you I believe that the coal weakness is a short-term problem. Good luck!

Reply

10 FI FighterNo Gravatar October 25, 2012 at 10:08 pm

AAI,

Nice option play there! You’ll be scoring shares at below $58 if assigned, and net $210 if the put expires. Doesn’t seem like you can lose there! You either get a great deal on NSC, or collect a hefty “dividend” for waiting.

I really need to start looking into options. What a great way to complement the more conventional buy and hold strategy.

Cheers!

Reply

11 Dividend MantraNo Gravatar October 26, 2012 at 3:57 pm

FI Fighter,

Great move. I love averaging down on quality businesses I already own when the market gives me the opportunity to do so. I’m definitely interested in adding to NSC as well, but my capital is tied up right now as I search for economical transportation options due to the nagging issue with my bus being late in the morning.

Great, quality businesses selling for attractive prices is just simply one of the pure pleasures in life.

I think this one will serve us well in the long-term. Even with the reduction in coal shipments, NSC will pick it up in other areas. Railroads are just such a cost-effective way to transport goods.

Best wishes!

Reply

12 FI FighterNo Gravatar October 28, 2012 at 8:24 pm

DM,

Good luck on your hunt finding a a cheap alternative to the bus. I can imagine it’s gotta be extremely frustrating to have to rely on unreliable transportation. I still have my car, but live close enough to work where I should be able to bike. I’ve been meaning to get started on that…

NSC should do well long term. It’s now my largest holding, which of course was unintentional. I really didn’t plan on buying any more shares, but sometimes you just take what the market gives you. Though I will have to return my focus to building the Core Holdings soon. I can’t forget about those.

Happy hunting!

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13 Compounding IncomeNo Gravatar October 27, 2012 at 10:55 pm

Wow that’s a good buy. Looks like you got in before the ex date too! Phew you built up to 100 shares pretty darn quick.

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14 FI FighterNo Gravatar October 28, 2012 at 8:27 pm

CI,

Yeah, getting in NSC before the ex-div date was just icing on the cake. Speaking of which, I’m also thinking about initiating a position in LNCO this upcoming week. It’s still trading a bit below LINE, and it goes ex-div on 11/2.

The shares are about $39, and I could reduce the cost basis by securing the dividend. And hey, I would be able to say that I collected LNCO’s very first dividend! Maybe I’ll be glad I did in 20 years…

Best wishes!

Reply

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