Portfolio Update: New Addition (LNCO; December 31, 2012)

by FI Fighter on December 31, 2012

in Stock Portfolio Updates

I had a feeling today might be a “disappointing” day for buying. Over the weekend, members of Congress re-iterated their confidence that a deal to avert the Fiscal Cliff could be reached before the end of the year. As such, even though an official deal still hasn’t been made at this time, the markets have rebounded nicely today on the positive news.

Time to Move On

I was afraid something like this would happen, which is one of the reasons why I elected to make a small purchase with The Southern Company (SO) last week. I had some more cash on hand, which I was hoping to deploy today to score deals on some more bargains.

Unfortunately, with the markets rebounding, prices didn’t dip to as low as I would have hoped for. Nonetheless, I decided to use some cash today to make my final purchase of 2012. I added 61 shares of LinnCo (LNCO) at $36.00/share. LNCO was on my most recent watchlist, and I believe the current price is attractive. Last time around, in early November, I purchased 63 shares for $39.15/share.

Today’s action allows me to average down my cost basis on LNCO, and add $43.31/quarter ($173.24/year) in dividend income, using the current dividend payout of $0.71. This should give my February payout a big boost. LNCO is currently sporting a 7.86% yield. As I’m seeing just now, LNCO also no longer trades at a discount to Linn Energy (LINE), which closed today at $35.24.

Summary

The Fiscal Cliff looks like it may very well come and go without making any lasting impact on the market. Go figure. With all the news and media coverage this (non) event has generated, I must say, this would rank it up there as perhaps the biggest dud of the year (right up there with the Mayan Apocalypse). This goes to show the importance of sticking with a plan. By this time next year, will anyone even remember the Fiscal Cliff of 2012? Probably not, so let’s just ignore this short-term news and keep building up our portfolios.

Happy Hunting and Happy New Year’s everyone!

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{ 12 comments… read them below or add one }

1 JC @ PassiveIncomePursuitNo Gravatar December 31, 2012 at 1:58 pm

That’s why I started to deploy cash last week at what I felt were good not great values. I wish I would have pulled the trigger to make another purchase today but there will be other opportunities. I was thinking it might turn into a non-event so I figured good prices on solid companies was worth purchasing and if the market completely sells off I still had some dry powder ready. I thought that the markets would stay pretty flat then sell off some toward the end of the session today, so much for that. Now we play the waiting game to see if Congress really does reach some kind of deal. I did read somewhere that one of the rumored agreements was to increase the LT capital gains and dividend tax rates to 20%, which would be nice that capital gains wouldn’t have such a huge tax advantage. Of course I’d prefer that it stayed at the 15% rate.

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2 FI FighterNo Gravatar January 3, 2013 at 9:10 am

JC,

Yeah, there will of course be other opportunities. It’s a good idea to have dry powder ready at all times, b/c you just never know. I elected to make some purchases before the New Year since I was still able to locate some value in the market.

I haven’t yet read what the new tax laws will be, but whether 15% or 20% taxation for dividends, that’s still a lot better than paying income level tax. I’m still waiting for a good/clear summary of all the changes to be posted.

Best wishes!

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3 Dividend Growth MachineNo Gravatar December 31, 2012 at 4:51 pm

Nice purchase. I need to do some research on LNCO. It looks like a compelling investment opportunity, but I don’t know enough about it yet.

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4 FI FighterNo Gravatar January 3, 2013 at 9:12 am

DGM,

Thanks! I really like LNCO around the $36 or below price point. I have KMI for midstream, CVX for vertical integration/superpower, and LNCO for upstream.

Take care!

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5 Brett @ wstreetstocksNo Gravatar January 1, 2013 at 7:34 am

Great stock, it has strong fundamentals. Have you looked into NOV, they are my favorite energy play.

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6 FI FighterNo Gravatar January 3, 2013 at 9:14 am

Brett,

I haven’t researched into NOV before. At first glance, the dividend yield is 0.74%. Since I’m a dividend growth investor, this entry point would be a little too low for me to consider for now.

Thanks for bringing this to my attention.

Best wishes!

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7 Brick By Brick Investing | MarvinNo Gravatar January 1, 2013 at 12:11 pm

Dud is right! Don’t feel too bad I was caught up in all the “hype” too. But now we’re picking up good companies at the start of what “should be” a nice bull run.

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8 FI FighterNo Gravatar January 3, 2013 at 9:17 am

Marvin,

Yeah, I also worry about the start of another potential bull run, which is a big reason I decided to grab some shares of LNCO before the new year.

But I’m sure it won’t take long for another fear event to take the place of the fiscal cliff. Just gotta be patient and wait for the markets to go haywire again.

Take care!

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9 Compounding IncomeNo Gravatar January 2, 2013 at 5:41 am

Nice I bought some at more or less the same price last week. It looks like the market is going to rise today, good timing there. I’m done buying Linn for a while because I am trying to rely less on high yielders. I find that when it comes time to sell a high yielder it is difficult to replace the lost income!

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10 FI FighterNo Gravatar January 3, 2013 at 9:22 am

CI,

You made some nice purchases recently with Linn and KO. I like LNCO as is, but yes, the high dividend is a welcomed boost. I used to own SDRL which pays a monster dividend every quarter.

If Linn keeps performing, I don’t see a reason why I would want to sell it. Ideally, when making a purchase, my mindset is to buy and hold forever. But you’re right, should you ever need to part with a high yielding holding, it is rather difficult to replace that high yield!

Best wishes!

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11 MartinNo Gravatar January 3, 2013 at 9:41 pm

I agree about the hype called fiscal cliff. What’s funny is that politicians call it “the greatest tax cut in history” and everybody ends up paying higher taxes in 2013. However, we survived prior this mess and tax cuts, we will survive after that too. We need to invest more so our income can cover the taxes and still produce enough income.

Thanks for the LNCO tip, I checked it out and this company doesn’t meet my criteria, so I have to pass it on.

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12 FI FighterNo Gravatar January 6, 2013 at 9:00 pm

Martin,

I just received my first paycheck for 2013, and yep, for sure, I notice the difference! 😉

The fiscal cliff and many others like it will come and go in our lifetime. It’s important for investors to stay the course and not waste precious time and energy worrying about it so much. An investor will save themselves a lot of stress, and their investments will probably do better than if they were to revise their strategy each time a “doom and gloom” event manifested.

Just curious, what criteria of yours did LNCO fail?

Best wishes!

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