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Portfolio Update: New Subtraction and Addition (UNP, NSC and GDX, KMI; July 27, 2015)

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I made a move a few weeks back to pick up some shares of Union Pacific (UNP) and Norfolk Southern (NSC). My timing couldn’t have been much worse… Although I tried to purchase the stocks during a pullback, I was indeed making the mistake of “catching a falling knife”. With that said, I do feel somewhat fortunate that I only invested funds that were allocated to my “play money” account. In other words, I was trading capital that I could afford to lose.

First Move

Last Monday, I made the decision that it was time to part ways with UNP. Although I believe that UNP is still a great long-term holding, I foresee a lot more short-term pain in store for shareholders. The dividend yield also isn’t quite high enough to motivate me to hold on and ride out the wave. I liquidated all 52 shares of UNP for $98.30/share. I originally purchased shares for $103.40/share back on May 18. Total realized losses were $265. I sold out just prior to the earnings report, which in hindsight I’m glad I did. UNP has stumbled another 5% since and is trading at $92.20/share at this time of writing.

With the proceeds, I rolled the dice and picked up 355 shares of Market Vectors Gold Miners ETF for $14.10/share. As I’ve mentioned before in previous posts, I believe that commodities, such as mining stocks, are greatly oversold right now. There may very well be a lot of long-term upside in this industry once things finally turn around… Sure, the price of gold and other commodities will most likely keep taking a hit over the next few months, but I felt comfortable enough at this time to initiate a small position. GDX has lost over 70% in the last 5 years as gold’s bull run started to turn bearish. This is a risky play, but it’s my attempt at “buying low” and hopefully I’ll be able to sell back much higher later. I would categorize this move as a medium-term hold.

Second Move

This morning, I decided to part ways with my other railroad holding, NSC. I sold out of my NSC position by liquidating 52 shares at $83.15/share. I originally purchased NSC shares for $96.60/share on May 20. Total realized losses were $709.38.

I immediately used the proceeds to purchase 125 shares of Kinder Morgan Inc. (KMI) at $34.48/share.

Similar to NSC, KMI is down over 20% in the last 3 months. So, in essence I traded out of one “loser” for another. In the process, I get to not only claim a tax loss, but I also get to swap out of a low-yielding dividend growth stock into a high-yielding one.

I figure, if I’m going to “ride out the wave”, I might as well do so while collecting a much higher dividend in the process…

Conclusion

The first move I made was purely speculative, as I’m placing a small bet on the rebound of commodities in the medium-term. By trading out of UNP and initiating a small position in GDX, I put some skin in the game. But not too much. My gut feeling tells me that there’s some more RED in store, and I think it’s somewhat probable that GDX will retract another 15-20% soon. If that happens, I might have to inject some additional capital into some mining stocks.

With the second move, I went ahead and took some realized losses, which should help me on my tax return (hopefully). Because I traded out of NSC and into KMI, I essentially swapped positions from one beat up stock into another… I really do like the price of KMI at these levels and I don’t mind getting into a few shares right now while the dividend yield is over 5.6%. Similar to the first scenario, I don’t feel like the bottom is in yet, and the oil and energy (and pipelines) sectors still have a ways to go before they reach a final bottom.

With both moves, I didn’t inject any fresh capital, as the bulk of my resources are still being held in cash, waiting for an even better entry point to get back into the game. I simply swapped out of positions from my trading account, which I had previously allocated $15,000 to. I still hold shares of Walmart (WMT), which has not surprisingly also taken a bashing recently…

What can I say? I made some really bad moves and ended up catching a lot of falling knives… Live and learn.

Let’s hope these two most recent moves will work out better in the future!

 

Happy Investing/Trading!

{ 6 comments… add one }
  • george puckNo Gravatar July 27, 2015, 6:17 pm

    Great minds think alike.

    I just posted on my blog about buying KMI. https://thedogsguidetopersonalfinance.wordpress.com/

    Now I didnt buy today like I thought I would. (since it was up quite a bit and we added some to our position last week.) but I think it is a great time to buy. And I talked a little in my blog about why I think it will rebound more quickly than the oil sector as a whole.

    • FI FighterNo Gravatar July 29, 2015, 8:58 am

      George,

      Thanks for sharing. Obviously, I’m aligned with your purchase and think KMI is a great buy at these levels.

      Most likely, I will look into acquiring more shares in the future as we all wait for this current situation to play out.

      Take care!

  • markNo Gravatar July 28, 2015, 10:41 am

    back the truck up on WMT. This will goto the moon. Mark my words.

    • markNo Gravatar July 28, 2015, 11:04 am

      the market has been retrenching. My home builders call earlier in the year is up 15%+. Check out all the new data that has come out to support that- still has room to run.

    • FI FighterNo Gravatar July 29, 2015, 8:59 am

      Mark,

      You’ve got a lot of confidence in WMT… Are you an insider? 😉

      Have you decided to back the truck up on this one?

      Cheers!

  • MarkNo Gravatar July 29, 2015, 7:28 pm

    Just double down that’s all I can say. Tremendous value. Costco too but that won’t help ur dividend strategy.

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