Portfolio Update: New Addition (ABT and MCD; November 7, 2012)

Wow, the market sure didn’t take long to finish celebrating the election and shift gears right back onto business. With the fiscal cliff back in the picture, stocks sold-off today, as the Dow Jones fell over 300 points!

Dividend Mantra had a great post recently about how the market over-reacts to short-term noise, and why we as investors should ignore it. So, instead of getting lost in an endless sea of disarray, we should focus on the big picture and realize these drops for what they really are – a golden window of opportunity to load up on quality companies.

With that message freshly ingrained into my head this morning, I didn’t waste any time before firing up the watchlist and going through the long list of stocks, searching for potential bargains. It didn’t take long before I found the ones I wanted.

First Buy

I initiated a position with Abbott Laboratories (ABT) last month. At the time, I only put in an order for 21 shares, so I was definitely hungry for more! With today’s steep pullback, I was able to secure shares for 14% off the recent 52-week high mark of $72.47, set just last month, on October 16. I ended up buying 30 shares of ABT at a price of $63.50/share.

This brings my total allocation in ABT to 51 shares. With a current payout of $0.51, today’s purchase will add $61.20/year in dividends.

I realize that ABT will be spinning off into two companies come January 2013, with the newly formed AbbVie paying the bulk of the new dividend. At this point in time, I cannot say with absolute certainty which company I will prefer to own long-term. I see the potential in both companies, so rather than having to pick a side later, I elected to get in now to avoid the dilemma altogether.

When ConocoPhillips (COP) spun off earlier this year, I didn’t know if I wanted to keep my Phillips 66 (PSX) shares. But, by purchasing into COP before the split, I was able to grab a stake in both companies. I probably wouldn’t have bought into PSX otherwise. Thus far, PSX has done surprisingly well, exceeding a lot of people’s expectations. I don’t mean to imply that the same type of success will be in the cards for AbbVie, but this datapoint is worth noting.

Round 2

It’s hard to be content with just one purchase when the market pulls back as much as it did today. Luckily, I didn’t have to attend any meetings, so I was able to witness the bottom of the free fall this morning. The next stock I purchased is one that has been on my watchlist for over two months now. Time and time again I’ve resisted the urge to add, but finally gave in today. I purchased 23 shares of McDonald’s (MCD) at a price of $86.80/share.

As some readers may know, I almost initiated a position with MCD last week. I decided to go with LinnCo (LNCO) instead, since it was declaring ex-dividend, and I wanted to get in on time. In some ways I felt like I took a gamble, not knowing for sure if MCD would continue hovering around these levels. Luckily it did, so the move worked out.

So, the “future prospect” from the SeaDrill (SDRL) and Transocean (RIG) trade has finally been acquired! I had mentioned that I wanted to exit out of some riskier investments and move my money towards more defensive plays. By trading into ABT and MCD, I feel like I have accomplished this goal.

Summary

The market pulled back today in fear of the looming fiscal cliff in sight. I stayed the course and used the fresh capital from the recent sale of SDRL and RIG to fund new purchases into ABT and MCD. Here are the results of the final trade (factoring in Monday’s transaction):

Trade:
58 shares of Transocean (RIG)
76.588 shares of SeaDRill (SDRL)
$25.48 to the broker to offset the salary differences

Acquired:
60 shares of Kinder Morgan Inc. (KMI)
30 shares of Abbott Laboratories (ABT)
23 shares of McDonald’s (MCD)

Status:
Approved by the commissioner’s office!

Time will tell which party got the better end of the deal.

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Round Up - 3 - Rising ReturnsFI FighterDividend MantraThe Keichi OneJC @ PassiveIncomePursuit Recent comment authors
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JC @ PassiveIncomePursuit
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Congrats! I like both of the purchases. I need to check more into ABT because I need some exposure to one of the major health care titans. I added to one of my positions today and have a post about it for tomorrow.

The Keichi One
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Great purchases in great companies FIFighter! I’d pick up more MCD myself if I didn’t just get INTC on the downturn. Well played!

Dividend Mantra
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FI Fighter,

Thanks for including me in your article. I appreciate the shout-out.

We are two kindred souls. I simply love pullbacks, especially when they coincide with my big commission check from my day job. I do love that.

I’m buying shares in high quality companies right now like an addict goes on a weekend bender. I guess I’m addicted to dividend growth stocks.

Nice trades there. I think you made your team much better for the long haul. MCD is simply rock solid at these prices, even with the recent negative same store sales news. ABT is interesting. I’m not adding to my shares right now, but I don’t see any reason that this company won’t do very well for shareholders post-split. Any setbacks in Humira is about the only thing that I can see as a potential headwind since it will be such a large percentage of AbbVie’s revenue.

Best wishes.

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