Portfolio Update: New Subtraction (CAT; May 11, 2015)


In general, when it comes to investing, I like to approach it with the mentality that I am Buying and Holding an asset indefinitely. Over the last four years, I’ve been in Rapid Asset Accumulation Phase, and after completing a few cash out refis earlier this year, you could say that I went straight back to that mode of operation — BUY BUY BUY… more assets!

But lately, I’m finding out that my mentality is starting to shift a bit… As I’ve expressed in numerous articles, I’m just not all that excited about investing in this current market environment. By no means can I predict the future, but I’m pretty certain that we are much closer to a market top than we are a bottom.

With that said, I’ve realized that I need to be more cautious with my investing as I move forward from here. Unlike before, Rapid Asset Accumulation is no longer the main focal point for me; rather, I’m entering the Wealth Preservation Phase, instead.

Sure, it’s probably possible to do both at the same time, but I’m going to lean much more heavily towards the latter. Over the next few weeks or so, I’m sure you’ll read more about my new approach to investing, as I’ll look to explain in more details in subsequent blog posts.

Until then, here’s what happened today:

I executed a sell order to unload 15 shares of Caterpillar (CAT) at $89.15/share. This transaction closed out my position in CAT.

Originally, I acquired shares at a cost basis of $1,190.55. This transaction replenished $1,332.26 into my cash account. Net proceeds were $141.71 before taxes. This is a return of 11.90% in about four month’s time.

Further, I was on record as a shareholder, and will qualify for the next dividend distribution that will payout $10.50. If you were to extrapolate the quarterly dividend payout throughout the course of a year, I would have received $42.00 annually had I held on to my shares. So, even with the consequence of incurring taxes on short-term capital gains, by selling now, I will have locked in higher profits than would have been paid out to me in dividends throughout the course of a full year.

Again, I want to emphasize that I’m now more focused on Wealth Preservation than Rapid Asset Accumulation at this stage of the investment game (this won’t necessarily apply to your own situation). Because I feel like we are closer to a market top than bottom, I have to be conscientious of what’s going on in the market, and if I see a good opportunity to lock in capital gains, I’ll take it. This isn’t to say that there’s anything wrong with CAT as an investment, it’s just that I’m leaning even more heavily towards holding cash than I had anticipated when I first started buying stocks again.

As always, my investment approach and strategies are subject to change and constantly evolving. However, I do feel that if we were at the beginning of another upcycle, I wouldn’t be proceeding with such caution. But again, I have to look out for my own best interests, and as someone who has accumulated more than $1MM in debt over these past 4 years, the limited upside left in this current bull run don’t justify me taking any additional risks.

Cash will indeed be king during the next market bottom… whenever that is.

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No Nonsense Landlord

The market is due for a correction, but we are not anywhere close to a bear market. Many investors can sell close to the top, but fail to get back in time for the resulting inevitable next run up.

Even in my 401K, which I have beaten the S&P for the past 10 years, it wasn’t by much. I lost 15% during the crash, rather than -38%, but failed to capture the 20%+ in 2009.

You would be far better to stick to a solid index fund. There are too many examples of solid stocks going under, or suffering multi-year losses.

Financials will be king for the next run-up.


NNL is right. Stick with financials.

walk us through why you chose (correctly) to sell CAT among many of your other holdings. Was it simply because it had a good run up and you wanted out? Was it based on other factors? Please elaborate.


CATS been a tough holding recently, so i can see why you decided to part ways. Its a fine company, but IMO there are plenty of better investments if capital preservations is your first priority.

What a different mindset it can make when you switch your strategy from growth to maintenance, huh?


Not sure I would sell CAT because of market-wide valuation or because it’s had a run up (unless it was now trading at a valuation that jeapordized future returns).
FWIW, I sell if 1) deteriorating financials ( 40… cut YUM recently), 4) elimination or cut of dividend.


Seems it cut comment short. 1) financials (PG, CL, WMT), 2) significant change in business model, 3) overvaluation jeopardizing future returns (PE 40.. YUM), 4) elimination or cut of div


1) financials (5 consecutive years of 3-yr avg rev or EPS growth > 5%; 3 consecutive negative Rev / EPS growth)


Meant growth < 5%; because there are too many other reliable growers that can be that


[…] I did what I felt like was in my own best interest. Just like will my sale of Caterpillar (CAT) earlier this week, my decision to liquidate shares of CVX is not an indictment of the company — CVX is a […]

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