FI Fighter

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

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!

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This Post Has 6 Comments

  1. 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.

    1. 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!

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

    1. 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.

    2. 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!

  3. 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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