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Twil's (future) portfolio - twil - 08-19-2014
Hi everybody! I just posted in the intro section now I thought I would post in here. I've been reading a lot of these posts throughout this forum and have come to the conclusion that I need to switch my style of investing. I need to plan for my future. Currently I have about 6000 to play with and I add about 100-500 per month to my trading account. I currently hold 3 small cap companies that I bought when I first started lost some money so now I feel obligated to hold.
My reason for posting is that I needed some guidance from the wise ones of these forums. I have been looking at the classics to start my portfolio: T, PM, MO, CVX, GE, GM, F, JNJ, TGT, WAG, KO, PG, MCD, INTC, MSFT, PFE and AAPL(if it drops a bit). Thats a big list, I know I need to narrow it down to a couple.
With 6000, would it be better to split it at 3k and buy two DG stocks, say PM and T? Or split it into 1000$ investments and buy 6 companies to start out with?
Like I said earlier, I will be adding to my acct monthly. Any advice would be greatly appreciated. Thank you !
Twil
*EDIT*
Current holdings:
(6/9/2016)
AAPL
ABT
BAC
COP
CVX
GILD
HIMX
KMI
KO
OHI
PM
SBUX
T
XOM
PLAN TO SELL: PLUG
Listed in no specific order, just how I remembered them.
RE: Twil's (future) portfolio - EricL - 08-19-2014
First of all, welcome to the forum!
First question is what amount do you plan on using for future purchases, and how many positions do you plan to build your portfolio with. 5? 10? 20? 50?
For example, if you plan on building on $1000 increments in the future and plan to start out building up to 10 positions, I would buy 5 or 6 with the initial cash and then add positions as new money becomes available. This allows you to stay fairly equal weighted as new positions are added.
If you are thinking of buying less frequently more in the $2000 to $2500 range then it may make sense to just buy 2 or 3 initially.
As for your watch list, here are some quick comments as I see things.
T - Love the current yield and bought the stock recently.
PM - Going through a slow period here with currency issues and I would consider it fairly valued at this level. (I am long)
MO - A bit overpriced by historical standards, but a great long term position. (I am long)
CVX - Fairly valued here and I think with a few big projects wrapping up could be headed for higher growth in the next couple of years. (I am long)
GE - Fairly valued and with expected increased buybacks due to financial spinoff and sale of appliance business the near term dividend increases could be higher than expected. (I am long)
GM - Seems attractive when looking at the yield and expected growth rate, but auto stocks typically blow up every 5-10 years and end up slashing dividends. Too risky for me.
F - See above.
JNJ - At the high end of fairly valued. I would wait for a pullback into the 3% yield range. (Do not own)
TGT - Attractive entry if you think growth returns in coming years. Trading with a historically high yield of around 3.6%. (Added to my position recently)
WAG - Fairly valued and recently announced acquisition of Alliance Boots. Dividend growth announcement was disappointing, but somewhat expected due to high costs for acquisition. Long term great hold in my opinion due to macro trends with baby boomers. (I am long)
(KO) - Recent slow growth but have been aggressive in buying stakes in GMCR and MNST. Staple for many dividend growth investors. Appears fairly valued here. (I am long)
PG - Slightly above fair value but hasn't had any earnings growth since 2009 resulting in a higher payout ratio. I expect lower dividend growth than other options in the next few years. (Do not own)
MCD - Going through a rough patch trying to find growth in a changing landscape. Fairly valued by historical norms but trading at a yield rarely seen for the stock. (I am long)
INTC - Has frozen the dividend for the last 9 quarters so not a consideration for me in a DGI portfolio. (Do not own)
MSFT - Slightly above fair value but a cash cow company with a great dividend growth rate. (I am long)
PFE - Has attractive yield but has had negligible earnings growth over the last decade and cut the dividend by 50% in 2009. There are better prospects in my opinion. (Do not own)
AAPL - About to enter a new product cycle and trading at reasonable valuation even after recent run-up. (I am long)
RE: Twil's (future) portfolio - Dividend Watcher - 08-19-2014
Interesting start, twil, but I fear you have some work to do.
First I recommend you develop some kind of plan. Include things such as goals, strategies, what's acceptable and what's not, how you're going to go about achieving these goals, etc. I've posted mine here. Read all the ensuing comments also. Others have posted their plans here or on Seeking Alpha. Speaking of Seeking Alpha (say that fast 3 times), look up Bob Wells or David Van Knapp as they've also espoused developing a plan and their examples are good also. It doesn't apply just to retirement accounts either.
That being said, you do have an interesting list of stocks there.
First I think you ought to throw out GM & F. Both are cyclical companies whose market seems to crater in every business downturn. From listening to others, Ford may not be so bad -- I don't know, I've never delved into the business -- but GM is a basket case. Their new CEO seems to be trying but I'm afraid that either the board is nixing her efforts to improve the corporate culture or she's becoming infected with the dreaded GM virus that seems to have infected the executive offices of that company for the last 30 years or so. Funny since I drive cheap, used GM vehicles until they're dead.
The rest seem like good candidates to which I would add MMM, PEP, GIS & EMR to pick from. I'm not going to pick any specific ones because I think you need to at least read about each one that really interests you so you get a feel for the business. Boring, I know but if you can develop that now, it makes your investing life easier in the future.
Then you're next task would be to determine which of those seem at a decent value at today's prices. We've discussed valuation here and there's a lot of information at Seeking Alpha (I only mention it again since it is a good aggregator of thoughtful information) or you can look through the resources section here to find other web sites to peruse.
As to how to split up your limited starting capital, to me 2 or 3 starters may be the best way to begin. You're young, in fact I have socks older than you, so you have lots of time to build and diversify your portfolio. You don't want to become bogged down monitoring a bunch of companies while trying to learn the ropes.
Hope that helps and good luck although I don't think you'll need it.
OK, I posted mine right after Eric. He must have been looking over my shoulder whilst I was writing since I see he plagiarized me.
RE: Twil's (future) portfolio - twil - 08-19-2014
First off, thank you both for the quick replies.
EricL
I would like to hold 11-20 companies within the next couple years. I am going to initially buy 4-5 stocks probably split it up evenly. My goal will be to buy stocks in ~1000$ or more, increments to make my trade cost 1% of purchase cost. Thank you for your thoughts on each of the stocks I listed.
Div.Watcher
I read SA Dividend app all the time on my tablet. It is a very good collective source of information like you said. I will go hit the books and figure out a few that I like and see potential in. Along with reading more posts here.
Well off to learn more, i'll post updates on this as I go along.
Thank you!!
RE: Twil's (future) portfolio - twil - 08-19-2014
I've narrowed it down to seven companies, I would like to get to 5 to start off. The seven are: AAPL, KO, T, PM, NLY, KMI and GE. Currently that would give me right under 1000 if i evenly disbursed in each position.
Another question... When starting a portfolio is it recommended to evenly disburse your initial investment between the companies that one picks?
RE: Twil's (future) portfolio - Turvok - 08-19-2014
(08-19-2014, 08:04 PM)twil Wrote: I've narrowed it down to seven companies, I would like to get to 5 to start off. The seven are: AAPL, KO, T, PM, NLY, KMI and GE. Currently that would give me right under 1000 if i evenly disbursed in each position.
Another question... When starting a portfolio is it recommended to evenly disburse your initial investment between the companies that one picks?
NLY is a risky stock. It has a great initial yield, but it requires too much monitoring for my tastes. Personally, I don't like GE either. It seems it's a favorite on this forum, but it doesn't meet my initial screening tests. It hasn't increased it's dividend for 5 consecutive years. It looks like you're going after yield, which is fine.
If you are going to only get 5 to start, I would try to diversify in case that ever-looming pullback happens.
AAPL (tech) is good. I believe the price will go up after the announcement of the iPhone 6.
KO (Consumer staple) is good
KMI (Energy)
Look into O or OHI as well instead of NLY. Personally, I like their stability more than the yield.
DE (Industrials) -- just under 3%, but 14% 5yr DGR
PM and T great and I am long both of those too. But I categorize them as Consumer staples and Tech, respectively.
RE: Twil's (future) portfolio - EricL - 08-19-2014
I agree on NLY. Its not a dividend growth stock and its highly dependent on interest rates. The dividend yield is appealing but it is not reliable.
Also agree on O and OHI. O is a bit overpriced currently, but OHI looks fairly valued. I own both.
RE: Twil's (future) portfolio - twil - 08-21-2014
Thank you everyone for the guidance and help.
I went with
AAPL
KMI
KO
OHI
PM
T
@Turvok
I am planning on my next purchase being in the industrial sector. Most likely MMM or DE.
RE: Twil's (future) portfolio - EricL - 08-21-2014
(08-21-2014, 08:14 AM)twil Wrote: Thank you everyone for the guidance and help.
I went with
AAPL
KMI
KO
OHI
PM
T
@Turvok
I am planning on my next purchase being in the industrial sector. Most likely MMM or DE.
Well done sir!
Nice diversification among sectors, great quality, and nice yields.
RE: Twil's (future) portfolio - Roadmap2Retire - 08-21-2014
(08-21-2014, 08:14 AM)twil Wrote: Thank you everyone for the guidance and help.
I went with
AAPL
KMI
KO
OHI
PM
T
@Turvok
I am planning on my next purchase being in the industrial sector. Most likely MMM or DE.
Those are some great stocks there. Congrats on starting out on DGI.
RE: Twil's (future) portfolio - ChadR - 08-21-2014
Great start. I own them all except for OHI. And two good choices for your next purchase too.
RE: Twil's (future) portfolio - twil - 08-21-2014
I really wanted to slip GE in there, but I decided against it since it would have cut my funds shorter for all the other stocks. I weighed them equally thanks to the advice of people on here. I have about 950-1000 in each and excited to see what happens next!