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+--- Thread: building new portfolio (/showthread.php?tid=1296)
building new portfolio - pyfish - 08-16-2015
Hi, I'm new to investing and just started building my portfolio the last 2 weeks. I'm 80% invested and still have 20% cash. Here are my picks:
hcp
ibm
ko
pg
rdsb
bbl
paa
vz
glw
nov
bp
bx
etn
mu
gsk
I realize that micron doesn't fit into the discussion here as it doesn't provide dividends. I am an engineer by trade and I felt that the potential is there. I will however need to average down on this stock already.
Averaged down on bbl during the chinese currency panic.
I am approximately breaking even, just fraction of percent down, which I understand is moot in the long run but gives you an idea of my entry into the market. I hope to get some feedback on how much risk I am taking or if I am overweight in some sector. I feel like I've been too greedy with the oil stocks.
RE: building new portfolio - rapidacid - 08-17-2015
Hey Py,
I imported your portfolio and grouped it by sector ... first thing I noticed is that your starting dividend yields are very high; excluding MU you're averaging about 5.2% dividend yield ... I wonder if you saw the yields as super attractive and focused a bit too much on them? Keep in the back of your mind that if your future plans involve holding the equities for a very long time, decades, you'll want to be including some smaller cap growth names that will aggressively grow their dividend over the years resulting in compounding wealth for you.
It looks like you did a pretty good job of grabbing entry points that were on the low end of the 52 week range. I noticed you didn't have any Utilities or Consumer Cyclical. Some suggestions for those sectors:
Consumer Cyclical: VFC, MCD, LOW, CBRL, MGA, GPS
Utilities: AWR, WEC, ED, SO, DUK
I really would pay no mind to where your overall portfolio is regarding profits + loss. I certainly wouldn't dump a stock ( in most circumstances ) just because it was down a bit or even a lot.
Take a look at David Fish's CCC list ( http://www.dripinvesting.org/Tools/U.S.DividendChampions.xls ) if you haven't already. That's where a lot of your ideas should be coming from.
Good luck!
RE: building new portfolio - hendi_alex - 08-17-2015
Keep in mind that SO is a coal heavy utility. They could be hit pretty hard as efficiency increase and carbon dioxide reduction mandates start to kick in. DUK is ahead of the curve on that issue, having already shut down 15 older coal fired plants and with plans in place to switch much more generating capacity to NG. NRG probably has the least coal exposure and the most green production in place. Problem is, their bottom line has not been doing that well. With Obama mandates in place, NRG's situation could improve dramatically however.
RE: building new portfolio - pyfish - 08-17-2015
Was considering getting some mcd last week but went with ko instead. Actually kinda hesitant to get into utilities because I have a hard time understanding how they can sustain good growth in the future. I do admit that I picked a lot of high yield stocks before saying hmmm this is strange there might be something off with the strategy.
RE: building new portfolio - hendi_alex - 08-17-2015
MCD and KO are both great established companies, but both are fighting to keep their products relevant. IMO the verdict is not out yet. Still for their history and strong current yield will likely include them as equal weight with my big cap dividend picks.
RE: building new portfolio - Dividend Watcher - 08-17-2015
(08-17-2015, 09:07 PM)pyfish Wrote: Actually kinda hesitant to get into utilities because I have a hard time understanding how they can sustain good growth in the future. I do admit that I picked a lot of high yield stocks before saying hmmm this is strange there might be something off with the strategy.
I'd hold off on utilities for now. Few utes are what I would consider in the "good growth" category for a utility; maybe WEC, NEE and D right now for some of the changes they're implementing. Yes, they dipped in the last few months but they were pretty pricey through the winter in my opinion. The ones I watch were starting to get close to fair value the last couple months (and I nibbled a little) but in the last couple weeks they seem to have started climbing again to levels I'd stay away from.
RE: building new portfolio - Roadmap2Retire - 08-18-2015
While I agree with most points mentioned above about Utilities - one thing to keep in mind is that Utilities play a slightly different role in the portfolio. Its not meant to make you rich overnight by giving you massive stock price appreciation. Utilities provide some inertia to your portfolio giving you stability while providing income -- thats why its the first sector in the asset class used as a bond substitute.
RE: building new portfolio - EricL - 08-18-2015
(08-17-2015, 11:30 PM)Dividend Watcher Wrote:(08-17-2015, 09:07 PM)pyfish Wrote: Actually kinda hesitant to get into utilities because I have a hard time understanding how they can sustain good growth in the future. I do admit that I picked a lot of high yield stocks before saying hmmm this is strange there might be something off with the strategy.
I'd hold off on utilities for now. Few utes are what I would consider in the "good growth" category for a utility; maybe WEC, NEE and D right now for some of the changes they're implementing. Yes, they dipped in the last few months but they were pretty pricey through the winter in my opinion. The ones I watch were starting to get close to fair value the last couple months (and I nibbled a little) but in the last couple weeks they seem to have started climbing again to levels I'd stay away from.
I generally agree about utilities, as they have gone back up now after the earlier selloff. I'm not seeing much for bargains in the sector. Oil & Gas and industrial stocks are probably the best bet for cheap stocks right now.
RE: building new portfolio - earthtodan - 08-18-2015
NRG is probably the deep bargain in the utility sector. However you have to be comfortable with non-GAAP cash flows. If you are, the earnings yield is in the teens. Also be aware that they are only an independent power producer, and they don't own a transmission network with regulated ROE like most utilities.
On the other hand, there is ITC (which I own) that is pure play high voltage transmission (no generation).
RE: building new portfolio - Sniper - 09-02-2016
I personally think picking oil stocks now is not a good option, the industry is going to tank in the future. Maybe add Artificial intelligence stocks, of technology stocks in your portfolio.
RE: building new portfolio - Sniper - 12-13-2016
That’s where investing in high-quality stocks that provide dividends come in. There are two ways you can make money on a stock: capital appreciation and dividend yield. Capital appreciation is the increase in the share price and the dividend yield is what the company elects to pay out annually. For example, if a company’s share price increased five percent in 2015 and paid an annual dividend of five percent, the annualized return would be 10%. Adding high-quality dividend stocks to your retirement portfolio is the best way to ensure consistent growth.
Since 1926, dividends have contributed nearly a third of total equity return, while capital gains have contributed approximately two-thirds. By ignoring high-quality dividend stocks, you could be ignoring additional gains of 33%. That number gets significantly higher when you factor in compounding.
When it comes right down to it, investing in dividend yielding stocks is more about common sense than finding under-the-radar stocks. That is, look for places where people spend their money when times are good and bad.
If you think the U.S. economy is moving in the right direction, look for consumer discretionary stocks (restaurants, furniture, automotive). If you think the economy is facing headwinds, look at defensive plays—those dividend stocks that make products we use every day (toothpaste, soap, shampoo, cigarettes, etc.).
These kinds of companies have relatively stable stock prices which makes them easier to buy and hold. That’s part of the joy of investing in big blue-chip dividend stocks; it doesn’t require a lot of monitoring.
That doesn’t mean you ignore your portfolio, but it means you probably don’t need to check in three times a day. That’s because businesses that report consistently higher earnings and increase their dividends clearly have a competitive advantage, one you expect will continue.