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Newly assigned IRA portfolio
#1
Hi,

After studying the DGI subject for a while and shadowing this great forum I finally decided to take initiative and transfer my "educational fund" into a self-managed IRA account.
As a non-US citizen the US is going to deduct taxes from my IRA account for dividends Sad bummer...

I'm going to describe my decision making process for future reference (for myself) and in hope to get comments on how it can be improved (and I already know it can!).

First I needed to decide how many companies I want to purchase before next month funding.
While decided I considered the following:
1. My account has ~$11,100.
2. By law I must make sure that each company has less than 10% of my entire account value at any given time.

Combining the above restrictions I decided on 11 stocks.
This decision means each company will get ~$1,000 and ~9% weight.

After figuring out how many companies I want to purchase today I turned to research.

For my research I used David Fish's CCC list.
I referred to the "All CCC" sheet and started to filter stocks out as follows:
1. Years increasing dividends: 10 or more.
2. Dividend Yield: 2.5% or more.
3. EPS% Payout: 60% or less.
4. TTM P/E: 20 or less.
5. Debt/Equity: 1 or less.
6. 1,3,5 and 10 year DGR: 2% or more.

Next thing I started to go over all the sectors one at a time.

At this point I created my own spreadsheet.
In this new spreadsheet I gave all the companies in each sector a relative rank in the following criterion's:
1. Dividend Yield
2 .EPS% Payout
3. TTM P/E
4. Debt/Equity
5. 10 years DGR
6. Chowder rule

Each company has its own rank in each criterion based on the "relative ranking system" (best company got 1, 2nd got 2, 3rd got 3... etc).
After giving all the companies their relative ranks I summed the ranks from all the criterion's and got a final company "score" where the lowest number is the best.

These are the results:

Code:
Consumer Discretionary    CBRL    GPC    MCD    TGT    WEYS
Yield    1    5    3    2    4
EPS% Payout    5    2    3    4    1
TTM PE    3    4    2    5    1
Debt/Equity    3    2    5    4    1
DGR10    1    5    2    3    4
Chowder    1    5    3    2    4
Total:    14    23    18    20    15

Consumer Staples    ODC    UVV    WMT
Yield    2    1    3
EPS% Payout    3    1    2
TTM PE    3    1    2
Debt/Equity    1    2    3
DGR10    2    3    1
Chowder    2    3    1
Total:    13    11    12

Energy    ARLP    COP    CVX    OXY    XOM
Yield    1    3    2    4    5
EPS% Payout    1    5    4    3    2
TTM PE    1    3    2    5    4
Debt/Equity    5    4    2    3    1
DGR10    2    3    4    1    5
Chowder    2    3    5    1    4
Total:    12    21    19    17    21

Financials    ACE    AROW    AUBN    BHB    CBU    LARK    NWFL    SBSI    TMP
Yield    9    2    4    6    7    3    1    8    5
EPS% Payout    1    8    4    2    9    6    7    3    5
TTM PE    2    8    3    1    9    5    4    6    7
Debt/Equity    5    2    4    1    3    9    7    6    8
DGR10    2    9    7    8    5    3    4    1    6
Chowder    2    8    9    7    6    3    4    1    5
Total:    21    37    31    25    39    29    27    25    36
    B13    B27    C6    B12    C12    C3    A13    B25    A30

Health Care    OMI    SPAN
Yield    1    2
EPS% Payout    2    1
TTM PE    2    1
Debt/Equity    2    1
DGR10    1    2
Chowder    1    2
Total:    9    9

Industrial    RTN
Yield    1
EPS% Payout    1
TTM PE    1
Debt/Equity    1
DGR10    1
Chowder    1
Total:    6

Information Tech    INTC    MSFT
Yield    1    2
EPS% Payout    2    1
TTM PE    2    1
Debt/Equity    1    2
DGR10    1    2
Chowder    2    1
Total:    9    9

Materials    BBL    BHP    BMS
Yield    1    2    3
EPS% Payout    1    2    3
TTM PE    1    2    3
Debt/Equity    1    2    3
DGR10    1    2    3
Chowder    1    2    3
Total:    6    12    18

Telecommunications    T
Yield    1
EPS% Payout    1
TTM PE    1
Debt/Equity    1
DGR10    1
Chowder    1
Total:    6

Utilities    LG    NJR    NU    RGCO
Yield    2    4    3    1
EPS% Payout    3    1    2    4
TTM PE    2    1    3    4
Debt/Equity    3    2    4    1
DGR10    4    2    1    3
Chowder    4    2    1    3
Total:    18    12    14    16

As you can see from the results above I had 10 sectors with the following winners:
Consumer Discretionary: CBRL
Consumer Staples: UVV
Energy: ARLP
Financials: ACE
Health Care: OMI , SPAN <== tie
Industrial: RTN <== solo candidate
Information Tech: INTC, MSFT <== tie
Materials: BBL
Telecommunications: T <== solo candidate
Utilities: NJR

Next step was to break the ties.
In the Health Care sector I chose SPAN over OMI because SPAN had lower PE, Debt/Equite and EPS% Payout ratio.
It has lower yield but I figured that if EPS% payout is lower than there is a bigger room to grow dividends in the future.
Also its Debt/Equity is lower so that means it'll have easier time operating in "rough weather".

In the Information Tech I chose MSFT because I already have INTC stocks (I worked for them in the past and never sold the stocks I got as an employee).

With all this filtering I ended up with 10 stocks:
ACE, ARLP, BBL, CBRL, MSFT, NJR, RTN, SPAN, T, UVV

Now I needed to find another stock to reach my "11 companies" goal.
I went back to the financial sector because it had the most companies in it that met my previous criterion.
In the financial sector 2 companies shared the 2nd rank: BHB and SBSI.
Going back to David Fish's CCC list I compared the 2 and decided on SBSI only because it's Chowder rule was 18.2 while BHB had 7.4 that's a huge difference.
BHB had everything else much better so I'm not sure if I made the right decision on this one though.

So I ended up with the following final list:
ACE, ARLP, BBL, CBRL, MSFT, NJR, RTN, SBSI, SPAN, T, UVV.

Just out of curiosity I made sure I have dividends coming every month of the year based on the dividend payout schedule for Q1 2014 (I had companies that paid on January, February and March).

With all this hard work behind me I headed to the broker account and made the purchases (using limit orders):
Code:
Symbol    Qty    Price    Commission    Total Cost
ACE       9    $105.15    $6.08     $952.43
ARLP      23    $44.42    $6.03     $1,027.69
BBL       15    $68.50    $6.05     $1,033.55
CBRL     10    $98.20    $6.07     $988.07
MSFT     24    $42.30    $6.03     $1,021.23
NJR       18    $56.20    $6.04     $1,017.64
RTN       11    $94.44    $6.07     $1,044.91
SBSI      36    $28.60    $6.02     $1,035.62
SPAN     51    $19.65    $6.01     $1,008.16
T           28    $36.14    $6.03     $1,017.95
UVV       18    $54.31    $6.04     $983.62

The commissions are killing me....
In any case, this is my newly created portfolio in my IRA account.

I expect deposits of ~$500 every month and another ~$32 a month (not really, I just divided the yearly gain by 12, didn't calculate exactly how it spreads over the year).

My plan is to purchase new company every 2 months with ~$1,100 until I reach at least 30 companies.
At that point, every time I'll have at least $1,000 in my account I will consider adding to positions which weight less than 5% or opening new ones based on market conditions and attractive evaluations.


Important thing I know and skipped altogether is performing background evaluation of the companies.
This will probably get back to make me regret this but oh well, I was anxious to get started Smile


I would appreciate the thoughts of the experts on this Smile
Reply


Messages In This Thread
Newly assigned IRA portfolio - by daat99 - 07-15-2014, 04:04 PM
RE: Newly assigned IRA portfolio - by ChadR - 07-16-2014, 02:17 PM
RE: Newly assigned IRA portfolio - by EricL - 07-16-2014, 02:20 PM
RE: Newly assigned IRA portfolio - by daat99 - 07-16-2014, 02:38 PM



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