It's All Over Folks, Now Get Back to Work

[Dividend Watcher]

Well, either this dead cat is bouncing especially well lately or there's still a wall of worry to climb.

After the last exciting week-and-a-half of some of my favorite stocks starting to get to levels where I was really enjoying the show, my portfolio is almost back to where it started. Overall I took a 10% hit and now I'm only down a little less than 3%. I've added to my General Mills and Northeast Utilities during the slump and picked up some more Coke to fill up my wife's allocation.

Anyone in a speculating mood? I'm guessing we bounce around a little here for a month or so and then a slow climb into late spring. I'm thinking we're going to see some sector rotation in the near future, which we haven't really seen in a while, where the steady-eddies will be stagnant and more growth-oriented stocks take the lead.

What's your gut feeling?

[Kerim]

I'll bite.

I never really understood the reasons for the dip in the first place, so I looked at it as a gift of a nice buying opportunity, but didn't expect it to last very long. So while we are guessing, I'll say that we're going to continue back up from here, and we'll all wish we had bought a little more than we did in the past week. Now I hope that I am completely wrong -- I would much prefer this to turn into a proper "correction" and give us a much better and longer-lasting opportunity to buy some great companies at even better prices.

Your "bounce around" prediction is pretty reasonable too, though.

[CritMass]

The past week or two just validates the wisdom of keeping a percentage of your portfolio in cash, and ready to strike. I agree with both of you, DW and Kerim. I think the market will slowly climb over the spring. This reminds me of the two "truths" of the market: the market goes up; the market goes down.

[Robandcindy2]

Whenever the DJIA drops in a large way I jump in my Financial Spaceship and zip out for a big picture view such as 1997-2014:

BigCharts

"The Great Recession" was GREAT....

Yet in the big picture, "phew, glad that's over...moving on...."

[Dividend Watcher]

(02-08-2014, 06:02 PM)CritMass Wrote: validates the wisdom of keeping a percentage of your portfolio in cash, and ready to strike.

If that's what you feel comfortable with. The question is, you make those well-timed strikes and then you have no significant amount of cash left. Then what? Depending on circumstances, it make take a while to build up capital from new contributions. If you're retired, then you're in the distribution phase and the cash will be going the wrong way.

I happened to have some cash leftover from trimming a couple positions. Both my wife's and my portfolios are 99% invested now and we won't have a significant stake for another few months. That's what works for me. In the meantime, I'm watching earnings reports and dividends. Another 6.8% bump on one last week. Yippee!

We all have to do what keeps us in our comfort zones.

Rob, that is a scary chart. No wonder everyone was in a panic.

[fiveoh]

The way I see it...

1. The whole market goes down - YAY I can buy more dividends with my money and some companies drop into fair value range
2. The market goes up - YAY my net worth increased

Win win! Either way, whenever I get extra cash, I'm always looking for companies that meet my buy criteria.

[Be Here Now]

I keep 3 stock lists.

First is the stocks I own. Yay! Lots of dividends, which is what I want.

Second is the stocks I do not own but would like to own, but only at the right price. I have a minimum current yield hurdle -5% - which I rarely violate. Yes this is a high yield but I am retired and need the income. At some point I will explain why, for a retiree, high current yield is much more valuable than low current yield + high DGR. I have a spreadsheet that models this relationship, if anyone is interested.

Third is the stocks I own and of which I want more, and how much more in $s.

Two weeks ago we had prime and possibly historic buying opportunities in two, both that I own and one that I want more of. These were MO and PM.

I used the RSI (relative strength index) technical indicator to identify, as close as one can in these things as they happen, the best time to buy both. For those who are not familiar with the RSI, readings below 20 are short term highly oversold, and readings above 80 are short term highly overbought.

On Feb 3, the RSI of MO dropped to 18.32. This was by far the most oversold MO had been in more than 5 years, including the 2008-2009 crash. I had some cash available, and my MO allocation was not as large as I wanted, so I bought.

On the same day, Feb 3, the RSI of PM dropped to 17.72. At the low that day, the yield was within a micrometer of 5%. PM has never been that oversold. If my allocation to PM were not full and then some I would have bought more. I bought most of my position in PM when the market crashed in Aug-Sep 2011, when the yield did rise to 5%.

I am happy to share how I combine fundamentals with technicals. I am retired and collecting dividends, and current income is my focus, but am not yet spending all of them. So far I am reinvesting the majority. If you look at my profile on SA you will see that I have a significant allocation to mREITs and BDCs. I reinvest the dividends opportunistically into my 2 stock lists mentioned above, which do not include the mREITs. I continue to hold a significant percentage in mREITs and would be happy to discuss them.

[TomK]

I'm sad that the dip was short-lived. I didn't grab nearly what I wanted, hoping that it would go down further. If PEP stays down or goes down further, I may grab some of that, though.

[Dividend Watcher]

Me too, Tom. I've got a little cash to put to work after selling wife's VOD holding. Of course, I decided that after the paltry dip and now thinking over my options.

BHN, the RSI statistic intrigues me. I'm going to start a new thread on that.