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Strategies for Building a DGI Portfolio
#41
I've heard a lot about Robinhood. Almost all my funds are in my Vanguard account so I meet the threshold to get $2 stock and option trades, free ETFs and Mutuals. I won't feel too bad making purchases as small as $1000. Even smaller wouldn't be such a bad deal. My TD Ameritrade account has much higher fees so it's off limits for small purchases. I'd close the TD account but the investor research content is FAR superior to VG.

As I've mentioned repeatedly I much prefer entering positions by selling a a put, but I can give that a rest for a little while as I add a number of smaller positions in stocks I've had my eyes on for years, or owned them 25 yrs ago and sold them along the way. I am getting a bit overweight in some of my big dividend payers lately, T-KHC-MO etc. I'll feel comfortable if I diversify the DGI portion of my port a little more. Overall it's an imaginary problem as 1/3 of my port is in index mutuals and ETFs. Another 1/3rd in cash but that is going to change as I add more stocks if this dip continues at this pace.

If you don't mind, give me your two cents on the following moves I am contemplating since you own most all of them. I'll share my port when I get a chance to make a spreadsheet like Eric's. You own almost all the stocks in my port, or something close enough. I have all the sectors covered with stocks or ETFs.

I think I am a little light on consumer non-durables, but a little too heavy on KHC for my comfort as it seems to have no bottom and I don't like the growth prospects.
-Almost sure I will buy GIS now, may lighten up on KHC soon and add more to GIS if further research warrants the flip. PEP is on the buy list but probably a nibble. I don't see it as dirt cheap yet. Most of the the other popular cons non dur stocks do not appear to be undervalued IMO

-TELCOs- Probably buy some VZ soon. Lighten up on T and add to VZ. I'm pretty fat on T but wouldn't call it extreme. I could dump a couple hundred shares and have plenty left.

-Transports, I have none outside index funds. UPS looks good for a nibble, maybe, since it pretty much hit my price target we were joking about last week. IMO it's virtually impossible for FDX 2019 projections to come true and UPS comes through it all unscathed. Treading lightly on UPS.

-Industrials-Real bargains will come next recession, but MMM has been on my list forever. Might start a position. It will be small. Same with DE. I live next to world HQ so a hometown favorite. Also like BA, CAT and a few others that are tempting. None of them safe from a serious further drop IMO. I don't have any industrials now because the tariff threat was in play before I moved my port to VG and it was all in cash.

-TECH- I have a lot in tech ETFs. May nibble on some CSCO down here. Little else looks compelling to me yet.

For now I am good on the other sectors. I'd like to be balanced within the next 6 months if market allows. I'll always stay fat on healthcare and utilities though.
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#42
(12-20-2018, 06:24 PM)fenders53 Wrote: I've heard a lot about Robinhood.  Almost all my funds are in my Vanguard account so I meet the threshold to get $2 stock and option trades, free ETFs and Mutuals.  I won't feel too bad making purchases as small as $1000.  Even smaller wouldn't be such a bad deal.  My TD Ameritrade account has much higher fees so it's off limits for small purchases.  I'd close the TD account but the investor research content is FAR superior to VG.  

As I've mentioned repeatedly I much prefer entering positions by selling a a put, but I can give that a rest for a little while as I add a number of smaller positions in stocks I've had my eyes on for years, or owned them 25 yrs ago and sold them along the way.  I am getting a bit overweight in some of my big dividend payers lately,  T-KHC-MO etc.  I'll feel comfortable if I diversify the DGI portion of my port a little more.  Overall it's an imaginary problem as 1/3 of my port is in index mutuals and ETFs.  Another 1/3rd in cash but that is going to change as I add more stocks if this dip continues at this pace.

If you don't mind, give me your two cents on the following moves I am contemplating since you own most all of them.  I'll share my port when I get a chance to make a spreadsheet like Eric's.  You own almost all the stocks in my port, or something close enough.  I have all the sectors covered with stocks or ETFs.  

I think I am a little light on consumer non-durables, but a little too heavy on KHC for my comfort as it seems to have no bottom and I don't like the growth prospects.
-Almost sure I will buy GIS now, may lighten up on KHC soon and add more to GIS if further research warrants the flip.  PEP is on the buy list but probably a nibble.  I don't see it as dirt cheap yet.  Most of the the other popular cons non dur stocks do not appear to be undervalued IMO

-TELCOs- Probably buy some VZ soon.  Lighten up on T and add to VZ.  I'm pretty fat on T but wouldn't call it extreme.  I could dump a couple hundred shares and have plenty left.

-Transports, I have none outside index funds. UPS looks good for a nibble, maybe, since it pretty much hit my price target we were joking about last week.  IMO it's virtually impossible for FDX 2019 projections to come true and UPS comes through it all unscathed.  Treading lightly on UPS.  

-Industrials-Real bargains will come next recession, but MMM has been on my list forever.  Might start a position.  It will be small.  Same with DE.  I live next to world HQ so a hometown favorite.  Also like BA, CAT and a few others that are tempting.  None of them safe from a serious further drop IMO.  I don't have any industrials now because the tariff threat was in play before I moved my port to VG and it was all in cash.  

-TECH- I have a lot in tech ETFs.  May nibble on some CSCO down here.  Little else looks compelling to me yet.

For now I am good on the other sectors.  I'd like to be balanced within the next 6 months if market allows.  I'll always stay fat on healthcare and utilities though.

Although I hold GIS, I just can't see adding more now. Typically I'd favor averaging-down, but the debt really concerns me. 72% payout ratio doesn't allow a lot of room to maneuver, and they lost their investment-grade credit rating after the Blue Buffalo acquisition. Past 5-year earnings growth is negative, and their projected 5-year growth (I take forward projections with a pillar of salt) is a paltry 5.85%. There is a not-inconsequential risk of a dividend cut if they fail to execute over the next several years. PEP I love. They are about 5% under their 10yr average P/E at the moment, so roughly fairly valued. Could certainly go down further with a bear market, but PEP at 3.4% yield ain't bad.

For Telcos, I am comfortable splitting my holding almost evenly between the T/VZ duopoly, with a small BT holding for the hell of it (6% yield, with dividend frozen through 2020, most of the Brexit risk and BT Italia scandal has gotta be priced into the stock at this point). 

UPS and FDX are quality companies that will be around generating substantial profit for a long time, IMHO. I'd just nibble on the way down. I'm actually looking to initiate a position in FDX, but my time horizon is 20+ years. If you are a current retiree, I can see how the 1.6% yield and near-term prospects aren't too appealing. 

In the Industrial space, I really like LMT. Have wanted to own it for years, and it hasn't been below a 15 P/E since 2013 (damn close now at 15.4). 3.3% yield isn't historic, but is in the higher range of where it has traded for the past decade, and defense spending is about as reliable as it gets. Looking to open an LMT position this morning. I love my BA shares, but think it is still slightly overvalued. Same feeling about MMM (a company I have wanted to own, but the valuation just hasn't been right when I've been shopping). 

Others I like right now (in no particular order) are cash generating monster AAPL (just nibble on the way down), SBUX if it drops under $60, DG, TROW, and UTX.
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#43
Appreciate the insight. I'll do more DD on GIS. It already bounced off the bottom on the earnings release anyway. I do need another consumer durable at some point. I agree FDX and UPS will be fine long-term. I like the idea of splitting up between T and VZ. I'm all in on AAPL already. I'll check out some of the others.
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#44
(12-13-2018, 04:34 AM)crimsonghost747 Wrote: First of all, I agree with the notion that 80 stocks seems to be way too much. Even if you just skim through their quarterly reports and spend 10mins on each, you'll end up using 13h everytime the quarter changes. I know I spend 10min on some, 1h on other reports. I've been between 20 and 30 stocks for a while now and personally that feels like a good range to be in.

Secondly, I'm not too sure why everyone feels like they can't eat out of the portfolio when they get old. Even if you plan on going somewhere after you die, you can't take any of it with you! I get that you want to leave some for your family and that is fine but it's not like you have to leave every dollar you've managed to acquire in your lifetime. Do the math on it, you probably have figured out an X amount of yearly income that you would like to have so you can retire early, right? And you've probably got an estimated sum of where your portfolio needs to be to accomplish that? Just see how that amount (and the time it takes to get to that amount) changes if you choose to withdraw different amounts on top of the dividend income. Even a 2% withdrawal will significantly reduce the amount that you need to get to your goal. And while you withdraw 2% annually, I'm still pretty certain that the value of the portfolio will keep going up.

It's not that one needs to plan on "Not spending the capital".  We didn't plan it, but once the portfolio got to a certain size, and we did not need to draw down capital to meet expenses, it continued to grow and compound quickly (the larger it gets the faster it grows).  Now we definitely don't have to draw down capital and its still growing. So we build up our cash reserve and just let the portfolio continue on its own.

As for the OP, I believe one should develop their own DG strategy, have an evaluation process, then follow that process to develop a "List of Stocks to Consider". The list would be the stocks one would buy, hopefully at a reasonable price. Ignore all other stocks, or add new stocks after putting the through your evaluation. One does not need to buy or own all stocks on their list, they are just the ones you've screened and determined they meet your own criteria. We are fully invested, retired and only own 12 stocks in all our accounts. I don't suggest 12 is ideal, rather that one does not need to own any specific number, rather, build your portfolio over time and only add new stocks if they meet your buy criteria. Once you have a portfolio you are happy with, add to your current holdings and monitor those holdings and grow your income.
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