Recent Buy

Well, I’ve decided to make a recent purchase. As I’ve said a few times before, I like to “walk the walk” when I “talk the talk”. I believe in making purchases through high and low markets, and I believe in dollar-cost-averaging into positions on a monthly basis. The market has been extremely volatile lately, but that hasn’t kept me away. I like to look past all the chaos and peer into what I think are good values, no matter the market conditions.

I have only made one purchase so far this month. I don’t know if I’ll have enough capital to make any more moves this month. Paying off my car has left my capital reserves a little parched, and for now I’m excited about what I have decided to do.

I purchased 72 shares of INTC at $21.44 share on 6/10/11. I am an avid fan of Warren Buffett. I believe, as he espouses, that you should only invest in companies that you totally understand, in industries that you can easily become familiar with. It is because of this investment thesis that Warren Buffett does not invest in tech based companies. He believes in investing in his “circle of competence”. I am somewhat inclined to agree with him on this. I have not invested in a tech company before this purchase, and have been generally shy about initiating any positions or committing any money to any tech stocks.

I feel pretty comfortable, however, getting my feet wet with Intel. I recently opined about my interest in Intel during my recent watch list article. When I wrote that article I was all but certain to initiate a position with Intel. I feel it is one of the better values on the market, with a relatively high yield, low P/E ratio and generally positive growth prospects. I feel that once they start to really grasp the mobile/tablet market the sky is the limit for this company. If they falter in that market, I really feel that bad news is already priced into this stock. The downside is limited, in my opinion, while the upside could be quite dramatic. We will see. At any rate, I don’t want to make this position a core holding, or a cornerstone of my portfolio, but I feel comfortable with the size of the position and would actually feel comfortable with doubling it if weakness continues. Beyond that, I would monitor and add as allocation would allow. We all know that the tech industry can change overnight, so one has to be careful about how much capital is allocated toward tech stocks. The entry yield on my investment is 3.92%.

What are you buying?

Thanks for reading.

Comments

  1. says

    Same here! I don’t normally invest in Tech companies or Financial companies (that’s my twist on Buffett’s philosophy!).

    Here’s my take on Tech – I understand that sector quite well and that’s probably why I don’t want to take the plunge.

    Things change very quickly in this sector and extremely hard to predict who’ll remain and who’ll bit the dust. I’ve seen this over and over again – companies that looked invincible at one time didn’t even last for a decade.

    I avoid domestic financial stocks because it is hard to tell who engages in creative accounting. If a company that produces goods does this, they get spotted very quickly. Not so with GS or AIG or Enron. I don’t trust the auditors either (Moody’s anyone?).

  2. says

    “I believe in making purchases through high and low markets, and I believe in dollar-cost-averaging into positions on a monthly basis. The market has been extremely volatile lately, but that hasn’t kept me away. “

    There is much wisdom in your approach. I DCA my Index Funds on a regular basis – for example I just added to my DJIA Index Fund.

    I also believe in taking it one step further, and making a deliberate purchase on market dips or corrections. For example I added to my core position in the Royal Bank (RY-T) as it is off its high by over 10%. Wish I had money to buy more stocks right now!

    When it comes to tech, I love tech, especially since I used to be in the busienss. However tech is always a bad investment. These stocks are volatile and the life-cycle is short (look at Nortel and now RIM). I have a small speculative play in Cisco, which frustrates me to no end, because it could be used for a better investment. But I will never buy anymore tech stocks – ever!

    I think Intel is an exception, and I think you will be OK since they are the worlds largest semiconductor producer, and in a sense have an economic moat in this industry. They have pumelled National Semiconductor etc. and they may be in an excellent postion after recent events in Japan.

    The big cable and cell phone companies I view more as utilities rather than tech companies. For example I have positons in Shaw Cable (SJR.B) and Rogers Communications (RCI.B-T).

    Keep up the good work Mantra! :)

  3. says

    Moneycone,

    I don’t blame you on your aversion to finance stocks. I’m almost as leery of them as I am tech stocks. I have thought about WFC and USB from time to time, but I am just seeing better places to put my money. Maybe a finance stock would be better as an outlier for a portfolio. I think it will be some time before finance stocks become the cornerstone of dividend portfolios like they used to be.

    Take care!

  4. says

    Ninja,

    Thanks for stopping by.

    I understand what you mean by emphasizing your buys on down markets. I try to do the same by making smaller purchases in what I feel are “up” months and trying to stress larger purchases on what I feel are “down” markets. My issue has always been deciding whether I have the accuracy or skill needed to differentiate between “up” and “down”, so my capital outlays are probably a more minimal than what most people would feel comfortable with.

    I appluad you on increasing your holdings when a core position was down in value. That’s the steadiness in the ship needed to stay the course.

    I hope you are right with Intel. I really feel that most downside protection is already offered in the stock price. The yield is strong, the dividend is growing and they appear to be about as healthy as a tech company can be. They also appear to have changed from a growth company to a pure value play. We’ll see where it goes, but I’m excited!

    Take care.

  5. Anonymous says

    Robert Drach had this to say about DCA ” most important,DCA methods can be demonstrated to be truly successful when prices are relatively low and more of the investment was purchased. Applying basic logic, why bother to buy during the periods of higher pricing? If the buying is confined to periods of decline, the results would generally be superior ” I agree 100%

  6. says

    Anonymous,

    I agree that DCA, just the same as any other buying strategy, would be best when the market is down. But, unfortunately, who’s to say the market won’t fall another 500 points next week? Will it rise by 500 instead? I don’t know. That’s why I believe in looking at individual securities that are undervalued or fairly valued in whatever market that is currently prevailing.

    Thanks for reading! Take care.

  7. says

    Mantra,

    I think you have it right here. Intel is a fairly compelling value right now and is worth allocating capital to. Like you, I don’t worry about picking bottoms, I just search for a fair price and average into positions over time. Too many times a great opportunity has slipped away waiting for a better price that never came. I really enjoy reading your blog, keep up the good work!

  8. says

    SellingTheta,

    Thanks for stopping by.

    I agree with you on letting opportunities slip away waiting for a better price that never came. If it’s a good business with good growth prospects at a fair price I’m always interested.

    I seen your portfolio. Very nice. A lot of Philip Morris there, and I would love to pick some more up myself.

    Keep in touch.

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