Recent Buy

buyThe market’s volatility has been a little head-spinning lately. It’s easy to get blurry eyed and dizzy, but I try to keep my head on straight and stay focused on my long-term goal to build a passive income stream to exceed my monthly expenses. This week has actually been pretty light, with the Dow Jones Industrial Average having a rough start on Monday, but bouncing back quite nicely over the last couple days. The DJIA finished up 131 points today.

My recent buy was a little different from my normal moves. I haven’t documented any stock sales since I started this blog, as every position I enter I plan to hold for a very long time. However, the choice to sell a position was essentially made for me, as Harleysville Group Inc. (HGIC) agreed to be bought out by Nationwide for $60 per share. This was great news for me, as HGIC was trading well below my cost basis. This instead turned out to be quite a large profit for me. I decided to sell all 64 shares of HGIC on 10/3/11 for $58.73 per share. I then took those funds and reinvested it into three separate companies. This will be one of the rare times I use profit from a sale to make other purchases, as I usually use collected dividends and capital from my day job to buy stocks. I will highlight my three purchases below:

I purchased 25 shares of Philip Morris International Inc. (PM) on 10/3/11 for $62.50 per share. This was an addition to my current position with PM, and I now own 60 shares of PM. I’m bullish on PM and have written the reasons for being so. I think it’s going to be a solid performer over the next couple decades. While smoking rates are slowly decreasing here in America, emerging markets with additional disposable income are going to fuel profits for PM as it gains new clients and simultaneously raises prices on its products as demand rises. My entry yield on this purchase is 4.92%, which is very solid. This purchase will provide me with $77.00 in yearly income based on the current payout. Incidentally, this is one my Dividend Growth Index picks.

I also purchased 20 shares of ConocoPhillips (COP) on 10/3/11 for $61.53 per share. This was another addition to an existing position, and I now own 55 shares of COP. I think energy is a great place to be in. While it will be especially volatile as a lot of major oil stocks are tied to the price of oil, volatility can produce opportunity. When oil drops, it’s time to purchase quality oil stocks. COP fits in that category for me. My entry yield on this purchase is 4.29%. This purchase will provide me with $52.80 in yearly dividend income based on the current payout. This is another of my Dividend Growth Index picks as it turns out.

My last purchase was 32 shares of Aflac Incorporated (AFL) on 10/3/11 for $33.85 per share. I opened a position with AFL last month at a price slightly above this purchase. I don’t mind averaging down when a stock I purchased falls in price. If the fundamentals remain the same, then I consider it a great time to lower my cost basis. This was one of those times for me. I now own 74 shares of AFL. My entry yield on this purchase was 3.54%, which is the lowest of my three buys but still solid. This purchase will provide me with $38.40 in yearly dividend income based on the current payout. This wasn’t one of my picks for the Dividend Growth Index, but The Passive Income Earner did pick it. Dividend Monk recently did a fantastic analysis on this company!

Some analyst opinions on my buys:

*Morningstar currently rates PM as a 3/5 star valuation.
*S&P currently rates PM as a 5-star Strong Buy with a 12-month target price of $83.00.

*Morningstar currently rates COP as a 5/5 star valuation.
*S&P currently rates COP as a 4-star Buy with a 12-month target price of $93.00.

*Morningstar currently rates AFL as a 4/5 star valuation.
*S&P currently rates AFL as a 4-star Buy with a 12-month target price of $42.00.

This may not be the last of my buying action this month, as these buys were not fueled by fresh capital, but rather by a rebalancing from the sale of HGIC. I’ll be receiving fresh capital in the form of a commission check tomorrow, and I’ll be waiting for the next market dip. I’ll be updating my portfolio at the beginning of November, which will include these recent additions.

What are you buying??

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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29 Comments

  1. Hi Mantra & guys,

    Nice picks Mantra, looking for money to buy PM.

    On tuesday I opened a new position on KO. I bought 15 shares at $63.57, it will provide a yield around 2.90%, which I think is ok for KO.

    Very truly,
    Manefla

  2. Great buys DM! I’m a fellow shareholder in PM and AFL. I believe both are great long term holds. I like COP and energy stocks in general. But their high capital expenditures, thin net margins, and government hatred towards the sector doesn’t fit my cup of tea.

    I do like industrial companies though. They’re my cylindrical play for when the economy picks up. I recently added more caterpillar and united technologies shares to my portfolio.

  3. Hey there Mantra!

    I managed to open a new position in Methanex (MX on the TSE, MOEH on the NYSE) on the market meltdown, and added to my position of Southern Pacific (STP on the TSE). Both of them were trading at near 52 week lows at the time, and both are companies I have long followed and/or held (Methanex is one I’ve long been bullish on, but was forced to sell my position in 2010 when I moved back to the province I live in now, I’ve been waiting a LONG time for a price I felt was right to get back in). To me it’s a no brainer. A dividend paying, solid company with $240+ million in cash and an undrawn credit facility, producing a staple commodity used in multiple industries.

    Averaged down big time on STP with the buy as it was at nearly .95 when it’s been trading at 1.10-1.75 all year. Back up to 1.09 as of today so can’t say I’m upset at having nearly doubled my holdings in it.

  4. I’m glad that you were able to get out of the HGIC position when it was otherwise below your Cost Basis!

    I also think that purchasing some solid, long-term growth stocks was a good move.

    We can only hope that another take-over boosts another of your positions for a similar result!

  5. This is gorgeous. I am super happy for my fellow investors’ HGIC story (I didn’t buy, myself, as the market cap was too low and the payout ratio too high). The AFL selloff has been one of the most egregious and fear induced that I have seen in a while. The CEO called for EPS in the low 6 range in the last quarterly report. I too bought in the early 30’s and now AFL is 38. Very curious to see if and what the AFL raise will be this year.
    My congratulations to you on this fabulous move.

  6. Manefla,

    Great move on KO. I think it’s a pretty good buy under $65 and it’ close to that level right now. I think you got a great price. It’s shown some weakness in the recent downdraft, which is nice for people (like you and I) that are looking to initiate a position or add to an existing one.

    Best wishes with your Coke investment!

  7. Henry,

    Great to have you as a fellow shareholder with PM and AFL!

    Great move on your industrial plays! I’m not overly familiar with CAT personally, but I think UTX is a great play right now. That’s been a perennial dividend growth pick for a lot of investors. It’s certainly on my watch list as one of my industrial picks.

    Thanks for stopping by.

  8. Neu Grufti,

    Although I am unfamiliar with the companies you’ve invested with, it sounds like you did a great job with averaging down on your STP investment. The fundamentals stayed the same, but the market discounted it and you swooped in and picked up a value and lowered your cost basis. I’ve done that same thing a number of times now.

    Great job!

  9. MoneyCone,

    Great move! UL is on my watch list, but I’m trying to limit my foreign exposure right now with the uncertainty in the eurozone. I currently have two foreign investments with TOT and TEF and I think that while both seem like pretty solid buys right now I need to be careful with my foreign exposure. Currency risk is also something to think about.

    Best of luck with your UL play. That seems like a pretty solid company, and one I’ve had my eye on for some time.

  10. DFTLR,

    Thanks for the encouragement. I was thinking about holding on to HGIC as it will basically act as a bond holding until the sale goes through to Nationwide. Also, depending on when exactly in 2012 it went through this could have gone from a short-term gain to a long-term gain for me, thereby producing less tax implications. But, I decided there were better opportunities and I decided to act on them!

    Sometimes you need to make tough decisions. This was one of them.

    Thanks again for stopping by. I definitely ju-jitsu’d my way in! 🙂

  11. Earning Jack,

    Nationwide is definitely on my side. HGIC was trading pretty significantly below my cost basis when it was going for $26/share. Nationwide was pretty much my white horse.

    It’s tough to lose what I thought was a strong company in my portfolio, but I’m glad that I got out of that unscathed.

    Best wishes with your investments!

  12. Joe,

    Thanks so much. I think that AFL was just screaming at me to buy it. It certainly may fall back down to close to $30 again, and if so I’m buying more.

    My congratulations to you on your fabulous move as well. I’m glad to have you as a fellow shareholder and I guess we were thinking the same thing.

    What else are you looking at currently? I have some capital to make some moves with and currently looking at T, PEP, KO, LMT, VOD, MMM, UTX and a few others. Since the market has rebounded, I don’t see any thing really popping out at me right now, so I may just hold.

    Thanks for stopping by. I always appreciate your insight.

  13. Nice work….

    I too have been trying to raise some capital for some purchases and am looking at some of the same stocks (AFL, PM). I also added to COP below 62 and feel great about it.

    Feel like that since I didn’t pull the trigger on AFL in the low 30s and now it’s at 38 that it’s getting away from me. Resetting my limit order around35+ to hopefully add it to my stable, but we’ll see. It’s an interesting mental exercise when a stock comes close to your buy price and then moves away…do you chase it, do you resign yourself to missing the opportunity and look elsewhere…

    Probably will wind up sticking more funds in INTC.

    I have to say, I’m nowhere near as frugal as you mantra, but I’m envious of your ability to keep building/churning out savings that get rolled into steady investments. Can’t help my spending habits towards good (reasonably priced) food and craft beers but I’m trying to be more aware of how much is going out….

    BuildingYield4years

  14. BuildingYield,

    I completely hear where you’re coming from when a stock enters your wheelhouse and then gets away just when you’re ready to make a move. That has happened to me a number of times. As I’m fairly young and a long-term investor I’ll usually bite if I fell it’s a great value. I don’t really think there’s much difference with paying $30 or $30.50 for a stock when you’re looking at that transaction 20 years down the road. That’s just my opinion on it. If it’s already fairly or overvalued I won’t bite…but then again if the stock was overvalued it likely wouldn’t have been in my wheelhouse in the first place.

    INTC seems like a great move as well. I’m a big fan of that business and I’m hoping I can catch it below $21 and even $20 if I’m lucky. I’m also currently looking at telecoms including T and VOD right now, industrials and defense stocks, consumer stocks (K0, PEP) and a few others. I have some available capital, so I’m praying for a downtrend!

    Well, you don’t have to be as frugal as me to be successful. I’m trying to be “extreme” with my frugality and investments to achieve my lifelong dream (financial independence) as fast as possible. It all really depends on your timeline, motivation levels and how happy you are in your current position. I dislike my career, find it hard to replace my income in this economic environment and I’m actually really enjoying my life transformation anyway.

    Best of luck to you! Cheers.

  15. What’s up D Mantra?, I hear your concerns about foreign exposure and currency risk, but did U consider more exposure to Canadian stocks. Might be a good way to get some foreign diversification without as much risk as the Eurozone. Lots of Canadian companies trade on American exchanges, pay regular quarterly divys and are often overlooked by American investors as your fellow dividend superhero (LOL) D. Ninja posted in some comments. I’m especially positive on Canadian banks (very stable relative to rest of the world). Right now I have positions in TD and Telus (TU). And I just bought SLF. I’m looking at CNI and at one point had BNS. I only sold it after making substantial capital gains that I could use to purchase other positions to increase diversification. Hard decision and in retrospect I wish I would have kept some shares.

    -Rock the Casbah

  16. Thanks for asking, bro!

    I could answer your question as far as what I am looking at right now all sorts of ways. As I’m sure you’ll agree, the volatility of the market these days makes it hard to answer that question with any sort of consistency.

    So I’ll just give you a gut-shot answer after looking at my lists and prices, on-the-fly….So this is basically what I think looks pretty decent as of tonight’s prices, Oct 6 (with varying decency, i.e. I must get it now vs. getting itchy):

    WMT, PEP, PM, MDT, WAG, SYK, BDX, and don’t forget…HRS.:)

    Do it! I just bought some HRS at 33.75.

    And I’d probably do NUE, NSRGY, and RBGPY too. Now I need to get the fund for all those investments:)….

    Keep it up…Again, heartwarming to hear of your HGIC story. A nice happy accident. When I saw the news that they were to be acquired that morning, I knew right then and there that there were probably a lot of very happy dividend growth investors. I didn’t realize just how happy until I looked up the ticker out of curiosity and saw +100%. Dayum!

  17. Rock,

    I hear you on diversifying into the Canadian companies listing on our exchange. In that way you limit some of the concern with ADR’s.

    I completely agree with you on the Canadian banks. They are much stronger and much more stable than many of our banks. I think there are some stronger buys in the smaller, regional banks here in the U.S. that don’t have the mega-sized liabilities creating toxicity on their balance sheets. But for large bank plays, you brothers north of the border have much, much better choices!

    Best of luck with your choices Rock.

    Take care.

  18. Joe,

    I appreciate your insight. I agree with you on a lot of your plays…WMT, PEP, BDX and MDT all look pretty attractive right now.

    As I always say…so many equities, so little cash.

    You’ve really got me thinking on HRS. I promise you I will do much more research on that one this weekend. It’s recent weakness perks my interest. I’ve wanted to get into something in that general space, with RTN taking most of my attention. HRS has a lot of room for growth and doesn’t face the unfunded pension issues (that I know of).

    I see some potential Joe. I appreciate your info.

    One more question, if you don’t mind. What do you think of T right now? The acquisition of T-Mobile could be pretty nice, but if it doesn’t go through, the $3 billion payment leaves me a little leery. High yield, low debt and trending at support looks interesting.

    I’m looking at making two plays this week. Choices, choices!

    Best regards.

  19. Dividends Warrior,

    Glad to hear you’re looking at starting a U.S. dividend portfolio.

    It’s hard to say where to start. I started with a little over $7k to start my portfolio and I have been dollar cost averaging my way in ever since.

    Be patient, and when the market dips again, get your feet wet!

    Good luck!

  20. Kyle,

    I’m not sure if I’m reading your comment correctly. I’m assuming you’re asking how much in total dividends per forward year am I expecting from all the stocks I own?

    If that is your question, I’m somewhere around $1,702.00 in forward dividends based on current payouts (rounded). That number obviously increases dramatically every month, so that’s only accurate as of now. Also, some of my holdings are foreign, and currency fluctuations variate that number daily. That $1,702.00 payout would mean my portfolio has a yield of somewhere around 4.2%, based on current value.

    Thanks for the question!

  21. Nice buys DM! Its funny to hear you talk about intel; my good friend works for them and he’s hoping for the exact opposite, waiting for the stock price to hit 24 to exercise some of his options.

  22. Big J,

    Thanks! I appreciate it.

    Intel is interesting, it’s been range bound for the last year or so, hanging out around $21 or so a share. I think it’s a superb buy close to the $20 level if you can buy it there. It’s a pretty solid buy even at current levels, imo. Best of luck to your friend on his options!

    Take care.

  23. DM,

    Nice move on adding to some existing positions. I haven’t bought anything lately, however, I am expecting more than $400 in dividends in October that will reinvest automatically. Nothing like dollar cost averaging into your positions, especially when everything is down for the moment. I also picked up an 8% dividend increase in one of my positions.

    I might not make any purchases for a few months. I will continue to add capital to my account as I am trying to whittle down some margin debt I am carrying at the moment. I used margin to buy some shares on some really nice pull backs. Now I have to bite the bullet and pay off the margin so I don’t have margin interest working against me…lol…

    Income Pirate

  24. Pirate,

    Wow. $400 in dividends for one month is fantastic. It’ll likely be at least a few years before I’m getting that kind of passive income. Congrats to you on that.

    I hear you on paying off your margin debt. You definitely don’t want to be paying interest out when you’re ultimately trying to maximize your income on your investment dollars. The two would just cancel each other out. I have some capital in the brokerage account right now (~$3k) that I haven’t deployed yet, but likely will be doing so next week.

    Best wishes!

  25. Hi DM,

    How do you hear news about your stock picks? Do you have a news service set up? I didn’t have HGIC but you are the 2nd person to mention how it was being bought by Nationwide and sell your position. I know I would have with the same news, but how do you keep up to date.

    Thanks,

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