Well, the time has come to update the Freedom Fund once again as we start another month. The Freedom Fund is my portfolio, and I think it’s aptly named. My portfolio is my way to freedom; freedom from a job I don’t desire to purchase goods I don’t need to impress neighbors I don’t care about. This journey is all about freedom and flexibility. One day, the dividend income this portfolio generates will fully cover my expenses and my time will be completely my own. What could you possibly want to own more than your time?
I’m extremely fortunate that I’m able to post these updates every single month, which shows the power of monthly contributions to investments because of the high savings rate I maintain. It shows how a relatively large sum of money can be built through the power of time, patience and perseverance.
It’s important to keep in mind that while updating the overall value of my portfolio is important for historical reference and for purposes of keeping track of total return, my main focus is on the rising dividend income stream the Fund provides.
We’re now a full month into 2015 and we’re off to an excellent start here. The S&P 500 index is already down more than 3% YTD, which is fantastic for those of us (most of you reading) that are actively accumulating assets. Cheaper stocks generally means lower valuations, which in turn means higher yields on those same stocks. Not only is the broader market down for the year thus far, but it’s been quite volatile along the way, with the energy sector’s problems seemingly reverberating across the economy. Fine by me, as I simply view short-term volatility as nothing more than a long-term opportunity.
I was just a little busier this month than I originally planned on. I started the activity off early on, with the addition to a burgeoning position in National Oilwell Varco, Inc. (NOV). This stock continues to sell off, so I may use that as an opportunity to average down one more time. I remain leery about adding too much to energy right now due to the fact that I already have too much exposure to that sector, as well as my belief that opportunities will continue to present themselves throughout the year.
It didn’t end there, though. My goal of $7,200 in dividend income this year isn’t going to complete itself, so I continue to keep the pedal to the metal. After a surprisingly impressive fourth quarter report, I added to my investment in AT&T Inc. (T) for the first time in more than three years. The yield near 6%, strength in wireless, intelligent acquisitions, and improving free cash flow were too much for me to pass up, so I didn’t.
I’m pleased with these moves. I believe NOV is substantially undervalued here and the company sports some of the best fundamentals in the oil & gas space. T is roughly fairly valued, but I’m honestly surprised that the stock isn’t priced higher here. I’ve noticed that investors have been hungry for yield over the last few years in an otherwise low-rate environment, which has pushed many REITs and utilities to all-time highs. Meanwhile, T’s been barely touched. I’m very happy with that, as I was able to snag a yield near where it was a few years ago.
The current market value of the Freedom Fund stands at $181,728.90, which is a 0.8% decrease since last month’s published value of $183,298.78. The portfolio could have actually done much worse, factoring in my higher exposure to energy. However, I was surprised to see that it declined by such a low percentage. Even factoring out my recent deposits, the portfolio decreased by a little more than 2%.
I’m excited. The relentless march upward has paused over the last few months, which means it could be a great time to add capital to select stocks. I can only hope the broader market falls by another 3% this next month, bringing down a large number of stocks with it. In the meanwhile, I’ll continue to allocate my limited capital to the best opportunities I can find, while keeping overall portfolio construction in mind.
I was a little more trigger happy than I should have been in January. My cash position remains low, which isn’t ordinarily worrisome for me. However, it’s a potential issue right now only because I view the odds of owing a substantial amount of money for my taxes this year as quite high due to the fact that I made a mistake by underpaying quarterly estimated taxes in 2014. That won’t happen again, as I was fairly aggressive with setting up the payments this year. I’ll continue to reassess this moving forward, but if my estimate is low, I’ll view that as a wonderful problem to have because that means my income is higher than I anticipated. At any rate, the amount of capital I’ll have to allocate toward stocks over the next few months is likely to be lower than usual.
The Fund now has positions in 51 companies. This is unchanged since last month. Both transactions in January involved stocks that were already in the portfolio.
These updates are mainly designed to show the increase or decrease in the value of the underlying equities I’m invested in, but the main purpose of investing in dividend growth stocks is for the rising stream of dividends over time. Thus, I don’t put too much emphasis on these monthly updates. I think it is a good idea, however, to keep track of the rising (or falling) value of one’s securities and be aware of where they are in terms of the marketplace and whether or not certain stocks are attractively priced. It find it a helpful exercise to update the values monthly. It gives me fresh perspective on which equities are performing well and which aren’t, and from there I can make educated decisions (based on further due diligence) on which stocks I’d like to add fresh capital to (while considering portfolio weight as well).
Full Disclosure: Long NOV and T.
How did your portfolio perform in January? Did you add as much capital as you wanted? Where are you seeing opportunities?
Thanks for reading.
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