As I’ve stated before I would like to show readers exactly when I buy and sell any positions. I decided to make two moves today. In this market it’s tough to find value, and it’s extremely difficult to find great companies trading for a discount. I have been holding on to a small amount of cash for the past week or so and missed the downdraft the market experienced back in the middle of the month. In the end, I don’t trade on trends. I believe in buying quality companies at a fair price every single month, as funds allow. To be honest, I had planned to allocate some funds towards starting a position with AT&T, but Big Blue ran away from me. So, I had to look elsewhere for deals.
I decided to start a position with a new holding, and I decided to direct some funds towards my largest holding.
I purchased 40 shares of TEF on 3/31/2011 at $25.24 a share. Based on the last known dividend payment, this investment will provide me with $72.00 in dividends this year. I like the international exposure and growth, I love the entry dividend yield and dividend growth of this company. They have grown dividends for 8 years, and I think the Latin American market is going to provide revenue growth in the future. I had my mind set on a telecom, and since T had a large run lately with the news of the T-Mobile merger, I felt TEF was a nice addition. I talked a little about TEF recently, and mentioned how I wanted to diversify my portfolio a little further, and wanted to increase my portfolio’s overall yield. The entry yield per Google Finance is stated at 6.82% right now, but it’s a little misleading as Telefonica recently stated they were raising the dividend by 14%. With that increase, it’s an entry yield over 7%.
I also purchased 17 shares of JNJ on 3/31/2011 at $59.41 a share. At current dividend rates, this investment will pay me $36.72 this year in dividends. I’m confident that the dividend payout from JNJ will be increasing shortly, however. I feel anything below $60 per share on JNJ is a significant value with little downside and a lot of upside potential. I don’t think it’s going to pop anytime soon, due to the ongoing quality control issues and recalls, but I think this is a great entry point for a long-term holding. This price is right in line with my cost basis and I feel very comfortable about that. Warren Buffet has a large investment in JNJ and I think he also sees a lot of value in this great company. I believe once the quality control issues are resolved and management starts righting the ship we’ll see some increased interest in this health care stalwart. The entry yield right now is at 3.65%, which is a fantastic entry yield for a dividend-grower like JNJ, and that’s before figuring the likely increase in April. They have been growing dividends for 48 years, and I don’t think that is going to stop anytime soon. This position is now my largest in the portfolio, and I will probably not be adding more anytime soon so as to diversify into other holdings. But if it drops below $57, I may reverse that decision!
Overall, I’m happy with my trades. Both companies I purchased have largely missed the run-up that the markets have experienced over the last couple weeks. Both companies are a little out-of-favor with investors, with JNJ’s recalls and TEF’s large exposure to a weak western Europe market. But, just when a company is most out-of-favor is when I like to strike. I have largely become fully-invested at this point and my cash position has been temporarily depleted. I’ll have some more allocation to cash next month and we’ll see where the markets are at that point.
What do you think about the trades I made?
Thanks for reading.
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