Freedom Fund Update – January 2012

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 working at a job I don’t enjoy to purchase goods I don’t need to impress neighbors I don’t care about.

The markets have been extremely resilient lately. I think investors are a little too optimistic about the overall state of the economy and some of the sovereign debt issues. This could mean that there is a market correction just around the corner, which would be more than welcome by me. I always look forward to corrections as a value investor, as that gives me the opportunity to purchase more shares for my money.

I made a few key changes to the Freedom Fund since my last update. I sold all my Telefonica S.A. (TEF) (ADR) holdings, due to what I thought was an unsustainable dividend–which later turned out to be an extremely accurate prediction as the dividend was cut less than a week after I sold. I used capital from that sale, as well as fresh capital from my paycheck and dividends to purchase shares with Emerson Electric Co. (EMR), Illinois Tool Works Inc. (ITW) and AT&T Inc. (T). I’m extremely pleased with these purchases, and all three are new positions to the Freedom Fund. EMR is down quite a bit since I purchased, which may open an opportunity to average down on that position to lower my cost basis.

The current market value of the Freedom Fund stands at $54,852.73. This is a sizable increase from the last published value of $51,379.60. This increase is due to my recent purchases, as well as strength in the markets.

I’m invested in 23 positions. This is an increase since last month, when I was invested in 21 positions. This is due to my purchases of T, EMR and ITW and the sale of TEF.

Another great month for the Freedom Fund. I directed the sale of a weak stock, and initiated positions with three strong companies. The market value continues to increase due to my aggressive purchasing during both up and down markets. It’s great to start off 2012 with almost $55,000 in equities, as that gives me a great point to start from and build onto. I’m looking forward to aggressively adding to the fund monthly, as long as capital and opportunities present themselves.

How are your portfolios doing? Starting off 2012 on the right foot?

Full Disclosure: I’m long ITW, EMR, T.

Thanks for reading.

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23 Comments

  1. Guess I was wrong about TEF being able to maintain its dividend haha. Good thing I didn’t go anywhere near it.

    And great work on reaching $55k!

  2. Henry,

    Thanks! I appreciate your support.

    TEF was a risky play. I got burned a little, but glad I got out when I did! I’ll likely try to stay a little more conservative for 2012, especially when the market is as high as it is.

    Best wishes for your 2012 investments!

  3. Nice call on TEF.

    I agree with the EMR buy. ITW is on my list of candidates for an analysis. My portfolio is unfortunately doing pretty well so there are fewer values to be found.

  4. Happy new year to you. What is your target for end of year 2012?
    How do you get time to analyze 23 positions :).?

  5. How many positions do you want to hold. I read alot of 20-25 positions is a good number with 4-5% of portfolio weighted to each position.

    Warren Buffett says “does one know much about the 50th position as they do the first position”. I believe he has only 10 positions in his personal portolio with dividends of about 42 million a year.

    Good progress you have made in very short amount of time.

  6. Monk,

    Unfortunately for both us, you are correct in the fact that values are hard to find right now. EMR is down quite a bit lately, far underperforming the market. I may add to it.

    Let’s hope for a correction soon! I’ll be keeping my fingers crossed. 🙂

    Best wishes!

  7. Relic,

    Thanks man! Your support is very much appreciated. I’m glad to see your dividend growth machine is running smoothly as well!

    Thanks for the congrats, I hope 2012 brings you much success.

    Take care.

  8. Divideningenieur,

    Thanks! With TEF, I wish the company well. It was a great move for the company long-term, but I think further cuts are necessary. The dividend policy is still a bit aggressive considering the debt load and aggressive growth they’re seeking.

    Take care!

  9. MoneyCone,

    Thanks for stopping by!

    I liked your list of best stocks for 2012. I’m long quite a few and hope to maybe pick up another one on your list.

    Best wishes for your 2012. I hope your finances continue to be successful.

  10. inq,

    I’m not sure about a target for 2012. It’s hard for me to forecast amounts, because my income is based on commissions and goes up and down through the months, and the market also gyrates quite a bit. I’d be happy with $80k or so at year end though.

    I don’t find 23 positions to be overwhelming. As the portfolio grows though, that could change. I could see how 40+ could be difficult to manage with a full-time job and everything else life has to offer.

    Best wishes! Keep in touch.

  11. Anonymous,

    I think owning 40 or so is where I’ll stop. I don’t want to be overwhelmed with managing a portfolio, but I also want to diversify my investments to the point where one company’s dividend cut or elimination will not affect my income flow. We’ll see. I’m still adapting and changing as I go. It’s all just part of the fun!

    Take care!

  12. Compounding Income,

    It’s hard to find value right now. EMR is down quite a bit and is attractive. I like stocks in the tech field, MSFT appears attractive at these levels, but I’m not overly in love with the business. INTC has shown weakness. Some value can be found in health care. I think most of your consumer based stocks are the ones that are high fliers right now. I really like PM, as you do, but gosh it’s on fire! UNS also looks interesting, one you pointed out to me.

    Keep me updated on what you’re interested in. I hope to purchase something in mid-January.

    Best wishes.

  13. Pey,

    Interesting. I’ve looked at it sparingly over the past year. They are down a whopping 32% YTD. Any particular reasons why? I have to admit, this isn’t one I follow regularly.

    Strong yield, low payout ratio. Revenues have stagnated and I’m not particularly interested in the brand name toy business. I don’t know how much of an economic moat is present here? Let me know what you think. Certainly something to consider.

  14. Hey Mantra,

    You bring up a good point in that such a strong brand shouldn’t really be down 32% YTD. I’m not certain why HAS has taken such a beating in 2011 and it wouldn’t be a bad idea to discern why prior to investing your hard earned money. Unfortunately, I’ve found when you’re dealing with stocks with such small market caps, it’s sometimes difficult to get the scoop on why it’s not doing well. On the other hand, the fact that it’s a small company could also suggest it’s overlooked by many investors, unlike companies like Apple and Exxon Mobil.

    Hasbro’s economic moat, in my opinion, is very far reaching (here’s a few of their products: NERF, MARVEL, STAR WARS, LITTLEST PET SHOP, TRANSFORMERS, PLAYSKOOL, MAGIC: THE GATHERING, PLAY-DOH, FURREAL FRIENDS, MONOPOLY), not to mention the revenue they bring in from the movies they produce as well.

    Hasbro’s a stable company that has been paying out dividends for decades while sporting a two year low and a dividend yield that’s significantly higher than the historical norm. I’m inclined to say there’s a margin of safety here that many dividend-paying stocks don’t possess these days.

    It seems to me the toy business will be a benefactor of a rapidly improving economy, which I believe we will witness in the next few years, and I’m happy to sit back and collect a near 4% dividend in the meantime.

  15. Pey,

    You make a compelling case. I’ll have to research this one a bit more. I need more small cap positions in my portfolio and I love picking up stocks on recent weakness. I’ll have to research this one a bit more over the next few days.

    It definitely appears to have a fairly large margin of safety, at least compared to its own historical norms.

    Hmm, thanks for the information! I will definitely look into it a bit more.

    Thanks!

  16. “rapidly improvin economy….next few years”? Not so sure about that, how or why do you come to that conclusion?

  17. thanks. however how often do you get time to analyze the 23 positions.

    when i meant 2012 target i was talking about dividend income target.

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