Freedom Fund Update – June 2014

piggybank1Well, 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 replace my day job’s income and my time will be completely my own. What could you possibly want to own more than your time?

I feel extremely fortunate and thankful 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It’s important to keep in mind that while updating the overall value of my portfolio is important for historical reference and for purposes of keeping track of total return, my main focus is on the rising dividend income stream the Fund provides.

May was a bit of a snoozefest for my portfolio, with very little activity. Of course, I prefer it to be that way pretty much every month. This month was particularly slow for me, however, due to the changes I’ve made in my personal life. Quitting my full-time job to move to Michigan and focus on writing while spending time with family has obviously put quite a dent in my free cash flow, and as such I invested no fresh capital. However, that doesn’t mean that I did absolutely nothing during the past month.

I decided to sell off half of my position with Lorillard Inc. (LO) in the middle part of the month due to what I felt was overexposure to tobacco in general, excess risk due to reliance on one product that could face unfavorable regulation in the future, and a strong run in shares. I then pretty much immediately reinvested that capital into a new position with The Clorox Co. (CLX) as I felt the household brands provided an economic moat while the valuation and yield in today’s market made sense.

The current market value of the Fund stands at $162,809.40. This is an increase of 1.35% over last month’s published value of $160,634.85. Not as impressive as I was expecting, but I also realized some weak stock performance from the likes of Target Corporation (TGT) and Aflac Incorporated (AFL) – two of my larger investments.

I’m expecting to make at least one investment with fresh capital during the month of June, which I’m particularly excited about. It’s funny to be excited about something as routine as buying stocks, but just getting back on the horse after missing the opportunity of investing fresh capital for only the second time in over four years feels great! Investing brings great joy to me, so I’m anxious to get back to it in June and see what happens. It’s very likely that one of my purchases will be one of the stocks I listed on my recent watch list article, so stay tuned!

I’m currently invested in 47 companies. This is an increase since my last update due to the new position in CLX. I anticipate new positions to be limited going forward as I’m getting fairly close to my self-imposed limit of ~50 companies.

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. So, with that said I don’t put too much emphasis on these monthly updates on the value of my portfolio. 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 proves to be a useful exercise, for me at least, 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 LO, CLX, TGT, and AFL.

Have a great May? Portfolio performing as expected?

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

Edit: Corrected fourth paragraph.

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44 Comments

  1. I think Clorox will be a good long term hold… A lot of people of Clorox products in their homes on a ongoing basis along with another holding of yours, Proctor & Gamble. I do think it is good to keep track of market value of one’s portfolio as compared to the cost basis of each position to allow the investor to see if their investment is performing well.. I like to keep track of the weighing by position and by income also.

    NOTE:: in the 4th paragraph down you said , “June was a bit ..” . Should be May .

  2. DM,

    Definitely good to see the MV of the portfolio, for sudden larger trends in your portfolio, to give you a bigger “bump” in the shoulder to scan your stocks to see which one’s are back to being undervalued/attractively priced. Congrats on the slight increase, but as us dividend investors truly want – we want our strong/solid/sound companies to slide a little to pick up even more shares with our planned capital. Here’s to hopefully an attractive June! Thanks DM, talk to you soon.

    -Lanny

  3. Congrats again on picking up CLX. I’ve had that one in my portfolio for a long time, even though many people were shying away from it due to it’s debt burden.

    It’s neat that you can still see portfolio action even if you aren’t putting in fresh capital. Portfolio action will always exist, albeit at a lower pace =).

  4. June has been good to me yet again. Seems 2014 thus far has been a winner. A few winners for me have been the following:

    – AAPL, bought in 2013 @ $440, now @ $630
    – MO, bought in 2012 @ $30, now @ $41
    – INTC, bought in 2013 @ $22, now @ $27

    Few of my price gainers of late, anyway. I take a more holistic approach to my portfolio. I have a slight preference for income-stocks, but will buy anything so long as the risk/reward seems to make sense.

    I’m not sold yet on a pure dividend growth strategy, but I see its merits for a portion of my portfolio. I’d like to probably see an even split in passive income between rental properties and stock dividends. Based on that, I still have another $3k/yr to go from dividends!

    Happy investing!

  5. Btw, I’m very interested to read/hear about your investing strategy once you reach the 50-stock “limit”. Obviously, you may go a few over, but naturally you’ll be looking to “reallocate” among existing positions, and eliminate any dogs.

    I think the hardest part about dividend growth investing is knowing when to hold ’em and knowing when to fold ’em!

    Even a thorny rosebush needs a little pruning once in a while.

  6. Hey DM,

    I appreciate your move of selling Lorillard for Clorox and I believe it will deliver good returns but I have to say that Clorox debt scares me.

    Regarding the market value of the portfolio, even though you don’t intend to sell, it always feels good when it goes up. Sadly, up seems to be the only way in the latest months, it’s getting increasingly hard to find proper value in this market. I’m getting concerned that Mr. Market will get overexcited and will keep buying and increasing valuations to unreasonable levels. Let’s see!

    Best,
    DividendVenture

  7. Another great month. Over a 1% gain to in market value of your fund is not too shabby. Clearly, we are in the midst of a ‘goldilocks’ market. Hey, ride it for a long as you can! Like the CLX and AFL too 🙂 Thanks for sharing the update. Always look forward to more.

  8. Hi DM,

    As mentioned, it is interesting to monitor your overall portfolio value, but the actual changes don’t matter too much. A 10% rise will not increase my dividend income by a dime, whereas a fall of 10% will not decrease my income. As such it is quite irrelevant. On the other hand, a sharp fall of one of the companies in your portfolio might indicate that something major happened, which might be an indication of other problems (maybe even leading to a dividend decrease),

    For myself May was fine. Overal the portfolio value increase with 3,8%, but mostly because of the acquisition of new shares not because my already owned shares rose in value.

    Best,

    DW

  9. Hey DM,
    Your portfolio keeps growing ever month and it shows. You will be at 200k in no time. Do you plan on reaching 500k or even 1 million at some point ? It doesnt seem like an unlikely goal. To me it would be scary to have that much money fluctuate in the market on a daily basis. Best regards!

  10. Freedom Fund is looking good as always DM! Amazing how far it has grown in four years. You’re a perfect example of why consistency matters.

  11. Jason
    Since I’m fairly new to your blog I need to ask a ‘dumb’ question. When you say “Full Disclosure: Long LO, CLX, TGT, and AFL.” what do you mean?
    Thanks,
    Debs

  12. IP,

    Thanks for stopping by.

    And thanks for catching that error! I corrected it. 🙂

    I’m with you on tracking the portfolio. While the dividend income is what will ultimately buy us our freedom, tracking individual positions for valuation and performance will hopefully allow the income to be built even faster by focusing on the best possible opportunities for capital.

    Best wishes!

  13. Lanny,

    I completely agree. Cheaper stocks would be much more preferable to a higher portfolio value. I honestly didn’t anticipate the market continuing up like this, which is why it’s good I’m not a trader/gambler. 🙂

    Let’s hope for some opportunities in June. Now that my capital is more limited than I’m used to I’m hoping for cheaper stocks more than ever!

    Appreciate the support.

    Best regards.

  14. Spoonman,

    I honestly wish CLX would decrease its leverage a bit, but management has been open about its intention to remain at these levels going forward. I think they’ll do well over the long haul regardless.

    Thanks for stopping by! You guys are on the final countdown (cue the song). 🙂

    Cheers.

  15. Ravi,

    Sounds like you’re off to a great 2014 there. Congrats! 🙂

    I wish you the best of luck with the rental property/dividend income split. I wish I could go down that path as well, because I can appreciate the diversification. But being a landlord and owning physical property just doesn’t seem to suit me. But that just leaves more opportunity in the hands of guys like you!

    As far as the 50 stock limit, it’ll definitely be interesting to see how I go about managing it. I’m getting close here. I think ultimately it will come down to dividend growth. If I’ve got some stocks in there with steadily decelerating growth in both profits and dividends and things don’t appear to be getting better, then those will likely be the first stocks to go if pruning occurs. However, I look at my stocks like children – I try to love them equally! 🙂

    Take care.

  16. Dividend Venture,

    I hear you on Clorox’s debt. Although it doesn’t scare me, I do wish they would cut down on the leverage a bit. I find it unnecessary for their business, but management has been open about keeping it stable. And so far the debt has been stable going back a number of years. It hasn’t seemed to harm them.

    I’m hoping things don’t go up too much from here. I think there is still value out there, and I’m doing my best to search for it. However, it’s getting more and more difficult to rationalize purchases. Let’s hope for better opportunities moving forward. 🙂

    Cheers!

  17. DivHut,

    I’ll continue to ride the market, as I don’t plan on selling anything. 🙂

    We’ll see what we get here. I’m having a hard time finding attractive places for new capital, but the great thing about dividend growth investing is that the dividends just continue to roll in no matter what. And life could be much worse than that!

    Best regards.

  18. DW,

    I’m with you completely. The value of my portfolio has really no effect on my ability to reach financial independence. The dividend income is the ultimate barometer of my success and progress. However, I still like to monitor the value and growth of the overall portfolio to see what’s performing and what’s not. If a great company had a rough month and I have available capital…well, that’s always something that peaks my interest.

    Congrats on your great month of May. It looks like you had a great month of dividends – over 200 euros! 🙂

    Keep up the great work.

    Cheers.

  19. DividendMongrel,

    Thanks so much for the support. Much appreciated!

    And I definitely plan on hitting $500k at some point – probably 8-10 years or so from now. My “number” is $1,500/month in dividend income, which will take around $500k invested to generate it.

    We’ll see how it goes.

    Stay in touch!

    Best wishes.

  20. The Stoic,

    Thanks, man. I appreciate it.

    Consistency is my sole superpower since I don’t make a ton of money to buy stocks up hand over fist. So I must stay consistent. And while it bothers me to miss a month for buying, which doesn’t happen often, I’m excited to get back on the horse this coming month and see what I can do!

    Take care.

  21. Debs,

    Whoops, sorry about that.

    That basically means that I own a piece of those companies – that I’m long those stocks. So if you ever see an article where someone is writing about stocks he/she should disclose their own holdings so as to be open and fair.

    I hope that helps. 🙂

    Take care.

  22. I admire your consistency, do you have stop losses on your stocks ? Or are you using VIX to hedge against a general market down turn ?

  23. HappyLater,

    I don’t have any stop losses. I wouldn’t want to lock in a realized gain or loss unless there was a reason to. I don’t let the market control my emotions.

    And I don’t use any hedges. I just continue to reinvest the dividend income and build my equity stakes. 🙂

    Best regards.

  24. Thanks for the update. Another boring month of gains and dividends. It feels like a correction is due, but it could be months away. If I could predict the market, well, I’d be rich. But alas, I cannot.

    Enjoy your summer back in Michigan. As a fellow mid-central dweller (Fargo, ND here) I love our summers. But the thought of another brutally long winter makes me slightly queasy.

    You can write from anywhere. Have you thought of splitting time between Michigan and Florida? I assume you have. Anyone who lives up here desires to escape during the long, cold winter.

    Wade

  25. Hey DM,

    Yet another positive month for the old Freedom Fund. A below average month for you (Portfolio value wise) still involves you moving closer to your ultimate goal of FI.
    Congratulations on your seemingly never-ending progress. Your blog is still a big inspiration to me, keep up the great work! 🙂

    I hope you’re now settling into your new life back with your family by the way.

    Cheers
    Huw

  26. Hey Jason

    Congratulations on your move, tinged with a bit of regret about your relationship. However, your position is made more tolerable by the money streaming in from your investments.

    Following your move, do you have a new job, or will you be living on your online and dividend income?

    I have to say it must be great to have the freedom to do what you have done, I still have to turn up to work each day (although I may be able to escape in around two years;.

    I hope you succeed in your move to living off your writing, and I will continue to follow your progress.

    Best Wishes
    FI UK

  27. AAPL is going sky high. Luckily I bought some shares @ 526,54 in April. Wish I bought them as cheap as you could (@440 / share), then I would have obtained more shares for the same amount of invested capital.

  28. Wade,

    If only we could predict the future. We need to get Biff’s sports almanac. 🙂

    Believe me, I’ve thought about a scenario where I live here for, say, half the year and the other half or so in Florida. But it’s just not realistic, unfortunately. Although I can technically work from anywhere right now, there’s no guarantee of future success with such. However, the bigger problem is housing and logistics. Mainly, where do I live? I’ve gone back and forth on ideas like living with family for the summers up in Michigan and then maintaining a household in FL, or doing six-month leases here and there…but any ideas I come up with are expensive or a burden on others or both.

    It’ll be interesting to see how I do with winters. I honestly get quite depressed when winter rolls around. However, if I am able to continue writing like I’m doing now that will make coping during the winter months much easier because I will have eliminated the drag of leaving when it’s dark, coming home when it’s dark, and dealing with the cold and snow on a daily basis. Of course, one might develop cabin fever being stuck inside for too long. It’ll also be interesting to see how the costs are – it will make it easier to not want to go outside and hit the town when it’s cold and dark, but at the same time one might want to do stuff like go to restaurants or something else just to “get out of the house”.

    Thanks for stopping by. And I appreciate the suggestion. I’m certainly not looking forward to the long, dark, cold winters, but I suppose you do crazy things for family, right? I’m guessing that’s why you stay in Fargo?

    Best wishes!

  29. Huw,

    Thanks so much. Appreciate the support and encouragement. 🙂

    And you’re doing great things over on your end too. You’re seeing the fruits of your labor already, and that tangible progress will only continue from here. Keep it up!

    And I’m settling in very nicely right now. I hope to write a post here in the near future on what life is like up here and what the new routine looks like.

    Cheers!

  30. FI UK,

    Thanks so much! Appreciate it.

    Well, right now the plan is to give the writing 90 days to see how it goes. If I’m coming close to covering my expenses (before factoring in dividends) I’ll likely continue it and try to ramp it up more as time goes on. However, if I’m falling way short every month then I’ll get at least a part-time job to make up the difference while still allowing for regular investments. I’m optimistic that it’s going to work, and the writing income will not only cover my expenses, but also allow for a little excess capital as well to combine with dividends to continue making regular stock purchases on my way to FI. We’ll see. I’m excited to give it a shot. Either way, I’ll have no regrets. 🙂

    Thanks for stopping by. And glad to see you regularly blogging again!

    Best regards.

  31. Jason, you are always posting your dividends for the month, so I calculated mine for May. I automatically reinvest, but the total would be $633.65 if I hadn’t. That was fun!

    BTW, I sold my shares in WMT today and put half of the proceeds into CMS. I have had my doubts lately as to whether or not WMT is a good long term investment, or if there are better alternatives. It might be a mistake, but as long as the money goes into stocks that do at least as well then I am okay. I like BAX, but already have enough shares. SBSI looks intriguing, might be where the other half of the WMT dollars go. 🙂

  32. KeithX,

    That’s awesome!! That’s about twice what I received in May. Must feel good to earn that much passive income you don’t have to work for. 🙂

    And best of luck with the investment in CMS. I’m not ready to give up on WMT quite yet, but we’ll see what kind of dividend raise we get in 2015. I’m certainly expecting more than what we got this year. It’s interesting that Buffett recently added to his WMT holdings, so we’ll see what we get.

    Thanks for stopping by! Beautiful weather we had this weekend.

    Best wishes.

  33. Still a lot of good buys out there KMI,ARCP,BP. Are you looking @ adding to your pos. in ARCP. looks enticing what’s your thoughts. I added today couldn’t resist. Have kmi on my radar to round out both positons. Good luck with your purchases in June, can’t wait to see what you picked up!

    All the best

  34. jharr,

    I agree that those three represent some of the better opportunities in the market right now, and I’ve written about the three over the past few months. However, I’m fully allocated to all three right now. I’m not looking to add to ARCP because I want to keep my allocation to REITs rather low (5-10%), and I’m there right now. Furthermore, the operating history of ARCP is still relatively short so I want to play wait and see before I go any heavier.

    Thanks for stopping by.

    Cheers!

  35. Yes family. Both my wife and I grew up here. All relatives are within 2 or so hours. Another item is our kids (14, 11 and 6) are firmly cemented in their schools and friends. I have brought up the idea of moving, but it is not well accepted. I agree logistically trying to split time would be tough. Although you have a much better shot than I do. I guess I won’t think about winter until October rolls around. It is usually decent until the 15th. After that all bets are off.

  36. Thanks for the update! I’d love to hear more details on your investment thesis on CLX. Great competitive moat, for sure, but it’s balance sheet is rough.

  37. I don’t know the market spoke today of the undervaluation of ARCP up almost 3%. Kmi also looks looks headed higher. 2 great picks in a market not showing much value.. I’ll buy the latter later and the value stocks now!

    Good luck,

  38. jharr,

    I didn’t see anything specific on ARCP, but it seems to be a rather volatile stock from my experience. I assume it will remain that way until all these acquisitions get swallowed.

    Take care!

  39. CLX should be great in the long-term. I’m looking forward to starting a position in them as well but like you it’s becoming difficult to really separate the wheat from the chaff and not own too many companies. I already feel like I’m getting in that area and really want to focus on building up positions. I like the boring months when it means there’s nothing major going on but I sure do like getting to “spend” my savings on great DG companies.

  40. JC,

    I hear you on portfolio management. I’m at the point now where new positions are considered very closely. Of course, I also see a few stocks that I could probably cut loose if I had to make room for another company I really wanted to invest in. It’s tough because I look at every stock like a child, and try to love them equally. Of course, there are some I just love a bit more (JNJ, KO, PM, etc.)! 🙂

    Best wishes.

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