Saturday, February 1, 2020

Likely buying opportunities: Coronavirus

It looks like we may finally be getting the catalyst to start a correction or recession, the moment value investors have been long waiting for. This will offer an opportunity to purchase more shares at low prices. China was already hit with trade taxes with the US, and had been slowing down due to it. And now paired with the Coronavirus, the hit to the second largest economy will be impactful. Factories are closing down and citizens are being asked to not go to work or work from home. Stores are also closed such as Starbucks and Apple for example. This will have ramifications globally if it extends for a long period of time, as revenue is basically stopped.

We have cases of temporary blips in market valuation from pandemics like SARS or Ebola, with corrections around 20-25%. However, nobody knows if the Coronavirus will be far more severe. Currently the number of cases for Coronavirus is already exceeding that of SARS, but today we have much better technology to combat these viruses.

In terms of buying, I have not pulled the trigger. I think in the month of February, my cash pile will start to approach $30,000 USD. My plan will not be to deploy it all at once and try to time the bottom. I will add as the market drops or stays depressed. For example if we get to -10% off S&P highs I will start deploying a bit. And -15 to -20% I will deploy more. 

Going forward, I plan to invest heavily into a few names that I feel are winner type companies. I have already built a portfolio over $800,000 USD in a diversified set of dividend aristocrats and consistent dividend payers. I think it's getting too diversified, to the point that it hinders performance. That is the nature of diversification, it dilutes the good ideas with the average ideas. However, I am not saying in any way I am not happy with the portfolio, it has done its job very well and is very conservative.

I think all my positions are great holdings, but only a few are truly outstanding companies. Going forward, since I am still young, I will focus more on growth and dividend growth, and less on the dividend income. I have found that the companies that yield higher but raise dividends more slowly are hindering growth opportunities for my portfolio. And since I am not 30 years old yet (almost), I want to start prioritizing some growth since I have already finished building much of my portfolio's foundations. I want to start picking some companies with high growth which will in the future after many years become the new set of dividend aristocrats, and by then their yields should be high and growth lower.

Watchlist (my high growth selection):
Technology 
 - ADP: Automatic Data Processing
 - MSFT: Microsoft

Financials
 - MA: Mastercard
 - V: Visa

Discretionary
 - ROST: Ross Stores

Healthcare
 - SYK: Stryker
 - TMO: Thermo Fisher Scientific

Staples
 - MKC: McCormick
 - CHD: Church and Dwight

Saturday, January 18, 2020

2019 Year End Portfolio Summary

As of the end of day on 12/31/2019 the portfolio is sitting at $813,979.31 USD
As I am writing this post on 1/18/2020, after the new year, the portfolio has moved up to $842,509.77 in large part from continued expansion in the US markets. It appears the portfolio is moving ever closer to the $1million goal mark I set out to do 6 years ago in 2013.

I'll start with a market background for the year, and then the portfolio summary.

The year started very poorly, with the SP500 correcting largely from the highs in 2018. A lot of events happened in 2019, a major uncertainty was the trade deal with the US and Chinese and also the tightening Fed policies which put a crunch on liquidity. After the new year, the Fed started enacting more quantitative easing and accommodating monetary policy like stopping the raise of interest rates and increasing the number of assets they were purchasing. Since the year started at basically the bottom, the growth throughout the year was huge. Then late in 2019 and early 2020, the China and US "appear" to have a first phase trade deal agreement. The trade deal uncertainty created a ceiling for US stock markets, with this battle between the US and China easing down, markets increased. However, I am skeptical how real of a progress this first phase trade deal really is. I use the SP500 as a reference as the portfolio holds many large cap stocks and they move rather in tune with the SP500, although a bit more defensive.

 
In 2019 the SP500 returns was 31%, this is huge. I usually do not focus on percentage returns of my portfolio as my goals are to reach $1M by 30 years old, and increase and manage the risk of my dividend income. Comparing my performance to the SP500 index is not of interest to me as I already have my goals defined, which to me is independent of how the SP500 performs. However, since comparing one's performance against the index is very important to some, and also  interesting I guess, I will show the table below for comparison:
 
Type 2014 2015 2016 2017 2018 2019 Growth of $10K Annualized Return
Young Dividend Portfolio 14.19% 6.73% 10.24% 20.42% -0.79% 29.51% $20,787.93 12.97%
Vanguard 500 Index Fund 13.51% 1.25% 11.82% 21.67% -4.52% 31.33% $19,606.88 11.88%
 
In 2019, I lagged the index by a few, but the returns are still respectable at near 30%. This is huge, but I think not sustainable. Since my portfolio does not have a lot of high alpha picks like hot tech or industrials or discretionary stocks, I lagged behind since I hold more conservative defensive companies. When times are good, people want to own the hot stocks and not the conservative dividend paying companies. But even so, dividend companies still performed respectably in 2019.
 
Since inception, my portfolio has done slightly better, but very similar to the largest 500 companies in the US. However, my portfolio generates more dividend income and the growth of that income is much more consistent. The figures above include dividends reinvested. The calculations for the Young Dividend Portfolio had some approximations as positions are constantly being added throughout the year due to my income flowing in, however, the figures above are quite representative of how my portfolio performance relative to the index. 
 
I have noticed my portfolio has similar or higher gains than the SP500 but has lower draw downs. The standard deviation for 2019 for example is 8.6% for my portfolio, while the SP500 is 12.9%. The max percentage draw down in 2019 was double for the SP500 when compared to my portfolio. Similarly, you can also notice in 2018, annual returns, my portfolio drop was less than half of the drop of the broader market. This is because my portfolio holds more defensive and non-cyclical businesses that can still survive when there is a recession. I do not own much in industrials, technology, or raw materials for example, which have high alpha. 
 
When the economy does well, I predict my portfolio will ultimately fall behind, but when times are tough I believe my portfolio will hold up much better than the broad index. I believe my portfolio in the long run will outperform the general market since my declines will be less and the "guaranteedness" of the dividend will help provide dependable returns in good times and bad which acts like a buffer. To illustrate the power of percentages when a correction happens: a 50% drop from 100 to 50 will require a 100% gain to move from 50 back to 100. Hence, I always am in favor of protecting the downside than chasing upside. I believe in another 50% broad market crash, my portfolio will only crash 35% according to backtests of similar characteristic portfolios back in 1998, 2000, and 2008. My goal is to build a portfolio that generates more income, has larger annual dividend increases, has less volatility, while maintaining similar or more total returns, than the broader market. 
 
The market has recovered for over a decade now since the housing recession. And has produced tremendous returns. However, one issue I have is that earnings have not been keeping up with price increases of stocks. As a result, 2020 is turning out to be a very expensive year to buy stocks, so I have not bought anything in a long time. My cash pile continues to grow. At the moment it is over $20K. I remember back in 2014, I thought prices were expensive relative to 2009 to 2012. However, looking back, prices in 2014 look really good compared to where they are now...

Thursday, January 2, 2020

December 2020 Dividends Received

Time to tally up the last month of the year in 2019. December I received $1768 in dividends.
The cash was reinvested back into the stocks that paid them. This month had a lot of payers, which illustrates the resiliency of the total income flow from any one company having difficulties paying or raising the dividend.

Ticker      Total    Taxable         401k
JNJ $253.82 $248.00 $5.82
HD $196.51 $157.68 $38.83
NEE $181.01 $136.46 $44.55
MMM $149.31 $122.76 $26.55
D $148.96 $96.69 $52.27
WEC $133.11 $116.84 $16.27
KO $132.28 $132.28
BDX $80.02 $80.02
O $73.26 $73.26
V $71.62 $55.04 $16.58
MCD $60.24 $60.24
ROST $54.77 $54.77
MSFT $50.11 $22.27 $27.84
TJX $49.47 $49.47
BA $45.73 $45.73
CHD $44.41 $29.71 $14.70
HON $43.29 $43.29
INTEREST $0.15
$1,768.07 $1,451.25 $316.67

Monday, December 16, 2019

Crossed $800,000 today

Markets rose further today after China and US agree on a phase 1 trade deal. My portfolio happen to cross the $800K level today.

The portfolio is moving ever closer to the $1M mark. Steady as she goes.


Saturday, December 7, 2019

November 2019 Dividends Received

Another month passed. That means more cash for the portfolio. The following payouts are listed below from my positions. Note the 2/5/8/11 month payouts are less compared to other months in the quarter, because I hold less companies that pay in these particular months.

Ticker      Total    Taxable         401k
T $273.54 $273.03 $0.51
CLX $182.13 $182.13
PG $126.03 $114.61 $11.42
APD $118.61 $118.61
GIS $91.30 $53.36 $37.94
CL $86.22 $73.52 $12.70
O $73.05 $73.05
SBUX $65.56 $51.43 $14.13
GD $56.17 $56.17
ABT $40.30 $40.30
MA $31.20 $15.65 $15.55
INTEREST $0.18 $0.18
$1,144.29 $978.99 $165.30

Saturday, November 30, 2019

November 2019 Portfolio Summary

In terms of equity pricing movements, November was a good month. The SP500 is pushing the new high barrier, and is well over 3000 now. Despite all the chatter about the trade war hurting the USA, the USA economic indicators shows a robust strong economy, and there are some "signs" that a trade talk with China is progressing better, leading to some more market optimism. I am in the view that the longer the trade war goes, the more it impacts negatively China and the longer this goes the more China will be pressed to sign an agreement, and the longer it goes the less favorable the agreement will be for China. As economic and export indicators show, the USA will suffer but not at the scale of China as many factories which US corporations setup in China will flee to other neighboring Asian countries that do not have these trade problems, such as Vietnam, Malaysia, Taiwan, South Korea, etc. There is actually an ongoing economic boom in many of these China neighboring Asian countries as new factories get setup and people are competing for manpower and resources to meet the new demand.

Putting trade talks aside as this is an investing blog not a political blog, the market treasury yields are all very low, the 10 year is at a measly 1.78%. This impacts equity prices, as lower interest rates means stock prices go up (and stock yields go down). In this environment, it is good if you held existing stock positions, but if you are constantly looking to buy more positions it is a bad time as everything has a very low payout yield due to inflated prices.


Thursday, November 21, 2019

Annual dividend income crosses $20,000 USD

Today, after tallying up recent dividend income that came in which were automatically reinvested, and investing another $2000 further from my own contribution, my portfolio crossed $20,000 in annual dividend income.

The purchases are the following:
CLX: $584
ADP: $849
3M: $494
T: $75

I usually slip in a few AT&T (T) shares at the end of all my purchase batches, since AT&T shares are cheap per share, so I can spend the remainder of my monies left over after buying more expensive share blocks. Trade commissions are free for me. The dividend income now sits at $20,027.54

This amount is increasing at an average of 9.6% and dividend yield is 2.6%, in total with dividend reinvested the portfolio is estimated to grow at around 12-12.5% in 2019. This type of growth I believe will allow my $20,027 dividend income to grow to $22,530 in one year all by itself without any further contribution from my side. This is the power of the double compounding effect that has been driving my portfolio higher year after year (i.e. the company pays dividends every year which get reinvested into even more shares that pay even more dividends, and the dividends from each of the companies increase every year on their own further empowering the dividend each share generates).

I can easily increase my dividend income to over $30K if I invested in higher risk assets or low growth, higher volatility, high yielding companies. I do not like to invest in these types of high yield companies as it exposes me to more risk, less growth. And I do not need to take such risk as I am still young and do not need the income. Instead, I would prefer investing in moderate yielding or even low yielding companies as long as the dividend is growing well above the rate of inflation. For me, a dividend growth rate + dividend yield that is 12% or over is what I find attractive to invest in. Usually that may be a 2% yield plus a 10% dividend growth, or a 1% yield and 15% growth. On average I try to maintain this 12% total dividend growth (with dividend reinvested) figure for my whole portfolio, which my track record has shown has been maintained over the last 6 years.

Friday, November 15, 2019

Recent buy: GIS, KO, CLX

Around 2K added today.

KO: $578
CLX: $435
GIS: $998

These are consumer staple names, been in my portfolio for a long time.

Now my forward annual dividend is $19,958 USD
Getting very close to 20K!

Friday, November 8, 2019

Recent buy: WEC, NEE, XEL

At last, the utility companies are pulling back. I will keep adding on the drops and plan to just average myself in as I want more utility exposure. If they can get over 3% yield that is most ideal. Here are the additions today. The top 3 utilities I like to eye are NEE as Number 1, and then XEL and WEC are my favorites behind NEE. NEE has grown to be in the top 5 list of positions in my portfolio mainly by its own effort. It has a very impressive earnings and dividend growth history spanning decades.

NEE: $221
XEL: $480
WEC: $263

Trades are free for me really so low dollar value trades are not an issue. $964 was invested.

Sunday, November 3, 2019

October 2019 Dividends Received

Here is a tally of all the cash received last month from my investments.

This is a record month. All dividends were reinvested to fund the income snowball machine I am trying to build.

Ticker      Total    Taxable         401k
MO $549.92 $474.56 $75.36
PM $472.03 $415.52 $56.51
KMB $145.23 $102.32 $42.91
XEL $135.41 $135.41
KO $126.95 $126.95
ITW $119.34 $96.57 $22.77
ADP $85.97 $85.97
MKC $72.99 $48.87 $24.12
O $72.84 $72.84
MDT $40.35 $40.35
SYK $35.24 $30.54 $4.70
INTEREST $0.48 $0.48
$1,856.75 $1,557.54 $299.21

Thursday, October 31, 2019

October 2019 Portfolio Summary

I am going to start to title my monthly reports using the month that I am writing in, instead of writing about last month's status, since I usually end up writing my monthly report at the end of every month. This summary will detail how my portfolio is doing for October 2019, as now is close to end of October.

I'll start with the two most important charts, which show the progress of my saving and investing strategy.


Wednesday, October 30, 2019

Recent buy: ADP , T

Bought the following today:

ADP: $2904.84
T: $114.42

My trades are commission free, I always trade with Limits. These are all previously existing positions, just adding more.

Wednesday, October 23, 2019

Recent buy: KMB, MO, D

I bought the following today:

KMB - $1073
MO - $929
D - $413

More dividends to come.

Saturday, October 12, 2019

Recent buy: MO, ADP, GIS, SYK, T, D

I added the following to my taxable account on 10/10 (Thursday).

I now only add to my taxable account as I do not use a 401k with my new employer. I rolled my original 401k with previous employer to a self managed IRA with the same broker I have for my taxable account, so both accounts basically are "one" account, easier to manage. And I can just walk in the same branch and get all the same job done.

I have not contributed to the Roth IRA for many years now since the $5-6K or so annual contribution limit is small compared to the contributions I do to my taxable account. So the extra paperwork, doing the backdoor Roth IRA, and managing multiple accounts is not worth it.

I also want to be able to use my money whatever way I like before old age, so I chose to pay taxes instead of delaying everything. Anyways, below is the purchase list. I tried to mix higher growth stocks with low dividends with high dividend slow growth stocks to balance things out.

Order Date   Trade  Action  Security  Quantity  Buy Price Total Invested
10/10/2019 10:46 AM ET  Buy   MO  30 $43.25 $1,297.35
10/10/2019 10:49 AM ET  Buy   ADP  6 $158.88 $953.27
10/10/2019 11:04 AM ET  Buy   GIS  13 $54.59 $709.66
10/10/2019 11:05 AM ET  Buy   SYK  2 $210.80 $421.60
10/10/2019 11:07 AM ET  Buy   GIS  10 $54.60 $545.99
10/10/2019 11:14 AM ET  Buy   SYK  10 $211.40 $2,114.00
10/10/2019 11:15 AM ET  Buy   T  30 $37.50 $1,125.00
10/10/2019 11:15 AM ET  Buy   D  5 $81.27 $406.35

Friday, October 11, 2019

September 2019 Dividends Received

Below are the dividends I received in September, close to $1800. All of this amount was reinvested back to keep the snowball moving.
It is a new high, and the dividends are pushing ever forward. The snowball looks to be set in motion.

Right now, the overall Portfolio is outputting  $19,518 USD a year after several recent additions. It is getting close to the $20K mark.


Ticker      Total    Taxable         401k
JNJ $251.94 $246.16 $5.78
PEP $210.73 $177.78 $32.95
HD $195.35 $156.75 $38.60
NEE $178.74 $134.44 $44.30
MMM $148.05 $121.73 $26.32
D $138.22 $86.54 $51.68
WEC $130.53 $114.36 $16.17
BDX $77.76 $77.76
O $72.45 $72.45
V $59.60 $45.81 $13.79
MCD $55.59 $55.59
ROST $54.64 $54.64
TJX $49.27 $49.27
BA $45.47 $45.47
MSFT $45.05 $20.02 $25.03
CHD $44.27 $29.62 $14.65
HON $39.25 $39.25
INTEREST $0.37 $0.37
$1,797.28 $1,455.56 $341.72