Tuesday, September 19, 2017

Updating My Investing Rules.....

I've been thinking about the rules I wrote when I started this Dividend Growth IRA.  I went back and looked at the rules I wrote in 2012, and here they are:











After 5 years of running this portfolio, its time I reviewed and updated these rules a bit.

1.  I've eliminated the "core" and "non-core" designations.  This is tough to track and doesn't make a ton of sense anymore.  I have a taxable account where I invest in lower yielding stocks, and that serves as the non-core.  Today, I only invest in 2.5% yield or higher stocks for this account (usually)

2.  The 10% cash goal is still valid, and I'm a little light today.  I need to trim some of my larger/overpriced names.

3.  I still only add stocks at nice undervaluation, so that's been good.  I'm a bit slow to sell stocks if they are 15% overvalued.  I'll need to change that to higher overvaluation number, perhaps 30% or so.  I also rarely use stop losses.  I find they don't work too well, and usually get triggered, then the stock recovers quickly.

4.  There are other factors I like to look at these days, among them are:
  • Debt level (50% or less preferred)
  • Credit rating (at least BBB+)
  • Morningstar rating (4* or better is what I usually require)
  • ROIC, lately looking for higher than 10% here...though a soft target
  • Revenue.  In addition to eps growth, I also like to see a growing revenue line
  • Insider action (I like to see insiders buying the shares, and especially hate to see them selling)
  • I also read the 10Q for the latest 2 quarters carefully, this is usually instructive, and gives me a feel for the CEO and whether or not she is a "bullshitter"






Friday, September 8, 2017

Selling AFL, Buying SJM

Put orders in today to sell my position in AFL, and start a position in SJM

AFL has been a decent performer, and is a modestly overvalued today.  The dividend is down to 2.14%, and also hold a larger position in my taxable account.  As a result, I'm closing the AFL position in favor or something more undervalued with a better yield.

Enter Smucker (SJM).  JM Smucker came to attention today via Chuck Carnivale, article here:

https://seekingalpha.com/article/4105099-choosy-investors-choose-j-m-smucker-dividend-adds-value

Thoughts on the matter:

  • AFL is a big position in two accounts.  Closing out one makes sense, and reduces risk
  • Growth prospects are better for SJM
  • Yield higher for SJM
  • AFL is a bit overvalued today, has a low yield, and is very stingy with dividend increases
  • I recently opened a position in ORI, another insurance name, so I feel fine closing AFL in the Chump account
  • SJM is a more defensive stock, and should fair well if the market tanks, or the economy slows

In short, this is an upgrade from my AFL holding here, a more defensive stock, and a better fit for my retirement portfolio given the higher yield, around 2.95% today....  Added the stock at $107, 1/2 position.

Best,

Chump