Playing Defense, New Dividends and Split Companies - A Year-end post

It has been a while since I posted something substantial concerning the portfolio.

 

I have been busy with work, co-planning (more like following) the honeymoon and multiple life events that will not be discussed in this post.  Suffice to say, I have been delinquent with my posts and for that, I apologize.

 

Now, with that out of the way, let's get on to business.

 

These days, the Market has been pummeled by the whole Fiscal Cliff discussion.  For those not in the know, if the US Government fail to come up with a deal to fix the budget deficit, there would be a catastrophic sequence of events that might bring the US back into a recession.  Automatic cuts in services, Defense and across the board tax hikes would probably spell disaster not only for the US but for the global economy as well.  That is why we've seen a lot of CEOs, insiders cashing out their stocks to take advantage of the current capital gains tax rate which in my opinion explains why high-flying stock such as Apple (AAPL) dropped so much in recent weeks.

 

Nonetheless, I think playing defense against a possible sell off/crash would be a prudent course of action which brings me to my last move for the year.

 

As you may know, I stocked up on my cash position in preparation for a possible Mitt Romney win in November.  I wanted to be in a position to buy GOP/Wall St-friendly stocks such as Defense Stocks (Lockheed Martin) and the Financials (the banks).  However, Mr. Obama managed to sneak in a win (good news/bad news, I'll leave that to you.  This is not a political blog) and the current status quo was maintained.  I left my cash reserves alone until after my honeymoon while I collect and analyze the data, news and trends from afar. 

 

Now, I have made my decision, I decided to use the $500 I have from the reserves to buy the GLD ETF.  The order was executed today (12/18/2012) and with the $4 fee (automatic investment), I got 3.0255 shares of GLD at $163.94/share.  The GLD is my hedge in case the US does go off the so call Fiscal Cliff where taxes would go up, the economy would go back into recession and stocks would drop.  The GLD would be my firewall in case my portfolio would take a hit and it would also be prudent to bring up my GLD position closer to the recommended 20% of my portfolio (It is currently at 16.7% including today's purchase).   Eventually, I want my AAPL position at around 10-15% of my portfolio (currently at 23%) and the rest of my positions at roughly 10-15%  so that I would not be heavily affected by the now "volatile" Apple stock.

 

In other news, I have received dividend payments since my last post.  It is safe to say, at least my portfolio was "working" on it's own.  Here's the breakdown:

 

Altria (MO): 10/10/2012 = $4.65 -> 0.1387 shares at $33.53.

Ex-Dividend Date: 12/21/2012 and Dividend Date: 01/09/2013

 

Waste Management (WM): 09/21/2012 = $4.19 -> 0.1287 shares at $32.56

                                           12/14/2012 = $4.24 -> 0.1260 shares at $33.65

 

Xilinx Inc. (XLNX): 08/29/2012 = $1.98 -> 0.0585 shares at $33.85

                               11/28/2012 = $1.99 -> 0.0584 shares at $34.08

 

Energy Transfer Partners (ETP): 08/14/2012 = $9.71 -> 0.2223 shares at $43.68

                                                 11/14/2012 = $9.91 -> 0.2354 shares at $42.10

 

Apple (AAPL): 08/16/2012 = $5.69 -> 0.0090 shares at $632.22

                        11/16/2012 = $5.71 -> 0.0106 shares at $538.68

 

Kraft (KFT -> KRFT + MDLZ): 07/17/2012 = $3.39 -> 0.0854 shares at $39.70

                                                   10/15/2012 = $3.42 -> paid to the cash fund which is possibly taxable.

 

Kraft did something special this year.  It broke up the company into 2 different companies which resulted in me having the following stock positions:

Kraft Foods (KRFT) = 3.9261 shares

Mondelez International (MDLZ) = 11.7784 shares

 

KRFT Ex-Dividend Date: 12/27/2012 and Dividend Date: 01/13/2013

MDLZ Ex-Dividend Date: 12/27/2012 and Dividend Date: 01/13/2013

 

KRFT will be the North American Grocery Division which will carry the Velveeta, Miracle Whip and Oscar Meyer brands.

MDLZ will be the Global Snacks Division which will carry the Cadbury, Milka, Oreo and Nabisco brands.

 

So far, both companies are performing well and upon further review, I would decide which of the two I would focus on. 

 

That's it. 2012 is over and the portfolio has survived the Elections, a Tech downturn and even the Apple sell off.  Not at all bad even though I could have locked in my Apple gains 3-4 months ago.  But there is no use reviewing the past.  I am still bullish on Apple and next year could be a big one for Apple with China, the rumored Apple TV set, the iPhone 5s and a possible refresh of the iPad.  If there is one thing I want Apple to deliver for next year it would be a more innovation iOS 7.  In as much as I love the iOS software, it would not hurt to have more innovation in the software and increase their lead from the Android OS.

 

With that, I would like everyone to have a happy holidays.

Uncle Sam's Cash Back, Apple Goodness, Promos and Some Cheesy Dividends

Our household recently received our State and Federal tax refunds.

After spending $1000 to help pay down my wife's car payment, we decided to split the remaining cash equally between the two of us.  Then my wife asked me: "What would you buy with your share of the refund? An iPad?"  I answered: "I'll buy more mutual funds for my Roth IRA and some stock for our taxable investment account."

She smiled.

For the past four years, I have used my tax refunds to invest in my Roth IRA.  I figured, why spend money and pay more taxes (sales tax) when I can just make more "tax free" money in my Roth IRA?  The answer is a no-brainer.  Reinvesting my tax refunds in my Roth made me more money and gave me more satisfaction compared to whatever gadget I would have bought.  I love making (easy) awesome decisions.

So what did I buy with the money?  I checked our portfolio and checked which stock had the closest Ex-Dividend date.  It turns out Kraft (KFT) would have their ex-dividend date on March 28, 2012 (next Wednesday).  I then transferred money to the account and set-up the Automatic Investment Plan for Tuesday, March 27, 2012.  This should be enough time for me to get the stock before the ex-dividend date and be eligible for the dividend.

Here is a breakdown of my transaction:

1. I transferred $350 to the account (the rest of the money will go to my ROTH).

2. I set-up the automatic investment plan.

3. I'll buy $350 worth of KFT shares - Potentially 9.1217 shares @$38.37 (as of 9:47am today).

4. There is no fee this time due to a promo (Thanks!)

5. I'll potentially own 11.6310 shares of KFT.

6. KFT currently pays a $0.29/share dividend - $3.37299 potential payout.

Thanks to Kraft, I'll have a nice and "cheesy" dividend. LOL

In other news, last Monday, Apple announced that they would pay a 1.8% dividend ($2.65/share quarterly, $10.60/share annually) to its investors.  Apple will also spend $10 billion to do a stock buyback.  This will reduce the number of stocks outstanding which would mean every remaining investor would own more of the company.  This obviously is good news for me.

The dividend payout would allow "value-oriented" mutual funds to invest in Apple.  In my opinion, this is both good and bad news.  The good news is that Apple would be exposed to more mutual funds and the bad news is that this opens Apple to more volatility as mutual funds' dollars goes in and out of Apple depending on how the stock and the market performed on a given day.  This also makes diversification a bit tougher as I expect a flood of new mutual fund investors.  I suggest checking your mutual funds' holdings and try to be as diverse as possible.

The dividend is a welcome bonus for me as an investor.  Although the dividend yield is not as huge as HP, Microsoft and the others but the growth rate and performance of Apple more than makes up for the comparatively "small" dividend.  Besides, I'm more bullish of Apple than HP.

Tempting as it is to get more Apple stock, I'll keep my emotions in check and keep our portfolio as balanced as possible.  We still have a long way to go.

Automatic Investment Plan Confirmed

Today, my new Automatic Investment Plan kicked in.

I got 2.1473 shares of Apple (AAPL) at $347.42 per share.

Analyst predict AAPL will go up to at least $400 in the next 18 months.  Watching the charts, this statement is not too far fetched.  Plus, with WWDC 2011 just around the corner, AAPL is poised to release their new Mac OSX version (Lion) and people still hope for a new iPhone 5.  Even if the iPhone 5 does come out in the fall (per rumor mills), AAPL is all but guaranteed to have record sales for 2011 because of the iPad 2, new iMacs, Mac OSX Lion and the iPhone 5 (with some push for the iPods in September).  Also, this weekend marked the first time AAPL beat Google (GOOG) as the world's most valuable brand.  AAPL is kinda down today... most likely from profit takers or mutual funds re-balancing their positions (Like the NASDAQ index).

I got 1.3806 shares of Lululemon (LULU) at $98.51 per share.

Currently, LULU is a bit higher than when I placed my order.Roughly 2-3 points down from the Day's high.  I still believe LULU has some room to run leading to the impending 2-1 stock split in June.  It is also not too far fetched that LULU will be the next Chipotle or Netflix.  High quality brands and room to grow in the US, Europe and Asia.

I got 2.9717 share of Xilinx Inc (XLNX) at $35.67 per share.

I bought some more XLNX ahead of it's X-Dividend date of May 16.  If I had more cash, I'll buy some more.. I'm practically getting paid to buy the stock.  I'll probably lock in some earning or re balance after I get the dividend reinvestment.

With this action, I'm a bit overweight in the Tech Sector.  This is a no no.. but in this case, I think I can ride out the imbalance because of two impending events with my 2 Tech positions.  Apple's WWDC and iPhone 5 and XLNX's X-dividend date.

I'll reconsider my positions as soon as these events pass.

Getting In on APPLE (AAPL)

The market has been down lately... especially on Tech Stocks.

Today, AAPL closed 15.33 down off it's 52-week high. Over 4% drop from the high and from today's range, almost broke the 5% pullback.

I think it's time to get in on AAPL.

Here's why:
1. Close to 5% pullback.
2. WWDC 2011 is coming up in June where Apple is expected to release it's new OS (Mac OSX Lion).  Also, the iPhone 5 might make an appearance (although highly doubtful per analysts and sources close to the matter).
3. A version of the iMac just came out with 2 Thunderbolt ports.
4. The white iPhone 4 finally came out and on WWDC, Apple would probably announce how much white iPhone 4's they sold.
5. RIMM is bringing Black Berry Messenger (BBM) to Android and iOS. This might convince BB users to finally switch to iOS or Android.  Either way, AAPL will have a greater profit margin since they control hardware and software distribution of the iOS devices.
6. Analysts and project AAPL to reach $400 in the next few months.

Therefore, I took $1000.00 from my reserves (which I will not do often) and put in my new Automatic Investment  Plan (to be executed on Tuesday, May 10).  I put in $750 for AAPL which would buy me 2.13 shares (@$350/share + $4 fee).  The $140 will be used to buy LULU that would fetch me 1.44 shares (@$94/share + $4 fee).  LULU is down 9.33% off it's 52-week high of $102.83.  A great way to buy some more LULU ahead of it's expected 2 for 1 stock split and Annual Stockholder's Meeting.  Finally, I allocated $110 to buy 2.94 shares of XLNX (@$36/share + $4 fee).  XLNX has bee rebounding lately and the X-Dividend date is coming up (May 16).  Might as well get those juicy dividends.

I know with my AAPL purchase, I may have 2 tech stocks and would unbalance my diversification.  However, with XLNX rebounding and the dividend distribution coming up, it makes good sense to keep XLNX and AAPL is also a great long term investment.

I will review my opinion of XLNX after the dividend distribution and earnings call.

Week Lessons

I just did a rear view mirror look of my investment moves last week.

Even though the market value of my investments are up, I'm still behind due to the fees that was charged to me to execute my trades.

Recap:
Total Money Put in fund: $200 + $50 bonus = $250.00.
Market Value of investments: $221.55 (as of 9:58 am PST)
Loss: $28.45
Fees paid $29.85.

Lessons learned:
Purchase positions that would bring more bang for my buck after fees.
ex: Buy 5 LULU at $90 each ($450) at one time with only $9.95 paid in fees instead of 5 different trades of LULU at $90 each ($450) and pay $49.75 ($9.95x5) in fees.  Whatever dollar cost averaging discount I get from buying in different times would have been eaten by the fees.

Plan of action: Perhaps do a monthly trade of blocks of stocks instead of buying one-by-one.  Also, do the automatic investment plan where the fees would be $4 instead of $9.95.