Tuesday, June 30, 2015
Today I seized the initiative and acquired some Union Pacific Corp. (UNP). I had a free automatic investment from my birthday (sweet), so for $1070 I received 11.2035 shares at $95.50 / share. The current P/E ratio is approximately 16.28 and yield is 2.27% on cost. I could throw out a lot more statistics, but instead I would prefer you check out My Dividend Growth and Dividend Mantra, who have done excellent research and who do a much better numbers analysis than I do myself.
I chose UNP over other stocks, namely TROW, BEN, and NSC. I like UNP's long term outlook more so than its Eastern counterparts in CSX and NSC for railroads. The West is much more vast, and the profitability margins for shipping are much better for UNP. Also UNP has a much wider array of goods it ships, and is not as dependent upon coal as the Eastern companies. I like UNP over TROW and BEN simply because I believe they will remain fairly valued for a while and UNP likely won't. UNP is clearly a fan favorite, and once the drama in the world shifts even slightly back to the positive we will see that.
Another topic I'd like to touch on here is one of moat and valuation. UNP has an awesome moat that is undervalued. Yes, we know that tracks, locomotives, employees, and land all contribute to the underlying value. However, what we neglect specifically on that land is where it is. A lot of it runs through dense cities, where large yards exist to deal with switching and maintenance. That is nearly impossible to replicate quickly. In addition, UNP in the west has a lot of remote and rugged areas where its track runs. Those lands are difficult to build on, so that history is its own value. The simple environmental impact statement (EIS) involved in a new track such as that is insane - I know this from experience. On top of that they have to content with a growing amount of Federal land and parks, which need to be avoided or have land grandfathered into any deals. This is a nightmare. Sure not the same level of problem that NSC and CSX have to deal with in the sprawling East, but one that can lead to long drawn out battles with Federal and State governments.
As far as competition, the main rival is BNSF. I believe strongly there is more than enough business to go around in the Western USA and on rail in general to keep all the large US and Canadian railroads looking good for a long time.
I would love to add more, but its a busy day. However, it is hard to contain my excitement with this play.
Currently my portfolio page is up to date with this and all other June purchases. Have a great July everyone!
- Long UNP!
Monday, June 29, 2015
Last month I brought in a total of $67.80 in dividends ($50.71 taxable , $17.09 Roth). This is a increase from last year ($56.71 total) by 10.82%. These numbers are a good start, but I plan to do better every quarter from here on out.
In terms of dividend increases, I realized two this month; Johnson and Johnson (JNJ) and Unilever (UL). It should be noted that a strong US dollar hurt my UL payout, despite UL's increase. Two new announcements for dividend increases were made; Realty Income (O) with its usual small increase and Target (TGT) increasing its payout by 7.7% / 4¢ per share quarterly! That last one is great, better than expected!
As with prior months I continued my Loyal3 march towards FI. I added 1 share of Microsoft (MSFT) and 1 of Coke Cola (KO). Those two positions should be brought up to a proverbial 'full' in terms of my Loyal3 goals by the end of August the latest. In addition, I am currently in the process of making a large buy. Literally it is happening today / tomorrow, so I will be putting up back to back posts, which never happens.
Ahh the month of Julius Caesar and the Juli Famliy. Queue the history lessons...
My only long term debt is my car, which shall continue. I have already gotten ahead on my monthly payments, and I will continue pushing that direction. Additionally, my wife got a dog, so there is that. Also, I am taking an important test for work that should get me a professional certification, the kind with letters after my name. If I successfully complete that, it could be a huge windfall - so I plan on putting a lot of time into this until my test date.
Next month should produce around $75 in dividends, which is a 9% year-over-year increase. I expect to realize one raise next month from O. I expect to pick up more shares of either KO, MSFT, K or VFC in my Loyal3 account - value dependent.
This is my first ever account review. I am planning to do this on a Semi-Annual Basis so I can measure myself over time. For this I will be looking at my various accounts (Taxable Investment / Loyal3, Roth Investment, and 401K) in comprehensive fashion.
At the end of last year I had a combined "retirement" total of $45,593. Today that total sits at $51,527, an increase of 13%. Those values include cash accumulating for future investments. I am pleased at this progress and hope to continue to push the boundary over the course of this year. Currently, the markets are down and I should be able to capitalize on that. At the moment my forward-year project for dividends is around $850, which is something I really want to increase.
Taxable Investments / Loyal 3:
Six months ago my total combined between these two was $13,782. At the moment it is $14,424, a 4.65% increase. This tells me I need to continue to work hard to push up my account value and most importantly use this as a chance to increase my holdings by acquiring good companies at cheap valuations. Loyal3 at the end of last year accounted for $5,435 (39.4%) of my taxable positions, today it is at $6,760 (46.9%). I will continue to use this powerful fee-free tool to slowly build numerous positions until merging is desireable.
To be honest, this is the account I am most pleased with. It has not suffered through my early aimless years of investing. No this account is 110% dividend growth and it shows how much ass it kicks. At the end of last year it was valued at $8,906, and today it is at $11,152 a 25% increase! Yes part of this is due to Kraft's (KRFT) amazing news, but much of it is due to the relative safety of all my positions. There is no Pengrowth Energy (PGH) in there. Also worthy of note is my dividend growth here is out of control - last year I earned $281.74 here, this year I expect to make $366 - 30% more. Between new investments and dividend increases this account has really nailed home for me the premise and promise associated with this kind of investing.
Hope everyone has a great July!
- Dividend Gremlin.
- Long all stock positions mentioned.
Friday, June 12, 2015
Personally, I love history and frequently indulge myself by listening to Podcasts on various subjects. I find it much more relaxing, especially when driving. It kills two birds with one stone for me. I learn new things and it keeps my mind fresh from an academic perspective. It also it allows me to not focus on the road-rage that come with living in the DC area.
Listening to Podcasts on The History of Rome, one of the lessons that can be ascertained for investors is on re balancing and selling positions. Oddly when thinking about this after listening to this section I came across a post from the Dividend Growth Investor, saying the exact same things. The lesson comes from conspirators who killed Julius Caesar no less. When Brutus, Cassius, and friends killed Caesar, because they believed to be defending the Republic, they neglected the fact that they would need to have someone waiting to replace him. Someone as loved as Caesar was, despite his faults. Investing should be viewed no differently, although clearly it is a different microscope. One should never replace or sacrifice an item, especially if you do not have something ready to be an equal or better replacement.
In reading numerous investment guides on retirement from my 401K program, there has been a lot of talk about re-balancing accounts. In other words sell your good stocks, read kill off, so you can acquire ones not performing as well. Naturally this plays into the hands of of those companies to sell this idea, they make money every time you make a move. However, it also does nothing to ensure the quality you sell will produce in a similar fashion. Also re-balancing in a 401K (not just in a stock portfolio) is foolish, because it is likely that the selected funds available all draw on similar stocks. Why allow them move money back and forth, so they can keep more of your money?
Another set of lessons, again from Roman History, can be learned from that of Marcus Licinius Crassus. Crassus had been born into a rich family, but had it all stripped away due to political upheaval. Once the pendulum swung back his way he was ruthless in regaining wealth from rivals, and even went after those who were neutral on the matter to acquire more wealth. Now of course this sounds horrible up front, but realize that Crassus was brilliant in that he acquired assets at the time at a considerable discount due to the ongoing events. He then used those assets to buy more, and wheel continued to spin around and around until he was the wealthiest man in Rome at the time.
It should be noted that essentially he was a growth investor, before such a thing existed. He understood that the best time to acquire a position is at its lowest point, then hold it making more profit over a long period of time. He showed an example of this in his acquisition of property. In Rome at time there was no fire-fighting service, so every time a fire popped up he would lead an army of slaves there and offer to put out the fire. The offer was simple; let us put out the fire and give me ownership of the building or let it burn. Clearly times were different, but it is hard not to see a Warren Buffett type enterprise in him. Indeed, Crassus' estimated modern day personal wealth would around $170 billion, approximately three times that of Buffett.
So do not be afraid to look into the past to get a glimpse of how to be a better investor, or how to better attain wealth. Sure times have changes in many ways (mostly for the better), but it does not mean that the age old lessons do us no good.
Have a good weekend and steer clear of those looking to pillage,
Friday, June 5, 2015
The reason I say this is mainly due to a ton of great advice I have received from people who do not fit our style at all. People who habitually spend a lot of money also have a penchant for finding ways to spend more of it. In other words, many of them look for deals like crazy because they too are cash strapped. Naturally the only difference is that FI folks usually put their extra funds into new securities and stocks, whereas spenders love new items or toys.
An example of this in my personal life is a friend of mine who constantly works to pay for debt. Constantly working and paying it off, and spending too much money on other crap. However, she has shown me more deals than anyone else because she truthfully loves shopping, or at least I think she does. Do I need to find some cheap shoes? Bam, call her. Did I crack my phone screen? Call her. Without a doubt, her lifestyle may sound like madness to most of us. To each their own, which is perfect because if everyone in the world was working towards FI, imagine the inflated prices of some of our favorite stocks? Sure, they might not rocket up, but it would make it more of a pain for us.
However, it is not just monetary advice that I am referring. Living a frugal lifestyle is excellent, but it should not be one that leaves you sad and disappointed. One of my better friends is extremely frugal, but he was such to the point that he was missing out on somethings in life. He turned it around and found passion for hobbies, which he has oddly turned into a money making venture. Pretty wise for doing this, and fair to say that most of us cannot replicate that. He is even more of a saver than myself and he invests as well, but prefers the index route.
He also gave me some great advice on dogs too. Most people see pets as an income sink, it will not actively make us money. While that is true, if you have a dog you cannot do what your other friends do. You have to go home, early cannot blow through money as often by eating out or staying out late. In a way they can save you some money as well. That leads me to a new and very related point that my wife and I got a dog this past week. That was totally unplanned, and in my mind at least 2 months away from happening. So in rolling with the punches, I sucked it up, she got us the dog and he is a good little boy.
Anyways, back to the topic at hand. You never know where great advice will come from. Sometimes its the frugal person, which makes sense - yet they might be missing out on life at times. Spenders can provide great ideas for us to save, so we should not let their advice slip away from us either.
Enjoy your weekend!
- Lifestyle Gremlin
- Long licks, belly rubs, and one slightly chewed TV remote