I love peanut butter, especially for breakfast. Almost every morning, I spread it on apple and banana slices. (Try it; you'll like it!) After a poor crop drove up prices this year, peanuts now are plentiful and my favorite product is expected to be more affordable soon. Talk about a classic buying opportunity ... I'll be purchasing P.B. in bulk!
So if I wait for better prices to fill my cupboard with peanut butter, is that akin to market timing? Or is it merely being a patient, informed consumer? The latter is my mission when shopping to fill my investment portfolio, too.
Tiptoeing Toward The Cliff
Despite some optimistic talk from our elected officials recently, nobody knows if they will make a deal before Jan. 1 to avert the dreaded "fiscal cliff" -- numerous automatic spending cuts and tax increases that could send the economy back into a recession.
In the first 10 days after the election, the mere threat of the scenario (combined with international turmoil, Superstorm Sandy and other factors) resulted in plummeting prices for McDonald's (NYSE:MCD), Kinder Morgan Energy Partners (NYSE:KMP), Altria (NYSE:MO), Microsoft (NASDAQ:MSFT), Chevron (NYSE:CVX), Realty Income (NYSE:O) and many other Dividend Growth Investing favorites.
Of course, one didn't need to be a soothsayer to see this coming. I don't pretend to be an expert, yet back on Sept. 6 I wrote that I was hoarding cash and waiting for the next big pullback in great part because of the fiscal cliff and the chatter about it.
Market Timing ... Or Patience?
A few commenters who read that article charged me with "market timing." Please. I was just being pragmatic. And believe me, I have absolutely no regrets about having passed on AT&T (NYSE:T) at $37.50 per share; it's down 10 percent since then ... and I still don't think it's a great value.
Having analyzed my portfolio thoroughly, I am choosing the holdings I want to increase, the companies I want to add and the prices I'm willing to pay. I am not trying to time a market bottom because I'm not Carnac the Magnificent. It's not as if I went on a selling spree when I thought the market might be somewhat overvalued.
I own shares of 25 companies, mostly long-time dividend growers from David Fish's list of Champions, Contenders and Challengers. I also continue to hoard cash, which makes up about 35 percent of my portfolio and is ready to deploy when I feel I can get the most "value bang" for my buck.
Still a relative DGI newcomer, I hope to own 40-50 companies by the time I complete my accumulation phase. Whether that takes one more month or two more years, I am determined to be patient, disciplined and informed.
Last month, I wrote an article in which I asked if Intel (NASDAQ:INTC) was priced to buy or avoid. Many readers said they were jumping in at $22.50, when Intel's dividend yield reached 4 percent. I said I was waiting for $20 or even lower. I still haven't added to my Intel stake. Frankly, the company's fundamentals don't thrill me right now.
Maybe that's smart shopping. Maybe it's a lucky guess. Maybe it will prove to have been a missed opportunity. Whatever the case, I don't think it's what traders would call "market timing."
I'm an investor, not a trader, and I want to invest in quality companies to hold for years and years. I simply don't want to overpay for them.
One Investor's Watch List
The post-election pullback, fueled greatly by fiscal-cliff fears, is starting to give investors opportunities. Monday morning, when the market was just beginning its 2 percent climb for the day, I increased my position in Royal Dutch Shell (NYSE:RDS.B). It was my first purchase in almost three months.
I also hope to add to what I now own of McDonald's, Altria, Realty Income, Omega Healthcare Investors (NYSE:OHI), Kinder Morgan Management (NYSE:KMR), GlaxoSmithKline (NYSE:GSK), AstraZeneca (NYSE:AZN) and Bristol-Myers Squibb (NYSE:BMY).
Among companies I want in my portfolio, these have gotten closer to my desired entry points: Chevron, Microsoft, Hasbro (NASDAQ:HAS), Owens & Minor (NYSE:OMI), Dover (NYSE:DOV), Kinder Morgan Inc. (NYSE:KMI), LinnCo (NASDAQ:LNCO), General Mills (NYSE:GIS), BCE Inc. (NYSE:BCE), PPL Corporation (NYSE:PPL) and Southern Company (NYSE:SO).
As for Unilever (NYSE:UL) and J.M. Smucker (NYSE:SJM) -- producers of Skippy and Jif, respectively -- they are disqualified by their high valuations. I'll happily buy their delicious peanut butter, but shares in their companies are not on my radar.
You know, I actually was disappointed Monday when the market rallied. But that's OK. I've got patience and time. And I've got faith that our elected officials will scare the bejeepers out of investors several more times over the coming weeks.
In my heart of hearts, I don't think Congress and the president will let us fall over the fiscal cliff. We probably will teeter darn close to the edge, though -- a fearful experience for many but an exciting opportunity for others.