Seeking Alpha
Research analyst, portfolio strategy, portfolio management, long/short equity
Profile| Send Message|
( followers)

Summary

  • The last "dip" was short lived but offered opportunities.
  • The creation of the BTDP stemmed from our continued opinion to buy the dips for increased income for retirement.
  • There will be other dips to take advantage of so have your shopping list ready.

The last market "dip," which we thought was finally going to be a correction, was short lived but created some buying opportunities. While the rest of the investment world is searching for the next best mouse trap, and a stock that will fly, dividend investors can increase their core holdings, expand into other stocks, and grow their income for a more secure financial future.

I realize that many, many investors want the quick buck and to find the next Apple (NASDAQ:AAPL), to "score" a double triple or more. For dividend investors our focus is to hopefully keep growing our income for retirement, and/or our later years. For us this is the path that should lead to financial security.

The Buy The Dip Portfolio Was Born At The Time Of The Last Dip

I have been writing articles that compare a stock only portfolio with an ETF only portfolio of which you can view the latest update right here. However, the reason the portfolio was constructed was to show how buying the dips could potentially work.

The last "dip" occurred in late January, early February, and while it did not last more than a week or so, if a dividend investor took advantage of it, they would be in fairly good shape right now.

The original BTDP consisted of just the following stocks: AT&T (NYSE:T), Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), General Electric (NYSE:GE), McDonald's (NYSE:MCD), and Chevron (NYSE:CVX).

Here is the original chart that we used to determine if we should buy this collection of stocks on the "dip:"

STOCKYIELDFWD P/E
T5.50%12.48
XOM2.80%11.83
JNJ3.10%14.09
KO3.00%17.04
PG3.10%16.51
GE3.60%13.81
MCD3.50%14.85
CVX3.60%9.72

The date was February 3rd, and that was the day I suggested buying the dips in these stocks. Let's take a look at what has actually happened.

2/3/2014StockYld on Cost5/5/2014% Gain/Loss
31.95T5.60%35.7611%
90.05XOM2.80%102.9111%
86.78JNJ3.10%99.9914%
37.21KO3.00%40.759%
75.71PG3.10%81.718%
24.35GE3.60%26.5810%
93.02MCD3.50%101.149%
111.14CVX3.60%125.3612%
xxxxx

Keep in mind that the momentum stocks as well as the small cap stocks have been hammered over the last few months. Some of the high flying names, like Tesla (NASDAQ:TSLA), Amazon (NASDAQ:AMZN), and Netflix (NASDAQ:NFLX), have all lost significantly more than these boring old blue chips have gained in the same time frame.

The overall yield on cost, on an equal allocation basis, was 3.54% on 2/3/2014, and since that time XOM, JNJ, and CVX have raised the dividends. The yield on cost right now would be noticeably higher, but the important fact is that depending on how many shares an investor bought or added, the income has gone up and the total value of this little portfolio is up by 11% at the same time.

While nobody knows what the future holds, if you were to just buy this one dip, in the stocks suggested, you would have more income and a higher net worth.

In case you missed the dip, there will be others, I promise. I just cannot say when or for how long or how steep. My suggestion would be to do your fundamental research on each of these stocks, note that most if not all will increase dividends soon, and review each company's earnings reports and conference calls with a glimpse towards forward guidance.

Buying the dips almost always works, and adding to your core holdings will enhance your income going forward, basically forever. That is the type of investing that makes more sense to me than anything else.

Disclaimer: The opinions of the author are not recommendations to either buy or sell any security. Please remember to do your own research prior to making any investment decision.

Disclosure: I am long AAPL, AMZN, CVX, GE, JNJ, KO, MCD, T, XOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Retirement Strategy: Did You Buy The Last Dip? You Should Have, But There Will Be Others