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Value, growth at reasonable price, contrarian, dividend investing
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Over the last few months, I have wondered whether investing in the stock market has become more of a hobby and less about money management. Even though I do not trade frequently – I average 3-4 trades a month – I am unable to compute and compare my total returns against any index or mutual fund, for that matter. Over the holidays I decided to figure out if it is worth trying to find individual stocks or better to stick with an ETF. Note that this comparison may be instructive/suggestive to others because each investor picks stock differently, which is what gives rise to a dynamic stock market.

I decided to pick 25 of my favorite stocks and created a virtual portfolio with $4000 invested in each company. I intend to track this portfolio over the next several years and compare the total returns (dividends + capital appreciation) against three ETFs that I particularly like. I will not reinvest the dividends but collect them in cash and invest in one or more stocks at the end of each quarter. This exercise is aimed at helping me answer the question – am I picking half-way decent stocks? Metrics I plan to use:

  • Volatility – would the wife be able to sleep at night?
  • Net monthly dividend amount received (annual dividends divided by 12) – would I have reasonable income if I were to desire it?
  • Capital appreciation – would we feel rich (multi-millionaires) in a couple of decades?
  • Winners/Losers – Do I have a winner / loser over the long term or mostly mundane picks?
  • Diversification – Am I suitably invested in different sectors, geographies and currencies? Sort of correlated to the volatility aspect.
  • I feel that I cannot answer some of these questions based on my current portfolio that has built over 4+ years and includes various crazy picks at weird prices mostly based on tips and random suggestions by others. I want to figure out if I am a better investor than I was 5 years ago when I first opened a brokerage account.
Company Ticker Price Num

Stocks

Holding Value EPS Div/Sh Div Yield Net Div Amt
AstraZeneca AZN 46.29 86 3980.94 7.26 2.7 5.83% 232.2
Banco Santander STD 7.52 531 3993.12 1.23 0.552 7.34% 293.112
Bank of Montreal BMO 54.81 73 4001.13 5.26 2.8 5.11% 204.4
BASF SE OTCQX:BASFY 69.73 57 3974.61 6.7 2.2925 3.29% 130.6725
BHP Billiton BBL 58.39 68 3970.52 8.54 2.02 3.46% 137.36
Canon CAJ 44.04 91 4007.64 2.56 1.4364 3.26% 130.7124
CPFL CPL 28.21 142 4005.82 3.06 1.4585 5.17% 207.107
Dover DOV 58.05 69 4005.45 4.3 1.18 2.03% 81.42
E.On AG OTCQX:EONGY 21.39 188 4021.32 1.38 1.5883 7.43% 298.6004
Emerson Electric EMR 46.59 86 4006.74 3.27 1.435 3.08% 123.41
Flower Foods FLO 18.98 211 4004.78 0.96 0.6 3.16% 126.6
France Telecom FTE 15.66 255 3993.3 1.13 1.6411 10.48% 418.4805
Intel INTC 24.25 165 4001.25 2.31 0.84 3.46% 138.6
J&J JNJ 65.58 61 4000.38 4.1 2.28 3.48% 139.08
Lincoln Electric LECO 39.12 102 3990.24 2.37 0.68 1.74% 69.36
Lockheed Martin LMT 80.9 49 3964.1 8.56 4 4.94% 196
Novartis NVS 57.17 70 4001.9 4.27 2.353 4.12% 164.71
Pepsico PEP 66.35 60 3981 3.99 2.06 3.10% 123.6
Qualcomm QCOM 54.7 73 3993.1 2.52 0.86 1.57% 62.78
Reality Income O 34.96 114 3985.44 1.07 1.752 5.01% 199.728
SeaDrill Ltd. SDRL 33.18 121 4014.78 3.51 3.135 9.45% 379.335
Siemens SI 95.61 42 4015.62 6.96 2.9541 3.09% 124.0722
Telefonica SA TEF 17.19 234 4022.46 4.08 1.72 10.01% 402.48
Timken Co. TKR 38.71 104 4025.84 4.46 0.8 2.07% 83.2
Total SA TOT 51.11 79 4037.69 5.33 2.6948 5.27% 212.8892
Total $99,999 4.68% 4679.9
SPDR S&P 500 SPY 125.5 796 $99,898 2.576 2.05% 2050.496
Dow Jones Select Dividend DVY 53.77 1859 $99,958 1.8483 3.44% 3435.99
Vanguard Div Appreciation VIG 54.65 1829 $99,954 1.172 2.14% 2143.588

Other financial information that I often track or use while making decisions:

Company Ticker Debt/Eq Div Gr - 1yr Div Gr - 3yr Div Gr - 5yr Div Yield Payout Ratio
AstraZeneca AZN 0.31 15.31 11.26 18.65 5.83% 37.19%
Banco Santander STD 0.36 -25.08 -4.71 6.9 7.34% 44.88%
Bank of Montreal BMO 0.24 0 -0.07 4.4 5.11% 53.23%
BASF SE BASFY.PK 0.51 -14.78 -6.63 6.69 3.29% 34.22%
BHP Billiton BBL 0.25 9.64 17.57 23.25 3.46% 23.65%
Canon CAJ 0.01 -0.68 10.58 3.26% 56.11%
CPFL CPL 0.98 15.3 -3.69 16.07 5.17% 47.66%
Dover DOV 0.45 4.9 11.59 10.15 2.03% 27.44%
E.On AG EONGY.PK 0.8 -5.76 -1.79 6.04 7.43% 115.09%
Emerson Electric EMR 0.4 2.99 4.77 9.17 3.08% 43.88%
Flower Foods FLO 0.38 14.81 19.14 24.84 3.16% 62.50%
France Telecom FTE 1.12 32.16 -0.06 15.68 10.48% 145.23%
Intel INTC 0.15 12.5 11.87 14.51 3.46% 36.36%
J&J JNJ 0.21 9.33 9.21 10.6 3.48% 55.61%
Lincoln Electric LECO 0.08 5.5 8.11 9.52 1.74% 28.69%
Lockheed Martin LMT 2.22 12.82 21.55 20.25 4.94% 46.73%
Novartis NVS 0.21 -3.6 14.65 13.86 4.12% 55.11%
Pepsico PEP 0.93 6.48 9.87 13.35 3.10% 51.63%
Qualcomm QCOM 0.04 12.5 10.52 14.04 1.57% 34.13%
Reality Income O 0.99 0.88 3.13 4.96 5.01% 163.74%
SeaDrill Ltd. SDRL 1.37 382 9.45% 89.32%
Siemens SI 0.46 67.48 7.44 8.8 3.09% 42.44%
Telefonica SA TEF 3 6.11 16.24 14.85 10.01% 42.16%
Timken Co. TKR 0.22 17.78 -7.05 -2.45 2.07% 17.94%
Total SA TOT 0.34 -11.2 -0.03 5.14 5.27% 50.56%

The prices are closing prices as of December 30, 2011. The virtual portfolio would pay approximately $4500 per year, which gives a yield of 4.5%. I intend to compare it against S&P 500 via the SPDR ETF (NYSEARCA:SPY) and two dividend focused ETFs – Dow Jones Select Dividend Index (NYSEARCA:DVY) and Vanguard Dividend Appreciation ETF (NYSEARCA:VIG). Obviously, there are many approaches and this is just one . There are perhaps far better stock picks, especially those intended for capital appreciation, e.g., Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN) etc. But Alas! They do not pay dividends and I absolutely require a 2% dividend yield.

I will be back every quarter with updates and thoughts on where I did well and where I did not and if any mid-year corrective actions are required.

Source: Benchmarking My Total Growth Dividend-Stock Portfolio