It seems at long last we are seeing the anticipated pullback we have been waiting for. I realize that it is never any fun to watch the overall portfolio value dip along with the market. Remember what our goal is; don't panic, get our shopping lists ready, buy on the dips and add to our core holdings. It is a good time to review this series, and see how we began our journey. (I urge everyone to read this)
The markets are scary. The markets are irrational. The markets are giving us an opportunity to buy great companies that are now coming down in price.
Our current portfolio consists of ExxonMobil (XOM), Johnson and Johnson (JNJ), AT&T (T), General Electric (GE), Annaly Capital (NLY), Southern Company (SO), Procter & Gamble (PG), Philip Morris (PM), Intel (INTC), Realty Income (O), Chevron (CVX), E.I. du Pont (DD), Duke Energy (DUK), Coca-Cola (KO), and Bank of America (BAC).
Let's Review Some Sale Pricing
ExxonMobil: Price: $82.17/share, Dividend Yield: 2.30%, ESS Rating: Bullish
On January 20th the price was $87.49/share, now it is $82.17/share. A drop of 6-7% and I would now consider placing a limit order just under $82.00.
I would not buy a whole truckload because oil prices are dropping right now, but the fundamentals of XOM have not changed one iota, and adding roughly half the amount of shares that you ultimately want, would give you more shares at a bargain price as well as keeping the other half of what you want to add on the side for another 5% drop.
If it does not fill, well that's fine, just wait a bit longer.
General Electric: Price: $18.74/share, Dividend Yield: 3.60%, ESS Rating: Bullish
Let's face it, GE has everything and is into everything. Another "hold forever" stock IMO. A month ago the share price was $20.20, now it is $18.74. Another 5-6% drop.
I would consider placing a limit order for half of the shares you ultimately want to add, at $18.25. Let the other half of your order sit for another 5% pullback if it happens.
In my opinion GE is just getting started on a climb upwards, and we are already holding it for income now anyway.
Proctor and Gamble: Price: $66.35/share, Dividend Yield: 3.25%, ESS Rating: Bullish
Let's play some defense while we play offense! PG is the ultimate defensive play in my opinion, and with its nice dividend we most certainly want to add some of this stock while the markets are acting fuzzy.
A month ago the share price was about $68.00, now it is about $66.00, about a 3% dip. Obviously there is a reason that PG has not dropped off a cliff. It is a safer investment during market confusion and correction.
I would consider placing a limit order for half of the amount of shares you want to buy, at $65.00 and let the rest sit quietly, waiting for another 3% dip.
Why Not Sell Puts To Acquire Shares?
I know many of you are thinking about doing this and i admit that it is tempting. What I suggest for your consideration is that we really do not know how far or how fast the market might continue to dip.
We could have a sharp sell off and we would then own shares that could very well be under where we have our strike price, and we would need to keep our cash available for the option event to occur.
It is your call, but I would not suggest it right now because it takes the purchase out of your control. Just my opinion, but for me it is too risky for now.
If you want to do some option trading, take a look at writing some covered calls on existing positions. I would suggest a 1-2 month expiration and a strike price no more than 10% higher than the current price. If the premiums are good, then you can pick up some extra money as we float around during this type of market.
Do not let the last 7 days of declines have you in a state of panic. I believe that the bull market is intact and this will probably be healthy for the next leg up.
Earnings season is here and it is making some folks squirm, but remember we have come off of a few great earning periods, so while expectations might be high, a closer look will still ultimately show expansion, just not as robust.
One other thing to just consider. The Fed and our Government does NOT want the recovery to derail I believe they will do what is needed to continue the recovery during an election year. While we hate to admit it, QE3 might pop up to "prop up" the markets and the economy.
I for one, wont bet against THAT from happening if needed.
Disclaimer: Please remember to do your own research prior to making any investment decisions. This article is not a recommendation to buy or sell any securities or stocks, and is the opinion of the author.