The 30+1 Portfolio: An Average Investor's Reasoning For Buying A Stock - AbbVie, Absolutely

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Includes: ABBV
by: Sleeps Well At Night

Summary

Why ABBV is in my portfolio.

Why I recently sold half my position.

Lessons learned from short-term noise, analysis paralysis and emotion versus long-term outlook on an individual position.

My current portfolio.

Here's a look from an average investor's perspective about the next stock after AAPL currently in my rollover IRA.

abbvie

What's ABBV Do?

AbbVie (NYSE:ABBV) is a leading biopharmaceutical company which focuses on an existing portfolio and pipeline development of new pharmaceuticals to manage existing acute and chronic diseases.

OK SWAN, Why Did You Buy It?

Part of my investing style, if you can call it that, is buy what you know. I work for a health and wellness company where one of the focuses is on specialty medications and LDDs (Limited Distribution Drugs). ABBV has always been a leader in this space both from an existing and pipeline portfolio.

I bought 100 shares of ABBV at 70.75/sh in August of 2017. There were three reasons I bought it.

  1. I saw how much Humira was being used for RA (Rheumatoid Arthritis) and PA (Psoriatic Arthritis)
  2. It was and is a dividend aristocrat
  3. My exposure to the other products that might not get as many headlines as Humira but are just as important to ABBV's growth. The products I was exposed to and saw being utilized in the healthcare community included Imbruvica (Oncology), Lupron (Oncology/Fertility), Viekira (Gastroenterology/Hepatology), and Synagis (Pediatric Cardiology/Pediatric Pulmonologist).

Being an average investor, the above three were the only reasons and diligence I did on this stock before clicking the buy button. I didn't pull investor presentations, financials, or any other tools of the trade. I think I mentioned before that I can barely tell the difference between a tan line and a trend line.

Great, You Got Lucky. Now All You're Doing Is Sitting Back And Watching The Stock Appreciate And Collecting Dividends. Boring.

I wish. Part of my reason for writing this series of articles is because I am trying to be a more disciplined investor. One of the disciplines I am trying to implement is an exit strategy. My strategy is to review a position once it drops 25% from my entry point. I then make a decision whether to hold, sell, or buy more if funds are available.

Source

Well, I got caught up in the hype when ABBV stock dropped like a rock when it was announced that something about a cancer drug was discontinued or not approved. I could go back and see exactly what the actual news was. However, I haven't because I want to illustrate how short-term news affects an average investor's decision. The fact that I don't remember exactly what the event was that caused the drop probably means that in the long term, the news wasn't all that bad. It's not like the CEO and the Board of Directors was doing this with company revenue.

Source

This bad news, whatever it was, coupled with ABBV dropping 25% from the highest price since I entered the position meant it was decision time. Then it happened. I hit the wall. I couldn't make a decision concerning ABBV. It was classic analysis paralysis.

Cry Me A River. What Did You Do?

Source

Why a picture of Dairy Queen? Because my decision was like DQ ice cream, soft serve.

After vacillating and overthinking the whole situation over 100 shares, I ended up selling 50 shares or about 1/2 my position at $93.60/sh which translates into about a 37% gain from original purchase.

With those proceeds I bought shares of O and STOR.

Source

Why did I buy them?

Let's just say O and STOR would be the guy on the left. Beaten down and battered.

What happened with ABBV shares since I thought I made the right/wrong decision?

It's back to about $100.00/sh.

Lessons Learned

What did I learn about actually having to decide if I wanted to keep a stock even if it hit my exit strategy metric of dropping 25% from the high since owning?

  • I don't care what anyone says. Even with a well-defined exit strategy, emotion is going to come into play unless you're actually a computer running an algorithm or Tyler Mason.
  • I'm glad I stopped automating my trailing stop losses for each of my positions at 25% off the highest price. I would have been completely stopped out on short-term bad news. Being able to take a deep breath and make a more informed decision about a stock that has hit your exit point is better than just automatically pulling the trigger.
  • Do I wish I was able to make a more firm and timely decision concerning whether to exit? I do. However, if my final decision led to me realizing a 37% gain and keeping 1/2 of my original position which has since rebounded a bit, it's all good. Plus, the proceeds from the sale allowed me to buy two quality REIT stocks that from my perspective were on sale.

Portfolio Update

Below is an updated look of my current rollover IRA as of 06.04.18

Symbol Quantity Cost Basis / Sh Cost Basis Total Current Value Total + / - Dollars Total + / - %
AAPL 272.69 $6.15 $1,675.70 $52,310.12 $50,634.42 3021.69%
ABBV 51.797 $68.33 $3,539.25 $5,133.08 $1,593.83 45.03%
ABT 104.497 $37.70 $3,939.95 $6,585.40 $2,645.45 67.14%
AFL 100.572 $44.68 $4,493.61 $4,568.98 $75.38 1.68%
AIMT 200 $31.56 $6,312.96 $6,372.00 $59.04 0.94%
AMZN 50 $666.59 $33,329.36 $83,263.50 $49,934.14 149.82%
APLE 101.11 $16.94 $1,712.95 $1,921.09 $208.14 12.15%
[[BABA 50 $154.43 $7,721.54 $10,447.50 $2,725.96 35.30%
[[BAC 100.814 $23.13 $2,331.45 $2,963.93 $632.48 27.13%
CNP 100 $26.56 $2,656.15 $2,563.00 ($93.15) -3.51%
DBX 100 $30.05 $3,004.95 $2,998.00 ($6.95) -0.23%
FB 50 $148.12 $7,406.11 $9,664.00 $2,257.89 30.49%
FCAU 100 $14.93 $1,492.50 $2,082.00 $589.50 39.50%
GLW 127.705 $15.45 $1,973.13 $3,591.06 $1,617.93 82.00%
KHC 100 $58.68 $5,867.95 $5,842.00 ($25.95) -0.44%
LDOS 101.538 $51.50 $5,229.45 $6,253.72 $1,024.28 19.59%
LVS 101.059 $72.03 $7,279.23 $8,066.52 $787.30 10.82%
MAIN 481.07 $9.83 $4,730.78 $18,530.81 $13,800.04 291.71%
MO 552.108 $18.92 $10,445.82 $30,929.09 $20,483.27 196.09%
O 100.624 $50.49 $5,080.95 $5,349.17 $268.22 5.28%
PGNX 200 $6.31 $1,261.47 $1,670.00 $408.53 32.39%
RDSA 104.078 $53.85 $5,604.91 $7,212.60 $1,607.70 28.68%
RF 104.577 $7.60 $794.45 $1,958.72 $1,164.28 146.55%
RSG 104.446 $44.34 $4,631.60 $7,093.97 $2,462.37 53.16%
SQ 125 $30.19 $3,774.21 $7,650.00 $3,875.79 102.69%
STOR 101.256 $24.25 $2,455.95 $2,686.32 $230.37 9.38%
OTCPK:TCEHY 100 $34.96 $3,496.45 $5,328.00 $1,831.55 52.38%
TLRD 100 $21.78 $2,178.30 $3,163.00 $984.70 45.20%
TWX 108.96 $55.72 $6,071.36 $10,183.40 $4,112.04 67.73%
VGR 214.312 $15.37 $3,294.20 $4,202.65 $908.46 27.58%
WEN 115.913 $6.88 $798.03 $1,896.33 $1,098.31 137.63%
TOTAL $154,584.72 $322,479.96 $167,895.32 108.61%

I include this as a reference point for people who choose to read my past, current, and future articles. Since I first posted the above three weeks ago, the portfolio is up 4%.

Please note that all dividends are reinvested. I'm all about the DRIP.

The Recap

There it is. Article #3 in an ongoing (hopefully) series of articles based on my experiences as an average investor.

I appreciate everyone who has decided to read, comment, and follow me so far and moving forward.

I look forward to the input and feedback on this specific article or investing in general.

Until next time.

Good hunting.

Disclosure: I am/we are long AAPL ABBV ABT AFL AIMT AMZN APLE BABA BAC CNP DBX FB FCAU GLW KHC LDOS LVS MAIN MO O PGNX RDSA RF RSG SQ STOR TCEHY TLRD TWX VGR WEN.

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.