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Trades For March 29, 2019

|About: Bank of America Corporation (BAC), MCD, Includes: ABBV, BUD, CCL, CTL, CVS, FNMA, GLW, IRM, MO
Summary

Buy orders.

To sell or not to sell.

Review current strategy and thoughts on possible tweaks.

They say better late than never and this blog entry is very late. So originally, I wanted to start keeping track of all my buy and sell orders. I haven't been very studious about it. This entry is a first crack at trying to write about what I'm buying and why I'm buying it.

So the week of March 25-29 has been crazy. Carnival and CVS began the week in the red and stayed there much of the time. I understand why Carnival (CCL) was down and down big. It was because of their lousy earnings' report, but I'm not so sure I understand why CVS (CVS) was down. At any rate, by Thursday each companies was slowly clawing back some of the losses. This bummed me out. I had a few dividends pay out by Wednesday, but my big payouts came Friday. I was really hoping the market or at least CVS and CCL would have stayed in the red long enough so I could pick up a few shares. Didn't happen, so I went with plan B.

Plan B is actually my Plan A which has a very simple rule. Collect dividends. If the  dividends pay enough so that I can buy shares of the paying company in multiples of 5 (i.e. 5, 10, 15, ...), the money is reinvested and shares are bought. If not, the money is pooled together with new money and used to buy shares in another company or to start a new position. One caveat I need to make is this plan of attack ONLY applies to my brokerage account. My Roth is too small to meet the listed requirements, so I buy what I can when I can.

This week was a big pay week. Both Bank of America (BAC) and Corning (GLW) paid out. I pooled those dividends together with my bi-weekly contribution and dividends from the beginning of the week. In total, I had over $800 at my disposal for purchases and before the market opened, I placed 5 buy orders.

Buy Orders.

Company

Share Order

Order Price     

Bank of America (BAC) 15 27.50
Corning Incorporated (GLW) 10 32.90
Carnival Corporation (CCL) 1 49.90
CVS Health Corporation (CVS) 1 53.50
Fannie Mae (OTCQB:FNMA) 5 2.94
CenturyLink, Inc. (CTL) 7                      11.90

I am a little upset with myself because once again the market gave me a big head fake. Three of these orders executed at open at a lower price than my limit; however, the prices continued to drop. When that happens, it sucks! I probably should wait 5-10 mins after open before adding an order, but I'm usually off to work at that time, so I end up getting my orders in early and just dealing with the consequences. This currently works, but another option I am considering is to low-ball my limit price. Low-balling involves setting a ridiculously low limit price in hopes that when the market bottom's out, you get ultra cheap shares. That's some advice another SA member wrote to me on one of the StockTalk channels. I like the idea, but I really do want to purchase my shares ASAP. While the upside is I get the ultra low shares, the downside is the limit order may never execute. I guess I need to look at all my options and work on a better approach for next time.

The three orders that executed were 15 shares BAC, 1 share CVS, and 5 shares FNMA. All three dropped by $0.20 from the limit order price, but only BAC and CVS recovered nicely from their day lows. FNMA opened low and stayed low. In the case of Fannie, I now wish I had more dry powder. I would like to get another 40 shares and bring my position up to 200 shares. If Fannie continues dropping, I am seriously looking at using my April dividends to pick up more shares.

The two buy orders that did not execute were Corning and Carnival. I didn't have any expectations for the Corning order to execute. That company pretty much follows the market. If the market is up, Corning is up. If the market is down... well you get the picture. Carnival on the other hand, did surprise me. It has been down all week. I half-expected it to open down and go much lower before gaining. It did not and the CCL limit order is still open. I'll look at modifying it if I think there is a chance the price will drop below my current limit order price.

The final buy order I placed was in my Roth account. It was for 7 shares of CentryLink. The CTL buy gave me some heartburn. It was a mid-day order and at first, I wasn't going to purchase any shares. I was looking at adding a new position (preferably one that pays out monthly). Unfortunately, I haven't done my homework with regards to a monthly payer, so I punted and added to my CTL position. One internal disagreement I am having with myself is if I should add new positions or in-fill current ones. It's Friday and my brain isn't up to the challenge of figuring that out right now, so I'll leave that for another blog entry.

To Sell or not to sell. That is the question.

I have a very small position (17 shares) in McDonald's Corporation (MCD). I love the company, but I dislike that the stock price is so expensive. One idea I have is selling my entire position as redeploying that money into something else like Altria (MO) or Abbvie (ABBV). If I were to do that, I could easily pick up 56 shares of Altria or 40 shares of Abbvie. Right now, my 17 shares of MCD only pays out $19.72 in yearly dividends. If I were to buy MO or ABBV, I could easily generate $179.20 or $171.20 in yearly dividends respectively. Looking at the numbers they scream SELL! SELL! SELL MCD!, but my brain keeps throwing up roadblocks like taxes or if there is some other position I should consider. Stop it brain! You are not helping me right now!!!

The other sell question mark I have is not if, but at what price I should exit the Anheuser-Busch InBev (BUD) position that is in my Roth. I really don't know what the heck I was thinking last year when I purchased BUD for my Roth. I really dropped the ball when I was researching the company. First strike was buying right before earnings. By the way, they missed earnings and they missed it bad. Second strike was placing the shares in my Roth. I knew it was a foreign company, but I didn't think anything past that. I assumed because it was in my Roth, taxes wouldn't matter. Wrong! So should anyone else read this, let this be a warning to ALWAYS DO YOUR HOMEWORK and that includes tax implications. Needless to say, I actually had a chance to get out of my position today and even placed a limit sell order for $84.25. Had I kept the order and allowed it to execute, I'd have sold with a tiny profit. But I got greedy and cancelled the sell order. I am looking for BUD to reach $85. If it does, I believe the next leg will be $90 then $100. I would like to sell at $100+. My plan is to use the proceeds to get a full lot (which for me is 100 shares) of CTL and more shares of Iron Mountain (IRM).

Purchase Strategy.

Earlier I talked about Plan As and Bs. My plan really is simple. I have 6 positions that generate enough dividends that I can pick up at least 5 or more shares per position. When those dividends are paid out, I reinvest them the same day. This isn't quite a DRIP, but it is a serious of controlled buys and makes tax harvesting easier to deal with. One small caveat is if my dividends only allow me to purchase for example, 13 instead of 15 new shares, normally I just buy 10 shares and the remaining cash goes to the kitty so I can use it to buy something else. But if I have enough cash in the kitty to cover all my buys, I will use that money to buy the 15 shares from the example above. In fact, that is what I ended up doing with my BAC purchase today. The BAC dividends only allowed me to buy 13 shares. I ended up taking leftover money from GLW's dividend, the kitty and BAC's dividend to purchase all 15 shares of BAC.

The second part of this strategy involves bi-weekly account contributions (new money) and making purchases to 13 other positions every 6 months. At the end of 6 months, I repeat the purchase order. I chose this way so I know I will be buying these positions at least twice a year. The goal is to build up each position so that by year's end, whatever I bought has at least 5 shares or a multiple of 5 shares. Next year, a new group of positions is selected and shares will be added. Because of the number of positions I have, this method takes 3 years to complete a full cycle of positions.

A part of me likes this plan because I only have to worry about X positions all year, but of late, I've been wondering if I would open it up to making a purchase in every position. The upside is I will be buying everything in my portfolio that year. The downside is I'll only be able to buy 1-2 shares a year instead of at least 4-5 shares a year. I really don't know what to do. For now, I am sticking to my current plan.

Final Thoughts.

This blog entry really only focuses on my brokerage account, but to be honest, my Roth is an absolute mess. It is much smaller than my brokerage account and has been treated like a red-headed step child. With that in mind, over the next month or two, I want to finalize the strategy I am using my brokerage account then turn my attention to my Roth. Because my Roth is much smaller in terms of balance and positions, I'm wondering if I can apply the buy strategy of my brokerage account to my Roth? If I can, I need to map out what needs to get done to right this ship.

We'll have to wait and see.

Disclosure: I am/we are long BAC, GLW, FNMA, CVS, CCL, ABBV, MO, MCD, BUD, CTL, IRM.