Friday, December 28, 2012

New Purchase - KO, LINE / Sale - BWP

New Purchase - KO

I added 35 shares of The Coca-Cola Company at $36.07 which will increase my annual income by $35.70.  This purchase came with a yield of 2.83% before commissions.  As many of you know, I've been looking to add to my KO position for quite a while now.  The last time I bought KO shares was June 2011 so it's been a good year and a half.  To be honest, I'm not excited about the price I paid but you'll rarely see this company on sale.  I decided to go ahead and pickup some shares now and just get it over with.  This is a company I never plan to sell meaning 20 years from now I doubt I'll really care if I paid $36 or $35 or $33.  The point is to increase my stake in this fine company and collect rising dividends the rest of my life.  Coke has a dividend growth streak of 50 years.  Impressive!



Sale - BWP / New Purchase - LINE

Boardwalk Pipelines (BWP) was one of my earliest purchases and frankly has been a disappointment.  I have some concerns with the safety of the distributions of this MLP so I decided to take a loss and trim back the position.  I sold 50 units at $25.05 which will reduce my annual income by $106.50 per year.  The concern here is that distributable cash flow coverage is thin and distribution increases have stalled.  BWP has a history of increasing the distribution every quarter, and was doing exactly that until about 6 months ago.  I've spent a lot of time listening to conference calls and reading articles on Boardwalk trying to figure out what went wrong.  I do not think the distribution will be cut, but I want to play it safe here.  I foresee flat payments until some of the projects they are building come online.  Pipeline systems and storage facilities are not built overnight.  It could be a year or two until BWP gets back on track.  At this point I'm not ready to give up on this company, but as a precaution I think it's prudent to hold a smaller position.  I have a fair value of $31 on this company and do feel it is undervalued right now.  They've also taken steps to diversify their business away from 100% natural gas.  I like that.

With the proceeds from the BWP sale plus some extra money, I purchased 40 units of Linn Energy at $36.04.  These units will increase my annual income by $116.00.  This swap was actually completed Thursday US time.  I wish I would have waited one more day to do this transaction, but I'm only human and cannot predict the future.  Basically what I did here is trim BWP and add LINE.  I'm more comfortable with this weighting.

I have to be honest with myself, I suck at picking MLPs.  I really like the concept of side stepping corporate taxes allowing for huge distributions that are tax deferred until sold.  It's a fantastic idea.  Unfortunately I haven't quite figured out how to make sound decisions in this industry.  Valuing MLPs is a difficult task.  I'm not going to throw new money at MLPs until further notice.  That includes KMI.  Even with KMI I've never really known if I'm under paying or overpaying.  I've learned that yield alone is not a good enough reason to buy a company.  Even though I have spent numerous hours researching Master Limited Partnerships, I just can't seem to get it right. 
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I also had a limit order to purchase LO which didn't execute.  The stock market opens at 11:30 PM here so I'm forced to set limit orders before I go to bed and hope they fill while I'm sleeping.  LO came within a few cents of triggering.  I've also reconsidered my stance on Hasbro.  New information has been brought to light.  Kids are increasingly interested in tablets and smart phones.  It makes sense that toy sales would be hurt with all the new technology these days.  I've seen this trend first hand with my coworkers kids.  At Thanksgiving, my buddy's son just sat there and played with an Ipad all night.  Back when I was his age it would have been HE-MAN or GI JOE.  Times are changing...  Not sure why I didn't pick up on this before.

15 comments:

  1. I think you are totally right in regards to KO and its price in long term view, whether it is 35, 36, or 33 as you said, however I try to pick the price of my stocks when they are either on sale or in correction, when in upward trend channel I always wait when the price gets to the higher low or lower trend line and add a few shares there and wait, if the stock continues up, fine, I'll wait for the next cycle, if it continues down I am OK with it too since I will be adding another position even cheaper.

    As far as MLPs I am lost with them too. But thanks for your insight.

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    1. KO is one of those stocks I plan to never sell. Now things might change in the future so I still need to pay attention to it. As I gain experience investing I find myself gravitating to quality companies. It can be difficult to find value though.

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  2. I think it depends on the child. My nephew can't get enough of physical toys -- trucks, Legos, Matchbox cars -- basically anything you can take apart and reassemble or that has wheels. He has a few screen-type gifts (including a fully functional toy digital camera with games) but they don't capture his attention for very long. But I do think that as kids get older, they to get drawn more to electronic gadgets like video games and tablets. Maybe buy HAS and AAPL and cover both bases?

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    1. Good point. For now I'm going to put money somewhere else. I might consider it if it gets extremely undervalued I guess. I do not feel the need to get into the toy business.

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  3. Nice add of KO. I've been waiting since I first purchased it to add to my position. If the fiscal cliff mess doesn't get resolved this weekend or on Monday then I'll have a big question to answer. Pick up KO or PM? I want to add to both positions but I won't have enough capital to make the size of purchases that I'd like to for both. Oh well, decisions decisions, hopefully the market will make it for me. I wasn't planning on making any more purchases this year but MDT and TGT pulled back enough to where I was able to average down enough to lower my cost basis that I went ahead and picked up some more of both. The fiscal cliff if going to be a huge catalyst depending on how it turns out. I wouldn't be surprised to see a + or - 300 point move for the DJIA on Monday. That makes it very difficult to plan your purchases.

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    1. Yes I might have to stay up late on Monday (I'm off) to see what unfolds. I might be a little intoxicated that night though! I have enough cash to make 5 purchases. I'll be looking to add quality and stability. Some names I'll be watching: KO, JNJ, PM, GIS, VZ, ABT, TD. We'll see what happens. If no deal is reached I imagine markets will decline in January too!

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  4. Nice buys man! We must be on the same wavelength again, b/c when I was monitoring stocks on Friday, I was sitting there thinking, "LNCO and KO look really cheap right now!" I really didn't think Congress could sort out the fiscal cliff mess by Monday, so I was going to wait until then to make another move.

    Good stuff!

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    1. Oh I have some dry powder ready to be invested. My thinking was to make 1 purchase now and jump in head first if no deal is reached. We shall see!

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  5. Maybe I overstated when I said "really cheap". What I meant was, a lot more attractively priced than from earlier this month. Basically, a good price to buy. ;)

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  6. Good buy with Coke. It's a solid play. I myself am looking at BDX and MCD. I'm hoping the fiscal cliff non-sense will drive their prices a bit lower. Next week should prove interesting.I just wonder how much longer the government can keep markets propped up.

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    1. This coming week could be a feast! I'm actually pretty excited to see what will be on sale!

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  7. Nice purchases. Like you, I've been wanting to increase my KO position for a while. If the price were to decline near $34 (the 3% yield point), then I would consider a purchase.

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    1. I wouldn't mind doubling my KO position and would definitely buy at $34.

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  8. Coca cola is an excellent company the thing about coke is their an international beverage company. Some investors may be a little confused when they look up the company online theirs several divisions of the company they trade as separate stocks theirs the bottling division and the the Coca-Cola Company' the marketing and promotional part of the company. Coca Cola Enterprises Inc. Coca Cola Enterprises Inc and the Coca-Cola Company are very profitable unlike Coca-Cola Bottling Co Consolidated which has razor thin profit margins.

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    ReplyDelete