Another month gone by and time for another FFJ Portfolio status report.
A few stocks I viewed as overvalued in recent months have retraced to fairly valued levels based on analyses I conducted in April. As a result, in the ‘side accounts’ I acquired:
- 217 shares of 3M (NYSE: MMM)
- 300 shares of Stanley Black & Decker (NYSE: SWK)
- 300 shares of Illinois Tool Works (NYSE: ITW)
There are, undoubtedly, some investors who may disagree with my call on the current valuation of these companies and are of the opinion I should wait for prices to retrace further. In the grand scheme of things, however, even if the share price of each company reflected above were to retrace another USD $30/share (I arbitrarily chose this value), I have only acquired 817 shares so we’re talking USD $24,510 on a portfolio currently valued at ~CDN $573,565 and ~USD $841,247. Subscribers can view the FFJ Portfolio holdings here and the monthly dividend income reports here.
I readily admit I have absolutely no idea where stock prices will be in a few months’ time. All I can do is to analyze a company on the basis of forecasts provided by company management and to determine what I view as a fair value.
Having said this, I do feel reasonably confident in my ability to determine whether a company will be far more valuable 10 – 20 years from now. In my opinion, the three companies reflected above are highly likely to continue to generate ample free cash flow to increase their dividends and to repurchase shares. This should bode well from long-term price appreciation. Should business conditions turn negative, I strongly suspect management will take appropriate action to ensure ongoing profitability.
Dividend income generated in the FFJ Portfolio in April amounted to ~CDN $2025 and ~USD $713. Income for the first four months of 2018 now amounts to ~CDN $5,416 and ~USD $4,637.
Another ~CDN $50 and ~USD $208 in dividend income was generated through the side accounts; the 3 recent investments noted above were made through the side accounts. I, therefore, expect to report an improvement in dividend income on the ‘side accounts’ over the next few months.
In addition to the YTD dividend income, I wrote in November 2017 4 JM Smucker (NYSE: SJM) covered CALLS at a $125 strike price which expire July 2018. I received USD $2.90/share for a total of USD $1,160 (less commission) at the time I wrote these contracts. If I were to repurchase these contracts today I would retain my SJM shares and I would need to fork out USD $1.48/share for a total of USD $592 (less commission).
I am of the opinion SJM’s stock price will stay below $125 and the options will expire worthless thus resulting in a profit of USD $1,160 (less commission); I am not planning to close these contracts at this point in time.
That’s my roundup for April. I hope you made progress on your journey to financial freedom during the month of April.
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Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decision without conducting your own research and due diligence. You should also consult your financial advisor about your specific situation.
I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.