The broad market pullback we are currently experiencing has presented buying opportunities. In this 2nd brief interim article during the month of March I disclose further recent purchases.
The FFJ Portfolio was created in January 2017 for the purpose of demonstrating how investing in high quality companies with competitive advantages and with a record of consistently increasing dividends can assist investors in reaching their long-term financial goals without the need to speculate or to chase dividend yield.
I truly appreciate significant market pullbacks!
It is certainly not my intent to sound like a broken record but for months I have expressed my concern about equity valuations in general having become increasingly stretched. I indicated that something was bound to happen to bring valuations back to reasonable levels but I had absolutely no idea the coronavirus would be a significant contributor to the broad market pullback we are currently witnessing. That’s beside the point. The point is long-term investors are now being presented with an opportunity to snap up shares at more reasonable valuations than we have witnessed in months.
Prior to our February vacation in Costa Rica I could not easily identify companies in which I was prepared to invest. Now? I have very recently been selectively deploying capital.
Today, with the significant broad market pullback having made valuations a bit more reasonable, I have acquired shares in the following two companies in a couple of accounts for which I do not disclose details for confidentiality reasons :
The Hershey Company (HSY) – long-term debt rated A1 and A by Moody’s and S&P Global
McDonald’s Corporation (MCD) – long-term debt rated Baa1 and BBB+ by Moody’s and S&P Global
- Moody’s A1: Top tier in the upper medium grade category
- Moody’s Baa1: Top tier in the lower medium grade category
- S&P Global’s A: Middle tier in the upper medium grade category
- S&P Global’s BBB+: Top tier in the lower medium grade category
In my March 26, 2019 HSY article I disclosed that I had written covered calls on a portion of my HSY holding since I thought HSY shares were richly valued. How did that work out? Well, come expiry HSY was trading well above my $120 strike price. I decided to let these shares get called away and used the proceeds to increase my exposure to United Technologies Corporation (UTX).
With HSY having pulled back earlier today to a level that was pretty close to my $120 strike price I decided to acquire more HSY shares.
On October 24th I wrote this MCD article at which time MCD was trading at ~$200. With MCD’s share price having dropped to under $160 earlier this morning I decided to acquire additional shares. The way I look at it, many people will suffer a drop in income and will be looking for relatively inexpensive meals. MCD also delivers meals so those afraid to venture from their home will be able to have their meal delivered directly to them.
I fully recognize MCD’s meals are not nourishing. If, however, an increasing number of people experience financial challenges brought on by the coronavirus they may need to resort to eating somewhat less expensive food to which they are accustomed. MCD’s food might be an option for many.
That’s it for now. We, however, live in a different environment. Circumstances are changing quickly so investors should be prepared for anything to happen on a moment’s notice.
For those whose ‘house’ is not in financial order, I wish them well. For those who had the foresight to prepare themselves for turbulent times, the moment is upon us. Opportunities that did not exist just a few weeks ago are now beginning to present themselves. The time to capitalize is when uncertainty reaches elevated levels. Here’s hoping you will be able to take advantage of the challenging times which lie ahead.
I wish you much success on your journey to financial freedom!
Note: Thanks for reading this article. Please send any feedback, corrections, or questions to [email protected].
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.