As discussed a while back I’d like to be more open and write about different buys and sells I make in my own investment portfolio.  I want to do this for a couple reasons.  The first reason is that it lets my readers see my thoughts on why I would sell a stock or why I would make a purchase in a stock.  The idea is this will help readers learn more about my investing strategy.  The second reason I want to be more open is to ask my readers for help in making me a better investor.  I ask that my readers judge and critique the moves I make and let me know in the comments if you agree or disagree with them and with my logic in making my purchase or selling decisions.

I haven’t made any new buys or sells in my portfolio for the past couple months.  If I had things my way I would be making new buys on a monthly basis and my stock account would be growing larger and larger month after month.  However, sometimes life interferes and other obligations need attention.  Recently my wife had some medical issues and I was required to use savings to pay the medical bills.  I like to keep my savings at a certain level so any money that normally would be used to invest got redirected to replenish the savings accounts.  However, now we are back on track and this week I made a few new moves in my dividend growth portfolio.

Sold Phillips 66 (PSX)

Earlier this year on May 4, 2012 I received some shares of Phillips 66 (PSX) due to a spin off from ConocoPhillips.  I own a small position and Conoco so I received very few shares in PSX.  I was debating whether to hold the shares of PSX or sell them.  I didn’t know what management of the new PSX would decide to do regarding their dividend policy.  Conoco had a history of paying annually increasing dividends and I thought maybe PSX would continue that tradition.  And after a recent announcement by PSX to increase their dividend payment, it appears they may in fact continue with a dividend growth philosophy.  However, with no history to refer to, this is not the kind of company I would normally invest in.  Recently I decided I would rather sell my shares of PSX and put the money into a company that would meet more of my investing guidelines.  The stock was up 63% since I had received the shares in the spin off and I decided I could lock in that gain tax free since I had some losses from 2 investing mistakes this year that could be used to offset the gain.

Purchased Aflac (AFL)

I used the proceeds from my sale of PSX along with some additional capital to purchase some shares of Aflac (AFL).  I already had a position in Aflac in my portfolio so this purchase was to increase my position.  Aflac is one of my favorite dividend growth stocks.  Aflac has been increasing their dividend annually for 30 years.  Aflac currently trades with a P/E ratio of 8.8 and a current dividend yield of 2.62%.  I’m excited to increase my position in Aflac.

Purchased Nofolk Southern (NSC)

I am also excited to initiate a new position in Norfolk Southern (NSC).  Norfolk Southern is a rail transportation company operating in the Eastern United States.  I like Norfolk Southern because they have increased their dividend annually for the past 11 years.  You might want to read my Norfolk Southern stock analysis to get a better idea of why I favor this company.   NSC currently trades at a P/E ratio of 11.3 and a current dividend yield of 3.27%.  This purchase will improve my portfolio by giving me a little more diversification because it is a new company to own and also in an industry that wasn’t previously represented in my investment portfolio.

Conclusion

I’m very excited about the moves I’ve made this month in my portfolio.  After not being able to make any buys in the past few months, it feels real good to make these 2 purchases.  I am confident that over the long run the additional shares of AFL and the new position in NSC will pay off very well.

What do you think about my buys and sell?  Do you own any of these companies?

Disclosure:  I am currently long AFL and NSC.

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10 Responses to Portfolio in Action: 2 Buys and a Sell

  1. Ben Hoben says:

    I like the moves. PSX has had a monster run and to take profits and put back into a stock like Norfolk Southern is a great idea. I’ve been watching that one myself.

    • Dan Mac says:

      Thanks Ben. PSX did have a nice run which made it hard for me to want to sell it! However, I had to realize that currently PSX doesn’t fit my criteria for dividend growth stocks in my portfolio. So I figured I was best to take the profits and put them to work in a company that meets all of my investing rules.

  2. Craig says:

    I own AFLAC and bought more after reading a good article about AFLAC’s balance sheets and value sources on SeekingAlpha. http://seekingalpha.com/article/1032911-aflac-s-hidden-source-of-value

    • Dan Mac says:

      Thanks for the suggested article to read Craig. Aflac is one of my favorite holdings right now. I’m excited to be adding to my position with this recent buy. I think long term prospects for this company are great and current valuation is a great entry point.

  3. I believe that selling PSX was a good decision. Refinery margins are very cyclical in nature. The stock is up because of short-term thinking. But once margins contract, the stock might as well go down.

    • Dan Mac says:

      Thanks DGI, I think it was a good idea to sell PSX and I’m happy to pick up two great dividend growth stocks in its place being AFL and NSC.

  4. Dan,

    Good stuff. I don’t blame you for selling PSX. The yield is low, and it’s had a great run. I’m holding for now, but that could change.

    I really like AFL and NSC (as well as other railroads) as some of the stronger value plays in the market currently. I already have a decent sized allocation to these two companies, so I’m holding for now. I only wish I would have bought more AFL in the low $30′s. It was a steal, but I didn’t want to get greedy. I’m fairly conservative for someone who is almost 100% long equities.

    NSC looks great here. I wouldn’t mind CSX and UNP to round out my railroad holdings at some point.

    The market keeps marching upwards and some stocks I had my eye on (KMI, GIS, WFC, KRFT, MO, PM) have all been strong. Tobacco plays are coming down now, so I may add there. We’ll see.

    Best wishes!

    • Dan Mac says:

      Thanks Dividend Mantra – I debated quite a bit about whether to sell my PSX or not. I’m really interested to see what the company does going forward (how their earnings and dividend grow). While I like the company I decided to sell since my position was so small even my large 67% gain only gave me a small gain in dollars. Who knows, I may be looking to buy it back in a few years once it meets my criteria.

      I also bought AFL earlier in the year in the low $30′s. I try to keep a pretty even allocation across the companies in my portfolio. With my new shares in AFL it now makes it my largest holding so I’ll probably be adding to other holdings before looking to buy more.

      I noticed the market keeps marching forward. I won’t have any new money to put to work until next month so I guess I don’t mind. Hopefully when I’m ready there will still be some companies I like at decent prices. Otherwise I’ll have to have some discipline and possibly build up some cash for when the market corrects itself.

  5. kolpin says:

    I’m long both, though I haven’t added to either recently. I bought AFL at $39 in June, always meant to add more–and the price has now gotten a bit away from me. Unfortunately, some of my best performing stocks have small allocations, as I have a very hard time adding to positions which I purchased at a much lower price. I need to get over this mental block, but thank goodness for dividend reinvestment in the meantime. My other main shortcoming as an investor tends to be with selling. The only position I sold this year was Costco because I felt it was overvalued and because of the low dividend yield. Two months later, and they issue a whopping special dividend! My approach going forward will probably be one where I sell 25%-50% of a position instead of 100%…after all, I always dollar cost average when I buy stocks.

    • Dan Mac says:

      Kolpin, like you I have trouble adding to positions when I’ve already bought some shares at a much lower price. But that is exactly what I forced myself to do here with AFL. Even though it’s had a nice run since I bought my original shares, I still think the company offers a great value at current price levels. Psychologically it can be hard but I think you just have to evaluate where the company is at and see if it makes sense at current prices to add more.

      Personally I would like it if I never had to sell any of my stocks. This year I had 3 sells I think. Two were previous investing mistakes where I didn’t follow my rules and later realized that they didn’t really fit my strategy and I didn’t want to own them. The last was PSX which was spun off to me by ConocoPhillips. I debated on whether to keep those shares or not but in the end decided I’d rather put the money in a company that fits in perfectly with my strategy and portfolio. Next year I hope to have 0 sells. Only reason I want to sell is if I believe a company has become majorly majorly over valued (like 30+ P/E). Otherwise if I am selling it probably means a company had a dividend cut or freeze or something which I’d rather not have.

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