The more confidence I have in each one of my stock picks, the fewer companies I need to own in my portfolio to feel comfortable.  -Joel Greenblatt

I made the first 3 purchases for the baby divi account last week. I am starting small with the idea of rapidly increasing my cash position in my brokerage account. All prices below include the cost of commissions in average price.

  • Corning (GLW); Avg Price: $29.45; 33.08% of portfolio
  • Hanesbrands (HBI); Avg Price: $20.43; 33.68% of portfolio
  • Magna International (MGA); Avg Price: $44.84; 32.87% of portfolio
  • Cash position: 0.37%
  • Unrealized gains/losses: + 0.38%

It’s very silly putting gain/losses on a portfolio that has been alive for one day. However, I thought it’d be an easy way to look back in time a year or so from now to get a snapshot of what was going on. Besides, the number is green! You sure wouldn’t be hearing about it if it was red.  🙂

I started a position with MGA as opposed to Kroger (KR) because KR was going up in price and never hit my mark. HBI is doing the best (+ 1.32%) with GLW being the only laggard (-0.52%). I am looking to have 7-10 positions in this portfolio. I will be increasing the cash position as opposed to buying more of a previously held position or starting a new one like in the past. I still LOVE dividends, but I am not solely focused on them anymore.

I am trying to follow Mohnish Pabrai and stay concentrated. I will have to re-read the Dhando Investor so I can hopefully do the book justice in a review. I have a hard copy of it which makes it more difficult to find my notes. My kindle has made me lazy!

According to gurufocus.com (a site I have fallen in love with over the months), Mohnish Pabrai has 7 (SEVEN) stocks in his fund! Autos are 71.74% of his portfolio. That’s conviction!

  1. Ferrari NV (RACE)
  2. Alphabet (GOOG)
  3. Southwest Airlines (LUV)
  4. General Motors (GM.WS.B)
  5. AerCap Holdings NV (AER)
  6. Fiat Chrysler (FCAU)
  7. Seritage Growth Properties (SRG)

 

I will end with a past mistake that is similar to my last post with ATVI. I had a position in Facebook (FB). The average price was somewhere between 118-120. I probably held it a couple of weeks (if that) because it wasn’t moving as fast in the direction I wanted. This was also when I was in the rapid trading phase. Here I was with a good company on a pull back from mid 130s, and I just wasted it! Was every person who uses facebook going to stop using it because the price went from 130s to 116s…No! People will still be going on FB when out to eat, when should be working, playing with the instagrams, posting their political griefs, cat photos, wishing a happy b-day to someone sitting beside them, etc…The stupid part of me really took over…I can probably add that I should have started a position in GOOG (I mean come on how many companies are actually a verb!??!) or AMZN on this same tech pullback…Live and Learn. I don’t even remember if it was a gain / loss so I probably just broke even or did a little bit better. I sure didn’t catch the run up to $150s! If it was a loss, it wasn’t even close to 1% of portfolio because I remember those even though I try to forget them!

Bruce Lee said it better than I ever can though:

I fear not the man who has practiced 10000 kicks once, but I fear the man who has practiced one kick 10000 times.

I feel like this has finely sunk in for me with all the flailing that I have done. I have to find my own way on this investing journey. In short (pun unintended), I am using a long only concentrated strategy with a year plus time horizon to benefit from taxes. It should be easier for me to not obsess over this portfolio too since I can look at my vanguard index funds to distract and am currently waist deep studying for the CFA Level 1 exam.

 

Happy Memorial Day!

JT

 

6 thoughts on “Baby Divi Account Started

  1. Hey JT,

    I’m curious as to why you started a baby dividend account rather than put it in with your main portfolio. What advantages do you gain by separating these stocks out like this (are you trying out a new strategy)?

    Reply
  2. Akash,

    Advantages? Probably none besides that I will get long-term gains as opposed to short-term on my vanguard index funds by holding for a year. I was very close to selling half my position in VTIAX and VTSAX to fund this account. I had the order in and everything. I woke up in the middle of the night with the sweats (not because it’s like an oven where i’m at) and had to cancel the order. I was already breaking my rule about holding for a year!!

    When I get to a year with the vanguard funds I might sell some. However, I am leaning more towards going in competition with myself as active vs passive and comparing the results. Also, there is the risk that the market could turn bearish and my funds would lose value. I fully admit there is a psychological difference b/w putting 2k and 20k in a position. I am trying to build myself up where I can handle it. The index funds provide a type of safety net if you will. Gives me the OK to fail though I DO NOT WANT TOO (obviously hah).

    It’s not really a new strategy for me just adding a couple of rules and eliminating the try anything mentality. Find stocks that I think are at a decent price and hold for at least a year. Peter Lynch would be proud because I could explain that with a crayon. Granted, I’d use a green one because I hope that’s the direction my stocks decide to go!

    Hope this answered your question Akash. Have a good one!

    -JT

    Reply
    • Thanks for the explanation JT,

      If you do start the “self competition” of active vs passive, which do you expect to win? I’ve read that over the long run, passive index funds typically trump active trades due to more favorable tax rates & less frictional losses from commissions.

      -Akash

      Reply

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