Thursday, February 25, 2016

Recent Buy: More Flowers Foods



On February 25, 2016, I bought 60 shares of FLO at $16.99 per share for a total of $1026.40. I averaged up but this is still a good price at 19x P/E (regular 20x). My portfolio is now 59..47% in the defensive sector. I am still working to push this up to 75%. The money came from my tax return. 

Forward income is $2,343.41 + FCISX + SCHD distributions. 


Thursday, February 18, 2016

Recent Buy: Flowers Foods



On February 18, 2016, I bought 64 shares of Flowers Foods (FLO) at 16.15 per share for a total of $1040.6. This will add $37.12 to my forward dividends. 

Rationale: 


  • To be honest I wasn't looking to make a buy in February. This was the month that I save up cash and then wait for opportunities to come. Surprise opportunity knocked. I research this stock a while back. It looked really good but I was waiting for the right price. Surprise 20% dip.

  • Earnings
    • FLO had a really really bad quarter (not really). It had a strong first three quarter but in the 4Q consumer grocery buying went down. At first I though this was BS but then WMT reported the same thing this morning as of many other companies. 
      • FLO grew its eps yoy in 2015 marginally. Forward in 2016 has 2% growth in EPS and revenue
      • FLO had good sales in the 4Q but low bread rolls and buns (hot dog and hamburger buns. No seriously)
      • FLO is still a growing company. It is using co-packers since there isn't enough bakers for all their distributions. 
      • Three bakery plants are about to open. One at the end of Q1 and the other two by the end of the year.
        • One of them is in Lenexa, KS at the old Hostess Bakery. I actually know the place from my years of roaming the midwest. It was really sad when those people were fired when Hostess declared bankruptcy. I'm glad some of those people got their jobs back. 
    • Integration of the Airpline and Dave's killer bread is taking some time to accomplish. I can wait.

  • Valuation 
    • FLO normally trades at a 22x+ P/E. I bought it at 17.5x P/E. 
    • FLO normally trades below 3% dividend. I got it at 3.69%.
    • Beta is less than 1.

  • Voodoo Logic
    • FLO is trying to become the #1 gluten free, non-GMO, Organic, whatever hipsters want.
      • Kidding aside this is the fastest growing product in the bread business. 
      • I'm not into the organic thing. I love me some white bread with peanut butter but I can appreciate a company trying to fulfill a growing niche.
      • I didn't know this but bake goods is the 3rd largest grocery money maker after meat and fresh produce.
Risk 
  • People stop eating bread and their pastry products.
  • Payout is 61.7%. 
  • Margins are low. 5% 
  • Stiff competition. FLO is the #2 Baker in the US. Bimbo is #1. Campbells and Panera both have bigger caps than FLO.
  • There is a lawsuit if their delivery drivers are employees or contractors 
    • Basically to deliver FLO breads you need to buy a region (100K). Then you have sole rights to deliver in that area. You can deliver other products if you want but the question is whether FLO controlled their drivers to the extent you can call them employees. 
    • Last year 5-6 million were used for litigation. the same for this year which knocks off .01 eps.
  • Integration of acquisitions is always a hard thing to figure out. 

Taking all this into account I believe the price of $16.15 is a good time as any to make a solid move into the bread business. After all the downgrades and upgrades, it looks like everyone is saying the 1 year estimate is between $18-19. FLO's strongest quarter is the first so we should see a nice gain after Q1 earnings in 3 months. I would like to make this into at least 100 shares ASAP but my budget is getting wrecked this month. DAMN YOU MEDICARE PART B, SUPPLEMENT, AND RX!

With the Trow, WMT, and KO dividend increase I currently stand at $2,307.54 + FCISX+SCHD distributions.

yay me. As a side note this is the most expensive bread I have ever bought. 

Monday, February 15, 2016

Some Advice I picked up over the weekend


Seriously this is a funny picture. in 2008 market crashed 504 and people are freaking out. In 2016 market crashes 300-400 points for a week and nobody bats an eye.

The market is going insane again. I’m not buying anything this month since I have to pay for medicare and income taxes. I am here to ask you a simple question.

Just how bad was 2008?

I might be an old man but I have only started investing since 2014 (the height of the bull market). I have never invested in a bear’s market or recession. Over the weekend I received some good advice from an old stockbroker who survived the 2008 market.

“Fortify your stomach, punch yourself in the heart, and distrust your brain. Get some Tums and invest like it’s 2008.”

He said I had been buying for dividends and capital appreciation whereas I should have been buying like 2008 is going to repeat tomorrow. Over the long run I’ll win with capital appreciation and dividend investment but humans aren’t long term animals. We love short term gains and even the longest of longs can sell if pressured hard enough. Basically go to yahoo finance and look at the highest prices in 2008 and the low bounce back price in 2009-2010. Now take repeat that idea for stocks in 2016.

So I took his advice and made this chart of stocks I would consider holding or am holding in my portfolio.


High LowDifference% LossToday's Prices2008 RepeatNew Price
JNJ$70.43$50.00-$20.43-29.01%$101.82-$29.54$72.28
PG$69.69$47.09-$22.60-32.43%$80.99-$26.26$54.73
KO$30.43$20.42-$10.01-32.90%$43.11-$14.18$28.93
PEP$71.27$48.14-$23.13-32.45%$98.49-$31.96$66.53
CL$38.96$29.50-$9.46-24.28%$65.70-$15.95$49.75
WMT$59.89$47.12-$12.77-21.32%$66.18-$14.11$52.07
T$39.90$23.77-$16.13-40.43%$36.47-$14.74$21.73
CLX$62.69$48.60-$14.09-22.48%$127.54-$28.67$98.87
EMR$58.18$26.75-$31.43-54.02%$46.02-$24.86$21.16
CAT$82.64$24.61-$58.03-70.22%$63.15-$44.34$18.81
SO$37.69$28.41-$9.28-24.62%$47.91-$11.80$36.11
ED$43.57$35.46-$8.11-18.61%$70.72-$13.16$57.56
GE$37.01$8.51-$28.50-77.01%$28.26-$21.76$6.50
CVX$99.13$60.71-$38.42-38.76%$85.43-$33.11$52.32
XOM$93.07$57.07-$36.00-38.68%$81.03-$31.34$49.69
O$26.31$17.53-$8.78-33.37%$60.48-$20.18$40.30
VTR$49.42$21.57-$27.85-56.35%$48.23-$27.18$21.05
ADM$45.10$20.73-$24.37-54.04%$32.45-$17.53$14.92
BBL$77.48$31.37-$46.11-59.51%$20.27-$12.06$8.21
SPY$140.35$73.93-$66.42-47.32%$186.63-$88.32$98.31
QQQ$50.01$27.53-$22.48-44.95%$98.02-$44.06$53.96

The idea is a test to know your limits. Just how much pain can you take. After concluding this test and looking at my portfolio I realize that I can’t take much pain. What I really need to do is drastically reduce my reits (30+% of my portfolio) and buy more consumer staples, healthcare, and utilities (which is at 59% of my portfolio).

*Someone emailed me asking for a subscription? After looking around on blogger I added the Follow by email App. I have no idea why anyone wants to follow me as this is just reminders to my future self what I did right and wrong in life. Probably more of the latter than the former.

Monday, February 1, 2016

January Review





Time moves so fast doesn't it?


DIS$3.52
FCISX$30.69
GE$11.73
HASI$25.50
KHC$7.79
LTC$3.78
MDLZ$0.38
NRZ$1.38
O$4.39
PEP$4.86
WMT$19.58
Total$113.60




Earnings and Loss

Bank$3,902.17
Capital One 360 Bank$1,578.89
Scottrade Tax$41,904.07
Scottrade ROTH$1,815.64
Loyal3$12,916.23
401k$23,367.89
Edward Jones Roth$7,214.30
Total$92,699.19
Salary$3,854.77
Dividend$113.60
Interest and Online$7.74
Total$3,976.11
Gas Bill$100.20
Electric bill$171.66
Water Bill$0.00
QT$47.05
Discretionary $3.00
Car payment$435.45

Total$757.36
Total Saved$3,218.75
% saved80.95%


Summary 

1) I swear there were some dividend increases. I think O and OHI increased their dividends? I don't know. Work is too hectic.

2) I started my first position in an ETF, SCHD (1 share). I am flipping my scottrade into SCHD and adding to this over time. I think I can add a good 30-40 shares at the end of the year if it continues to remain low.

3) I'm feeling a bit gun shy and angry. My three biggest investments from December to January were PG, WMT, and SO. All three have risen to the point where I cannot add a large portion at these prices. What is with this market. First you beat these three down and then it only started increasing after I bought it. I swear the market is rigged.  

4) Even thought the market is down 6% there really isn't anything I want at the moment. Manufacturing is having a contraction year, railroads are getting crushed, agriculture said good night and good bye, and materials/oil are zombies. What I want is to build up more of my core holdings which won't go down! 

5) Game plan for this month
  • Save my money until opportunities in the defensive sector comes around. I've learned my lesson the hard way. Focus on building your home before exploring new properties. I would like to get 100 shares of SO, JNJ, PG, and WMT. 
  • If by the end of the month there is no opportunity I'm buying $1000 worth of XLU or SCHD.
  • Theory:
    • XLU rises when the market is bad. Goes down when the market is good. Utilities are discarded for growth in good times and hoarded in bad times. It has a low 0.14% expense ratio with a 3.5% dividend yield. 
    • SCHD rises when the market is good. Goes down when the market is bad. SCHD holds all the major dividend aristocrats that people tend to cling onto when the market is bad. It pays a nice 3% yield with a 0.07% expense ratio.
      • As an aside. If you want to know how good dividend aristocrats were in January. The Market fell 6% but my Loyal3 full of dividend aristocrat went up 7%. It was only held down because of Apple and VFC. My top pick of 2016, WMT, is destroying the market. I hate being right...I really wanted more shares of WMT.   
    • If the market stays flat I will buy XLU for its defensive nature. 
I'm almost near 100K. This is my biggest goal for this year! See you next month. Have a happy Valentine's Day. 

As promised. This year I will try to become a more interesting person. I spent January listening to music I would never normally listen to...and I got addicted to country music. I present you my favorite song