As part of my commitment to keep my readers up to date on my stock portfolio and options holdings, I write up short posts describing my transactions. Today, I’m going to try to do something different by writing this transaction update as a bit of a fun story so that you can see my exact train of thought.
When we last left my portfolio, I was working on trying to deploy the rest of the capital that was freed up after I had converted my account to a margin account. After my last buying binge, I still had a few thousand dollars of left over capital to deploy. Unfortunately the market has been really overvalued as of late so there wasn’t a lot of good value out there. But I was undaunted and hunted around for the best value that I could find. I wound up buying some LO, KMI, and APD as described below.
- 50 shares
- Cost basis: $2,059.99 or $41.20 per share
- Yield: 5.33% – What a great starting yield!
- Dividends: $2.20 per share
- This will increase my yearly dividend stream by $110.00.
- See my analysis of LO.
Kinder Morgan Inc (KMI)
- 20 shares and 12 shares (32 shares total)
- This was bought on two separate days because limit orders don’t have to be filled all at once. For simplicity’s sake, I will combine them.
- Cost basis: $1,235.98 or $38.62 per share
- Yield: 3.83% – Not too bad.
- Dividends: $1.48 per share
- This will increase my yearly dividend stream by $47.36.
Air Products and Chemicals (APD)
- 20 shares
- Cost basis: $1,735.79 or $86.79 per share
- Yield: 3.27% – Not a bad starting yield
- Dividends: $2.84 per share
- This will increase my yearly dividend stream by $58.80.
- See my analysis of APD
That was fun, but the story isn’t over. You see as soon as I finished blowing through the rest of my capital, what does the market decide to do? Start tanking! I figured a correction would come at some point since things were so overvalued. I just didn’t think it would start the day after I bought my stocks. So that made me kind of sad.
In addition to generally heading South, the market also took a few of great companies companies out behind the woodshed and proceeded to beat them senseless. Both Caterpillar and BHP Billiton were pounded down to near their 52 week lows. I like both of these companies and the prices were great. But I was out capital. What was I to do?
Naked puts to the rescue!
One of the great things about having a margin account is that I don’t actually have to have the cash on hand in order to sell puts any more. In the old days I would have had to drag the cash out of my bank account (assuming I had any in there), then sell the put and keep the cash locked up until expiration, assignment, or close out. But no more! With the power of margin I can be much more flexible and respond quickly to crazy market spaz outs. And respond I did.
I sold two puts.
- BHP Billiton (BBL) Sept 21 2013 $50.0 Put – This brought in $289.23.
- Caterpillar (CAT) Jan 18 2014 $80.0 Put – This brought in $729.22.
While I didn’t sell either of these puts with the intention of being assigned, I wouldn’t be complaining about it if I did. Especially that CAT put. If I get assigned CAT, I’ll have a starting yield of over 2.7% on a great company.
Oh, and look at that, selling these puts brought in over $1,000 in options premiums. Whatever am I going to do with that? Buy more stocks! So I bought some BBL. If it’s good enough to sell a put against, it’s good enough to buy outright.
BHP Billiton (BBL)
- 19 shares
- Cost basis: $1,035.99 or $54.52 per share
- Yield: 4.18% – Not a bad starting yield
- Dividends: $2.28 per share
- This will increase my yearly dividend stream by $43.32.
So there you have it. At the end of the week, I managed to increase my yearly dividend stream by $259.48. I feel that I did a pretty good job of both finding value in an overvalued market and capitalizing on a downswing all in the same week.
The market may go down more. Or it may go up. I don’t pretend to know. But I’ll just keep on hunting for value the best that I can.
Readers: What do you think of my transactions? Did you make any notable transactions recently?