March Stock Purchase: GSK, Shire, NCC, Stagecoach 2

March saw the FTSE 100 hit a record high. London’s main index is now trading at an astonishing P/E of 38 when looking at trailing earnings. On a forward earnings basis, the FTSE only trades at a P/E of 14.67. Much better! The vast disparity between the two is because the heaviest components of the FTSE 100 are oil and mining related stocks. With commodity prices bouncing back, analysts expect these companies to produce much higher earnings over the year and that is why the forward P/E is more than twice as low as the trailing P/E. Personally, I think analysts are being too kind with earnings here but if they are proved right, now might actually be a good time to buy the market for the index investors out there.

As an active investor myself, I get the benefit of being able to chose which companies I wish to own. I can chose what price to pay and when to pay it. For instance I bought oil related stocks, BP and Shell, right at the bottom of the market; that is why I have no reason to add to these at the moment. This is the advantage individual stock pickers have over the purely passive investors. I am not forced to buy expensive stocks that make up the index. I can pick and chose and find value. That is why my returns eclipse the FTSE 100 index.

But instead of bashing passive index investing (which I do think is great for people who have no time and don’t know how to read a balance sheet), I want to talk about a problem passive and active face in common; emotional control. Right now with markets being at all time highs and rising months after month, it is easy to feel unstoppable. But a time will come where we see the market drop and keep dropping. When this time comes, it is important not to panic. As I wrote in my article ‘Investing Is More About Emotional Control Than Technical Skills’, don’t let fear kick in. In fact this is the best time to batten down the hatches and buy some more. You want to be buying at the bottom and not selling there.

The more I read about investing, the more I realise that when you are young  and have a long-term horizon, nothing bad can ever happen in the stock market.

  1. If your stocks go up, you get richer.
  2. If your stocks go down, you can buy more shares to lower your average cost.
  3.  If your stocks stay the same, you can still deposit your dividend checks in the bank.

It’s all good. It’s a win win situation. No wonder Buffett is always optimistic about the stock market.

What Stocks I bought in March

Here are the stocks I bought in March

  • Glaxosmithkline (GSK): Bought 9 shares at £16.70 each. As mentioned in my last monthly stock purchase post, GSK is very appealing and looks set to be a permanent future of my Monthly stock purchase programme. I am hoping the price drops soon so that I can load up the truck with this stock. Dividend Income: £7.2
  • Shire : Bought 3 shares at £48.10 each. Another FTSE listed healthcare company that deserves attention. Shire has one of the best medical pipelines in the industry and I feel the market is discounting this. Maybe investors are not piling in to this stock due to its immensely low dividend yield. Dividend income : £0.64

  • NCC Group : Bought 151 shares at £1.10 each. The Manchester based technology company has faced difficulties recently. It has lost 3 of its biggest customers and seen its CEO step down. But the core business is still intact and with cyber security becoming an increasingly important component of the modern world, NCC is set to grow for years to come. Dividend Income : £7
  • Stagecoach: Bought 85 shares at £2.02 each. Bus and rail operators are hated at the moment. Knowing me, this is exactly what I like. The company is currently trading at a forward P/E of just 7, FCF yield of close to 10% and has a dividend yield of 5.16%. Furthermore, the company operated in an industry with high barriers to entry providing it with a durable competitive moat (LINK). One reason I feel the company’s share price has been hit hard is due to its UK centric business and the obvious uncertainties surrounding UK at present. But stagecoach has a decent international presence which is growing rapidly year on year and I expect the company to do well in the years to come. Dividend Income: £9.94

All in all, March has been a months with not much purchase activity. It is becoming increasingly hard to find decent value in the market. Nonetheless, I have increased my dividend income by £24 by buying into these 4 companies. Onwards and upwards.

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  • Fool name

    Good post, thanks.

    2 questions though:

    do you pay much attention to the ex-dividend date?
    do you ever worry worry about being over-diversified?

    • moneygroweruk

      Thanks for reading.
      No, I don’t pay much attention to the dividend day. This is because it doesn’t really make a difference as the stock price usually drops in proportion to the dividend. So say a stock pays out 5p in dividend. If I buy it before the ex-dividend date the stock should cost 100p. But if I buy it ex-dividend, the stock price should be only 95p as 5p in dividend will go to the previous owner of the stock.

      The second one is much more of a tricky question. Most investors say that you only need 15-25 stocks to be adequately diversified. There is even an argument by Charlie Munger that as a small investor, you should only own 5 stocks at a time as this means that you really do your due diligence before buying and you only buy 10 baggers. I on the other hand am a dividend growth investor so the more companies I own that pay me a dividend, the better it is for me. I stick to blue chip companies ensuring that I don’t have to do as much research as I would buying a smaller company; but it is important to remember that you still need to put in the work when buying even the bluest of blue chips. Another reason why I personally like owning many companies is every time I use a product, I want to feel like some profit is coming back to me. An an example, I bought Unilever because I use their deodorants and bought PZ cussons because I use their handwash – using a company’s products in itself is not a reason to invest but if the company is great, why not.

      Hope this answers your questions