Monthly Stock Purchase – Pearson Tesco Essentra AG Barr Lamprell SSE

The deeper we go into the bull market, the harder it becomes to make large stock purchases. This is something I have come to realise over the past year. Just when I thought the stock market was beginning to correct, all logic went out the window and stock markets in the western world are now close to their all time highs. Brexit was supposed to be the catalyst that led to a stock market crash but the uncertainty it has caused led to central banks like the Bank of England acting in a rushed manner to slash interest rates to new historic lows. This has led the stock market to jump higher over the past two month and have made bargains even harder to come by.

At this moment in time, with constant central bank intervention and lack of conviction (see federal reserve), it has hard to judge how long the current bull market will go on for. As I mentioned in my post earlier this week titled ‘Should you buy shares in an overvalued market?’, market timing is futile and thus it is a good idea to invest a set amount each month in a company that looks to be decently valued. This way you do not get caught out on the sidelines and miss the stock market bull. As Warren Buffet famously said, ‘ The market can stay irrational longer than you can stay solvent.’

Over the past 6 month, this is exactly what i have been doing. I have signed up to my brokers (LINK) monthly purchase scheme which allows you to buy shares on a fixed date each month for the low dealing fee of only £1.50. The dealing date is the 10th of each month so on the 9th, I look to see which companies shares is attractively valued from my master list of stocks and stick between £120 – £200 on that purchase. I have personally found this to be great as I can focus on buying individual attractively valued shares without worrying about the overall market.

Here is a list of the shares I have bought in the past 6 month using the regular investment service.

  • Pearson (PSON) – This dividend champion has had a tough time of late with the shares crashing over 25% over the past year. Whilst the company does have some problems right now, it is always important to take the long term view and think about what the company is trying to accomplish and how it will make a profit in doing so. In the long run, educational outcomes still matter and governments will continue to be under pressure to raise student and school performance and technology represents the only tool for governments to improve these outcomes. Also, as technology plays a larger role, the education publishing business, which historically reached scale economies at national levels, will become more and more global. Pearson’s larger size and investment in technology should lead to gaining share and becoming increasingly profitable.
  • Britvic (BVIC) – I bought 186 shares in this company for £1,102 in the wake of brexit as seen by my Britvic share purchase article. Since my share purchase, the share price had remained undervalued and thus I was able to add 24 more shares at 611p a piece. In the last two to three weeks, the shares have increased in price and whilst still offering good value, I am happy with the number of shares now owned in this defensive stock. In total, I am expecting to receive just over £50 in dividends from Britvic over the coming year.
  • AG Barr (BAG)– Similar to Britvic, I have taken the same philosophy of ‘if it tastes good, buy the stock.’ The companies top product, Irn Bru is the No 1 drink in Scotland and I suspect it will continue to be so for a very long time. AG Barr has also started an international drive and this seems especially promising for the future of the company.
  • Tesco (TSCO)– This was one of the more tricky purchases I have had to make considering Tesco does not pay any dividends. But I am liking what I am seeing by Dave Lewis’s turnaround plan and I am personally starting to see shoppers returning to Tesco. The company still has a long way to go in order to get back to where it was but it is heading in the right direction and I feel that the company will initiate a dividend sooner rather than later.
  • Essentra (ESNT) – This is another company that has seen its share price fall by over 40%. The share price has tanked due to a plunge in profits and a relatively high debt load the company carries. But as usual, the market overreacted and I was able to get my shares at 480p and since then the share price has recovered somewhat. The dividend yield of close to 4.5% looks really good considering the dividend payout is only 50% of the company’s profits.
  • Lamprell (LAM) – With the oil price zig-zagging over the past 6 months, it has to know as an investor when to get into an oil stock. Excluding cash, my portfolio is currently very highly weighted towards RDSB and BP shares due to their meteoric rises in share price since the bottom in early February. As these two companies are out of my stock purchase list for now, I was looking for another way to gain exposure to the oil and gas market. After I did my research, lamprey appeared to be a very good candidate to add to my portfolio. The oil rig manufacturer currently has a very good order book and it still remains profitable in this low oil price environment. How many oil service companies can say that? Furthermore, it being based in the middle east which has the lowest cost per barrel is an added advantage.

  • SSE – I have been wanting to buy into a utility company, and in specific SSE, for a while now. But the problem I have faced is that as the price goes down, I hope for it to go down some more in order for me to buy it. As we all know, the market waits for no one and I have missed several opportunities to get into SSE. Thus, using this monthly stock purchase programme offered by my broker is great as it has meant that I have finally bought shares in this company. I bought 11 shares for a total of £170. I will be looking to add more shares in the future as I believe that this is one of the better run utility companies in the UK.

As a dividend focussed investor, my main goal is to try an increase the dividends I receive from my ownership stakes in companies over time. In an overheated market, this is hard to do as I consider myself to be a very cautious value oriented investor. But by forcing myself to make a small purchase once a month, I ensure that I am not sitting on the sidelines waiting for the next crash to come. For all we know, that could be years away. In the meantime, the dividends received from my monthly stock purchases mentioned above will take my annual dividend estimate for next year to £853

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