I’ve now lived through four decades. The 1990s, The 2000s, The 2010s and March.
To say the last few weeks have been unsettling is somewhat of an understatement. Covid-19 has wreaked havoc on health systems all over. The whole world, for the first time in a long time, is fighting a common enemy. Collective action is the only way to fight and starve off this disease.The days and weeks ahead will be interesting. Let’s hope that the situation is quickly improved and a cure is found.
Turning to the financial markets, the uncertainty brought about by this new global pandemic has caused single-day declines in stock markets, the likes of which have not been seen for over 30 years. Some of us are experiencing volatility the likes of which we have never seen before. I have written a few pieces over the past couple of weeks in regards to this so they are definitely worth a read.
For anyone starring at their portfolio over the last few weeks, it is a painful watch. But whilst markets are down, now is an opportunity to find value where previously it was harder to come by.
This is exactly what I have been doing. A majority of my purchases so far been from my stock list which I consider to be the absolute best companies in the world. (Even though I document most of my share purchases in the my journey section of this blog, there are some high quality share purchases I make which are kept hidden. This is because I sell a stocks list and it would be unfair to people who bought the list to disclose companies on that list.To buy the stock list, contact me via the contact form on this website or email me on firstname.lastname@example.org)
As many of you would have noticed, my stock market purchases over the last year had dramatically slowed down. I haven’t been buying much as compared to what I have been doing in years gone by. This is because I follow a strict valuation discipline. As such my cash position has been creeping up. The present market sell-off is making prices attractive again for many great companies and I am now able to deploy my cash at once in a decade prices.
As an investor, my goal is to invest in companies that can grow and compound sustainably over time. This means that I favour some sectors over others. I have never hidden my fondness for consumer staples as my portfolio is loaded with companies from this sector. On the other hand, I avoid sectors such banks, airliners, high street retailers, cruise liners, miners and overly levered companies. This latest round of economic malaise caused by COVID-19 will be particularly damaging to these specific industries.
With that being said, here are the stocks I bought using my March monthly stock purchase programme:
- BP – Bought 112 shares at £3.30 each. Dividend Income = £39
- Royal Dutch Shell – Bought 49 shares at £12.89 each. Dividend Income = £61.
- Hargreaves Lansdown – Bought 14 shares at £13.14 each. Dividend Income = £4
- PZ Cussons – Bought 109 shares at £2.70 each. Dividend Income = £9
- Euromoney Institutional Investor – Bought 17 shares at £9.63 each. Dividend income = £6
- Schroders – Bought 12 shares at £18.98 each. Dividend income = £13
For Schroders I bought the non-voting shares instead of the voting shares (SDRC instead of SDR). This is because the non-voting shares sell at a discount to the voting shares. And let’s be honest, I will not hold enough voting shares to make a difference so voting makes no difference to me. So it makes better sense to buy the non-voting shares as they trade at a cheaper price and offer a higher dividend yield. I will probably right more on this in the coming days.
All the shares bought are at what I deem to be attractively valuations. At the time of my purchase, I was sure we had not seen the end of the market rout. I know for sure that I cannot time the bottom as market timing is impossible. All I can do is buy stocks at attractive valuations and give myself the best chance of earning returns in excess of 10% annually.
As an example, following the above purchase of Royal Dutch Shell, the price dropped by 20%+. So I bought even more shares of Shell after the drop at an even cheaper valuation. (I will be writing about this stock purchase in the coming days).
So do I regret buying Shell at close to £13 when I could have got it 20% cheaper a week later? Not at all. I think for a integrated oil major such as Shell, £13 is a very attractive level to buy it at. At this price I get a 10% dividend yield in a company that has not cut its dividend since World War 2. Think about all that has happened from the second world war to today. And across all the various event and catastrophes, Shell has not cut its dividend. This is the type of company I look for.
At the time of my purchase, I could not predict with certainty that Shell would fall further. Say Shell rose instead of fell, I would have kicked myself for not having the courage to pull the trigger at £13. So for me, this was a good buy.
Looking at the price of Shell today, it is above the £13 mark. So I am sure as hell glad that I bought 49 shares at £12.89 and a whole lot more when it price cratered even more.
Turning back to the portfolio, the above purchases add £132 in dividend income to my portfolio. My portfolio is now expected to earn an annual dividend of £4,088 a year. To cross the £4k mark is simply amazing. I will be writing about this in the coming days so stay tuned (It seems the lockdown has got my writer juices flowing!)
Month like these turbo charge my timeline of reaching financial independence. Buying stocks at low valuations and high dividend yields are a blessing which don’t last too long. So don’t panic amid these turbulent times in the stock market. Instead cherish it. Your future self will appreciate that you were able to keep a level head and add to positions in times like these.