The Return: Taking a Look at the Issues that Make Up My Portfolio

Since setting this blog up, clearly I dropped the ball, and went another direction with my writing.

Luckily, that didn’t stop me from continuing do live frugally, add to my portfolio cash reserves when ready, and deploy that cash when I reach my chosen threshold. Generally, what I’ve done is wait until I have enough cash to make two purchases, and make one purchase. In every case since I’ve started investing, my investments have been in lots of approximately $1,000, and I consider this a “full position”.

Obviously, someday I hope to scoff at the notion of $1,000 in an AT&T (T) or Chevron (CVX) being a full position, but that is where the portfolio is today. The reason I generally wait to be able to make two purchases, and then actually only deploy half of that amount, is that I obviously always want to have at least one purchases worth of cash should an unexpected opportunity arise. Now, with the market reaching loftier and loftier valuations, I find myself stretching this rule, and starting to save even more in my cash reserves before finally breaking and investing in whatever I find to be the most compelling (but probably still overvalued, to be honest) opportunity when the market hits a snag. As they say, in a lofty market such as this, it is difficult to find good value, and I worry that, no matter the quality of the companies in which I invest, a sudden market correction could punish any stock issue, for an extended period of time.

Lastly, another thing I have been doing to cope with this stretched market is to allot additional capital to my monthly mortgage payments in lieu of my portfolio cash reserves. Normally, I would not be a fan of paying additional principal towards the mortgage, especially on a loan that was originated less than three years ago. The reason for this is twofold: first, the maximum return I get for “investing” in paying my mortgage more quickly is exactly equal with the interest rate. Since I was able to buy my house in the downturn following the Great Recession, I have a pretty good interest rate in the low fours, so that is a low rate of return. Secondly, my mortgage payments should grow pretty slowly with the rate of tax and insurance increases in the Boston area. Though its not impossible that these could pace suddenly higher, I look at it as unlikely.

With this in mind, and keeping in mind that via inflation alone, not to mention hopefully career advancement, I should be making more money on absolute terms in the future than I am now, I consider it smart to pay the mortgage more heavily in the back half than at the beginning.

With the market at this level though, I really don’t think there is THAT much lost in putting most of the money that would have gone into my cash reserves to be deployed to buy stocks into paying down extra principal instead. Whatever value is lost, and I admit there could be some, is likely worth it to me in the added psychological benefits of seeing my debts go down, and my net worth and equity go up immediately as I pay down the house.

Now, with some of the mechanics of how I actually go about investing, I would like to commence an issue by issue look at the components of my portfolio.


On November 22nd, 2013, I initiated a position in Apple, one of the very first purchases I made since re-instituting my portfolio following a sell-off to make the bank happy in order to buy my house. At the time of purchase, the company was trading at $74.20 (split adjusted- I bought prior to the 7:1 split and massive dividend increase), and it now trades at 127.80, meaning I have experienced an increase of 70.6% since that fateful day.

This has been my most successful investment to date, and I expect that trend to continue.

Since then, I have received Apple’s dividend six times, and reinvested it into more shares of this wonderful company immediately each time. That means that I have gone from making $6.52 every three months off of my $1,000 of Apple stock, to netting $7.42 every quarter.

Now, obviously I could have done better with the stocks I mentioned previously, T or CVX, but I certainly would not have come close to hitting my first four-bagger (100% capital appreciation) as I have so far with AAPL. And I think the future is still bright for Apple.

Obviously, the bulls and bears will always have it out over this stock, and I have read the cases many times for both sides, and you can put me squarely, firmly, and loudly in the bull field. My biggest concern with the company is simply the law of large numbers- as the largest in the world, and approaching the inflation adjusted largest business in modern HISTORY, it is difficult for AAPL to make a large or sudden dent in its earnings.

At the same time, when I travel to other countries or even less urban parts of this beautiful country, I see opportunities for AAPL everywhere. Literally millions upon millions of hungry potential customers, everywhere you look. The world has truly just begun connecting, and the upper echelon of American and Western European society may have begun to reach their saturation point with AAPL products. But thinking that this means AAPL’s growth is done is, in my estimation, a huge mistake.

As populations grow, as the world economy grows, and as developing countries like the BRICs, parts of Africa and the Middle East and more continue to develop, millions of people are joining the middle class every year. These new middle class entrants will continue to want AAPL products because of three huge and important factors: their quality, their ease of use, and the status which they confer to their owners.

Simply put, Apple products are nice, easy to use, and people love owning them.

Obviously, I believe that with continued sales growth, that $150 BILLION plus pile of cash just waiting for an opportunity to be repatriated, and a solid payout ratio of just 20%, AAPL’s dividend will continue to grow, and provide me with a large part of the growth part of my dividend growth portfolio.

Other businesses, such as Royal Dutch Shell (RDS.B) or Realty income (O), are included in my portfolio for their current yield. AAPL is not one of those companies, but I believe that one day it could be, and I will enjoy the capital appreciation and dividend growth along the way.

If you’ve stuck with me through this long post, which included an introduction about my portfolio and the first in my series going over the thesis I have for each company I own a part of, I thank you. Stay tuned for more.

Next on the list: CSX

Disclosure: Long all aforementioned securities