Why I made my first purchases since December 2018

We all knew the fall will come one day. Of course, the market can not go up forever. Stock prices were already too high. Sadly, ordinary people who just bought overpriced funds are losing now, desperately selling. Banks are able to advise them sell the shares they have buyed overpriced just weeks ago. In January I witnessed such an discussion in one of the Czech banks. They call it “dynamic” fund and offer to people as little bit risky investment with high reward. It was January 2020 and the SnP index was then at record highs over 3200 points. Really bad time to buy. Now, on the other hand, almost everyone is afraid to buy. I ask why? Some of us have experienced 1987, 1999 or at least 2008. It has always been the same – panic started the metldown and after sometime it went up to the sky again. Nobody knows how serious will be the impact of the coronavirus and how long it will slow down the economy, Therefore I think it makes no sense to forecast the right time to buy. My approach is to buy slowly all way down.  In my opinion, we have the best opportunity to buy high quality dividend stocks since the dip in December 2018. Yes, I have personally been waiting for this chance for over a year. On Thursday, February 27, 2020, the SnP index crashed under 3000 points territory, so I finally used the buy button after long time. Of course, I’m not all in yet as I have invested approximately the first 20% of free capital determined to shares. The reason is nobody knows how long is the way down. Is it 2500 points, 2000? Maybe 1500? In that case I am ready to go all in! However this is still a long way to go, let’s take a look at what has happened in the markets last week.

Shares and my actions from 24.2. to 28.2

20 February 2020, SnP Index  reached all time highs of 3,386 points. 28 February 2020, only 8 days later, falls to 2,856 points and returns to 2960 points same day. The stock price decreased by 18.6% in a few days! I still held some stocks myself, so losses also hit my portfolio. However, I was not discouraged and, unlike most Czechs, did not performed apocalyptic shopping in supermarkets, but visited my brokerage platform. So what did I buy at the end of the week?

Johnson & Johnson (20.2. for 149,38$, 28.2. falls to 130,82$ >> decrease 14,2%) I do not need to write more about JNJ as everything was mentioned in linked article before.

Caterpillar (20.2. for 138,89$, 28.2. falls to 119,03$ >> decrease 16,7%) I do not need to write more about CAT as well as everything was mentioned in linked article before.

Qualcomm (20.2. for 91,88$, 28.2. falls to 73,34$ >> decrease 25,3%) Qualcomm’s outlook remains bright, and its truce with Apple is what matters most. While Qualcomm’s near-term headwinds are serious, given the ongoing coronavirus epidemic and the impact that is having on both the semiconductor and smartphone industry, the firm’s promising long-term outlook remains the same. Qualcomm is also company with dividend growth for 16 years and current dividend yield is over 3%.

IBM (20.2. for 151,62$, 28.2. falls to 126,36$ >> decrease 20%) My thesis on IBM is simple. First, the new CEO Arvind Krishna , who has a lot of experience in cloud and research, could supercharge the company’s growth in cloud computing. The second thesis is that IBM’s valuation could do better if the company decided to focus on cloud and do away with the low-margin business. It could also do away with the cyclical Systems business. IBM is also company with dividend growth for 20 years and current dividend yield is almost 5%.

Wells Fargo & Company (20.2. for 47,41$, 28.2. falls to 39,75$ >> decrease 19,3%) In October 2019, Charles Scharf, once CEO of BNY Mellon, became CEO of the bank to help improve its technology. Investors (WFC owns also Waren Buffet) hope that he will repeat BNY Mellon bank’s success at Wells Fargo. Wells Fargo had regulatory problems and suffered with legal costs, but the scandal seems to be the past. Wells Fargo is also company with dividend growth for 9 years and current dividend yield is almost 5%.

What next?

I am closely watching other companies as well. Especially the energetic sector is recently hated by everyone so I did there small purchases. However, I am still waiting for further decrease. So far, I am satisfied with the significant purchases of companies mentioned above. If the SnP index plunges to 2800 points or below, I am going to make small purchases again. I am really curious what is going to happen during next week and afterwards. I am not fan of coronavirus, but if it brings panic to the market, I intend to monetize it even at the cost of temporary losses. I really do not believe in the end of the world or total meltdown of the global economy.

Sources: seekingalpha.com


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