Thursday, October 23, 2008

why would anyone buy stocks now?

Investing should be really simple, you buy low and sell high. The problem is that when the 'low' is available, stocks are about as attractive as the girl who did the 100 meter dash in the 90 meter gym. Has the five letter word 'S-T-O-C-K' become a four letter word yet...?

As Canadian Dream: Free at 45 puts it, I have been buying up storm since the S&P 500 index plunged really hard in early October. I thought I'd summarize the additions I've made to my non-registered portfolio since the sky came crashing down.

Oct 6 Alcoholic Beverage Firm, Diageo PLC (DEO) at $58.61 (BEER)
Oct 9 Integrated Energy Co., Husky Energy (HSE) at $33.85 (GAS)
Oct 16 Utility Firm, Fortis Incorporated at $21.31 (LIGHTS)
Oct 22 Financial Services Co., Sun Life Financial at $29.37 (RETIREMENT)

These stocks were all yielding at least 4.7% at my time of purchase. This means that I'll be paid at least 4.7% of my money back annually in the form of dividends for my investment in these companies.

It is no secret that the reason I am doing a great deal of buying right now is because I feel there is a lot of really good long term value in the stock market right now. Many of the stocks I've purchased and attempted to purchase were trading at or near multi-year lows, and I feel that their potential to grow their earnings and dividends in the long term are very good. Near term there are currently countless hurdles and issues such as writedowns, economic pain, and consumer and investor fear, that are keeping many companies from growing their earnings. It is my belief that the companies in which I am investing will move through this period to excel in the future.

I must take advantage of these low valuations and high volatility in order to truly 'buy low'. Has the market bottomed? Who knows, but I will do my best to buy whenever I see value that is hard to resist when I look out long term. Hopefully I can stagger my purchases enough that when we look back at this period I'd have done at least some buying at the most opportune times to do so. If I'm wrong, my significant income in the form of dividends will be my solice. As long as dividend cuts are rare I'll be quite happy in the long term. I'm no Warren Buffet, but even Warren himself could give you a list of what he is buying right now.

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Dave said...

There's a typo in the Fortis purchase price. It had me confused. Doesn't take much.

MG (moneygardener) said...

Thanks Dave. That has been corrected.

Thicken My Wallet said...

Fortis was a nice buy considering it may replace BCE in the TSX 60 when (if again?) they go private.

Frog of Finance said...

I keep adding money through my DRiPs. I just sent a cheque to buy some more shares of The Bank of Nove Scotia -- their price is so low that it's almost unbelievable. Their yield is now 4.85%! I just wish I had more money available. :o)


MG (moneygardener) said...

Frog, I actually added more Scotia today at $37.60, yielding 5.2%.

Anonymous said...

Great post. Your strategy should pay dividends down the road!

Like you, I have picked up some great companies all with yields between 5 and 13%.

Bell Aliant, BNS, FTS, BMO, MBT, CM, and Emera.

Let's hope we are near the bottom.

Excellent blog btw.

Assetologist said...

Nice post!
I too have been buying stocks from my watch list as they strike my hit list price. The 'Alerts' option at GlobeInvestor Gold has been worth it's weight - sent straight to my cellphone. This allows me to either buy immediately or revise my hit price if the trend and rate of change suggests the ability to buy even lower. Using this strategy I have slowly accumulated solid companies with great dividends/distributions including CM, BNS, MFC, SLF and REI.UN.

Fortis is worth having a look at this weekend - thanks.

I came close to buying DEO but the plummeting CDN dollar has dissuaded me from taking positions is US dollar stocks right now.

What do other bargain hunters think of exchanging CDN to USD right now. Depending which crystal ball you are looking into it is possible that we hit parity once again!?

Forex said...

I also thought like this. Since I have already invested when market was in peak, now I am finding it difficult to get extra finance. This is true to grab the present situation for good returns.
Forex Income