I’ve been engaged in the dividend growth strategy for about five years now. After years of inaction and focusing on my college degree I eventually jumped back in. I started by purchasing 30 shares of Fastenal stock in 2013; the company I began working for. I then picked up larger stakes in McDonalds, P&G, PM, and Coca Cola. Around this time, I also learned NOT to sell. Unfortunately, I sold MCD at $101 only to watch it rise to $160 years later. Nowadays, my holdings are all listed under the portfolio tab. Even so, I thought it would be a good time to examine the winners and losers. What mistakes have I made since selling McDonalds? What are some successes?
The clearest winners are Apple, Archer Daniels Midland, Target, Amazon, Intel, 1st Source, and Hormel. These positions have returned around 30% or more in capital gains. Apple and Amazon are absolute monsters with strong growth rates. It’s no surprise these two FAANG stocks lead my portfolio. 1st Source is benefiting from tax cuts, regulation, and the strong local economy in Northern Indiana. Archer Daniels Midland and Hormel are benefiting from more stable commodity prices. Intel broke out and is experiencing solid growth among almost all its business sectors. Intel is truly the beneficiary of a strong economy. The most profound turnaround was Target. Target completed its strategic initiatives by renovating stores, developing ecommerce, and adding more high-quality exclusive brands.
On the other hand, the three losers are Philip Morris, General Mills, and Rio Tinto. Unlike my agriculture companies, Rio Tinto is dealing with declining commodity prices. For example, copper is near a one-year low. General Mills is still coping with changing consumer preferences. As discussed in a previous post, they recently paid a hefty premium for Blue Buffalo, a premium pet food company. The debt needed to buy out such a company is a risky play, especially in a rising rate environment. Finally, PM is in the process of marketing its iQOS heated tobacco device in other markets and trying to convert the late adopters in Japan. The slowing growth rate in the Japan market scared investors and sent shares tumbling a few months ago.
Overall, there are many more winners than there are losers. Yes, it’s a bull market and prices could fall quite sharply. However, there are few alternatives to true wealth creation. Bonds & CDs barely return anything. Maintaining physical real estate is time consuming, expensive, and bad tenants are a nightmare. Building one’s own business can be rewarding but caries much greater risk. Simply working “harder” to hoard cash in a checking account at 0.2% is a zero-sum game. For most of us, the only pathway to early financial independence is by being a silent partner in many quality businesses. So I’ll gladly deal with the price fluctuations. In the long run, the probability of success is quite high.
DISCLAIMER: I am long on AAPL, AMZN, HRL, PM, GIS, RIO, SRCE, INTC, and TGT. I am not a licensed investment adviser or tax professional. I am not liable for any losses incurred by any parties. This blog should be viewed for entertainment and/or educational purposes only. Any transactions published are not recommendations to buy or sell any securities. Please consult with an investment professional before making investment decisions.