Wednesday, July 6, 2016

Three More Home Runs!

I hit my first home run with DivGro in October 2014, when General Dynamics Corporation (GD) crossed the 100% profit mark. I initiated a position in GD in March 2013 at $67.61 per share. The stock is trading around $138 per share, still placing it in home run territory. With dividends added, GD has returned 117% and on an annualized basis, a remarkable 35%!

My second home run came February this year, when Nippon Telegraph and Telephone Corp (NTT) reached the 100% milestone.  I bought shares of NTT in February 2013 at $22.43 a share. The stock is trading near $48 per share, still in home run territory! With dividends added, NTT has returned 124%, or 37% annualized – even better than GD!

Today, I'm happy to report 3 more home runs! All of these stocks have passed the 100% profit mark a while ago when taking total returns into account, but they've only recently crossed doubler status as far as the stock price is concerned.

Home Run #3


I bought 48 shares of Digital Realty Trust, Inc (DLR) in April 2014 at $52.73 per share. DLR officially became a home run stock on 28 June 2016 when shares closed at $106.64. When adding dividends, DLR has returned 125%, the equivalent of a spectacular 57% annually!

Here is a 3-year price history chart of DLR. The stock really took off in September 2015 and has been going from strength to strength ever since!

I'm obviously very happy with DLR's performance. The stock has returned 14.51% of my initial investment in the form of dividends. The 3-year DGR (dividend growth rate) is 5.2% and yield on cost (YoC) is 6.68%. Price appreciation has pushed current yield down to 3.16% at $111.23.

My fair value estimate for DLR is $75, so the stock is trading about 48% above fair value.

Home Run #4


bought 75 shares of Altria Group Inc (MO) in January 2014 at $35.29 per share. MO has yet to cross the $70.58 mark to make its home run status official. Today it topped out at $70.14, which is close-enough for me to call it! If I add dividends, MO has returned 111%, or 46% on an annualized basis. 

Here is a 3-year price history chart of MO with my entry price level indicated. Whereas DLR's chart is quite impressive (especially over the last 12 months), MO's steady climb over a 30 month period is really impressive!

At $69.61, the stock yields 3.25%. My YoC is 6.40%, which is up from the initial YoC of 5.44%. MO's 3-year DGR is 8.4%. 

My fair value estimate for MO is $61, so the stock is trading about 14% above fair value.

Home Run #5


I bought shares of Reynolds American, Inc (RAI) on 5 occasions, each time paying more for each share. The transactions and my entry levels are visualized in the chart below. My average cost basis for 185 shares is $27.07. At one point today, RAI traded at a new 52-week high of $54.48 before closing at $53.89. This means RAI is officially a home run stock!

Including dividends, the stock has returned 115%, or 48% on an annualized basis.

RAI is one of the stocks I transferred to DivGro from one of my other accounts, so some transactions precede the founding of DivGro.

RAI is one of my best and most consistent performers. At $53.89, the stock yields 3.12%. My YoC is 6.21% and the stock's 5-year DGR is 8.2%. Dividend growth is slowing down some, but I'm very happy with this stock's performance.

My fair value estimate of RAI is $48, so the stock is trading at a premium of 12% to fair value.

Concluding Remarks


It is exciting to get home runs because it means the stock in question is performing well!

If a stock performs well and the dividend grows at a fast enough pace to keep up, so to speak, I want to hang onto my shares and just enjoy the ride!

Buying more shares is trickier because you have to make sure you're not paying a premium price. Each of the home run stocks presented today are trading at premium prices. I won't be increasing my positions in these stocks anytime soon.

In fact, I may consider selling one or more of these home run stocks! In each case, the stock price increase has outpaced dividend growth, pushing yield way below my initial YoC. Selling when stocks are trading at a significant premium would allow me to invest in stocks trading at a discount to fair value. More on that later...

Do you have home run stocks in your portfolio? What, if anything, do you do when a stock you own doubles in price? Please let me know below in the comments section...

12 comments :

  1. Replies
    1. The best is you don't have to do anything but wait! Thanks for reading and commenting!

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  2. Thats great news FerdiS! I own DLR and am up almost 70% on it. I was contemplating selling too, but then I decided to ride it out for a bit longer. Its great to have homeruns as you call them!

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    1. DLR has gone up so fast its giving me a little acrophobia. I'll keep an eye on it and let it run until things turn sour. It is trading at a huge premium!

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  3. Nice wins,i had maybe 1 that went up 100%.

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    1. Thanks for reading and sharing, desidividend. Congratulations on the home run!

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  4. This is awesome! Congrats! What program do you use to get your graphs that way?

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    1. Hi Mat, thanks for visiting and commenting. The graphs are from my Scottrade brokerage account. It allows one to draw horizontal lines at specific price points. However, I use photoshop to add the transaction detail text and the filled circles representing entry points.

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  5. Very inspirational information here Ferdi. Congrats on another home run. I own MO and DLR, I need to check and see if i have any home runs there. If not, they should at least be triples ;-)

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    1. Triples are great, too! The home run analogy comes from an investment advisory service I subscribed to a few years ago. It was focused on small and mid cap trades rather than dividend growth investing.

      When I started DivGro, I guess I didn't even think about reaching the point of having home runs. Of course, my goal is not to chase home runs, but is sure is nice to hit some!

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  6. Nice Ferdi. I commented the last time that MO was my only 100%er. I just looked and that is still the case. I am at 60% (next highest) for O and SBSI.

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    1. Thanks, Mike A -- in time, you'll have more home runs too! I don't SBSI, but my O position is doing great, too. In fact, I just sold half of my O position. A post on this will appear tomorrow.

      Take care!

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