In June last year I opened positions in four stocks that don't pay dividends. For fun, I call these stocks my future dividend payers.The stocks are the most popular and best performing technology stocks in the market and have generated rather spectacular returns for investors.
One of these stocks just became DivGro's fourteenth home run stock. I use the term home run to describe any position in DivGro that crosses the 100% mark in total returns.
In this article, I recap DivGro's previous home runs, announce the 14th home run, and list the positions that are closing in on home run status.
FANG
Coined by CNBC's Mad Money host Jim Cramer, FANG is an acronym for four popular high performing technology stocks—Facebook, Amazon, Netflix, and Google (now Alphabet).
Google and Facebook dominate the online advertising space, while Amazon dominates e-commerce and cloud services and Netflix is the preeminent provider of streaming content.
In June 2017, I decided to open positions in each of the FANG stocks. Rather than being speculative, I consider these positions to be long-term investments just like the other positions in DivGro.
Some doom profits suggest that the best days of FANG stocks are over or to avoid FANG stocks until Summer. However, I'm comfortable owning these stocks and enjoying whatever rides they take me on... whether they continue to outperform the market or drop precipitously when the bears take over. If the latter happens, I'll buy more shares.
Previous Home Runs
Here is the list of DivGro's previous home runs, with updated total returns (and annualized total returns):
- Home run #1: General Dynamics (GD) — up 250% (50% annualized)
- Home run #2: Nippon Telegraph & Telephone (NTT) — closed for 125% gain (37% annualized)
- Home run #3: Digital Realty Trust (DLR) — closed for 102% gain (44% annualized)
- Home run #4: Altria Group (MO) — up 111% (28% annualized)
- Home run #5: Reynolds American (RAI) — closed for 180% gain (53% annualized)
- Home run #6: Main Street Capital (MAIN) — up 51% (20% annualized)
- Home run #7: Microsoft (MSFT) — up 230% (49% annualized)
- Home run #8: UnitedHealth Group (UNH) — up 172% (46% annualized)
- Home run #9: Northrop Grumman (NOC) — up 130% (47% annualized)
- Home run #10: McDonald's (MCD) — up 74% (21% annualized)
- Home run #11: AbbView (ABBV) — up 90% (53% annualized)
- Home run #12: Lockheed Martin (LMT) — up 98% (29% annualized)
- Home run #13: Raytheon (RTN) — up 104% (37% annualized)
Once a position reaches home run status, it retains that status even if a stock price drops and total returns dip below the 100% mark. (See MCD, ABBV, and LMT above). Furthermore, if I buy additional shares of a home run stock at a higher cost basis, the calculated total returns could drop below 100% as well, such as with MAIN above.
Home Run #14
My 14th home run stock is Netflix (NFLX), an Internet television network engaged in the delivery of TV shows and movies, either by streaming content to Internet-connected screens or by providing DVDs by mail. As of 22 January 2018, the company had approximately 117 million members in 190 countries. NFLX was founded in 1997 and is headquartered in Los Gatos, California.
NFLX is not a dividend payer.
I bought 30 shares of NFLX on 16 June 2017 at a cost basis of $151.08 per share. NFLX now trades at about $320 per share, easily doubling my cost basis.
Here is a one-year price chart of NFLX showing my buy price:
NFLX's performance in 2018 has been spectacular! In January, the company smashed subscriber estimates, adding 1.98M domestic streaming subscriptions versus guidance of 1.25M and 1.29M consensus estimates. International streaming subscriptions increased to 6.36M, handily topping expectations of 5.05M.
The company's Q4 results included in-line EPS of $0.41 per share from revenue of $3.39B, up almost 33% year over year!
Home Run Contenders
Below are DivGro positions that are approaching home run status. It would be interesting to see which of these stocks, if any, will become Home Run #15!
Aflac (AFL) is the forerunner by the slightest of margins, but I wouldn't be surprised if Intel (INTC) wins the race. INTC has the momentum with 1-year returns of about 41% versus AFL's 23%.
Concluding Remarks
Before becoming a dividend growth investor, I sold half of my shares when a position doubled. I justified the sale by saying that I'm now playing with "house" money.
I no longer have a trader's mentality. Most of my positions are income-generating dividend growth stocks and cutting my income in half just because the position has doubled is silly. Rather, I allow my winners to run as I continue to collect the regular (and growing) dividend "checks".
The fact that NFLX is not a dividend payer does not change my approach. It is a long-term investment and I'll allow it to run just like I allow my winning dividend growth stocks to run.
Thanks for reading! Let me know what you think of my investments in the FANG stocks. Do you own any non-dividend-paying stocks, or do you only invest in dividend growth stocks?
Home Run #15! Awesome stuff Ferdi! You're really starting to rack them up. I've got 10 myself within my taxable account although a few of those are up at 200% and 300% total returns now and then a few that are around the 80%+ total return level. I primarily invest in dividend growth stocks, but in my IRA where I'm doing the bulk of my options trading I do venture into non-dividend payers when I feel the situation warrants it. AMZN is one of the non-dividend payers that I for sure want to add to my portfolio, although that's probably going to have to come during the next recession/bear market to get at least a semi-decent valuation.
ReplyDeleteActually, Home Run #14 -- but INTC and AFL are getting close.
DeleteThanks for sharing your stats! Ten home runs are great and I love the fact that a few of them are up 200% or 300%. (My highest is GD at 250% and MSFT at 230%). I wish I could do options trading in my IRA's, but to do so would mean I'd have to move those accounts to another brokerage. About AMZN (and the other FANGs) -- I certainly did not buy any of these a semi-decent valuations. Yet, AMZN is up 55%, FB is up 23%, and GOOG is up 19%. Not bad for 8 months I'd say. Though things can change quickly!
Ferdi,
DeleteYeah I hear you on paying rich valuations for the FANGs and I'm sure I'll still have to whenever I do finally buy some. However, given where we're at in the stock/economic cycle I'm wary of starting positions in these companies because they very well could have some of the furthest to fall. If I could buy AMZN like $100 at a time I'd be all for that to get exposure to them now and then just save up for a big purchase when the markets crap the bed.
It's completely understandable that you don't want to get in big at the top. These stocks could fall far when the market sentiment changes to bearish. Of course dollar-cost averaging into a position is not a bad way to go. One of my reasons for getting into AMZN is that I noticed its (competitive) impact on several of my dividend paying stocks. So it's partially a hedge, I guess.
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