Now, I’m not saying not to treat or indulge yourself at all. The exercise for me was more to think about these goals that I really, really want to achieve but will take some time. I’m hoping that making a list and referring to it will help me to be disciplined. I’ve also started to do a weekly spending review, each and every week. I do it come hell or high water and have been at it for 10 weeks now. I store them on YouTube as private videos but they allow me to review my progress. In the weekly review, I go over things like current credit card debt balance, net worth, cash flow for the past 30 days and year-to-date, as well as how much cash I have on hand. I find that it helps me to focus too. And sometimes the embarrassment of just looking back and being able to say “What the fuck?!” really helps to instill discipline. Let’s see if this keeps me going. 5 years is 310 weeks… and I’m only in Week 10!
But perhaps because of all of the above now’s the perfect time. The famed Warren Buffett did say to be greedy when others are fearful and we’re getting close. It’s worth looking at this market to uncover some undervalued issues and see if you would like to allocate some of your capital there. Speaking of Buffett, Berkshire Hathaway’s annual report and letter to shareholders have been released. They are all worth reading for the serious investor who wants to be well informed. You can find back issues of both on Berkshire’s website and they are worth more than their weight in wisdom. The part I find very interesting in this year’s annual report is the bit about pensions.
The bottom line is not to look at this as a time to worry… it may just be an opportunity in disguise.
Target (NYSE: TGT)has taken a beating since the whole credit card hacking debacle in late 2013. They went from a high of $73.50 to under $55.00 – a drop of over 25% in just a few months. Yes, Target was responsible for the hacking and yes, they may take quite a hit from consumers for it. But being punished to the tune of 25% was a bit of an overreaction. The company is still strong and should recover. Any liability should be minimal. Target responded properly and took responsibility so I think this will blow over.
Target has a strong balance sheet, a strong history of paying dividends, and has a good image with consumers. At current prices, the yield is about 2.85%. Even if Target comes back halfway to its 52 week high, it’s still a gain of over 16%. There’s no reason it can’t get there and perhaps even more. I believe in it so much, I took a position in it in late January and it now makes up 9% of my personal portfolio. This is a pure value play for me – I think it’s just dirt cheap and took a much bigger beating than it deserved. If you’re waiting for a decent retail stock, Target might just be the right opportunity.
Once recent pickup for me has been Target based on the same rationale. The whole credit hacking debacle really did a number on Target. I believe their response is right on the money. They didn’t shy away or make any excuses and accepted responsibility. The exposure for them should be manageable. Yet the market beat them up pretty bad, putting them at a new 52 week low. Even if they can get halfway back, it’ll be a nice return. In the meantime, I’ll collect my dividends and hold onto a quality retailing company.
For me, it’s too late to retire at age 30. But it may not be too late to retire substantially early. Call it age 50 for now. Once you do retire though, plan on withdrawing roughly 4% or less of your portfolio per year. It’s been shown that amount will allow you to have your savings outlast you. Typically when you do retire, your spending goes down a little bit anyways, regardless of your actual age when you do retire. Now I just have to convince my wife that we need to spend less!
MCD – $49.8K (650 shares at $76.60)
INTC – $50.0K (2400 shares at $20.85)
IBM – $50.2K (340 shares at $147.48)
DD – $50.0K (1000 shares at $50.03)
All were purchased on 01/03/2011. Total cost basis: $200,039.
At the end of this year (12/30/2011), the market values were:
MCD – $65.2K ($100.33 a share)
INTC – $58.2K ($24.25 a share)
IBM – $62.5K ($183.88 a share)
DD – $45.8K ($45.78 a share)
Total value = $237.9K ($231.7K in equities & $6.1K in dividends). Total gain for 2011: 18.90%. By comparison, the Dow 30 was up 5.53% in 2011 and the S&P 500 was flat at -0.04% for 2011.
For 2012, I’m buying these 4 stocks from the Dow 30 in equal dollar amounts:
MRK, INTC, CVX, and WMT (Merck, Intel, Chevron and Walmart). The only remaining stock in that basket from last year is Intel, although both DuPont & IBM were close in making the cut again. Check back next new year’s to see how these stocks fare. If I can beat the market next year as well, awesome. Good luck investing!