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Trade adjustment – Lorillard, Inc. (LO) addition

Today I added 25 shares of Lorillard to my portfolio. The trade trigger was triggered and the order was executed. It seems that the selling hysteria of this stock over a potential menthol ban calmed down. Of course, it still may happen, but it may not as this issue was on the table a year ago and nothing happened. In my opinion such ban would have quite economical effect, mainly on the already tight federal budget. So banning this industry without prior thinking may have a huge impact. And that thinking can take quite a long time.

As I wrote in my previous articles, I enter into stocks when they pull back. I do it by entering a trade trigger or contingency order at a price, which is slightly higher than previous close (you can find calculation here). As the stock continues sliding, I lower the trigger as well. When the stock reverses, the trigger activates a limit order and if executed I buy more shares on the way up.

Sometimes the trade goes up for a while and then the stock returns on its downward move. If the move is just a suckers selling, but the fundamentals I am interested in are intact, I repeat the process. Works most of the time.

So here is a history of this order:

On February 22, 2013 I entered the following order:
If the last of LO is greater or equal to 41.77 Buy 24 LO at limit $41.77

On February 25, 2013 I lowered my order down as the price of LO dropped:
If the last of LO is greater or equal to 41.26 Buy 24 LO at limit $41.26

On February 27, 2013, I adjusted to the following:
If the last of LO is greater or equal to 40.54 Buy 24 LO at limit $40.55

On February 28, 2013, I adjusted to the following:
If the last of LO is greater or equal to 39.38 Buy 25 LO at limit $39.39

As you can see I could add 1 more share to the order and buy 25 shares in lieu of 24 in originally entered trade.

On March 1, 2013, I adjusted to the following:
If the last of LO is greater or equal to 38.86 Buy 25 LO at limit $38.87

At the end of the trading session on March 1, 2013, I adjusted to the following:
If the last of LO is greater or equal to 38.45 Buy 25 LO at limit $38.46

Today this last trigger executed and I bought 25 more shares at 38.46 a share (instead of 42.30 if I haven’t waited for this drop). If the stock continues dropping I may consider adding more shares. That’s why I try not to commit all my money at the very beginning of my position building, so I have cash available for next trade. So I somewhat phase-in into my trade.

Trade execution

03/04/2013 09:31:44 Bought 25 LO @ 38.46

As of today my new dividend income from Lorillard would be:

Total shares held as of today: 50
Estimated annual dividend: $110.00
Consecutive Dividend Increase: 4 years
Dividend yield today: 5.76%
Dividend 5yr Growth: 23.33%
Dividend paid since: 2008

Happy Trading!





6 responses to “Trade adjustment – Lorillard, Inc. (LO) addition”

  1. Sfi says:

    This is an awful company to invest in. Smoking is passe, and investing in such a company shows lack of compassion or even morals. Also, there are specific risks in taxes and regulation to owning it.

    All of this leads to outperformance. This is how you outperform , using facts about financials to make money when everyone else looks for excuses or an exit.

    I first bought in @25 when the menthol issue first surfaced in 2011. I knew nothing would happen because this issue comes down to money not health.

    There still is a regulatiry risk here. But i am buying it as cheaply as possible. A near 6% yield is unmatched in the market now.

    • Martin says:

      @Sti: I am a bit confused from your comment. On one hand you are saying it is an awful company to invest in because of moral issues, on the other hand you are saying that you are buying. I know that this company deals with morality and beliefs of some people, mine included. Shall I invest into a company manufacturing a product my faith prohibits to use? Or shall I ignore it, because it is not me who uses it and i treat this company as an investment vehicle only and leave the moral issue to those who voluntarily chosen their fate by smoking? By investing into this company, am I forcing and convincing these people into smoking? Partially, perhaps.

      This is a never ending philosophical & moral question, same as use of alcohol and investing in companies manufacturing it, some drugs, which may be abused and companies manufacturing it and recently in Colorado almost approved marijuana bill. Shall our company refuse designing HVAC systems for the grow shops because this plant can be abused? What a question!

      Thanks for stopping by! I appreciate it.

  2. Martin says:

    MFIJ, thanks for stopping by. I think any online broker allows conditional orders. I do not know all of them, I have accounts with TD and Scottrade and both allow conditional orders, so you should be able to enter them. I think this is a neat way how to boost your revenue.

  3. I think LO is a solid addition to your portfolio.

    Also thanks for the description of trade triggers. I need to look into whether I can set up something similar.

  4. Nice buy Martin. You ended up getting LO at a much lower price by adjusting your orders. I prefer placing specific limit orders over buying market so I can get better prices.

    LO is still near the top of my list to add more to. It has a great starting yield as well as high past dividend growth. I would have already bought more if it wasn’t one of my larger holdings.

    Good luck!

    • admin says:

      AAI, i agree with you. Since the company increased dividend recently and didn’t issue any warning and no analysts I watch issued any warnings this sell hype is just a hysteria for me. It may change however, but I think, looking at the company’s history, Lorillard management knows what they are doing. Hope I am not wrong. I am building my position in LO, so I will be definitely buying more over time, unless the stock stops meeting my buy criteria.

      Thanks for stopping by. I truly appreciate it.
      Martin

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