WHAT WE DO? WE SELL OPTIONS FOR INCOME. WE USE THAT INCOME TO BUY DIVIDEND GROWTH STOCKS!
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Posted by Martin October 25, 2012
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New trade – Abbott (ABT)

New trade - Abbott (ABT)

(TD Account)

I bought ABT as part of the accumulation phase. The goal is to continue saving in Lending Club as long as the account reaches 10,000 dollars. Then I will start focusing more on TD account and accumulating 10,000 dollars in TD account. Then I will switch to ROTH and accumulate 5,000 dollars in the Roth account.

This stock dropped significantly in price, partially due to slower revenue and partially due to market correction. This company is a dividend achiever, continuously raising its dividends. During this drop the company didn’t decrease dividends so for me it is an accumulation signal. Since I have little cash in this account I could trade only 13 shares. I will be saving more to add more shares later as long as I reach 100 shares, which enables me to use covered calls strategy as well.

I used a buying strategy based on the following formula:

subtract day low from day high. Divide the result by 2 and add it to close. I was lowering the buy price per this calculation since Friday 19th, 2012 and this strategy helped me to avoid buying into falling stock, but only a stock which is reversing in price. The stock recently reached its support at $65. It may be now bouncing, but it should be now growing up. Time will show. If the stock stays at the recent lows I will continue accumulating.

I entered at 65.96 per share today:

10/24/2012 09:58:28 Bought 13 ABT @ 65.9599

Estimated annual dividend: $26.52
Consecutive Dividend Increase: 39 years
Dividend yield today: 3.10%
Dividend 5yr Growth: 9.63%
Dividend paid since: 1926




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Posted by Martin October 23, 2012
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Market shake out or in trouble?

Market shake out or in trouble?

Today the market got beaten down by worse than expected earnings reports. This can be a temporary over reaction as we experienced many times during previous seasons or it can be a significant game changer turning the markets back to south. Which way the markets will go? It depends on many factors. Let’s take a look at it from the technical analysis perspective and let’s keep it simple.

SPY

From the chart above we can see the market SPY being in a formation known as a flag. Typically it is a consolidation pattern and it is considered that if you enter into this pattern from bullish perspective, we will most likely resume the trend from which we entered.

However, today we broke down from this pattern. That can signal two things to me. We are either experiencing a shake-out when weak hands will be gotten rid of their positions in panic selling and the market resumes, returns into the pattern and continue running up. All the weak hands will be rushing back in moving the market up.

Or we are at the beginning of deeper trouble, the consolidation pattern fails and we will see further downtrend. How deep can we go in such case? Currently we are at the 1.st support level, if we break it, we can go as deep as $138 mark. Time will show.

For me this is a great opportunity buying more shares of my holdings such as Abbott. I moved my buy point lower yesterday and since today the price dropped even lower, after today’s closing I will be moving the buy price even lower (buying cheaper). My new buy point for tomorrow will be at $65.93 per share.

Now let’s wait for the next move.

Happy trading




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Posted by Martin October 20, 2012
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Abbott (ABT) is a buy at recent price


Many investors are wondering what’s going on with ABT and why it dropped some much in price recently. Some wondered whether the failed kidney drug test was the reason, or was it sales and earnings although it met expectations, or decreased revenue? I do not know, but honestly, I do not care that much.

What I care however is this. The company is a dividend payer. How the current situation affects the dividends?

If you take a look at JNJ which undergone serious issues last year with recalls, the company was able to sustain it, it didn’t decrease the dividend and it survived because of the strength of the company, its size and a whole range of products it manufactures.

Thus I believe Abbott is in the same range of companies. It’s been raising dividends for consecutive 39 years, the dividend growth is 9.63% annually and dividend yield is now 3%. It’s PEG ratio 1.89 is in line with industry median of 1.69, P/E of 16.203 is in line with industry median of 18.71 and thus the company is fairly valued. As a dividend achiever, to me, this stock is a buy.

Last Friday I used scaling in tactics to buy more shares of ABT. My buy price for Monday would be only if it reaches $66.9 with stop limit at $67.8.




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Posted by Martin October 15, 2012
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Impact Of QE3 On Agency Mortgage REITs?


In this article, I look into how QE3, more particularly the Fed’s MBS purchase program, affects agency mortgage REITs. I discussed my approach for agency mortgage REIT analysis in this prior article.

A few days ago, the Fed laid out its plan to buy about $40bb of agency MBS per month over the next several months. The price of mortgage-backed securities has since gone up, and their yields have come down significantly. As a consequence, many fear that REITs investing in these bonds would see their income drop, which would imply lower dividends in the future.

However, I think that in fact QE3 will not have a negative effect for two main reasons:

  • The spread between primary and secondary mortgage rates will widen as the Fed pushes MBS yields tighter.
  • The increase in book value of REIT MBS positions will largely compensate for the loss in interest.

I illustrate my logic with Armour Residential (ARR). I like it as an example because I own it.

Continue reading…




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Posted by Martin October 14, 2012
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Armour Residential ARR is it a buy?


In my opinion and view Armour Residential (ARR) is a buy. I am not searching for the reason for the recent drop in price. Since I am building my portfolio by buying more and more shares and reinvesting dividends, I am also looking at the point when is the best time to add to a position. ARR recently dropped down and the question goes whether it is a buy now or the stock is experiencing troubles so you should stay away from it.

My view is that this stock is a buy. Why? The first reason for adding more shares to my existing position is that insiders are buying. In last 12 months there were 20 trades by insiders; 18 were buys and only two were sells. The most recent buys happened just recently in September 2012.

The next reason is that ARR is currently trading at book value. For dividend investing it is a great sign. The dividend rate is now 15% so by buying now your dividend yield to cost will be great.

This stock is not the true dividend achiever to me, it has poor record on rising dividends and it recently lowered the dividend rate, but as a high yield payer and REIT (which in my opinion will grow as the retail market gets alive again) this stock is a great addition to my portfolio which can pay nice dividends to be reinvested.

Thus I am buying more shares of this stock.




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Posted by Martin October 12, 2012
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How to increase profits in the stock market


I am going to let you in on a dirty little secret. Of all the forces in the economy that have caused people to lose money in the stock market, none have been greater than the advice of financial experts and brokers. Brokers and most financial advisers could care less about your financial well being and if you follow the advice of these people it is highly unlikely that you will do anything more than contribute to their salaries and retirement. We may be hurting but believe me Wall Street is still very fat and still a little stupid.

These Wall Street fat cats are the same people that have put much of the world’s economy in the toilet in the last couple of years. But of course there were a lot of people willing to listen to the advice of these Wall Street morons also.

But that is all history now. The good news is that the economy and the market are going to recover and this is a great time for stock market investment. It is time for the little guy to take revenge.

Continue reading




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Posted by Martin October 08, 2012
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November 6 the future of the USA


As the election day approaches I would like to know who you would vote for:

[poll id=”14″]

Thanks for voting.




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Posted by Martin September 11, 2012
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Focus on savings and investing with Lending Club

Focus on savings and investing with Lending Club

Money growing Recently I was evaluating my investment goals and the way I was saving money for investing. In many of my previous posts I preached a way of saving into non transaction fee mutual funds, which would allow investing small amounts let’s say $50 every month without paying a fee. Then I could see something I didn’t like. Those funds locked my money for 6 months. If you sell prior to that test period you will pay a back fee. Another issue with this is that the return on those mutual funds was very low, many times they didn’t even keep up with the market and in many occasions lost value.

Yes in a long term, the mutual funds can be a great tool, but they didn’t look great to my purpose.

And I didn’t see a great opportunity I had right under my nose. Investing with Lending Club. Yes, that investment can lock your funds for up to three years, but you can always sell on the secondary market FolioFn and raise your cash back.

At first I was scared of this, thinking that I could be losing money when selling on the secondary market, but over the time I realized – not necessarily!

I’ve been investing with Lending Club for three years and since the beginning I was able to reach 12.83% annual return rate, no delinquent or late notes and when needed I was able to sell notes without having negative impact to my return rate. After almost three years of successful investing with Lending Club I realized that this may be the vehicle I was looking for and which can help me to park my small money, grow them on a nice high interest rate and relatively safely.

I redirected all my savings to my Lending Club account and I also decided to take some risk and use leverage to boost my account value and get more money back home. I took a loan of 2000 dollars at 7% interest rate and invested that loan in my Lending Club 12.83% rate netting 5.83% return home. I am paying the loan from my regular paychecks which totals some 61 dollars per month, but my Lending Club “loan portfolio” is paying me some 63 dollars monthly back, which I decided to reinvest and use it to pay the original loan back only if i won’t be able to pay it back using my paycheck proceeds. This looks to me like a nice plan, so after three years I will repeat the process, borrow another 2,000 dollar or more and invest it.

However, this approach may not be suitable for everybody. You have to know how to invest with Lending Club and protect your current investments. On the Internet you may find a lot of negative articles of people with bad experience or low return on investment results. When I was reading through some of those articles, I could see how badly managed their portfolios were. Loses can be avoided if you know how to do it. Next time I will try to write about some of the techniques you can use to protect your portfolio and get rid of the notes before they turn bad.

Before then, here are the charts of the current value of my Lending Club account and monthly payments (principal and interest):

[poll id=”13″]

Happy Trading!




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Posted by Martin August 03, 2012
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What do you think?


In today’s morning papers Mitt Romney promised 12 million new jobs in his first term if he captures the White House.
[poll id=”12″]




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Posted by Martin July 31, 2012
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Poll


Tell us what do you think:

[poll id=”11″]

Thanks




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