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Watchlist

We constantly build our watchlist of stocks we want to own and trade options against those underlying. We also evaluate those stocks to determine whether we will accumulate these stocks or not and whether we will trade options against them or not.
 

What is the process of selecting our stocks?

 
I select our stocks primarily from the Dividend aristocrats list. But I also watch investing videos on Youtube, follow other investors on social media, and follow other dividend investors’ blogs. These resources give me tips on stocks that I might be interested in.

Then I investigate those stocks. I read about the companies, what they do, how they make money, do they pay dividends, are they making money, what is their business about, etc. I also read about those companies on social media and websites like Seeking Alpha and read what other investors say. If I like what I see, I check whether the company offers good options and premiums.

If all is good, I put the stock on my watchlist. If they are still good, I may initiate options trading against these stocks and I start selling strangles.

Then I evaluate these stocks based on their valuations. That helps me to determine whether I want to be also accumulating these companies.
 

Valuations and trading

 
If I see the company as overvalued, I may be trading options against those companies only. I do not accumulate them. If I get assigned, which I tried to avoid as much as possible, I sell covered calls with a goal to get rid of those companies. This is also my main reason for accumulating dividend stocks. If I get assigned and hold the position, I want to get paid for holding it while waiting for calls assignments.

If I see the companies as undervalued or fair value, I start selling strangles but I also start buying shares of those companies. I do not try to avoid an assignment at all costs. I still roll and try not to get assigned but if it happens I keep the position.
 

Our watchlist

 
Here is our watchlist. Note, this is a list of stock we either own or may want to own in the future. This is not a buy list. We evaluate stocks in this list and based on their intrinsic value, we assign our valuation judgment to each stock. We start accumulating stock positions that are marked as “undervalued”. We also start trading options against those stocks.

Some stocks will be overvalued all the time. Like Apple or SNOW, or other tech stocks. But not just tech stocks. Coca-Cola (KO) has been overvalued for years. The only way you can get these stocks at better value is to trade options against them and artificially lower the cost basis at which you are purchasing the stock. It is a long process though.
 

We will be updating the watchlist regularly.
 

Stocks to buy

 
Out of the watchlist above, we compile a list of stocks we want to accumulate. Every month, we create a list of stocks to buy and we continue accumulating these stocks. It is like a goal. We set the goal and then we start buying, diligently, slowly, one stock after another. Until we buy 100 shares. Then we go and move to another stock on the list.

 

Here is a list of stocks to buy in October 2021:

 
October 2021 dividend growth stocks
 

Archived lists

 

Stocks to buy in September 2021
Stocks to buy in August 2021
Stocks to buy in July 2021
Stocks to buy in June 2021
Stocks to buy in May 2021
Stocks to buy in April 2021
More Stocks to buy in March 2021
Stocks to buy in March 2021
Stocks to buy in October 2020
Stocks to buy in September 2020

 

Current stock positions

 
Out of both lists above, we accumulate our stocks. Below is the most current list of our holdings. We also publish this list in our weekly investing and trading reports.

 
TW Account holdings week 40
Holdings as of 10/09/2021
 

I hope, this helps you to understand our selection and accumulation process. Let us know if you have questions.





7 responses to “Watchlist”

  1. Luis Iglesias says:

    Hello, Would like to know how do you calculate the fair value? thank you

    • Martin says:

      I use the Graham Dodd formula {V= EPS x (8.5+2g)}and P/E multiple to calculate the company\’s growth. Then when a stock trades below the calculated value, I consider it undervalued.

      • Luis Iglesias says:

        thank you for that information, I was actually working with Peter Lynch formula for PGE Over or bellow 1 and Yahoo financial gives this data in Statistic section of the ticker, but it has different result than Graham formula, in relation to be under or overvalued.
        PE multiple is Current stock price/ EPS (year) right?

      • Luis Iglesias says:

        thank you for that information, I was actually working with Peter Lynch formula for PGE Over or bellow 1 and Yahoo financial gives this data in Statistic section of the ticker, but it has different result than Graham formula, in relation to be under or overvalued.

        PE multiple is Current stock price/ EPS (year) right?

        • Martin says:

          Yes.
          The reason for the different results between Yahoo and my calculations is also that Yahoo uses GAAP data. I use adjusted operating earnings while Yahoo uses diluted earnings (GAAP). I also cap PE at 15 if the calculations end up with higher PE.

          • Luis Simon says:

            Adjusted operating earnings? where you obtain this data? in nasdaq.com, cnbc, or other?
            Could you please explain a little bit about cap PE at 15 if higher PE calculated?
            thank you very much

            • Martin says:

              It is any non-GAAP reporting. Nasdaq provides them, Zach provides it or you can take it directly from the company\’s financial reports. They usually report both, diluted and adjusted.

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