Friday, April 25, 2014

My First Double

Upon checking my portfolio this morning, I noticed that I had my first double -- a stock with an unrealized capital gain of 100%:


The stock is Illinois Tool Works (ITW), a diversified machinery company that is a Dividend Champion. My one and only purchase of ITW occurred in November 2011 when I was in the process of transitioning to a 100% dividend growth stock portfolio. At the time, I doubt I would have predicted that ITW would be my first two-bagger, but I am happy that it has performed well in terms of dividend growth and total return.

20 comments:

  1. DGM,

    Congrats! That is quite an accomplishment. My best performer is Microsoft and it has only moved from 31 to 40.

    MDP

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    1. MDP: Thanks! MSFT has also performed well for me, with an unrealized capital gain of around 48%. It's one of the few tech stocks that is reasonable as a dividend growth investment.

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  2. Congrats on the double! I've got a few so far but none of them were huge positions to start so the percentage looks nice. I'll be looking to buy ITW when the economy struggles again whenever that time comes. I saw your quarterly update over on SA and it looks like things are going quite nicely for you. Hopefully work will slow down a bit and you can starting writing a bit more again. Best of luck.

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    1. PIP: Thanks! It's also the case that my biggest gainers tend to be my smallest positions.

      I'm glad you checked out my quarterly update over at SA. Given my lack of monthly updates here, I wanted to do something to bring people up to speed on my investing progress. I don't know how much spare time I'll have this summer for activities such as investment writing. On the one hand, I won't be teaching; on the other hand, I have a ton of research and grant writing to do.

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  3. Do you have any plan to sell a stock when it has reached a specific level of unrealized gain and reinvest into another stock to increase quarterly income?

    I regularly ask myself this question...

    Thank you for this very informative blog!

    J-L

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    1. J-L: Thanks for your comment. To answer your question: No, I don't have a specific profit threshold at which I will sell a stock. If the company is continuing to do well, the dividend is growing, and the stock is not extremely overvalued, then I will keep holding.

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    2. I too purchased ITW in late 2011. My holdings are at 1.9x, so almost a double, like you. I always struggle with whether to sell or not, mostly because of the fact that it'll take another 17 years of dividends before I make back the original investment via dividends (assuming 5% dividend growth/yr). In other words, the underlying value of the stock has increased by 20-years worth of dividends, in just 3 years. Somehow it seems to me there's an opportunity cost being thrown away by holding for the dividend...but I continue to hold.

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    3. yes, for me it's always hard to sell. But after observing of all my stocks ups and downs I begin to think that the best way to earn more is to sell stock when it earned enough and invest this money into another stock on sale at this moment. Then repeat the process... This is my new plan because I already missed enough of ups and downs.

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  4. Nice work...'grats!

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  5. Do you know why you purchased it back then? Did you write a post on it?

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    1. Evan: Unfortunately, I didn't write a post about it because this blog didn't exist at the time. However, I remember that ITW was on my watch list because it was a Dividend Champion. When the market had a substantial correction in the fall of 2011, it also dragged down ITW, making it considerably undervalued. I think it had a P/E of about 11 when I bought it. Subsequent earnings growth and re-valuation by Mr. Market resulted in a large capital gain over the next two and a half years.

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  6. Congrats on your first double. ITW was obviously a great buy roughly 2 1/2 years ago!

    Two-baggers don't happen often with dividend growth stocks since they continually reward investors with dividends payouts. This company must have also done a few stock re-purchases as well. Regardless, nice accomplishment.

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  7. Congrats on it! Is it a pure capital gain or adjusted for dividends? I only have JNJ getting close to be a two-bagger. All other stocks are yet to work on it. But I own many of them for a lot shorter period than you, so I hope it will get there. If, however I add dividend and option income to my cost basis, the picture looks a lot different.

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  8. Wow great stock grab. Always feels nice to hit triple digits. Hopefully many more to come!

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  9. Congrats! Always nice to see that triple digit percentage gain in a portfolio. ITW has been a long time holding of mine as well. It's a great dividend machine that is extremely diversified. Thanks for sharing!

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  10. I bought four industrials during the crisis. MMM I sold way too soon (at a ridiculous 40% gain, by ridiculous I mean I gave it away). Sold ITW at about a 90% gain. EMR and IR I still hold. I've realized that selling such terrific compounding machines is a sure way to prevent real wealth creation. I'd buy ITW back in a second if I ever got a chance.

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  11. Congrats on the news.
    I am only new to the joys of investing myself. I am 25 now and I regret
    not starting when I was a lot younger. I recently read the rich dad poor dad book and
    started listening to Buffet a lot on youtube and it really changed
    my mindset on how I should use my earnings. I don't have a huge amount of capital to start with but
    looking forward to the long term journey. Your blog looks really interesting and I hope to learn a lot from it.
    I haven't been lucky enough yet experience a doubling a stock of my investment portfolio
    but if it does take 20 years of dividend payments to make up the current value then I would probably sell possibly half but
    probably only if there was an attractive dividend stock that was possibly undervalued at the time.

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