My Investing Journey with Passive Income and Stock Market investing

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Investing Lessons I’ve learned the last 2 years

1)Buy and Hold is a great strategy but not ALWAYS the best strategy. I have had serious winners (up 30%) turn to losers (down 30%) in a hurry. I held on because I believed in buy and hold. Meanwhile, I would have been better off to take some off the table. I ALWAYS take a bit off the table every other quarter or so. This provides a psychological benefit of “winning” as well 🙂


2)Check a companies BOND RATINGS. This has become even more evident during the recent Coronavirus Crash. You are seeing companies that have paid dividends for decades have to cut their dividend. Many of these companies were downgraded to Junk and downgraded again. Look to see the standing of the bonds of the company you are investing in. Use the Moody’s website, create a free account. You can do this research quite easily for most large-cap stocks.


3)Check companies’ EARNINGS in detail. If you see the earnings dropping quarter to quarter over the course of a year or more, it may be time to get on another horse. These companies are not growing. It doesn’t matter if they pay a dividend if your TOTAL RETURN is seriously negative. Buy companies with some growth, whose revenues and earnings are increasing.

4)Debt/Equity Ratio-Once again, the Coronavirus Crash is showing just how important this is. If the company is overleveraged, in hard times like this, it will not be able to meet it’s debt. Invest in companies with PLENTY of cash and reasonable debt levels.


5)Don’t over diversify-I think one issue I had with my portfolio initially is simply too many positions to keep up with. Ideally, I’d like 20 at the most, maybe even 15 really good ones. You don’t HAVE to own every sector with individual stocks if you already have a good index fund.

6)Don’t fall for the P/E trap. What I mean is, just because something has a low P/E, does NOT mean it is undervalued. First and foremost, it is ridiculous to believe the rest of the investing world can’t look at a P/E number and ascertain whether it’s valued appropriately…..so yeah, it’s most likely “priced in.” Not all sectors have the same P/E values, tech can have higher P/E values. Companies on their last leg can have very low P/E numbers but that doesn’t make them undervalued.


7)Don’t forgo BONDS-Luckily, I never had this problem but it bears repeating. I often see people tell younger investors you don’t need to use bonds/bond funds. I think this is ridiculous. One of the reasons my IRA and Roth aren’t down as bad as they could be is because of the bonds. They have a HUGE purpose in a portfolio.

8)”Cash is Trash”. A famous investor recently said that and I know I’m taking it out of context but cash is DEFINITELY not trash. Cash is SUPER important and should be conserved so when a buying opportunity comes along, you can take advantage of it. One thing I did wrong last year is I just kept buying, all the time. Then, when I had lower prices, I didn’t have enough cash to buy. NEVER AGAIN! I think I want to have 10% of my portfolio in cash going forward. Get the money in the market but also don’t just throw it all in at once.


9)Cut losers QUICKER. That is right, when a company drops 20%, maybe it’s time to sell. Not always but sometimes. Personally, I’ve found when I get a quick drop like that I almost always come out better if I just sell. Have a game plan, once you lose a certain percentage, get out. Do not mindlessly use a buy and hold approach, reassess the situation.

What am I buying?

1)Universal Forest Products is a new position I started, it is a small-cap company in the lumber, backyard equipment, gardening supplies area. They also supply materials for Construction as well

2)Chewy– I’m still taking Nibbles at CHEWY :)….a few shares here and there. My wife and I use Chewy for our two cats (Sid and Ellie) and we love the service. At this point, I consider this a speculative bet though.

3)Mcgrath Rentcorp-I was FINALLY able to buy shares of this company at a reasonable price. The books look great and it is well managed. Another small-cap stock.

4)Still buying Stanley Black & Decker

5)Schneider Trucking and Marten Transports-You MAY be thinking, didn’t this guy just sell SNDR? I did, but I kept a small portion of my shares and at these prices, I think TRUCKING STOCKS present an incredible bargain. They were already priced for a recession and have held up pretty well during the Corona Crash.

6)Taking small nibbles at ITOT and QQQ every few days. I know we can’t time the bottom so I am just buying around 2400 and under mark on the S&P 500. These are great index ETF’s that I want to hold until retirement.

7)Hooker Furniture Company-another small-cap I’ve been holding almost two years. This presents me with a great opportunity to lower my cost basis considerably. I am down around 40% in this stock, luckily it’s not a huge position but I believe in the company long-term, if it can get past the Tariff stuff (and now the virus!)

8)Lowe’s-I had recently bought Home Depot to swing trade and here I am with Lowe’s this time for another swing trade. I am up 3.5% after one day so far, I play on getting out around 5-6% unless it just blasts up and then I will, of course, hold longer.

Will Dividend Investing Protect you more?

I will preface this article by stating I do a good bit of “Dividend Investing.” At the same time, it is not all I do.

One common argument by dividend investors is that by focusing on Dividends, you are more protected during a market correction, recession or bear market.

How has that technique faired in this Coronavirus Correction? Let’s take a look at some major ETF’s.

ITOT (Total Stock Market ETF containing 3633 holdings): It pays a distribution of 2.05% and is currently down 22.11% YTD.

NOBL (A Basket of 65 S&P Dividend Aristocrats): It pays a distribution of 2.13% and is currently down 24.54% YTD

DGRO (A basket of 477 Dividend Growers): It pays a distribution of 2.48% and is currently down 22.76% YTD.

If we do some quick math here and add back in the dividends we get a total return of the following, all numbers NEGATIVE (Yes, I realize that doesn’t take into account some factors over the next year but we have to work with knowable here)

ITOT 20.06%, NOBL 22.41%, DGRO 20.28%.

If you look at those numbers; NOBL is the worst performer, even taking into account the dividend. ITOT and DGRO are very close; DGRO paying a greater dividend.

ITOT holds the largest number of companies, followed by DGRO, followed by NOBL. I believe the greater diversification is part of the protection equation.


SECTOR exposure plays a big part here:

ITOT is 8.45% tech, 5.33% IT services

NOBL is 9.41% chemicals, 7.86% Household products

DGRO is 12.06% banks, 9.13% Pharmaceuticals

The lack of TECH exposure within NOBL is part of the reason it doesn’t perform as well poorer. DGRO has 4% Software and 3% Tech storage/hardware exposure and notice the better performance.

It turns out over the last 4 weeks, DGRO has fared slightly better than ITOT; NOBL is still behind. It remains to be seen how each will do over the next month or so.


Some other considerations when focusing on dividends:

LOTS of Dividends have been slashed during this Coronvirus Crash:

Here are just a few:

  • Macy’s
  • Occidental Petroleum
  • Ford
  • Darden Restaurants
  • Nordstrom
  • L Brands
  • GAP
  • Texas Roadhouse
  • FCX
  • Cracker Barrell
  • Delta
  • Boeing
  • Marriot
  • AMC

There are many on that list that NO ONE would have predicted would have to cut their dividend. For example, if you just looked at Delta’s payout ratio, you wouldn’t have thought it was at risk? Some of those companies have been paying dividends for DECADES.

Please keep this in mind: The risk of a DIVIDEND stock is compounded by the possibility of its dividend being cut/reduced. When the dividend is cut, it sells-off, causing the price to crash further. You not only lose the dividend but you lose the total return as well.

Furthermore, something that MANY Dividend Investors don’t realize. When that dividend is cut, a dividend-focused ETF has to remove it from it’s holding. Thus, there is more selling of the stock. Yet, another reason that even a dividend-focused ETF could present more risks. At the moment, I don’t know if any Dividend Aristocrats have had their dividends slashed or not.

I think before this is over, the Corona crash will prove that Dividend Investing is NOT innately safer. It has risks just like everything else. I say this as someone who has already had TWO dividend cuts (Darden Restaurants and Ryman Hospitality Properties). There is NOTHING wrong with Dividend Investing; however, I don’t think to focus solely on it or even heavily making that your deciding factor when investing is a smart idea, even during bear markets.

Week of March 16th-New Positions and Thoughts

While I said I was working on REDUCING positions, I managed to INCREASE positions. I guess the deals got too good.

I started a small position in HOME DEPOT. I do feel it can go a little lower here but Home Depot will be fine long-term and I thought it was a good chance to get in on a company that has very little competition. I personally would rather shop at Lowes but Home Depot’s margins and bond ratings a little better here to me than Lowes.

I also bought a few shares of Stanley Black & Decker. This is another home improvement play. This companies share price has been getting destroyed. I don’t like the recent acquisition that has exposure to Boeing (amongst all of its problems) but I’ll overlook it at this level.

Smuckers-I still think this one is a bit overvalued but as we head into lockdown and a potential recession I think I’d like to increase my exposure to Consumer Staples. Especially considering how great General Mills has been to me. The Dividend is currently 3.26%

Chewy’s-Here is a riskier play but one I’ve been on the fence about for a while. With the Coronavirus, people are pent up in their house for a bit and the pets still have to eat. We use Chewy’s service for our two cats (Sid and Ellie) and are pleased with the service and price. So just a few shares of Chewy’s at this level.

Akamai-As usual, I’m still loading up on Akamai, I want it to be one of my top 4 positions.

What am I avoiding?


Ryman Hospitality Properties has just completely fallen apart. Nobody could have seen this coming. All I can do at this point is hold tight, hope they don’t cut the dividend and worse, hope they don’t go bankrupt. This is a MESS. The risk is very high at this point and I can’t buy any more.

Darden Restaurants is in a similar mess. No one will be sitting down at a meal at Olive Garden for a while. The price is nose-diving bad. I simply can’t buy any more here.

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