DGI Adventure – 12-01-2015 Limit Order Executed – Cummins Inc. (CMI) - $96.66/share
LOE – Limit Order Executed
Well that was quite a morning! Apparently I bought 16 shares of CMI for $96.66/share for a total investment of $1553.51 (including $6.95 trade commission).
Before Thanksgiving, I had decided that I was ready to initiate a position in CMI even though there is a long time before the next dividend. I had messed around with my limit order after writing the thesis, and decided I wanted to invest closer to $1,600 instead of $1,500, so I upped the order to 16 shares from 15. I kept that limit order price at $98.00 though because I still didn’t think there would be a whole lot more downside in the share price over the next quarter.
To quote myself:
There are some very old peaks from 2011 and 2012 in the $96-97 mark and some troughs around $86. I’m not inclined to wait around to see if it wants to push $86. That’s just too far. It seems much more likely to start to go up from here. If it does go down to test those old lows, I will probably be buying more.
Boy was I wrong. CMI’s share price got hammered today. It seems the primary headline driving the selloff was BofA Merrill Lynch’s downgrade from “Buy” to “Underperform”. The downgrade skipped the “hold” or “market perform” or whatever intermediate “neutral” rating they use. Jim Cramer didn’t help matters. My favorite quote from that video: “If they’re involved in anything that’s machinery, they’re just…done. “ Stick a fork in them. Diesel engines are obsolete. Machinery is obsolete. We don’t need stuff anymore…just clouds.
The downgrade came out before the market opened, so there was a big premarket drop. It dropped right past my limit order opening at $96.58, which meant it was executed as a market order. Unfortunately, the regular hours robots took up right where the premarket robots left off, and the price pushed even lower until it stabilized around $92 ish. It closed the day at $92.43.
So I said if the stock price wants to test those very old lows, I would probably be buying more. Is it already time to put in another limit order? While I wouldn’t call this exactly $86 territory, it’s a lot closer than it was. When the oracles at BofA Merrill Lynch lowered their rating, they also lowered their target price from $115 to $90. (Seriously? That’s $4.4B of market capitalization! Overnight? Really?) A week ago I thought it was more likely to go up from $100 than to go down. Another limit order around $86 would imply I think it’s more likely to down from here than up. Have I changed my tune? I have no idea. That’s what I get for trying to make a prediction in the first place. Thou can’t time the market, so thou shall not try to.
But…I think I’d like to give it a month or so before tying up more cash in a limit order. The FOMC is supposed to raise rates later this month, and maybe that’s already priced in, or maybe it isn’t. I felt a $98 price had a decent margin of safety. I got the shares I wanted for even less than I expected, so now that I own some shares, I’m less concerned with what direction it goes from here.
The portfolio has been updated accordingly so yesterday’s monthly update is already out of date. Sorry.
DGI Adventure – 10-28-2015 Limit Order Executed – Omega Health Care Investors Inc. (OHI) - $36.00/share
LOE – Limit Order Executed
I had decided to purchase OHI shares in my ROTH IRA long before I had come up with my investment thesis structure, so I don’t have one to reference. Today I bought 46 shares of OHI at a price of $36.00/share for a total investment of $1,662.95 (including $6.95 trade commission).
The limit order was originally set for 47 shares at an even $32.00/share on 8/24/15. It was so close to being executed. On 9/4/15 the intraday low was $32.01. On 9/8 it dipped to $32.16. That was it. From there it shot up to over $35.
On October 14, OHI announced another dividend increase. Not only are they a dividend contender having raised their dividend 13 consecutive years, they’re currently on a streak of raising their dividend 13 quarters in a row. That’s pretty impressive.
OHI goes ex-dividend tomorrow, which means today was my last day to get in on this quarter’s dividend. With a market yield over 6%, a strong growth history, and a do-nothing FOMC leaving interest rates at zero, I don’t really see OHI dropping 10% any time soon to get back in that $32 range. I made the decision to go ahead and raise the limit order in the hope I could get the shares in time for ex-dividend day. It worked and now I’m the proud owner of 46 beautiful shares.
I had earned some dividend income since the original order was placed and I had spent a little less on the other investments than planned, so even at the higher price, I could buy nearly the same number of shares with my remaining cash. As much as I love trying to get a nice temporary low for a purchase price, I’m really after the income. In this case I chose to ignore the share price in order to lock in the income. This has a lot to do with the fact that this is in my ROTH IRA. The amount of fresh capital that can be added per year is capped at $5,500. I want to earn cash so I can invest in more securities with less commission. I need my money working for me if I’m going to earn that cash between now and next year. Waiting around too long for the perfect entry point is ultimately a disservice if it means missing out on a big dividend. And on ex-dividend day eve, when I am literally down to my last shopping day…bargains might not be available. I’m okay with that.
By purchasing one less share than originally planned, I’m giving up $2.24 in income based on the current dividend. That is the difference between $105.28 versus $103.04 in annual income. By acting now I know I’ll have an extra $25.76 of cash to invest on top of next year’s $5,500 contribution than I would have if I missed out on this quarter’s dividend.
And what if OHI’s share price just goes up over the next quarter and I dither around and wait even longer for the perfect entry point? I was so close to getting OHI at $32.00/share. Literally within $0.01/share. Oh well. I didn’t.
Sometimes you spend more time fishing than catching…and that’s the fun of it. Other times you need to catch something because you’re hungry. I hope I can tell the difference, and act appropriately for the situation.
