It has been 10 months since my last post. The nice part about writing this blog is that I can go back and read my thoughts from last year and laugh at them. I can see that I was completely wrong with my analysis on where the market stood, when I thought the likes of Oshkosh, Office Depot and Texas Instruments were at historic lows. Back then I was also considering investing in DSP plans in the financial sector, such as WAMU, BOA, Lehman Brothers. Am I glad I did not step into any of those direct stock plans.
However, the market deterioration since last July has not deterred me from continuing to invest in the direct stock purchase plans I had initiated last summer. I am continuing to dollar cost average my stake in the following stocks.
I add two more companies to my basket, General Mills (GIS) (Google Yahoo Earnings Chart) and Cash America International (CSH) (Google Yahoo Earnings Chart).
You are probably wondering how I have fared since last July? Is there really a benefit to dollar cost averaging? Let me show you how I have fared. If I simply compare my initial purchase price for these stocks (purchase price associated with my first purchase in each DSP) with the current price (as of May 27, 2009) here is how I fared:
Note - I have only listed new stocks I initiated last July.
Now, if you factor in dollar cost averaging, here is how I have really fared:
The higlighted columns shows the relevant data.
My worst investments have been PNM Resources and Oneok, Inc. The remaining 4 have not yielded terrible results. Two of them, Oshkosh and Office Depot, are in the positive. I am not sure I would have been able to achieve the same by attempting to time the market. Considering how bad my analysis was last year, as to where the market stood, I am confident that I would have failed to time the market. I am quite happy with how my DSP portfolio has fared in the last year.
May 09 updates to my DSP portfolio
July 08 updates to my DSP portfolio
With the market in correction, I couldn't help but consider opening new positions in some solid companies that offer inexpensive DSP plans. This market is going to turn around at some point. I am no economist nor am I an investment professional. I do not know what will shift the balance to the positive side. Whether it is oil price speculation correcting itself, the dollar appreciating, the housing market stabilizing, the credit crunch easing, I am not sure. What I do know is that this market will turn around. It did it 2000, following the dot-com burst and it will after the current crunch. I cannot predict a time line for a recovery, for that matter, I am not too worried about the time line itself. My investing horizon is long (10~15 years) and I have enough time for a recovery and forward growth. The current market condition brings to mind one of Warren Buffett's quotes, when he said "Be fearful when others are greedy and be greedy when others are fearful." I have had my share of lousy luck being greedy. I have never timed the market correctly, and I really should not have tried. I have fared much better when I have diligently and in a disciplined manner bought shares of an undervalued company at periodic intervals over a period of time. My motto right from childhood has been 'Slow and steady wins the race'. It is obviously taken from the story about the Hare and the Tortoise but it applies to the investing world as well. Dollar Cost Averaging helps to make investing affordable for those of us that do not have thousands of dollars in one shot to invest in multiple stocks. It also helps to keep the cost of investing low and is designed to even out the purchase price due to market inefficiencies. As long as the company fundamentals are good/strong, dollar cost averaging is the best way to reduce the risks of trying to time the market. By participating in multiple DSP plans I am also able to effectively diversify my portfolio.
Well, enough of my rant on dollar cost averaging and portfolio diversification, I am sure you all have heard that argument many times before.With that in mind I ventured out to the various DSP Plan websites. I came across one of my old favorites, Paychex (Amstock). Earlier this month I had noticed that Paychex was trading at it's year low. In fact, the current price for Paychex is close to the price I paid for it in early 2005. I participated in the Paychex DSP plan previously from 2004 through 2007. I started accumulating in 2004 and continued through 2007, selling some in 2006 (to finance the purchase of our house) and the rest in 2007 (to finance some urgent international trips). Except for the fees I paid when I sold the shares I did not pay a transaction fee for the monthly purchase. That’s a pretty good deal.
I re-initiated my monthly investment plan by signing up for an automatic debit of $150 from my checking account.
I also found a few other DSP plans that I believe would be good investments under the current market conditions:
(Click on the link to access specific plan information)
Oshkosh Inc. (Computershare)
Texas Instruments (Computershare)
Office Depot (Mellon Investor Services)
All of these are mature, well established companies.
Oshkosh makes commercial and fire trucks, and military vehicles. It has been around since 1917 and is currently struggling with lower-than-expected sales and a gloomy forecast for the 3rd quarter. I expect the stock to languish in the $17 to $20 range for the next 6 months or so until the end of the 4th quarter. That would give me some buying opportunity over the next 6 months and further.
Texas Instruments makes chips and calculators, to put it simply. It is almost 80 years old and the first chip design from TI came 50 years ago. Unlike some of the other technology giants like Intel, Cisco, IBM you won't hear much about TI but it is the market leader in what it does. It is priced quite attractively right now at ~ $24.
Office Depot is a supplier of office products and services to individuals and businesses. To my surprise Office Depot has been expanding internationally through investments in China, India, South Korea, Israel and others. I think these investments will pay off in the long run. Among the 3 companies I have mentioned here I am most concerned with Office Depot’s ability to turn around. There are some legitimate concerns about management quality at Office Depot, compared to Oshkosh and TI. However, the price is what attracted me. At around $7 it looks like a bargain.
That brings my DSP participation to 8
I am looking to invest into a couple more stocks offering DSP plans. Will need continue doing my research over the next 2-3 weeks to identify them. I have been thinking about diversifying into the financial sector. All of the major financial institutions such as BOA, Wachovia, WAMU, and Lehman Brothers offer DSP plans. Any suggestions?
Well, enough of my rant on dollar cost averaging and portfolio diversification, I am sure you all have heard that argument many times before.With that in mind I ventured out to the various DSP Plan websites. I came across one of my old favorites, Paychex (Amstock). Earlier this month I had noticed that Paychex was trading at it's year low. In fact, the current price for Paychex is close to the price I paid for it in early 2005. I participated in the Paychex DSP plan previously from 2004 through 2007. I started accumulating in 2004 and continued through 2007, selling some in 2006 (to finance the purchase of our house) and the rest in 2007 (to finance some urgent international trips). Except for the fees I paid when I sold the shares I did not pay a transaction fee for the monthly purchase. That’s a pretty good deal.
I re-initiated my monthly investment plan by signing up for an automatic debit of $150 from my checking account.
I also found a few other DSP plans that I believe would be good investments under the current market conditions:
(Click on the link to access specific plan information)
Oshkosh Inc. (Computershare)
Texas Instruments (Computershare)
Office Depot (Mellon Investor Services)
All of these are mature, well established companies.
Oshkosh makes commercial and fire trucks, and military vehicles. It has been around since 1917 and is currently struggling with lower-than-expected sales and a gloomy forecast for the 3rd quarter. I expect the stock to languish in the $17 to $20 range for the next 6 months or so until the end of the 4th quarter. That would give me some buying opportunity over the next 6 months and further.
Texas Instruments makes chips and calculators, to put it simply. It is almost 80 years old and the first chip design from TI came 50 years ago. Unlike some of the other technology giants like Intel, Cisco, IBM you won't hear much about TI but it is the market leader in what it does. It is priced quite attractively right now at ~ $24.
Office Depot is a supplier of office products and services to individuals and businesses. To my surprise Office Depot has been expanding internationally through investments in China, India, South Korea, Israel and others. I think these investments will pay off in the long run. Among the 3 companies I have mentioned here I am most concerned with Office Depot’s ability to turn around. There are some legitimate concerns about management quality at Office Depot, compared to Oshkosh and TI. However, the price is what attracted me. At around $7 it looks like a bargain.
That brings my DSP participation to 8
I am looking to invest into a couple more stocks offering DSP plans. Will need continue doing my research over the next 2-3 weeks to identify them. I have been thinking about diversifying into the financial sector. All of the major financial institutions such as BOA, Wachovia, WAMU, and Lehman Brothers offer DSP plans. Any suggestions?
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