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Changes for my portfolio. Lesson learned. August 28, 2013

Posted by shaferfinancial in Uncategorized.
Tags: , , , ,

All summer long it bothered me.  While I was on the Oregon Trail, I kept thinking that I had broken my investing rules for stocks.  Last May I purchased stock in a company called Dassault Systems [DASTY].  It wasn’t a huge buy for me, but was significant enough to bother me.  You see I broke my rules.  For the last few years I practice a value investor strategy that buys for the dividend stream.  This stock  had a P/E ratio of 38 and a measly .88% dividend yield when I purchased it.   

I loved the story though.  There is a new technology coming on called 3-D printing that is revolutionizing manufacturing.  I wanted a way to get involved.  And Dessault Systems is a leading software company that writes the software underpinning 3-D printing.  So the story was good for me.

Out on the trail though it bothered me.  So, when I got back I sold.  Fortunately, in the 3 months it went up and I booked a 11% profit.  Not bad for a mistake!   

Lesson learned.  Don’t forget your own rules!  Don’t be afraid to shed mistakes.

The next stock on my list was bought.  I always have a list of stocks I am looking at.

This company is called Sea Drill [SDRL].  Sea Drill is the brainchild of Norwegian billionaire Frederik Halvorson.  By its name you can tell it is a deep sea oil drilling company.   It currently operates a fleet of 64 various drilling operations.  But the real exciting point is that they have in process $8B in new drilling units.  So not only is its fleet the newest of all the drillers, it has a major expansion coming on board.  It has an order backlog of over $19B.  And currently is very profitable.  The only negatives on the books is a high level of debt and the dividend coverage ratio is 135%.  But, I think that is really an accounting issue more than anything else.  I am accepting that dividend risk over the long term positives of this stock. [While I was writing this they announced a dividend increase from $.88 to $.91].  

More detailed on this stock will come at the next quarter numbers, but for now:

My purchase price $43.35.

Dividend Yield at time of purchase 8.3%

P/E at time of purchase 18. 



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