Our Family Investments: March Transactions

Normally when I report transactions made on our family investments, it is a combination of new purchases or adding more shares to an existing position: this month we find ourselves with a sale for the first time in nearly two years. We also added two new positions between the five accounts we are tracking which are detailed below. March was a busy month for our family investments.

One Sale this Month

In Grandma’s portfolio she had a long-standing rule that we weren’t going to sell any stocks, she simply wanted to see how the portfolio performed. Now that my parents are the owners of the shares they have allowed me to do some selective selling and this month I took the opportunity to liquidate the portfolio’s position of General Electric (GE). The shares were sold on March 16th at $94.06 per share.

For this portfolio, I feel that at this time General Electric is not a company that is meeting the goals of the portfolio. This portfolio is generally set up to provide a reliable source of income to the owners that when needed can be spent, and when not needed can be reinvested into new opportunities. General Electric has shown for years that returning capital to its shareholders is not the primary goal of the company. With the shares providing .01 per quarter per share, nearly anything purchased will be an increase to the portfolio’s income stream. While I understand the long-term plan that they are attempting I don’t see it coming together in an active and manageable plan that fits the portfolio goals. I had held off making this change for a few months hoping that I could see a glimmer of hope in the stated restructure plan, and while I am encouraged by the recent announcement of share buybacks there wasn’t enough there to have me believe that the shares were worth holding on to at this time.

Two Purchases this Month

In Grandma’s account, we decided to imitate a position in Amgen (AMGN). The shares were bought on March 29th at a price of $239.89 per share. At the time of purchase, the company was trading with a P/E Ratio 14.05, with a FWD P/E of 13.45. For a company whose 2023 earnings are estimated to grow at just over 9%, I feel that the current price was an acceptable risk to be added to the portfolio. The company also meets the goals of the portfolio providing a current annual yield of 3.23% while supporting just a payout ratio of 41%. They’re a company that has shown 11.71% dividend growth yearly over the last five years, and with the current payout ratio, that is sustainable going forward.

Another aspect of this purchase is rounding out the portfolio. Prior to the purchase, the only company the portfolio owned purely in the healthcare industry was Johnson & Johnson (JNJ). Given the size of the healthcare industry in the United States, we needed at some point to add at least one more company to help round out the portfolio. Given the current market, I believe that Amgen gives us a good chance to meet portfolio goals while also seeing solid total returns over the next few years. I will continue to look to add to the position if the price remains around $240 per share.

Jacob’s First Purchase

Last month Jacob started a job at Home Depot, along with placing 5% of his paycheck into the company 401K plan he has decided that he will start monthly investments into his investment account. This month Jacob added the first position to that account with a purchase of The Boeing Company (BA) at a price of $188.68 on March 25th. Being that Boeing at this time does not pay a dividend and is unlikely to until at least 2023, the real test for how this initial investment goes will be how earnings shake out for the company over the next two years. On a P/E basis Boeing looks overvalued at its current price if it meets median expectations with a ratio just over 53. Next year’s projections show enough growth in earnings to knock the future P/E ratio down to 26, still higher than I would like it to be, however, if they have any kind of upside surprise Jacob could be looking back at this purchase as one he’s happy to be starting out with.

I let Jacob make the decision to purchase this on his own, although we have had many conversations over the years about valuation and dividend reinvestment, he wanted his first couple choices to be companies he knows about. While he’s interested in early dividend reinvestment he thinks that this is the best place to start from. I wasn’t going to try to change his mind as I believe the best way to keep all three of my older children interested at all in their investment portfolio is to make sure they have a voice in how those funds are invested. The other thing he reminded me of is that he’s going to have a lot of time to add to this portfolio and these positions and knows that not every choice he makes is going to play out the way he thinks they will.

I know that he’s also interested in adding McDonald’s (MCD) to his portfolio and wishes to add shares of Alphabet (GOOG) and Amazon (AMZN) post-split when his monthly contribution will allow for him to pick up shares. So he’s likely to have companies that initially do not pay him dividends but in the future could become solid income providers. My stewardship job with him will be to make sure that while he has a focus now on the companies that he’s interested in adding, that I advocate him towards a well-balanced portfolio that provides both growth opportunities but also adds some dividend income to the portfolio so reinvestment can start to occur.

Where We Go Next

March was a busy month for our Family Investments, I do not think the same will occur in April. April is my busiest month of the year at work and if the first week is any indication will be my wife’s busiest month since starting her law firm. Unless the kids decide to make a purchase or Mastercard (MA) drops back to trading in the $320’s I think it’s likely we take the month off from additions to the portfolio. From our family to yours, happy investing!