Patience Pays Off Quickly

But even if it hadn't, the same fundamentals would drive decisions: dividends, valuation, balance sheet strength, and diversification.

Feb 16, 2014 at 8:03PM

This year started off ugly for the market, with the S&P 500 falling around 3.6% in January. For the real-money Inflation-Protected Income Growth portfolio, it was a sign of just how important patience is in investing successfully. Indeed, last week's update focused on how dividends make it easier to have the patience to hold on during troubled times.

Somewhat surprisingly, that patience was amazingly quickly rewarded. The market rallied, carrying the IPIG portfolio with it. As this chart shows, the portfolio has since recovered everything it lost in the January swoon, and is now retesting its recent high-water mark:

G

Chart from the IPIG portfolio brokerage account, as of Feb. 14, 2014.

How did that happen?
In the past week, the IPIG portfolio gained more than $1,000 in market value, a significant rise in such a short time for a portfolio that's worth around $39,000. As is often the case, a big chunk of that gain was due to the market's own 2.3% rise on the week. Still, good old-fashioned fundamentals, activist investors, and industry-level successes played their parts in helping the portfolio gain.

Mine Safety Appliances (NYSE:MSA) was the IPIG portfolio's biggest winner on the week, gaining about 10% thanks to a surprisingly strong earnings announcement. As its name states, Mine Safety Appliances is in the business of providing safety equipment, primarily to the mining industry. That makes it a very economically sensitive stock and one where the positive news truly took the market by surprise.

Air Products & Chemicals (NYSE:APD) took second on a percentage gain basis, up around 7.5% on news that activist investor Bill Ackman set a $200 price target for the company over the next three years. Ackman's claim is that Air Products & Chemicals can improve its operating margin has some merit. Still, the company has to remember to balance the needs of margin with the need to keep making long-term investments to grow the business.

Walgreen (NASDAQ:WBA) rounded out the top three percentage gainers, on a combination of its own bullish views at a London investor conference and a strong earnings report from archrival CVS Caremark (NYSE:CVS). CVS's strength may bode well for Walgreen, as the two drugstore titans generally face similar economic conditions and risks. Still, while bullish sentiment from management may project good earnings from Walgreen, it needs to be backed up with actual results in upcoming announcements.

In spite of the overall strength in the portfolio, not every pick rose on the week. J.M. Smucker (NYSE:SJM) put in the worst performance, falling around 1.7%. Weak earnings results and a softening forecast drove Smucker's decline, which knocked its shares down to around 5% above the IPIG portfolio's purchase price from December 2012. While Smucker's namesake jams and jellies remain staples in people's homes, it's becoming clear that its growth story isn't what it once looked like.

Still -- you had to be there to get it
The IPIG portfolio's quick recovery from its January drop certainly was a pleasant surprise. Still, had it taken longer to recover, the IPIG portfolio would still lean on its key investing criteria of dividends, valuation, balance-sheet strength, and diversification to see it through. Those key fundamentals underpin the overall portfolio and will, through good times and bad. Put it all together, and as of Friday, Feb. 14, 2014, the portfolio looked like this:

Company Name

Purchase Date

Total Investment (Including Commissions)

Current Value
Feb. 14, 2014

Current Yield
Feb. 14, 2014

United Technologies

12/10/2012

$1,464.82

$2,049.66

2.07%

Teva Pharmaceutical

12/12/2012

$1,519.40

$1,679.22

2.95%

J.M. Smucker

12/13/2012

$1,483.45

$1,560.77

2.53%

Genuine Parts

12/21/2012

$1,476.47

$1,976.85

2.50%

Mine Safety Appliances

12/21/2012

$1,504.96

$1,905.12

2.27%

Microsoft

12/26/2012

$1,499.15

$2,069.10

2.98%

Hasbro

12/28/2012

$1,520.60

$2,271.26

3.26%

UPS

1/2/2013

$1,524.00

$1,944.80

2.55%

Walgreen

1/4/2013

$1,501.80

$2,591.20

1.95%

Texas Instruments

1/7/2013

$1,515.70

$2,061.42

2.74%

Union Pacific

1/22/2013

$805.42

$1,080.84

2.02%

CSX

1/22/2013

$712.50

$936.02

2.18%

McDonald's

1/24/2013

$1,499.64

$1,532.48

3.38%

Becton, Dickinson

1/31/2013

$1,518.64

$2,059.20

1.91%

Aflac

2/5/2013

$1,466.35

$1,704.51

2.34%

Air Products & Chemicals

2/11/2013

$1,510.99

$1,995.46

2.42%

Raytheon

2/22/2013

$1,473.91

$2,590.11

2.29%

Emerson Electric

4/3/2013

$1,548.12

$1,806.28

2.67%

Wells Fargo

5/30/2013

$1,525.48

$1,706.81

2.60%

Kinder Morgan

6/21/2013

$1,518.37

$1,418.76

4.85%

Scotts Miracle-Gro

1/3/2014

$1,974.68

$1,846.08

3.03%

Cash

   

$807.94

 

Total Portfolio

   

$39,593.89

 

Data from the IPIG portfolio brokerage account, as of Feb. 14, 2014.

Why dividends rule
A key reason dividends are so important to the IPIG portfolio is also one of the dirty secrets that few finance professionals will openly admit: Dividend stocks as a group handily outperform their non-dividend-paying brethren. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best.

With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

To follow the IPIG portfolio as buy and sell decisions are made, watch Chuck's article feed by clicking here. To join The Motley Fool's free discussion board dedicated to the IPIG portfolio, simply click here.

Chuck Saletta owns shares of Aflac; Air Products & Chemicals; Becton, Dickinson; CSX; Emerson Electric; Genuine Parts; Hasbro; J.M. Smucker; Kinder Morgan; McDonald's; Microsoft; Mine Safety Appliances; Scotts Miracle-Gro; Raytheon; Teva Pharmaceutical Industries; Texas Instruments; Union Pacific; UPS; United Technologies; Walgreen; and Wells Fargo.

The Motley Fool recommends Aflac; Becton, Dickinson; Emerson Electric; Hasbro; Kinder Morgan; McDonald's; Mine Safety Appliances; Teva Pharmaceutical Industries; UPS; and Wells Fargo and owns shares of CSX, Hasbro, Kinder Morgan, McDonald's, Microsoft, Raytheon Company, and Wells Fargo.

Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers