I remembered the first year when I started investing. I thought everything was possible. When I invested my first $3,000, it was to purchase shares of Power Corporation (POW.TO). I naively thought this was the first step toward being millionaire. I imagined watching my stock grows so fast and so high that I would become the next Warren Buffett. You know, thoughts crossing a 23 years old kid’s mind. I was fresh out of school with the corporate world in front of me.
You can guess my trade on Power Corporation didn’t make me rich. I rapidly got bored and sold the stock. It’s only a while after I realized that in order to build an impressive portfolio, I need to be patient and wait. Those stories with investors reaching triple digit returns are real. But you have to be patient and never get rid of your good picks. Have you heard of the triple digit club? Those are my holdings, showing a stock return over 100%. That’s right, they more than doubled since I hold them. I currently have three companies in that club and three more coming. But before I tell you about them, let me tell the disadvantage when you put mindless trading rules like, “I’m selling when I’m +30% because I want to cash my profit…”
The stock that should have opened the door to the four digits club!
You might have read my story already, but I started investing back in 2003 when I finished my bachelor degree in finance-marketing and got my first job as a banking advisor. The day after I received my first paystub, I ran into a branch to open a line of credit of $20,000 and an online brokerage account. I was processing investment loan (leverage) applications all day, I was not going to be left out of the party! Within the same month, I had borrowed $19,500 from the line of credit after telling my girlfriend I was going to only use $3K for my “adventure”.
As I mentioned, I got bored quickly after purchasing my shares of POW and thought I could use more “free money”. After all, I was working for that bank and my cost of borrowing was about 1%. But instead of buying dividend growth stocks, I was only about growth at that time. Therefore, I bought shares of Alimentation Couche-Tard (ATD.B.TO) and sold it with a nice profit. I used one of those stupid trading rules such as “selling when I’m up 30% to cash my profit”. Let’s have a look in the past and see what happen when you don’t keep your winners:
That’s right, 1,620% return… this is the price you pay when you sell too fast. Fortunately, I now use a set of stronger investing rules that would not permit the sale of outperforming shares. Based on those rules, I’m building a solid Triple Digits Club. I already have three members and three more should join soon.
My Triple Digits Club Member
The first stock to reach this milestone in my portfolio is Apple (AAPL). I guess this is a triple digits and even a four digits member for many investors portfolio! I bought my first shares when the stock was in a rut, a few months before the split. I didn’t believe Samsung would take over the iPhone and thought it was the perfect timing to buy a company that would increase its dividend for at least the next 10 years without blinking. Later on, I bought more shares of Apple based on the premise that the company is developing a whole new business within their product ecosystems. Not only all Apple devices communicate with each other like they were high school best friends, but AAPL is developing numerous services integrating perfectly the “Apple World”. As at December 28th, APPL shows a stock return of 173.08%.
The second triple digits member of my portfolio is Johnson & Johnson (JNJ). Then again, I bought my JNJ shares during a rare bearish moment. A Few years ago, JNJ ran into multiple quality issues generating several recalls, notably for Tylenols. I jumped on this great opportunity to buy this Dividend King. Today, I keep JNJ in my portfolio because this is the kind of business that will continue to rise forever. JNJ pharmaceutical division is developing speciality drugs that are harder to replicate. This gives them more time to reap benefits even after patents expire. As at December 28th, JNJ shows a stock return of 113.82%.
The third triple digits member of my portfolio is Lockheed Martin (LMT). I followed LMT for a while before pulling the trigger. The stock was showing on my reports back in 2012 but I waited. While I should have picked LMT several years ago, it seems it’s never too late! LMT has a dominant business in the military aircraft with its F-35 and its Sikorsky helicopter division. With treats and defence budgets rising accordingly, LMT is poised for a decade of growth. As at December 28th, LMT shows a stock return of 135.68%.
I have three others coming!
The beauty in dividend growth investing is that you keep your holdings for so long that you are building a huge triple digits club! I already have a strong pipeline coming up with Disney (DIS) at +64.12% (wait for its streaming services in 2019!), Coca-Cola (KO) at +71.06% and Telus (T.TO or TU) at +75.49%.I also have a bunch of stocks in the +40-50% that will be next in line. Please note that those returns exclude dividend (therefore, Telus is probably in my triple digits club!). I don’t spend much time tracking return stats as I rather follow great companies instead. But once in a while, it feels good to see how much your holding has grown, right?As I continue forward, I will be soon talking about the four digits club again. Hey! I even bought back Alimentation Couche-Tard this year!
For those who have been dividend growth investors for year, I’m sure you have many of them. I am curious to know which stock is part of your triple digits club.