It’s been a while since I’ve made an individual stock purchase as I’ve been selling some holdings over the last two months instead. But last Friday (even though it was April Fool’s Day), I finally reversed that trend and added to one of my existing positions. Click on to see why and what…
I had reason to celebrate in March, not only from the higher dividend income and tax refund that I received, but also because my brokerage my reduced stock trading fees from $7 a trade down to $2!
This is because I finally achieved the next premium tier at Vanguard. Due to the assets that I hold there, which includes my Traditional and Roth IRAs, I now qualify for the Voyager Select status where one of the perks is $2 trades. It’ll take longer to reach the next level which requires $1 million in assets (excluding individual stocks) but I’m patient and I know I’ll get there eventually.
Note: There are other (and potentially cheaper) ways to get free trades e.g. the Merrill Edge Rewards Program but I’ll take this reduction.
I prefer buying stocks with P/E values under 20 and I only hold a few companies whose P/E is below those levels right now. One of them is JPM and I decided to buy $1,200 worth to complete a position based on an arbitrary position size of $2,000. So I bought 20 shares at $59.90 which, with the $2 commission, came to exactly $1,200.
Together with my existing cost basis of $859.82, I now own 36.4125 shares for a total cost basis of $2,059.85 with a market value of $2,180.02.
My reasons for buying (in no particular order) were:
- Low P/E of 10
- Low Dividend Payout Ratio of 28%
- Good dividend yield of 2.8%
- Strong free cash-flow of $73B.
- Meets my diversification criteria (under 5% weight)
- Valuation looks reasonable based on historical values
- Adding to existing position
- I’m a customer and have had good experiences with them
JPM, along with most banks, should benefit from rising interest rates over the long-term, so the current price was a good opportunity to settle in for the interest rate ride that’s expected to start later this year.
I’ll be making more fund purchases for the remainder of this month so my overall asset allocation at the end of April will still show a decrease in individual stocks despite this purchase.
Quote of the Day
Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.