What a volatile market!
So much excitement in this volatile stock market last couple of weeks. When people thought bottom was close, the market drops even further then it turned around went up by 5% for last 2 days then head back in red. I love it. So many investors are crying on a daily basis and trying to figure out whether they will ever recover their initial investment. Some probably are thinking of selling all the stocks that are in red swearing they will never get back to investing ever again.
Meanwhile, here I am thinking whether I need to reserve cash or not for a next little while. As you probably know by now if you have been following my blog, I don’t have patience in saving and reserving cash. I hate seeing Mr. Cashman sitting in the corner of the home smoking cigarettes and stealing my beers while doing nothing. Whenever I see him, Mr. Cashman would say things like
“Hey what’s up, I will just sit here and look pretty. And just to let you know you are low on Coronas”
That being said, I am not honestly too happy about getting into the market a bit early in this downturn market. I thought stocks that I purchased were hitting near the bottom but it turns out there is always more to go. Most of the stocks that I purchased are high quality companies that produce fairy strong cash flows during its industry downturns. They are the dogs of the market so I am not too worried about the temporary capital depreciation however I could have bought the stocks a bit cheaper if I waited longer.
So after these purchases, I will try to reserve cash for a while. My rationale?? If the market heads down a bit further, then I will have more cash to invest and take advantage on even more attractively discounted stocks. If the market heads up then I will just be happy with the capital recovery and growth and rebalance my portfolio at some point. Of course, I will keep trying to find undervalued stocks. Until then, I will have to suck up with Mr. Cashman sitting in the overstuffed couch drinking my beers. But Mr. Cashman should know one thing, I am always ready to dispose him in exchange for stocks of good quality companies.
But before working on the cash reserving goal seriously, I added the following two stocks to my portfolio. Welcome home my employees without pay and benefits!
Dream office REIT (D.UN)
Dream Office Real Estate Investment Trust (the Trust), formerly Dundee Real Estate Investment Trust, is a Canada-based open-ended investment trust. The Trust operates in segments: Western Canada, Calgary downtown, Calgary suburban, Toronto downtown, Toronto suburban and Eastern Canada. It is engaged in building and maintaining a diversified portfolio of office properties in Canada, based on an established platform, and providing cash distributions to unitholders and managing distributions over time. The Trust’s portfolio comprises central business district and suburban office properties, located in urban centers across Canada, including Toronto, Calgary, Edmonton, Montreal, Ottawa and Vancouver. Its ownership interests includes 177 office properties (207 buildings) totaling approximately 24.3 million square feet of Gross leasable area (GLA). The Trust is managed by Dream Asset Management Corp. (DAM) (Reuters).
Dream office REIT had been in our watch list for a really long time (about 2 years) and luckily the stock has dropped by 50% of its value over last 2 years, 45% of its value over last year and 35% over last 6 months period. What a great deal. I liked the company when it was being traded at $27-$30 then I like it even more when it is now being traded around $15-17. Think about it. Its book value is $35. The main assets of the company are office buildings across Canada. The current price of the stock basically means if I buy the stocks at this price, I will get Greater Toronto 9.6 million SQ office properties for free. How does it sound to you?
Its fundamentals are fairly reasonable. I don’t really love it but with the decent price discount, I see it as a good opportunity to keep until this cycle passes. It has never suspended its dividend during 2008-2009 crisis, I think the management will handle this downturn pretty well and maintain the dividend. That means, I am locking it at 14% of annual dividend. Sweet tomatoes!
It has good and constant operating cash flow. After necessary capital expenditure, its free cash flow is just little short during last 2 years to cover the cash dividend. That’s the risk that I am willing to take considering its 14-15% current yield and amazing discounts that I got from buying the stocks.
Recent insider activities aren’t too bad as the company has been buying back its stocks at dirt cheap price of $15-18 last month worth $400-500K every day. Why they would buy back its own shares? because it is very attractively priced.
Analyst recommendations are pretty even. 2 buys, 4 holds and 1 reduce.
Price target is from $17 to 27. That’s 43% of upside potential.
Look at all this crazy ratio right now. Dream office’s stock used to be traded at 5.5 times of 5-year average. It is now traded at 2.2 times of its annual revenue. What a bargain for me.
Its forward PE is also dirt cheap at 5.9 times compared to 5-year average of 11.5 times.
I purchased 349 shares at $16.98. Total $5,936. The purchase will add $781 to my annual dividend.
Orvana Minerals Corp (ORV)
Orvana Minerals Corp. is a Canda-based multi-mine gold-copper producer. The Company operations consist of the El Valle-Boinas/Carles gold-copper mines and the copper-gold-silver Don Mario Mine. El Valle-Boinas Mine and Carles Mine are two underground gold-copper-silver mines located in the northern part of Spain and Upper Mineralized Zone at the Don Mario Mine is an open-pit gold-copper-silver mine located in the south-eastern part of Bolivia (Reuters)
My first gold stock pick of my life and it does not pay dividend. On top of that it is a penny stock. Of course it is….
Yes go ahead. Give it to me. I can hear you booing 🙂
I gotta spice up a little bit. Let me go through the company briefly and explain why I bought it.
As you know, I am not a big fan of gold stocks. As Warren Buffett famously said,
“It doesn’t do anything but sit there and look at you”
He sees very little to no value in gold as he perceives that gold has no usefulness and that’s how I see it as well. However due to gold’s prolonged downturn for last several years which hurt various gold mining companies as well as their stocks and current general economic downturn, I purchased a gold stock as a safe haven. The further economy headed down, the better gold mining stocks will do. Well… it won’t be as simple as what I just said but it will certainly better position itself compared to other stocks during economic downturn.
I think Orvana is a very interesting value pick. It has been traded around for about 2 decades. It once was traded at around $10 then it dropped to penny stocks level then it jumped back up in 2011 reaching $4 then it dropped again and currently being traded at around a dime. What a ride that I never want to imagine however, I would certainly enjoy the ride up if the direction of the wind changes.
I still see this as a very risky bet so if you are going to follow my suit then please use your own discretion.
The fundamentals of Orvana is pretty decent so far based on the numbers. It always had a positive cash flow from operating activities regardless of its net income. Its capital expenditures have been always reasonable and lower than cash from operating activities. As you can see its free cash flow has been positive for last 4 years. Awesome.
One thing that I will have to admit is that, I don’t understand very well and how to analyze mining companies future perspectives effectively but at least I see positive cash flows and prudently having no debt during the downturn as positive moves by the company’s management. It recently completed its audit and its auditor PwC sees the company is still worth $1.16 in the book. Well… I paid it for $0.11 per stock so at least that’s comforting. 🙂
I purchased 23,000 stocks at $0.11. As I said there will be no dividend from this purchase.
The management is really committed in reducing its long term debt.
Beautiful cash flows over the years.
Both purchases, well… Dream office purchase will add approximately $781 to my annual dividend income. That’s at least $65 passive monthly income that will be given to me year after year. Highly likely $65 will get bigger as time goes by. What a life! We will keep buying when opportunities are out there in the market. I see many opportunities lately due to the crash of the oil price which is just perfect for me. As you may know, it did not take too long to build this portfolio. When I started this blog (a year ago), our net worth was around 80K (excluding my car) and that only provided us less than $2,000 of annualized dividend income. However, now it provides predictable $7,500 of annualized dividend income per year and that number will always go up. Amazing huh?
As I mentioned several times, building your dividend portfolio isn’t very difficult. See the following links for excellent ways to save money and invest.
- 30 most important tips to be a millionaire no matter how much you make.
- Renting vs Buying
- 16 most important tips to save on car insurance by 40-60%
- Norbert’s Gambit- Save thousands of dollar from foreign exchange conversion fees
- What’s in my wallet
- Needs vs Wants
- 20 smart moving tips that will save you time and money
- How to save $1,000 annually from your TV cable bill
- 7 extremely easy tips to save 20-50% on flight tickets
Check out my portfolio page to see what stocks I own and the following article for more investment tips-How to Simply Invest and Get Richer for Dummies in 8 Easy Steps.
If you are also a dividend investor like me, then you should check out the following page to see how other dividend investors are doing. You won’t regret a moment of reading their valuable and inspirational articles. The Blogroll
Hope my recent buy updates inspire anyone who is dreaming of becoming financially independent. I am not there yet but I am happy to share where I am and where I will be headed along the journey to be a millionaire thus financially more independent. Don’t dream on winning lottery or a jackpot from your local casino. That’s not going to happen to you.
Dream on something that is so real that you can catch it after executing easy passive income strategies. It is not going to take very long to see the results and I am sure you can do it as well. All you need is a strong commitment for your future. Start your first step right now and come along for the million-dollar journey. Hang in there because your loved ones got your back (and I do as well)