Wednesday, August 3, 2016
Recent Buy Macy's, Impulse Control, and Lessons Learned
So I realize that I'm being too impulsive with my buys. Today was just the worst example. I know enough not to react too much to the market short term and start selling. I can't say the same for buying. Macy's wasn't even on my radar. I was actually starting to screen utilities for more diversification and looking at which current positions, I might like to add to. Next thing I now I bought two shares. This was a wakeup call. From now on things will be different.
This started yesterday. I saw Macy's, Nordstrom and other consumer stocks took quite a dip. I remember being a little shocked that Macy's would fall so quickly. When I think of Macy's I think of the parade. They are so diversified, selling anything from shirts and suits, everyday clothing, perfume, makeup, jewelry, kitchen wear, bedding etc. That their price points attract large segments of the population and that they are excellent at e-commerce as well for those, that prefer to shop at home. But aside from that, they sell items that people buy in person. So when the stock dropped 7 percent yesterday I had to take a closer look. What I saw was a great P/E Ratio of around 10. A stock that had been trading at $70.12 in the last year valued in the low 30s. How much lower could it really go. The dividend yield was over 4. I get the falling price makes the yield seem high. However, Macy's has 6 consecutive years of significant dividend increases.
When I was looking at the literature surrounding Macy's falling price, most what I was reading was mixed. That Macy's is losing market share to e-commerce companies like Amazon and that it might be a shift in how business could be done. Even so suits aren't going to be ordered solely online. People like to try on clothing. Surely Macy's has enough of brand and is large enough that it has the potential to reinvent itself. Maybe I'm naive, but I just don't see department stores disappearing overnight.
I decided to wait and see what happened when the markets opened this morning. I saw Macy's stock go down almost another four percent almost immediately. So on impulse I bought 2 shares for what I believed to be a great price of 31.40 per share. It seems others had the same idea I did. The stock ended the day at 33.43.
I honestly see two major problems with my buy. First I didn't even look for new information. I saw the price drop and I swooped in because I saw a good valuation and a decent recent dividend history. The second problem was I wasn't even planning on buying anything. In hindsight I don't believe I made a terrible buy. But I don't think it was the steal I was thinking in the moment either. I really think it could go either way. The valuation does mitigate some of the risk. But overall I believe my decision making was both reckless and sloppy.
What I realize now is that I need to better formalize my criteria for screening and buying dividend stocks. That I also need to be more disciplined and measured about my buys. Investing with real money isn't a video game, and reacting the way I did today could in the end lose me money in the long run. This is part of the reason that I am grateful for the Robinhood App. I'm able to go through this learning curve at reasonably low stakes.
Disclaimer: This post is for entertainment purposes only. I'm not a financial advisor. I do not even play one on tv. Please do your own research before entering into any investment.
I've done the rounds of reading financial blogs as well as books and expert articles. From everything I read achieving FIRE is not some ...
It's hard to believe I've been at this for less than a year. I'm excited to report that March was a record month for me. My ent...
Happy Halloween everyone. I consider it a holiday every month when I get to count up this money I didn't have to work for. October is ty...
Another double digit dividend month thanks largely to owning shares of T. $10.98 in total dividends and below is the breakdown. Last year t...