"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful."
"The stock market is a no-called-strike game. You don't have to swing at everything - you can wait for your pitch."
- Quotes by Warren Buffett.
What do these quotes mean, and why am I starting an article off with them? Well, I don't have a lot of real compelling stock ideas right now. I certainly have my eye on a number of high quality companies that I'd either love to own a part of, or increase my ownership stake in. But I feel that investors are being a bit greedy right now, so I'm consciously choosing to be a bit fearful. While I abstain from timing the market or valuing the entire market, I continue to believe in thoughtfully valuing individual companies through qualitative and quantitative analysis and only purchasing shares when they are trading for prices comfortably below their intrinsic value which confers a margin of safety. And right now I'm finding margins of safety on high quality companies to be few and far between.
As many of you know, I'm extremely bullish on equities over the long-term and I've invested monthly excess savings from my day job into dividend growth stocks every single month for three years save for a short period of time last summer when I took a break from blogging and investing. However, this may be one of those rare times I don't purchase stocks during the course of a month.
What I've found is that dividend growth investing is wonderful for times like this, when the stock market is valued at all-time highs and us value-oriented investors are left scratching our heads for attractive opportunities in which to put new capital to work. Dividend growth investing can actually be wonderful for inactivity.
The joy of doing nothing can be powerful indeed because the wonderful companies that I'm already invested in - companies like Johnson & Johnson (JNJ), The Coca-Cola Company (KO) and Philip Morris International Inc. (PM) - these companies are still sending me dividend payments just the same as they have for decades before. The great thing is that these dividends continue to stockpile in my brokerage account. It's like a wealth snowball being built right in front of me, except I'm not doing any of the work. I'm not rolling any snow or trying to source a carrot nose. The companies are actually increasing my liquidity so that I can take advantage of Mr. Market's eventual mood change. At that time I'll be very ready to be greedy when others are fearful.
I still have a couple days to purchase shares in a high quality company before the month ends, but if I don't I'm comforted by the knowledge that I don't have to swing at every pitch. Maybe the pitch that Mr. Market is throwing at me right now is a wide-left ball. Maybe in two weeks I'll have a fastball right down the middle that allows me to get on base. Who knows. What I do know is that I'm slightly empowered right now by inactivity, and I'm realizing the joy in actually doing nothing.
As I've said many times on this blog, a dividend growth stock portfolio that's providing solid passive income doesn't build itself, and so for over three years I've been wiring money from my checking account to my brokerage account like a giddy schoolgirl, anticipating buying stocks as soon as the wire transaction cleared. And that strategy has worked very well, allowing me to build a six-figure portfolio during that three year period.
But right now I do wonder if being fearful while others are greedy isn't a prudent move to make. As always, I believe cash to be a horrible asset that will only guarantee losses to inflation over time. However, liquidity via excess capital can be a powerful tool indeed if Mr. Market's historically bi-polar personality profile takes a sudden turn from manic to depressive.
In conclusion, I am currently finding some solace in doing nothing. I am not seeing many high quality companies that are trading at prices with any significant degree of a margin of safety to their intrinsic value, and so due to such I take great pleasure in continuing to receive my dividends from the wonderful companies I'm invested in. I know that these companies are building me a nice little balance sheet with growing cash. I may not have an elephant gun when the time is right like ol' Warren, but I'll be happy to go hunting with the pea shooter that my investments are providing me. Free bullets, anyone?
How about you? Find the joy in doing nothing, while collecting your dividends?
Thanks for reading.
- High Yield Dividend Stocks in Gurus' Portfolio
- Top dividend stocks of Warren Buffett
- Top dividend stocks of George Soros