The original Sharpe Income post can be found here.
The Sharpe Income category be be found by clicking on that red ‘Sharpe Income‘ tag next to this post title, or by clicking here.
We continue the discussion from the last entry.
International Business Machines (IBM) is biting me a bit today. But remember, this is Fixed Income. Not pure valuation investing. Although yes … I do use valuation metrics when evaluating Fixed Income instruments that are equity based.
But I digress.
IBM is biting me a bit today. And yesterday I revealed that I’ve owned American Express (AXP) for some time in my Fixed Income account, and I have been collecting the dividends so as to improve my yield-on-cost, as I think it’s a good company. And as I have stated for some time on my personal page, before the launch of this website, I also own Union Pacific (UNP) for income. In fact, I owned it before the split, and have a nice yield on cost built up here.
So why all the talk of this project lately?
Why talk about American Express (AXP) if I’m not buying it right now?
Why talk about Union Pacific (UNP) if I’m not buying it right now?
Why talk about them at all?
To emphasize a couple of points.
Point number one, is that to build a Fixed Income account that grows, and has great performance metrics can take a few months to get going. It doesn’t happen overnight. This project is about building an income account, over time, so that you can be paid a monthly income.
Point number two, is that of proper diversification.
So IBM has bit me a bit lately.
I am properly diversified, though I am not overly diversified.
I have a technology company (actually, two separate technology companies but more on that later) in IBM, a Credit Card Service company (American Express) and a railroad company (Union Pacific). I have others as well, but I don’t want to overwhelm anyone by getting into them at this point.
Suffice to say that I’m going to buy early at times. It happens. Positions will move against me. So what. That’s part of this business. I know how to position myself in such a way, that these moves against me do not hurt me as much. That is what is key. If IBM moves against me? Fine. I let the dividends build, and I put it on the back burner for a while. I have other options.
I’ll also take this opportunity to say that I have reviewed the IBM conference call, and am satisfied with my position as it stands. I’m not happy that some sales are slowing, or the currency impact of the strong U.S. Dollar is having on them. But I know to have patience, step back a bit from IBM, and focus my efforts elsewhere. At the moment, I actually have six different equity exposures in five different sectors. And, even beyond that, I have another whole strategy working in my Fixed Income account (“Wha wha what Dan? A whole other strategy?” Yeah, more about that later). IBM isn’t the end-all-be-all of my world, and it does have a few issues at the moment that may take a bit of time to work out.
In the meantime, I continue those capital contributions, let the yield build up on IBM, and continue forward.
The public Google Drive Spreadsheet that tracks the Sharpe Income account can be found here
The next “Sharpe Income” entry can be found here.
Disclosure: I do maintain long positions in UNP in my own personal Fixed Income account at a cost average of $77.01. Note that this cost basis is actually prior to the last 2 for 1 split. I hold no other positions in UNP other than that of Fixed Income. No businesses that I am associated with, to my knowledge, has any position in UNP, long or short, at this time.