3 Mar, 2021

Why I don’t invest with a concentration on stock price

I don’t understand why a company’s stock prices moves up or down. I’ve never understood it. I watched Microsoft’s stock hover at $26.00 for a decade until Steve Ballmer stepped aside. It didn’t make sense to me because Microsoft at the time was way larger than Apple and they were making money hand over fist. But their stock price languished.

This takes me to Target. I own Target stock but not for the price appreciation. Even though I’ve done well in that regard. My unrealized gain on Target is 69.9%. It’s been fantastic. But that’s not why I hold the stock. My dividend yield on Target is 1.57% and their dividend growth is 3%. While 1.57% doesn’t seem like a great deal I hold Target because they are a stable company with a market cap of almost $100 billion. They should not be going anywhere soon.

Target released their sales numbers the other day and they were stellar. All their numbers were up… way up.

Target said Tuesday that holiday sales rose solidly, capping off a year when the Minneapolis-based retailer increased revenue by more than it had in the previous 11 years combined.

Comparable sales, those from stores and digital channels operating for at least 12 months, rose nearly 21% in the fiscal quarter ended Jan. 30, boosted by strong demand for online services, including same-day order pickup and delivery. For the full fiscal year, revenue hit $93.6 billion, a 20% increase.

Wall Street Journal

Their earnings were incredible.

In the most recent quarter net earnings hit $1.38 billion, up 66% from the year-earlier period. Earnings per share were $2.67, compared with $1.69 a year earlier.

Wall Street Journal

What happened? Their stock price dropped 6.8%. Why?

Yes, the numbers are all pandemic related so it should not be expected to continue along this path. But, in my opinion, a company that is able to maintain its business and capitalize on the problem is a company that is smart and should be pegged for higher growth once the country re-opens. At least that’s what makes sense to me.

This is why I invest for dividend income. The strategy for me is less tied to stock price. Do I want the stock to go down? Of course not. But I also don’t really care if it goes up. The reason I put my money with a company is so they pay me for ownership. If the stock price goes down but they are able to continue to pay me dividends then I generally hold.

About : Kevin Bae

%d bloggers like this: