A few weeks ago, in mid/late February, the market was at a very low point, with many quality companies selling at bargain prices. Unfortunately for me, I didn’t have any capital available to deploy at the time; I was just a week or so away from receiving an influx of cash flow to invest, but by the time that money hit my bank account, the market had undergone a strong rally not seen in a while since the oil glut shenanigans began.
It was disheartening for me to see all these companies I had been eyeing now up 10%, 15%, some even more than that. For example, I really wanted to buy TROW when it was selling at $65, but it is now going for $71-$72. VTR is another stock I was dying to grab at $49, but it now trades above $61! Granted, I still think these are discounted prices for such great companies, but I just couldn’t bring myself to pull the trigger when the prices had been so much lower just a few days beforehand. It was messing with my head too much, lol!
Thankfully, there are still a couple of solid stocks that have seemingly been left behind in this little rally. One such stock is biotech giant Amgen (AMGN), which is currently selling at absolutely bargain prices, usually in the low $140s, even dipping into the high $130s some days. Morningstar has it fairly valued at $194, which means that it is trading for something like a 25%-30% discount. And it’s not just Amgen — the entire biotech sector is hurting these days due to fears about politicians regulating drug prices in the near future, which is creating some very nice buying opportunities across the entire industry for the patient, long-term investor.
Another stock that is currently trading at bargain prices is mortgage REIT Starwood Property Trust (STWD). Starwood’s dividend has been pretty anemic since 2014, but it is a well-run company with a great CEO at the helm in Barry Sternlicht. I already have a fairly large position in STWD, one that initiated last June at $22.5/share (which I believe was already a good price), and that I then added to in September at $21.35/share.
After considering both stocks I ended up opting for STWD, since it goes ex-dividend in 2 weeks whereas Amgen isn’t due until May; might as well snag that upcoming divi! On 3/10/2016 I purchased 72 shares of Starwood Property Trust at $17.95/share, for a total investment of $1292.40.
Like I said, Starwood’s dividend has been static since 2014, which obviously isn’t great, but its fat 10% yield — a yield that has artificially inflated to extreme levels due to price deflation, might I add — easily makes up for having a bit of patience until the company starts boosting the divi again. And when the price dipped below $18, it was just too good an opportunity to pass up for me to average down on my already existing position. Starwood Property Trust is now my largest holding, and while I certainly don’t like that a large portion of my portfolio’s income is currently derived from this one stock, I’m still very early in the accumulation phase of my nest egg, giving me plenty of time to balance out my positions as I invest more and more capital.
My cost basis for STWD is now right around $20/share, which I’m very happy about. If prices remain low for a while I may even add a little bit more to my position to further average down to sub-$20 levels, at which point I would consider my position maxed out at a very good cost per share. With that being said, my next purchase will almost certainly be Amgen, as I would love to make a full position out of my currently modest one by buying at/under $140 and averaging down from my already decent cost basis of $159/share or so.
Stay tuned for moar! 😀
Disclosure: long AMGN, STWD