I Just Bought Apple (AAPL) and 4 Other Stocks For My Grand-Twins College Fund

When discussing investing these days, it’s almost impossible to ignore all the buzz about an online forum on Reddit called “Wall Street Bets.”

From the financial media to stand-up comedians and from politicians to teenagers, it seems everybody is talking about the WSB “retail bros” — and their attempt to bring hedge-fund billionaires to their knees by bidding up prices of GameStop (GME) and other oft-shorted stocks.

Decades from now, will this “short squeeze” have been merely a historical blip, or will the Winter of 2021 be remembered forever as the time average Joes outfoxed business tycoons?

Will my grand-twins Jack and Logan have gone from enjoying Dr. Seuss’ “Hand, Hand, Fingers,Thumb” as 18-month-olds to reading “Wall Street Sure Looked Dumb” as adults?

I am not going to get too deep into the weeds here about the WSB action; if you’re really interested in the nuts and bolts of it, you either already have read a ton about it or you can check out one of the bazillion articles available (such as this one HERE).

Suffice it to say that, as an investor who tries to ignore the noise, I have not really let this cacophony affect me much.

That goes for my personal portfolio, as well as the Grand-Twins College Fund that I am building for Logan and Jack.

I tip my hat to traders who can make a quick buck, but that’s not my style. I’m a long-term investor who isn’t very concerned with the market’s day-to-day zaniness.

That’s doubly so with an endeavor like the GTCF, a “growth and income” portfolio with eyes gazing far into the future.

So it should be little surprise that my January buys were of companies that were of no interest to the Reddit gang, as I added to the following GTCF positions:

Apple (AAPL), Constellation Brands (STZ), Mastercard (MA), McDonald’s (MCD), Pepsi (PEP).

As I said, I tried not to let the short squeeze stuff affect me … but, in a way, it did.

Schwab, the brokerage I use for the Grand-Twins College Fund, executed a second — and unauthorized — buy of Constellation.

When I called to tell them, they apologized profusely and reversed the transaction (as shown in the red-circled area of the graphic above).

My daughter Katie, son-in-law Ben and my other grandson, 3-month-old Owen, were visiting from Seattle … and they had to hear me whining about being on hold with Schwab. I would have much rather been spending more time with Little O!

I highly recommend that all investors carefully check your accounts to make sure you aren’t being victimized by unauthorized trades as this tumultuous short-squeeze drama continues to unfold.

OK, now that I’m done with my public service announcement, let’s see how the GTCF has been doing.

The portfolio owns 16 stocks and one ETF. Of those 17 holdings, a dozen had no buys or sells in January, and therefore can be part of an apples-to-apples comparison:

After slightly underperforming the market in December, the aggregate of these GTCF positions slightly outperformed in January — registering a small gain while the S&P 500 had a small loss.

DraftKings (DKNG) continued its pattern of following a weak month with a strong one.

More and more states are turning to legalized gambling as a way to boost their coffers, and DraftKings has positioned itself as the industry leader.

Using Schwab Stock Slices, I have been increasing investments in other GTCF companies in $25 increments. Because DraftKings is not part of the S&P 500, however, it is ineligible for Slices, so I would need to buy a full share (which was about $54 at the end of January).

As a result, it is the only GTCF component in which I have invested less than $100 (see Position Cost column in table below). I hope the volatile nature of DKNG gives me an opportunity to add a share at a more attractive price in February.

The above table is updated regularly, and can be seen on the GTCF home page HERE.

There was one reason that I chose to buy Apple, Constellation Brands, Mastercard, McDonald’s and Pepsi in January: Other than DraftKings, they were the only positions in which I had invested less than $125-ish.

Apple: Pricey, Yes … But Also Attractive?

AAPL, STZ and MA did have outstanding earnings presentations, and MCD’s wasn’t bad. Pepsi’s next report will be made Feb. 11.

Apple did especially well, with significant beats in earnings and revenues, and with strong gains in pretty much every segment of its business.

Although AAPL seems overvalued at 29 times forward earnings, most analysts love the company. Of the 39 surveyed post-earnings by Reuters, 28 rated the stock either Buy or Outperform.

Reuters, via schwab.com

Argus analyst Jim Kelleher stated several factors in raising his AAPL target to $165, about 25% higher than its price at the end of January:

• Record quarter as iPhone 12 takes off; reiterating BUY
• Apple delivered fiscal 1Q21 revenue and EPS that shot past consensus expectations, including a first-ever $100 billion-plus revenue quarter.
• The bang-bang launches of iPad Air, Watch series 6, the service bundles, and the new 5G iPhones show that Apple is firing on all cylinders.
• The recent 4-for-1 stock split was designed to broaden AAPL’s appeal to retail investors, and could put further wind in Apple’s sails.
• In April 2021, we anticipate new shareholder-return initiatives including an expanded repurchase authorization and a dividend hike.

Nevertheless, because investors almost always expect perfection from Apple, even great earnings reports can result in brief stock sell-offs.

For example, after a fine presentation on Oct. 29, AAPL pulled back nearly 6% to about $109.

That ended up being a good buying opportunity — AAPL has gained a market-beating 16% since then, as shown in the chart above — and this could turn out to be one, too.

Income Report

Although the Grand-Twins College Fund is growth-oriented, it will produce a useful income stream over time.

January saw two positions, Pepsi and Sempra Energy (SRE), receive dividends, which were reinvested to purchase fractions of additional shares in the companies.

Those same two companies are expected to state their next dividend raises in February. (The last several years, Pepsi has been making its informal announcement in February while not officially declaring the payout until May.)

Based on their recent histories, I’d expect at least a 5% hike from each.

Wrapping Things Up

It’s easy to get distracted by market mayhem such as the Reddit bunch’s short squeeze.

That’s doubly true when it becomes difficult to log into one’s brokerage or, even worse, when one finds some unwanted buys have taken place in one’s account.

I will keep my eyes open to make sure I’m not victimized again by the latter, but otherwise I’m going to invest the way I want to — both for my personal account and for the Grand-Twins College Fund.

It didn’t seem to bother Owen much, so why stress out about something beyond our control?

Note: I also manage another real-money project, the Income Builder Portfolio. There, we own stakes in 37 companies. My next IBP stock-selection article is scheduled to published on Saturday, Feb. 6. Check out the portfolio HERE.

— Mike Nadel

This article first appeared on Dividends & Income