Updown Performance : +14% YTD

My Updown account is currently up about 14% for the year so far. The S&P 500 is up around 15.8% for the year.

Overall I'm down about -1.4% since I started. The S&P is down -21.4% since I started in Updown.

I sold off some CBL and SHO and bought some MSW and UMH. I looked at MSW & UHM when I was researching a good REIT to buy for real in my own Roth IRA account. I passed on those two and instead bought some NRF. But I figued I'd buy them in Updown since its play money.

Stocks & ETFs on my Watch List

Warning: I'm not a financial professional. The below article should not be taken as investment advice. I'm simply discussing my own personal investment methodology.

Here are a number of individual stocks and funds that I'm looking at potentially buying for my Roth IRA:

Individual stocks:
EI DuPont de Nemours & Co. (DD)
Pfizer Inc. (PFE)
BP plc (BP)
Verizon Communications Inc. (VZ)

ETFs / trusts:
BP Prudhoe Bay Royalty Trust (BPT)
iShares iBoxx $ High Yield Corporate Bd (HYG)
Vanguard REIT Index ETF (VNQ)

Generally these fall into two main groups: Large cap stocks with relatively high dividends and diversified non-stock investments with relatively high yields.

Why are these stocks/ ETFs on my watch list?

Once in a while I'll do some research on potential investments and then throw them into my watch list. I found each of these by running a stock screen and looking for stocks with relatively high dividend yields. I also then screened for stocks with healthy financial stats like a relatively low P/E and positive earnings. The ETFs might be a little more unique and I looked for those kinds of investments specifically. So I looked for REIT ETFs and high yield bond ETFs and found the two on my list.

Lets look a little more at each of the items I'm watching...

Dupont (DD)

Dupont is a Dow component. They have a very solid dividend history, though we know thats not guarantee as we've seen with GE. Duponts earnings and profit are pretty solid. They are trading for about $32 a share right now but before the recession they were in the high $40's for several years. Currently their dividend of $0.41 / quarter is yielding about 5.0%.

Pfizer (PFE)

Pfizer is also a Dow component. Their stock traded in the $20's for years until the recession hit. Currently they are at about $17. Their dividend was cut in half in 2009 down to $0.64 a year giving them a current yield of about 3.7%. Their PE is around 14. They have a giant pile of money with about $49B in cash.

BP plc (BP)

BP aka British Petroleum is one of the major producers of oil. They have truly massive revenues of over $367B in 2008 and significant profits of over $20B. They are currently trading over $57 and their P/E is about 20. Their dividends are paying $3.36 a year or 5.8% annual yield.

Verizon (VZ)
Verizon is a major telecommunications provider in the USA. Their stock is at about $29 and they pay $1.90 a year dividends which is about 6.5% yield. Verizon had sales of $97B and profits over $6B in 2008.

BP Prudhoe Bay Royalty Trust (BPT)

This is a trust that directly owns a royalty stake in oil reserves in the Prudhoe bay oil field in Alaska's North slope. The trust basically owns oil in the ground and gets revenue when the oil is pumped and sold. At the end of 2008 they had about 55M barrels of oil in the ground. Oil is currently about $80 a barrel so thats around $4.4B in oil they own. As the oil is sold the royalties the trust gets are then paid out in dividends. So the dividend fluctuates with the price of oil. Recent quarterly dividend was $1.73 which equates to an annual yield of about 8.8%.

iShares iBoxx $ High Yield Corporate Bd (HYG)

This is an ETF that invests in bonds that have lower credit ratings (C to BBB range) and pay a higher yield. A common term for such bonds is "junk bonds". Bonds with lower credit ratings are deemed more risky due to the financial state of the company issuing the bonds. So there is more risk of default for such bonds. In order to get people to lend them money, companies with poor credit ratings have to pay higher interest. The yield bounces up and down a bit based on the bonds they hold at any given time. Latest dividends have been about $0.70 a month giving a roughly 9% annual yield rate. The expense ratio is 0.5%.

Vanguard REIT Index ETF (VNQ)

This is an ETF made up of REITs. Vanguard manages a fund of REITs. The REITs themselves are invested in real estate and pay out high dividends rates. Having a fund of REITs diversifies the investments and averages out the gains as well as reduces risk of individual REIT failure. The Vanguard fund is trading at about $40 and the yield is currently around 4-5%.

I may or may not buy some of these

When it comes time to pick some more investments for my Roth IRA I'll do some more research. At that time some of these stocks or funds may look less appealing. I'll do more stock screens and compare these choices to other similar investments. But right now these are some of the items I'm watching and they are potential purchases, nothing more.

Estimating Savings From Our Home Insulation Improvements

We got our home air sealed and added insulation back in August. My hope at the time was that it would could our home energy costs by 20-30% and give us a good return on the expense. But I really had no way to know how much it would save us until we did it. Unfortunately I couldn't find or think of any good way to accurately predict the energy savings based on proposed insulation improvements before hand.

I'll watch my electric bills for the rest of the winter and then compare them to last year to see how much the insulation has saved us.

We've had our heat on since the start of October and so we're starting into the winter heating season. I just got the electric bill that covers the month of October.

October 2009 : $113.77
October 2008 : $149.30

So it seems we might have saved about $35 in electric heat this year. If we assume that our base electric bill is $80 then our heat costs went from $69.30 last year to $33.77 this year. Thats a 52% drop! But before I get too excited about my savings we need to look at why our bill might vary from one year to the other.


Was Oct. of 2009 warmer or colder than Oct. 2008?

Its quite possible that we used less heat this past Oct. as compared to Oct. 2008 simply because it wasn't as cold this year as last year. One way to measure the relative coldness for a time period is called a degree day. The degree day is found by taking the average temperature for a day and subtracting from a fixed figure, usually 60 or 65 F. You can find the degree days for a month by adding all the daily figures. So for example if the average daily temperature is 45F every day of the month then the degree days for a given day might be 65F - 45F = 20F and the degree day total for the month would be 30 days x 20 degrees = 600 degree days.

I used WeatherUnderground to find the average daily tempatures and then calculated the degree days myself. For my area the degree days for Oct. of this year and last were:

October 2009 : 362 Degree Days
October 2008 : 374 Degree Days

Thats only about 3% difference between the two years. So I'd say that Oct. 2009 wasn't significantly warmer than Oct. 2008.


Did other electric usage differ much?

Part of our electric bill is for other things besides heat. I don't have any way to know exactly how much our other electric usage might have changed from Oct. 2008 to Oct. 2009. Its possible that we had our lights on more, watched the TV more, ran our washer/dryer more, ran the stove more, etc in 2008 than we did in 2009.

I could guesstimate the variation in non heat electric usage from month to month by looking at the usage variation in the summer months. The heat is off in the summer months so our electric bill for those months is entirely from non heating usage. From June to Sept. of 2009 our electric bill ranged from $73 up to $80. Looking back at 2008 our summer months bills varied from $70 to $81. So, at most our summer months electric bills vary up to $11. I think we can use this figure as a margin of error based on non-heat electric usage of up to +/-$11.

Did our heat usage differ from 2008 to 2009?

Its possible we didn't have the heater on as much in Oct. 2009 as we did in Oct. 2008. I had the heat furnace turned on the full month. But we might have been away from home more in 2009 or otherwise not had the heat up as much. Looking at 2008 and going from month to month I can see that the kWh used per degree day varied pretty drastically. In some months it was as low as 2.2 kWh / degreeday and in other months it was as high as 3.6 kWh/degreeday. That is a 39% difference from high to low. So worst case scenario we might see up to 39% difference between months based on heat usage. However Oct. 2008 was the minimum usage last year. So I think its pretty unlikely that we'll see Oct. 2009 be 39% lower than Oct. 2008 due to usage.

So lets add it all up and find the range of % differences that the insulation probably had...

We start with a 52% difference from Oct. 2008 to Oct. 2009

Lets add in the variation in our basic non-energy related electric usage ranging from $70 to $80:

Oct 2008
Total bill = $113.77
Non-heat usage = $70-$80
Energy usage = $33.77 to $43.77

Oct 2009
Total bill = $149.30
Non-heat usage = $70-$80
Energy usage = $69.30 to $79.30

Now we see the range is up to 37% to 58% improvement.

If we add in the fact that bills could vary as much as 40% from month to month then that would expand the widest possible range to -4% to 70% improvement.

Its pretty likely that the bills will fluctuate $5-10 from month to month based on non heat electric usage. But its not very likely that the bill from Oct. 2008 would be as much as 40% different than the bill in Oct. 2009 due to heat usage differences. We keep the heat at set values with a programmable thermostat and our activity really hasn't changed much. I would think up to a 20% difference in heat usage might be more feasible.

If we assume a $5-$10 monthly fluctuation in electric use and as much as 20% difference in heat usage levels month to month then our Oct. 2009 bill is 26% to 67% reduction from our Oct. 2008 bill.

That seems fairly realistic to me. If this is true then we've got at least a 26% reduction in our home heating costs due to the insulation.

This is just one months data so I'll have to watch it going forward and see what our bills are like for the rest of the winter. Hopefully we'll continue to see similar cheaper bills for the rest of the winter.

Net Worth Update : October 2009 = Down $11,632

I track my net worth monthly on NetworthIQ.

In September 2009 our Net Worth is $627,342 which is down $11,632 from September.

This is the first time in 10 months that our net worth has dropped.

Much of the drop was due to spending for repairs and maintenance on a vacant rental property as well as the lost rent in the mean time. I haven't added up the exact cost but its around $4,000 or $5,000 in spending as well as $1,000 in lost rent. Otherwise my retirement accounts were down about $2,000 and our real estate values dropped about $2,000 too.