Impulse Buy

09 Nov 2013 22:38

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Last week I did something out of character. Normally I track a potential stock on a watch list, tear apart its annual report, and monitor its performance over time before I make a buy decision. Instead I made an impulse buy and bought a small position (20 shares) in Ensco PLC (ESV). This purchase completes my diversification with energy and has increased my annual dividend by $60.

ESV is a contract drilling company based in the U.K. that specializes in offshore drilling contracts. Their financials are strong but historical consecutive dividend increases were weak with only 3 consecutive years. After the market close on 11/5, ESV announced a 50% dividend increase increasing their annual dividend yield to just over 5%.

Originally I had been tracking and targeting Helmerich & Payne (HP) as my last energy investment but its stock price shot up from $66 to $78. Out of fear that ESV could do the same I placed a buy order on the next market open.

After having time to tear apart the annual report I now feel confident about my purchase. Yet, I was surprised at how quickly I assessed the stock and made an impulse decision and this was a bit troublesome. On the positive side it was limited to a small investment but would I do it again in the future? I honestly do not know. Assuming I may, I will need to adjust my appetite in relation to risk for these types of purchases so I am adjusting my rules that any impulse buy must be limited to small purchases of $1,000 or less.

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