DGI Adventure – 09-29-2015 Limit Order Executed – Eaton Vance Corporation (EV) – $33.25/share

LOE – Limit Order
Executed

Well it came a little earlier than I expected, but the limit
order I set last week triggered at the end of trading yesterday. Yesterday was
a pretty crazy day in the market. The S&P Index dropped over 2.5%. There
are all kinds of explanations for what was driving the selling. China. Fed rate
hike. Fed rate no-hike. Overdue Correction. Death Bear Vampire Cross. Maybe a
vampire panda bear broke into the Federal Reserve and started eating people. I’m
going to go with that:

Markets were skittish today as a 400 pound metaphor mauled
central bankers in search of yield cookies, which they forgot to lock in the
bear proof box.

Whatever the reason it made me pretty happy. Those are the
kind of days I like to buy. I’m not so sure this is the bottom for the market
in general or for EV. EV got my attention after the initial carnage in August
when the yield skyrocketed 50 basis points in the matter of a few days. I feel
pretty good about my margin of safety and the $33-ish share price, and I only
have about a month before it goes ex-dividend. I would be pretty upset if I set
my limit order at $30 or even $32 and it ends up holding at this $33 support
level. A 2 year chart for reference:

image

Chart courtesy of Yahoo Finance.                                

I’m not really a chartist, but I like to look at them. You
can talk all you want about fundamentals and fair value, and blah blah blah.
The fact of the matter is a stock price goes up when there are more buyers than
sellers and it goes down when there are more sellers than buyers. There may be
a lot of variables involved, but sentiment, momentum, relative strength…all
that hocus pocus is definitely connected to the share price. Predicting exactly
what will happen is impossible. But there are better times to buy than others.
This is the 4th time in the last month that it’s bounced in the $33
range and after the initial major dip on 8/24, the RSI has been setting higher
lows and the momentum is in an uptrend. The RSI is nice and low right now (37 –
38).

Now that I have the shares, I don’t really care much what
happens to the share price. Going forward I’m more focused on the dividend
growing, which I think it will. I would like to be right about the support
level though. An increasing share price increases the delta between my invested
yield and the market yield. That makes me feel smart.

All in all I think I got in at a pretty good price. This is
the lowest price you’ve been able to get EV shares for over 2 years. It has a
high current yield relative to its 5 year average and I expect the invested
yield to grow through increased dividends. No regrets.

Meanwhile if things stay in the red I’ve got a couple other
stocks with more aggressive price targets. TROW is a very similar investment
thesis to EV. If the market momentum doesn’t change, I would love to diversify
into TROW instead of average down on EV.

Plenty of dry powder left. Someone give the panda some more
yield cookies. This is fun.

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