In my inbox I found a message inspired (?) by my last post. In a nutshell, it was a request for further insight into my October purchases. I have to admit that, on the surface, the appearance is that I was throwing stuff against the wall to see what would stick. I would like to think I’m slightly more calculating. To set the scenario, I had an oversized cash position due to a merger, the markets had started their pre-election downward drift and the FBI just breathed new life into Candidate Trump’s aspirations.
- Reducing My Options
- In late October, I participated in a round table discussion in Kansas City with the primary topic being healthcare and associated REITs. My takeaway was that with the election uncertainty and various possible consequences (some unintended) the better part of valor was to ignore this segment until 2017. This was reinforced in part by Bert’s analysis of his O purchase. Note: In violation of this thesis, a small investment in HUM (HRA exposure), DGX (Zika testing), and IRM (after earnings release) were made. IRM has a contract with my primary care provider for records storage.
- Increase January Payers
- Seeing my January dividends facing a Y/Y drop due to the merger was a primary factor in increasing my DIS, PEP, TD, TRP, KMB, HWBK and NJR stakes. Additionally I added eleven new January positions. Note: The jury is out on whether these moves – and dividend increases – will accomplish the objective but it should be close.
- Initiate Positions in non-traditional REITs
- Last May, DivHut published Dividend Investing In A ‘Mad Men’ World which spurred my thought processes. In his post he broached the topic of billboard REITs. (OUT, LAMR). Around the same time Cramer chatted up Cell Tower REITs (AMT, CSAL, CCI). So I thought it would be cool if the space were combined and slid both categories onto my watch list for further investigation. Fast forward a few months and it turns out Crown Castle (for one) has embraced Small Cell Solutions on their billboards. Note: I included QCOM in the mix as their technology is a good part of this trend. What was unexpected was the severity of the post-election drop in this space – primarily on interest rate fears.
- Hedge Against a Strong US Dollar
- As a believer in Newton’s third law of motion stating; “what goes up must come down“, I think it’s also applicable to currency valuations as well. The KOF and CCE purchases in addition to the additions of UL, TRP and TD are applicable to this theme. Note: I probably bought KOF a little early as the Mexican Peso continued its’ drop post election. Goldman Sach’s investing themes for 2017 (released 18 Nov) are eerily similar to my views.
- Coca-Cola Bottlers
- I’ll add a future post with my bottler theory for 2017, but opened an initial position in three companies (COKE, CCE and KOF). I also included BLL in this category.
- I filled in with a few other REITs (VER being the biggest question mark), Community Banks, A possible privatization play (VALU), and a baseball team (BATRA). The Braves are the final (known) component to my content theory . I included ABM as they have contracts in place for various aspects of facility management and pay a small dividend. Others in the management space include CMCSA (owned), ARMK, SDXAY (France) and CMPGY (UK).
The takeaway is that my biggest winners post election are the community banks – a group with no funds to repatriate, no FX concerns, a slight positive with a lower tax rate and potentially looser regulations. Increased lending demand and higher interest rate expectations are the growth drivers.
Is the rally overdone? Perhaps. But I prefer my money riding this wave rather than having a new position in CAT which has a slew of headwinds starting with a glut – and under-utilization of – equipment and a strong domestic currency inhibiting exports.
This basically was my line of thinking. The wild swings were tempered by the diversity of the portfolio – meaning my 11% loss in FX and 5.7% loss in REITs were more than offset by the gains elsewhere. And the bonus is dividend increases continue to be announced!