Sluice Box: My 2018 Strategy

In a recent conversation with a friend of mine, the topic of cryptocurrency arose as he has started accepting Bitcoin in his business.  Though more enamored over the possibilities of wealth through hoarding and/or trading, he began to look under the hood to figure out why I had a greater fondness for Blockchain over any cryptocurrency.  His insight surprised me: “You’re like the sluice box salesman in the California Gold Rush.”

I choose to think of myself as a shortstop hitting singles rather than a home run hitter going for the fence, but his analogy was apt.  I prefer to get a slice of many transactions as opposed to getting the big one.  I play the percentages.   He was able to visualize I place a greater value on the tools (mining), transport (exchanges) and utility (ancillary applications) rather than the commodity itself.  Meaning, I’d rather sell the Levi’s than look for (and mine) the gold vein.

It appears the revisions to the tax plan being discussed will be slightly less draconian than previously announced resulting in a little lead time for portfolio adjustments.  My guess (pure speculation) is the first half of 2018 will be relatively good but a little choppy.  The last half I suspect we’ll be seeing a weaker dollar, a little uptick in inflation and minimal tangible results from the administration’s policies.  Anyway, an emphasis on appreciation over dividends in a rising tax environment may result in tax deferral possibilities.  This belief is the basis for next years’ strategy as subsequently outlined.

  1. Continuation of the primary portfolio strategy in regards to moving closer to the defined target allocations.  One example of this was my first December purchase, KMB which is an Anchor holding of mine.
  2. With the tax bill still in an uncertain status, load the maximum allowable contribution to the IRA.  These funds have been allocated and will be moved by month end.  A small Canadian holding in my taxable account has been identified as my new IRA purchase which will probably be made in January (pre ex-div).  A by-product of this will be a temporary overweight status in this issue.  Since I don’t like redundant holdings across accounts, my smaller taxable holding will be sold post ex-div.  This should shield more income from taxation (under current tax).
  3. Implemented (December 14th) my side strategy for 2018 titled Sluice Box which is a reference to the Gold Rush days.  This represents about 1% of the portfolio and was created (and bought) in my Motif account (shameless plug).  The emphasis is on Bitcoin, Blockchain, Growth and my first Swiss stocks with a couple of beaten down issues thrown in.

My 2018 strategy research began in earnest when I encountered Fortune magazines’ November 1st article, In Search Of ‘Vital’ Companies.  Of the fifty companies listed, my selection process drilled into the dividend payers – albeit at low yields.  Then on November 7th, Investor Place published The 10 Best Growth Stocks You Can Buy Now I chose to ignore The Dividend Guy’s August 23rd launch of Dividend Growth Rocks as I tend to shy away from paid sites particularly when operated by one person with multiple pseudonyms.  Besides, only one of his selections (Nordson – NDSN) was either not owned already or replicated in the other analyses.

Once the data was combined, I removed issues already owned and ones I had no inclination to buy.  Basically I had to be convinced of the opportunity and that the price (subjective argument) remained reasonable.

The following table presents my 2018 picks and the primary reason.  All but one are dividend payers and I front-loaded my purchase to 2017 to ensure receipt of CME’s special dividend (ex-div Dec 28).

SLUICE BOX (Motif: 2018 Growth)
Yield
NVIDIA Corporation (1,2) NVDA 7.30% 0.32% Bitcoin chipset
CME Group Inc CME 7.30% 1.76% Bitcoin Futures
Cboe Global Markets Inc CBOE 6.70% 0.86% Bitcoin Futures
Intercontinental Ex. (1) ICE 6.80% 1.14% Coinbase investor
Nasdaq Inc NDAQ 6.70% 1.96% Blockchain
Microsoft Corp. (2) MSFT 6.80% 1.98% Blockchain (Azure, Ethereum)
JPMorgan Chase & Co. (2) JPM 6.80% 2.68% Blockchain (hyper ledger)
Veritex Holdings Inc VBTX 5.90% 0.00% emerging growth co. (JOBS Act)
Ottawa Bancorp, Inc. OTTW 6.10% 1.10% 2-step conversion (growth)
Newell Brands Inc NWL 6.50% 3.02% Brands
Energizer Holdings Inc ENR 6.50% 2.44% Brands
Cognizant Technology (1) CTSH 6.50% 0.84% Future 50
Intuit Inc. (1) INTU 6.70% 1.00% Future 50
Novartis AG (ADR) NVS 6.70% 3.21% possible Alcon spin
ABB Ltd (ADR) ABB 6.70% 2.91% purchased a GE segment

Notes:

  1. Future 50 (also currently own: MA, V)
  2. Investor Place 10 (also currently own: V, SQ)
  3. Other Bitcoin/Blockchain indirect investments include: GS, IBM, WU, AMTD

At the very least it will be interesting to observe the Crypto phenomenon in more of a supporting role.  I also need to acknowledge Dividend Diplomats whose research on NWL was enlightening.

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6 thoughts on “Sluice Box: My 2018 Strategy

  1. Bit coin is like 1999, where day there is a dot com went on the market. I remember sitting in my computer science class and my teacher was showing a clip that all these people were on their lawn waiting for the market to open and saw their stock price shot up way high.

    What’s left of the dot com are: yahoo, red hat, (google didn’t go until 2003?), Cisco barely survived…
    I’m not sure I’ll be lucky enough to enter bit coin at the “right time”. I’m sticking to my “brick and mortar ” boring investing approach. Noting wrong with investing in the Fortune 500.

    By the way, visa and master are great company. I’m waiting for the end of he year when people harvest gain to buy a bunch.

    Novartis is good, although with Puerto Rico drug plants are down affecting 100% of the hospital in the US, I’m surprised that Wall Street know nothing about it. Revenues definitely are down on all the drug companies that have plants in Puerto Rico. The situation is dire at my hospital.

    Liked by 1 person

    • Have to agree with you on Crypto valuations. I realize when I’m potentially outmatched and have learned over the years that there are times it’s better to be on the sidelines. My guess is Bitcoin will have an impact the volumes and profits in the options trading, NVIDIA with the chips (mining). ICE (through NYSE) is a Coinbase investor which is being used by at least two companies to convert Bitcoin to USD. So while I’m not interested in the currency itself, I’ll take a small slice of the side action.

      On NVS, they were already in the process of moving/outsourcing much of their PR operation before the hurricane (expired tax benefits). With 25% of all US drug exports manufactured in PR (plus mainland demand) I’m a little surprised more emphasis wasn’t given to this aspect of “US” manufacturing and the 90,000 or so “US” jobs dependent on these factories.

      Good to see you back!

      Liked by 1 person

  2. My primary strategy (about 65% of the portfolio) has been intact for years with the only modifications being percentages allocated or position changes due to mergers.The remaining 35% I use to play ideas or themes that (my opinion) have some potential. Like regional banks coming out of the TARP years or last year’s emphasis on foreign issues. We’ll see if this years’ idea has legs but if history is a guide, these side strategies have been the difference in my beating the index most years. The by-product (since I rarely sell) being having to manage a broader than average portfolio.

    Thanks for visiting!

    Like

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