Dec 2017 Update and Year End Review

The upward trend continued this month with catalysts being the tax plan and holiday sales.  My guess remains that the first half of 2018 will be good for corporations (i.e., dividends and buybacks) with a shift in focus later with deficits and mid-term elections playing a leading role.  I remain convinced the yearlong weakness in the US Dollar will continue and expect to allocate more cash into foreign equities during the first half 2018.  I will review this plan as my personal tax implications become clearer.  For the month,   the S&P index increased by .98% while my portfolio increased by 3.29% largely fueled by Financials (again).  For the year the S&P increased by a stellar 16.26% while I came in at +20.58%! The S&P return with all dividends reinvested adds about 2.41% which my hybrid approach still beat.

Headlines impacting my portfolio (bold are owned):

  • 12/6 – UNH acquires DVA’s medical group
  • 12/6 – RCI considering sale of CGEAF stake (abt 11.5%) and Toronto Blue Jays
  • 12/6 – BNS to aquire BBVA Chile
  • 12/7 – BAC secures patent for auto cryptocurrency exchange and conversion system
  • 12/11 – MMM sells communication business to GLW
  • 12/11 – IRM buys IO Data Centers LLC US operations
  • 12/18 – TSS buys Cayan (pvt)
  • 12/19 – HUM buys 40% of KND w/ the other 60% acquired by pvt eq ptnrs
  • 12/20 – ABB to restructure/spin (JV)/wind down parts of its engineering, procurement and construction business
  • 12/20 – PNC aquiring Fortis Advisors
  • 12/21 – HD acquires The Company Store
  • 12/21 – SJI files to aquire Elizabethtown Gas from Pivotal Utility Holdings
  • 12/22 – UNH acquires BAN.SN
  • 12/27 – merger approved closing 1/1/2018 new symbol NTR (2.23:1 AGU, 0.4:1 POT)

Portfolio Updates:

  • increased position in existing KMB holding
  • Added to CVLY (stock dividend)
  • Added to LARK (stock dividend)
  • Added to CBSH (stock dividend)
  • Added to CASS (stock dividend)
  • Initiated positions in ABB, CBOE, CME, CTSH, ENR, ICE, INTU, JPM, MSFT, NDAQ, NWL, NVS, NVDA, OTTW, VBTX


  • December delivered an increase of 34.13% Y/Y with the about 60% of the increase being attributable dividend increases and the remainder purchases.
  • December delivered a 4.15% decrease over last quarter (September) due to two payouts being moved to December and two foreign cycles paying in Sept.
  • Dividend increases averaged 10.95% with 74.01% of the portfolio delivering at least one increase (including 2 cuts (XRX and YUM) and and 1 suspension (TIS)).  Note: GE’s announced cut is counted as 2018.  As a point of reference, this is slightly below 2016’s 12.3% average with 74.5% of portfolio companies  increasing.
  • 2017 Dividends received were 25.94% greater than 2016 dividends and exceeded last years’ total on October 25th.
  • Portfolio churn was higher than normal (excluding M&A).  I attempt to keep it below 1% and my 5 year average is less than 0.25%.  The sale of Orchids Paper (dividend suspension) was the primary culprit with two minor positions (UL and LB) eliminated resulting in a 1.5% turnover.  Of these three, only my rationale behind UL could be suspect.


Spirit Realty Capital (SRC) – Nov 21, Form 10 was filed confidentially with spin completion targeted for 1H 2018.

2017 saw one spin completed (MET/BHF)


AGU/POT (Nutrien) approved (completed 1 Jan 2018)

2017 had three mergers with my company relinquishing control for a premium: LSBG (now BHB), JNS (now JHG) and SGBK (now HOMB)

Splits and Stock Dividends

Although splits are agnostic, I consider them a positive with reverse splits a negative.  Six companies split their stock (CMCSA, BANF, DST, BLL, NWFL and BHB) while one (XRX) had a reverse split.

Seven companies showered me with shares of stock ranging from 2.5% to 10%.  I do love stock dividends and this year the benefactors were: SBSI (2.5%), CBSH (5%), HWBK (4%), CASS (10%), LARK (5%), AROW (3%) and CVLY (5%).


The portfolio increase in 2017 can be segregated as follows (not precise but close):

  • Dividend Increases – 11%
  • Reinvested Dividends – 26%
  • New Funds – 10%
  • Market Gains – 46%
  • M&A – 7%

While the market valuations can be fickle, the key numbers for me are New Funds plus     Reinvestment (I’m under running my budget) and Dividend Increase rate (staying ahead of inflation).  M&A is always welcome but not expected.  Barring unforeseen expenses, these three metrics are an indicator of a growing portfolio regardless of the tactics used.

My 2018 strategy is to focus on Consumer Staples and Utilities (existing holdings), increase direct foreign exposure a little further (ForEx hedge) and incorporate a side strategy on lower yielding but faster growing companies.   Of course I will continue to pursue opportunities as they arise.

All in all a solid year.  While I’m still not willing to give the new regime all the credit they seek due primarily to the built in lag time inherent in new policies/laws and the effects rolling through the system, I will acknowledge that on balance (from an economic view) the changes are not catastrophic in the short term.  The jury remains out on the impact of deficit spending and debt servicing.

4 thoughts on “Dec 2017 Update and Year End Review

  1. It’s funny you use the term “regime” hihi to describe the Trump Administration. (The term is used most often to describe the communist party such as North Korea 🙂 🙂 I don’t give him the credit for the new Tax Law, it’s all the GOP, but he did the PR part.

    Wow, massive increase between dividend increase, reinvestment, market gain and M&A!! I’ll be sure to check back here more often to get the guru’s perspective.

    I was looking at my brother’s funds earlier, his return was 20%, but your portfolio beat his by 100% at 40% increased. you beat mine by 50%. That’s awesome!!

    Liked by 1 person

    • Glad you liked it 🙂 and thanks!

      Now you’re forgetting three things.
      1) Being overweight financials at the start of the year was fortuitous. With the financial crisis still a recent memory this type of positioning could’ve been viewed as reckless.
      2) Increasing my foreign holdings post election provided an opportunity to goose my portfolio value due to the weaker US dollar (and it’s still getting weaker). Again, not an exercise many people would undertake.
      3) Being on the right side of M&A is more luck than skill and I’ve had two years of good luck so far.

      Take a look at my January purchase (Compass Holdings plc) for a little of my mindset. (Especially the why regarding order execution). Not a guru … but lucky.


  2. Hi SR. Nice job on beating the market. Looking forward to more of your thoughts on utilities and staples in coming posts as the year progresses. Utilities have lagged a bit this year and may represent a good opportunity. I’m with you that the impact of deficit spending and growing public debt are concerning. Tom

    Liked by 1 person

    • It was a tough year to eke out a win, but mission accomplished! My focus on Utes is regulated electricity (as utility commissions generally allow increased borrowing costs to be passed on to ratepayers) and natgas with pipeline exposure – likely increasing existing holdings. I will have to make a change in the grandaughter’s portfolio as she’ll be losing WGL in an all cash merger. With staples I think I need to wait out the euphoria over tax reform before making much of a move. Nothing wrong with holding cash when no better ideas are at hand. 🙂

      Thanks for visiting!


Comments are closed.