Volatility Returns!

With the wild ride in the markets this week, I perused some of the community’s blogs to gauge the reaction.  While not meeting scientific norms regarding sample size, I was surprised by the lack of reference to the pullback in 66% of them – including ones with posts as recent as yesterday.  Perhaps it’s a lack of funds to take advantage or the deer in the headlights syndrome.  One blog, Fully Franked Finance, had a timely piece a few days prior which stated the importance of a ‘shopping list’ – as many others also encourage.  I too, engage in a strategy which emulates  the ‘shopping list’ strategy.  So, what were my moves so far this month?

  • Feb 1st – last ‘normal’ day – implemented my previously telegraphed move on selling my smaller RY stake.  Through a partial rebalance transaction, rolled the proceeds into my other Canadian stocks.  Net effect in hindsight – wash.  Up on the sale portion, down on the buy side.
  • Feb 2nd – DOW down 666 points – killed off my domestic watch list.  I didn’t have time to fully review my international list, but added Southwest Airlines (LUV), Scotts Miracle-Gro (SMG), Bank of N.T. Butterfield & Son (NTB), Waste Management (WM), Republic Services (RSG), Covanta (CVA) and Carlisle Companies (CSL).  Also added to existing ABB, CME, CBOE, CTSH, ICE, ENR, NWL, INTU, JPM, MSFT, NDAQ, NVS, NVDA, OTTW and VBTX positions.  Rationale: SMG (legal cannabis exposure), NTB (Bermuda – CM reviewing a similar structure), LUV (on sale) and the other new ones because of China’s decision to restrict imports of garbage.  These are the leaders in the Waste to Energy (WTE) space.
  • Feb 5th – DOW down 1175 points – added to existing KMB position covering last month’s fractional sale (and then some).

While I missed Thursday’s drop I was at least able to capitalize on the week’s overall retrenchment. The S&P has experienced a 7.23% decline for the month while my portfolio (similar to most DGIs) had a lesser decline – mine being 6.45%.

Blockchain World

Bitcoin, pronounced as a value store, lost a further 13% so far this month – ouch.  Even so, this hasn’t deterred new Blockchain ETF announcements most recently from Canada.  HBLK started trading in Toronto February 7th with BLCK and LINK pending (also Canada).  I realize that Crypto is separate and distinct from Blockchain but obviously someone failed to share this knowledge with HBLK which is heavily weighted with mining operations and speculative endeavors unlike its’ US counterparts.

Geographical Diversification

As mentioned above, my foreign holdings (ex Bermuda) remained basically constant during these gyrations.  There’s no conspiracy theory only that wild swings tend to distort pricing and exchange ratios.  I also like to identify the root cause prior to allocating capital – both of which require a little more analysis.  As my domestic watch list is now empty (save one), foreign stocks on the list hail from Japan (5), Australia (3), China (2) and Mexico, Switzerland, and Sweden with one each.  The largest obstacle being that – despite all the protestations in Davos, the US Dollar has dropped against all of the currencies paying me dividends (except Hong Kong) since Trump was elected.   Notable is the Euro at 14.4% making Canada and Australia looking like bargains at 7.4% and 4.1% respectively.  The following table presents my final 2017 tally with the percentage against ALL dividends (US and foreign).

GEOGRAPHICAL DIVERSIFICATION OF 2017 DIVIDENDS

COUNTRY %
Canada 9.68%
 Australia  1.67%
 United Kingdom  1.25%
 Singapore  1.03%
 Hong Kong  0.85%
 Bermuda  0.60%
 Chile  0.39%
 Luxembourg  0.28%
 Mexico  0.24%
 Ireland  0.06%
 China  0.01%
 Switzerland  0.00%
China, United Kingdom and Switzerland are partial year dividends

How have you survived the roller coaster month?

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10 thoughts on “Volatility Returns!

  1. Thank you thank you thank you!!
    I’ve been eyeing on CSL forever.

    The Kcentra has been flying off our hospital pharmacy shelf like hot cakes. I thought this company only listed in Europe. Now it’s on the New York exchange, yes, I’ll buy 100 shares! Yay!!!!!

    Liked by 1 person

    • My CSL is Carlisle Companies which is the manufacturer (among other things) the solar caps RSG started using to generate solar power from their landfills.

      Your CSL is not European, but Australian and (coincidentally) is on my foreign watch list. It does trade in the US as an ADR (BK sponsored) 2:1 ratio as CSLLY. Enter the ticker in the search box: https://www.adrbnymellon.com/directory/dr-directory/

      They do pay an unfranked dividend (withholding may apply) on an interim/final basis and you just might catch their ex-div date if you’re so inclined. 🙂

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  2. SR, It is interesting that so few blogs referenced the correction. I wrote an article Friday that will post Monday regarding it and what I bought Friday just for the record. You were much more active than me. About a week ago I added to my VYM holding. It was a limit order I set up at least a month ago when the market was rising everyday. Friday I added to my position in Southern Company.

    To directly answer your question, I have been paying some attention to the action and made two purchases. In general I have been pretty relaxed about it so far. I have enjoyed looking at my portfolio again and more seriously thinking about what to buy. Thanks for your thoughts. Tom

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    • Perhaps it’s delayed reaction but I saw a few more this morning. Myself – probably pent up demand 🙂 Not to say it’s over, so I left a little dry powder. Can’t believe I blew my watch list away.

      Gotta love limit orders – still have one waiting for execution as well. And good move on SO – looks like overblown concerns on interest rates even though utes can generally pass through those costs to ratepayers. Let’s see what this week brings!

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  3. Great to see some Aussie shares getting a mention – and nice to see you have some exposure to our market SR! CSL has been an amazing story – remember looking at this around $30 and thinking it was a little overvalued…

    Thanks for mentioning my article and taking the time to have a read. Interesting perspective on the lack of posts discussing the reaction. Personally, I think there tends to be too much ‘noise’ in the media and blogs when these little events happen, so I wasn’t planning on adding to the noise and writing specifically about it at this stage.

    I’m also being patient and a little selective with investments in the new Fund – the few on my watchlist had bounced up in the last couple of months, and aren’t quite back down to where I’d like them ideally. I expect a couple of new additions to be made over the next week or two if the prices are right…

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    • Welcome to my slightly irreverent space on the web. No problem on the reference – just figured your timing was better than most – good advice by the way.

      On CSL my concern is not the valuation (which they’d probably grow into with their pipeline) but moreso the new tax plan’s treatment of unfranked dividends (similar issue as your shying away from companies that don’t pay fully franked ones). Thus my question regarding the point that growth prospects outweigh franking credits.

      I understand the waiting game. Unless (or until) volatility returns, I may have to retreat to the sidelines until the next opportunity. Like Buffet says, “It is far better to buy a wonderful business at a fair price than a fair business at a wonderful price”. I try to wait for “fair” to show up. 🙂

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      • Yes I’m with you on that Buffet advice – I used to lean towards average businesses at (what I thought were) wonderful prices, but it’s too easy to fall for a value trap (this is also probably why I never considered buying CSL a few years ago at that ‘expensive’ $30!) My next post should be a good example of this – before I put some funds to work in a (hopefully) better than average business…

        Really liked your question to Ian on what would sway him (and me) from focusing on franking credits. I personally try not to focus just on yield at the expense of all else, and try to make sure the businesses I buy have decent growth prospects (or appear undervalued) first and foremost – the Fully Franked yield is just a nice little bit of cream on top that I love 🙂

        Also like some of the individual US stocks in your portfolio – If I was to ever dabble internationally a couple of them would certainly be on my list.

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  4. I do admit to having quite a collection – but each one serves a purpose. Which is a topic I agreed to elaborate on in the near future. My bread and butter reside on the Anchor, Core and Satellites which are basically the top 36 holdings. The remainder are speculation which includes foreign (Computershare and Coca Cola Amatil are my two Aussie ones right now).

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