July 2019 Update

The market continued to defy gravity this month as the only external turmoil was leveled at the Fed with encouragement to cut rates in excess of a quarter point. At month end, the Fed chose their own path and the market tailed off from the highs recently attained. Earnings season has been generally good to mixed with ongoing concern regarding Trump’s Tariff strategy the main issue. This month the S&P gained 1.3% while my portfolio gained 1.8%. For the year, I remain ahead of the benchmark by 1.0%.

PORTFOLIO UPDATES

  • finally sold out my OMI position (prior dividend cut) and used the proceeds to increase my RY position
  • Sold my UNIT (dividend cut/debt covenant issue) and LAMR (reporting discrepancies (my opinion)) positions using the proceeds to increase positions in ABM, ARD, BLL, CHCO, KOF, CCEP, CTBI, AKO.B, HOMB, IRM, NWFL, OCFC, OUT, PLD, QCOM, SRC, SMTA, BATRA and VALU as a rebalance
  • increased my CHD position
  • increased my JNJ position

DIVIDENDS

My primary focus resides on dividends with the goal being a rising flow on an annual basis. This month marks the removal of the quarterly comparison as this has proved to be steadily meaningless.

  • July delivered an increase of 4.64% Y/Y. This is off my typical run-rate due to two foreign pay cycles hitting in August this year, rather than the July of last year.
  • Dividend increases averaged 10.13% with 57.27% of the portfolio delivering at least one increase (including 4 cuts (two being OMI)). This is off last years’ pace and I believe a new personal record for dividend cuts in a single year since about 1980.
  • 2019 Dividends received were 64.31% of 2018 total dividends putting me on target to exceed last years’ total in late October. The YTD run rate is 107.66% of 2018, slightly under my 110.0% goal – but still recoverable.

Note: I updated my Goals page to provide a visual of these numbers.  Based on Mr All Things Money’s instruction set with a conversion to percentages.  My code only updates when the monthly Y/Y number is exceeded.  Otherwise, the prior year actual is used.

SPINOFFs

On Oct 4, 2018 MSG filed a confidential Form 10 to spin the sports business which remains in progress.

MERGERS

XRX merger with Fujifilm cancelled (still being litigated). Pending settlement expected in September.

TSS to merge into GPN (all stock, .8101 sh GPN for each TSS sh) estimated to complete in October – Upon the announcement, I was prepared to sell my TSS position to book almost a triple in just over 4 years as GPN currently pays only a penny per share dividend per quarter. However, page 14 of their slideshow states: Dividend – maintain TSYS’ dividend yield. This would appear to indicate an increase in GPN’s dividend, so for now I’ll hold.

PB to acquire LTXB for 0.528 shares and $6.28 cash for each LTXB share. I plan to vote in favor of the transaction (on both sides), pocket the cash and sell the new shares – retaining the old and perhaps use some of the cash to purchase additional PB shares post-merger.

VLY to acquire ORIT for 1.6 sh VLY to 1 ORIT. This merger will result in a slight dividend cut November forward as the rate will be normalized to VLY’s current rate. In my view, the other positives outweigh this negative.

PBCT to aquire UBNK for .875 sh PBCT to 1 UBNK. I plan to hold this one as I wouldn’t be surprised if PBCT gets taken out at come point.

The last three continue to validate my strategy of bank consolidations from a few years ago. The only flaw (so far) was the holding period required – but dividends were received while waiting.

SUMMARY

Overall, no complaints. It appears the pending mergers might provide premium to improve my performance over the index, but I don’t want to get too far ahead of myself yet. I still see a little consolidation in my holdings through the last half by migrating to a slightly risk off stance, offset slightly by companies with compelling stories. My cash position does remain slightly above mean.

Here’s hoping your month was successful!

4 thoughts on “July 2019 Update

  1. Nice work Charlie keeping ahead of the index. I certainly feel like I’m missing the party this year, but July was a better month as my IVF companies gained some momentum. Still a long way to go to beat my Indexing rival however!

    Hopefully you can find some compelling opportunities for that cash in the near future.

    Cheers, Frankie

    Liked by 1 person

    • Thanks! I’ll say this is a weird year – and at least I can use the strong USD to my advantage. Too bad the rest of the world has issues of their own as well – kind of like pick your poison. At least I’m on the right side of the curve (so far).

      I owe you a response or two – got mixed feelings on your charity drive (as you figured some might have) and more notably the liquor biz (probably because I own one of the companies – Amatil). I do like the general direction you’re going though 🙂

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  2. Wow, only half way through the year and you’ve already surpassed last hear payout.

    I should pick up your cue on banks.

    I picked up $COF, PE only 6, it should come down even more when the tariff kick in on China and the Fed would have to decrease interest rate again or holding under pressure from the market.

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    • I hope I wasn’t misleading … I haven’t surpassed last year yet but my current trajectory says I will – probably in October. The regional bank strategy is pretty much played out as M&A is now priced in. Basically I’m either rolling the proceeds over on stock deals to delay taxation or take some money off the table on cash deals. If the market really tanks there may be another opportunity.

      Not sure I have the nerve for COF after the data breach. Unless Congress intervenes with ideas of their own my guess is they’ll be back in 12-18 months.

      On the tariff issue I think you’re right. What has me a little perplexed is falling rates typically inflate asset prices – which we’re not seeing yet. Kind of makes me want to look under the bed to see what’s hiding out of sight.

      Hope you’re doing well 🙂

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