It appears that after taking the country’s creditworthiness to the brink, cooler heads prevailed and established a new cliffhanger for two years hence. Fitch remains unimpressed and is keeping the US’ rating on credit watch negative. For my part, I’ve removed the cash accumulation mandate and released the portfolio from artificial restraints.
The reality is that I don’t foresee short-term changes in the current approach. As long as the yield curve remains inverted and short-term rates remain above the portfolio’s Yield-On-Cost, the profitability exceeds the lost compounding effect (given my age and limited room to run it). Until it reverts, outside my requisite monthly stock purchase, I expect to build CD ladders for the duration.
Besides, there are too many moving parts in the economy right now for this feeble brain to determine how it sorts out, with emphasis on inflation and the Fed. Additionally, I have the overweight Financial sector to deal with as it is the big drag on the portfolio, allowing the S&P index to bury me year to date. I suspect next quarter’s earnings reports will be key to understanding how many bankers failed to navigate the duration issue. Basically, it’s a waiting game which hopefully by year-end will result in a year on year improvement to the cash flow without a corresponding gain in overall value.
Portfolio Performance
For the month, the S&P rose 0.25% while the portfolio dropped 4.14%. For the year, we now lag the index by 10.01%.
Dividends
Dividends and interest for the month registered a 9.21% gain over 2022 – hopefully turning the corner. The run rate is sitting at 105.95% and stable. Dividend increases are averaging 8.79% including 1 decrease) with 45.0% of the portfolio announcing.
New Positions
- none
Positions Increased
- WEC – underweight Anchor position
Completed Mergers
- none
Positions Sold
- none
Positions Reduced
- PLD – completed migration to the IRA (still slightly overweight)
Cancelled Mergers
- none
Pending Mergers
- none
Cash Position
- Cash on hand increased from 3.94% to 5.53%.
Spinoffs
- ABBNY announced a delay in the Chargedot IPO due to “challenging market conditions”
- Liberty Media (BATRA) announced the demerger of the Atlanta Braves. Shares of the current tracking stock are expected to be exchanged on a 1:1 basis for Atlanta Braves Holdings in 1H 2023.
- Baxter (BAX) announced plans to spin off their kidney care unit
- Novartis (NVS) plans a Sandoz spin off in 2H 2023
Corporate Actions
- ABB completed their NYSE delisting and are now traded on the OTC market with the ticker ABBNY
- TMX Group (TMXXF) to split 5:1 effective June 13th (ex June 8th)
Barring further sector implosions, the portfolio is now stabilized. Now the fun begins on the recovery effort with one hand (Financial sector) tied behind my back. Here’s hoping you were more in line with the index this month!
Seeking Returns 