Going into the homestretch of 2019, it’s the time I begin the reflection process and assess the strategy going forward. Last week presented a broad brush view of my expectations for the new year. This week addresses my portfolio turnover for 2019 and more importantly, the why.
In general, my philosophy is to buy and hold for the long run. I tend to identify strategies and identify issues that have the potential to benefit. As a strategy runs its course, rarely do I sell – choosing to stop accumulating instead. This approach minimizes fees and taxable events.
Currently I hold 231 stocks and 4 ETFs. During the past year, 13 were lost and 24 added. Therefore my turnover rate was higher than I like so let’s dig in and see what happened.
M&A is pretty straightforward with the differential being the one I held on both sides of the deal. Dividend cuts are pretty much slam dunks as well – although I did retain one of the cutters. Management is an unusual one as I typically reserve this for activist actions. This case was tax forms being received that didn’t match SEC reporting. In my view, that deed is worse than cutting the dividend – therefore a sale. The largest category being strategy. I added one to my 2017 KO bottler strategy, four as part of a new platform test and nine to replicate the cashed out portfolio.
Mergers are always welcome as long as they arrive with a premium attached, Dividend cuts will always be assessed but will usually be fairly automatic sales. Activism I dislike but generally hold my nose and ride along. Strategy – I thought ended in 2018 until I tested a new platform and also chose to replicate the granddaughter’s portfolio after having to liquidate it. All reasonable reasons but all contributors to the action.
Currently I have three new companies on my watch list for 2020 which I’ll only buy at the right price point:
- MTR Corporation Limited (MTCPY) – Hong Kong’s rail line constantly in the news
- TMX Group Ltd (TMXXF) – Canada’s stock exchange
- Coca-Cola Bottlers Japan (CCJOY)
This isn’t to say there won’t be more, only that my going forward inclination is that fewer is probably better. Notable that US issues are absent although currently I expect only additions to existing positions.
In a nutshell, the majority of turnover was a result of M&A activity (a good thing) tempered by the breaking of the (I think) personal 38 year record for dividend cuts (5 total this year). Unless there is more M&A on the horizon, my hope is to settle back into a 1-2% annual turnover rate. Even with the move towards $0 commission trades my ultimate goal is a set it and forget it type of portfolio which has served me well for many a year.
Hope your holidays are wonderful!