Thoughts on EV Investing

FI Fighter returned from his self-imposed exile with a renewed passion.  Now I’ll be the first to admit that his investing style is a little (ok, maybe a lot) more on the fringe than mine, but his concepts and theories are well-reasoned.  Perhaps the downside to his methods as the timing – not in the sense of timing the market but in having a measure of foresight in developing trends. Being ahead of the curve tends to have drawbacks as Elon Musk can probably attest.

He returned May 18th with a series of three posts/podcasts, one of which garnered my attention.  His views on metals – in particular Lithium – seem to resonate with me. I agree with his general view of market direction, our disagreement would be in the investment manner.  In short I prefer a greater margin of safety with a ‘proven concept’ where he’s all-in on a ‘plausible theory’.

Continue reading

Advertisements

Mar 2018 Update

A few days late since Easter got in the way with the markets being closed March 30th and dividends not being posted in a timely manner.  FX transactions were also delayed impacting my final accounting for the month and quarter.  This month the DOWs first quarterly loss since 2015 grabbed the headlines while the news getting my attention was the rising Libor particularly with its potential impact on adjustable rate mortgages and business loans.  March saw the S&P drop 2.69% and for the first time this year my portfolio outperformed the index by registering a drop of 0.06%!  YTD I still lag the S&P by 0.81%.

Portfolio Updates:

  • Added to PWOD, WU and ABB
  • Initiated a position in VLVLY

DIVIDENDS

This is where my main focus resides.  Market gyrations are to be expected but my goal is to see a rising flow of dividends on an annual basis.  I’m placing less emphasis on the quarterly numbers as the amount of semi-annual, interim/final and annual cycles have been steadily increasing.

  • March delivered an increase of 39.79% Y/Y fueled by dividend increases and purchases.  In particular, my December buys were almost exclusively March payers.
  • March delivered a 11.44% increase over last quarter (December).
  • Dividend increases averaged 11.25% with 40.3% of the portfolio delivering at least one increase (including 1 cut (GE) and 1 suspension (DST see M&A).
  • 2018 Dividends received were 29.3% of 2017 total dividends putting us on pace to exceed last year in early November.

Spinoffs:

Spirit Realty Capital (SRC) – Mar 6, Form 10 was filed publicly with spin completion targeted for 1H 2018.

Mergers:

Jan 13 – DST announced it was merging with SS&C for $84 cash per share.  As part of the merger agreement, the dividend has been suspended – the merger received shareholder approval on March 28th.   I expect the deal to complete in April or May.

Jan 31 – XRX announced a merger with Fujifilm for stock and $9.80 in cash.

A few others are rumored to be in play including Humana and Shire.

Summary

With my March call being spot on (… it appears we’re getting a preview of March Madness in the form of a Trump induced possible trade war.) the Paychex jobs data (small business) released this morning is keeping me in a cautious mood.  Yes it is only a one month view showing fewer jobs – but small businesses are supposed to be the economic driver in Trump World.  Perhaps it’s an aberration – but one to keep an eye on.  Overall a good month in spite of tariff uncertainty.

Hope all of you had a good month as well.

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?

Continue reading

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.

Continue reading

Sluice Box: My 2018 Strategy

In a recent conversation with a friend of mine, the topic of cryptocurrency arose as he has started accepting Bitcoin in his business.  Though more enamored over the possibilities of wealth through hoarding and/or trading, he began to look under the hood to figure out why I had a greater fondness for Blockchain over any cryptocurrency.  His insight surprised me: “You’re like the sluice box salesman in the California Gold Rush.”

I choose to think of myself as a shortstop hitting singles rather than a home run hitter going for the fence, but his analogy was apt.  I prefer to get a slice of many transactions as opposed to getting the big one.  I play the percentages.   He was able to visualize I place a greater value on the tools (mining), transport (exchanges) and utility (ancillary applications) rather than the commodity itself.  Meaning, I’d rather sell the Levi’s than look for (and mine) the gold vein.

It appears the revisions to the tax plan being discussed will be slightly less draconian than previously announced resulting in a little lead time for portfolio adjustments.  My guess (pure speculation) is the first half of 2018 will be relatively good but a little choppy.  The last half I suspect we’ll be seeing a weaker dollar, a little uptick in inflation and minimal tangible results from the administration’s policies.  Anyway, an emphasis on appreciation over dividends in a rising tax environment may result in tax deferral possibilities.  This belief is the basis for next years’ strategy as subsequently outlined.

  1. Continuation of the primary portfolio strategy in regards to moving closer to the defined target allocations.  One example of this was my first December purchase, KMB which is an Anchor holding of mine.
  2. With the tax bill still in an uncertain status, load the maximum allowable contribution to the IRA.  These funds have been allocated and will be moved by month end.  A small Canadian holding in my taxable account has been identified as my new IRA purchase which will probably be made in January (pre ex-div).  A by-product of this will be a temporary overweight status in this issue.  Since I don’t like redundant holdings across accounts, my smaller taxable holding will be sold post ex-div.  This should shield more income from taxation (under current tax).
  3. Implemented (December 14th) my side strategy for 2018 titled Sluice Box which is a reference to the Gold Rush days.  This represents about 1% of the portfolio and was created (and bought) in my Motif account (shameless plug).  The emphasis is on Bitcoin, Blockchain, Growth and my first Swiss stocks with a couple of beaten down issues thrown in.

My 2018 strategy research began in earnest when I encountered Fortune magazines’ November 1st article, In Search Of ‘Vital’ Companies.  Of the fifty companies listed, my selection process drilled into the dividend payers – albeit at low yields.  Then on November 7th, Investor Place published The 10 Best Growth Stocks You Can Buy Now I chose to ignore The Dividend Guy’s August 23rd launch of Dividend Growth Rocks as I tend to shy away from paid sites particularly when operated by one person with multiple pseudonyms.  Besides, only one of his selections (Nordson – NDSN) was either not owned already or replicated in the other analyses.

Once the data was combined, I removed issues already owned and ones I had no inclination to buy.  Basically I had to be convinced of the opportunity and that the price (subjective argument) remained reasonable.

The following table presents my 2018 picks and the primary reason.  All but one are dividend payers and I front-loaded my purchase to 2017 to ensure receipt of CME’s special dividend (ex-div Dec 28).

SLUICE BOX (Motif: 2018 Growth)
Yield
NVIDIA Corporation (1,2) NVDA 7.30% 0.32% Bitcoin chipset
CME Group Inc CME 7.30% 1.76% Bitcoin Futures
Cboe Global Markets Inc CBOE 6.70% 0.86% Bitcoin Futures
Intercontinental Ex. (1) ICE 6.80% 1.14% Coinbase investor
Nasdaq Inc NDAQ 6.70% 1.96% Blockchain
Microsoft Corp. (2) MSFT 6.80% 1.98% Blockchain (Azure, Ethereum)
JPMorgan Chase & Co. (2) JPM 6.80% 2.68% Blockchain (hyper ledger)
Veritex Holdings Inc VBTX 5.90% 0.00% emerging growth co. (JOBS Act)
Ottawa Bancorp, Inc. OTTW 6.10% 1.10% 2-step conversion (growth)
Newell Brands Inc NWL 6.50% 3.02% Brands
Energizer Holdings Inc ENR 6.50% 2.44% Brands
Cognizant Technology (1) CTSH 6.50% 0.84% Future 50
Intuit Inc. (1) INTU 6.70% 1.00% Future 50
Novartis AG (ADR) NVS 6.70% 3.21% possible Alcon spin
ABB Ltd (ADR) ABB 6.70% 2.91% purchased a GE segment

Notes:

  1. Future 50 (also currently own: MA, V)
  2. Investor Place 10 (also currently own: V, SQ)
  3. Other Bitcoin/Blockchain indirect investments include: GS, IBM, WU, AMTD

At the very least it will be interesting to observe the Crypto phenomenon in more of a supporting role.  I also need to acknowledge Dividend Diplomats whose research on NWL was enlightening.

September 2017 Update

This month for my portfolio was choppy to say the least.  Impacts were the start of calculating hurricane damage, data breaches, fears of a primary tenants’ possible bond default, continuing geopolitical fears and a strengthening of the US dollar at month end (again). With a portfolio currently weighted 15.35% pure international and a little overweight towards Texas it’s not too surprising the S&P index outperformed by increasing 1.93% versus my 0.36% increase.  For the year I’m still ahead by 2.9%.  On the other hand, dividends received set a new monthly record.

Headlines impacting my portfolio (bold are owned):

  • 9/7 – SQ to apply for UT banking license as an industrial loan co.
  • 9/7 – BANF acquires First Wagoner Corp and First Chandler Corp
  • 9/7 – EFX announced massive dB hack
  • 9/11 – UNH makes formal offer to acquire BANMEDICA.SN
  • 9/11 – Cdn approval for POT/AGU merger received. awaiting  US, India and China.
  • 9/14 – MMP forms JV w/ VLO for marine termimal in Pasadena, TX
  • 9/21 – GBL (Mario Gabelli) increases stake to 7.74% in BATRA
  • 9/25 – GE sells industrial solutions unit to ABB
  • 9/28 – DGX acquires Shiel Medical Laboratories from FMS
  • 9/28 – IVZ buys Guggenheim Ptnrs ETF business
  • 9/29 – AIG sheds SIFI designation

Portfolio Updates:

  • added to FFIC prior to ex-div on market weakness (N. Korea)
  • added to NWFL (stock split)
  • added to AROW (stock dividend)
  • added to HOMB and lost SGBK (merger)

Dividends:

  • September delivered an increase of 47.56% Y/Y with the about half of the increase being attributable dividend increases and the other half purchases with an assist from a merger premium.
  • September delivered an increase of 16.87% over last quarter (June).  Semi-annual payers, a purchase and dividend increases being the reasons.
  • Declared dividend increases averaged 10.98% with 65.54% of the portfolio delivering at least one increase (including 2 cuts and 1 suspension)
  • YTD dividends received were 92.61% of total 2016 dividends which if the current run rate is maintained would exceed last years’ total in late October.

Spinoffs:

Spirit Realty Capital (SRC) has been announced.

Mergers:

AGU/POT (Nutrien) remains pending, SGBK/HOMB completed September 26th.

Summary

With the primary goal of exceeding last year’s dividends in sight, my focus turns to developing a strategy for 2018 – which will likely hinge on the degree of success – if any – to be expected in Year 2 of this administration.  Otherwise I’ll probably continue with the current adding to the underweight holdings unless news erupts.

Harvey

Hurricane

Mother Nature certainly is a beast at times.  Watching her ongoing treachery on the television is heartbreaking to say the least.  Looking out the window, I see sporadic rain – which will continue for a few days – but nothing of the magnitude being experienced just a couple hundred miles away.

As my mind wanders a little due to the same images being replayed over and over, I can’t help but thinking of the economic impact of Harvey.  Being resident in Texas, my portfolio has a little bias towards my home state.  In a similar vein, which companies stand to lose – or gain – from this tragedy?  I figured I’d lay out my thoughts – which probably are incomplete – as a basis for determining whether my portfolio can weather (pun intended) a storm of this severity.

Continue reading