Week in Review: Nov 20th

Even the second vaccine announcement did little to motivate the markets as election uncertainty and increasing Covid cases took center stage. It is a little interesting to see the push-pull of the Stay at Home versus re-opening trades. If you’re a buy and hold type, I think you’ve probably already staked out your position and can do little else considering the overall elevated valuations.

It tends to be genuinely amazing when the pieces of the puzzle fall into place – particularly when the basis was a gut feeling fed off an educated guess.  I’m referring to Coca-Cola’s (KO) Tax Court ruling on November 18th.   Now we apparently know the full rationale behind the 21st Century Beverage Partnership Model implemented in 2016-2017 – and why the roll out schedule was accelerated.  My speculation in 2017 centered more on the capital intensiveness of the bottling business evolving more to the tax treatment in 2018-2019.  Not once did I consider alleged profit shifting schemes with underlying net tax liabilities of some $1.6B.  Ouch!  The good news?  The remainder of my thesis stands a little taller today.  I will say the jury is still out on whether the bottling strategy I implemented beats the index, but I’m currently not complaining.   (note: one of my infrequent SA comments.)

During their Investor Day Wednesday, ABB (ABB) announced an operational review that could result in the divestment of some of their core business units.  Dodge (including the former Baldor Electric) is one with the others possibly being its power-conversion unit and remaining minority stake in its power grid business which the majority was sold to Hitachi Ltd (HTHIF) in 2018.  If successful, ABB will become even more focused on robotics and automation which makes it increasingly interesting in a post-pandemic world.  However, I do have to keep an eye on this one going forward as I’d have issues if they sold at fire-sale prices.

Thursday’s market action brought my first purchase for the month, adding to my WEC position.  I had previously moved my full shares from Computershare resulting in a forced sale of my fractional at $96.48.  I was able to replace the fractional (and then some) at $96.30.  The only downside is the purchase was after the ex-div date, meaning my dividends on this new tranche won’t begin until March. 

The other moves being considered prior to year-end outside a monthly purchase for December are:

  • Selling my M1 C shares.  This is the final step since last months increase via the Webull platform.  This will be done after Thanksgiving to avoid issues relating to wash sales.  End result will be a larger position with a lower cost basis.
  • Reduce Energy exposure by exiting Valero (VLO) but retaining my larger Chevron (CVX) and Shell (RDS.B) holdings.
  • Maybe make a decision on Codorus Valley Bancorp (CVLY).  All signs that I generally use are flashing SELL (dividend cut, no stock dividend announced and reduced communications subsequent to the fraud acknowledgement).  Perhaps its wishful thinking, but I’m wondering if the silence may be due to a possible take-out bid as opposed to management cowering from shareholder wrath.

I caught a CNBC interview with Greg Maffei, Liberty Media’s CEO.  Not that I have an interest in the SPAC they’re peddling, but his invocation of a Charlie Munger morsel on the state of the variable future (2021) economic recovery, “investment opportunities that may result because of those consequences of the consequences of the consequences.”  He goes on to outline a little bit of their going forward thought process.

Assuming the recovery is uneven, I figured it’s time to update the perceived portfolio impact areas outlined in May.  Considering additional thought is required in the areas of vaccine accessibility, possible higher winter outbreaks and whether the popularized ‘stay at home’ portfolio still has legs – that’ll be a topic for another day.

I did review the outcome from my initial review.  Nine issues with perceived exposure were sold.  As of November 20, 2020 all of these stock prices were higher averaging 23.41%.  On that front my timing sucked, but that presents but one side of the coin.  Dividends were cut or suspended on seven of the nine, the two outliers remained the same.  Overall, dividend payouts on this basket dropped by 69.52%.  Moral to this analysis is that the results are uneven as well.  As my priority is the dividend I made out like a bandit.  But for someone not in retirement with a higher risk capacity, the opposite could easily have been a decent answer.   Investing is not a team sport as an individual’s priorities and margin of safety desired are different for each of us.

Thanksgiving week (US) is upon us and even in these uncertain times I’m sure we all can find something to be thankful for.