January 2020 Update

What a way to start the new year.  Beginning with the reshuffling of my portfolio and continuing right into earnings season and the inevitable debate over the Coronavirus impact on the economy … all I can say is yep it’s a lot to digest – and it’s only January.  With the gyrations in the market, all but two of my low-ball limit orders executed, probably the most controversial being MTR Corporation – the Hong Kong high speed rail line recently at the forefront of the protests. Anyway, I added two Canadian companies (Fortis and TMX Group – (Toronto stock exchange)) and starting the long rumored whittling of some of the non-core holdings (XRX and MSGN).  Most of the other action was moving Canadian companies from my taxable accounts to the IRA – some of which were done as a rebalance to minimize fees (hence the slight additions to the other holdings). Also selling part of the PB stock (which went overweight due to a merger) to fund these movements. As I indicated last week, this is the first of a multi-month transition. Obviously my timing was decent (this time, anyway) as the S&P lost 0.16% for the month while my portfolio gained 1.81%.

PORTFOLIO UPDATES

DIVIDENDS

My primary focus resides on dividends with the goal being a rising flow on an annual basis.

  • January delivered an increase of 22.73% Y/Y primarily the result of last years’ dividend cuts rolling off.
  • Dividend increases averaged 11.48% with 8.5% of the portfolio delivering an increase.
  • 2020 Dividends received were 1.86% of 2019 total dividends putting me on target to exceed last year’s total in November. The YTD run rate is under my 110.0% goal but I anticipate this will normalize as my portfolio movement becomes clearer and the current year begins to distinguish itself from the last. 

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.

AT A GLANCE

Inspired by Simple Dividend Growths reporting

The relationship between market action and purchase activity was roughly 95/5.  As I’m generally playing with ‘house money’ (proceeds from sales, M&A activity and dividends), I doubt there will be a significant variance until I fund my 2019 IRA contribution.  The Net Purchase Expense being less than 1 or 2% illustrates the ‘house money’ concept. Timing did play a part as I sold early in the month (before the drop) and most of the purchases were in the latter part of the month. 

SPINOFFs

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

MERGERS

Spirit MTA REIT (SMTA) voted on Sept. 4th to approve the sale of most assets to HPT for cash. A second vote was held to liquidate the REIT. The first payment was received and awaiting final settlement payout. Fully expecting a profitable outcome for one of my most speculative positions.

SCHW to acquire AMTD for 1.0837 sh SCHW to 1 AMTD.  My only surprise with AMTD being taken out was the suitor – I had expected TD.  Regardless, I have three concerns over this deal, 1) profit margin compression with the onset of $0 fee trades, 2) possible liquidation of a partial TD stake to reduce their ownership share from 13.4% to 9.9% (the same issue Buffet regularly faces) and 3) 10 year phase-out of AMTD/TD cash sweep account relationship.  The third one means TD has a low cost (albeit, decreasing) source of deposits for the foreseeable future. After the first of the year, I’ll probably cash in AMTD and increase TD a little further.  

SUMMARY

Overall, the only complaint is the sluggish start to the year. Minus the drag from last years’ dividend cuts I figure this will be short lived.  On my goals, progress was made as follows:

  • Scenario 1 – TD is now confirmed
  • Scenario 2 – Half complete, awaiting timing issues for the sell part
  • Scenario 3 – Determination of maximum contribution amount complete
  • Scenario 4 – 2020 RMD amounts identified

Here’s hoping your month was successful!

Dec 2018 Update and Year End Review

he fourth quarter swoon continued in earnest this month resulting in an annual loss for the markets.  While the final trading day closed higher (DJIA up 265, NASDAQ up 51 and the S&P up 21) it was nowhere near close enough to avoid the worst December since 1931.  Though surprised by the resiliency of the US dollar, last year’s intent to migrate further into foreign equities was largely preempted by tariff uncertainty. My other 2018 concern of rising federal deficits stifling the economy did not manifest itself as yet – though I remain skeptical of  administration claims that growth can outpace the deficit. For the month, the S&P index dropped by 9.18% while my portfolio dropped by ‘only’ 8.44%. For the year the S&P posted an unusual loss of 6.65% while my overall loss was 3.57%. In an otherwise ugly ending to the year, my primary goal of exceeding the S&P’s return was attained marking the 33rd year (of 38) that I’ve been able to make this claim.

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Where’s Santa?

What a start to the final month of the year.  At least there is a little something for everyone.  First the CME tripped the first wave of circuit breakers in the futures market.  Then the chartists found the S&P closed the week in a death cross.  Then there’s news of a possible yield curve inversion.  Lest we not forget, the most recent China issue which may or may not even be legal.  While the Huawei issue is unfolding, Lighthizer continues to stir the pot by saying he considers March 1 “a hard deadline” otherwise the delayed tariffs will be imposed.  Hmm … kind of like bringing a gun to a knife fight – or – perhaps the administration really believes that “free and fair trade” is an outgrowth of convoluted negotiations.

If week one is any indication, the traditional “Santa Claus Rally” will be delivering a lump of coal this year.  Being the eternal optimist, I’ll argue Christmas isn’t here yet so I had to take advantage of the sell-off to do a little buying:

  • First, I added to my ETF group.  I accomplished two things with this:
    • As the majority of these are foreign, they are underwater.  Therefore, an ‘average down’ scenario.
    • These all pay December dividends (one quarterly, three semi-annual and one annual) all yet undeclared.  All are now captured.
  • Second I executed a rebalance on a small portion of the portfolio.  I chose a ‘rebalance’ as the fees were lower than the alternatives.  End result being:
    • Sale of BOKF.  I had this issue in two accounts due to a merger, now it’s only in one, with the proceeds and accumulated dividends:
    • Added to ADP, MMM, KIM, FAF as these are underweight target holdings
    • Added to AVNS as they may have received a good price for the division sold to OMI
    • Added to LARK and CASS – missing the ex-date for the stock dividends
    • Added to BR, CNDT, CDK, FHN, JHG, KSU, PJT, WU, XRX – capturing WU’s December dividend

I still have another rebalance queued pending completion of a merger (might be into the new year) and then we return to normal operations.

I also will be selling my OMI – perhaps later in the month to see if Santa really exists!

Ho-Ho-Ho …

My 3Rs – Revamp

Last post in this series I highlighted my views from the rear view mirror.  Going into 2019 will see more changes than normal.  No I’m not selling any positions but changing the emphasis (allocation) on certain issues.  The game plan is for reinvested dividends and fresh money to gradually swing the portfolio into balance with the new targets.

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6 Degree Investing

Six degrees of separation is the theory that everything is six or fewer steps …
“Invest in what you know (coupled with serious fundamental stock research)” attributed to Peter Lynch
“Own What You Love” Loyal3 slogan
These are common themes used widely among investors. Presuming due diligence has been performed and ones minimum requirements are attained it makes perfect sense. One example is my granddaughter’s portfolio. Each Christmas she receives a stock that she can relate to and one with a company sponsored DRIP. Her first was General Mills as she liked Lucky Charms. When she studied US history it was Washington Gas Light (WGL) as they keep the Capitol lit. Over the years her portfolio has grown to also include Hershey, Walmart, Procter & Gamble, Union Pacific, Disney and Kraft-Heinz. This year’s addition was Texas Instruments since she applied – and was accepted – to a high school sponsored in part by them. It is a moderately diverse portfolio, but more important is the fact that she can identify with it.  Although none are owned through Loyal3, it is a kind of Own What You Love portfolio.

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