The month was relatively crazy with geopolitics driving the highs and domestic lunacy driving the lows. In between were relatively strong earnings and interest rates inching higher driving the question of the bull market sustainability. Personally, I’m not overly concerned yet but Marco Rubio‘s “implication that Republicans have found no good answer to the problems Mr Trump described is irrefutable.” may be an omen of things to come. Meanwhile, I took advantage of some dips and stayed the course. April saw the S&P rise 0.27% and my portfolio outperformed the index by registering a rise of 0.65%! YTD I still lag the S&P by 0.43%.
Generally I refrain from back-to-back posts with similar topics but decided to make an exception this week as the moving parts have kicked into high gear. My post last week addressed my uneasiness with cryptocurrency as well as my interest in the underlying blockchain technology. It appears that my view has some support as two blockchain ETFs debuted on January 17th (BLOK and BLCN) and one January 25th (LEGR). This should be followed by KOIN next week. Horizons and Harvest (HBLK) also have ETF applications pending. Grenadier penned a piece on Seeking Alpha that did some analysis on the first two. Four of LEGR’s top five holdings are included in either one or both of the originals so it will probably be similar. David Snowball highlights this sentiment in his piece There’s no idea so dumb that it won’t attract a dozen ETFs stating, “…there are no publicly traded companies that specialize in blockchain; there are mostly companies with a dozen other lines of business that have some sort of efforts going into blockchain.” This is 100% correct.
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.
- 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.
- 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).
- 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)|
|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|
|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|
- Future 50 (also currently own: MA, V)
- Investor Place 10 (also currently own: V, SQ)
- 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.
This month was pretty solid with the market continuing its upward grind. Earnings season was in focus with good reports outweighing the bad. Most of the attribution to the hurricanes was legitimate but a few did raise my eyebrows. The US dollar turned in a second rising month. The S&P index increased by 2.22% while my portfolio lagged (again) by only increasing 2.03%. The two culprits were international currency weakness and a drop in value in my October (speculative) purchase. For the year I’m still ahead of the index by 2.7%.
Headlines impacting my portfolio (bold are owned):
- 10/3 – IRM acquires Bonded Services Holdings from Wicks Group, LLC
- 10/4 – IBM acquires Vivant Digital (pvt)
- 10/5 – YUMC initiates quarterly dividend scheme
- 10/5 – IRM buys CS datacenters in London and Singapore
- 10/6 – K acquires Chicago Bar Company LLC (RXBAR)
- 10/11 – BHB sells insurance business
- 10/11 – FHN acquires Professional Mortgage Co.
- 10/16 – SJI buys NJ/MD assets from SO
- 10/17 – SYY acquires HFM Foodservice
- 10/18 – India approval for POT/AGU merger received. awaiting US and China.
- 10/18 – DGX to acquire Cleveland Heart Lab
- 10/19 – JNJ acquires Surgical Process Institute
- 10/25 – AAPL acquires PowerbyProxi
- 10/30 – DGX aquires some California Laboratory Associates assets
- 10/30 – TU to acquire Xavient Information Systems
- initiated position in NXNN
- October delivered an increase of 24.59% Y/Y with the about half of the increase being attributable dividend increases and the other half purchases.
- October delivered an increase of 8.53% over last quarter (July).
- Declared dividend increases averaged 10.91% with 70.62% of the portfolio delivering at least one increase (including 2 cuts and 1 suspension).
- YTD dividends received were 103.83% of total 2016 dividends which exceeded last years’ total on October 25th.
Spirit Realty Capital (SRC) has been announced.
AGU/POT (Nutrien) remains pending.
With the primary goal of exceeding last year’s dividends completed, my focus turns to developing a strategy for 2018. Meanwhile adding NXNN (speculative) in October and DRE for November’s primary purchase. DRE as they go ex-div next week and a special dividend is likely in December as a result of the sale of their Medical buildings to HTA this past May.
The news cycle appears to be churning ever faster. Whether as a reaction to events, an attempt to manage the narrative or obscure the message is a debate that will occur for some time with the real answer becoming apparent in the hindsight of history. Not to minimize the Charlottesville tragedy or the headline grabbing Bannon ouster, but these stories are playing out in several flavors depending on the source. As one who attempts to discern the impact of issues on my investments, two (possible) financial headlines crossed my desk amid the other events that intrigued me.
Every now and again events are thrown our direction which necessitate a change. Being one who abhors change, I tend to procrastinate until the absolute last minute. I knew the drive in my laptop was on its’ last legs a year ago when I bought a new one. Last week it bit the dust. I did perform regular backups so data loss was minimal. What loss exists is not due to Wanna Cry but their evil twin, Micosoft (MSFT). Though I have an Office license, my use (legally) of an upgraded version resulted in the inability to perform a backward migration. It appears my best recourse is to purchase an upgrade. My frugal nature has an issue with this solution (being held hostage?). Meanwhile, seeing if Google fills the void. I did add a sheet to my Dividends spreadsheet (Div Dates) which – assuming I get the hang of conditional formatting – has the potential of automating my watch list.
One year ago I embarked on a mission to determine whether Primerica stock (PRI) was a better investment then the sum of its’ parts – well at least most of the parts. SEC filings were scoured to identify their investments as insurance companies are required to maintain reserves (the float). A portfolio was established (3Q 2015) , funded (4Q 2015) and tracked (Oct 2015 to Sep 2016) to be able to declare a winner.
And the winner is … Primerica by 16.15%. Now I realize that a single snapshot in time may not be reflective of reality, but to my surprise Primerica outperformed the basket through this snapshot in time.