March 2017 Update

March brought us the longest DOW losing streak in five and a half years on the heels of the first legislative defeat of the Trump administration.  The talking heads then moved their focus to the “end of the earnings recession”.  Frankly, I think as long as the US dollar remains strong, earnings will continue to suffer – except for domestically focused companies.  As a leading indicator to this thesis, I would point to the slowing growth in dividend increases as a proxy.  Regardless, the S&P closed the month down .04% while my portfolio rebounded ending the month up 3.3%.  At the end of the first quarter, I lead the S&P by 1.35%.

Headlines impacting my portfolio:

  • 3/1 – SQ buys OrderAhead (pvt)
  • 3/6 – FMBI acquires Premier Asset Mgmt, LLC
  • 3/9 – BR acquires Message Automation, Ltd.
  • 3/13 – BUSE acquiring MDLM
  • 3/16 – MMM acquiring Scott Safety from JCI
  • 3/16 – Fed lowers barriers for <$100B bank mergers
  • 3/20 – UL reviewing sale of spreads line
  • 3/23 – BLK buys 5% stake in NTDOY
  • 3/27 – BLL sells paint can line to BWAY Holding
  • 3/27 – DST buys remaining UK JVs from STT
  • 3/27 – SGBK to merge with HOMB
  • 3/28 – KO and KOF close on AdeS line purchase from UL
  • 3/29 – MA acquires NuData Security
  • 3/30 – CM increases offer for PVTB

Portfolio Updates:

  • Added to BCE
  • Added to SQ
  • Added to KO
  • Added to TD
  • Initiated position in AKO.B

Dividends:

  • March delivered an increase of 9.15% over March 2016.  2.24% of this increase is attributable to purchases with the remaining 97.76% a result of dividend increases.  The Y/Y comparison is a little distorted as four companies shifted pay dates and one special dividend did not reoccur.
  • March had an increase of 6.44% over the prior quarter.  This was primarily due to a pay date shift as a result of a merger.
  • Declared dividend increases averaged 7.75% with 36.42% of my portfolio delivering at least one raise (1 cut – YUM).
  • YTD Dividends received were 27.1% of total 2016 dividends.  If the current run rate is maintained would exceed 2016 around October 15th – particularly with most of my semi-annual or interim/final cycles paying during the next quarter.

Spinoffs:

The MET spin (Brighthouse Financial – BHF) remains pending.

Mergers:

Agrium/POT, JNS/HGG.L and SGBK.HOMB remain pending

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My 2017 Strategy (Coca-Cola)

Usually during the third quarter of each year I analyze my portfolio’s performance, do a little tweaking and cast about for an underlying strategy for the new year.  2016 was especially difficult due to a couple of mergers wreaking havoc on my portfolio structure as well as the uncertainty caused by the election.  The easy fix is to add to my anchor, core and satellite holdings at reasonable price points to get them to their target weightings.  This is illustrated by my recent purchases of KMB, CLX and SBUX with more to come.  The more difficult issue was identifying potential value plays for an ancillary portion of the portfolio.

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Nov 2016 Update

November was a wild month with a downward trend leading into the US elections and what is being referred to as the ‘Trump Rally’ following the widely unexpected result.  All major indexes achieved record highs on November 21st.  Fortunately I was able to redeploy the majority of the merger funds prior to the election.  This month The S&P gained 3.42%.  My portfolio recorded a gain of 11.49% (no normalization) largely reflecting my overweight position in the Financial sector.  This increases my lead over the S&P for the year to 17.74% with one month to go.

Headlines impacting my portfolio:

  • 11/2 – EPR acquires CLLY properties in liquidation
  • 11/8 – XRX spin (CNDT) set for 12/31/16, ratio 1:5
  • 11/14 – Maine is final approval for the BHB/LSBG merger.  Closing expected Jan 2017.
  • 11/15 – BMO designated as Canadian clearing firm for renminbi trades
  • 11/16 – AMC gets EU approval to for Odeon & UCI merger

Blog Updates:

I chose not to do an October portfolio update due to all the activity which distorted the results a little, especially the XIRR column.  The November data has been compiled and should be posted in the next couple of days with the goals update later in the week.  The Unabridged portfolio should be next week as per normal.

Portfolio Updates:

  • Added to DIS
  • Added to UL
  • Added to PEP
  • Added to TD
  • Added to KMB
  • Added to NJR
  • New position – IRM
  • Added to TRP
  • Added to KOF
  • Added to CCE
  • Added to FLIC (they chose to round up fractionals on a split)

Dividends:

  • November delivered an increase of 29.1% over November 2015.  This was due about evenly between dividend increases (Y/Y) and late 2015 funding.
  • November had a 2.1% increase over the prior quarter.
  • Announced dividend increases currently average 12.5% with 71.81% of my portfolio having at least one raise so far this year.
  • Through November, dividends received exceeded total 2015 dividends by 13.8%.

Spinoffs:

The XRX spin (Conduent – CNDT) is on track to complete 12/31/2016.

Mergers:

LSBG/BHB expected to close in January 2017.

Of This and That

Periodically I piece together thoughts based on my internet browsing or events garnering recent headlines.  Some may have an impact on my portfolio or strategy, others are only  food for thought.   For your entertainment, I present my latest installment.

Cuba Revisited

Previously I wrote on Cuba themed investing .  Yesterday’s headline delivered the news of Fidel Castro’s death.  Regardless of individual feelings on the Cuba issue, the fact remains the current trajectory is for further easing of sanctions.  It will, however, be an interesting first test for the new president pitting his stance on increasing exports versus his campaign rhetoric on rolling back Obama’s executive actions and the promises made to the Cuban Americans in Florida.  At the very least, the Canadians are likely chuckling at Trump’s conundrum as they never had an embargo to begin with.  A couple of articles are linked below.

(Long: SGBK, KOF)

28 November 2016, Mastercards (MA) issued by Banco Popular (BPOP) and NatBank (NA.TO, NTIOF) are currently valid by Executive Order (Obama) as well.

School Transportation

Also in the headlines this past week was the school bus tragedy in Chattanooga, TN.  Knowing there are four bloggers invested in school bus transportation services, I figured it was time to perform a little research.  There appear to be three major players in the space, two from the UK and one from Canada.  The largest is apparently First Student (FGP.L), followed by National Express Group (NEX.L), with Student Transportation (STB) in third.  First Group’s dividend has been suspended for a couple of years and National Express has been flirting with being acquired but with suitors leaving her at the altar.  National Express has Durham School Services as a subsidiary which was involved in the accident.  Our four blogger friends are all invested in STB.

The New Healthcare?

One of the bigger questions surrounding the new administration is the direction to be taken with healthcare.  In all likelihood changes are coming but to what end?  Outside my fondness for HSA/FSA managers, a plausible argument has emerged pertaining to Medicare insurers.

(Long: UNH, HUM)

Philanthropy

One blogger displays the fact that he is a philanthropist.  Now this got me thinking.  I’m old school and think of the likes of a Carnegie (public libraries) when considering the term.  My opinion is that this title is earned by – or bestowed upon – individuals based on works and deeds over a significant period of time.  Considering my net worth is greater than his (but his growth trajectory is increasing) and his portfolio has performed similarly to mine, left me scratching my head.  I do consider myself charitable but think philanthropy takes charity to another level.  Thinking that perhaps I’m operating in the past, I looked at the Urban Dictionary‘s definition which says, “one who gives money to charity, often associated with the wealthy and given a negative connotation by people who have never donated more than a dime at McDonald’s.”  Hmm … perhaps we are all (or most of us) philanthropists.

Until next time.

Prepping for ’17

In my inbox I found a message inspired (?) by my last post.  In a nutshell, it was a request for further insight into my October purchases.  I have to admit that, on the surface, the appearance is that I was throwing stuff against the wall to see what would stick.  I would like to think I’m slightly more calculating.  To set the scenario, I had an oversized cash position due to a merger, the markets had started their pre-election downward drift and the FBI just breathed new life into Candidate Trump’s aspirations.

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A Sea of Change

There are events that present opportunities through chaos and the US election – as Brexit was – appears to be one.   During these times as the sands are shifting I find it prudent to attempt to handicap the situation identifying strengths and weaknesses primarily using my portfolio as a lens.  Many questions currently have no answers and some stock gains appear to be based on assumptions more than facts.  I do reserve the right to modify my thoughts as more data is obtained.

REITs have generally taken a beating primarily on interest rate fears.  but the same could be said for Telecoms and Utilities.  Telecoms appear to have been spared due to M&A activity.

Financials appear to be a tale of diverging paths.  Pundits are bullish on the big banks but not so much on the little guys.  My guess is M&A will slow among the small banks as Dodd-Frank is tweaked but will accelerate as the reality of profitability through synergy is identified.  Multinational banks will continue to have to deal with Basel III to remain competitive globally tempering some of potential gains.

Healthcare is a wildcard.  To repeal a dysfunctional new scheme to implement an old dysfunctional scheme without morphing it into a newly dysfunctional scheme is ludicrous and where this sector’s profits will be found (until Congress gets wise).

Discretionary will depend on the economy – is the new plan recessionary?

And Mexico?  Strangely silent have been F, UTX, KO, DE and a host of others with operations there.  Then there is the NAFTA treaty which requires Senate action to modify.  It’s difficult to see many California or Texas senators supporting an action that would raise unemployment and reduce tax receipts by shuttering logistics centers.

Basically I see no immediate strategic portfolio change but additional diligence will be required.  A possible watch list might include UMBF, WBS and ONB for exposure to Health Spending Accounts (HSAs); KSU (Mexican trade); and KOF.  Other then the peso valuation and the ADR trade, I know of no other US exposure for KOF (Coca-Cola Femsa).

And how are you surviving?

Oct 2016 Update

October was basically a quiet month with OPEC failing – once again – to shore up their hold on the oil markets.  Chevron announced a small increase in their dividend maintaining their status as a Champion.  Several small positions were added at month end as the market began a pullback (continuing into November) enabling me to start redeploying funds received from PNY’s merger with DUK.  This month The S&P dropped 1.94%.  My portfolio was basically flat, ending down 0.1%.  Note: I normalized these numbers to consider the impact of cash infusion from the merger.  My ‘pure’ equity positions decreased by 4.15%.  The need for this normalization should end as my excess cash is used.  This increases my lead for the year to 11.5% with two months to go.

Headlines impacting my portfolio:

  • 10/3 – JNS to merge w/ Henderson
  • 10/11 – SRCE gains FRB approval for Sarasota, FL branch
  • 10/19 – C finalist to be designated as clearing firm for Renminbi trades

Blog Updates:

I’m a little behind again this month but the portfolio data has been compiled and will be posted in the next couple of days with the goals update later in the week.  The Unabridged portfolio should be next week as per normal.

Portfolio Updates:

  • Closed PNY due to merger
  • Added to BMO
  • Added to CVLY prior to ex-div for the stock dividend
  • Added to JNS (weakness on currency exposure)
  • New position – ABM
  • New position – AMT (Jan)
  • New position -BLL
  • New position -CASY
  • New position -CHCO
  • New position -KOF (Mex. peso exposure)
  • New position -COKE
  • New position -CCE (UK exposure)
  • New position -CSAL
  • New position -CTBI (Jan)
  • New position -CCI
  • New position -HUM (Jan)
  • New position -LAMR
  • New position -NWFL
  • New position -OCFC
  • New position -ONB
  • New position -OUT
  • New position -PLD
  • New position -QCOM
  • New position -DGX (Jan)
  • New position -SRC (Jan)
  • New position – SGBK (Cuba exosure)
  • New position – BATRA
  • New position – VALU
  • New position  – VER (Jan)
  • New position  – YUMC (YUM spin-off)

Dividends:

  • October delivered an increase of 28.9% over October 2015.  This was due about evenly between dividend increases (Y/Y) and late 2015 funding.
  • October was down 10.68% from the prior quarter due to special and semi-annual payments in July.
  • Announced dividend increases currently average 12.59% with 67.11% of my portfolio having at least one raise so far this year.
  • Through October, dividends received exceeded total 2015 dividends by 7.2%.

Roughly half of the PNY/DUK proceeds have been redeployed with an additional 3 orders pending for January payers.   I’ve filled some of the hole I’ll face in January, so I plan on maintaining a small cash position through the election before making further decisions.

Spinoffs:

The XRX spin (Conduent) is on track to complete by year end.  MetLife has filed for a spin of their Brighthouse Financial unit under the ticker BHF.

Mergers:

Proxies were received and voted for both the LSBG/BHB and AGU/POT mergers.