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