April 2020 Update

The market staged a little recovery this month seemingly shaking off – or at least minimizing – any effects of the ongoing Covid-19 devastation, due in part to the partial ramp up of the economy in some states.  My state is one where a ‘phased’ approach is underway and there is uncertainty as to whether the peak has been attained (thereby ignoring the federal template).  While the economic malaise is running rampant through the states, it is doubly acute in the oil patch where state budgets (Texas) are dependent on a 4.6% tax on extraction (in a declining price environment) addition to an otherwise robust economy.  It will be an interesting social experiment as to how quick the average consumer will embrace the new reality (capacity limits in restaurants, for one), the ability for these businesses to turn a profit anew and if this throttling can move the needle on the economy (GDP, unemployment) without a corresponding spike in cases and/or mortality.   For one, I’m willing (and able) to wait at least two weeks and reassess at that time.

Due to the broker reshuffling caused by Motif shutting down, I can only provide a close estimate for the month.  Currently about $2,000 (cash, dividends, sells, buys) is in the ether migrating amongst accounts.  A full accounting is probably a week or two out.

Portfolio Value:  An estimated increase of 10.8% versus the 11.26% gain of the S&P.  For the year I’m up 2.06%.  All full share positions have been received by my primary broker with.

Dividends:  As previously acknowledged, my dividend increase run rate was not sustainable.  This came to bear in April with a 7.49% year-on-year actual increase.  I don’t think I lost any dividends with the timing of the transfer, but I may take a slight temporary hit as I await the cash to redeploy it.  Also some of the cycles will change as I exit some issues.

The pace of dividend cuts/suspensions continues to increase while any increases tend to be muted by 2019 standards.  Net increase for the portfolio stands at 5.75%, meaning my 10% dividend growth rate goal is in jeopardy.

Strategy Shift: In probably an overabundance of caution, I’ve decided to exit REITs that have a retail focus.  If the crisis is prolonged, rents, vacancy rates, property values and ability to refinance could come under pressure.  The ones retained are the four industrial and specialties in my portfolio.

I borrowed this illustration from one of my companies (BOKF) and modified it for my portfolio to begin to gauge potential impacts.  Currently PEP and KO’s biggest impact would reside in their fountain drinks (restaurants and venues).  I have yet to calculate a total …
Covid-19 Impact Areas

Entertainment & Recreation
Gambling Industries EPR
Convenience Stores & Gas Stations CASY, VLO, CVX, RDS.B
Restaurants CBRL, YUM, YUMC, SBUX, MCD
Specialty OUT
All Other Retail KIM, SRC, WRE, VER
Hotels MTCPY
Churches & Religious Organizations CMPGY
Colleges & Universities SYY
Airlines LUV, SWRAY
Identified Businesses most impacted by Covid-19 mitigation efforts approximately xx.xx % of portfolio

I’m using this template strictly as a guide.  The retail facing REITs are all sold (with the exception of Kimco), Southwest Airlines has been reduced, the others on this list are cautious holds.  I continue the review of my portfolio with an eye on secondary impacts – like who really considered any impact to banks because church services weren’t being held?  I probably need to expand my thought process to include further knock-off effects.

Later in May I’ll update my posted portfolio – once the confirmations (and money) arrive.  What will be clearer is the shift to larger but fewer holdings.  While the portfolio remains sizable, I will retain  some speculative stocks and a few where I remain undecided.  By and large, banks with no dividend growth or ones where M&A prospects have dimmed will be pruned.  In June I expect to exit ETFs as well.  For the near term (12-24 months) I’m willing to accept a lower dividend yield if I gain quality – and limited Covid-19 exposure – in return.

Here’s hoping your month turned the corner!

Portfolio War Footing

the condition or status of a(n) … organization when operating …or as if a state of war existed.


This week we’ll delve into the dark side as 2020 is rapidly evolving into a nightmare for investors.  While stabilizing a little this week, I believe the market can easily take another leg down. Just let the headlines sink in a little … questions on the length and breadth of the pandemic and the efficiency of the mobilization of the government’s economic response.  Meanwhile the numbers roll in – record unemployment and GDP contraction. Pundits are debating whether this is a recession or even a depression – you never are quite sure until you’re in the middle of it. The icing on the cake? Earnings season is upon us with some nasty surprises likely in store.  So what’s an investor to do? First and foremost … maintain your sense of humor in order to keep your perspective intact. Here’s one for the Hormel investors:

Many DGI folks are in the selection phase – identifying the potentially weak links.  The ones that could be in the position of cutting, suspending or even only maintaining (not growing) their dividends.  This is where it gets tricky as geography, industry, diversification and geopolitics need to be incorporated into relative financial strength of a company with the estimated disruption time frame on earnings as the divisor.  Best of luck with that model. Particularly when there is little consensus on when the US will fully reopen for business. Not mentioned publicly is the liability factor. Will the government indemnify consumer-facing companies from lawsuits arising from contagion?

The EU banking regulator now “urges all banks to refrain from dividends distribution or share buybacks which result in a capital distribution outside the banking system, in order to maintain its robust capitalisation” through at least October.  Australian and New Zealand banks are also scaling back and there are calls in some quarters for US banks to do likewise.  I take this as a signal that regardless of the daily message being delivered, there is some feeling this won’t be enough – and it may last a little longer than some would hope.   

Florida tourism appears to be closed at least until June 1st with Universal’s announcement.  Schools remain closed with remote learning in full swing and graduations postponed. We’re looking at even odds that the granddaughter’s first college semester will be distance learning as well.  Four small businesses on my walking route have been shuttered, so there is tangible evidence that change is afoot.

My approach to investing and life has always been to prepare for the worst but hope for the best.  With the prospect of a depression looming ever larger, my realization is that my portfolio is not on war footing.  In fact, I remain unsure exactly what war footing would look like given the circumstances of today.  The one certainty at this moment is the government has successfully recruited several private sector companies to marshall the distribution of the first wave of the largess.  Ones from my portfolio include, Blackrock (BLK), State Street Bank (STT), Paypal (PYPL), Intuit (INTU), JP Morgan (JPM) and Bank of America (BAC). Little doubt these will generate new business with the initial volley.

If the economic hit worsens or broadens, there is but one historical reference to use as a guide.  Granted the causation differs, but we’re only looking at outcomes. During the Great Depression, the baseline differs as we were a creditor rather than debtor nation and a more industrialized rather than service economy.  The human factors (I think) would be similar in nature to enable a broad brush comparison.  

The major difference between the eras is that then, movies and events provided an escape from reality – today, this outlet is non-existent with social distancing  and AMC Theatres (AMC) may now require a bailout to stave off bankruptcy. Venue operators and concessionaires loom large in this equation as well, although diversification may limit some of the impact – or worsen it.  Companies in my portfolio waving caution flags in this regard include, Disney (DIS), Comcast (CMCSA), Compass Group (CMPGY) and ABM (ABM). Non-portfolio public companies include Aramark (ARMK) and Sodexo (SDXAY).

A 2008 analysis by Dave Chase (which was geared more towards the role advertising played) did present some useful findings:


Data from Dave Chase

Perishable – meat, vegetables, dairy products, prescription drugs

Semi-Durable – clothing, furniture, preserved foods

Durable – automobiles, home appliances, electronics,, firearms, toys

Services – haircuts, doctors, car repair

While past performance may not be indicative of future results, if human nature and the self-preservation instinct remains intact there should be some correlation. My investments don’t quite match these categories and the task at hand is to perform more research – especially where secondary effects may be present, one example (of many) being Southwest Airlines (LUV) capacity cuts impact on ABM Industries (ABM).

This line of thinking will probably be prevalent this year.  But I’d be more than happy to chuck it in the trash if, as the President promised on February 28th, “It’s going to disappear. One day, it’s like a miracle, it will disappear.”  And may that day be soon.

August 2018 Update

The markets took comfort by rising on a possible trade deal with Mexico with hopes of Canada being a slam dunk being dashed (until possibly next month) by the president’s own words (albeit off-record) that shot the negotiations down.  Kind of have to wonder about the art of that deal :).  Anyway, earnings were generally good with only a few surprises although several companies guided lower on tariff concerns and the inability to maintain the run rate that was accelerated by the tax plan.  I did come off the sidelines a little this month with mostly repositioning moves on the few dips.  August saw a rise in the S&P of 3.03% while my portfolio lagged a little by registering an increase of 3.02%.  YTD I’m ahead of the S&P by 1.06%.

Portfolio Updates:

  • Initiated GNBC (hedge on VBTX merger)
  • added to LUV on weakness
  • added to CHD (repositioning move – now overweight through the dividend)
  • Initiated MSCI on weakness (capturing their 52.63% dividend increase)
  • added to JNJ (repositioning move – now overweight through the dividend)
  • added to COBZ (merger approved by regulators)


My main focus resides on dividends.  Market gyrations are to be expected but my goal is to see a rising flow of dividends on an annual basis.  I’m placing less emphasis on the quarterly numbers as the number of semi-annual, interim/final and annual cycles have been steadily increasing in my portfolio.

  • August delivered an increase of 53.11% Y/Y, the impacts being a Sep dividend paid in Aug (10%), last month’s rebalance (5%), dividend increases (5%), interim/final cycle (5%), purchases (1%) and the remainder being dividend reinvestment.
  • August delivered a 17.93% increase over last quarter (May) due to an interim/final cycle.
  • Dividend increases averaged 14.83% with 69.16% of the portfolio delivering at least one increase (including 1 cut (GE).
  • 2018 Dividends received were 77.59% of 2017 total dividends putting us on pace to exceed last year in early November.

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.


GE‘s rail unit to spin then merge with WEB

GE to spin 80% of the health business

NVS proposed spin of Alcon scheduled for shareholder approval Feb 2019


XRX merger with Fujifilm cancelled (now being litigated).

SHPG to merge into TKPYY

GBNK to merge into IBTX

COBZ to merge into BOKF

GNBC to merge into VBTX (semi-reverse)


The Y/Y dividend result is a great illustration of the power of reinvestment – particularly in light of the fact that “fresh” money investment is minimal.  Next week will be the continuation of the 3Rs series which will highlight some of the moves I’m making going into 2019.  You might guess at a couple of them based on my portfolio additions.

Hope all of you had a good month as well.

Feb 2018 Update

The theme for the month was volatility.  A couple of ETNs cratered as a result of the high volatility causing investors to lose significantly when using these levered products.   “We sincerely apologize for causing significant difficulties to investors,” Nomura said.  Credit Suisse stated “investors who held shares of XIV had bet against at volatility at their own risk.  It worked well for a long time until it didn’t, which is generally what happens in markets”.   Caveat emptor.

During the month, the S&P index dipped into correction territory before rallying to close the month down 3.89%.  My portfolio sympathized with the index closing down 5.53%.  I never hit correction so my peak drop was less but I also failed to recover as quickly.  Probably an area to perform a root cause analysis on at some point.  Following back-to-back monthly losses against the S&P, I’m down 3.44%  to start the year. Continue reading

Volatility Returns!

With the wild ride in the markets this week, I perused some of the community’s blogs to gauge the reaction.  While not meeting scientific norms regarding sample size, I was surprised by the lack of reference to the pullback in 66% of them – including ones with posts as recent as yesterday.  Perhaps it’s a lack of funds to take advantage or the deer in the headlights syndrome.  One blog, Fully Franked Finance, had a timely piece a few days prior which stated the importance of a ‘shopping list’ – as many others also encourage.  I too, engage in a strategy which emulates  the ‘shopping list’ strategy.  So, what were my moves so far this month?

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Pure Randomness

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.

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