2019 Year End Report

Looking back at last years’ End Of Year post, the concerns raised at that point all remain valid.  I have to admit that even with the evils of tariffs, rising deficits and US dollar strength the economy remained surprisingly strong.  I did nail one right – the administration’s claim that GDP growth can outpace the deficit was wrong. If it can’t be done when the economy is hitting on all cylinders – the question becomes ‘when can it?’

For the month, the S&P index rose 2.73% and my portfolio (excluding October and November purchases) rose 4.26%.  When those purchases are included, the monthly increase was 10.51%. Yes my gain would have been larger had I re-invested the dividends throughout the year but at least I was fully in the market during the last quarter run-up.  For the year the S&P rose 30.43% (depending on how it’s calculated) the best year since 2013. My Portfolio rose 34.54% allowing me to extend my claim of the 34th year (of 39) that I’ve beaten the index.

Dividend cuts were the big obstacle for the year as I endured five in total.  Frankly, it wasn’t until December that my Dividend Goal (10% annual increase) was in the bag.  This is typically attained in late October or early November. 

I have only three new companies on my watch list with limit orders in place on two.  All are foreign with Canada, Hong Kong and Japan tagged. I have a few I’m willing to shed with a couple more needing repositioning due to mergers.  For the first time in probably five years I’m in a position to reduce my holdings while beefing up my Anchor and Core positions.

Thirteen countries were represented in my portfolio (18.5% of my dividends), losing Ireland but gaining Japan via a merger.  The top countries were Canada (9.77%), UK (2.61%), Singapore (1.21%) and Sweden (1.02%). I’m continuing the migration of Canadian companies from my taxable accounts to my IRA to take advantage of the tax treaty (no Canadian tax withholding for most issues).

Continuing with the Monthly Recap in its newest iteration, I’m still finding pieces that require some elaboration in order to rationalize it.

For instance, the net purchase expense threshold is not a pure indicator of my cash position.  I’m thinking it’s in the 2-3% range as my cash position increased last month despite the purchases.  The Incr/Decr from the market — yes, 99.2% of the increase in portfolio value was due to the market.  A slight disappointment is the Dividend Raises. They weren’t enough to even round up to 0.01% (more a reflection of portfolio size than wimpy raises).

Dividends:

  • December delivered an increase of 40.87% Y/Y with most of the increase attributable to the Oct/Nov purchases, the OMI fiasco of last year aging off and a weaker US dollar (finally).
  • Dividend increases averaged 10.11% with 68.28% of the portfolio delivering at least one increase (including 5 cuts.  Basically a lackluster performance.
  • 2019 Dividends received were 13.78% greater than 2018 dividends and exceeded last years’ total on December 1st.  It would have been over 15% had there been no cuts.

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.

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, 2019 to approve the liquidation of the REIT. I am awaiting the final settlement payout and as of December 31, this issue was delisted. I fully expect 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.  

Although XRX is officially off the list with their Fujifilm settlement, Icahn & Co. couldn’t wait for the ink to dry before stirring things up with HPQ.  As of now, I am considering exiting my XRX position.

Splits and Stock Dividends

Although splits are agnostic, I consider them a positive with reverse splits a negative.  Two of my companies split this year – PWOD and FFIN with no reverse splits to report.

Five companies showered me with shares of stock ranging from 3% to 5%.  I do love stock dividends and this year the benefactors were: CBSH (5%), HWBK (4%), LARK (5%), AROW (3%) and CVLY (5%).

Summary

As we slide into tax season, we’ll see if my readjustments panned out.  My goal was to achieve the 0-10% tax bracket by taking a one year tax hit.  The first part was completed so the results will be evident in the next month or so.  Overall, not one of my better years but I did attain (at least) my minimum objectives.   

Hopefully your year was great or at least in line with the market. 

December Purchases

Despite the ongoing record setting pace of the market this month, two purchases of note were made. There are in addition to the DRIP and FRIP purchases which are generally reported in bulk at month end.

This one is allocated to the granddaughter’s future holdings, continuing the tradition of a stock for Christmas. The only rationale given for these purchases is that it is meaningful for her – forget PE ratios, valuation, etc. In this case, she and her friends spend a good part of their off-campus lunches at McDonald’s (MCD) – end of story. I had considered Toyo Suisan Kaisha Ltd (TSUKY) the maker of ramen noodles but decided that one might be a better choice for her first year of college.

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An outstanding limit order executed more than doubling my holding. That said, assuming the dividend remains intact it will account for maybe 1% of my forward dividends. I suspect capex spending has peaked and their attention can turn to the balance sheet. So – I essentially reduced my cost basis although I remain underwater on this one.

Two things I be keeping an eye on as 2020 begins – 1) their expansion (via JV) in Saudi Arabia, and 2) their version (and traction) on streaming.


Unless there is a major retraction over the next day or two, this will close the curtain on my 2019 activity. Here’s hoping your 2020 is great!

Isn’t the Election Over Yet?

Following the most divisive and cantankerous election I’ve ever seen, I – along with many others – were likely longing for a return to normalcy.  A day where markets are driven by earnings, GDP, or other useful metrics rather than tweets and soundbites.  A time when logic dictates norms rather than bluster and berating.  The ability to take a deep collective breath followed by attempting to figure out how our respective investing strategies need to be tweaked to profit from the new regime.  I’m not referring to the recounts as I suspect they will result in no significant change with Clinton winning a majority of votes cast but Trump winning the Electoral College – and therefore the election.  What I’m referencing is the ability to cipher a meaningful direction that the President-Elect (PE) is going to take the economy.

Three diverse events occurred this week that gave me pause.  On the surface these are likely one-off issues but looked at in total generate more questions than they answer.

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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.

2015: What Went Right

Yesterday I published a post where I referenced an article by Bespoke Investment Group. During this season of reflection of the past year and anticipation of the one to come – aka goal setting – I figured further analysis of their article and its relationship to the DGI community might be warranted.

First I need to address the caveats:

  • Only publicly disclosed data culled from portfolios in my Blog Directory were used. If your blog is not listed, your data was not included.
  • My data only reflects a snapshot in time. Once entered in my database I generally make no updates.
  • I make no guaranty as to the accuracy of the data either through input errors, processing errors, or the legitimacy of the source data. Meaning, use at your own risk – or you get what you pay for.

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