Which is my state of mind this week. For the most part earnings reports arrived with a caveat – Coronavirus impact to arrive at a future point in time. And the markets generally rose as the can got kicked down the road. So I too moved on to more mundane matters, like:
This is So Wrong!
There comes a time when ones’ sanity is legitimately questioned. Such a time occurred this past week when reading what I thought was a recent post by the Conservative Income Investor. Note the publish date of February 3. 2020. While reading this I felt a little like Bill Murray in Groundhog Day while saying over and over this is so wrong. The root of my disagreement was the section: It pays no dividend. It does one thing especially well: Compound the retained profits, which in this case is all of the profits because the company pays no dividend, at a rate of 15% per year. Over the past ten years, the profits compounded at a rate of 18% per year. The book value has grown by 21% annually. I mean are we talking about the same SF I added to my portfolio in 2018? The one that raised this non-dividend by 25% last year? Determined to correct this egregious oversight, I found myself stymied by the inability to leave a comment – which was deactivated. Perplexed, it was only then I found the small print, “Originally posted 2015-02-26 21:35:26”. Fact of the matter is they initiated a modern day dividend policy September 15, 2017 – subsequent to the original post. Fact of the matter is Conservative Income Investor regurgitated the original without regard to updating an environment that changed, leaving me – and who knows how many other readers (if knowledgeable) – in a Twilight Zone scenario.
Up, Up and Away …
The meteoric performance of Tesla has to leave one scratching their heads a little. Granted, it has finally started to perform as a company rather than a performer in Elon’s three ring circus and recent China results have been favorable – pre Coronavirus. My assumption had been a significant portion of the rise was a result of a short squeeze as it was one of the most shorted stocks. But this may not be the case as a convergence of factors could be at play. Like their fourth quarter profit – although largely overlooked is the reason (sale of $133 million worth of regulatory credits to other automakers). It is possible that the corner has been turned though. Then there’s the rise of ESG which you know has become mainstream when Blackrock’s on board. Perhaps it’s an old-fashioned bubble as millennials flocked to the stock on the SoFi platform. I guess Warren Buffett’s advice is best followed here … “Never invest in a business you cannot understand.” In this case, I don’t understand the fundamentals at play.
I did confirm something I had long suspected. It is the rare occurrence that I hold the same issue in different accounts but the move of my Canadian stocks from my taxable account to my IRA temporarily accomplished that for at least one dividend payment:
Toronto-Dominion Bank (TD)
Schwab – $0.56 (USD)
Motif – $0.5534 (USD)
Now the reasons could legitimately be either 1) Rounding on the exchange rate, 2) Rounding on the applied payment, 3) FX rate when applied, rounding on the handoff between platforms (BK/Motif) or 5) a combination thereof.
It’s not worth my time to figure out why as I realize the differences are minimal. But extrapolating a little, these fractional cents on 100 shares would result in an annual difference of $2.64 (assuming a constant exchange rate) which will go into my pocket once the conversion is complete. Just another little tidbit to assist in keeping the snowball rolling!
Note: This anomaly has only been identified with foreign issues, not domestic
Conundrum of the Week
Last, a side note on ESG investing. On my to-do list is to develop a framework or mission statement on my strategy. This is difficult at best on both the macro and micro levels. Will it be a hard core approach or more a negative screening? Will it acknowledge incremental improvement or pursue a scorched earth policy? Will it recognize that some suspect companies do not profit directly from the market unless possibly through a secondary offering? Can one be both a contributor and a destroyer?
I present these questions as food for thought as the answers become increasingly murkier as the popularity of ESG increases.
And here’s to your week ahead!