Generally I refrain from back-to-back posts with similar topics but decided to make an exception this week as the moving parts have kicked into high gear. My post last week addressed my uneasiness with cryptocurrency as well as my interest in the underlying blockchain technology. It appears that my view has some support as two blockchain ETFs debuted on January 17th (BLOK and BLCN) and one January 25th (LEGR). This should be followed by KOIN next week. Horizons and Harvest (HBLK) also have ETF applications pending. Grenadier penned a piece on Seeking Alpha that did some analysis on the first two. Four of LEGR’s top five holdings are included in either one or both of the originals so it will probably be similar. David Snowball highlights this sentiment in his piece There’s no idea so dumb that it won’t attract a dozen ETFs stating, “…there are no publicly traded companies that specialize in blockchain; there are mostly companies with a dozen other lines of business that have some sort of efforts going into blockchain.” This is 100% correct.
In a recent conversation with a friend of mine, the topic of cryptocurrency arose as he has started accepting Bitcoin in his business. Though more enamored over the possibilities of wealth through hoarding and/or trading, he began to look under the hood to figure out why I had a greater fondness for Blockchain over any cryptocurrency. His insight surprised me: “You’re like the sluice box salesman in the California Gold Rush.”
I choose to think of myself as a shortstop hitting singles rather than a home run hitter going for the fence, but his analogy was apt. I prefer to get a slice of many transactions as opposed to getting the big one. I play the percentages. He was able to visualize I place a greater value on the tools (mining), transport (exchanges) and utility (ancillary applications) rather than the commodity itself. Meaning, I’d rather sell the Levi’s than look for (and mine) the gold vein.
It appears the revisions to the tax plan being discussed will be slightly less draconian than previously announced resulting in a little lead time for portfolio adjustments. My guess (pure speculation) is the first half of 2018 will be relatively good but a little choppy. The last half I suspect we’ll be seeing a weaker dollar, a little uptick in inflation and minimal tangible results from the administration’s policies. Anyway, an emphasis on appreciation over dividends in a rising tax environment may result in tax deferral possibilities. This belief is the basis for next years’ strategy as subsequently outlined.
- Continuation of the primary portfolio strategy in regards to moving closer to the defined target allocations. One example of this was my first December purchase, KMB which is an Anchor holding of mine.
- With the tax bill still in an uncertain status, load the maximum allowable contribution to the IRA. These funds have been allocated and will be moved by month end. A small Canadian holding in my taxable account has been identified as my new IRA purchase which will probably be made in January (pre ex-div). A by-product of this will be a temporary overweight status in this issue. Since I don’t like redundant holdings across accounts, my smaller taxable holding will be sold post ex-div. This should shield more income from taxation (under current tax).
- Implemented (December 14th) my side strategy for 2018 titled Sluice Box which is a reference to the Gold Rush days. This represents about 1% of the portfolio and was created (and bought) in my Motif account (shameless plug). The emphasis is on Bitcoin, Blockchain, Growth and my first Swiss stocks with a couple of beaten down issues thrown in.
My 2018 strategy research began in earnest when I encountered Fortune magazines’ November 1st article, In Search Of ‘Vital’ Companies. Of the fifty companies listed, my selection process drilled into the dividend payers – albeit at low yields. Then on November 7th, Investor Place published The 10 Best Growth Stocks You Can Buy Now. I chose to ignore The Dividend Guy’s August 23rd launch of Dividend Growth Rocks as I tend to shy away from paid sites particularly when operated by one person with multiple pseudonyms. Besides, only one of his selections (Nordson – NDSN) was either not owned already or replicated in the other analyses.
Once the data was combined, I removed issues already owned and ones I had no inclination to buy. Basically I had to be convinced of the opportunity and that the price (subjective argument) remained reasonable.
The following table presents my 2018 picks and the primary reason. All but one are dividend payers and I front-loaded my purchase to 2017 to ensure receipt of CME’s special dividend (ex-div Dec 28).
|SLUICE BOX (Motif: 2018 Growth)|
|NVIDIA Corporation (1,2)||NVDA||7.30%||0.32%||Bitcoin chipset|
|CME Group Inc||CME||7.30%||1.76%||Bitcoin Futures|
|Cboe Global Markets Inc||CBOE||6.70%||0.86%||Bitcoin Futures|
|Intercontinental Ex. (1)||ICE||6.80%||1.14%||Coinbase investor|
|Microsoft Corp. (2)||MSFT||6.80%||1.98%||Blockchain (Azure, Ethereum)|
|JPMorgan Chase & Co. (2)||JPM||6.80%||2.68%||Blockchain (hyper ledger)|
|Veritex Holdings Inc||VBTX||5.90%||0.00%||emerging growth co. (JOBS Act)|
|Ottawa Bancorp, Inc.||OTTW||6.10%||1.10%||2-step conversion (growth)|
|Newell Brands Inc||NWL||6.50%||3.02%||Brands|
|Energizer Holdings Inc||ENR||6.50%||2.44%||Brands|
|Cognizant Technology (1)||CTSH||6.50%||0.84%||Future 50|
|Intuit Inc. (1)||INTU||6.70%||1.00%||Future 50|
|Novartis AG (ADR)||NVS||6.70%||3.21%||possible Alcon spin|
|ABB Ltd (ADR)||ABB||6.70%||2.91%||purchased a GE segment|
- Future 50 (also currently own: MA, V)
- Investor Place 10 (also currently own: V, SQ)
- Other Bitcoin/Blockchain indirect investments include: GS, IBM, WU, AMTD
At the very least it will be interesting to observe the Crypto phenomenon in more of a supporting role. I also need to acknowledge Dividend Diplomats whose research on NWL was enlightening.
June was an interesting month in that the Tech sector hit a rough patch, some IPOs had trouble getting out the door and financials had a second wind. Frankly I think a lot of the action had more to do with repositioning as some funds/traders’ positions didn’t perform as anticipated and are now playing ‘catch up’ during the last half of the year. The S&P ended the month up 0.48% while my portfolio recorded a gain of 1.44% largely on the heels of the bank CCAR results. For the first half of the year, I’m ahead of the index by 5.02%.
Headlines impacting my portfolio (bold are owned):
- 6/12 – HYH explores sale of surgical line (infection prevention)
- 6/12 – SBSI acquires Diboll Bancshares
- 6/14 – OUT acquires Dynamic Outdoor
- 6/23 – IBTX sells 9 Colorado branches to TBK
- 6/23 – CM completes PVTB merger
- 6/23 – Upon merger, POT/AGU to be renamed Nutrien
- 6/27 – V takes stake in Klarna
- 6/27 – XRX sells France research center to NHNCF
- 6/29 – MET spin finalized
- 6/30 – OCFC to acquire SNBC
- Added to KSU
- Added to CLX
- June delivered an increase of 31.84% Y/Y with, once again, the vast majority of the increase being attributable to foreign dividend cycles (larger, although less frequent). With one exception this should now be normalized.
- June delivered an increase of 12.4% over last quarter (Mar). The breakdown of the increase is:
- 37.4% replacement for TIS (which paid in April (late) and suspended the div)
- 36.2% April purchase for tax reduction
- 14.8% foreign cycle
- 11.3% purchases from dividends/dividend increases
- For the second month in a row, no new cash invested
- Declared dividend increases averaged 10.82% with 56.5% of the portfolio delivering at least one increase (including 2 cuts and 1 suspension)
- YTD dividends received were 59.58% of total 2016 dividends which if the current run rate is maintained would exceed last years’ total in early November
Note: My portfolio additions have begun migrating back to US equities as the weakness in the US dollar has been faster than I forecast. Unless geopolitical events occur to reverse this trend I suspect fewer foreign issues will be acquired.
MET has declared their spinoff – Brighthouse Financial (BHF) – effective August 4th. Holders as of July 19th will be entitled to 1 share for each 11 MET shares owned.
AGU/POT (Nutrien), SGBK/HOMB remain pending
January saw DOW 20,000 being attained before dropping under once again. The post inauguration euphoria beat a hasty retreat in the wake of record protests, a wave of executive orders and a record number of lawsuits filed against a president in his first eleven days. In finance terms, this uncertainty translated into concerns about the the ability or time required to effect change through the legislative process – in particular tax reform. This month The S&P gained 1.79%. while my portfolio recorded a gain of 3.51% largely due to the final significant merger completing. After a great 2016, I’m making some changes in my 2017 strategy that will (hopefully) accelerate performance in 2018. Meanwhile I’ll be content with a slight win versus the S&P this year.
Headlines impacting my portfolio:
- 1/5 – WMT ends V ban in Canada
- 1/9 – SBUX discontinues Evenings concept
- 1/10 – NWBI divests MD assets to SHBI
- 1/13 – LSBG/BHB merger completes
- 1/17 – ADP acquires Marcus Buckingham Co.
- 1/20 – IRM acquires Kane Office Archives LLC through BK court
- 1/23 – AMC acquires Nordic Cinema
- 1/24 – Executive order moving Keystone (TRP) forward signed
- 1/25 – DOW 20,000
- 1/25 – BLK moves 1T$ from STT to JPM
- 1/26 – JNJ to acquire ALIOY then spin R&D unit to ALIOY shareowners
- 1/30 – GDOT buys UniRush (RushCard)
- 1/31 – BX prices INVH IPO
posts under consideration for Feb are Methods to my Madness Pt 3 update, Anti-Trump strategy, My Coca-Cola strategy and The Commonality Between Trump and Me
- Added to CLX
- New position – CCLAY
- New position – BHB (LSBG merger)
- New position – SWRAY
- January delivered an increase of 15.46% over January 2016. This requires normalization due to PEP and WRE paying in January rather than December, KO paying in December rather than January and BUSE paying in February. On a normalized basis, this represents a Y/Y increase of 3.1% which is attributable to dividend increases (Y/Y). This means my October purchases from merger proceeds were successful in maintaining my Jan,Apr,Jul,Oct income stream.
- January had a 3.0% increase over the prior quarter.
- Declared dividend increases averaged 7.44% with 19.65% of my portfolio delivering at least one raise (1 cut – YUM).
- Dividends received were 9.2% of total 2016 dividends and if the current run rate is maintained would exceed this total around October 15th.
The MET spin (Brighthouse Financial – BHF) remains pending.
Agrium/POT, JNS/HGG.L remain pending