The month was relatively crazy with geopolitics driving the highs and domestic lunacy driving the lows. In between were relatively strong earnings and interest rates inching higher driving the question of the bull market sustainability. Personally, I’m not overly concerned yet but Marco Rubio‘s “implication that Republicans have found no good answer to the problems Mr Trump described is irrefutable.” may be an omen of things to come. Meanwhile, I took advantage of some dips and stayed the course. April saw the S&P rise 0.27% and my portfolio outperformed the index by registering a rise of 0.65%! YTD I still lag the S&P by 0.43%.
A few days late since Easter got in the way with the markets being closed March 30th and dividends not being posted in a timely manner. FX transactions were also delayed impacting my final accounting for the month and quarter. This month the DOWs first quarterly loss since 2015 grabbed the headlines while the news getting my attention was the rising Libor particularly with its potential impact on adjustable rate mortgages and business loans. March saw the S&P drop 2.69% and for the first time this year my portfolio outperformed the index by registering a drop of 0.06%! YTD I still lag the S&P by 0.81%.
- Added to PWOD, WU and ABB
- Initiated a position in VLVLY
This is where my main focus resides. 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 amount of semi-annual, interim/final and annual cycles have been steadily increasing.
- March delivered an increase of 39.79% Y/Y fueled by dividend increases and purchases. In particular, my December buys were almost exclusively March payers.
- March delivered a 11.44% increase over last quarter (December).
- Dividend increases averaged 11.25% with 40.3% of the portfolio delivering at least one increase (including 1 cut (GE) and 1 suspension (DST see M&A).
- 2018 Dividends received were 29.3% of 2017 total dividends putting us on pace to exceed last year in early November.
Spirit Realty Capital (SRC) – Mar 6, Form 10 was filed publicly with spin completion targeted for 1H 2018.
Jan 13 – DST announced it was merging with SS&C for $84 cash per share. As part of the merger agreement, the dividend has been suspended – the merger received shareholder approval on March 28th. I expect the deal to complete in April or May.
Jan 31 – XRX announced a merger with Fujifilm for stock and $9.80 in cash.
A few others are rumored to be in play including Humana and Shire.
With my March call being spot on (… it appears we’re getting a preview of March Madness in the form of a Trump induced possible trade war.) the Paychex jobs data (small business) released this morning is keeping me in a cautious mood. Yes it is only a one month view showing fewer jobs – but small businesses are supposed to be the economic driver in Trump World. Perhaps it’s an aberration – but one to keep an eye on. Overall a good month in spite of tariff uncertainty.
Hope all of you had a good month as well.
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
Being in bed following a minor medical procedure yesterday brought me full frontal to the shenanigans playing out on the ‘news’ shows. Edited clips framed to curry favor depending on the audience is the rule. No longer can we – the consumer – decide whether a story is right or wrong without blatant editorializing. As Sammy Davis, Jr. aptly stated in reference to The Huntley–Brinkley Report, “My only contact with reality. Whatever I’m doing, I stop to watch these guys.” (Life magazine, 1964). Or as Warren Buffett writes in his recent letter, “… media reports sometimes highlight figures that unnecessarily frighten or encourage many readers or viewers.”
My contact with reality was found in the (probably edited) recitation by our president of the lyrics to a song in his speech to CPAC members.
“Oh shut up, silly woman,” said the reptile with a grin
You knew damn well I was a snake before you took me in
The Snake by Oscar Brown, Jr., 1963
Applause erupted, a pregnant pause ensued, before he mentioned the words “immigration”. I really thought he was referring to himself for a minute. But it does provide a decent lead into this weeks’ post.
The market came out of the chutes and barely looked back this month, the catalysts being the realization of the tax plan’s impact on corporate earnings and few earnings reports being significant disappointments. The lower tax rates started trickling into paychecks (average about 3.5%) but the average gas price nationwide increased by roughly 5% primarily due to the weakness in the US dollar (caused in part by the prospects of increased deficits from the tax plan that haven’t been offset by jobs, productivity or GDP gains yet). At least we can watch commercials touting unrealized benefits even though it is way too early for any tangible impact to be realized. Kind of makes me wonder a little. For the month, the S&P index increased by 5.62%% while my portfolio value increased by merely 3.81% putting me behind by 1.81% to start the year. Continue reading
Nothing like trying to wrap your head around a convoluted deal before the first cup of morning coffee. This one is likely tailored to provide an exit strategy for activists Carl Icahn and Darwin Deason. The end result is that Fujifilm Holdings (FUJIY – 4901.TSE) will acquire majority ownership (50.1%) of Xerox (XRX). This will be accomplished by Fuji Xerox first buying Fujifilm’s 75% stake in the current Fuji Xerox / Xerox joint venture followed by Fujifilm buying 50.1% of ‘new’ Xerox shares.
When completed (July/August 2018), the entity will retain the Fuji Xerox name, be traded on the NYSE (probably XRX) and shower existing Xerox shareholders with an estimated $9.80 special dividend in addition to a minority ownership stake.
Even though this combination is of two troubled companies, with cost cutting and synergies this could evolve into an interesting arrangement – particularly if R&D is applied more towards emerging technologies (think the AI/AR space). The other question is the dividend scheme where Xerox pays quarterly (Jan/Apr/Jul/Oct) and Fujifilm pays on an interim/final (Jul/Dec) cycle. The old Xerox annual dividend rate has been affirmed on a continuing basis.
While I already obtained what I was after in this investment with the prior Xerox spin of Conduent (CNDT), with the special dividend this moves from a slight loss on the books to a 5.3% gain. I’ll continue to monitor this one as it progresses but my guess is this will be my first Japanese holding albeit gained through a back door approach.
The upward trend continued this month with catalysts being the tax plan and holiday sales. My guess remains that the first half of 2018 will be good for corporations (i.e., dividends and buybacks) with a shift in focus later with deficits and mid-term elections playing a leading role. I remain convinced the yearlong weakness in the US Dollar will continue and expect to allocate more cash into foreign equities during the first half 2018. I will review this plan as my personal tax implications become clearer. For the month, the S&P index increased by .98% while my portfolio increased by 3.29% largely fueled by Financials (again). For the year the S&P increased by a stellar 16.26% while I came in at +20.58%! The S&P return with all dividends reinvested adds about 2.41% which my hybrid approach still beat.