Portfolio 3 Updated April 2017

Portfolio 3 is 9 1/2 years old.  The trustee contributed $5000 and the trustee $10,000 for a total of $15,000.  The current value is $17,483 for a gain of $2,483 or 16%, which is about 2.7% / year when adjusted for the timing of cash flows.  You can see the detail at the links on the right or go here.

The portfolio is generally doing well.  We will consider selling ConocoPhillips (COP) which has been selling off assets to pare down debt and reduced their dividend.  Their stock has stabilized but this may not be the best oil play.  We are also sticking with ExxonMobil (XOM) which we bought near a high because that company has proven to be well run over the last few decades.

In the new “analytics” tab you can see that this portfolio has a heavy non-US component, with 62% of stocks from non-US countries.  We have 2 of the 3 major Chinese internet companies and also 2 large Canadian banks, among others.

Portfolio Six Updated October 2015

Portfolio Six is four years old.  The beneficiary contributed $2000 and the trustee $4000 for a total of $6000.  The current value is $5572 for a loss of ($427) or (7.1%), or negative (2.9%) / year.  See details here or use the links on the right.

Like many of the portfolios, the commodity price collapse has impacted these stocks.  Exxon Mobil (XOM) and Royal Dutch Shell (RDS.B) are both well run companies working to cope with lower oil and natural gas prices and to protect their dividends and long term interests.  Seaspan (SSW) is a Chinese shipper with a very high dividend of 9% that it is currently maintaining.  Finally, Coca Cola Femsa (KOF) is the Mexican Coke bottler which has been negatively impacted by the fall of the Mexican Peso vs. the US dollar.

Portfolio Three Updated October 2015

Portfolio three is eight years old, with the beneficiary contributing $4500 and the trustee contributing $9000, for a total of $13,500.  The current value is $13,243 for a loss of ($256) or (1.9%), which works out to an annual return that is slightly negative (0.4%) / year.  See the details here or use the links on the right.

The portfolio has had some stocks move against us lately.  Wal-Mart (WMT), an historically strong performer, recently came out with 3 year stock guidance that showed low growth and the stock went down.  Wynn (WYNN), a gambling company with strong interests in China, was also adversely hit by the Chinese governments’ crack down on money laundering and VIP gamblers.  Exxon-Mobil (XOM), the energy giant, has gone down tied with the commodity bust.  Yahoo (YHOO) is up overall but down from recent highs and is mainly a value play on its Alibaba (BABA) stake.

We will look at selling some of these stocks as part of our 2015 new stock purchase planning.

Portfolio One Updated October 2015

Portfolio One is our longest lived portfolio, at 14 years.  It started right after 9/11 and has tracked the ups and downs of the stock market since then.

The beneficiary has contributed $7000 and the trustee $15,500 for a total of $22,500.  The current value of the portfolio is $34,648, a gain of $12,148 or 54% since inception, at a rate of about 5.5% / year.  To date dividends have contributed over $5000 towards the value of this portfolio.  You can download the portfolio here or go to the links on the right.

For the year to date, the portfolio stocks are down about 7%, compared with the S&P 500 being up 2% and the non-US index down about 6% (in US Dollar terms).  The portfolio is roughly half US and half non US and the increased downturn is due to our concentration in resource stocks and some currencies that depreciated significantly vs. the US Dollar.

There are 19 stocks in the portfolio, with an average value of about $1700.  The largest position is Exxon (XOM) at about $3000 and there are 2 stocks under $1000, Statoil (STO) and Trans-Alta Corporation (TAC).  It isn’t a co-incidence that STO and TAC have been hit by the recent commodity price downturn (Exxon too, although not as much).  The goal would be to have less than 20 or so stocks in the portfolio.

There has been a lot of volatility in the market and we’ve been holding off on selling to see how the dust settles.  We may make some sales prior to reinvesting the new stock selections for 2015.  Items that we are considering for sale are TransAlta (TAC), Yahoo (YHOO), Garmin (GRMN), and Wal-Mart (WMT), although we don’t want to make hasty actions based on short term moves (this mainly applies to Wal-Mart).

Stock Sales Summer 2015

We have been watching the markets and trends and there are some stocks that we will cull prior to the next round of investing.

Coca-Cola Femsa (KOF) – this is basically the Mexican and Latin American Coca-Cola distributor.  Per their last earnings release:

“As beverage transactions continued to outpace volumes across our operations- reinforcing our daily consumer engagement – we are encouraged by our operators’ positive performance in the midst of a challenging environment, marked by weak consumer trends in Brazil, a slowly recovering consumer landscape in Mexico, and currency volatility across our markets. On a comparable basis, we delivered high single-digit consolidated revenue growth and double-digit operating income growth during the quarter.”

What they mean by “comparable basis” is that the currencies of Mexico, Brazil and other countries such as Argentina have collapsed and they are still making a lot of sales but the sales are worth less when they are converted into the US dollar or some other index as they were in prior periods.

So what do we do?  Do we hold on and wait for the dollar to fall and / or their currencies to rise?  The company seems well run (they have growing transactions) and Coca-Cola is never going away, and these countries have a rising middle class and growing populations (unlike most of the world) to consume more goods in the future.

Royal Dutch Shell (RDS.B) – Shell has been pummeled by the commodity price slump.  They are also based in the UK / Europe so they face an additional currency overhang when translated into US dollars.  They also were “acquirers” of a natural gas company in the midst of these events which means they paid a premium price in a time of decline.  The most worrisome element, however, is that they continue their high risk plan of drilling for ice in the volatile and difficult arctic, at a time of reduced oil prices (which makes high cost investments like deep water drilling even riskier).  They also have a relatively higher chance of environmental catastrophe which will be very difficult to clean up given the paucity of local resources and the ferocious environment in the far north.  They are a sell.  If we want to “buy low” in the oil or natural gas business there are better candidates.

Trans Alta (TAC) – Trans Alta is a Canadian power generator.  They have strong exposure to coal and also the Canadian commodity boom / bust which consumes much of their electricity.  They pay a strong dividend (for now) but it has been reduced as the company struggles.  Future dividend cuts would impact the company even further.  Given the combination of the poorer Canadian economy and currency, the dire forecast for coal, and the commodity bust, this is a sell.

Wynn (WYNN) – Wynn is a gaming operator with operations in Macau, the only area of China where their gambling-mad citizens are allowed to play.  There are also many other more subtle elements to this infatuation with gambling including an ability to move currency out of the country, which is otherwise difficult to do.  Recently the new Chinese premier (dictator?) has cracked down on certain types of ostentatious corruption (generally among those who are not politically allied with him, since “corruption” is embedded into all aspects of their command economy) which has hurt gambling.  But Wynn is a shrewd operator and he is expanding capacity and likely this too, shall pass.  It is hard to sit while revenues and profits decline, however.

Exxon (XOM), Statoil (STO), and Devon (DVN) – these energy giants (Exxon is the biggest, but Statoil is unique since it is from Norway, and Devon is smaller but well run) have all been hurt badly by the reduction in oil and natural gas prices.  For now, unlike Shell above, I think it makes sense to stick with them.

Seaspan (SSW) – Seaspan owns container ships that travel between China and overseas destinations and has been investing in a new, fuel efficient fleet.  Seaspan has a very high dividend (8%) which they have been able to sustain so far.  On the one hand they seem to be a good operator but overall Chinese exports are faltering and if there is a general fall in the market they likely will still be able to rent out their newer, fuel efficient craft but the rate that they would receive would be correspondingly lower.  This one is on the edge.

Westpac Banking (WBK), Canadian Imperial Bank (CIB), Toronto-Dominion Bank (TD) – the first bank is Australian and the latter two are Canadian.  These banks are generally well run but all have been hit by the depreciation of their currencies vs. the US dollar, and the fact that they are exposed to real-estate “bubbles” in the Australian and Canadian markets.  As the commodity markets fall, the entire country can be hit with reduced services, demand and an overall high level of debt.  These are on watch.

Portfolio Six Updated March 2015 – And It’s Tax Time

Portfolio Six is our newest portfolio, at 3 1/2 years. The beneficiary contributed $1500, the trustee contributed $3000, for a total of $4500. The current value is $4530, for a gain of $30, or 0.7% or 0.3% / year across the life of the fund. You can go here for details or download the spreadsheet at the links on the right.

In 2014 we earned $122 in dividends, for a yield of over 3%. In an era of no interest on deposits, that is very good. We sold one stock in 2014, Yandex, the Russian search engine, for a slight loss at $35. The stock subsequently tumbled down to $14 with the impact of Russian sanctions and the crash of the Russian ruble.

Two of the stocks are oil stocks – Exxon Mobil and Royal Dutch Shell. When oil prices fell from over $100 / barrel to under $50 / barrel (which no one saw coming, at least not the formal analysts) these stocks fell. However, they are both well run companies and pay solid dividends and we plan to hold them for the longer term, unless new adverse events occur.

Two of the other stocks remain under pressure – Coca Cola Femsa, which sells Coca Cola and other beverages in Mexico and Central America, has fallen with the decline in the Mexican Peso vs. the US dollar. Mexico is a good long term growth market but this is on watch. Seaspan, the Chinese shipper, also fell but their very high dividend (7.3%) is still holding up.

Baidu (the Chinese internet company) and Procter and Gamble are both doing well.

Portfolio One Updated March, 2015 – and it’s Tax Time

Portfolio One is our longest lived portfolio, at 13 1/2 years. I remember the first day we invested very well – it was right after 9/11/01, and the markets were closed for a few days. The beneficiary’s mother asked me if investing was the right thing to do and I said that we had a long run out in front of us.

Portfolio One has a value of $34,875. The beneficiary contributed $6500 and the trustee contributed $14,500 for a total of $21,000. The gain has been $13,875 or 66% since inception, which works out to approximately 6.9% / year. You can see performance here or use the link on the right sidebar.

It’s tax time. The brokerage sends a nice form. Over the years this has gotten easier as they have the cost basis on the stock for each sale and whether it is a short or a long term gain. Apparently you have to buy the higher level Quicken if you need to do any individual stock sales which probably means that the average American filer doesn’t have much at all in terms of stock gains or losses (in a non-retirement account) and that is sad. Likely in the old days all you had to do was leave your money in a bank account and earn some interest but nowadays I don’t even receive a tax form for interest for these accounts anymore because we literally earn 2 cents / year for the cash on hand in these individual accounts.

We had dividends of $816.17 and long term losses of ($165) and short term losses of ($801). In 2014 we sold Twitter, CNOOC, Urban Outfitters, Yandex, Philip Morris and China Petroleum. Not that we have the benefit of hindsight at the time we make sales like this but of the 6 we sold all but one (Twitter) are below the price right now of where we sold them.

Of the stocks we currently hold, most are pretty far above their cost basis, except for Statoil (the Norwegian oil company) which was hit like all oil companies by the fall in the price of oil and then there was a double whammy because the US dollar appreciated against the Norwegian Kroner which means that the stock price hit is magnified in US terms (it did better on the local exchange if you were a Norwegian holding your investments in Kroner). Our most recent tranche of Exxon is also down but overall that is a good stock to hold for the long term with a nice dividend and a ruthless and focused executive team.

The dividends number is nice. Every year this portfolio earns almost $900 in dividends, on about $34,000 invested in stocks of average, (the cash returns interest, which is zero),for about 2.6% yield. Since cash returns zero as we discussed above this is how you earn any sort of income anymore – you need dividends back from your stock. Qualified dividends receive a lower tax rate – it doesn’t impact the beneficiary as much as it impacts us – but for some reason not all dividends qualified. It turns out that you have to hold the stock for 60 days to receive the tax benefit and often there is a first dividend payment before we hit that date.

I pass on all this information to the beneficiary and now they are adults and they need to do their own taxes. That is a sign of adulthood when you finally realize how much taxes you pay every year to social security, medicare, the Federal government, the State government, etc…