Portfolio Update April 2020

The markets have moved up and down since the lows hit in March, 2020. The government has taken a number of moves to shore up the market, including reducing interest rates, back-stopping some industries, and even buying some corporate debt instruments and ETF’s. After some incredible moves up and down, the markets are back to about where they were at the end of Q3 2019.

Portfolio April 12, 2020
Portfolio April 12, 2020

Our stocks mostly went down with the overall market, although some performed better. Specific sectors, like energy and airlines, were particularly hard hit. The Coronavirus is making us reconsider our core assumptions in light of how the market has been performing recently. We may sell out of some sectors to avoid potential further declines.

Portfolio One:

  • Exxon Mobil (XOM) – while well run and with a good dividend, the energy sector is facing significant challenges with reduced oil prices and this stock has been stuck and declining for a decade.  Consider selling.
  • Toronto Dominion (TD) – this is a well run Canadian Bank with trading exposure.  However, banks face unknown challenges with debt defaults and trading commissions have recently evaporated.  Consider selling

Portfolio Four:

  • Oracle (ORCL) – Oracle is famous for being ruthlessly well run and has held up well in the market turmoil.  However, they piled on debt to keep up earnings per share through stock buybacks and are generally passed by in most areas of Technology.  Consider selling
  • Nucor (NUE) – A good company with a good dividend that hasn’t risen in many years even in a favorable regulatory environment.  Consider selling
  • Royal Dutch Sell (RDS.B) – large European oil & gas producer hit hard by oil price downturn.  Consider selling
  • Westpac Banking Group (WBK) – large Australian bank hit by recent market turmoil and other issues.  Has been stagnant or falling for many years.  Consider selling

Portfolio Five:

  • Baozun (BZUN) – Chinese e-commerce enabling company has been down for some time in terms of stock price.  Poised to be successful in future growth.  May want to consider selling
  • Canadian Imperial Bank of Commerce (CM) – Canadian bank with high dividend that has been down more than the market.  Consider selling
  • General Motors (GM) – US car maker hit by reduced demand for cars and fight with the president.  Consider selling
  • Siemens (SIEGY) – German industrial company that is spinning off components and hit with market events.  Consider selling.  May look at buying pieces of the company later post restructuring

Portfolio Six:

  • Baozun (BZUN) – Chinese e-commerce enabling company has been down for some time in terms of stock price.  Poised to be successful in future growth.  May want to consider selling
  • Royal Dutch Sell (RDS.B) – large European oil & gas producer hit hard by oil price downturn.  Consider selling
  • Exxon Mobil (XOM) – while well run and with a good dividend, the energy sector is facing significant challenges with reduced oil prices and this stock has been stuck and declining for a decade.  Consider selling

Portfolio Seven:

  • Baozun (BZUN) – Chinese e-commerce enabling company has been down for some time in terms of stock price.  Poised to be successful in future growth.  May want to consider selling
  • General Motors (GM) – US car maker hit by reduced demand for cars and fight with the president.  Consider selling

Portfolio Eight:

  • Baozun (BZUN) – Chinese e-commerce enabling company has been down for some time in terms of stock price.  Poised to be successful in future growth.  May want to consider selling
  • General Motors (GM) – US car maker hit by reduced demand for cars and fight with the president.  Consider selling

 

Portfolio Four Updated February 2020

Portfolio 4 is 10 1/2 years old.  The beneficiary contributed $5500 and the trustee $11,000 for a total of $16,500.  The current value is $23,284 for a gain of $6784 or 41%, which is 5.6% / year adjusted for the timing of cash flows.  See a summary here or at the links section.

We had 2 sales in 2019 for a long-term loss of ($320) and $361 of dividends.

The current portfolio is doing well.  The stocks on watch are:

  • Box (BOX), a well run software / storage company which has been in the doldrums for a while.  I thought that they could be a takeover candidate which would cause the stock price to rise.  May sell not much happening
  • Royal Dutch Shell (RDS.B) – this oil major has a high dividend but the stock has not done much for years.   Hit with recent oil price declines like the other oil majors.  May sell
  • Nucor (NUE) – we’ve had this US metals company for many years.  While well run, it hasn’t done a lot.  May sell

Portfolio 4 Updated August 2017

Portfolio 4 is 8 years old.  The trustee contributed $8000 and the beneficiary $4000 for a total of $12,000.  The current value is $14,957 for a gain of $2,957 or 25% which is about 5% / year adjusted for the timing of cash flows.  Go here or to the link on the right for more details.

We need to make some decisions on stocks prior to investing:

  • Devon (DVN) – energy company hit hard by the decline in oil and gas prices.  Likely sell
  • Spirit Airlines (SAVE) – discount airlines down recently due to increased competition from major airlines.  May sell
  • Nucor (NUE) – metals company under continuous pressure from cheaper overseas imports.  May sell

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

Portfolios four and five are both five and a half years old. The beneficiary has invested $3000, the trustee $600, for a total of $9000. The fund value is $11,051 for a gain of $2051 or 22%, which works out to about 5.9% / year across the life of the portfolio. You can see the details here or go to the links on the right side of the page.

The portfolio has many dividend stocks and in 2014 earned $341, or a yield of about 3.2% / year. That is a great yield and helps performance over the long term. There were no stock sales in 2014.

Currently we have a few stocks on watch:

– Nucor (NUE) – the US steel maker downgraded its profit targets since the US is being “flooded” with foreign steel from loss making state owned companies (primarily in China). It is surprising that the stock didn’t fall further with this decline in earnings guidance
– Devon (DVN), Royal Dutch Shell (RDS.B) and Statoil (STO) have all been hit by the crashing price of oil. Also Shell and Statoil are in UK Pounds and Norwegian Kroner and both of these currencies have declined vs. the US dollar, which adds to the difficulties. For now we are holding on to these although they also are on watch
– Coca Cola Femsa is the latin America (Mexico mainly) distributor of Coke. It has been hit by the declining peso like all foreign investments. We will hold but likely put a collar on this stock in case it falls much further. Would be good to have investments in Mexico since it is a rising economy

Portfolio Four Updated October 2014

Portfolios Four and Five are each 5 years old, with the beneficiary contributing $3000 and the trustee $6000, for a total of $9000.  The current value is $10,856 for a gain of $1856 or 20%, or about 5% / year adjusted for the timing of cash flows.  Check the detailed spreadsheet here or on the links to the right.

We will watch the new holdings Coca Cola FEMSA (hit by rising US dollar) and LinkedIn (hit by recent turmoil in internet stocks).  We also have seen some declines lately in oil stocks caused by drops in the price of oil (there are three in the portfolio, Devon, Statoil and Shell).  Finally, Nucor came above our purchase price after years of waiting and has dropped 15% recently on fears of a global slowdown.

New Stop Loss Orders

Our stop loss orders have expired.   I went through the stocks and picked out a few more per portfolio.  These expire in 60 days (6/3/14) or if they are executed.

Portfolio One

Twitter (TWTR) is at $44.  Put in a limit at $35.  The stock has dropped since we purchased it and is very volatile.  Twitter got dumped on by the market and fell quickly, hit limit and we sold

Portfolio Two

Splunk (SPLK) limit at $60.  This stock has been a great portfolio but don’t want to ride it too far down.  Hit limit and sold off.  Note the stock has continued to fall far below this number, into the 40’s. Glad we sold.  At some point may look to get back in the stock

– Facebook (FB) limit at $50.  Same as Splunk.

Portfolio Three

– Splunk (SPLK) limit at $50 per above.  Hit limit and sold off

– Baidu (BIDU) limit at $140, has been down since we’ve bought it

Portfolio Four

– Nucor (NUE) limit at $46

– Seaspan (SSW) limit at $18

Portfolio Five

– Seaspan (SSW) limit at $18

– Baidu (BIDU) limit at $140, has been down since we’ve bought it

Portfolio Three

– Seaspan (SSW) limit at $18

– Baidu (BIDU) limit at $140, has been down since we’ve bought it

 

 

Revised Stop Loss Orders

Generally these portfolios are roughly balanced between US stocks and overseas stocks (ADR’s bought on US Exchanges).  Recently there has been a shakeup in the overseas markets, as their currencies have begun falling vs. the US dollar (which drives a corresponding drop in the value of the stock since we receive value based on the US currency).

As such we’ve been evaluating the stocks and stop orders outstanding, and are adjusting the stop loss orders to reflect the downside risk (some already realized) on non US stocks.  Since we try to limit stop orders to 1/3 of the stocks available (or less, ideally) we are going to take the stop loss orders off some US based stocks.

Here are the new stop loss orders (and existing ones have been canceled and replace with new ones looking 60 days out rather than having them expire at odd dates).

Portfolio One

  • Urban Outfitters (URBN) – keep at 35 (don’t want to ride this back down) Executed
  • Philip Morris International (PM) – keep at 80 (had a big run, don’t want to fall below) Executed
  • Taiwan Semiconductor Manufacturing (TSM) – keep at 15 (same)
  • CNOOC (CEO) – now at 159.. at 150 (Chinese stocks have been hit by the emerging market currency issues and also potential defaults with the “trust” vehicles).  SNP, another Chinese oil company, hit its stop loss target and sold off Executed
  • WIPRO (WIT) – at 12.88 – make at 12 (WIPRO has had a great run, but the Indian rupee is also at risk)
  • Yandex (YNDX) – at 38, – make it 35 (Yandex had a good run, but now the Russian ruble is also subject to emerging market contagion) Exccuted

Portfolio Two

  • Urban Outfitters – URBN – at $35 (don’t want to ride this back down) Executed
  • Yandex (YNDX) – at 38, – make it 35 (Yandex had a good run, but now the Russian ruble is also subject to emerging market contagion) Executed

Portfolio Three

  • Urban Outfitters (URBN) – at $35 (don’t want to ride this back down) Executed
  • CNOOC (CEO) – now at 159.. at 150 (Chinese stocks have been hit by the emerging market currency issues and also potential defaults with the “trust” vehicles).  SNP, another Chinese oil company, hit its stop loss target and sold off Executed
  • Cliffs Natural Resources (CLF) – now at 19.33… at 18.  Cliffs was hit hard recently and we want to put a floor on this.

Portfolio Four

  • Nucor (NUE) – from $41 to $55, now $48.  At $46 KEEP
  • Seaspan (SSW) – from $15 to $25, now $21… At $18 KEEP

Portfolio Five

  • Seaspan (SSW) – from $15 to $25, now $21… At $18 KEEP
  • Yandex (YNDX) – at 38, – make it 35 (Yandex had a good run, but now the Russian ruble is also subject to emerging market contagion) Executed I thought this was set up but I missed it.  Now at $38 again will set one up at $35

Portfolio Six

  • Seaspan (SSW) – from $15 to $25, now $21… At $18 KEEP
  • Yandex (YNDX) – at 38, – make it 35 (Yandex had a good run, but now the Russian ruble is also subject to emerging market contagion) Executed

New Stop Loss Orders Entered

Back in October we set up some stop-loss orders.  None of these orders were executed because the market has been up since then (for my stocks, at least).  Since the orders didn’t occur they were free to set up and it is free when they expire (or I cancel them).  We did “pull the trigger” on some stocks that have been on watch (Riverbed, Bancolumbia).

Stop loss trades are good for 60 days, and then they expire.  Given that the market has been on a tear, it makes sense to set up some more stop loss trades in case we move into an extended downward phase – I don’t want to watch the run-up and then watch them go back down.

While there isn’t a “rule” on stop losses, I am going to make some now.  In general:

– I don’t want more than 1/3 of a particular portfolio in “stop loss” mode (this may not apply if you have only a few stocks, like 4 or 6).  These are long term investment vehicles, and I don’t want to deal with re-buying an entire portfolio after a 10% small market correction

– If a stock needs to be sold, then sell it, don’t use stop losses as a wimpy sales mechanism.  We did clean up a couple of stocks that were on watch recently

– Remember that while stop loss orders can prevent you from taking a big loss, they also take you “out of the market” if it goes right back up

– Sales near year end will generate gains that may generate additional taxes for the government.  In general these portfolios are not as tax sensitive because they are owned by individuals who don’t pay much in taxes but if we had a big selloff it could cause them to pay some additional amounts to Uncle Sam

– Finally, remember that money sold off needs to be re-invested.  Back in 2007 I sold off some stocks that made big runs, and we did well and many of the stocks haven’t reached their pre-crash peaks.  However, that money has to be re-invested, and often the stock you pick is as over-valued as the one that you are selling.  This isn’t a free lunch…

Portfolio 1 – 20 stocks

  • Urban Outfitters – URBN – at $35 (don’t want to ride this back down)
  • PM – recently dropped from $92 to $85… Stop loss at $80
  • SNP – went from 70 in July to 90 then down to $84.  Stop loss at $78
  • TSM – was down to $12 then up to $20 now at $17.  Stop loss at $15
  • CMCSA – from $37 to $50… a big run… At $44
  • EBAY – big rise and then recently from $58 to $52…  at $47

Portfolio 2 – 18 stocks

  • Urban Outfitters – URBN – at $35 (don’t want to ride this back down)
  • SI – from $82 to $131…  At $123
  • SNP – went from 70 in July to 90 then down to $84.  Stop loss at $78
  • WYNN – from $94 to $164… at $150
  • FB – $20 to $51, now $47… at 43
  • SPLK – $26 to $75, now $72… at $65

Portfolio 3 – 10 stocks

  • Urban Outfitters – URBN – at $35 (don’t want to ride this back down)
  • SI – from $82 to $131…  At $123
  • WYNN – from 94 to 164… at $150
  • SPLK – $26 to $75, now $72… at $65

Portfolio 4 – 10 stocks

  • NUE – from $41 to $55, now $51.  At $46
  • SSW – from $15 to $25, now $21… At $18

Portfolio 5 – 9 stocks

  • SI – from $82 to $131…  At $123
  • SNP – went from 70 in July to 90 then down to $84.  Stop loss at $78
  • SSW – from $15 to $25, now $21… At $18

Portfolio 6 – 4 stocks

  • SSW – from $15 to $25, now $21… At $18

 

Portfolio Four Updated November 2013

Portfolios Four and Five are both four years old.  The beneficiary contributed $2500 and the trustee contributed $5000 for a total of $7500.  The value is $9284, for a gain of $1784 or a 24% gain, which is 7.2% / year.  The portfolio can be viewed here or in the links on the right.

There are ten stocks in the portfolio, with 4 overseas stocks and 6 US stocks.  The portfolio is getting to the point where changes in one stock won’t significantly impact the total value overall.

The portfolio is doing well, with Nucor on a stop loss to not go below the original purchase price (it was underwater for several years) and for Oracle because it is near a multi-year high and facing cloud competition.  The positions are generally doing well, with Westpac (Australian bank) and Wal-Mart the best performers.

 

Stop Loss Trades Entered

Update – since the market has kept going up, none of these stop / loss orders has been triggered. This is a good thing. We will leave the orders out there and may re-calibrate them based on the new highs. We only put stop losses on stocks where we thought that either they were near a top or a stock that we’ve had a long term issue with and I wasn’t going to sink all the way back down once it had gotten to break even.

The market has been on a nice rally. Some of the stocks that we’ve held on to for years we’ve given up on (Alcoa, and Exelon a while back) while others we are now putting on “watch” and have a “stop loss” price where they will automatically be sold when the market hits a certain price.

In general, these portfolios are managed as if they have a long time horizon. We will stay invested in the stock market over the entire haul. However, we will watch for stocks that have either stagnated for a long time or may be entering a period of secular decline. Finally, some stocks we’ve nurtured back from earlier lows and I won’t be able to take watching them fall back again.

The last time we put this strategy in play was before the stock crash in 2007-8. We did sell some high flying Chinese stocks that never recovered those high prices again. However, you have to re-invest the money so even selling at a high doesn’t mean that you won’t necessarily lose money; it means you took the gain off the table (or avoided the loss) and then started with a NEW stock that was possibly over-valued at the time of your initial purchase. There is no free lunch, and that is why we employ this strategy sparingly.

How a “stop loss” works is that if a stock hits a certain price, a sell order is immediately issued. It doesn’t mean that it will sell exactly at that price (for instance if your stop loss is at $34 then that is when the order is triggered but it could get filled at $33 or any other price in that range depending on how quickly it is moving down). There is a variant with a “limit”, where you stop at $34 but say something like you don’t want it selling below $33. In that case, if the stock plunges on past your stop and the only offers are at $32, nothing at all happens. In my case I went for the simpler “stop loss” order.

These orders are outstanding for 60 days. After that time they expire, unless renewed. The hope is that the stock market continues to rise and we never trigger ANY of these orders. At that point I will review the market again and determine if I want new stop loss orders for these or different stocks and how to proceed next based on conditions and my specific stocks.

Stop Loss Trades Entered

Portfolio 1

URBN 28 shares at $34 good til December 6

Portfolio 2

ORCL 30 shares at $30 good til Dec 6

WYNN 6 shares at $150 good til Dec 6

URBN 23 shares at $34 good til Dec 6

Portfolio 3

WYNN 6 shares at $150 good til Dec 6

URBN 28 shares at $34 good til Dec 6

CLF 44 shares at $17 good til Dec 6 (updated)

Portfolio 4

ORCL 26 shares at $30 good til Dec 6

NUE 14 shares at $45 good til Dec 6

Portfolio 5

RVBD 30 shares at $13 good til Dec 6

No stop loss orders were entered for Portfolio 6

Portfolio Four Updated August 2012

Portfolio Four has been updated through August 2012 you can see the sheet here or on the right side of the page. The beneficiary contributed $1500 and the trustee $3000 for a total of $4500 over three years. The portfolio value is $5201 for a gain of $701, or 15.6% or 7% / year since inception.

Portfolio Stocks

Westpac Banking (WBK), an Australian bank, has done well especially with the rising Australian dollar and a high dividend. Wal-Mart has also done well and Nucor (NUE) the non-union US steelmaker, is under its price but has come up from its lows.

Stock Portfolio Review

In any portfolio it is good to keep and eye out for stocks that have had a big run up and might be at a point to sell as well as stocks that have dropped and don’t seem to have a chance to come back in the near term. We also watch for stocks that are just stagnant.

While we don’t rapid-trade in these funds we do rebalance occasionally. I am looking to re-balance before we buy stocks again as part of the annual purchase process (I contribute $500, they contribute $500, and then I “match” $500 for a total of $1500 every year) which happens at the end of the summer. Since many stocks are held in more than 1 portfolio I only describe them one time.

Portfolio One

– Urban Outfitters – low debt, seemingly well run, has recently had departure of top executives. Holding on a bit to see if they can turn things around since drop already priced in. if they don’t turn around by end of summer will drop

– Procter and Gamble – has been a core of the portfolio for a long time with a strong dividend. The CEO recently had a bad conference call and the company hasn’t been growing much when compared to rivals

– Canon – has been a good long term performer but Japan still refuses to have a stock market rally. Need to look at this more but want to have some Japan exposure

– Comcast – held on for a long time when the stock did nothing or tanked because believed in broadband growth and they also added and boosted their dividend over the years. Will watch to see if now it is over valued after the run up

– Ebay – another stock that did nothing for years and went down but finally came back. No dividend but basically a bet on pay pal since they sold Skype. Will look into this some more may want to take profits

– Exelon – the nations’ biggest nuclear utility. Now getting beat because of the low price of natural gas. This hurts coal much more than nuclear because nuclear always runs but it limits its profits, as well. They just took over a big Eastern utility. Will keep holding but watch

– Wal-Mart – recently ensnared in a bribery case. Given their massive size it didn’t move their stock price that much. They have been buying back shares aggressively and boosting the dividend which increases profits per share. On watch

– Philip Morris – had an immediate, great run up. Also a good dividend. May want to see for gains

Portfolio Two

– Also Urban outfitters, Wal-Mart

– Wynn – took almost a 20% hit out of the gate with the share holder dispute issue. Has regained half that loss. Still a great play on China gambling. Will watch

– Siemens – had a big run up but now back to break even. OK run but subject to Euro issues and overseas expropriation and potential corruption issues. Will watch

– Diageo – had big run up and fall, much of which was caused by gyration of UK currency vs. US dollar. Up now at some point may take profits

Portfolio Three

– Also Urban Outfitters, Siemens, Wal-Mart, Wynn

Portfolio Four

– Also Wal-Mart, Exelon

– Nucor – a well run metals company in the US that is subject to vagaries of US economy as well as foreign price competition. Will watch but hate to part with it because it is well run but may not be able to sustain high valuation (see Southwest Airlines)

Portfolio Five

– Also Seimens

– Alcoa is a company like Nucor, well run but hit hard by foreign competition and international prices and demand. Like Nucor would benefit from US rally post “great recession” but that never really materialized. Will continue to watch

– Riverbed – a company with high growth prospects that lost 30% of its value in a single day when they slightly missed their earnings. Held on and since they have hung on at about the same price. Will hold through an earnings release or two seems transient not permanent

Portfolio Four Updated March 2012

Portfolio four has 2 1/2 years of history. The beneficiary has contributed $1500 and the trustee has contributed $3000 for a total of $4500.

Today the portfolio is worth $4925 for a gain of $425, or 9.5% or about 4.5% / year over the life of the portfolio.

When stocks have unrealized or realized gains plus dividends of over $200 I mark them “green”, and when they have unrealized losses minus dividends of over $200 I mark them “red”. Right now there is nothing green or red in this portfolio.

Nucor (NUE) is a well run non unionized steel company with a rising dividend. Unfortunately steel companies are very dependent on the economic recovery and NUE is still below where we bought it. Since it is a well run company with a rising dividend we are holding on to it.

Statoil (STO) and Westpac Banking (WBK) are both foreign ADR’s, one from Norway and one from Australia. They are both denominated in non US currencies so if the US dollar falls they will rise in value. They too are both doing well so far in the limited time we’ve owned them.

This portfolio hasn’t had any “sells” yet (just buys) so taxes are simple, just dividends and a tiny amount of interest income (a few cents). There were no foreign taxes withheld because Australia (Westpac) doesn’t withhold on US dividends, although Statoil (STO) will when they pay out in May 2013.

Update – what is interesting is that the article I linked to previously showed Australia withholding at 30%. However, there were no taxes withheld on Westpac (WBK). I started doing some research and it was hard to figure out if their tax treaty with the US meant that there was an exception to the usual 30% withholding, it wasn’t clear, but I assume that my brokerage firm knows what they are doing. Foreign withholding is an area of interest to me so I will try to research it some more as time allows. For now my brokerage firm is not withholding on WBK.

Portfolio Four Update August 2011

Portfolio is one of two (4 and 5) that began 2 years ago.  They started after the 2008 market crash but just got caught up in the 2011 market turbulence, which took them down a bit like everyone else.

Portfolio 4 beneficiary invested $1000 and the trustee invested $2000 for a total of $3000.  The current value is $2858 for a return of negative (4%) or about negative (3%) / year when adjusted for the timing of cash flows.  This portfolio was above “break even” before the recent market turmoil.

This portfolio has NUCOR (NUE), the US steel company.  The company is down significantly but I am not inclined to sell it because it has a good dividend and seems well valued at its current price, with new plants coming on line.

Portfolio Four Updated December, 2010

Portfolio Four began last year and this is the start of the second year of investing, with a total contribution to date of $3000. The performance has been roughly flat, and with four stocks in the portfolio it is subject to changes based on the price change of a single stock.

These newer portfolios benefit from free commissions and no costs; a slight offset is that the interest rate that they receive on cash is minuscule due to today’s rock-bottom low interest rates.

A couple of stocks on watch in this portfolio – NUCOR (NUE) is a non-union US steelmaker that has traditionally been well run. While I thought stimulus spending would raise demand, NUE missed guidance in Q3 and is trending down, although this is partially offset by an excellent dividend. Will monitor this stock and recommend a sale if it doesn’t turn around. Also on watch is Exelon, the utility stock with large nuclear holdings that would have benefited significantly from cap and trade (because they own low emission nuclear plants and this would cause the price of coal to rise, earning them windfall profits). Down the road at some point EXC should be worth a lot as generation in the US starts to keel over, allowing the remaining base load assets to earn monopoly profits (since we aren’t building any more and wasting our time on marginal alternative technologies). We will continue to monitor EXC as well.