Portfolio One Updated Feb 2021

Portfolio One is our longest lived portfolio at 19 1/2 years. The beneficiary contributed $5000 (net of withdrawals) and the trustee $19,000 for a total of $24,000. The current value is $86,099 for a gain of $62,099 or 259%, which is 10% / year when adjusted for the timing of cash flows. Go here or to the link on the right for more detail.

During 2020 we had $650 in dividends and two sales for a net long term loss of ($802). We sold Toronto-Dominion Bank (TD) and Exxon Mobil (XOM).

The portfolio is doing well overall. A couple stocks to watch are AEP (utilities have been down for years) and Alibaba (BABA) due to political turmoil in China.

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

 

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.

Follow up on 2012 Stock Picks

Every year we select six stocks for each portfolio to choose from, and they generally each buy two stocks (sometimes three if cash has piled up from previous sales or dividends). We picked six stocks and then we added one more as a mid-year replacement for stocks that were sold. The selections were:

1. PCS Wireless (no ticker, sold) – had a good run up when it was bought up by T Mobile. This is what we were hoping for
2. Facebook (FB) – recommended at its nadir, now nearly back up to its IPO price (almost a 100% gain)
3. Procter & Gamble (PG) – had a 20%+ run up, plus pays a good dividend
4. Sasol (SSL) – went up over 10% with a good dividend, was also hurt by the relative strength of the US currency vs. the South African Rand
5. Toronto-Dominion Bank (TD) – a small gain and good dividend
6. Royal Dutch Shell B Shares (RDS.B) – a small loss, decent dividend, also hurt by UK currency vs. strong dollar

Our replacement stocks (mid year) to add to portfolios after sales were:

7. SPLUNK (SPLK), a technology stock, that went up over 50%, in about half a year
8. Garmin (GRMN), the GPS company, that went up over 10% in half a year (with a good dividend)
9. Wipro (WIT), an Indian outsourcing company, that went up a couple percent and has an OK dividend – it was hurt earlier by currency changes and a general hit to Indian outsourcing firms caused by a perceived decline in Western business contracts.

The Dow and S&P 500 both went up about 20% plus dividends over the same time frame. The non-US benchmark VEU (a Vanguard ETF) was up about 10% plus dividends over the same time frame (usually about half of our stock picks are non US companies, buying through ADR’s).

Thus those picks did well for 2012, probably a bit higher than the benchmarks when adjusted for the time value of money (half a year of SPLUNK helps). We hope to do as well as this with our 2013 picks.

It’s Stock Picking Time (for 2012)

We traditionally select stocks at the end of the summer, before the beneficiaries go back to school or off to college (or even graduate school). This allows the a chance to earn money over the summer because the equation is 1) trustee contributes $500 2) beneficiary contributes up to $500 3) trustee matches up to $500. The matching concept has worked well at aligning interest in these investments because it is “their” money, too.

SIX STOCKS FOR 2012

1. Facebook (FB) – oversold, still has enormous momentum long term

2. Royal Dutch Shell (RDS.B) strong dividend (5.4%), good cost control, focus on liquid to oil. No foreign withholding on “B” ADR shares because they are out of the UK which has zero withholding (this is a UK ADR)

3. Metro PCS (PCS) – plays on no prepaid plan smartphones, buyout candidate (right size)

4. P&G (PG) – great consumer products company, being shaken up, good dividend (3.3%)

5. Toronto Dominion Bank (TD) – top North American (US and Canada) bank in terms of safety, dividend of (3.4%), good financial performance (this is a Canadian ADR)

6. Sasol (SSL) 4.51% – can play Africa growth and also gas to fuel synthetic gap to leverage low gas prices (this is a South African ADR)