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…

Portfolio One Updated August, 2014

Portfolio One is our longest lived portfolio, at thirteen years.  It started right after 9/11/01.  The beneficiary has contributed $6,000 and the trustee $13,500 for a total of $19,500.  The current value is $33,739 for a gain of $14,239 or 73%, which works out to approximately 8% / year.  Go to the link on the right or here for a detailed spreadsheet of the holdings.

The stocks in the portfolio are doing well.  We took a big hit on Twitter earlier in the year when the e-commerce and web companies were hit hard and sold but it’s bounced up a bit since then.  Generally we are doing well overall and don’t have any stocks with stop loss orders (for now).

There are 17 stocks in the portfolio and $2205 in cash.  Assuming that $500 is contributed by the beneficiary and the trustee contributes $500 and matches $500, there will be $3705 available for investing.  We will select two stocks in the cost range of about $1800 and try to keep the total number of stocks in the portfolio under 20 or so (would be 19).

Stocks in the News

I try to check on the portfolios every couple of days and also watch for news stories about our portfolio companies.  Today I saw the following article about our natural gas company Anadarko with the scary title “Anadarko to Pay $5.15 Billion in Largest Ever Environmental Contamination Settlement”.  This sounds like bad news, right?

When I checked on the stock price, it had gone up by almost 15% on news of the settlement.  Apparently the market had already “penciled in” a much bigger cost and this was viewed as “good” news.

On the other hand, Twitter has been going down recently on various negative news and analyses.  Since the stock is so highly valued, as a multiple of revenues and profits, any sort of analytical approach can come up with widely different results (by contrast, a company such as Exxon generally trades within a narrower range). 

Stock Selections – February 2014

Due to recent stop orders being triggered it is time to select additional stocks for all but one of the six portfolios.  My goal is to select stocks and purchase them so that we can update the portfolio information in line with the need to file taxes by April 15, 2014 (although many of the portfolios don’t need to file because the beneficiaries don’t meet minimum income requirements between these funds and other earnings).

As the individual portfolios get larger, we want to keep the number of individual stocks manageable, so these portfolios will generally have larger purchases of a single stock than multiple stocks at smaller quantities.  The goal is to keep the number of stocks in each portfolio between 10 – 15 stocks, so smaller portfolios will buy in smaller quantities until they hit the 10 number, and the larger portfolios will buy larger positions when they hit the 15 number.

Stock Purchases by Portfolio: 

Portfolio 1

– 3 stocks at $2000 / each

Portfolio 2

– 1 stock at $1700

Portfolio 3

– 2 stocks at $1100 / each

Portfolio 4

– No purchases required

Portfolio 5

– 2 stocks at $700 / each

Portfolio 6

– 1 at $800

 Portfolio Selections for February 2014

US Companies

KO – Coca-Cola – $37, 52 week range ($37-$43), 3% yield, $164B market cap, $37B debt.  Coca-Cola is the worlds’ most iconic beverage brand.  They had some recent issues and their stock fell and this could be a buying opportunity for a well-run company with a good dividend.

APC – Anadarko Petroleum Corporation – $82, 52 week range ($73 – $98), 1% yield, $41B market cap, $14B debt.  Anadarko is a leader in US oil and gas development and there are continuing opportunities with the rising price of natural gas and US oil.

AVA – Avista Energy – $30, 52 week range ($25 – $30), 4% yield, $1.8B market cap, $1.5B debt  Avista is a well run utility in the Pacific northwest.

TWTR – Twitter – $56, 52 week range ($39 – $74), no dividend, $30B market cap, almost no debt.  Twitter is one of the main players in the modern internet.

GRPN – Groupon – $8, 52 week range ($4 – $12), no dividend, $5B market cap, no debt.  Groupon is attempting a comeback from recent issues and has come up substantially from market lows.

CVC – Cablevision – $16, 52 week range ($13 – $20), 4% dividend, $4B market cap, $10B debt.  Cablevision is run by the wily Dolan family and may be part of industry consolidation.

Non-US Companies

BHP – BHP Billiton – $70, 52 week range ($56 – $76), 3% dividend, $188B market cap, $38B debt.  BHP is a well run global commodity company based out of Australia.

TAC – TransAlta Corp – $12, 52 week range ($12 – $16), 4% yield, $3B market cap, $4.5B debt.  TransAlta is a Canadian energy company that recently cut their dividend and plans to spin off some market segments but provides energy to the growing Alberta market so this may be a buying opportunity.

BIDU – Baidu – $172, 52 week range ($82 – $185), no dividend, $60B market cap, $3B debt.  Baidu is an iconic Chinese internet company.  Their price is near the top of the range.