Portfolio One Updated July, 2018

Portfolio One is almost 17 years old.  The beneficiary contributed $2000 net (of withdrawals) and the trustee $16,000 for a total of $18,000.  The current portfolio value is $42,930 for a gain of $24,930 of 138%, which is approximately 7% / year when adjusted for the timing of cash flows.  You can see the detail here or on a link on the right.

This portfolio has moved over to the beneficiary and the former trustee now has agency so that we can take advantage of free trades on the former trustee’s account.  We are now at a phase where it makes sense to consider making some sales to take “risk off” on the account.  In addition, cash yields about 1.85% “risk free” in a money market account, so the impact of leaving money in cash is less impactful (it used to be earning effectively zero).

Here are the stocks that we are considering selling:

  1. Tesla (TSLA) – Tesla is a highly risky and volatile stock.  There is enough information out there about this stock to fill 10+ blogs like this.  As a result it is under consideration for selling
  2. Anheuser Busch Inbev (BUD) – This giant multi-national beer company is well run by the G3 group out of Brazil.  But growth has been hard to come by because they are gigantic and they are battling the high end craft beer in the USA and cheaper alternatives abroad
  3. WIPRO (WIT) – This Indian outsourcer has a low dividend and hasn’t been making much of a return.  A candidate for selling
  4. Wal-Mart (WMT) – Massive retailer in battle for its life with Amazon.  Starting to acquire other companies and expand e-commerce footprint to compete.  May want to take earnings and move on
  5. Illinois Tool Works (ITW) – ITW has been a great stock for many years.  They acquire companies and integrate them and have earned above average returns.  They recently have had some worse earnings results and maybe it is time to take gains off the table and move on
  6. Comcast (CMCSA) – While Comcast has a hellish reputation, they have been a good stock.  Down a bit and under pressure, maybe it is time to take our gains and move on
  7. Ebay (EBAY) – Ebay was an amazing pioneer.  After the spin off of PayPal (PYPL) which is doing great, they’ve not done super well, and seem far removed from most top-of-mind Internet conversations.  Perhaps it is time to sell off remaining eBay

There are 19 stocks in the portfolio (we bought Exxon Mobil XOM twice at two different purchase prices so we show them separately and it looks like 20 stocks if you count the lines).  They are not all of equal weight – they range from about $1300 to about $4300, but the average ($43k / 19) is a bit over $2000.

If all the above stocks were sold, that would be about 33% of the portfolio.  At that point we could determine how much to keep in cash (perhaps all, or maybe just $10k of it) and how much to re-invest.  These sales would result in gains but they would not be too significant; they are all long term sales and the maximum rate is 15% for long term capital gains (and this only applies to the “gain” portion, which would be relatively small for these stocks).  Would calculate a more exact amount if we were specific on what was being sold.

We executed this plan in August and will determine what to do with the proceeds.

 

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