Thursday, February 22, 2018

Recent buy: MMM

Market is cheaper. There are some good deals around, wish I had more cash. Each dollar invested now pushes my annual dividend up much higher than before's purchases.

Bought $1200 of 3M

Monday, February 12, 2018

Recent buy: MMM, ITW, GD

The last two weeks have been a godsend for me. I am seeing 10% discounts across the board for some high quality companies that have absolutely no change in fundamentals. I have no idea why the market is reacting the way it is. Some say it's because of rising interest rates. Others say it's due to margin calls due to over leverage on the volatility derivatives. To me, the companies I own have still the same fundamentals a month ago as they do now, and I do not see any danger in any of the companies I own in regards to their dividend payout ratios. All that has changed for me is the lower purchase price which makes buying a lot easier as yield % have gone up on every single company. This makes every single dollar that I put to work now much more effective than the dollars I deployed a month ago. Everyone is panicking but I do not understand the mindset. I am finding the opportunities given in this period to be positive especially given the tail winds many of these companies are experiencing (i.e. lower tax rates and repatriation and expanding markets and weaker dollar).

My strategy this time is to load up on the highest quality dividend paying companies in sectors that I am too underweight in. Since I have around 1/3 my portfolio in consumer staples, I want to pay less attention to that sector. I will focus on industrials (6% weight) and healthcare (14% weight) first. Since these more cyclical sectors tend to have a higher beta, they should have larger pull back percentages than pullbacks seen in the consumer staples space. Materials (1% weight) and Tech (2% weight) are sectors I will also be looking at but those are sectors I do not have such a high priority in. I only have so much money to go around when buying. For financials (9%) I will be only looking at Visa and Mastercard which to me are very expensive and I already have quite a lot of both (their yields % are quite low for me), so those two are lower priority.

For REITs, I do not plan to add more in the short term. I will only reinvest the high % dividends. REITs do not do so well in rising interest rates and I have enough position in "O" to make me happy. I do want more utilities, it's one of my favorites sectors. However I think there is more room to fall given the headwinds and negative narrative of rising interest rates. The companies in that sector are just way too overvalued given the rising rate environment. There's better names elsewhere to get with a higher growth rate for the same P/E ratios than sticking to the overvalued companies in the utilities sector. The only exception I would say is NEE which I always am looking forward to add. I prefer to prioritize purchasing companies that I feel have a higher propensity to "spring" back up due to a positive growth environment (industrials and defense companies for example) instead of companies that will have a negative narrative (rising interest rates) looking forward for a long time.

Today I bought:
$457 - MMM
$422 - GD
$322 - ITW

All three are industrials that pulled back recently.

Friday, January 26, 2018

Recent buy: APD

APD yields 2.60% when I bought it. I bought 6 shares so around $1014.

APD just raised its dividend a massive 16%. They also just announced earnings. The guidance going forward was boosted as expected due to tax changes. Revenue was up 18% Y/Y. And they beat by 14cents out of 1.79$ which is impressive. The shares were down 2.75% when I bought them so I took the opportunity to add more to a dividend aristocrat after a beat and raise, I never can understand the logic or moves of the market.

Wednesday, January 24, 2018

Recent buy: JNJ

I bought JNJ after the 4% dip when announcing earnings. I felt the report was good and JNJ continues to excel, as usual.  One of the highest quality companies on Earth. AAA balance sheet.

I added 9 shares at around $142 or $1278 total.

Monday, January 22, 2018

Recent buy: Utilities and AT&T and others

These shares were purchased last week on 1/19/2018.

SO was sold in taxable account: $2579.
T was bought in its place: $2698
SO yields a bit lower than T when I bought T.
Commission for above was $0

WEC: $1400 bought in 401k
Commision for this transaction was $7.95

Rest of purchases are in taxable account. The trades are free with due to the balance of my account with my broker.

TJX: $157
T: $111
HD: $200
MKC: $100
WEC: $126
XEL: $135
MA: $167
MMM: $248
ITW: $172
ADP: $121
NEE: $150
D: $75

Friday, January 19, 2018

December 2017 Portfolio Summary (Year End)

I'm a little late with my 2017 year end portfolio summary post. So I will post using data as of today. My portfolio is growing and 2017 was a very healthy year for the market. New policies from the new Trump administration have benefited businesses. From lower regulation, repatriation, and lower corporate taxes, the stock market is surging to all time highs. The cyclical business names are on fire and rising every day, it is nearly impossible to buy these types of companies at fair prices anymore. The more defensive sectors have not run as quickly but have benefited no doubt. Due to the growth in 2017 of all sectors, my portfolio has reached all time highs. Buying companies at previous old price target numbers is now impossible. Almost everything is expensive and I have to now re-calibrate my price targets with future outlook in mind, since most American companies are now having huge tailwinds from the tax cut. The economy of the world has also grown very nicely in 2017 and the outlook for 2018 is positive, which fuels the growth.

For 2018 I am expecting higher dividend raises due to the lower tax rates and repatriation and more buybacks to fuel earnings per share growth. Also for 2018, I am expecting rates to go up as the Fed is going to have to start hiking due to all the growth in the economy. As rates go up, I expect high yielders and debt heavy industries like Utilities and REITs will see their prices fall (although utilities I have to say will benefit a lot from the reduced tax rate from high 30%s to low 20%s), presenting good buying opportunities. In 2018, I am expecting my portfolio's average yield to go down. It has already moved from an average of 3.0% yield when I started to 2.5% right now. As prices rise above the rate of dividend payout increases, the yields start to fall which makes me sad because each of my stock purchases in 2018 won't be able to contribute so much dollar in income as they used to.

I will start off with a chart of the S&P500 this year. The chart is quite incredible. Although I am more after the income stream my investments can generate for me, I cannot lie and say I am not enjoying the large rise of my assets on paper. From the chart above (Jan 20 2017 to  Jan 19 2018), the S&P500 has gained a massive 24% and this does not even include the dividends.

Thursday, January 11, 2018

Trump's new tax rates and my portfolio

One may have their own personal opinions about Trump. But one thing is certain. He is making me a lot of money at the moment. He is a businessman and his approach to running the White House definitely is benefiting big business. When businesses succeed, the owners of those businesses (the shareholders) succeed. I expect large dividend increases, M&A, earnings expansion, and large buy backs in the coming months or years.

Under the new president, tax rates are now 22% (or something much lower) compared to the high 30%s that used to burden USA businesses. I ran through my portfolio checking what the average taxes paid for each my companies are. The numbers are averages, and I tried to ignore one time expenses or charges (one offs).

I found a lot of companies that are centered in the USA (not so much international) will benefit severely from this tax change. I expect they will profit handsomely and my price targets have changed quite drastically for these names. A lot of these are brick and mortar, utilities, restaurants, or companies that operate solely in the US and are based in the US (no shady tax dodging overseas setup).

Name Ticker Sector       Value   Weight        Divies      Yield Tax Rate
TJX Companies Inc TJX Discret $6,297.55 1.45% $102.39 1.6259% 38%
WEC Energy Group, Inc. WEC Utilities $3,886.67 0.90% $135.10 3.4759% 38%
Ross Stores Inc ROST Discret $15,017.97 3.47% $116.42 0.7752% 37%
Home Depot Inc HD Discret $24,501.88 5.66% $448.05 1.8286% 36%
Visa Inc V Financial $23,736.68 5.48% $154.49 0.6509% 36%
Altria Group Inc MO Staples $37,889.92 8.75% $1,423.10 3.7559% 35%
Southern Co SO Utilities $2,669.53 0.62% $136.87 5.1271% 35%
Church & Dwight CHD Staples $7,423.49 1.71% $114.28 1.5394% 34%
Xcel Energy Inc XEL Utilities $7,395.83 1.71% $233.96 3.1634% 34%
AT&T Inc T Telecom $10,904.35 2.52% $597.83 5.4825% 33%
Starbucks Corporation SBUX Discret $7,574.30 1.75% $151.49 2.0000% 33%
McDonald's Corporation MCD Discret $5,647.95 1.30% $131.60 2.3300% 33%
Dominion Resources, Inc D Utilities $8,302.07 1.92% $335.53 4.0415% 32%
Automatic Data Proc, Inc ADP Tech $8,290.95 1.92% $178.30 2.1505% 32%
Clorox Co CLX Staples $6,891.90 1.59% $163.09 2.3664% 32%
Colgate-Palmolive Co CL Staples $4,672.54 1.08% $100.28 2.1462% 32%
General Mills, Inc. GIS Staples $3,782.93 0.87% $127.64 3.3741% 32%
NextEra Energy Inc NEE Utilities $16,860.53 3.89% $440.28 2.6113% 31%
Kimberly-Clark KMB Staples $8,717.29 2.01% $300.12 3.4428% 31%
Mastercard Inc MA Financial $12,788.33 2.95% $79.47 0.6214% 30%
Illinois Tool Works Inc. ITW Industrial $8,468.05 1.96% $156.33 1.8462% 30%
General Dynamics Corporation GD Industrial $3,288.16 0.76% $53.76 1.6350% 30%
Philip Morris International Inc PM Staples $34,320.42 7.93% $1,400.83 4.0816% 28%
3M Co MMM Industrial $13,252.73 3.06% $257.06 1.9397% 28%
Kraft Heinz Co KHC Staples $5,001.72 1.16% $162.12 3.2413% 28%
McCormick & Company MKC Staples $11,956.95 2.76% $246.24 2.0594% 27%
Becton Dickinson and Co BDX Health $17,517.72 4.05% $232.72 1.3285% 26%
PepsiCo PEP Staples $15,822.45 3.65% $435.90 2.7550% 25%
Abbott Laboratories ABT Health $3,556.11 0.82% $67.56 1.8999% 25%
Procter & Gamble Co PG Staples $9,243.78 2.14% $283.00 3.0616% 23%
The Coca-Cola Co KO Staples $8,417.12 1.94% $270.58 3.2146% 23%
Air Products & Chemicals, Inc APD Materials $5,987.53 1.38% $133.86 2.2357% 23%
Johnson & Johnson JNJ Health $26,849.50 6.20% $623.07 2.3206% 19%
Medtronic plc MDT Health $8,211.31 1.90% $176.24 2.1463% 18%
Stryker Corporation SYK Health $4,616.59 1.07% $54.72 1.1854% 17%
Realty Income Corp O REIT $13,619.44 3.15% $651.83 4.7860% 1%

I think this corporate tax policy will benefit greatly all corporations that are over 30% tax rate which is the majority of the portfolio. From 36% to 22% tax rate is a huge boost to margins. That extra money is such a huge windfall for these large companies that opens the doors for numerous possibilities for growth. I expect a huge spike in earnings and this will likely result in more expansion, M&A, higher dividends, and large buy backs. All excellent for shareholders! Companies that are based overseas with low taxes (like MDT) or not tax impacted (like REITs) will not benefit.

There seems to be a large sector rotation away from defensive names (like staples and utilities) and more towards super cyclicals, think industrials and energy and materials and discretionary and technology. This has led to a lot of companies I consider Core to fall back to levels I am particularly interested in, especially considering the major tax cut. I am specifically eyeing the Staples and Utilities sectors, but will consider minor additions to other sectors.

Happy investing