Sunday, December 26, 2021

Portfolio Update and Housing Plans

It is the holiday season, and year end. I decided to write a portfolio update and what is happening from my side as I haven't been writing as much as I wanted to this year. I wish everyone a happy holidays and it is a time to appreciate what we have and celebrate.

In the last few months, as same as before, I have not purchased any new stock except for my dividend reinvestment. In December, I have turned dividend reinvestment off, and am now holding the cash. I have also sold some stock (temporarily) to raise cash for housing down payment. I do have to pay a capital gains tax on this, as many of these positions were held for years, over 95% of the proceeds sold are long term gains, so the tax rate will be 15%.

Currently, my cash position is a bit over $320,000 USD. I have sold a bit over $200,000 USD in stock and still own around $955K in stocks. I tried to sell positions that had lesser capital gains and still keep the positions that had huge capital gains to avoid taxes. A lot of this $200K had capital gains, in total there is around $27K of capital gains. I felt selling some overvalued stock to fund a house, at stock all time high levels, is not too bad of a decision; I still hold a lot of stock still so I am still in the market. My total asset position is still around $1.31M USD, so this cash position is around 25% of my portfolio now. I don't think it's a terrible idea to hold a lot of cash at market highs. 

At the moment, I have gotten Pre-Approval from lenders for a mortgage, but due to the limited inventory in winter it's likely that I will have wait until some time in Spring and Summer when I have a better chance to find a home to live in. I have currently sent offers on 3 homes but the seller did not take the offer. For me, I am in no rush to get a house and overpay to get in quicker, I will take my time to find something I like and of good value. My plans for a home are to own it for the long term, at least 20 years, and I believe with an average 3% appreciation rate per year, and a 20% down payment (5 to 1 leverage ratio), the returns on a home can also be decent low double digit percentage over 20 years.

The following are shares that were sold, some were partial positions sold, some had all positions sold.
- Dominion Energy
- AT&T 
- Colgate Palmolive
- 3M Company
- Kimberly Clark
- Johnson and Johnson
- General Dynamics
- General Mills
- Altria
- Philip Morris
- Honeywell
- Coca Cola
- Medtronic

Although right now the housing market is very heated, my rationale is most of my asset and net worth were in stocks, and stocks have also run up a lot, and I am looking to trade one over-valued asset to another over-valued asset to diversify. Both stocks and housing are over-valued, as are many other asset types. The low interest rate and large money supply have increased demand for all forms of assets. If I were holding cash for many years, I would feel worse if I were buying a house now as my effective buying power is less. But since I had most of my money in stocks over the years, I can now diversify my assets from all stocks to now some stock and some housing. The benefit also, is with housing, I can live inside it and also perform reductions in my taxes. 

Name Ticker Sector Value [$USD] Weight Divies Yield SP Fin VL Fin VL Safety
Microsoft Corporation MSFT Tech $67,862.95 5.07% $500.42 0.7374% AAA A++ 1
Home Depot Inc HD Discret $66,092.92 4.93% $1,051.09 1.5903% A A++ 1
Visa Inc V Financial $59,241.19 4.42% $410.05 0.6922% AA- A++ 1
NextEra Energy Inc NEE Utilities $58,151.79 4.34% $959.23 1.6495% A- A+ 1
Realty Income Corp O REIT $54,415.00 4.06% $2,138.90 3.9307% A- A 2
PepsiCo PEP Staples $47,739.03 3.56% $1,181.73 2.4754% A+ A++ 1
Automatic Data Proc, Inc ADP Tech $43,569.43 3.25% $657.31 1.5086% AA A++ 1
Johnson & Johnson JNJ Health $40,155.21 3.00% $995.25 2.4785% AAA A++ 1
Abbott Laboratories ABT Health $39,366.36 2.94% $503.48 1.2790% A- A++ 1
Altria Group Inc MO Staples $39,215.30 2.93% $2,979.01 7.5965% BBB B++ 3
Procter & Gamble Co PG Staples $36,345.82 2.71% $773.22 2.1274% AA- A++ 1
Clorox Co CLX Staples $35,799.18 2.67% $952.67 2.6612% A- A 2
Mastercard Inc MA Financial $33,510.22 2.50% $164.14 0.4898% A+ A++ 1
Air Products & Chemicals, Inc APD Materials $32,524.09 2.43% $641.37 1.9720% A A+ 1
Church & Dwight CHD Staples $30,943.09 2.31% $304.30 0.9834% BBB+ A+ 1
McCormick & Company MKC Staples $30,446.97 2.27% $428.61 1.4077% BBB A+ 1
Illinois Tool Works Inc. ITW Industrial $30,296.30 2.26% $599.05 1.9773% A+ A++ 1
Xcel Energy Inc XEL Utilities $29,380.77 2.19% $794.19 2.7031% A- A+ 1
Costco Wholesale Corporation COST Staples $28,226.95 2.11% $157.12 0.5566% A+ A++ 1
WEC Energy Group, Inc. WEC Utilities $26,962.72 2.01% $753.30 2.7939% A- A+ 1
Stryker Corporation SYK Health $26,190.71 1.96% $246.81 0.9423% A- A++ 1
Philip Morris International Inc PM Staples $24,520.76 1.83% $1,290.57 5.2632% A B++ 3
Starbucks Corporation SBUX Discret $23,105.27 1.72% $387.16 1.6756% BBB+ A++ 1
The Coca-Cola Co KO Staples $21,751.79 1.62% $617.18 2.8374% A+ A++ 1
Becton Dickinson and Co BDX Health $15,600.74 1.16% $215.88 1.3838% BBB A++ 1
McDonald's Corporation MCD Discret $14,760.85 1.10% $303.95 2.0592% BBB+ A++ 1
Kimberly-Clark KMB Staples $6,394.60 0.48% $204.03 3.1906% A A++ 1
General Mills, Inc. GIS Staples $5,667.66 0.42% $171.59 3.0276% BBB A 1
Dominion Energy, Inc. D Utilities $4,973.08 0.37% $159.52 3.2077% BBB+ B++ 2
Colgate-Palmolive Co CL Staples $2,654.77 0.20% $55.99 2.1092% AA- A+ 1
3M Co MMM Industrial $279.87 0.02% $9.33 3.3328% A+ A++ 1
Honeywell International Inc. HON Industrial $166.25 0.01% $3.13 1.8800% A A++ 1
General Dynamics Corporation GD Industrial $110.78 0.01% $2.53 2.2833% A A++ 1
AT&T Inc T Telecom $27.22 0.00% $2.30 8.4553% BBB A++ 1
Medtronic plc MDT Health $7.55 0.00% $0.18 2.4360% A A++ 1
Misc Type ……….. Partial Totals Weight Yr Dividends Avg Yield …..832 …..9 …..82
Equity Stocks   $976,457.17 72.89% $20,614.58 2.1112%      
Investable US Dollars   $335,164.01 25.02%          
Toyota Vehicle Depreciate   $25,800.00 1.93%          
Miscellaneous Assets   $2,215.20 0.17% $85.00        
. .. Total [$USD] ….. Yr Dividends …..2 …..222 …22 …..223
Total     $1,339,636.37   $20,699.58        

At the moment, housing prices are high I believe due to a few factors. The housing crisis in 2009 removed a lot of builders from the market and there is a hesitancy still to build, so there is a general lack of supply which has not kept up with population and demand. There is also a increase in demand for housing due to work from home and COVID life style. Additionally, the low interest rates and high money supply (government free checks and tenants who didn't have to pay rent for many months due to COVID) are causing buyers to have more available cash to offer on a home. And lastly, a lot of raw materials are of high cost now due to lack of supply, such as wood, appliances, and labor. This means the cost of goods to build a house is higher which increases prices.

Right now the assets are largely in cash. With the biggest stock positions being Microsoft and Home Depot and Visa. MSFT and HD grew to these sizes from their own growth which has been impressive. The stocks that I have sold, I will plan to buy them back over the 2022 time, as my income comes in, as my goal is to recover the dividend lost from selling shares.

The forward annual dividend did take a sharp nose dive due to the stock liquidation this week to reserve cash for a home purchase. My plan is going forward, I will no longer be liquidating any stock and in 2022, more stock will be added into my portfolio to recover the dividends. Although a home does not pay dividends (unless I am renting it out), the home allows me to live somewhere without having to pay rent (although there are still expenses involved like taxes and interest). This value contribution from a home is like a dividend to me, so I think the tradeoff is still worth it, for the cut in dividends in 2022.

The total asset value continues to climb as the stock market continues to rise. At the current level of my portfolio, my income from my job does help but it is no longer the large determination of the growth or decline of my portfolio. The portfolio moves are largely dictated by the market movements as the total size is now over $1.3M USD. 

Happy Investing
I wish everyone a prosperous and healthy 2022 year.

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