Q2 is over and not much has changed. The very same problems in world economy are still in place. Markets are close to all time high valuations but there’s increasing discussion about recession or worse. I’ve successfully eliminated effectively all debt within the portfolio and the question remains: should I keep building cash reservers or look for investment opportunities? There are some interesting possibilities such as Wärtsilä corporation (dropped today on earnings but long term energy mega trend story is still there) or EPR properties (new REIT position with monthly and relatively high dividend). On the speculative growth side there’s the Second Sight Medical Products which I’ve been looking at as a speculative brain-machine-interfacing position.
Q2 results didn’t contain any major surprises. Dividend income was 3047 EUR before taxes which can be compared to 1824 EUR year before. Solid growth mostly fuelled by additional investments.
First quarter is now over and it can perhaps be best described as unexpectedly quick rebound from previous quarter. Main dividend portfolio value increased over 15% in value during the quarter. Received dividends totalled 1442,40 USD including one time extra dividend from BHP Billiton. Main problems are still in place as the trade war tensions between US and China have not been resolved and the brexit resolution was once again pushed forward. Main portfolio is currently in maintenance mode in order to deleverage while waiting for better opportunities and some kind of resolutions for the main problems in global economy. One extra ingredient in this are the local elections which might end up changing the local tax environment from quite bad to extremely bad. This remains to be seen.
Busy day today. Apple Inc. posted a revenue cut yesterday and dropped post market and today. I was tempted to add on it but decided to execute a swap with remaining Diageo shares. I sold all the remaining 30 shares for 138,53 USD per share. In retrospect I should have sold all of the shares back when I sold the first 20 shares but that’s not a big deal. I still consider the the valuation to be a bit stretched and yield is on the low side though growing. I deployed some of the money back to Sampo Plc and Apple Hospitality REIT – both equipped with seemingly much better valuations and yields. I bought additional 100 shares of Apple Hospitality REIT for 14,19 USD per share and 30 shares of Sampo Plc for 38,36 EUR per share.
Now that I’ve exited the whole Diageo position it’s time to check to results. I bought to original 50 shares for 5497,98 USD and sold the shares for the total of 7048,17 USD. Realized capital gains were therefore 1550,19 USD before taxes and commissions. Total dividends received came in at 435,01 USD before taxes. This is a result I’m very pleased with. I still like the company and it’s very likely that I’ll buy back these shares if the price comes down to 110 USD per share range.
Another year has passed and it’s time to take a look at the results. Sentiment really changed towards the end of the year and we saw quite dramatic volatility. The problems however are the same old ones: Trump presidency & trade war tensions, weak EU & brexit and possibly slowing global economy. There’s no doubt that we have been closer to the end of the cycle than to the start of it. Who knows when the real turn will happen – it could be happening already or it might still be years away. Looking back at the results, it’s clear that I got what I wanted and managed to follow the strategy I’ve set to myself.
- Fourth quarter dividend income was 1 514,51 EUR (992,23 EUR during Q4/2017)
- Dividend income for whole year was 5 373,07 EUR (4 450,93 EUR during FY2017)
- Primary portfolio performance was -0,36% during the whole year
- Debt ratio was maintained at or close to the planned 10% of the portfolio market value
What will happen in 2019 then? I don’t personally expect big changes going forward. We are likely to see even extreme volatility on index level but I don’t see strong reasons for changing the existing strategy. I will continue to buy and will aim to make at least one purchase per month for the main portfolio. For the secondary portfolio I’ll probably make one small purchase per month or one per quarter at the minimum. ETF portfolio will get a small buy each month and will be funded from the primary portfolio dividends.
I’ll keep an eye on few things: high yield companies with reasonable debt loads (as we might see mainly sideways movement for the next couple of years), quality companies with significant cash positions (which might be thrown overboard when the overall market tanks and which are in great position to deploy cash during a downturn) and advanced technologies such as brain-machine-interfacing, fuel cells & hydrogen economy. High yielding candidate could be e.g. Apple Hospitality REIT or Nordea Bank. Quality companies with significant cash positions would be the likes of Apple Inc. or Berkshire Hathaway. Advanced technologies will be much more difficult to cover. NEL is obvious candidate and it might be accompanied by PowerCell Sweden. Brain-machine-interfacing will require extensive analysis if I intend to find a suitable for addition for the secondary portfolio.
Another quarter passed with pleasing results. Dividends received consisted only of US dividends an totalled a nice 900,76 USD. Last year Q3 dividends were 680,11 USD in total. Primary portfolio value increased 9,65% during the quarter. Four purchases in three companies were made for the primary portfolio: Apple Hospitality, Telia Company and Europris. None of the existing equities were sold. Solid quarter even though the trade war is still very much in play and Euro zone problems are starting to raise their ugly heads once again.
Second quarter is over without any major new developments but ongoing issues are plenty to handle – trade war debate is going strong, European Union has plenty of political problems stemming from immigration issues and North Korea is still looming in the background. Given these issues the quarter was quite stable for both of my portfolios: roughly 6% capital gains in value (compared to previous quarter) and 1 824,24 EUR in pre-tax dividends.
- Gjensidige Forsikring (220 shares)
- Citycon (1200 shares)
- Diageo (20 shares)
- AT&T (40 shares)
- Sampo (50 shares)
- VEREIT (200 shares)
- Johnson & Johnson (13 shares)
- Lockheed Martin (4 shares)
- 3M (20 shares)
- Philip Morris International (25 shares)
- Nordea Bank (90 shares)
- Loudspring (200 shares)
First quarter was red one and surprisingly full of event as the trade war rhetoric increased towards the end of the quarter. Other than that there wasn’t really major changes in the portfolio – mainly unplanned Apple and Citycon purchases, exits from General Mills and Yara and move into portfolio maintenance mode. In general these events have been the long awaited for market correction – on personal level that is. Global economy will be hurt from such stupidity but it’s robust enough to survive the way it always has. Meanwhile we are getting closer to valuations triggering once again multiple purchases. Let’s see if we get there during the next quarter, until then I’ll remain in maintenance mode.
Dividend income increased quite nicely from 929,31 EUR to 1 224,73 EUR (before taxes). This consisted of new purchases but also from quite solid dividend increases from existing positions. This dividend income together with new capital has reduced the portfolio debt quite quickly. If there are no surprises I expected to eliminate portfolio debt during third quarter.
Fiscal year 2017 is coming to an end so it’s time to look at the results. This time around there were multiple significant events but none of those had massive short term effect on the market. Trump won the presidential election and first year has been interesting, tensions in the Korean peninsula escalated a bit and Catalonian independence remains unclear. Then there’s the hype like Bitcoin and cryptocurrency boom which will not end well for some of the participants I suspect. Predicting the future is always a bit difficult but I’d guess that none of these issues will truly be resolved during FY 2018. I’m also expecting Euro zone to face again the underlying problems hidden by the ECB. We might see a mild market correction but I wouldn’t expect a full recession until well into the 2020’s. My personal assumption is that ECB fails to significantly raise the interest rates before the next recession. I expect the interest rates to be below 3% when the next recession forces ECB to lower them again. Having said that, I’m also interested in reducing the debt I’m carrying as a defensive measure. That’s because I believe more in defence that I do in predictions.
In the portfolio FY2017 was quite boring. Pre-tax dividend income was 4 167,45 EUR which is a solid increase from the previous year’s 3 186,27 EUR. Adjusted and currency converted portfolio value didn’t change much as it increased merely 0,15% which clearly is a loss compared to (almost any) index. This is quite insignificant for me as this is pretty much defensive and income oriented portfolio but added margin of safety would have been nice bonus. Market valuation being in general all time high, I’ve moved the portfolio once again to a maintenance mode. Currently I plan to slowly add on Fortum and Loundspring positions while using majority of the new cash to improve the debt level. This is possible due to the secondary brokerage account I opened in Nordea Bank as they have pricing model which allows small transactions with acceptable fees. I’ll also consider selling some assets to eliminate the portfolio debt but that remains to be seen. Potential elimination list contains VEREIT (turnaround play with legal issues, original target price close to 11 USD per share), Hennes & Mauritz (sector I have mixed feelings for in general) and Nordea Bank (once there’s suitable M&A taking place).
Third quarter is over and done with. Major events impacting the portfolio during this quarter were the still ongoing tensions with North Korea, Nordea deciding to propose moving HQ to Finland and Fortum buying a major stake in Uniper. All this didn’t cause much fluctuations in portfolio value, rather minor swings back and forth and closing with 1,32% gains. As a preparation to the Nordea decision I’ve built a bit overweight position on the company via Sampo. I don’t see that as a huge problem as both are quality companies which act as a hedge against eventually rising interest rates. Therefore it’s not likely that I would sell neither one unless there’s a major overvaluation which would justify such a thing. However I did sell my stake in Fortum with a nice profit. News on the Uniper deal drove the share price up and since this deal increases the involved political even further, I didn’t see any problem in selling out. I might be interested in buying back the shares around 14 EUR (sold at 17,20 EUR) per share but that’s a big if. Political risk was significant before but this will take it to a whole new level.
Another short term target was to eliminate some of the debt which was a bit on the high side and above my target level. Selling my stake on Fortum made this possible even though I initiated a new position on Apple Inc. In this market situation I’d be inclined to reducing the debt even further but there are some interesting valuations to pursue as well. As I don’t see a clear mechanism for major market correction (as I ever would if one was coming) or quick changes in the interest rates, I might just as well keep the debt level target as is and keep investing as long as I can find reasonable valuations in quality companies.
Pre-tax dividends were 680,11 USD compared to 487,01 USD year before. Nothing special there, pretty much as expected. Perhaps the most positive thing was the increase from BHP Billiton which is turning around nicely. Last year they paid 39,20 USD for my 140 ADR shares and this year much nicer 120,40 USD which I expect to go up next year.
Second quarter is gone without any major issues. During this quarter I decided to move the portfolio into a conditional maintenance phase. With this I’m aiming to reduce the portfolio debt which is on the high side after a recent debt restructuring. Conditional in that sense that I will anyway buy additional shares if companies in my watch list drop below my thresholds. While waiting for that I’ll use majority of new capital to pay down the debt and in addition make few mainly small maintenance purchases. Once the debt level hits the targeted 0.1 D/E ratio I’ll replan my purchases. Given the current market situation I would kind of prefer having the debt ratio at 0.05 level or even eliminate the debt completely.