Groundhog day – Pandemic Edition continues. Yet another boring quarter has passed and handling of the pandemic is still as poor as it has been throughout the pandemic. Speaking of Finland in many ways EU of course. As expected, US appears to bounce back like a dead cat from trampoline which makes us look even worse than usual.
This quarter was quite slow one. I made only few maintenance purchases and sold some of my NEL shares. This was mainly caused by the market situation but also by personal reasons as running & resolving my late father’s estate and associated inheritance details took quite a lot of time. This will have significant impact on second quarter as well. Timing with NEL was spot on but I’ve been holding back on buying back the shares. In general I’ve kind of moved towards reducing portfolio risk which might continue going forward. This should leave the door open for significant moves in my personal finances later. I’ll likely do just minor maintenance purchases and possibly sell some growth or non-core positions.
Dividend income during the quarter was 1284,37 EUR before taxes. Dividends have recovered quite nicely from the hit caused by pandemic. Quite a few REIT are still to restore the dividends and ECB is pushing back bank dividends but these will hopefully resolve themselves before the year ends.
This is once again something I might regret later but I trimmed my NEL ASA position today and sold 1000 shares for 33,63 NOK per share. Cost basis for these was 4.6 NOK per share. Quite nice profit in that sense. There’s really no specific reason for this. I just decided to take some of the profits now. My long term view really hasn’t changed as I still consider NEL to be a buyout target for bigger players. In current environment it’s really difficult to say when that might happen – if it will happen at all – but the sector in general is likely to boom for years to come. I would also be amazed if there’s no significant pullback in the near future. Some of the sector plays have gone through the roof lately and correction there would probably pull NEL down as well. I might buy back these shares (and then some) should that happen but let’s see. For now don’t mind holding some cash.
Everything comes to an end eventually. Probably 2020 will not be missed by many. Pandemic is still ongoing concern even though vaccinations are in progress. Even in developed countries the progress seems to be a bit asymmetric and EU in general seems to be lagging behind a bit. US elections were held and results can be considered final even though some aftershocks are still coming. Brexit was also “finalised” but it seems to be a gift that keeps on giving for years to come. In general pandemic together with brexit revealed something fundamental about EU community. As a result of those events I’m slightly more convinced that EU and Euro as currency will start to break down sooner than later. I don’t anticipate it to happen very quickly but quicker than I thought before. This kind of uncontrolled step towards federalization without a real mandate – and for fundamentally incompatible national economies – will eventually bite us in the ass. I’m guesstimating a timeframe of 8-15 years until this really starts to hit us.
Fourth quarter was somewhat expected kind of quarter. Dividend income compared to previous year was impacted negatively by the pandemic and reduced, eliminated or postponed dividends. Fourth quarter dividend income was 1078,82 EUR before taxes compared to 1 343,74 EUR in 2019. ECB also continued the dividend ban for banks and other financial companies so previously postponed dividends were not paid during this quarter. It is possible that some of those will be paid during 2021 but it’s likely that those and additional since then cumulated profits – buffered dividends if you will – will be heavily capped by ECB. I fear that this ECB decision will be as effective as pissing in your pants in freezing temperatures. FY2020 dividends before taxes were 5040,06 EUR compared to 6769 EUR in FY2019. Primary portfolio market value was hit very hard during the pandemic due to heavy REIT allocation for which recovery is still in progress: 12 month change in dividend portfolio value was −16,43%, fourth quarter change was +6,08% but this paper loss was partially compensated by the secondary growth portfolio.
FY2020 was still a success in personal finances. I tracked my overall savings rate for the whole year and managed to save 73,7% off all my income. That’s a figure which would be hard to beat consistently. I also end the year with portfolio debt to equity ratio of 0,004 which significantly below the 0,1 target average. Plenty of liquidity available for 2021 but in current environment it’s difficult to make any moves. Plan is to keep adding consistently with focus at least on healthcare sector and Swedish dividend stocks. It’s likely that I’ll let cash to to build up a bit but let’s see how the first quarter unfolds.
Not that much has changed compared to previous quarter. Global economy is mainly dominated by still ongoing COVID-19 pandemic and BLM protests in US as they prepare for presidential elections. There were ups and there were down during the quarter. Index level recovery has been surprisingly quick one. Personally my portfolio is still down mainly due to the heavy REIT allocation. Lately I’ve been holding back a little bit as the elections are likely to provide some turbulence together with second – and third – corona wave.
Dividend income before taxes during Q3 was 871,88 EUR (Q3/2019 1 206,75 EUR). Corona is clearly showing but not too badly. Impact was way clearer during last quarter as the Euro dividends have been cut or postponed especially in financial sector.
Monthly maintenance purchase time. I couldn’t come up with anything fancy so I bought additional 400 shares of CapMan for 1,946 EUR per share. I’m not a huge fan of the market environment at the moment. This is especially true in Europe with all the EUCO related things but I worry mostly about the long term effects. Short term? Who knows. Global situation in few months time frame could be anything between sun shine and gloom & doom. Second round of COVID-19 will probably come in shape or another. Vaccine might come sooner or later. US elections and BLM might move on and calm down sooner or later. Seeds for dismantling European Union might have been now sown but that remains to be seen and will most likely take quite long to materialise. Having said all that, there’s probably no reason to change my long term plans. Keep buying, focus on quality businesses making profit and try to minimise effective taxes when possible.
First quarter of the year is over and what a ride it was. First the markets were hitting all time hight valuations and then corona virus hit the global stock markets like a black swan on steroids. In retrospect quick adaptation by selling everything would have been the sensible choice but that doesn’t really fit into the DGI influenced strategy. Real impact on dividends will remain to be seen. Short term there will be a significant hit but there are also long term possibilities. Some of the strong companies should probably eliminate the whole dividend and invest the money wisely. Prime candidate for this would be Sampo Plc which could increase the stake on TopDanmark. For the main portfolio this quarter was quite bad with -37% drop in value. Impact on dividends is not visible on metrics until next quarter. Dividend income during Q1 was 1 302,58 USD and 101,40 EUR before taxes.
Overall this drop was not totally unexpected though it should be noted that exact timing and reason was unexpected to me. In retrospect it should have been quite obvious if one would have paid enough attention on the news coming in from China during January and February. Long term strategy has not been changed. I was always planning on buying at least for one turn of the economic cycle. Therefore I’ve naturally now moved back to normal buying mode. I’m quite well positioned for it unless of course if this economic turn hits my personal finances. Even that should be quite easily digestible event as I’ve prepared for the turn for quite some time now. This was mainly done by reducing the debt load to minimum. It’s quite easy to take this kind of hits without mortgage. This drop also opens the possibility to make some tax efficient moves by e.g. moving certain assets between providers.
Corona keeps on spreading and insanely large stimulus packages are being created. Don’t get me wrong, I absolutely believe that situation requires massive public spending. The problem is that there has been plenty of unsustainable public spending for a decade or so already. This keeps the door open for inflation and interest rate problems in the future though there’s a solid case for deflation as well. This is the reason for my debt re-structuring during the last six months or so as risk mitigation. Running very low debt to equity ratio makes it much more easy to face this kind of turmoil both in stock market and in the underlying economy. So far the impact on portfolio has been easily manageable even thought REIT heavy allocation hit the portfolio hard. Even though the main portfolio carries some debt (which is offset with cash & equivalents elsewhere for liquidity and counter party risk offset purposes), lowest interest rate level was maintained in portfolio during the last drop.
It’s really hard to say where stock will go in short term. I wouldn’t be surprised if we will see a major correction in either way during the next three to six months. Therefore I’ll maintain disciplined approach and buy through this cycle while maintaining the low debt to equity ratio. Eventually all this stimulus money will go somewhere even in Europe. Germany being involved, I believe Uniper (of which Fortum owns a majority share of) will be in good position to either benefit from the stimulus with energy transformation focus or to behave as as more stable and defensive play in extreme bear scenario. Having this in mind, I made small Fortum purchase with 20 shares bought for 13,455 EUR per share.
Monthly purchase and this time around it was once again EPR properties. I bought additional 20 shares for 72,30 USD per share. Nothing much to say about this as I’ve been building this position for a while now. This position could now be considered full or one purchase shy from it as my REIT exposure tends to be on the high side already. This purchase was also partially dividend re-investment action as I try to make at least one purchase per month on both porfolios.
Short term watch list going forward could include various kinds of stocks such as CapMan, AbbVie, Barrick Gold, Freeport-McMoRan and Brookfield Renewable Partners. CapMan is a bit tricky one as dividend ex-div is getting close and they reported excellent results today so valuation tends to be on the high side for short term. On the other hand it’s a full position in the making so I just might have to keep building it in steady manner. I’m also looking for additional euro stocks to host in Nordea which doesn’t provide currency accounts (and dividend income in other currencies would include conversion costs there).
Third quarter is over and this time around it was a bit special one. I decided to restructure my overall finances and paid off my mortgage. This operation involved some stock sales as well since the main motivation was to trim things into a more defensive position (keeping the investment debt carried in portfolio in low end of the allowed range). In global economy main risks are still in place as I expected. Recession risk is real but then again political decisions can easily cause big shifts in a way or another. I might increase cash position in fourth quarter but that remains to be seen. I’m also considering splitting the main portfolio between Nordnet and Nordea. This could be achieved by making additional purchases in portfolio hosted in Nordea.
Third quarter was quite solid considering all the global challenges. Dividend income was 1 337,50 USD and main portfolio value increased 5,45% during the quarter.
I decided to restructure my finances including mortage. In my current strategy debt to equity ratio is one key metric. I plan to include mortage in the debt component but exclude the attached real estate from equity. This is because co-owned real estate used as home is by no means liquid asset. In theory it doesn’t make sense to pay off cheap loans too soon but there are many factors to it. One is the current cycle phase and trade war in general which makes this likely a decent time to lock in some tax efficient gains and play safe. Therefore I sold today 650 shares of Telia Company for 41,18 SEK per share (roughly break even), 70 shares of Apple Inc for 202,1101 USD per share (roughly 3000 EUR profit plus dividends which I can offset with old losses) and 2500 shares of NEL ASA for 6,68 NOK per share. There’s a good chance that I’ll regret these at least for short term. I still see a 300 USD per share bull case for Apple but then again it’s very much possible that I can buy these back as I expect the trade war issue to remain well beyond US elections next year. NEL is a question mark but I kept 3000 shares just in case my bull thesis for 2025 plays out the way I expect.