Recent Buy: EPR Properties

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).

Q3/2019 Results

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.

Sold: Telia Company, Apple Inc. & NEL ASA

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.

Q2/2019 Results & Strategy Update

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.

Q1/2019 Results

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.

Recent Buy: NEL ASA & Short Term Strategy Change

I’m repeating myself but I bought additional 200 NEL shares for 4,958 NOK per share. I’m nibbling away on a slow pace for now as I’m also considering alternative hydrogen stocks to spread the risk a little bit. Having said that, I’ll most likely postpone purchases in the main dividend portfolio to see how the most significant risks for global economy will play out. Those would be mainly the trade deal deadline between China and US but also the deadline for brexit deal. Meanwhile I’ll mainly deleverage and wait for possible market corrections.

Q4/2018 & FY2018 Results

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.

FY2017 Results & Strategy for FY2018

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).

Recent Buy: Fortum Corporation & Strategy Update

As a risk management operation I decided to open a new account in Nordea Bank. It will complicate reporting a little bit but allows me to spread the risk in many ways. Most obvious is the protection against service downtime which could prevent me from placing buy or sell orders. Their pricing model also allows me to put the overall portfolio in a maintenance mode in which I will be making only small purchases (with reasonable fees) and use most of the new capital to pay down the portfolio debt. This also a way to put some pressure on my main broker Nordnet as they have some technical limitations that are not really acceptable, though I have to admit that they are not likely not notice this. Anyway, as the new account was opened and they had a campaign in which the stocks listed in Helsinki stock exchange could be bought without any fees, I re-initiated a position in Fortum Corporation with mere 10 shares bought at 17,73 EUR per share. I don’t expect to build a full position on the company due to the political risks mentioned before but slightly smaller position will do as there’s a lot to like in their strategy going forward.

Strategy Update H2/2017

Recent debt restructuring has left the portfolio D/E ratio way above the limit defined in my strategy. I’m aiming at 0.1 ratio during normal market conditions and calling current market normal is a stretch as well. At the moment the ratio sits at 0.154 and as we are more likely to be at or near peak of the market, ratio should really be more in the neighbourhood of 0.05 0r less. Then again central banks are making it very difficult to define market normal or abnormal. This may very well be the new normal for years to come.

After some consideration I’ve decided to move into a conditional maintenance mode. By this I mean a mode in which majority of the new capital is used to pay down portfolio debt. Conditional in that sense that should there be significant corrections in value for some of my holdings and/or companies in my watch list, I will execute planned purchases regardless the portfolio debt level. Short term execution should be quite easy as my broker still has the small purchase order campaign active which allows me to make small maintenance purchases in a cost effective way. One unknown factor is Nordea Bank AB. If they decide to move their HQ to Denmark, I might have to eventually sell my position due to taxes. In such case timing would be a bit tricky and I most likely would invest at least some of the money in Sampo in order to increase my indirect Nordea position. Some of the money could be used to pay down debt and speed up the planned debt rebalancing. There are many alternative plays here and some analysis and planning is required before proceeding with any of them.

For new positions I have some in my radar. I’ve been thinking about hydrogen sector for some months now and might initiate a position in NEL Hydrogen if the stock revisits sub 2 NOK levels. It’s a risky play and in a sense not suited for this portfolio as it doesn’t pay a dividend at the moment. Then again it could be considered as ultimate dividend growth stock if and when it starts to pay one. The sector has a lot to like. Public discussion is way too focused on standard electric cars when the actual beef is in larger scale mid-storage solutions, ships and busses and so worth. Family cars and fuel cell applications would be interesting possibility as well since the refuelling process would be similar with the current one, transportation and storage would be closer to the current method which should appeal to current big players such as NEL partner Shell. Easier taxation would be interesting factor as well as it might lead to not so market driven subsidies. There’s a lot to like in the sector even though it’s very speculative.