Most people are probably glad that 2022 is now over and done with. This year will probably be remembered as tail of COVID-19 pandemic and from Russia’s brutal war in Ukraine. Perhaps it will eventually be remembered as the year when Ukraine forged itself into proud western democracy that will build itself back and prosper. Russia will be remembered the way it always has been remembered: failed 3rd world country. Next years hopefully will bring end to the war with clear victory for Ukraine, and hopefully well executed build back better financed by Russian money and with western backing.
In general this was very bad year for the markets. Therefore it’s a bit surprising that my portfolios performed well. Main portfolio gained 8,56% during the year while overall markets declined significantly. Dividend income for the whole year was 10821,77 EUR before taxes. At the time of writing this, last dividend from Lockheed Martin has not yet been registered but that does not have huge impact on the bigger picture. Based on preliminary analysis this dividend income covered 130,6% of base consumption after taxes (exact effective tax rate will be resolved later). This indicates that current portfolio fulfils requirements for lean FIRE. Therefore project appears to be on schedule and on track.
Plan for FY2023 is quite simple. I’ll try to eliminate last debt I have but that depends on market moves. I’ve been net debt free for quite some time already but main portfolio still contains small amount of investment debt which I’ll try to eliminate during first half of the year. In addition I’ll re-invest dividends and all other extra cash that remains after handling the debt. Should the market drop significantly, I might postpone the debt payment and buy stock instead.
Black Friday is not a big deal for me as I’m not into consumerism but decided to use this opportunity and reinvested dollar dividends without transaction fees. Bought additional 20 shares of EPR properties for 41,22 USD per share. Still seems quite reasonably valued if not even cheap all things considered. Sure, there are still all kinds of risks but position is quite small so overall risk is quite limited. This position comes with quite high dividend yield but all of those can’t be traps.
Third quarter is over and we are getting to bearish enough sentiment. Russia’s invasion in Ukraine has escalated but Ukraine has put on a brave fight and seem destined to eventually win this war. Price they have and will pay is enormous but mandatory. Hopefully western nations will only scale up the military support and financial support afterwards. Russia appears to be escalating in Nordic neighbourhood with the explosions in the Nord Stream pipelines and probably more will follow. Then there’s the central bank activities with steep rate increases, inflation being somewhat out of hands and overall very pessimistic investor sentiment. Taking all this into account third quarter was somewhat OK as YTD in main dividend portfolio is still positive but performance during third quarter was -3,47%. Dividends before taxes were 1834,10 EUR (169,54 EUR, 190 SEK and 1 633,59 USD).
Assuming that there’s no big changes in overall environment, I’ll slowly decrease my accumulated cash. Dollar investments will probably be dividend reinvestments unless I’ll start converting received dividends into euros and Swedish kronas. Euro zone stocks in focus will probably include at least Kemira and possibly Finnish heavy industry related stocks if/when those will drop enough going towards recession.
Sentiment is getting bearish enough for me. Someone (totally not Russia but it was Russia) blew up Nordstream I pipelines, stocks are dropping all around and have been doing so for a while now, Russia’s war effort in Ukraine is approaching later phase peak in many ways, nuclear threat is thrown around, Bank of England is already moving back to QE and list goes on and on. This is enough for me and I’ll move from holding pattern to normal purchasing mode with option to slowly scale down cash reserves. First purchase was CapMan Oyj with 900 shares bought for 2,365 EUR per share.
Time for dividend reinvestment and this time I decided to add on existing AbbVie position and bought additional 10 shares for 143,93 USD per share. Abbvie has it’s risks with outgoing blockbusters but overall I consider the company solid and valuation decent. This is part of attempt to increase overall exposure on medical and pharmaceuticals. Assuming that market does not move from recession mode to bull market anytime soon, I’ll probably try to add on Pfizer and Johnson & Johnson during the next three quarters. Johnson & Johnson is bit of a question mark with the consumer spinoff and all. Anyway this will happen with dividend reinvestments only as I haven’t felt comfortable changing euros to dollars in a long long time. Quite contrary, I’m tempted to start converting received dividends back to euros or possibly to swedish kronas. That would make sense but then again majority of interesting companies are dollar nominated.
Turbulent times continue but I’m sticking with the short term plan as my cash reserves are otherwise getting too large. Therefore I bough additional 120 shares of Kemira for 11,75 EUR per share and additional 100 shares of CapMan for 2,59 EUR per share. Both of these positions are almost full but few additional purchases are still likely. Once remaining USD dividends for September are paid, I’ll probably add on Abbvie, Johnson & Johnson or Pfizer.
Energy crisis is escalating and European markets are feeling the pain. Euro as a currency reached new lows when compared against US dollar. I decided to buy additional 80 shares of Kemira Oyj for 11,75 EUR per share. This is not really related to the recent turmoil even though Kemira is not immune to it. Valuation seems to be decent, second dividend of the year is still coming and my main thesis (water) for building a full long term position is intact. Let’s see if I manage to complete the position during Q4.
My cash reserves are above my hard limit so I bought additional 400 shares of CapMan Oyj for 2,81 EUR per share. I find this valuation to be acceptable even though the overall situation if full of risks. This is mainly dividend play but the sector has some serious M&A potential as a bonus. It’s extremely difficult to say anything about the likelihood of CapMan being part of such activity and if it would be, it would be difficult to know on which side of the table it would be sitting on. I see significant risks on the market but will follow strategy as follows: re-invest dividends, try to limit cash reserves to current level and focus on primary DGI strategy.
Streamlining portfolios towards original primary strategy started or continued. I sold my modest Fortum position consisting of 270 shares for 10,225 EUR per share. This is hopefully a short to mid term exit. I still see Fortum as relevant company to own in 2025-2035 timeframe but current mess with Uniper and energy crisis is such that I expect to to easily buy these shares back in period between Q4/22 to Q1/23. Meanwhile I record minor loss here to offset some taxes. I used these funds to increase my positions in Kemira (70 shares bought for 12,32 EUR per share) and Capman (100 shares bought for 2,82 EUR per share).
While at it, I decided to also sell my Warner Bros. Discovery (79 shares sold for 13,55 USD per share) and Orion Office REIT (50 shares sold for 10,08 USD per share) and buy additional 25 shares of Gilead Sciences for 63,59 USD per share. These transactions also record minor losses to offset some taxes but are likely exited permanently or at least it’s difficult to come up with reasoning for re-entry.
This is quite likely short term exit and bored attempt in trading but I sold 300 shares of NexGen Energy for 5,40 CAD per share. These shares were bought in 2,07-2,21 CAD range. Uranium sector is likely to provide plenty of volatility but mid and long term vision is still intact. Therefore I might buy back these shares later. Then again I’m interested in simplifying the portfolio by focusing more on the main strategy. Let’s see how coming months play out.