Planned maintenance purchase for January consisted of 10 Fortum shares bought for 17,87 EUR per share and 50 Loudspring shares bought for 2,65 EUR per share. I’m also considering adding Kemira to the list of maintenance purchases as it’s quite reasonably priced and the secondary portfolio containing these maintenance purchases will act as watch list going forward. Due to technical reasons this portfolio will host only stocks listed in euros or stocks not paying any dividends (currency transaction costs).
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: Loudspring Plc A
Secondary maintenance purchase for December with a purchase of 80 Loudspring Plc shares bought for 2,56 EUR per share. I expect to slowly build a full position on the company as they have quite a few interesting holdings. Nocart is the most obvious one as they have huge potential in African market which is not the easiest of the markets but there are others as well.
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.
Recent Buy: Omega Healthcare Investors, Inc.
Omega Healthcare Investors took another hit yesterday as possible class action law suit was made public. I used this opportunity to trade in and out in order to increase my position with additional 25 shares and to record some tax losses as a bonus. Cost basis for these additional shares was 26,86 USD per share. Let’s see what this litigation means in practise.
See: http://www.businesswire.com/news/home/20171120005769/en/EQUITY-ALERT-Rosen-Law-Firm-Announces-Filing
Recent Buy: Nordea Bank AB and Telia Company AB
Nordea has been dropping lately mainly because of the speculation on Swedish housing bubble and uncertainties in the long term business model. Latter one is kind of the reason I’m buying right now. I expect to see a banking merger motivated partly because of these concerns and I expect Nordea to be on the right side of the table in such event. I suspect that this has has been Sampo’s goal all along. It might take couple of years to happen and major correction before that is a significant risk but one I’m willing to take. That’s why I today bought additional 100 shares for 9,98 EUR per share.
Telia dropped today probably just because it’s Telia. Sure there are uncertainties in operator business models as well but I anticipate bright enough future for companies such as Telia. Strategic state ownership and associated regulation should work in their favour even though growth prospects are a bit limited. I consider Telia to be the bond substitute in my portfolio and therefore bought additional 250 shares for 3,764 EUR per share.
All this puts the portfolio debt level slightly above the target level. Depending on the market situation I might once again focus on reducing the debt but should there be attractive enough valuations, I’ll increase it accordingly.
Recent Buy: Sampo Plc A
Sampo reported third quarter results today and those were excellent as one could expect. Market reaction was a little bit strange as the stock went slightly down. In preparation for my eventually happening exit on Nordea, I decided to buy additional 27 shares for 45,10 EUR per share. This rounds up the total share count as well. Not that it matters but it kind of does.
See: http://www.sampo.com/globalassets/arkisto/taloudelliset-raportit/2017/sampo_q3_2017_en.pdf
Recent Buy: NEL ASA
This is a purchase I’ve been thinking about for quite some time now. NEL ASA reported their 3rd quarter results today and I’m still liking what I’m seeing. I consider this to be a slightly contrarian play on electrification of transportation. EVs are clearly going to be a big thing, there’s no doubt about it, but I still see a clear bull case for hydrogen. With this in mind I initiated a position on NEL ASA with a purchase of 7000 shares for 2,94 NOK per share. It’s a bit odd position for my dividend portfolio but as I’ve said in the past, it will be an ultimate dividend growth stock if and when it starts paying one. That remains to be seen and I’m willing to wait for that to happen.
See: http://nelhydrogen.com/news/third-quarter-2017-results/
Recent Buy: Nordea Bank AB
Nordea dropped today after reporting 3rd quarter results. Valuation was just so compelling that I decided to buy additional 100 shares for 10,50 EUR per share. I don’t expect this to be exceptionally long position as I suspect that Sampo has big plans for Nordea. I wouldn’t be surprised if they complete the relocation to Finland next year, optimise the operations including the IT infrastructure and announce a merger in 2019 which could complete in 2020. They appear to be in excellent shape going forward and the gradually rising interest rates should work in their favour as well.
See: https://seekingalpha.com/pr/16980447-nordea-bank-ab-publ-3rd-quarter-results
Recent Sell: General Electric Company
Well this escalated quickly. I went over the numbers again and made projections for the next six to twelve months and as a consequence decided to eliminate the whole GE position consisting of 230 shares for 22,013 USD per share. There’s a significant risk for an extremely hard reset for the company. For the short term is also allows me to take some tax losses from my original entry position. I’ll keep an eye on the company for a re-entry but don’t expect it to happen until the first half of 2018. Then again my thesis might be completely wrong in which case I’ll try to use the cash to trim down the portfolio debt which I would like to eliminate completely within a year or so.