I hate selling but sometimes it makes sense. In retrospect I have usually failed at the timing but a plan wouldn’t be a plan if I wouldn’t at least try to execute it. With that in mind I decided to sell all my Scorpio Tankers (NYSE:STNG) shares for 3,583 USD per share which translates to a minor loss. Looking back couple of months the stock has seen daily swings around ~4 percent. Today the swing was a positive one so I decided to exit the position for now. It’s very likely that I will have the possibility to buy back the shares for a bit cheaper but I’m not convinced I’d do so but it is something to consider.
Recent Buy: Fortum Corporation & Sampo Plc
Maintenance purchase for August consisted of 7 shares of Fortum Corporation and 8 shares of Sampo Plc. I wasn’t really planning to increase my Fortum exposure but lately anonymous buyers have pushed the price up. This might indicate that someone has knowledge of upcoming M&A actions so this minimal increase was justified. As a bonus it also rounded up the total share count to full hundreds which gives me some unexplained mental pleasure. Sampo on the other hand is an easy decision even though the valuation isn’t cheap. It’s partially preparation for switching Nordea for Sampo if they choose to move to Denmark. In addition to these small purchases I decreased portfolio D/E ratio to 0,123 from 0,135 a month ago.
Summary:
- 7 shares of Fortum Corporation for 14,94 EUR per share
- 8 shares of Sampo Plc for 44,59 EUR per share
Recent Buy: Fortum Corporation and Sampo Plc
Planned maintenance purchase since Q2 reports caused minor corrections for both Fortum and Sampo. I’m increasing my position in Sampo mainly because I might eventually trim or even eliminate my position in Nordea due to tax reasons. Sampo allows me maintain some of the exposure in that case and in general is exceptionally well managed company. Fortum is in a position to benefit from major trends but has way too much political risk. I most likely will not increase my position on it unless there are significant changes in valuation and/or market situation. In addition to these purchases I trimmed the portfolio debt a little bit and current D/E ratio stands at 0,135 target being 0,1 or less.
Summary:
- Fortum Corporation 14 shares for 13,98 EUR per share
- Sampo Plc 4 shares for 45,89 EUR per share
Q2/2017 Results
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.
Recent Buy: Fortum Corporation
Maintenance purchase to complete the monthly purchase target. Fortum is not very cheap and has all the political risk I would like to avoid but it still has, in my view, more upside than downside potential. Hence the purchase of additional 14 shares for 14,20 EUR per share. Right below 200 EUR in total to keep the transaction fee in line (broker campaign).
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.
Recent Buy: Realty Income Corporation & VEREIT, Inc
Speaking of blue chips, REIT sector really took a beating today. This was mainly caused by tenant issues Spirit Realty is having. Realty Income Corporation has demonstrated such a quality that I wouldn’t mind adding to it even if it would have similar short term issues itself. Sure, online sales and companies such as Amazon are a risk for it but very reasonable one given the tenant base Realty Income has. So I decided to buy additional 27 shares for 55,14 USD per share.
VEREIT on the other hand was slightly undervalued, in my books, even before this dip. Therefore it wasn’t very difficult to find reasoning for buying additional 150 shares for 7,57 USD per share. VEREIT really isn’t a key holding of mine but the turnaround is impressive and I have high hopes for 2018 and 2019. Debt reduction is on track and after these purchases I really should follow their lead on that.
https://seekingalpha.com/news/3263616-triple-net-lease-players-sink-alongside-plunge-spirit-realty
https://seekingalpha.com/pr/16821049-vereit-announces-first-quarter-2017-operating-results
Recent Swap: Betsson AB For AT&T Inc
AT&T is among the bluest of blue chips in the world. Recently the share price dropped a little bit so I decided to make a move on it. I still wanted to maintain the debt strategy I’ve set to myself so I pretty much had to sell something. Betsson in the other hand was originally purely speculative play on my part. I initiated a position on it with suspicion of share price engineering to benefit management through their bonus program. Funny coincident that there’s similar bonus period coming up soon. Then again the management is proposing initiatives I don’t fully understand. Based on this I assume that there’s a good enough change to buy shares back with cheaper valuation during the summer and sold all my 230 shares for 74,90 SEK per share. This translates to a minor loss. I then proceeded to to buy additional 37 shares of AT&T for 39,00 USD per share.
Recent Buy: Sampo Plc (A)
Premature dividend reinvestment on Sampo Plc with a purchase of 4 shares for 44,21 EUR per share and 4 shares for 44,20 EUR per share. Separate orders due to small transaction campaign my broker has. Sampo has grown to be a core holding of mine. The quality of the company is so great that I might add to it during summer if the price is right. Close to 40 EUR per share would be really difficult to pass in the current market even though I’ve already gone overweight on it.
Recent Buy: Pfizer, Inc.
There aren’t many great opportunities out there but Pfizer seems to be quite reasonable with current valuation. Therefore I decided to buy additional 30 shares for 33,79 USD per share. Valuation is not exceptionally cheap but considering the overall market it’s quite OK. Yield is on high side with moderate payout ratio so it’s quite natural addition especially since I already had a starter position on it and had some USD to spend without converting too many euros.
Next month I might focus on taking advantage of the small transactions campaign my broker still has. I might add to my position in Sampo and Fortum. Latter surprised positively with the latest report and I still consider it to be a very relevant position in the long term. The political risk is a big factor there but it might be a manageable risk after all.