Omega Healthcare Investors reported their earnings and dropped around 5%. Reported numbers were fine but guidance was considered weak as it’s supposed to be flat for FY2017. That would be acceptable as well given the current valuation which is still indicating them to be significantly undervalued. I personally consider the guidance as the worst case scenario and decided to buy additional 35 shares for 30,97 USD per share. There are some real risks involved but long term case is still very much there for me.
If I had to choose one European company to put my money into, Sampo would be a strong candidate. So I decided to increase my European exposure with a purchase of 50 additional shares for 42,99 EUR per share. As a valuation it’s acceptable in the current environment. Only downside is that it increases my exposure to Nordea Bank even further. Not necessarily a bad thing but a bit on the risky side. I do suspect that Wahlroos & Stadigh is cooking up something new. There were some rumours about Nordea merger but who knows if that will ever materialise. I suppose they will eventually take control of Topdanmark on the insurance side but that’s yesterdays news really. I just have a feeling that they are up to something that will be very lucrative and perhaps will go through during the next couple of years. Meanwhile better economical environment (interest rates) will support Nordea and dividends from Topdanmark will help to increase the distributions for next couple of years.
I’ve been thinking about this move for quite some time now. I generally don’t like to sell my holding but I suppose every rule has an exception. I originally opened positions in certain bond-like stocks mainly to park money in order to benefit from strengthening dollar. Colgate-Palmolive served that purpose well and most likely would have continued to do so. In general I don’t like to time markets but we are living exceptional times at the moment. Should there be a market correction perhaps triggered by Mr. Trump, I prefer to have this extra ammunition in place for that. And should there not be a market correction, such short term correction might occur for single companies. Defence and space is something that I would like to increase my position in. Then again it might make sense to lock in some of the forex gains by converting dollars back to euros if my forecast about parity ends up being accurate. This remains to be seen.
This was the reasoning behind the decision to sell my 50 shares of Colgate-Palmolive for 64,75 USD per share. In retrospect this should have been done some months ago when the stock was ridiculously expensive. During my ownership I collected 223,50 USD as dividends. I originally paid 65,37 USD per share but currency changes resulted almost 30% profits.
It’s getting really difficult to find decent valuations but for some reason Telia Company has performed quite poorly for quite some time now. It dropped today almost 2% so I decided to buy additional 250 shares for 3,714 EUR per share. Dividend policy is exactly what I expected it to be going forward. 2 SEK annually for next couple of years (+ perhaps additional ones) is quite OK and I still maintain a fair value estimation significantly above the current valuation. Then there’s the additional consolidation option in the sector which should provide interesting possibilities for the involved parties.
Fiscal year 2016 is now officially over and what a year it was. UK voted in favour of brexit, US presidential election won by Donald Trump, Syrian conflict (among others), terrorism, rising tension between US and Russia and massive amount of refuges. Surprising enough the year ended with a bull market (especially after the US election). Portfolio performed almost too well and closed almost in all time high valuation.
Q4/2016 PerformanceFY2016 Performance
Historic Performance After FY2016
Fourth quarter dividend performance illustrated year over year (pre-tax, in EUR).
I managed to pretty much follow the strategy I’ve created for myself. Perhaps only open issue was the sale of Deere Company. It remains to be seen if that was the right thing to do. I just couldn’t justify all time high valuation for cyclical company near the bottom of the cycle. I still think there’s a chance it can be bought back in the 92 USD range during FY2017 but I could be wrong there.
Given the circumstances, it’s now very difficult to predict anything for the next year. Major correction is inevitable but it’s pretty much impossible to time it. Personally I feel that it won’t take place next year but perhaps in 2018. I suspect that there’s a smaller correction during next year (in 10% range on index level) but that’s not so relevant for me. In case of major correction I’ve enough ammunition in place to take advantage of it. This ammunition contains possibilities to increase debt significantly, add some capital from reserves, sell and reallocate funds from my bond substitute positions (e.g. Coca-Cola and Colgate-Palmolive) if the correction is very asymmetrical. Other than that I’ll keep my strategy as it is. If there aren’t any meaningful valuations available, I’ll reduce the current debt.
In my overall strategy I’ve ruled that the portfolio can contain one pure risk position. In the past this position was filled by VEREIT (ARCP at the time) but since then VEREIT has pretty much completed the turnaround and is now considered as normal position. Today I however decided to open yet another such position with a purchase of 350 shares of Scorpio Tankers Inc. for 4,66 USD per share.
Not a very typical holding for my portfolio as it’s operating in a leveraged cyclical segment I really don’t like nor understand in detail. Main motivation was the assumption of good enough chance of turning cycle, very modern fleet providing competitive edge, somewhat limited downside, significant upside potential and very high yield. I’m hoping to exit this position around 9 USD per share and meanwhile collect the dividends. The exceptionally high yield is a risk indicator and there’s always the possibility for a dividend cut which in turn would test the thesis about limited downside.
There’s also one extra factor in this position. As the company is incorporated in the Marshall Islands, taxation will be a bit different. As Finland doesn’t have tax treaty in place with Marshall Islands, dividends shall be taxed as normal income very much like normal pay check. At the moment this isn’t a big factor but for a long position that could provide interesting possibilities for less taxed dividend income. Not really relevant for me since the taxation is likely to change many times before I’ll willingly decrease my normal income. For pensioners this could be an interesting detail though.
Portfolio and overall markets are in all time high valuations but still there are some investment opportunities available. H&M is one of them. I’m still not a huge fan of the sector in general but the company characteristics, yield, debt and cash balance make it very difficult to ignore right now. SEK exchange rate is also one factor in this process which could turn out to be a positive driver for the future. Today I bought 40 additional shares for 255,80 SEK per share. Depending on the market mood swings I might make identical purchase during Q1/2017.
I’ve been waiting for a decent possibility to add on my existing Lockheed Martin position. Finally Mr. Trump provided one with a tweet about F-35 budget being out of control. Not especially cheap valuation but I still decided to buy additional 4 shares for 248,91 USD per share. I really doubt this will have even short term impact on the company, yet alone long term.
Yet another addition to existing Diageo position with a purchase of 10 shares for 99,99 USD per share. There are multiple factors pushing Diageo down, none of which are very relevant in the long term. Very reasonable valuation made me pull the trigger once more. Almost bought more REITs as well but I’ll try to control myself to see how the sector moves when FED actually makes the rate decision.
Minor compensation for the closed Deere position with a purchase of 120 shares of VEREIT for 8,29 USD per share. Most of the upcoming rate hike should be already priced in but there might still be a minor correction in REIT sector when FED actually pulls the trigger. There are still some risks from the ARCP fiasco but in general the new management has done terrific job to turn the company around.
