Sunday Reads & Comments – June 18, 2017

A bit short this week, as there’s too much going on beyond Wall St.

KR: just lucky sometimes

Recently, i bailed out of KR with a break-even trade, eventhough i was expecting to hold the company much longer, i just couldn’t see the intermediate success on either a company or dividend income basis … so i sold.

Take a look today (i sold north of $29) …

There was nothing here about marketing timing, or predicting AMZN purchase of WFM … just pure, dumb luck.

Sunday Reads & Week Review – June 11, 2017

  • Jeff Miller (WTWA) pointed to this article suggesting that wholesale inventories were declining suggesting slowing economic growth and possible GDP impact.  Here’s a sample quote (bold is my add):
    • “The decline this month was in non-durables. Overally, I believe the rolling averages tell the real story – and they significantly declined this month. There is an obvious growth trendline in wholesale – but this was a bad month.  Inventory levels returned to recessionary levels.  To add to the confusion, year-over-year employment changes and sales growth do not match.”
  • The 10yr note crawled up a bit, S&P500 basically flat, but boy was there a bunch of noise in last week’s market activities.  So easy to get lost in the noise … (taken from WTWA)
  • Another pointer from this week’s WTWA –  A solid opinion and teaching piece valuations.  I have my own thoughts on this topic, and slightly disagree with the author’s opinion about holding cash.  I hold cash often and if not, have targets to sell to raise cash; i am a vulture investor.  I try to take advantage of the inefficiencies in the market to purchase companies at a reasonable or discounted price.  Not having cash complicates my vulture behavior.
  • A good summary of GE valuations by Brian Gilmartin GE is one of my top holdings (>5% of taxable account with cost basis of $17.50), and i continue to hold but uncomfortable exceeding my 5% with additional purchases until the sentiment starts to turn … per Brian’s review, it may be at the next earnings report, or trading activity breaking thru $27 or landing on $25.  For me, if it declines below $27 it will be hard to pass for a possible intermediate duration trade (12-18 months).
  • Portfolio changes this week included:
    • the removal of KR.  I made a mistake with the trade and let my emotional attachment to Fred Meyer and KR private brand products cloud my judgement.  The potential capital appreciation and dividend flow were not within my standard guardrails.  I sold with materially a break-even point – no loss, no tax penalty for my mistake.  Fail, fail fast, and learn …
    • the reduction of 75% of FPI due to management performance in my opinion – posted earlier.
    • the trimming of NWN to 50% of position.  The upper levels of valuation were reached, and as a Radar 2 stock, the position was reduced.  My purchase yield on NWN is 4.5% and there are equally interesting yields with greater capital potential (and less loss) than NWN.
    • the re-entry and increase in DSW.  I added to my daughter’s account and re-entered in my taxable at $16.40.  For my daughter’s account, i may sell the higher priced position for loss after 30-day wash.  For my account, a solid entry point before ex-div date, and a solid short or intermediate term trade for another ~5% gain.
  • What is the one company that i want to buy but the stock valuation is not yet right? …. MSFT.  I kick myself as i passed on purchase at $65 thinking that >%60 was better entry point.  MSFT is a missing element in my IOT narrative and i believe the better investment than the data center REITs, DLR or QTS.
  • Positions that could be added next week … PFE, but below $32.  I had opportunity Friday morning, but passed given all the thrash going on within the market and US / UK politics.  New positions on Friday make me nevous at times ….. less rational decision making i guess.
  • Later additions (after the first go in morning)

Lost patience w/ FPI

Lesson learned and patience lost wrt FPI.  Yesterday’s news and stock repricing was too much for my patience tolerance.  I sold off w/ a stop loss order at$9.30 (removed all emotion from the trade).  Kept 30% of the position that was purchased below $10.  A SA article yesterday maybe too dramatic, but i lost faith in management team … this reset was just too close to their reporting.  Integrity lost.  I will try to capitalize on a dead-cat bounce and get as close to neutral as possible and leave this company / REIT.

I can typically stomach a pricing reset in companies that i respect, but when management does not play their role sufficient … confidence lost and money moved elsewhere.

Healthcare REIT summary – Hoya Capital

Hoya Capital posted a summary view of a short list of healthcare REITs.

i appreciated their differentiation of the REITs (and segments) vis-a-vis interest rates and current risk profiles.  This article has me starting to evaluate my HCN position (i.e., in non-taxed account, a decent gain so far, consider selling to lock profit and take position in DOC).  In healthcare REITs, i am long OHI, HCN and LTC.  I consider LTC rock solid, OHI is the yield machine, and HCN was opportunity.

Sunday Reads – June 3, 2017

  • First of all … credit to Jeff Miller WTWA Sunday post
  • Blackrock posted an interesting update and here is a take-away i found interesting
    • “Bottom line: Trump trades have been dented, but we expect reflation trades – negative for government bonds, positive for cyclically geared assets – to resume in an environment of US growth slightly above trend, which we see at around 2%.”
    • On wage growth (bold is my add), “Wage growth stalling here would suggest a structural shift making this cycle truly distinct from all the others in the post-war period. We have a hard time seeing why this would be the case but see two potential factors. Poor productivity growth could offset the labour market’s recovery, keeping wage growth tepid. Technology’s displacement of workers may be having a broader impact.”
  • The refutation of bad data usage … looking at graphs without understanding the data is hazardous to your financial health.  this is good example
  • Jeff’s weekly scorecard (look at 10yr yield this week)
  • Farming report from Goldman Sachs … this fits into a couple of my narratives (IOT and land scarcity). – this a thick report and requires more than a 1x read.

Mary Meeker’s Internet Trends

My favorite read of the year and one that takes 3-5 times to catch the good stuff.   I started reading her reports in 2010 and appreciate her narrative as well as her ability to simplify and connect a boat-load of important data.

The two things that struck me the 2nd time thru and that may modify some of my investment narratives:  the convergence of mobile advertising, content and location driving more foot traffic to physical stores (retail) and not to digital stores; and the situation in India.   For India, i think a timing issue based on when per capita income increases across more of population.

DSW Store Visit

On Saturday, my wife and i went to our local DSW for a pair of treadmill shoes for her.  25% discount on selected Nike shoes.  The store was more crowded than i was anticipating.  Selection was decent in the Nike womens, and with teh 25% discount, prices were good.  Most of the shoppers were women, and ranged across most age buckets (from observational point of view).  The counter staff were friendly but the energy was low.  The ‘behind’ the counter decorations were a bit cheezy with poor tape job holding them up.  For me, it was a positive experience and helped confirm that DSW merits more attention.  The one key element i need to fully understand is their digital strategy … the details of what, how and when.  That element could make all the difference on the company value (quality of execution and their plan).

Two loosely connected trends

Two trends could collide in an ugly intersection.  Read this article and then consider the trend of the declining leadership of USA.  If, when, the US Treasury needs to sell more and more treasuries to cover the widening gap, will the same demand exist at prices the Treasury requires?

Both trends contain some speculation and inference (assuming a specific conclusion) … but surely makes me ponder on possible mitigations / contingencies.