Weekly Update, April 29, 2018

More General / Macro Oriented Weekly Reads  (a journal of my thinking and reading, not intended for investment advice)

  • *** Here Ends Morning Reads***

Specific Actions, Plans, & Analysis

Weekly Update, April 22, 2018

Weekly Reads  (a journal of my thinking and reading, not intended for investment advice)

Actions, Plans, & Analysis

  • General positioning:  a) resist buying dips without strategic confirmation of entry points (regardless if trade or investment), b) watch the earnings reactions for flashes of inefficiency (really low or high prices), c) preserve capital and d) build higher cash flow rates on invested capital
  • Stop-loss analysis -> i went thru all my equity positions and created detailed stop-loss targets to both preserve capital and lock in gains.  I am not planning on eliminating core holdings, e.g., INTC, CSCO, T, VZ, UMPQ … BUT, i may reduce positions
  • VTR – hit the stop loss mark and is now a 0 position
  • Problem Children
    • WELL 
      • positions are so negative that i am just going to claw my way up w/ DRIPs
    • LTC
      • a very small position but similar to WELL – relying on DRIPs to help, BUT due to my admiration of LTC management team (and value) i may double down here – in taxable account
  • Took profits in speculation trades this week:  CRON (my account) and ACBFF (daughter’s account) … will go back in at validated support levels
  • Favorite watch items for new positions unless adding:  SWKS, MDT, ETSY, TCEHY, PFE(adding)

Weekly Update, April 16, 2018

Posts and readings of note from the week

  • Chuck Carnevale (Fast Graph Wizard) published a series of 3 posts on dividend growth stocks (posts 2 and 3 this week).  Again, the methodology is more important than the specific recommendations. Here are some of the common analyses done between us and i am not a fan of the specific company
    •  CAH and OMI – the distribution business has too much risk to margins given the disruption that i see coming from autonomous machinary in supply chain and the every present Amazon threat – too much risk for me given the narrow profit margins in the segment
    • WBA – i am avoiding almost all retail given both the Amazon risks (not specifically Amazon across all things but similar supply chain disruption that will risk these retailers margins beyond the risk calculations being used, and the top of the economic cycle) – one would have to have confidence that WBA best margin is in non-discretionary high margin vectors.
    • TGT – punted on the retailer over a year ago … no returning
    • OHI – way too much risk in the SNF area – i have sold all my OHI and minimized my LTC position which i think is the better company … i MAY increase LTC if bargain basement prices surface
    • Here are the companies Chuck recommended that i do own and my view
      • PFE – buy more around $34 for nearly 4% dividend – could double current position with cost basis $33.01
      • VZ – full position
      • RY – full position w/ its cousin BMO
      • T – full position – though could extend it if Time Warner deal crashes the stock
  • There were several posts on Healthcare REITs that have increased my angst and hence why i upped my stop loss w/ WELL (below)
  • TCEHY is one of my favorite nonUS companies regardless of the China government risks … getting my head around the valuation and a good entry point is still baffling, and this author’s attempt did not help much https://seekingalpha.com/article/4162861-tencent-holdings-ltd-americans-finally-ready
  • Jeff Miller’s WTWA – https://seekingalpha.com/article/4163039-weighing-week-ahead-stock-prices-already-reflect-strong-earnings
    • My key view of this last week – the distracting noise is deafening and hard to focus on strategy and rational investing, but these times may provide similar opportunities as 2008/09 for entry points, but one will have to be very nimble imho
    • Watching the details rather than simple aggregates and averages is growing in importance for me  – looking thru the details in the recent CPI report out  shows that growth above the top level numbers is very narrowly placed:  Housing, Energy and Transportation … bad side of those = non-discretionary
    • Jeff pointed to Brookings report on debt https://www.brookings.edu/blog/up-front/2018/04/11/the-fiscal-picture-is-worse-than-it-looks-and-it-looks-bad/ … i share people’s angst on debt and the short and long term risk the constant build up of debt (government, personal and corporate)
      • a key quote:  “Under current law, CBO projects that the debt—currently 77 percent as large as annual GDP—will rise to 96 percent of GDP by 2028. And that’s if Congress does nothing. If instead, Congress votes to extend expiring tax provisions—such as the many temporary tax cuts in the 2017 tax overhaul—and maintain spending levels enacted in the budget deal (which is called the “current policy” baseline), debt is projected to rise to 105 percent of GDP by 2028, the highest level ever except for one year during World War II (when it was 106 percent).”
    • The weekly indicator board
      • 10 yr is back up to last month’s level
      • Equity risk premium is down but not to last month’s levels
      • Anticipated inflation ticked up
      • Technical health is degrading … any question why i continually to raise cash w/ capital preservation stop-loss orders?
  • Lance Roberts posted a good summary around why hold cash https://seekingalpha.com/article/4163050-8-reasons-hold-cash
    • Lance thinks (at least in his writings) very close to my own models, so i have to be careful to not find too much support for my own thinking
  • Another good post on the decelerating rate of consumption and the growth of debt  http://www.seekingalpha.com/article/4163082
  • Blackrock’s Q2 advice took some effort to get enough details to make sense of it  https://www.blackrock.com/investing/literature/whitepaper/bii-global-investment-outlook-q2-2018-us.pdf
    • I was paying the closest attention to the bond proxies section … the advice is a bit late if you ask me; this would have been best to have heard and implemented in early January. Blackrock’s disdain for RUST is easy after the drubbing received in March

Actions and Plans

  • WELL – Stop loss executed in taxable account – position is now 50% with greater unrealized loss.
  • CRON / ACBFF – took new speculation positions at recent lows – @$5.35 and $5.49 respectively – both have stop loss orders in place that keep moving up
  • Still haning on to 2/3 of the position in June 250 SPY puts … the next up/down cycle will offer some profit
  • Watching
    • ZBH – as close to $100 as possible for a good value entry
    • ETSY – still working the right entry point, but i love the business in future ($26-$27 is where i am interested, vs current $29.87)
    • CLDR – was watching this for speculation, but the recent jump took my risk tolerance off the table … will watch for another momentum trade
    • Water Equipment – BDI, MWA, XYL, ITRI … the list is just getting started, but smart water infrastructure is going to be a non-discretionary expense, investment across the globe in the next 5-10 years. (my opinion)
  • ILP.pr.d – added another portion to this preferred position.  This is only 1 of 2 preferred stocks that i own outside of an ETF (PGX and PFF); the yield rose to my comfort / low risk zone, so grabbed a bit more to up the cash flow (taxable)

 

Weekly Update, April 8, 2018

After a short vacation and a small bout with a gastro bug, i have the focus to post.  Just a reminder.  I write this blog to help me understand, plan and make investment decisions.  This is NOT any semblance of recommendation or advice.  Just my way of holding myself accountable for sound, data-based investment planning and execution … using the best Plans and Clues I have!

Weekly Reads

  • Doug Short put together a good look at Treasury yields – worth the read for additional historical context.  https://seekingalpha.com/article/4161348-treasury-yields-long-term-perspective
  • Lance Roberts posted on debt and inflation … i am WAY more anxious about debt than inflation.  There is a narrative that can be built that depcits debt as the method being used to prevent disinflation.  Sooner or later unless there’s a major jubilee, the debt must be paid.  https://seekingalpha.com/article/4160453-ballooning-debt-really-inflationary
  • A short’s perspective on Canada Weed https://seekingalpha.com/article/4161019-aurora-canopy-time-sober-90-percent-downside
    • This guy may be fueling his own position – short, so a bit overly negative perhaps
    • The one big retort I have on the author’s position is using the average production cost from areas (WA, OR, CA, CO) where growers can actually grow outside.  It’s rational for me to see how outdoor farming will be lower cost as well as higher capacity
    • I do agree, however, that these companies are NOT investments yet.
  • Brian Gilmartin posted on S&P earnings yield and where that indicator sits going into Q1 earnings season.  I totally share Brian’s opinion / anxiety in one of the comments.  I will paste both the question and Brian’s answer as it’s spot-on.  https://seekingalpha.com/article/4161628-s-and-p-500-earnings-yield-remains-elevated-good-thing
    • Q:  Looks like we are approaching earnings season with market weakness… could be good for the market
    • A:  Market weakness but earnings season optimism. Dont like to see all the bullishness headed into earnings season
    • I have read several posts / articles that sugggest earnings will create the floor in market over the next few weeks … i think misses will be severly punished, and there may be collateral damage with competitors and / or suppliers to those punished.
  • Jeff Miller WTWA  https://seekingalpha.com/article/4161614-weighing-week-ahead-trump-trade-reached-tipping-point
    • A perfect quote from Jeff on this graph; as i was surprised when i reviewed as i was expecting Friday’s close below Monday’s.  Quote:  “The loss this week was only 1.4%, but the dramatic daily moves made it seem like more. The trading range was 4.8% including 3% in a single day.”  -> it felt much worse than it was … 
    • Interesting that both Rail and Trucking are up —
    • Weekly Indicators  – Earnings Yield over 6, 10yr down from last month, technical health declining … Here’s  Jeff’s summary:  “I have increased the 9-month recession probability to the 18% range. I am monitoring, but not yet especially worried. The long-term technical health is 1.5, but I rounded it up to reflect the change.”
    • Jeff, like many of us, is keeping eye on Trade War consequences, and has a great summary:  Quote:  “What is the worst case from a trade war? Estimates suggest it would lower world GDP growth from about 3.5% to 2.5% in China and the US – a reasonable level, but not the fuel for a big rally in stocks.  Since none of the US or China proposals will take effect for two months, there is plenty of time to negotiate and modify positions. On the US side there is evidence that this is already happening with close allies.  But there is a reason for additional worry – the loss of business confidence.” My bold on where i agree strongly.
  • One data point a trend does not make … but i also negatively react to analysts who parse out a report to point out how things are not what they seem.  https://seekingalpha.com/article/4161585-suspiciously-pessimistic-march-jobs-report
  • This is a great post and i walked away w/ 2 key points https://seekingalpha.com/article/4161625-trade-wars-just-beginning-war-fight-indefinitely-shrinking-pie
    • Helps explain some of the motivation behind the huge China infrastructure investments into Africa / India – that’s where consumption growth will be in long term
    • Fits as well into the debt-driven consumption that many of us are concerned about … where is the next debt wall, and what will be the fall out
  • From the folks at Fast Graphs, the first in a series of posts of potential value investments https://seekingalpha.com/article/4161426-dividend-growth-stocks-remain-expensive-50-part-1-5
    • As always from Chuck’s posts, the methods and tool usage are more important than the specific content
  • REIT master, Brad Thomas, posted on VTR https://seekingalpha.com/article/4161244-ventas-inc-grand-slam
    • The comment section is equally valuable
    • I share Brad’s interest in VTR and am looking to add to position
  • A short post on Friday’s job reports … this points out that the March numbers while below expectations are maybe not as important as the downward adjustments to January and February http://www.crossingwallstreet.com/

Plans and recent actions

  • Sold off portion of PEGI in taxable account to preserve capital – sold for nominal gain after x-Div.  This bring PEGI position into more rational size and increases the cash position – target reinvestment is VTR with a target around $49.50
  • Sold my full CRON position in my speculation trading account for loss of ~10% which was my stop target.  (see above Weed pointer).  I will continue to look for trades in the large 4 TMWJF, ACBFF, AHPQF, and CRON, but the winds need to shift to more positive sentiment after the bears make some money.  These are NOT investments yet, IMHO.
  • Bought several SPY June puts, and sold 1 for decent profit – holding the remaining puts for the next big swing
  • My investment discards at today’s valuations:  CY, SQ, and HBAN … both CY and SQ have solid business plans and fit within my narratives, but valuations (Risk / Reward) are just too high
  • My investment ‘watch’ for rational entry point within today’s ranges are:  PFE, ZBH, and VTR.
  • My speculation trades are focused on:  ETSY, IOTS, CRON, ACBFF and APHQF … no positions today