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)

 

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