Weekly Update, May 13, 2018

Plans and Clues Blog – a personal investment journal, not advice

More General / Macro Oriented Weekly Reads 

  • General Reads
  • Stocks
    • One of 3 Canada Week stocks i hold (very, very small position) … These are swing, high risk intermediate trades and long term speculations (TWMJF, APHQF and CRON).  CRON being the largest position and the most ‘trade-like’.  The upcoming countdown to recreational legalization is going to be key for these stocks, as well as export opportunity.
    • More up-side w/ S&P?  http://seekingalpha.com/article/4173102 … i will take it; keep selling covered calls and upping my stop loss orders accordingly on positions that i want to trim or capital i want to protect
      • I am selling into the rally, not buying into it
    • Brian Gilmartin’s latest on S&P earnings http://fundamentalis.com/?p=7784
  • Rates / Bonds
    • REIT investments are closer to rates / bonds than stocks imho.  While this overemphasizes the retail segment, the sentiment is consistent it seems and contrarian views suggest adding to REIT exposure that can ride through economic cycles  https://seekingalpha.com/article/4172245-trouble-reit-land 
    • A Data Center REIT specific deep dive  http://seekingalpha.com/article/4172113
      • I only hold Data Center REIT preferred (DLR.Pr.C) after exiting QTS before its dive
      • While the data center is a key element in my IOT narrative, my view is that the risk in the REITs exceeds the reward on a grwoth or income basis – just think there is easier money to be made in other parts of the IOT value chain
      • I like the tower REITs better at lower entry points (e.g., CCI <$101)
      • The hyperscale buiness is going to be interesting in intermediate term … i would not want to be negotiating leases / prices w/ major CSP
    • A rational voice on bonds and their role in portfolio … regardless of the opinions and commentary http://seekingalpha.com/article/4172053
      • I agree and continue to both nibble at shorter term treasuries, as well as hunting for ~10 year corporates when 10yr rates exceed 3%, i.e., Berkshire, Apple, Microsoft quality
    • Treasuries are doing just fine even after this last week’s huge auction … there continues to be some supply / demand fears (supply will outstrip demand pushing rates higher) … maybe not, but all continues needed watch items  http://www.seekingalpha.com/article/4173291
  • Jeff Miller’s WTWA  https://seekingalpha.com/article/4173344-weighing-week-ahead-stocks-benefit-trump-policy-changes
    • https://static.seekingalpha.com/uploads/2018/5/12/55431-15261830686069257_origin.png
      • an easily observable trend this week – will it continue is the key question
    • This quote on ease of credit came as surprise, as ancedotal feedback locally is that credit is tough for small business.  Quote:
      • Bank lending is getting easier. New Deal Democrat notes that an ongoing criticism of the economy has been the deceleration of commercial and industrial loans. The Senior Loan Officer Survey tends to lead lending by about six months. He concludes, “Credit remains loose, and indicates continuing economic growth over the next 12 months”.
    • On inflation … “Inflation remained tame. The PPI increased 0.1% with the core up 0.2%. The CPI increased 0.2% with the core up 0.1%.”
    • A great pointer to China trade framework … if this is accurate, there will be little progress in short term.
      • This shows the segments that will be impacted w/out real progress  
    • Here’s where policy gets in the way of stated growth objectives for no other reason than rhetoric. Quote:
      • Economic growth. Looking a bit better with current “nowcast” results of 3-4%. Worries? Immigration limitations hit potential growth as do trade restrictions. In total, these may reduce GDP by more than 1%. [We are still headed for solid growth, but it will be less than it might have been].
    • Weekly indicators  
    • Jeff’s closing worrying statements ring true to me:  Iran and China
      • Iran. It appears that the European allies may split with the US. The chance for retaliation is higher. Most experts question whether bilateral negotiations are possible.
      • Deterioration in the tariff and trade talks. The high-level meetings have produced no progress on an issue of great economic significance. The market rates this as a bigger threat than do economic analysts. I agree with the market.

Specific Actions, Plans, & Analysis

  • Key summary point this week – confounding indicators and data increasing and keeping pulse on investments is getting harder …
    • will novice folks lose big?  employ professionals?  I’ll take Andy Grove’s advice – “Only the paranoid survive”
  • Per last week’s update, I added to my T position by almost 50%; cost basis $31.65.  Regardless of Time Warner outcome, the yield and capital risk to T @ 31.65 was just too hard to pass – i consider the position now complete (though would add more for intermediate trend trade if opportunity surfaced)
  • I traded in and out of IOTS before / after earnings for small profit.  I still hold 10% position but was greatly disappointed by the market’s reaction to earnings and strategy execution.  I expect this to drop in price unless surprise news surfaces – M&A in close proximity or new major deal – i still love this small cap investment – earnings conference call transcript
  • Sold a couple of $80.00 June ’18 calls on BMO stock that i would be ok w/ trimming at $80+/share … this is not a reflection of BMO quality, but position balancing
  • Worked through Canada telco analysis this last week, and found TU the favored risk / reward company within my IOT narrative – target <$35.  Risk low = $30, valuations ranged from GuruDCF $34.10 and SimplyWall.St $39.42.  ROE above my 15% guardrail and ROIC close to 10% target.
  • Next segment on deck for deep dive = water component manufacturers:  BMI, PNR, XYL and MWA (i shorted MWA ~$11.50 for a swing trade as the price is ahead of itself after earnings imho)
  • In retirement account, i also add 50% position to VGSH to compliment positions in VGIT and VCSH
    • I was a bit early on VGIT and VCSH and carry small unrealized losses
    • I am not yet ready on the longer end … e.g., VGLT

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