Weekly Update, June 10, 2018

Actions – Last Week’s Plans

  • Utilities are getting my attention and other authors are floating different ideas based on two factors (i think): a) the sector is so oversold and b) a retrenchment to lower risk capital with rates topping out make utilities appealing.
  • PFE is medium sized position and part of healthcare narrative, but i admit i understand too little about the company, its business and where / how it fits into a longer term narrative.  It’s high level generalities that make me uncomfortable as an investor / owner in the company.  I started looking to both understand more and to make a better investment decision.  I came to the same basic conclusion as this author https://seekingalpha.com/article/4180357-pfizer-still-hold-dividend
  • I started looking into BNS but a hard bar to hurddle given my great positions in RY and BMO; a recent post caught my attention, but most importantly was one of the comments https://seekingalpha.com/article/4180526
    • Comment quote:
      • Isn’t the bigger question ‘why would you want to own traditional bank stocks’? Imagine that you had to create a banking industry from scratch. It would not look remotely like BNS. There would be few or no physical branches. They would not employ armies of people whose sole purpose is to sell products that people neither need nor want. They would not get away with the current level of charges and commissions. In China there is a generation growing up with smart phones and modern payment methods. It seems that many don’t have traditional bank accounts because they add no value. There is a growing FinTech industry that is providing services in many innovative ways. Can BNS (and others) compete with this? I suspect not, and the returns available in no way compensate for that risk. The banks are not going to disappear any time soon, but their high margin and high cost model will be constantly attacked from all sides mercilessly. All to the benefit of consumers.
  • No investment positions were eliminated or grown this past week – UMPQ was trimmed in my daughter’s account after substantial price increases – the NW local housing market is bound to cool down shortly and UMPQ carries risk going into that transition.
  • Stop Loss orders continuously reviewed and updated as stock prices increased.
    • Even core portfolio holdings, e.g., INTC, CSCO, BMO and UMPQ, now have stop loss orders on about 25-30% of the respective position.  I will also keep writing covered short-term calls slightly out of money to increase some cash flow from them as well.  I see this as an opportunity to a) realize gains at higher levels, b) reinvest capital into higher paying dividend opportunities w/ less capital risk (maybe over the next 3-9 months) and c) balance out portfolio by reducing some larger positions .  Only a few core holdings will be left unhedged for now:  AAPL, JNJ, based on price, valuation and intermediate growth opinion.
  • Favorite trades this past week are all on the short side – SJR, CY and STM.  All are hanging onto above Piovt prices and still open positions.

The Clues this Week

  • Equity / Stocks
    • Lance Roberts weekly view comes across more bullish than expected though with downside risk cautions.  I am definitely not adding to long-term investments based on broad market performance / analysis.  The overbought, over-valued conditions persist imho (see Stop Loss point above) https://seekingalpha.com/article/4180578-bulls-make-break
    • This was a great snippet / news brief on blockchain technology and it has nothing really to do w/ crypto … the companies that can figure this out early (blockchain) will have an advantage https://seekingalpha.com/news/3361633-northern-trust-gets-two-u-s-patents-distributed-ledger-technology
    • There were a couple of posts on cell tower REIT companies this week – i have 50% of my targeted position (IRA) in CCI which in my analysis ~6 months ago i determined as the better investment than AMT.  I would increase position <$100.
    • Brian Gilmartin’s team on S&P earnings growth and a pretty good look-ahead into later 2018 and 2019.  There is a cautionary view to Q1’19 and i am in same camp; even if the S&P can continue w/out major pullback through summer and fall, the earning comps going into 2019 will be tough  http://fundamentalis.com/?p=7838
      • Quote:
        • With Q1 ’18 earnings practically complete, readers can see how strong actual tech earnings were versus the expectations as of April ’18
        • Will Q2 ’18 be as strong ? So much depends on Apple. The fact that investors are seeing upward revisions to Tech earnings for Q2 ’18 through Q4 ’18 is comforting.
        • However look at Q1 ’19 and how that estimate’s growth rate has fallen. Should we be worried ? Hard to say – if there is a problem with Tech earnings beginning in Q1 ’19, then the stocks should start to discount that issue shortly.

  • Debt / Bonds
  • Jeff Miller’s WTWA
    • S&P – one way trip without detours or distractions
    • inflation expectations are back to last quarter’s @ 2.13%, and all else seems settled back into the groove … calm before storm?
    • This is a new chart for me and the general takeaway is global economic leading indicators are decelerating at least … sentiment weighs in here as well 
    • This is a great table from Morningstar … Jeff wisely points out the “Fair Value Uncertainty” … what a challenge for those wanting FANG results to continue forever
  • Emerging Markets get their own topic this week – as stated earlier, i am getting more interested in China, India and Africa.

The Plans next Week

  • Specific Analysis
    • Continue digging into Utilities — where are the values and valuations for my portfolio?
    • Continue measuring investment opportunity for TU, RCI and SJR
    • Continue digging into the “Water Boys” – XYL, BMI, MWA, ITRI, PNR
  • Actions Set Up – no clear investment entry points, but tons of cautionary ‘protect my capital’
  • Triggers to watch
    • N. Korea and FOMC will rule the airwaves … will emotional reactions create opportunities?

Leave a Reply

Your email address will not be published. Required fields are marked *