Weekly Update, Aug 20, 2017

  • Brian Gilmartin’s analyses are almost always worth reading, and this very short one had a very troubling line – https://seekingalpha.com/article/4100520-russell-2000-teetering-edge  
    • “An interesting fact was thrown out from the panel – from Jason, Chris Verrone, Rissmiller, et. al.: approximately 1/3rd of the Russell 2000 components are now unprofitable? The percentage could be higher, but I also could have heard wrong too.”
    • This got my attention.  If accurate, it feels too much like 1999 for me.
  • Another piece from Brian, that i cannot quite my head around.  Basically he is saying that based on S&P earnigns yield, the 10yr Treasury could increase 100% and still be the lesser value investment.  I was thinking that a 10yr just over 3% would attract my conservatively invested funds;  I could be way off here. https://seekingalpha.com/article/4100466-s-and-p-500-earnings-yield-5_70-percent-week-telling-us
  • Doug Short’s weekly S&P 500graph (curtesy of Jeff Miller) … geopolitical events and too many people looking for excuse to take profits
  • Jeff’s weekly scorecard  … I studied this one and was surprise that 10yr note was same as last week and lower across monthly and quarterly.  
  • Here is an analysis that puts a few things into context:  a) GDP growth rates, b) large company growth rates, and c) the inference that our expectations as investors need to be reset (and if you do not do on your own, then the market will help just like it did in the internet bubble pop) https://www.advisorperspectives.com/commentaries/2017/08/20/imaginary-growth-assumptions-and-the-steep-adjustment-ahead

Commentary

  • I upped my CSCO position by 50% and it is now my largest holding in taxable portfolio … i looked at IBM, CSCO and QTS as the top investments during this last Trump decline.  CSCO i own now at $20.29 cost basis and yielding over 5%.  I also understand their transformation strategy.  I do not understand IBM.  QTS has to decline below $50 before i can be tempted.
  • I reviewed CAH this weekend thinking that i liked it at $69 and now it is <$65.  I could not ‘write the check’ to buy the company.  Their margins are just too thin to fight off any viable competitor from the bottom or adjacent markets, e.g., Amazon.  I am also treading carefully in healthcare given the future US political posturing that will only get worse as folks ready for 2018 election.
  • I also started a very small trading account in a new platform – Robinhood.  First postion was a small pre-earnings gamble on DSW.  DSW got killed on the Foot Locker results, but i am not sure those are apples-to-apples.  I am betting that DSW will not be as impacted as expected … this is true speculation, not investing.

Weekly Update- Aug 13, 2017

Commentary

  • Open question:  Is it time to adjust annual return expectations for the next couple of years to <5%?  – i have a fairly low risk master portfolio and pegged returns on average to ~5% including dividends.  Upside surprises are nice, but is it time to even plan for worse (at least one major scenario)?
  • Two small portfolio adjustments this past week:  a) purchased another slice of LTC after the price declined nearly 10% on the week (this is a really well run organization and my position is in IRA.  i will build it further as price passes rationality)  The news of the week seemed to be one tennant of LTC being in default with a maximum 5% bottomline hit.  Lower price exceeded the mark imho.  b) i exited out of OHI in my taxable account.  I did not want losing position there as it was a temporary park for dividend and possible appreciation.  OHI still has several tennant issues to work thru as well as the larger macro confusion on fedral healthcare policy.  I have not decided if i will build out position in IRA.

A new REIT commentator

A REIT commentator surfaced today that i had not seen before (probably just my miss due to information overload) … i thought this was a good quick review of the REIT landscapte https://seekingalpha.com/article/4097044-reits-foundation-become-increasingly-shaky

As with most commentators, one needs to critically review their insights and inferences … and look for opposing or at least differing opinions, e.g., Adam vs Brad from the Seeking Alpha crowd.

Where i ended up aligned w/ Adam:  caution on OHI (maybe even reduce).  Where i diverged:  not FR, but STAG (from Brad), but the segment is compelling!

Weekly Reads, Reviews and Comments – Aug 6, 2017

Data based fear

I read this … and i think a bit too much fear building, but cannot be simply ignored.  https://seekingalpha.com/article/4092664-hot-potatoes-dutch-tulips

I have been leaning toward more and more cash based on my own analysis and convictions, and articles like this make it hard to remain balanced and objective.  Rational logic anchored in consistent and reliable data is needed, not more emotion (fear or greed).

Weekly Reads, Reviews and Comments – July 30, 2017

Commentary

I am fairly comfortable with my current holdings.  I have >15% cash in taxable, and plenty of dry powder in nontaxble accounts as well.  I will continue to look for opportunitistic profit taking in the Radar Position 2 companies, and writing covered calls for some others.  Over the next few weeks, i think the 10yr Treasury is the key indicator and it will be watched carefully … i read somewhere this weekend that 2.4% on 10yr is a critical point.  that is about the point where i am willing to take positions in the 7-10yr durations – investment grade muni and corp (not sure about treasuries).

For new positions or building existing ones, the favorites remain (pending logical entry points):  STAG, QTS, MSFT, SWKS, CSCO and APPL.  Of all these, MSFT is probably my favorite.  Shorts being considered though too early on all 3 right now:  THO, NFLX and NVDA.

Data Analysis is Important

Here is an interesting article from SA this morning … now the content itself is a bit hazy and incomplete, but there is a very good data insight that cannot be emphasized enough … maybe it could be called the importance of ‘mathmatical context’.  In our increasing use of headlines, tweets, and other ‘snackable’ information, context and understanding are secondary.  For investors, that surface understanding can cost us …

“Just as logically, there should be some “proportionality” to yield curve tightening. While today’s yield curve would require only an 85 basis increase in 3-month Treasuries to “flatten” the yield curve shown in Chart 1, an 85 basis point increase in today’s interest rate world would represent a near doubling of the cost of short term finance. The same increase prior to the 1991, 2000 and 2007-2009 recessions would have produced only a 10-20% rise in short rates. The relative “proportionality” in today’s near zero interest rate environment therefore, argues for much less of an increase in short rates and ergo – a much steeper and therefore “less flat” curve to signal the beginning of a possible economic reversal.”

https://seekingalpha.com/article/4091112-bill-gross-curveball

 

Discards – FPI; Reductions – NWL, TJX

Closed FPI position (last remnents of a speculative REIT purchase) – first time was on earnings and discussion, and this last time was on inconsistencies from the CEO on up-coming lease renegotiations.  This is just a bad picture forming and i do not have the stomach or patience to wait and watch dishonest / obscurely speaking CEO.  I swallowed a 9.5% loss in non-taxed account for this mistake.  Key learning from this mistake … do better research on the CEO, the company promises (and how they’re kept), as well as stronger competitor analysis.

NWL position was reduced by 30% in taxable account.  My cost is <$12/share, but i am just running out of confidence in consumer, as well as taking an opportunity to reduce my investments in oil-based plastics.  This was simple housecleaning, no message to risk / reward for the company other than the macro consumer fatigue that i see looming on the intermediate horizon.

TJX position was reduced as well by 30% in taxable account.  The position sold cost was >$77, and i just did not see the patience path to profit and i had gains to offset … take the loss and focus on the lower priced positions that actually have profit potential in near/intermediate term.  TJX is completely out-of-favor, and i have paid the price for underestimating the negative sentiment.  Key learning from this mistake, exaggerate the risk discount in price targets … i was 10% off.

Weekly Reads, Reviews and Comments – July 23, 2017

FPI Inflection Point

I still have a very small position in FPI … waiting for the dead-cat bounce to make next decision, and the time is nigh.  Two recent articles in SA help a bit, but for me i am not patient enough to wait this one out.  I will take my money and go play somewhere else.

Probably the icing on the cake for my decision is the distrust of CEO now established with his inconsistent narrative on lease renewals, as well as the renewals scheduled over next 24 months.  Risk for surprises is just too high.

jnj – q2 earnings

https://seekingalpha.com/article/4088491-johnson-and-johnsons-jnj-ceo-alex-gorsky-q2-2017-results-earnings-call-transcript

  • love point they are trimming portfolio and reinvesting proceeds for future rather than giving it all ack to shreholders
  • analyst focus is pharma
  • there were good points made about jnj credo and a bit of tranparency on drug pricing

more finacials this weekend

Weekly Reads and Comments – July 16, 2017

Personal Portfolio Commentary

  • sold all of my WTR >$33.00 (sell target within Radar Position
  • added an incremental slice to T (intend to add more if price continues to drop >of 5.75% yield
    • cannot speculate on probability either way)
    • T becomes one of largest taxable holding
  • targets this coming week
    • CTWS liquidation
    • NWN liquidation
    • Select REIT out-of-money (OTM) call sales