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Open Thread: What Have You Been Buying/Selling/Pondering
Happily re-establishing position in Graincorp (GRCLF) after takeover by Archer Daniels Midland was denied by Aussie govt. Added Diageo (DEO). Adding to Marketfield (MFLDX)
Thanks for putting the thread up again. I always enjoy reading what others are thinking and what they might be up to plus I enjoy writing about my thoughts too. For me, I have not been doing much of anything during the past couple months, or so, except watching the markets and collecting all my fund distributions in cash thus building cash within my portfolio.
With Friday’s market close I have the S&P 500 Index priced at 1806 and using the trailing twelve month’s earnings of $96.43 I compute the TTM P/E Ratio to be 18.7. I favor the TTM method over forward price to earnings methodology as this is often based upon wishful thinking, erroneous assumptions and analyst bias whereas the TTM is based upon actual results. Morningstar has been reporting that stocks, in general, have been recently selling at a four to five percent premium. To me this is saying stocks are not cheap or even selling at fair value … They are selling at a premium based upon historical (TTM) and fundamental (Morningstar) methodology. And, Ted has provided links to Bespoke that show reports that many sectors within the S&P 500 Index are in overbought territory. Yes, it is for sure investor and trader hype is present as valuations have become stretched.
As we move through December and come January our elected in Washington will have to again deal with the Federal Budget and Debt Ceiling debates … Yes, again! With this, I feel better stock prices might be coming as it seems our elected in Washington can only agree, not to agree. This from my thinking is not good for the economy or for the stock market. Then there is the FOMC getting a new chairperson … So, is the taper on or off? And, there is 4Q2013 earning season and revenue reporting that begins in January. Will it be stellar enough to support stocks selling at these premiums? Perhaps, as analyst will dial back expectations just before certain companies report so a good beat rate can continue. After all the beat rate seems to get hyped a lot but no one seems to mentioned the revisions to expectations that are made often just before a company reports.
Since, I currently have pretty much an all weather asset allocation which is set based upon my risk tolerance and needs … I am just watching while letting cash build as my investments make distributions.
As a long term investor, I have "never" made good money when I bought at, or near, the top or in an "overvalued" market. Now as a trader that is something else as they follow momentum and they could care less about valuation. From my thinking it is the traders and hedge funds that have been pushing stock valuations upward and to a premium that exist today. And, on top of that there are many who have levered up their positions through the use of margin which is very aggressive positioning ... and, margin calls can be made in market pullbacks for additional capital requirements to protect positions or the positions get sold out. So not only are we dealing with an overvalued market we are dealing with one that is levered up.
For me, I have positioned somewhat defensively by holding a good sum of cash (20+%) within my portfolio and overweighting the defensive sectors plus holding some investments that can position defensively and even short when these fund managers feel market conditions warrant. Over the past couple of days my portfolio has declined about just half of what the Lipper Balanced Index has and although I trail my bogey year-to-date, I am happy with my current positioning as I feel caution is most definitely warranted. Over the past five years my portfolio has had an average annual return of better than sixteen percent and has a distribution yield of better than five percent on amount invested. And, folks I'll take that and not look back with any regrets.
Reply to @Charles: I am curious as to why you sold GE. Admittedly it's had a bit of a run this past year but with the potential spinoff of GE Capitol and an anticipated dividend increase I see further upside. However my buy in price is $10 below today's close so I guess I can be a little more loose in my thinking.
Bought KTF a muni bond cef and UL (Unilever) as its been beaten down of late and to me provides a better value than PG. I didn't hold anything in the consumer space prior to this purchase. I am also taking a long hard look at HCN although I already hold more than a handful of O, OHI and WSR in the REIT space. HCN is a long-standing, steady, boring, consistent income player that my portfolio would welcome if I can find a way to fund it.
Recently timed a haircut correctly for POAGX and VGHCX. Will position the proceeds into MERFX for a cash alternative for a bucket one holding. Kinda madcap I guess.
Looking to sell PAUDX this week. It goes down when the market goes up...and down when the market goes down. I wonder what sweet spot it's looking for? My biggest loser this year even including some EM bonds.
I'll also nibble at some REITs since they're getting dinged and throw off a good yield.
Reply to @Mark: Ha! I know, I love the GE story...but after the nice run up, I've become a bit spooked on valuation compared to other opportunities...surely, my own lack of understanding at work as well.
OK, so. GE has $12 per share cash, but $8 per share "goodwill and other intangibles." Not to mention high debt to equity. But suspect that is somewhat manifestation of financial operation, which like you I want to see them out of...much of it anyway.
Nice 3% dividend with >50% pay-out ratio.
But, declining FCF:
Ditto for operating cash flow.
Cap spending up, good for long run I think in GE's case.
So, just started thinking there may be clearer opportunities right now than GE with more upside in next year or so.
Hi Charles, I am speaking in past experiences and with this I feel caution is warranted with respect to the present conditions, at least it is for me. It is for certain ... we want know if we are at the top to it has come and gone. Markets can remain in an overbought condition for an extended amount of time just as they can be found in an oversold condition for an extended amount of time. A lot has to do with investor sentiment. From my thinking it seems that many can now perhaps be found on a "sugar" high.
But, let me ask you this. Would you want your new money invested when the markets are overbought and are at or towards a top or when they have pulled back and better value might be had?
Like rono and his pm's and despite being certifiably overweight already I bought more KMI on this mornings ridiculousness believing it to be no more then year end tax manipulations by other investors. Something tells me that Richard Kinder was buying as well although I have no proof of that. What's a poor boy to do.
Reply to @Charles: I have looked at ADM over a couple of years but have just never liked it enough, despite thinking it's something Berkshire Hathaway might buy at some point. ADM has some great assets, but I also don't like being in the middle of the debate over high fructose corn syrup and ethanol.
I owned Graincorp pre-ADM purchase and really liked it - great play on ag infrastructure and really nice dividend policy. I owned the somewhat similar Andersons (ANDE) in the US when it was in the $30's and sold in the mid-50's. That is now nearly $90.
Certainly not expecting the same result, but Graincorp has terrific, strategic assets (grain supply chain in Australia w/Asian demand, oils, etc) that I really don't mind holding for a very long period. It's also now trading lower than it was pre-ADM. Plus, while it may vary (although not as much as it used to, given diversification), Graincorp has been yielding around 4-4.5%. I may be right, may be wrong, but it's the kind of thing I could see holding a decade or more and thrilled to be able to buy it less than book/replacement value.
I may add to Visa and/or Canadian National Rail (the latter recently split, not that that really matters). I continue to look at oil names. APA is a very good choice.
Seneca is a really interesting choice and I think I'll take a look at that as well. It also reminded me of CAG, which I looked at but had completely forgotten about.
Reply to @Mark: I own Kinder Morgan (although not the parent, but I am really thinking about adding the parent again today.) Personally, I think it's a matter of owning hard assets that someone could not come in tomorrow and easily replace/recreate/etc. Hard assets that serve a real purpose, are strategic, needed, etc, etc. I own Hutchison Whampoa, which is one of the world's largest port operators. I was pleased to be able to buy Graincorp again after ADM was blocked from buying it by the Aussie govt. The railroads are another example, as is a Kinder Morgan. I am a little disappointed in how the Kinder companies have fared lately, but remain very long-term with it and just continue to reinvest divs.
The other thing that some have mentioned is a simplification of the Kinder family, possibly merging EPB with KMP. I do think that Kinder continues to be a solid leader until proven otherwise.
The other company I like that is a mix of infrastructure and services is Canadian company Gibson Energy (http://www.gibsons.com/), which has exposure in both the US and Canada.
Reply to @Mark: HCP is a good choice for those with a long-term view. Ventas I think is interesting, as well. This entire space has gotten absolutely creamed. In terms of "right time", I dunno, maybe it isn't, but nice yield for those with a long-term view, plus I think demographics play a positive role. I mean, Ventas at $56 with a 52wk high of $84 and a 4.75% div...
I was looking at this space a couple of months ago and thought it was starting to look reasonable.
Some of the Timber REITs have, well, gone Timberrrrr in the last few months (RYN, for example.)
Reply to @Mark: O is something I've looked at, as well. I continue to own similar WPC (which has raised its dividend for 50 straight quarters) - REITs have been creamed, but I really do like the triple-net REITs as a long-term holding.
Hi Scott, you seem to focus your new ideas (investments) on individual stocks verses funds. Could you offer some pointers as how a mutual fund investor such as yourself has evolved into a stock picker? Have you found greater success? Lower costs? Did you at some point realise that you have an investment philosophy that didn't align with the purchase of ETF or mutual fund?
You seem to have a wealth of knowledge with respect to individual investment ideas. Briefly, any tips on how to develop these stock selection skills? The best I can come up with is reverse engineering my mutual funds by examining my mutual fund holdings. As we all know these list of holdings can be somewhat stale (difinitely not "new ideas").
Anyway, I enjoy reading your stock picks and your investment strategies...we are all on a Joulearney (Learning Journey)...thanks for sharing yours.
Reply to @scott: This entire space has gotten absolutely creamed. In terms of "right time", I dunno, maybe it isn't, Getting Cheaper. "Meanwhile, last month's big loser among the major asset classes: US REITs, which shed a hefty 5.2% for the month just passed." http://www.capitalspectator.com/archives/2013/12/major_asset_cla_31.html#more
I think it's been a difficult transition that has admittedly resulted in some successes and some lessons learned, but the general philosophy is that individual themes have really interested me in the last couple of years and individual names have - I think - been a more pure play on some of those themes than a mutual fund or ETF.
The other view is that I'm tired of short-term trading and if I am taking the long-term view on a set of investments and riding the market up (and maybe it will go down again for a sustained period sometime, who knows), in something of a "live by the sword, die by the sword" mentality, the stocks are almost entirely choices that fit into themes and in a number of cases also provide a nice source of income. I am certainly not out of funds, but I think there have been a number of companies over the last few years where I've liked the company and assets enough that - aside from something particularly unexpected, I can see owning it for 5-10+ years.
The idea of "what do *I* want to own?" has lead to learning experiences, but I think it's been a satisfying experience overall. Additionally, owning companies that I feel strongly about has lead to less stress and less focus on the day-to-day. It's essentially the "own what you know" view. What I own are really things that I like (themes, assets, etc) and understandably, are not going to be what everyone likes.
In terms of knowledge, I think I've always been one of those people who takes in knowledge like a vacuum when I'm interested in something and have real problems doing so when I'm not. I can just sit and research companies in different parts of the world for hours. It's something of a hobby and I find it interesting to come across great individual company stories in other parts of the world. I think the phone and apps like Taptu and Feedly have made reading articles all the more easy - all my regular news sites in a convenient, easy-to-use location.
Lastly, as I mentioned a few posts above, I particularly like hard assets that are strategic, need-based and difficult/costly to replace. Pipelines, railroads, ports, anything in terms of food supply chain because there are so few "ag infrastructure" plays (Graincorp, Andersons), real estate (particularly appealing are more "need-based" RE such as healthcare, apartments) and other such assets. They may underperform at times, but I think long-term they will stand the test of time well.
I've talked about Graincorp - you have a company that owns silos, rail to the ports and a number of ports up and down the Eastern part of Australia - it was originally a government entity that started in the 1910's and it's the kind of company I think will continue around for many years to come. The diversification of the business in recent years will also likely lead to less volatility based upon how good or not the year's crop was. Will it do well tomorrow, next week, next month? I dunno, but I like the assets and think it has a good position in a needed industry where there are really not that many choices at all that are public. The dividend policy ( returning between 40 and 60 per cent of net profit after tax to shareholders across the business cycle) is also appealing.
The other major player in the grain handling space, Viterra, was bought by Glencore.
Another recent add is Brookfield Property Partners (BPY), which is Brookfield's spin-off of its real estate assets (including stakes in General Growth, as well as exposure to their private equity funds and real estate investments; exposure to the latter will be a larger and larger part over time.) That is trading below book value and offers a great, diversified set of assets - retail, offices, apartments, industrial. The issue: it is an MLP and the K-1 form that comes with that.
If I can get paid to wait to some degree, all the better.
Definitely not out of funds, just wanting to own more specific things in many instances.
Comments
Last couple weeks I've initiated three positions:
SENEA
JBSS
APA
Looked pretty hard at ADM after the failed acquisition, but opted out.
Sold GE.
Remain heavy AA, BAC, SCHN, HES, DODGX.
While cutting back on FAAFX and SIGIX.
Hope all is well.
Charles
PS. I trust you did see in David's commentary this month that TEAMX is history!
:
Proctor & Gamble
Merck
MMM
ISTIX
MWLIX
Initiated positions in:
Lincoln Electric
Tessco Technologies
Travelers
Sold:
GLD (I waited too long, took at 20% hit)
Century Link
FSCRX (sold in taxable, bought equal amt in Roth)
Pretty much through for the year unless one of my stocks stops out in a correction.
Good Investing and patience to all
Thanks for putting the thread up again. I always enjoy reading what others are thinking and what they might be up to plus I enjoy writing about my thoughts too. For me, I have not been doing much of anything during the past couple months, or so, except watching the markets and collecting all my fund distributions in cash thus building cash within my portfolio.
With Friday’s market close I have the S&P 500 Index priced at 1806 and using the trailing twelve month’s earnings of $96.43 I compute the TTM P/E Ratio to be 18.7. I favor the TTM method over forward price to earnings methodology as this is often based upon wishful thinking, erroneous assumptions and analyst bias whereas the TTM is based upon actual results. Morningstar has been reporting that stocks, in general, have been recently selling at a four to five percent premium. To me this is saying stocks are not cheap or even selling at fair value … They are selling at a premium based upon historical (TTM) and fundamental (Morningstar) methodology. And, Ted has provided links to Bespoke that show reports that many sectors within the S&P 500 Index are in overbought territory. Yes, it is for sure investor and trader hype is present as valuations have become stretched.
As we move through December and come January our elected in Washington will have to again deal with the Federal Budget and Debt Ceiling debates … Yes, again! With this, I feel better stock prices might be coming as it seems our elected in Washington can only agree, not to agree. This from my thinking is not good for the economy or for the stock market. Then there is the FOMC getting a new chairperson … So, is the taper on or off? And, there is 4Q2013 earning season and revenue reporting that begins in January. Will it be stellar enough to support stocks selling at these premiums? Perhaps, as analyst will dial back expectations just before certain companies report so a good beat rate can continue. After all the beat rate seems to get hyped a lot but no one seems to mentioned the revisions to expectations that are made often just before a company reports.
Since, I currently have pretty much an all weather asset allocation which is set based upon my risk tolerance and needs … I am just watching while letting cash build as my investments make distributions.
As a long term investor, I have "never" made good money when I bought at, or near, the top or in an "overvalued" market. Now as a trader that is something else as they follow momentum and they could care less about valuation. From my thinking it is the traders and hedge funds that have been pushing stock valuations upward and to a premium that exist today. And, on top of that there are many who have levered up their positions through the use of margin which is very aggressive positioning ... and, margin calls can be made in market pullbacks for additional capital requirements to protect positions or the positions get sold out. So not only are we dealing with an overvalued market we are dealing with one that is levered up.
For me, I have positioned somewhat defensively by holding a good sum of cash (20+%) within my portfolio and overweighting the defensive sectors plus holding some investments that can position defensively and even short when these fund managers feel market conditions warrant. Over the past couple of days my portfolio has declined about just half of what the Lipper Balanced Index has and although I trail my bogey year-to-date, I am happy with my current positioning as I feel caution is most definitely warranted. Over the past five years my portfolio has had an average annual return of better than sixteen percent and has a distribution yield of better than five percent on amount invested. And, folks I'll take that and not look back with any regrets.
I wish all ... "Good Investing."
Old_Skeet
PRBLX
LEXCX
AMANX
MVPFX
thanks
nath
Looking to sell PAUDX this week. It goes down when the market goes up...and down when the market goes down. I wonder what sweet spot it's looking for? My biggest loser this year even including some EM bonds.
I'll also nibble at some REITs since they're getting dinged and throw off a good yield.
OK, so. GE has $12 per share cash, but $8 per share "goodwill and other intangibles." Not to mention high debt to equity. But suspect that is somewhat manifestation of financial operation, which like you I want to see them out of...much of it anyway.
Nice 3% dividend with >50% pay-out ratio.
But, declining FCF:
Ditto for operating cash flow.
Cap spending up, good for long run I think in GE's case.
So, just started thinking there may be clearer opportunities right now than GE with more upside in next year or so.
Gotta run to dinner. But let's discuss more.
M* pegs GE fair value at $27. Seems reasonable for foreseeable future, until things become clearer.
Max? $33-$35 a ways out?
Again, long term, OK, but think there are some better opportunities nearer term.
Hey Mark, let's revisit down road, see how things unfold.
I watch it daily, so if I see opportunity to jump back-in, will let you know.
Hi Charles, I am speaking in past experiences and with this I feel caution is warranted with respect to the present conditions, at least it is for me. It is for certain ... we want know if we are at the top to it has come and gone. Markets can remain in an overbought condition for an extended amount of time just as they can be found in an oversold condition for an extended amount of time. A lot has to do with investor sentiment. From my thinking it seems that many can now perhaps be found on a "sugar" high.
But, let me ask you this. Would you want your new money invested when the markets are overbought and are at or towards a top or when they have pulled back and better value might be had?
Old_Skeet
http://seekingalpha.com/article/1873881-right-now-is-the-wrong-time-to-be-buying-healthcare-reits?source=email_inv_edi_pic_1_1&ifp=0
I owned Graincorp pre-ADM purchase and really liked it - great play on ag infrastructure and really nice dividend policy. I owned the somewhat similar Andersons (ANDE) in the US when it was in the $30's and sold in the mid-50's. That is now nearly $90.
Certainly not expecting the same result, but Graincorp has terrific, strategic assets (grain supply chain in Australia w/Asian demand, oils, etc) that I really don't mind holding for a very long period. It's also now trading lower than it was pre-ADM. Plus, while it may vary (although not as much as it used to, given diversification), Graincorp has been yielding around 4-4.5%. I may be right, may be wrong, but it's the kind of thing I could see holding a decade or more and thrilled to be able to buy it less than book/replacement value.
I may add to Visa and/or Canadian National Rail (the latter recently split, not that that really matters). I continue to look at oil names. APA is a very good choice.
Seneca is a really interesting choice and I think I'll take a look at that as well. It also reminded me of CAG, which I looked at but had completely forgotten about.
The other thing that some have mentioned is a simplification of the Kinder family, possibly merging EPB with KMP. I do think that Kinder continues to be a solid leader until proven otherwise.
The other company I like that is a mix of infrastructure and services is Canadian company Gibson Energy (http://www.gibsons.com/), which has exposure in both the US and Canada.
I was looking at this space a couple of months ago and thought it was starting to look reasonable.
Some of the Timber REITs have, well, gone Timberrrrr in the last few months (RYN, for example.)
Edited to add: added Ventas (VTR)
Hi Scott, you seem to focus your new ideas (investments) on individual stocks verses funds. Could you offer some pointers as how a mutual fund investor such as yourself has evolved into a stock picker? Have you found greater success? Lower costs? Did you at some point realise that you have an investment philosophy that didn't align with the purchase of ETF or mutual fund?
You seem to have a wealth of knowledge with respect to individual investment ideas. Briefly, any tips on how to develop these stock selection skills? The best I can come up with is reverse engineering my mutual funds by examining my mutual fund holdings. As we all know these list of holdings can be somewhat stale (difinitely not "new ideas").
Anyway, I enjoy reading your stock picks and your investment strategies...we are all on a Joulearney (Learning Journey)...thanks for sharing yours.
Getting Cheaper.
"Meanwhile, last month's big loser among the major asset classes: US REITs, which shed a hefty 5.2% for the month just passed."
http://www.capitalspectator.com/archives/2013/12/major_asset_cla_31.html#more
Regards,
Ted
I think it's been a difficult transition that has admittedly resulted in some successes and some lessons learned, but the general philosophy is that individual themes have really interested me in the last couple of years and individual names have - I think - been a more pure play on some of those themes than a mutual fund or ETF.
The other view is that I'm tired of short-term trading and if I am taking the long-term view on a set of investments and riding the market up (and maybe it will go down again for a sustained period sometime, who knows), in something of a "live by the sword, die by the sword" mentality, the stocks are almost entirely choices that fit into themes and in a number of cases also provide a nice source of income. I am certainly not out of funds, but I think there have been a number of companies over the last few years where I've liked the company and assets enough that - aside from something particularly unexpected, I can see owning it for 5-10+ years.
The idea of "what do *I* want to own?" has lead to learning experiences, but I think it's been a satisfying experience overall. Additionally, owning companies that I feel strongly about has lead to less stress and less focus on the day-to-day. It's essentially the "own what you know" view. What I own are really things that I like (themes, assets, etc) and understandably, are not going to be what everyone likes.
In terms of knowledge, I think I've always been one of those people who takes in knowledge like a vacuum when I'm interested in something and have real problems doing so when I'm not. I can just sit and research companies in different parts of the world for hours. It's something of a hobby and I find it interesting to come across great individual company stories in other parts of the world. I think the phone and apps like Taptu and Feedly have made reading articles all the more easy - all my regular news sites in a convenient, easy-to-use location.
Lastly, as I mentioned a few posts above, I particularly like hard assets that are strategic, need-based and difficult/costly to replace. Pipelines, railroads, ports, anything in terms of food supply chain because there are so few "ag infrastructure" plays (Graincorp, Andersons), real estate (particularly appealing are more "need-based" RE such as healthcare, apartments) and other such assets. They may underperform at times, but I think long-term they will stand the test of time well.
I've talked about Graincorp - you have a company that owns silos, rail to the ports and a number of ports up and down the Eastern part of Australia - it was originally a government entity that started in the 1910's and it's the kind of company I think will continue around for many years to come. The diversification of the business in recent years will also likely lead to less volatility based upon how good or not the year's crop was. Will it do well tomorrow, next week, next month? I dunno, but I like the assets and think it has a good position in a needed industry where there are really not that many choices at all that are public. The dividend policy ( returning between 40 and 60 per cent of net profit after tax to shareholders across the business cycle) is also appealing.
The other major player in the grain handling space, Viterra, was bought by Glencore.
Another recent add is Brookfield Property Partners (BPY), which is Brookfield's spin-off of its real estate assets (including stakes in General Growth, as well as exposure to their private equity funds and real estate investments; exposure to the latter will be a larger and larger part over time.) That is trading below book value and offers a great, diversified set of assets - retail, offices, apartments, industrial. The issue: it is an MLP and the K-1 form that comes with that.
If I can get paid to wait to some degree, all the better.
Definitely not out of funds, just wanting to own more specific things in many instances.