Friday, October 17, 2014

Chaos Update

I'm just kidding.  It's not Chaos, well, I mean the market action the past few weeks is just a case of jitters in my opinion.  The way our government is handling the growing Ebola crisis, now that's chaos.  Why we don't temporarily stop incoming visitors from Ebola countries is a mystery to me.  I can only guess that our leaders think it isn't PC?  Oh well, I'd rather think about the market.

The chart below shows the YTD return of the S&P 500 (red line) vs. the Chump IRA (blue line).  As you see from the graph, we've now endured four straight weeks of declining returns.  And while it may seem like the bottom has fallen from the stock market, the market has only dropped around 6.5%, not even the "10 percent" correction that everyone has been calling for over the past 2 years.

So keep things in perspective, this is not a big deal, and we are not entering a recession.  Use the lower prices to add to undervalued positions you hold, or start new ones.

The Chump YTD returns are starting to gap again with the S&P, not falling as hard in this downturn.

I've been paying close attention to my watch list during this minor correction, but NOTHING has hit my estimated buy price based on fair value, so I'm a little frustrated.  Regardless, I needed to build a some cash in the event I'm ready to buy, so I closed my positions in VMI and John Deere (DE).

Not that I don't like VMI and DE, but both have been lowering guidance, and are forecasting declining EPS for at least the next 18 months.   Both are subject to farm prices and agri-business spending.  I also have a position in ADM, which I'll keep.   I decided to close these out, and look for companies that are growing earnings now, pay a growing dividend, and are undervalued.

In a previous blog, I mention Alaska Airlines.  I added ALK to my watch list a few months ago, and with the Ebola news, airlines got beat up as a group.  Seemed like a good time to "swap" my VMI for ALK...better dividend, better valuation, nice growth in EPS.  As the market has continued to correct, I've added to the position.

I also used some of my sale proceeds to add to my positions in HAL and KMI.  The entire energy sector is getting beat up, and good companies like these are on sale!  HAL pays a small dividend, but is growing it rapidly, and is forecasting 25% EPS growth over the next several years.  KMI pays a great yield (see blog from yesterday for more info).

I still have some cash on hand, so I'll wait to see what next week brings.

Wednesday, October 15, 2014

Kinder Morgan (KMI)

As mentioned in earlier posts, I like KMI, even after the consolidation upcoming with KMP.  KMI is a dividend machine.  Here is a press release today regarding the recent quarter

Here are the highlights:

  • Increased the dividend from $0.41 to $0.44, a 7% increase
  • Revenue was up vs. last year 9%, as was cash available for dividends
  • After the consolidation, which is on track, the dividend is expected to rise 16% next year from $1.72 to $2.00 (full year)
  • KMI finished up today, and closed at $35.29.  The current dividend yield is around 5%
Here is a FASTGraph for KMI, based on FFO (funds from operations) instead of EPS, which is a more relevant number when looking at KMI:

Due to a hit to cash this year caused by $70B merger, the hit a top of around $40....with the current market sell off, the stock is down nicely, and offers a nice buying opportunity, with a "guaranteed" 16% raise in the dividend next year.  

Here is another recent "bull" case article from SA:



Tuesday, September 23, 2014

Stock Swap Today (VMI & ALK)

I've been reading a bunch of negative press regarding VMI recently.  In parallel, I've been reading a lot of positive press about Alaska Airlines (ALK).  So I started comparing the two.....

In summary, I think the growth prospects for ALK over the next two years, far exceed those for VMI, and they pay the same dividend.  So I closed VMI today, and bought a 2/3 position in ALK...around $44.73/share

Here is the FASTGraph snapshot for ALK:

Great earnings growth, they recently added the dividend, and the stock is nicely undervalued today!

Friday, August 29, 2014

Some Thoughts on Portfolio Performance

Several weeks back, I started looking at performance of the Chump IRA vs. the S&P on a week to week basis, to see if I could learn anything interesting.  I read lots of articles where authors state that they have different goals, and that they don't use the the S&P benchmark, or any other, to measure their performance.  The argument goes something like this,  "My goals are different, therefore I don't benchmark.  As long as the portfolio is on track doing its job, I leave it alone, and I'm happy."  Certainly, I'm over simplifying, but this is the gist.

To this investor I say "NONSENSE!"

**Unless you are retired, and need a nice yield from your portfolio to supplement your income**, you should be growing your "pile" of assets as fast as you can, as much as you can.  Track your performance, learn and improve, and failing improvement, put all your money into a low cost Vanguard ETF like VOO (S&P 500).  It's just that simple.  If you are consistently trailing the S&P over every period you measure, stop, and redeploy.

The whole point of this blog is to see if I can beat the S&P 500 over different periods of time.  If I continually fall short, I will liquidate, and put the money in ETFs until I retire.  End of story.

This comment may seem like heresy to some of my dividend growth investment friends, but it isn't.  I love dividend growth stocks, and I'm invested almost exclusively in them.  However, I've also been beating the S&P 500, collecting more yield for reinvestment, and enjoying a lower than 1.0 volatility (beta) in the portfolio.  I do this by picking undervalued stocks in which to invest.

Here is my YTD total performance for the past several weeks vs. the S&P:

I'm kind of angry this week, because the S&P caught me, and stands slightly above the Chump IRA at 9.87% vs. Chump at 9.80% for YTD total return.  As you can see from the graphic, I went into week 31 with a nice 300 basis point lead, then fell short of my benchmark in every week since.  I know that this can change quickly, and I had some bad luck the past couple of weeks, especially with WAG, but this graph serves as a warning, so I'm going to try and learn a few things, take a deep dive into my holdings, and come back with a strategy to re-build my lead! So there!



Today, A Political Message

This is a very good article by Wayne LaPierre at the NRA.  Give it a read.

Chump is "long" NRA!

Tuesday, August 26, 2014

Good Article on Valmont Industries (VMI)

Nice write up and comments regarding VMI on Seeking Alpha here:

I'm long VMI in the Chump IRA, here is an up to date FASTGraph:

The stock is selling at a decent entry point today.  They have a small, but growing dividend, and I like their long term prospects.



Friday, August 15, 2014

More on KMI and KMP

As discussed previously, all the Kinder Morgan entities are merging into KMI.  I own KMI in the Chump IRA, but also have a full position of KMP in my taxable account.  So I'm wondering, should I sell my KMP while the shares are up, or should I wait for the deal to complete?

Here is the math attached to the deal: 1 KMP unit = 2.1931 shares of KMI + $10.77

Using prices from right now, KMI = $41.40, and KMP = $98.78

Solving for KMP in the above equation = 2.1931($41.40) + $10.77 = $101.56, which around $2.75 more than I get selling today, or roughly 2.5% higher.  The difficulty comes with the two moving parts....if the price of KMI drops, my payout declines, and if the price of KMP rises, it might make sense to sell my shares.

I'm tempted to sell my KMP shares and be done with this, but I want to investigate the tax implications of selling now vs. holding until the deal closes....