Wednesday, July 23, 2014

Warren Wednesday: H1 1963

Warren Wednesday is back. I won't be able to promise consistent every other Wednesday but I will be getting it out when I can. The ability to learn from the greatest investor ever is too big a chance to pass up.


H1 1963Written: July 10, 1963Length: 13 pagesSourceRPCPA.com
Dow return for H1 1963: +10%Buffett's return:  +14%Major events: In Gideon v. Wainwright the Supreme Court rules that states have to provide an attorney to those who cannot afford one. Coca-Cola releases its first diet soda, Tab. The first James Bond film, Dr. No, is released in theaters.


Warren starts off by making a good point of comparisons between himself and the Dow. Him being +4% with profit is less satisfactory then when he had a 14.2 margin with him being -7.5% when the Dow was -21.7%. If someone is paying Warren to manage their money you'd expect him to protect it as much as try to make more money and prove his worth over indexes.
Incidentally this was my reasoning why I was in mutual funds in 2008. I learned the hard way that not all fund managers think this way.

Next he talks about his "Generals" and his "Work-outs" as far as sometime one will do good and the other will cause drag on his portfolio numbers. Then later the reverse is occurs. He doesn't come out and use the word diversification but its something we in the present day can look at. Yes all his categories hold equities but diversification can come in many forms, not just asset classes. He has split up his portfolio by how much work needs to be done to unlock profit in each category of equities he invests in. So if his efforts on a board of directors fails, he still has a backup plan. Multiple strategies in a portfolio can be powerful.

That's a big reason I have bond ETFs within my portfolio. At a 10%-15% weighting, I have enough to give some stability to my income and portfolio stats without compromising the overall investing strategy.

Returning to Buffett, he then moves on to talk about Dempster Mill Manufacturing Company. Harry Bottle was brought in to turn the company around and he did. A lot of unproductive assets were turned into productive ones and generated cash which was then used to invest in various securities. They turned the company from a value of $35/share up to $64 mostly from clearing out inventory.

We won't be able to buy out a company outright and turn them around but we can look for similar scenarios where the market miss-values a company. Aileron from No Nonsense Trading originally pointed me to STX. At the time I bought them they were incredibly undervalued and the company announced they were going to buy 1/3rd of their shares back within 3 years. Its because of situations like this where in the day and age of high frequency trading and everyone having computers and analysis that I don't believe in Efficient Market Theory. Not every company is going to turn around. I'm looking at you Staples (SPLS) but if we as investors and stock pickers can be patient enough and not swing for every ball thrown our way, we can wait for the easy pitches and get a hit.

He goes into people taking money out and some tax talk before ending on what I found was an interesting comment.
My closing plea for questions regarding anything not clear always draws a blank. Maybe no one reads this far. Anyway the offer is still open.
Funny how he goes from making this comment and others that his letters are to long to today where 30,000 people come to hear what he has to say.


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Sunday, July 20, 2014

Goals H1 review of 2014 Goals

With the first half of 2014 down, I want to take a look at how my goals for 2014 are shaping up. I made some very lofty goals in doubling my portfolio numbers in 1 year what it too me 3 years previous to do. I started the year thinking I set them too high...

Total Portfolio size of $30,000: On Track
Start of 2014: $13,512
Q1: $18,327
Q2: $23,070
I'm adding almost $1,000 - $1,500 a month with capital gains, dividends, and deposits, $4-$5k a quarter.
I wasn't so sure at the end of Q1 but this is looking like it will succeed.


Total Dividends received of $1,000: On Track
Q1: $181.54
Q2: $430.27 ($248.73 for the quarter).
To hit $1,000 I'd obviously need $250 average a quarter. I knew Q1 would be short of that average and the question stood: Would the second half of the year with its extra deposits make up for a light first half? Dividends have a big drag time on them in that you purchase them and may not get any income from them for a couple months. With Q2 essentially at the average I only need $570 for the rest of the year... $95 a month average. If I can hit my average monthly dividend amount I can hit this one.


Average monthly dividends income of $100COMPLETED
Start of 2014: $55.88
Q1: $80.49
Q2: $101.51
I started the year focused on just dividends and didn't know if Lending Club would have a place in my portfolio. It does and has added quite a bit of income. I had felt this would be the easiest to hit because this stat is forward looking with each purchase even though I may not hit a dividend payment for a position for up to a quarter after a purchase.


Revisit Lending ClubCOMPLETED
I wanted to revisit Lending Club and see if they improved enough for me to come back. I knocked this one out early and have made it an active part of my portfolio.


Continuing Education: On Track
Q1: FAILED Improving my skills and knowledge in finance was an important goal I set for myself and this goal I feel I am failing at. I started strong with my Warren Wednesday series of looking at Warren Buffett's past letters and pick up several finance books. Things at work deteriorated and derailed me.

Q2: SUCCEEDED Work is back under control. Where once I was on a team of 5 of us we are now 10 and I am the manager. The team is coming along and my stress levels have dropped allowing me energy and focus to get back to not only college but my financial education.
I've also picked up Capital in the 21st Century by Thomas Piketty. The blogosphere of professional investors can't stop talking about this one so I felt it deserved a read. Its pretty good so far but only about half way done.

One final thought and comment. My portfolio stands at about 20% cash. I have hit my goals and am on target with a very large cash position and essentially one arm tied behind my back.


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Tuesday, July 8, 2014

Monthly Update: June 2014

Half of the year has gone and we come to another monthly update. Things are coming along quite well and I have been shifting my equities to capital gains positions while Lending Club is working its magic with income.


Portfolio Acitivities
$500 deposited into the Investing Account
Sold WMT @ $74.93 (+34.65%)

Sold CIG @ $8.10 (+47.38%)
Sold MCD @ $99.90 (+12.57%)
Bought 10.3121 AFL @ $62.65
$200 deposited into Lending Club

Portfolio Income
Dividends ($83.64)
     AFL: $2.15
     IBM: $6.04
     MCD: $2.23

     WMT: $2.15     
     ARCP: $6.35

     VTR: $12.03
     PSEC: $11.93

     TCPC: $25.53
     COP: $2.51
     NDRO: $2.56

     WHZ: $30.49     
     BLV: $2.75
     JNK: $4.65
     PCY: $1.98
     Interest from Cash: $0.78
Lending Club
     Interest: $24.15
Rental Income
     Townhouse 1: $621.41



New Record: I hit a new record of non rental income. $107.79. Lending Club is really doing well for me.

Taking Profits: I sold off CIG for profit taking, WMT to free up cash for a purchase coming this week, and  MCD was sold on a stop loss order. 

Small Deposit month: I relaxed a bit this month and vacationed a little bit with the family. As I cut my budget really tight with portfolio deposits, that was the only real place I had to pay for it from my budget. Next month however my company will buy back its vacation time and I should be able to sell 40+ hours. I plan to make up for my June's deposit at that time.
Additionally, I have a deposit landing July 1st which technically is next month. I'll have a 3 paycheck month in July though so it should work out.

Still a partial rent month: Had a few finalized fees associated with getting a new renter (general repairs and paying utilities for the couple month's vacancies. Next month should be a regular full month.


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Thursday, July 3, 2014

Be careful of your own bias and limitations

I was reading Barry Ritholtz's top 10 reading list. I find he has excellent links and skips on the stupid and the spam. He had a graph in there from the Wall Street journal that I thought was excellent. Its a timely graph because today we had an excellent unemployment report and all the Zerohedgers out there are saying how its actually terrible.
Whats a retail investor to do and to believe in?


The economic expansion since the last recession has been 4.8 years... the exact average of expansion timeframes since World War 2. We are not in uncharted territory here where this bull market and economic growth is breaking new boundries and we should be scared and go 100% cash to get ready for another crash. In fact the Fed and CBO are predicting we have another 3+ years coming.

Now I am not saying we are or are not going to have economic growth in the future near term or long term.
What I am saying is I prefer to look at data and THEN make my decision. Most people do not. They have a bias of whats going to happen and look for confirmation. So to say we have gone on for too long and that is the reason to make portfolio changes is flat out false.
Keep in mind these people couldn't spell "fiat currency" before 2009 and now they have a 2 year old blog where they are going to tell us how the world economy is going to be over the next year.

How much experience do you have? How accurate are you at making estimates and getting the timing correct? Do you have a political or economic bias or opinion that shapes your thoughts?
The unrealstic long case is as bad as the unrealistic short case. People that couldn't spell the word "dividend" before 2009 now have a 2 year old blog talking about how investing is as simple as buying a dividend aristocrat at any price and then wait till retirement till they get rich.

I am wiser than this man; neither of us probably knows anything that is really good, but he thinks he has knowledge, when he has not, while I, having no knowledge, do not think I have.” ― PlatoApology

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Tuesday, July 1, 2014

Dividend CCC Review: June 2014

One word sums up this month's screen: "Slim Pickings". Ok well two words. After a nice 5 year bull market
This month's fields are:
Dividend score: Yield, 5 year dividend growth rate, payout ratio
Fundamental score: P/E, Graham valuation, 52 week low (how close is it to the 52 week low signifying a good entrance time)

Name Symbol Industry Div Fund Score
Axis Capital Hold Ltd. AXS Insurance 2 6 8
Alliance Res Part LP ARLP MLP-Coal 5 2 7
NACCO Industries NC Machinery/Consumer 2 4 6
AFLAC Inc. AFL Insurance 2 4 6
Chubb Corp. CB Insurance 2 4 6
Deere & Company DE Farm Equipment 4 1 5
PSB Holdings Inc. PSBQ Banking 0 5 5
Textainer Group Hold TGH Transportation 3 1 4
Wal-Mart Stores Inc. WMT Retail-Discount 3 1 4
IBM IBM Technology-Hardware 2 2 4
Universal Corp. UVV Tobacco 0 4 4

For the life of me I cannot figure out why Excel isn't bordering the left edge. Luckily though this isn't the "Teaching ourselves Microsoft Office" Blog.

Companies quick to cross off
AFL: Already own and in fact added in recently.
TGH: Reviewed in past months. Too much floating rate debt.
WMT: Recently sold to rotate into another retailer.
IBM: Already own
UVV: I do not invest in tobacco
There was a dozen small banks but I am just going to start saving you guys reading time and remove them completely if I recognize them.

New companies for possible review
AXS, Axis Capital Holdings Ltd: A holding company with a mix of insurance and re-insurance companies. Its undervalued on Fastgraphs but it does have the re-insurance problem of regular collapsing EPS. My current insurance positions, AFL and AFSI, don't have this problem

ARLP, Alliance Resources Partners LP: A coal MLP. I looked at them awhile ago but I have a hard time getting excited about a U.S. coal mine. Its up +25% so far this year. I think at this point its too late to catch it and will watch for a pullback.

NC, NACCO Industries: A holding company about as weird as you can get. North American Coal Corporation which runs coal and limerock mines. Hamilton Beach kitchen, bar, and restaurant appliances, and Kitchen Collection stores that sell personla cooking equipment. This company peaked my interest until I saw it has had negative EPS growth for the past 10 years and -52 EPS in 2008.

PSBQ, PSB Holdings Inc: A holding company of a local bank that trades 80 shares a day. Boy we really got the whole trifecta right there of reasons to pass on this one.


This month's research screen winner
DE, Deere & Company: They keep coming up every other month or so and each time I say I might need to take a look at them.  Here is what Fastgraph's shows for diluted earnings.



Their debt level is really high and I am concerned at first glance that basic EPS is dropping but diluted is going through the roof. Different companies and different sectors will have different ways to look at EPS. Fastgraphs these days has 6 different EPS views. I'll need to research and learn more about DE before I pass judgement.


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Wednesday, June 25, 2014

Warren Wednesday: H2 1962

Warren's letters are starting to grow in size and you can tell with his writing that he is getting used to reporting and giving updates...

H2 1962
Written: January 18, 1963
Length: 13 pages
SourceRPCPA.com
S&P return for 1962: -11.81%
Buffett's return for 1962:  +13.9%
Major events: Marylin Monroe dies. Nelson Mandela is arrested for incitement to rebellion. Cuban Missile Crisis.

I find it humorous that Warren talks about people wanting his annual letter to be shorter. I guess 7 pages a year is too much to read for someone making you ridiculously rich especially this year where he absolutely demolishes the markets. Tripling them over a 6 year average

He goes over (again) some basics that there are no guarantees of returns, problems of taking out monthly payments etc. The same warnings he gives each year. He also reviews his numbers compared to two big investment funds which he also beats handily. He talks about the power of compounding interest which after having read the Snowball where he tells his kids not to sell their shares, I have to take this as a warning to the monthly payment partners.


Alright now for something we in the 21st century can use... how he breaks down his portfolio.

1: "Generals":  Regular investments where Buffett has no say on the boards.
5-6 positions of 5%-10% each
10-15 positions of smaller size. 
But isn't Warren famous for saying only invest in your 6 best ideas because the 7th one won't make as much money. THIS is exactly why I wanted to read his letters. Separate the sound bites and quotes he gives to general public. What is he thinking and do with his own money.

2: "Work Outs": Companies that take some corporate action to be profitable. Selling of assets, merger and acquisition, spin off.

5-10 positions.
Interesting comment her by Warren...
I believe in using borrowed money to offset a portion of our work-out portfolio, since there is a high degree of safety in this category in terms of both eventual results as well as intermediate market behavior.
He will borrow 10%-20% of the partnership's assets up to 25% maximum. He mentions 5% interest rates. Boy who wouldn't kill for some of that right now in ZIRP.
I don't know if this strategy would work in this day and age. Taking a loan to buy stock with the hope of them being bought out or spinning off a new company. To me it seems way to risky in this day and age.

3: "Control" Companies that he is working on buying out or just activist investing in. The smallest category and one where he says will take years to play out.


     Next he talks about the highlight of 1962, Dempster Mill Manufacturing Company. Dempster made farming instruments, water supplies, and well equipment and Buffett owned 73% of the company. His dollar cost average was $28 and he calculated book value as being $35. You really aren't going to find many companies under book these days but I think we can do something similar with P/E ratios in evaluating undervalued companies. I've owned a few 3 P/E ratio companies in the past.

     So Warren tried to work with management to get them to start being profitable instead of lagging sales and low inventory turnover. They didn't so he put a man named Harry Bottle in charge. By the end of the year the book value had risen to $51.
     I am not entirely sure but from the sound of it he turned the financials around and got an unsecured loan. Still had $16 a share worth of manufacturing but the $35 left over was financial which they then used to by more "generals" stock of other companies. 

He repeats a section that he had in a previous year that I think is critical and will repost it...

You will not be right simply because a large number of people momentarily agree with you. You will not be right simply because important people agree with you. In many quarters the simultaneous occurance of the two above factors is enough to make a course of action meet the test of conservatism.
You will be right, over the course of many transaction, if your hypotheses is correct, your factors are correct, and your reasoning is correct. True conservatism is only possible through knowledge and reason
He next goes into discussion of total return isn't his goal but in beating the market. He did have one section of wording that really stuck out to me...
Our job is to pile up yearly advantages...
Note he didn't say his goal or job is to make a lot of money. Or buy cheap undervalued companies. Its to get advantages. This pleases me because its something I have tried to focus on in my own investing. An advantage to me is a reason why the company will outperform others. 
It could be a 5%-10% yearly share buyback rate that gives management a big cushion in growing EPS. (SWY, AAPL, STX)
It could be hugely undervalued (CIG, AFL, AFSI)
It could have a high but staple yield that you can get profit from that regardless of what the share price does (ARCP, PSEC).
Though I am in no way comparing myself to Buffett, just that I am happy to be thinking along similar lines as he did.

Warren ends his letter with some personal call outs and general miscellaneous discussion.



Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Sold Cemig (CIG)

Just a quick update. I went and sold Cemig (CIG) @ $8.10. The more I looked at it the more I had to realize why I got into the position in the first place. Capital gains. Its a utility company with less then 2% EPS growth and their dividend policy is they will pay out 50%. There is no growing dividend stream here with this one.

They changed their dividend policy to have 1 ex-dividend date for the entire years of dividends and will make one payment in June vs half June and half December so I do not have to hold for the rest of the year.
CIG could well keep on going up but I decided to sell because I know there is a 5% drop whenever it goes ex-div. The U.S. exchanges just haven't realized it yet.
If something happens and I do not get the dividend? Then I am glad I am out because their policy is too odd and confusing for me to be comfortably

I ended up with a +41% gain for a 4 month position so I really can't complain about how much I might have left on the table if only I risked some more. Thats a sure way to blowing up your account.

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Saturday, June 21, 2014

Going a little defensive.

The market's seem a little, well odd at the moment. For the past several years no bit of bad news has shaken equities out of their bull market. Not Crimea, NSA, China slowdown, quantitative easing, Iraq, Turkey, nothing. Every bear case has been ignored and pushed onwards. We are starting to get into high valuations of the market. Note I am not saying we prices. High prices mean NOTHING. Its all about the valuations of price to the fundamentals of an asset and market.

Money seems to be coming back everywhere AFTER a 5 year equity bull market with S&P 500 +7%. Emerging markets are rising with EEM +8.4%. Other assets too are rising, GLD +7%, TLT +9.4%. Normally something should be dropping as money is coming from one asset class to another. All this money seems to be cash that has been idle on the sidelines for years. That's concerning to me as its so late in the game this could be "dumb money" chasing profits and jumping in at the wrong time as its oft to do.

The VIX measures volatility of the S&P500. How fast and how far is it moving. Its at record lows and could dip below 10. During 2008 and 2009 it was in the 60-80 range. Things are quiet out there. Perhaps too quiet.

At this time of year we have "Sell in May and go away" where the volume in the markets drops off for the summer until fall picks up again.

All this can breed complacency which I have come to learn is right when something goes wrong with the markets and people's portfolios. I'm not wanting to flat out sell my positions. Many of them are income that I want to keep for years. However where I will differ from most of my dividend investing brothern is that I don't want to completely ignore my capital gains. I am also seeing things way overvalued in my portfolio that looks like its running out of steam. I'm not ready to put on some SPY puts for defensiveness. I see no reason for the market to go down. All I am acknowledging is that we are in an environment where we have an increased chance of something stupid happening.

I have stop losses on the following positions so that in the case of a general market reversal, drop, crash, freak out, whatever you want to call it, I am ready.

Cemig (CIG) @ $7.99: I am looking at a 45% gain on this one. As you can see from fastgraphs, their EPS is dropping. I'm not worried about that but I am worried about Brazil and their inflation and economic problems. Brazil (EWZ) is up 25% since March. Maybe its on fire and will continue, maybe its going to need a break. CIG has announced their entire yearly dividend will be paid soon vs installments. The exchanges are terrible at recording CIG ex-div dates. I already qualify for the 5% payment but the price has not dropped down. I can get the dividend and the full share price. I'm debating selling it first thing Monday as this is one of my more complex positions and I don't fully understand it.
Not knowing your position, in a foreign market, when you know a 5% price drop is coming with all the above oddities in the markets I am seeing? I don't know if I am willing to risk 45% gains on all that uncertainty.


Coca-Cola (KO) @ $39.59: Every time it rises this far above its P/E it pulls back. 22 P/E.

Potash (POT) @ $33.40 (below the 200 day SMA): Their earnings are a mess due to the breaking up of the potash cartel and I bought after that crash in 2013. I added in later as it looked like the cartel would recombine. Now with Russian potash deals with China and problems in the Ukraine, I don't know anymore. Fastgraphs is showing some big valuation problems. Where it once was undervalued its not getting over its historic P/E range.


Seagate (STX) @ $48.90 (below its recent low): I've enjoyed a beautiful multi-year run with them and have 120% return. But I see its tired and failed 3 times to break and hold $60 range this year. I got into them because of their share buyback program which ends this year. As we can see with fastgraphs, It never really gets to its valuation potential. Most tech companies do not so I am seeing how far it is above its historic P/E range (blue line) and thinking overvalued.


Prospect Capital (PSEC) @ $8.83: PSEC recently had some SEC concerns that they were not reporting earnings correctly. It had to do with how they were reporting their subsidiary profits. PSEC appealed and the SEC withdrew their complaint. There is some concerns that PSEC cannot maintain the dividend and for business development companies? The dividend is everything and I would expect a massive drop to equal the dividend cut.
Note: Fastgraphs doesn't do BDCs because fastgraphs does not report NII, they only do EPS and FFO for reits.

ConocoPhillips (COP) @ $77.90. I'm looking at 50% capital gains and then I look at their valuation on fastgraphs and its looking dangerous.


McDonald's (MCD) sold @ $99.90. This stop got triggered and I am out. I have been with MCD for several years and enjoyed a nice gain. They are having problems breaking through and holding $110. Yes their valuation are rising but I have other places for money then things going sideways.



I don't like trying to time the markets. Nobody can do that consistently and it causes missed opportunities and drag on your portfolio from transaction fees and taxes. However given the environment we are in, the time of the year, and the valuations of the above positions I am comfortable with becoming "defensive".

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Friday, June 20, 2014

My updated Lending Club screen

I have updated my Lending Club screening process in how I find notes in the secondary market. As Lending Club is becoming a bigger and bigger part of my portfolio, I have created its own page. Of course it'll have its own spreadsheet. You guys know how I love my spreadsheets!

I actively avoid the normal platform. The place where people can fund brand new loans. We have over 5 years of data that Lending Club provides us and I found that about 80% of all defaults occur within the first year. If I can avoid this time frame I can give myself a huge edge. So I invest on the trading platform where I buy existing notes. After a loan is funded everyone gets a note with a principal value of whatever they contributed. This is now a financial asset and can be bought and sold in an over the counter market.
The advantage here is there is a lot of screening tools available to pick what type of loan I want.

The following is my screening process.

1: 700+ credit score. I want to focus in on the people who have made good past financial choices and are just needing help to get out of debt.
2: Rising credit score trend. Are they making good choices outside of their Lending Club loan in turning their finances around or are they just using me as another stop gap to bankruptcy?
3: Never late or missed a payment.
4: 40-50 payments remaining. I want to avoid most of the first year default range but I want enough time to work with a solid borrower to make interest from.
5: 4% maximum markup by the seller. I understand they want to make an extra payment or two and am willing to work with them but I won't be gouged. A couple months of interest is what I will give up.
6: 16%+ net interest. Lending Club tells you the interest after fees and seller mark up. I want to be sure I hit a nice level.

After the screen is ran then I screen further manually
7: "Credit Card Consolidation" or "Debt Consolidation". I want to work with people who understand they made mistakes and wanting to get out of debt. I have no interest in giving you a 20% loan for a motorcycle or 25% loan to cover your margin call in the commodities market (I have seen those!).
8: Debt-to-Income < 20%. I hold myself to a high standard of keeping my expenses down so that I have room to absorb emergencies in my life. I expect my borrowers to do the same. Emergencies will always come up and we have to be prepared for them.
9: Revolving Line Utilization < 90%. Along the same line, I want my borrowers not to have used me as their lender of last resort and have wiggle room for emergencies in their life if they need additional credit. I'd prefer a 60% or 70% but I do have to understand most people coming to Lending Club are at the end of their rope.

With these requirements I hope to avoid the majority of defaults and allow me to hit high net yields. I will still get some defaults, Lending Club gets their cut, the seller of the note will get their cut, and there will be taxes. My goal is to have a 12%+ net interest yield after taxes.
Right now I have 11.97% pre taxes but it is drifting higher.

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Monday, June 9, 2014

Dividend CCC Review: May 2014

Getting back on track with my screens at the beginning of the month. Change things up this month as usual. I feel its important to change the screen slightly or you'll keep getting the same ones and not many new ones

Dividend Score: Yield, 5 year dividend growth rate, and Payout Ratio
Fundamental Score: P/E, Graham Valuation, and the % below the 200 day simple moving average (SMA)
My thought is this time around I'd see if I couldn't buy something on a nice pullback.

Name Symbol Industry Div Fund Score
Horace Mann Educators  HMN Insurance 5 4 9
ACE Limited ACE Insurance 3 4 7
PennyMac Mort Inv Tr PMT REIT-Residential 2 5 7
Western Union Co WU Financial Services 5 1 6
BOK Financial Corp. BOKF Banking 4 2 6
BHP Billiton plc BBL Mining/Oil&Gas 4 2 6
Chevron Corp. CVX Oil & Gas 4 2 6
Textainer Group Hold TGH Transportation 4 2 6
Rent-A-Center Inc. RCII Retail-Specialty 2 4 6
SeaDrill Limited SDRL Oil&Gas Drilling 2 4 6
Monarch Fin Hold Inc. MNRK Banking 2 4 6
Bar Harbor Bankshares BHB Banking 2 4 6
Hanover Insnce Group THG Insurance 2 4 6
Old Republic Internati ORI Insurance 2 4 6
Travelers Companies TRV Insurance 2 4 6
Principal Financial Gr PFG Financial Services 4 1 5
Frisch's Restaurants Inc. FRS Restaurants 3 2 5
TAL Int Group Inc. TAL Rental/Leasing Services 2 3 5
PartnerRe Limited PRE Insurance 2 3 5
Territorial Bancorp TBNK Banking 1 4 5
Triangle Capital Corp. TCAP BDC-Financial Services 1 4 5


Companies quick to cross off...
ACE: Previously crossed off
PMT: Previously crossed off
WU: Previously crossed off
BBL: Previously crossed off
TGH: Previously crossed off
RCII: Previously crossed off
SDRL: Previously crossed off
THG: Previously crossed off
TRV: Previously crossed off
PFG: Previously crossed off
TAL: Previously crossed off
PRE: Previously crossed off
TCAP: Previously crossed off


New companies for possible review...
HMN: Horace Mann Educators Corp: Thought it would be something with education but its a holding company for insurance companies. I'm long AFL and AFSI, I need another like I need another goldbug telling me the stock market is going to crash.

BOKF: BOK Financial Corp: A holding company of small regional banks covering 8 states. Fastgraph's is showing they are down EPS for the past two years and they are now at fairvalue. Think this one falls under the too late category.

MNRK: Monarch FInancial Holdings: A regional bank of Virginia. I didn't recognize them so wanted to take a peak. Not sure what happened in 2013 share price wise but I want none of that.

BHB: Bar Harbor Bankshares: A holding company of banks. Fastgraphs shows that the share price really hugs the historic P/E of 7.6 which its at now. This really doesn't increase in share price and a 5% dividend growth rate and 5% EPS growth rate means thats all I will get. I want my potential to be more than that.

ORI: Old Republic International: An insurance holding company. This is one of the scariest Fastgraph's I have seen. Overvalued, dropping EPS currently, and it goes to 0 EPS for 4 straight years.

FRS: Frisch's Restaurants: A restaurant chain of "Frisch's Big Boy". About 110 or so locations. They had a huge dividend in 2012 but nothing really gets me excited about this one.

TBNK: Territorial Bancorp Inc: A holding company for a Hawaii regional bank. What is it with holding companies this month? Its share price has dropped this year on expected lower EPS. I want a pullback with increased EPS as safety I don't want to gamble on something silly happening to go against bad fundamentals.


This month's research screen winner...
CVX: Chevron: So almost every month this comes up and I write it off because I already own COP. But I have a 60% total return with COP. Seeing as how COP currently has a -1, its time I look to rotate out. Usually my pick of the month looks really good or is some exotic off the wall stock I have never heard of. CVX is probably about as big a company as I am going to find on my monthly screen. I'm concerned that its above its historic P/E level but its not dangerously high. I will research them to keep as a backup.


I have a stop loss order with COP to exit when it goes against me. It's really taken off and its dividend yield is now equal to CVX while giving up a lot of fundamental safety in the price.





For you capital gains investors who like to buy on the dips, here are the companies that are 5% or more below their 200 day SMA
Name Symbol Industry Div Fund Score
Rent-A-Center Inc. RCII Retail-Specialty 2 4 6
Marketing Alliance Inc. MAAL Insurance 2 2 4
Sturm Ruger & Co RGR Firearms 3 1 4
Coach Inc. COH Apparel 2 1 3
Best Buy Corp. BBY Retail-Electronic 1 2 3
Nu Skin Enterprises Inc. NUS Personal Products 1 1 2
TESSCO Technologies TESS Technology-Hardware 1 1 2
Family Dollar Stores FDO Retail-Discount 3 -1 2
Armanino Foods of Dist AMNF Food Processing 3 -1 2
PetSmart Inc. PETM Retail-Specialty 0 1 1
Target Corp. TGT Retail-Discount 3 -2 1
Brady Corp. BRC Business Services 0 1 1
Infinity Property & Cas IPCC Insurance 1 0 1
Core Laboratories NV CLB Oil&Gas Equip/Svcs 2 -2 0
Stepan Company SCL Cleaning Products 0 0 0
TJX Companies Inc. TJX Retail-Apparel 1 -1 0
PetMed Express Inc. PETS Drugs-Animal 0 0 0
Ralph Lauren Corp. RL Apparel 1 -1 0

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial adviser, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.