Thursday, September 26, 2013

Choosing your economic caste

My deposit day snuck up on me but I want to continue the discussion I started in my evil shareholders post.

Since the Great Recession of 2008 there has been a lot of animosity from the middle class to the rich. Ok well lets face it, its always been there but its really intensified since then. The rich were the cause of the stock market crash hurting everyone's 401ks, they caused the housing bubble to pop, they caused millions of jobs to disappearr. Right or wrong, truth to that statement or not, that is what I've seen is the middle class's perception because the rich shareholders as a whole have come out richer and not seen to be struggling like the middle class employees.

Further complicating the issue of dividing up people in an us vs them mentality is an economic caste mentality in society. Economic caste in this case meaning: employee, upper management, shareholder.
I've had 12 jobs in my working career since I was 18 years old. I've worked for two of the Dow Jones companies. I've found it absolutely amazing how strong the following mentality is. ..
The way the middle class makes money is through their job.
Gotta work hard to get that promotion for a better job. Gotta go to college for a better job. When I bring up investing to my coworkers I'm often given a blank stare, told they don't know anything about investing, or told they don't have the money for investing. The conversation is often changed back to bitching about how bad they have it in their job. The middle class doesn't invest, that takes millions of dollars. I've even been told a 401k isn't investing its saving for retirement.

The ironic part of all of this is employee vs shareholder struggle going on is that we all choose to be in the economic caste that we are in. My experience as an employee is that to be really successful you have to compromise yourself. Brown nose ass kissing, sleeping with your boss, knowing someone on the inside to pull strings to get you a job or promotion, putting yourself into massive debt for that 4 year college degree, being a white male. While it is possible to be successful on your own merits, it is harder then what I listed above.

Through all this struggle, hard work, and moral compromising there is that other caste. The evil shareholder, controller of society and destroyer of middle class lives. How does one become a member of this lofty club of people with the power?
Do you have $38 to buy 1 share of Coca cola stock?
There is no discrimination based on race, gender, age, disability, sexual orientation. You do not have to compromise your morals. There is no being the new guy who has to go get the coffee and be the whipping boy. You do not have to work 70+ hours a week to meet a deadline for your boss.
Its open to everyone who is willing to set aside some of their money to improve themselves.
It seems to me that there is a difference in good and evil but not what the middle class focuses on.

"But Pully. I don't have any money. Buying stock? Ain't nobody have time for that! Its the rich shareholders who have all the money!"
The iPhone 5c and 5s are out. It recently blew expectations selling 9 million units in a weekend. Each of those people paid $200-$400 for that new phone, to replace their existing "outdated" iPhone 4. On top of that to have a data plan they need to pay +$40 more a month vs just a regular cellphone plan. $40 a month so you can look at cat videos on your phone. $40 sounds a lot like $38 to me.
That is why I own Apple (AAPL)


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, 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, September 23, 2013

Deposit Day 9-23-13

One nice benefit of setting aside money for your future is it gets you away from the living paycheck to paycheck "which bill do I put off until next paycheck" lifestyle. Once you have your debt paid off and move on to investing it relieves a lot of mental pressure. This may sound crazy to some but, for me, I get to the point where I even forget when payday comes. That's where I find myself today on this deposit day...

Deposit
The discretionary deposit is going to the investing account. I'm right at the 5th digit mark of $10,000 and I want to blow right past it. I'm really looking forward to this next year with the account. The funding that will come will kick this account into overdrive.

Earning Season starting soon
In two weeks Q3 2013 earning season starts. I want to be comfortably weighted with cash. This deposit will position me for that as it brings the weighting to 21%. As we head into earnings I can do 2 more investments now that I am recovered from my POT, IBM, and AAPL purchases.

Stock Market Seasonality
The Christmas rally isn't that far off as seasonally it starts on Halloween. Then we normally have several solid months of gains. That's only an average and each year can be different (i.e. 2008) but it is something to keep in mind when planning out where to deploy your capital.


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, 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, September 20, 2013

Those evil shareholders!

It seems that I cannot go a week without reading some article about how evil shareholders are. Taking all the profits for themselves and paying the employees a slave wage. Issues of morality are brought up that its not right. The shareholders are greedy at the expense of the employees.

Most recently this came up when Walmart (WMT) threatened to not build anymore stores in Washington DC if they raised minimum wage from $8.25 to $12.50. The law was only for large big box stores, smaller companies were exempt. Cries of greed and evil flew through comment streams on the news sites. Setting aside the fact that these same people have 401ks that own an equity ETF that owns WMT, lets take a look at this greed...

Walmart has 2 million employees. Lets assume they work 30 hours a week for Walmart to avoid paying health care. 1,560 work hours a year would mean that for every $1 raise Walmart has to come up with $3.12 billion. We need to find $13.26 billion to cover the raise to $12.50.
Walmart paid $6.12 billion in dividends so if they took 100% of my pay as a shareholder we are still less than halfway there. Google Finance shows WMT profit margins to be about 3%-5% and thats about the number I hear on earning calls too. So there probably aren't any cost cutting measures involved and if you have shopped in a Walmart you already knew that.

The only place I see the money for an employee raise coming from is if they raise prices and the burden is put on the commenters calling investors greedy. If the average consumer was pure of heart they would have shopped at other stores that pay a better wage but charge more for the same goods, like say, all the stores that closed because they lost their shoppers to Walmart.
Where is the morality now?

I have no love of Walmart. I hate how they treat employees. I do my personal shopping at Costco and Kroger for groceries and Target for most other things. I will not give Walmart my business. So how can I justify owning Walmart shares in the blog portfolio?
Because all the hypocrites calling Walmart evil can't stop spending their money there which in turn is a dividend to me.
I love how Costco treats their employees but I can only get a 1% yield from them.
Target has a comparable yield to Walmart but their growth plans are building a few stores in Canada.
Walmart's plans include buying entire chains in South Africa and Brazil and building a Walgreen's sized store with a pharmacy.

Most middle class people have a choice. They can be an employee at the bottom of the pecking order and complain about being abused and how someone else needs to fix things.
Or they can choose to become the boss as a shareholder. That though is the topic for my next entry...


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, 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, September 17, 2013

My Watch List

On the Portfolio tab below my portfolio spreadsheet I have my watch list. At first glance its a multicolored miasma of formulas and numbers that instant intuitive as to what is going on. This watch list covers the companies I am currently invested in, were invested in but no longer am, and companies I want to keep tabs on. You can reach a certain point where you are looking at dozens of companies and you can easily forget your past research on them. I've found having a watch list to be incredibly useful and want to go over it with you here.

There are two sections. The Dividend section which measures shareholder return and the Valuation section that covers the price and valuation of the company and its shares.
Each section has 5 fields that have conditional formatting to trigger different colors. Those colors equate to a score based upon my opinion of what is good or bad for each field.
Bright Green: +2
Dull Green: +1
White: 0
Dull Red: -1
Bright Red: -2
From there we add up the points where each section can have -10 to +10 points and a final score of -20 to +20.
I want to repeat and stress that the scoring system is a person opinion and not based on "fact". I feel a 2.5% to 3.0% is an average yield for my goals and what I think a dividend stock should pay. Other investors might feel that a 2% is ok. As everyone should be doing their due dilligence in research and determining what is valid for their own portfolio both can work.

Shareholder Return
Yield: Dividend yield
5/10y Net Share Buyback: The average yearly % of total share repurchased. I try to use the 10 year but if not applicable I will use the 5 year.
10y DG %: The average yearly dividend growth rate. Again, when a 10 year number doesn't work then I use the 5.
DIV/EPS Gr %: The % of the growth of the dividend more then the % growth of the EPS on a yearly basis. Ideally here I want the EPS to grow more then the dividend to increase the chance of a sustainable dividend growth rate. I think too many dividend investors will look at past dividend growth and presume that will continue on. Some of these companies are giving 20%+ growth rates. There is no way that can be sustained forever.
Fwd Payout Ratio: The payout ratio of the dividend compared to the future estimated EPS.

Valuation
Fwd P/E %: This is a % of how much higher the forward estimate EPS is vs the twelve trailing months of EPS. I want this higher to indicate the company is growing. If its growing then current valuations will improve.
10y P/E %: The % of how much lower the current P/E ratio is lower than the average yearly P/E ratio. If its lower then it might be considered "on sale".
Graham %: The % that the actual share price is below the Graham fair value. Benjamin Graham used several formulas and the one I currently use is Value = ((EPS * (8.5+2g)) * 4.4 ) / Y. Where g = the EPS growth rate and Y = the average 20 year AAA corporate bond rate. He felt that if an investor could get a better return off a company's bond then their stock there was little reason to buy the stock.
FastGR%: The % difference in actual share price vs Fastgraph.com's fair valuation. They use a version of Benjamin Graham's fair value formula and change it based on a few things. It will not always be the same as my own Graham% number.
Tweed#: Norman Tweed of SeekingAlpha.com came up with a quick and dirty way to determine if a dividend stock was undervalued or not. Essentially he believes the yield + 10y dividend growth rate = P/E. I use it as a % estimate for how much the P/E is below this number. Its a way of stating how much a dividend stream is worth.

Looking at my holdings in this portfolio and the total score you'll probably see I go for the higher scores. I use my watch list as a guideline for further research. I do not have any hard rules triggering buys and sells. I would advise against such a system. At the time of this post the railroad company CSX has a score of 11. Seems like a great buy. However what a screen like this cannot reveal is the fact that the majority of their cargo is coal. Personally I feel thats a dying industry and while their current fundamentals look great, I am not so sure we will see their stock grow.

Lastly, it's worth noting I invest in different types of companies. Corporations, MLPs, REITs, BDCs, Royalty land trusts. While they all have similar fields I look at, they do not have the same thresholds as to what is good or bad for the scoring system. They each have different standards. e.g. a 4% yielding REIT is pretty low while a corporation have that much yield would be great. Each section has different conditional formatting rules for what is good or bad.

Some fields update automatically, some I do manually once a month, quarter, or even only twice a year. They will not be current and updated. Please do your own research and due diligence for your own portfolio.

Hopefully that helps explain a bit more my ideas on finding companies and if they are worth spending time on in depth research.

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, 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, September 12, 2013

Why I have multiple savings accounts

It might surprise some that not only do I have multiple savings accounts but I am actively looking to open more. What's the big deal? Just set aside some money for a rainy day and be done with it. I have several reasons for this which I'll share.

Different money has different purposes
I like to keep my portfolios and money organized in a clear cut manner. If I had one savings account then how much would be set aside for an emergency like losing my job and how much would be set aside for a planned vacation that is ok to pull money out of the account? They have different uses. If they have different uses and different goals each would have different funding levels where one might need more money than another to fulfill its purpose. Separate accounts make it easy to see where you stand.

Legal reasons and establishing a business
I consider my rental property its own business. Even though I have a property manager keeping an eye on things I spend a good deal of time on this business and I am in constant communication with the property manager discussing changes, upgrades, repairs, and legal matters. If it were any other business like say a pizza restaurant, well the owner would not pay his groceries out of the restaurant's bank account. It gets everything convoluted and hard to keep straight.

With these two reasons in mind you'll see I have two savings accounts within the Real Estate section of the portfolio. The Real Est Savings is for repairs. I just recently replaced the furnace and installed a new A/C unit but I want to be prepared at any time for a major repair. $2,000 gives me that cushion.
The Real Est Cash is the unused cash that I have available for discretionary spending. Now it has to be spent on things for the rental but I have flexibility in how that gets accomplished.
Sometimes I will make the mortgage payment from that account freeing up income from my paycheck for other things.
Sometimes I will make a payment from both account to speed up paying off the loan.
Sometimes I'll have it sit there if I expect a major expense coming.
The key thing is it brings in flexibility.

Know your psychological limitations
I have something to admit to you guys. I am terrible at saving money. Absolutely terrible. That might sound funny after revealing several savings accounts but its true. I cannot keep money in my main savings account tied to my personal checking account that my debt card pulls out of. The problem is that I do not see it as a savings account as much as an "checking account overdraft fund." For whatever reason I will save up a couple thousand then subconsciously spend a little more with the debit card and overdraft my savings to $0. Funnily enough I never go below that limit and buy something that truly causes a deficit. No matter how mad I get at myself that I will never do it again, I eventually seem to.
So instead of fighting that aspect of myself I work around it with separate accounts.

I am currently in need of yet another savings account. I want it to be a slush overflow fund of a sorts. Where I can apply the cash wherever for whatever reason. CDs at this time are not giving much more over savings accounts but the Fed has hinted that next year it will start raising rates. I want cash ready to go if CDs start offering good rates again.

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, 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, September 9, 2013

Deposit Day 9-9-13

When I ran my Model Portfolio I had the deposit come in on Mondays. I stated its a good way to start your work week and I still hold to that belief. When you are sitting at your desk looking at your work calendar of boring meetings and emails, you can get he satisfaction that you are making progress on your goals.

Deposit
The investing account is getting both its $250 and the discretionary $250 this pay period. My recent purchases of POT, IBM, and AAPL have left the cash position too low. Before this deposit it was sitting at 12.43%. My goal is to have it at 10%-15%. That way if I find a new company like IBM, or a company that has a dramatic drop presenting an opportunity like POT did, then I want to be ready to act.
However I still want to be able to make a regular investment once per pay period so I will need both deposits this time.

Where is that savings account?
Last Deposit day I said I was going to open a new savings account. I have the money set aside and ready but my problem is I have yet to pick one.

What I really want out of a savings account is a high yielding CD, with the account tied to a checking account's debit card, AND that if I use the debit card it will cash out a CD to cover it. I doubt that exists but I am looking for one.

Historic Dividends
I was looking at Dividend Mantra's site and saw he has a historic dividends section. While I have explained why I have explained why I removed my old posts, I still have the history and progress of the account itself that I have shared. I don't see a problem with sharing the total income of past months. Hard to believe it all started with that one single PCY dividend  of $1.26.

I would like to hear from you guys on your thoughts of the historic dividends. Is it disingenuous to have hidden past posts but want to reveal the past dividends? Or does it fall under a "Pully its your blog go for it!"
The reason I ask is that I have a pet peeve of people who try to hide past mistakes and performance and hide things. Absolutely hate it, I feel it may be (but not always is) a kin to deceit.


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, 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, September 4, 2013

Monthly Update: August 2013

I'd be lying if I told you I wasn't looking forward to this post. No more fake demo accounts for people who'd rather watch silver porn and be miserable about their status in life. This is about sharing ideas and progress with fellow investors.
It's with pleasure that I now get to join the other progress blogs in giving an update on how the past month went.

The spreadsheet is available for totals so I won't be reposting them here. Instead I will discuss the activities and any actions. I'm sure that my format will change over the next few months as I get a feel for how I want to report my updates. I might even shamelessly steal reporting ideas from fellow progress blogs lol...

Portfolio Results
Purchases and Sales
     Bought 1 AAPL @ $560.95
     Bought 2 IBM @ $188.83
     Sold 4.32 SBUX @ $72.41 (+27.16%)

Income
     Monthly Dividends
     BLV: $0.89
     JNK: $1.42
     NDRO: $4.16
     ARCP: $2.59
     PSEC: $7.49
     PCY: $1.91
     Quarterly Dividends
     HAS: $2.72
     STX: $7.34
     SBUX: $0.91
     WHZ: $33.60
     Rental Income
     Townhouse 1: $555

Portfolio Weighting
     Income Weighting by Asset Class
     Stock: 20.53%
     BDC: 25.74%
     REIT: 8.85%
     Energy: 33.57%
     Gold: 0%
     Bonds: 11.31%
     Total Value Weighting by Asset Class
     Stock: 40.52%
     BDC: 13.92%
     REIT: 7.47%
     Energy: 14.54%
     Gold: 0%
     Bonds: 11.02%
     Cash: 12.52%

Portfolio Review
August saw a new investing income record for this portfolio receiving $63.03. The bad news is that half of that came from one source, WHZ. That was to be expected as it was one of my two highest positions along with PSEC. Land trusts are front end loaded for their profit. Wells drop in pressure and thus production each year. As WHZ is new I want to get profit now and then sell later. WHZ is not behaving as most trusts do where share price remains stable or increases. It is dropping along with the payments and not recovering which I had considered possible. I have owned it for about a year now and funny enough the position drawdown is -21.73% yet the yield is 21.74%.

I sold SBUX for a nice gain especially considering I bought it for this portfolio in March. I love the product, company, and its future. However their valuation is way too high for me. Historically they have some room to run but I'll let Fastgraphs speak for me...

The blue line is their history P/E ratio. The orange line is their Ben Graham fair value price. The black line is their actual share price. I'll share my thoughts on IBM later but I replaced SBUX with it...



My REIT income and total value weighting is too low. I am wanting to increase that as new funds come in. However there are concerns on how a rising interest rate will hurt REITs. Much of that is getting priced in and I have seen my two REITs, ARCP and OHI, drop recently. For now I will be patient and add in later.

Precious Metals has no position right now and I don't see that changing. I want to wait for gold to get under $1,000 and silver to get under $10. Even with covered calls being generated off of GLDI and SLVO, their base underlying asset is a non income producing metal. I want a margin of safety.

I received only $555 from my property manager for my rental. Normally they are paid $950 from my renter, then they take their 10% fee and pass on to me $855. Last month however I had to pay for $300 of fence repair. Four posts had to be dug out and replaced and their four sections replaced. It was the original fence when the house was built in early 1980s and I was expecting it. This is exactly why I set aside 10% for repairs. It eases the impact of months like this. I have my Real Est Savings account to ease the burden if I was needing to live off my full amount.


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, 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.