Looking under the hood;
Am I adequately diversified? Let's look at the details
energy:
Conoco phillips 6076
Linn Energy 27201
Chevron 17064
Enterprise Products Partners 16029
Kinder Morgan Management 15589
Seadrill 14015
Spectra Energy Corp 9434
Teekay LNG Partners 14832
120240
14.69%
utilities
Atlantic Power Corp 10629
Southern Corp 21177
Duke Energy Corp 14008
National Grid 16559
62373
7.62%
telecom
Consolidated Communications Holdings 6271
France Telecom 5095
Otelco 878
China Mobile Ltd 17409
Chunghwa Telecom 11889
CenturyLink 9470
AT&T Inc 14574
Verizon Communications 13933
79514
9.71%
consumer staples
Sysco Corp 24152
Put General Mills 7800
Heinz HJ Corp 14256
Proctor & Gamble 17811
Kimberly Clark14559
78578
9.60%
consumer discretionary
Staples 7166
Costco 17330
Darden Restaurants 16396
McDonalds Corp 14013
Walmart Stores Inc 14499
Put Hasbro 3750
73154
8.94%
basic materials
technology
Nokia 1424
Axion Power International 9149
Cisco Systems, Inc 7594
Intel Corp 12068
Johnson Controls 18341
Microsoft Corp 13951
Exide Technologies Com 9124
71651
8.75%
healthcare
Abbott Laboratories 16420
Johnson and Johnson 15973
Teva Pharmaceutical Industries 14922
47315
5.78%
financials
Aflac Inc
Paychex 9020
Automatic Data Processing 15289
Hudson City Bancorp 14904
US Bancorp 15239
Wells Fargo and Co 15159
69611
8.50%
industrials
General Electric Co 7622
Waste Management 14712
Navios Maritime Partners 13029
25363
3.10%
REITs
Healthcare Trust of America Inc 1198
National Retail Properties Inc 6569
Health Care REIT Inc 15582
Realty Income Corp 16054
Corporate Office Properties 6076
Retail Opportunity Investments Corp 5585
51064
6.24%
Conglomerates
Central Securities Corp 5792
Compass Diversified Holdings 8402
Berkshire Hathaway Inc 17700
31894
3.90%
Mutual Funds
Matthew's Asian Growth and Income Fund 6173
0.75%
Bond Funds
Alliance Bernstein Global High Income Fund, Inc 17886
Western Assets Emerging Markets Debt Fund, Inc 13291
Pimco Strategic Global Goverment Fund, Inc 12483
Templeton Emerging Markets Income Fund, Inc 15241
Blackrock Income Opportunity Trust Inc 12263
71164
8.69%
I seem to be lacking any basic materials...will need to study why I have missed that sector.
My healthcare is essentially all big pharma, except that I have some healthcare REITs
I have a good exposure to global bond funds, but bonds are still only 9% of my overall portfolio.
The conglomerates muddy the waters a bit with respect to sector diversification. I don't have a really good idea of which sectors they represent.
From a standpoint of geographic diversity, my international holdings include the bond funds, the Asia mutual fund, GE, Navios, Big Oil and LNG, Aflac, Big Pharma, Consumer discretionary, Technology, Consumer staples, Telecom and Utilities
In fact, I'm surprised at how well I have international investments covered with the holdings I have.
The pundits would say I should be 50% in bonds, given my age. I just can't bring myself to do that, so my alternative is a high concentration of dividend paying, dividend growing large-cap stocks with relatively low volatility. I think the REITS have similar qualities, since irrespective of property valuations, the lease returns on property pay out similar to a bond. I can convert any of them into income when the time comes, and given my time frame, the underlying capital value is pretty safe.
Compared to the Standard and Poor 500, I'm overweight energy, utilities, telecom, consumer staples, consumer discretionary. I'm underweight basic materials, technology, healthcare, financials and industrials.
Neither the S&P 500 or the NYSE lists REITS as a sector.
I am 6.24% REITS, 8.69% bond and diversified income funds.
If I were to rebalance, I'd increase my health care a bit( Perhaps McKesson, Medtronic, Novo Nordisc) , increase my industrials a bit ( I'm thinking EMR, Cummins, Deere, CAT, maybe Illinois Tool Works, RPM, Dow, ) , find some materials that meet my criteria (perhaps fertilizer, uranium, lithium, silver) of producing dividend income. I like my overweight in energy and utilities, but perhaps I could so a very selective pruning of these to allow diversification into the sectors where I'm really short.
This has been a productive workshop; we'll see how I address this in the new year; should be some profit sharing coming along, so I can rebalance with new cash as opposed to selling a bunch of shares.
Wednesday, November 21, 2012
Sunday, November 18, 2012
nuts and bolts
I was recently reminded that I haven't written a cogent business plan for my retirement portfolio. I have a general understanding of what I want the porfolio to do, but no specific goals and benchmarks. I think I'll start writing an outline and then fill in the details;
1) Over-all goals for the portfolio
a) Produce a stream of cash from dividends that is adequate to support me and my family.
b) Produce a stream of cash that grows at or greater than the rate of inflation
c) Produce capital growth that grows at or above the rate of inflation
2) Contribution phase
I am 52 years of age as I type.
a) I will contribute another 4 years at maximal rate, at a minimum
b) I will contribute another 10 years at some rate, as will my wife
3) Accumulation phase
a) I will continue to accumulate assets for another 15 years, until age 67 at least, from internal returns from the portfolio.
b) I will continue to work and support my maintenance in some fashion until age 67 and possibly longer
4) Distribution phase
a) We will live on dividend distributions, rental income and social security, if it still exists, in retirement.
b) The portfolio will continue to grow in value at or above the rate of inflation by capital appreciation, as well as dividend re-investment above and beyond our maintenance needs and minimal distribution requirements.
5) Portfolio design
a) Individual stocks;
business model easily understood.
current dividend >/= 3% ( exceptions for extraordinary company with rapid DGR)
CAGR revenue plus CAGR dividend >/= 10%
member of Dividend Champion, Contender lists (David Fish)
b) sector diversification;
roughly equal distribution into 10 major sectors
energy
utilities
telecom
consumer staples
consumer discretionary
basic materials
technology
healthcare
financials
industrials
OK to overweight sectors according to preference on a year-to-year basis
Individual stocks will be held at roughly equal percentage in the portfolio.
The full allocation for each position will be 2%, with target of 50 holdings
I may choose to purchase half a position or less at a time based on available cash.
c) management of dividends
default position is automatic dividend reinvestment
I will consider a move towards complete or partial targeted reinvestment in order to grow under-valued positions
d) management of new cash inflows
first priority will be given to addition of shares to undervalued holdings
second priority will be given to addition of shares to partial positions
e) rebalancing; on a yearly and ad-hoc basis, rebalance to bring holdings close to the 2% target
f) criteria for selling;
earnings stop growing
failure to raise dividend
dividend cut
company spin off, company will be purchased
this represents a pretty good start....
1) Over-all goals for the portfolio
a) Produce a stream of cash from dividends that is adequate to support me and my family.
b) Produce a stream of cash that grows at or greater than the rate of inflation
c) Produce capital growth that grows at or above the rate of inflation
2) Contribution phase
I am 52 years of age as I type.
a) I will contribute another 4 years at maximal rate, at a minimum
b) I will contribute another 10 years at some rate, as will my wife
3) Accumulation phase
a) I will continue to accumulate assets for another 15 years, until age 67 at least, from internal returns from the portfolio.
b) I will continue to work and support my maintenance in some fashion until age 67 and possibly longer
4) Distribution phase
a) We will live on dividend distributions, rental income and social security, if it still exists, in retirement.
b) The portfolio will continue to grow in value at or above the rate of inflation by capital appreciation, as well as dividend re-investment above and beyond our maintenance needs and minimal distribution requirements.
5) Portfolio design
a) Individual stocks;
business model easily understood.
current dividend >/= 3% ( exceptions for extraordinary company with rapid DGR)
CAGR revenue plus CAGR dividend >/= 10%
member of Dividend Champion, Contender lists (David Fish)
b) sector diversification;
roughly equal distribution into 10 major sectors
energy
utilities
telecom
consumer staples
consumer discretionary
basic materials
technology
healthcare
financials
industrials
OK to overweight sectors according to preference on a year-to-year basis
Individual stocks will be held at roughly equal percentage in the portfolio.
The full allocation for each position will be 2%, with target of 50 holdings
I may choose to purchase half a position or less at a time based on available cash.
c) management of dividends
default position is automatic dividend reinvestment
I will consider a move towards complete or partial targeted reinvestment in order to grow under-valued positions
d) management of new cash inflows
first priority will be given to addition of shares to undervalued holdings
second priority will be given to addition of shares to partial positions
e) rebalancing; on a yearly and ad-hoc basis, rebalance to bring holdings close to the 2% target
f) criteria for selling;
earnings stop growing
failure to raise dividend
dividend cut
company spin off, company will be purchased
this represents a pretty good start....
Saturday, November 10, 2012
Can't you hear the silence? No campaign ads. It turns out you can't buy the White house, or the Senate after all. I hope all those super PAC donors think hard about donating to support the "I got mine" philosophy the next time. Most of us want our government to look out for the little guy. After all, the tycoons don't appear to need any help.
So there's a little post-election correction. Sorry, y'all bet wrong, and bidding up stock prices didn't help much. Now there's the issue of the "fiscal cliff". I'm betting it's going to by like Y2K...remember that? We all thought the world was going to come to an end, and it didn't. Likewise the 'fiscal cliff'. Taxes go up a bit, for folks who can handle it. The government lives with less. It's exactly what we need; we're living beyond our means, collectively. We have to stop spending money we don't have, pay down our debt.
Life goes on. Washington is like the stock market; too much hype and over-reaction to news.
I think the companies I own will continue to sell their products, continue to pay dividends, and i'll continue to invest them. Even if we get a real correction, what should I do? Abandon a strategy to grow yearly income and put the cash under a mattress? Come taxes, come recession, the best strategy I know is to be invested in the best companies on earth, selling things that people can't do without.
The following trends seem inevitable; we need energy, will produce more domestically. I own the pipelines and regulated utilities, as well as big oil and domestic, land-based oil and gas, a fair piece of renewables buried in there.
The population grows, and each member grows. That means food. I own food distribution, food production, groceries and the like.
We need shelter; I own REITS, rental property.
We need health care; I own the property where health care is delivered.
We need technology infrastructure; I own the best of breed amongst them.
We want and need to communicate more; I own a bunch of the telecom infrastructure.
I'm dabbling back into some financial institutions; so far not too successfully. I have a couple of speculative investments in the energy space, also taking a beating. Don't know why I don't learn those lessons...but by percentage, just a bit of my investments. I can afford to wait these out and see if the theses play out as expected.
The passing of another election makes me think about chunks of time and the events that mark the end of one thing and the beginning of another. Early in life there was the onset of school. Then high-school, college, med-school, residency and fellowship. All defined amounts of time, with endpoints and new beginnings. I skipped the academic ladder, with tenure, associate and full professor, etc., o what I had was starting practice and retirement, with some unofficial landmarks in there...becoming medical director, becoming managing partner, but nothing all that solid.
Really, though, the career interval is age 35-67; 32 years, arbitrarily divided into 4 8-year segments, or 8 4-year segments. So, at age 52, I'm through 4 1/2 of those 4 year segments, with 3 1/2 to go.
If I work until age 67 (fat chance!), I have another 15 years to stash away about 50k per year if I can keep working the pace I do now. Actually, I can't imagine doing that. at least 2 of those 4 year segments need to be directed to doing something different than I'm doing now, perhaps 3 of them. That means only 2-6 more years of humping it, before bailing out of my current activities and finding meaning elsewhere. I have plenty of ideas. I wonder if I have adequate courage?
So there's a little post-election correction. Sorry, y'all bet wrong, and bidding up stock prices didn't help much. Now there's the issue of the "fiscal cliff". I'm betting it's going to by like Y2K...remember that? We all thought the world was going to come to an end, and it didn't. Likewise the 'fiscal cliff'. Taxes go up a bit, for folks who can handle it. The government lives with less. It's exactly what we need; we're living beyond our means, collectively. We have to stop spending money we don't have, pay down our debt.
Life goes on. Washington is like the stock market; too much hype and over-reaction to news.
I think the companies I own will continue to sell their products, continue to pay dividends, and i'll continue to invest them. Even if we get a real correction, what should I do? Abandon a strategy to grow yearly income and put the cash under a mattress? Come taxes, come recession, the best strategy I know is to be invested in the best companies on earth, selling things that people can't do without.
The following trends seem inevitable; we need energy, will produce more domestically. I own the pipelines and regulated utilities, as well as big oil and domestic, land-based oil and gas, a fair piece of renewables buried in there.
The population grows, and each member grows. That means food. I own food distribution, food production, groceries and the like.
We need shelter; I own REITS, rental property.
We need health care; I own the property where health care is delivered.
We need technology infrastructure; I own the best of breed amongst them.
We want and need to communicate more; I own a bunch of the telecom infrastructure.
I'm dabbling back into some financial institutions; so far not too successfully. I have a couple of speculative investments in the energy space, also taking a beating. Don't know why I don't learn those lessons...but by percentage, just a bit of my investments. I can afford to wait these out and see if the theses play out as expected.
The passing of another election makes me think about chunks of time and the events that mark the end of one thing and the beginning of another. Early in life there was the onset of school. Then high-school, college, med-school, residency and fellowship. All defined amounts of time, with endpoints and new beginnings. I skipped the academic ladder, with tenure, associate and full professor, etc., o what I had was starting practice and retirement, with some unofficial landmarks in there...becoming medical director, becoming managing partner, but nothing all that solid.
Really, though, the career interval is age 35-67; 32 years, arbitrarily divided into 4 8-year segments, or 8 4-year segments. So, at age 52, I'm through 4 1/2 of those 4 year segments, with 3 1/2 to go.
If I work until age 67 (fat chance!), I have another 15 years to stash away about 50k per year if I can keep working the pace I do now. Actually, I can't imagine doing that. at least 2 of those 4 year segments need to be directed to doing something different than I'm doing now, perhaps 3 of them. That means only 2-6 more years of humping it, before bailing out of my current activities and finding meaning elsewhere. I have plenty of ideas. I wonder if I have adequate courage?
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