July Movements

IMG_20141020_091103Following the resolute in the “Moving Things Around” post, cleaning of the portfolio moves on together with reinvesting of the money that I manage to save monthly.

On the top of the realization that the PF is too wide, a new consideration sunk in… TAXES.

My Belgian buddy (No more Waffles) made a post some time ago regarding taxation in the EU and the whole issue of double taxation of dividends.

This was an aspect that I overlooked when starting the portfolio investment and now I see myself having to retrace to a series of investments that in reality don’t fit anymore with one of the basic Rules of Engagement, to be more precise point 5 in the list.

In order to achieve a 2% YOC (net) in most cases I need to have a nominal yield of at least 3.5%/4%. I said in “most cases” because we have no double taxation from England (my beloved Albion), but we have stupid tax rates from France (49%), while USA goes with a 36% rate more or less. As a matter of fact European investments are heavily affected by this new realization, because already us Europeans are not renowned for Dividends, but the double taxation makes it really hard for my strategy to allocate money in the EU. Incidentally that opened up the necessity of evaluating ITALIAN stocks (which I avoided on purpose so far), so there will be movements there in the future, and some high yielding stocks. Let’s see where we get there.

Of course I am not going “all nazi” with the yield percentage, meaning that I will keep stocks that will yield LESS than 2%, but some positions that are well below this mark must go.

As a result PF cleanup started to be very easy, and by the end of the year I might get lower than my target of 40 positions.

Because of the 2% yield constraint In July I have moved out of:

AAPL (Apple),  AMGN (Amngen), NOVO NORDISK (FRA:NOVC) and MDT (Medtronic)

They are all companies that I really like, and would have not sold based on their fundamentals, they have solid businesses and good prospect of doing well, but the yield was too low.

On my radar (for the same reasons as above) are now:

DIS (Disney), EPA:OR (L’Oreal), GWW (Grainger)

These are companies that I really have difficulty parting with, so at the moment I am waiting to make a decision, although I think that the American stocks will probably need to go. L’Oreal is a stock that I can sit on in a couple of years, if I don’t buy in more, we might get to the 2% mark.

On the acquisition side I have bought 16 more share of Pepsi (PEP) @ 97.10 USD, thus marking the very first repurchase of the stock with an higher value than the starting one.

I really think that Pepsi is a good stock and to be honest it doesn’t matter all that much if the price will go down, their brand portfolio and movements in the snack market speak for themselves, they have got a solid business and that’s what I am looking for at the moment. P/E is above my “buy in rule”, being it at 22 (my threshold is 20), but for them I am ok with bending the rules a little. Pepsi become the biggest holding (cost-wise) in my PF thanks to these 16 shares.

I am planning to reinvest the cash made with the sales this month, plus the extra money that I can save in July, but further movements are likely to happen closer to August.



2 thoughts on “July Movements

  1. Ciao RF,
    I had difficulties in letting the stocks go, but the reality is that having to face market risk for a return that I can get from a saving account doesn’t make sense to me. Yes the stocks could skyrocket and give you a 50% return, but to me that would be on paper only because I am not in for the quick sale (trader prospective), but rather for the long run holding. So in theory the capital gain is there, but the reality it isn’t.
    This means steering towards more “boring” investments, but I am not too much concerned about it, this PF is a surrogate “pension scheme” so it doesn’t have to be too aggressive… 😛


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