March Update

Processed with VSCOcamMarch has been a quiet month if we compare it to the Jan/Feb start of the year, in reality much happened also at international level (see FED and ECB actions), and thanks to the generous policies of central banks all around the world markets kept the “cheap debt” fueled recovery. How long will it last we do not know, time will tell.

To the Long Haul portfolio this month was rather positive for total returns (markets recovered) and also because I have started the cleanup procedures that hopefully will take me to have a smaller portfolio. The aim of the cleanup is not so much to get capital gain  (better if it’s there of course) but it’s to make things a little bit smaller to have add greater weight to the stocks that remain (and also to have less things to check)…

LH Index Fund

As of the end of March 2016 the shares are worth 99.38 Euro (-0.62% against the average value of the shares I “bought”). Not much improvement this month compared to last month (it was around -2%) but I am not complaining, the fund should move slower than a normal stock. By the end of April I should be able to post a separate page with graphs and more visual data.

BOND – 36.61%
STOCK – 58.03%
CASH – 5.37%

DCA/Increased Positions

NRZ – 65 @ 11.20 USD

LON:LGEN – 440 @ 2.28 GBP

LON:NXT – 20 @ 56 GBP

 

New Positions

BIT:CMB – 75 @ 13.50 EUR

I picked Cembre to replace Orange, the dividend yield is higher than the telecom giant and the company is really well run and shows marvelous fundamentals. It’s much smaller and therefore there is an intrinsic risk factor that I need to account for, but is one of the best performers on the Italian market thanks (so far) to a very good management and strategy.

LON:PSON – 115 @ 8.9 GBP

Pearson was picked to replace BP. Another “fallen giant”, they are the world leader in education materials and anything to do with textbook. Pretty much like BP they have had a significant drop in revenues mostly due to slow demand from the US, and the stock price plummeted in recent months. Management passed a very strong restructuring plan to fast-track the online side of the business, laying off several people at the same time to cut costs. I am not a fan of these “tactical” actions (cutting jobs cannot be strategic, it’s short lived), but considering that they are a leader in this field and after the recent reports from management (who confirmed dividend), I decided to move in. My thought is that the risk profile is lower than BP with an higher dividend and, if all goes well, good prospects of growth. Plus, it’s a sector (education) where entry moats are huge, and there aren’t many players out there.

Sold Positions

BP – 26 @ 77.73 GBP

Sold BP at a loss of around 12% including dividends, taxes and commissions the total loss was 12.67%. Simply put it, I had a small starting investment dated 17 December 2014 (right at the start of the Portfolio), yes dividend yield was good, but I was not going to add more money in this stock which is seriously under pressure from low oil prices and the Mexican Gulf spill payments. BP might also cut dividends, so I prefer to move the money to RDSA or CVX when the price is a bit more right to keep exposure to the Energy sector. Selling BP is also a step forward is rationalizing the PF.

EPA:ORA – 66 @ 15.65 EUR

Orange is a good company, but by buying into a telecom (especially so skewed on mobile communications) you also buy a lot of debt. YOC was 1.98% because of double taxation, in the end I can get a better dividend without buying into so much debt in a very competitive business like telecoms. Also my stake was really marginal, one more reason to sacrifice the stock for simplification. Total return 2.3%

BME:REE – 26 @ 77.73 EUR

Red Electrica was added to the PF for stability and great track record in dividends. The company never disappointed me, but despite the important weight in the European part of the PF, yield was still around 2% because of double taxation. Again, the rationale behind this move was that I can get a much better yield from an Italian or British utility, to avoid double taxes. Total return was 0.35%

MCD – 14 @ 126.023 USD

Macdonalds was one of the first stocks I have bought. There is little to say about the apart from the fact that MCD has been my best performer in the PF. Yesterday the stock price touched an impressive +40% mark, and I decided that it was time to cash in those 18 years of dividend in form of capital gain. The shares I had accounted for a small part of the PF, but with such a price increase adding more stocks was out of question. Might get back in if the opportunity arises. Total return 43.18%

 

 

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16 thoughts on “March Update

    1. Ciao Alf,
      Si, a +40% in 1 anno di capital gain + dividendi dovevo lasciarla andare… Alla fine il dividendo netto era del 2,4% e posso trovare questi yield in altri posti non esponendomi al rischio incrementi stipendio di base in USA e alla crociata anti junk food che ormai sta diventando una cosa abbastanza pubblica. se scende in maniera importante ci rientro sicuro, il brand è fortissimo, non si discute, ma avevo su 1000 dollari e a +40 non aggiungo altro capitale, mi azzoppo solo il capital gain… E’ stata una decisione molto molto difficile eh…

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  1. Si vero, è un casino trovare opportunità USA al momento… Vabbè attendiamo, qualcosa salta fuori sicuro prima o poi! Per quanto riguarda certe vendite purtroppo con tutte ste tasse, il buy and hold puro è impossibile per un investitore italiano che va su una politica dividend centered.

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  2. Ciao! Lovely to read a good old trading update. I also bought into PSON, but got it at £7.20!!! I’ve already sold out though, as I had to move money into my ISA before the tax year end. I’m thinking of buying back in though… It goes ex-div in a few days on a fat dividend 🙂 it’s also a company which generates its revenues mostly outside of the EU and Britain, so has some more protection from the ‘Brexit question’ volatility I’m sure we’ll see more of until the end of June…

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  3. Ciao TV,
    Thanks for stopping by! I was tempted at entering when it was at 7.2GBP, but I couldn’t find any news and reviews of the stock during that time and the only piece of news that I had was the press conference of the CEO that to be honest was rather shitty. Then they came out in February with the restructuring plan, more info and (in my opinion) a decent solution to their actual problems, but at that time I didn’t have the money to buy any stocks, so I missed the 8.0 GBP mark that I set for myself… They go Ex-div on the 7th, I bought them higher than what I wanted to, but I do not want to miss the train to the first payment, plus I might invest more if the price falls in the “8.0 GBP” region… We’ll see. They have problems, but as I switched them for BP I feel that I lowered the risk factor there.
    What resources do you use to do research on the UK stocks normally?

    As to Brexit… Honestly… I lived 5 years in the UK, did all my Uni there, I understand the underlying feelings that people have there, but I don’t think that getting out of the EU is actually beneficial to the country, pretty much like separating when Scotland wanted independence. But I guess we need to have a little spice from now till June, and Brexit will certainly be much discussed until then! (pound is darn cheap these days by the way… shame I have no money to change!!!). What is your view on Brexit?

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  4. Stalflare, it´s a pity to have to sell European companies because of double taxations issues. This is one of the reasons we all tend to invest in US/UK instead of in other Europeans countries.
    As example, could you please explain in the case of REE, how much net dividend you get for each euro in Italy? is the any way to recover it in your annual tax in Italy?

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    1. Ciao SS!
      Thanks for stopping by!
      Dividend taxes are a pain when they involve countries that don’t have agreements with other countries, and despite all the fuss about a free open world, in the end dividends (which are already part of a gain that is taxed) get taxed very heavily. There is a “way” to claim some taxes back, but it’s made in a way that only if you have a portfolio of several million euros it actually makes sense to put in place. Just to let you understand each dividend must be requested separately to the bank, and each request costs something like 50 Euros…
      REE is a great company, one of the few European Dividend Champions, almost a monopolist in Spain. The gross dividend was something around 4% but thanks to double taxation I would get something like 1,90% net. The rationale behind selling it was mostly linked to the fact that I can get a much better return from a company like TERNA (for example), or SSE in the UK. Same risk more or less. I will not let the European part of the portfolio go, my mark is above 2% NET, so it’s doable with very good companies, but it’s going to be smaller compared to the UK or USA.

      A way to lower taxation would be to move fiscal residency in other countries, but then it gets messy as you actually live there and prove to be there, and the extent of my finances is not good enough to cover for something like that…

      Thanks again for posting, do you have a site/blog as well? What do you normally invest into?

      Ciao ciao

      Stal

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      1. Thanks for the answer Stal, Unfortunately I´m also familiar with double taxation. I usually invest in Spain, UK and NorthAmerica for the very same reason. It´s true that there´s not a lot of dividends champions in Europe but a common regulation in taxes is a must, it has no sense to be able to invest in USA and not in Italy.
        I like your 2% net yield mark.

        Liked by 1 person

      2. Ciao SS,
        Totally agree with you. One of the problems of Europe is the lack of a common regulation when it comes to fiscal and financial policies… What other companies do you keep in Spain? I was eyeing Repsol some time ago, but I am too exposed to the Energy sector so I let it slide… In any case the 2% mark is sacred, especially in double taxed Europe, the only exception that I am making is for Nestlè.
        ciao caio
        Stal

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      3. Ciao Stal,
        Repsol does not met requirements for dividends investments, although it could be a value bet.
        Others interesting here could be BME, Abertis, Mapre, Gas Natural, Enagas. Of course none of them are aristocrats and probably unsafe in some aspects but yielding high.
        Good quality companies but with low yield are Inditex, Ebro Foods, Viscofan and Grifols.
        Best

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      4. Ciao SS,
        I have ti say that Abertis was on my radar too, but then again we have Atlantia in Italy that pretty much does the same and invests also in other countries, so in the end I went with them, no need to add too much diversification in the sector. I’ll check out the other names, Inditex was interesting but the yield is quite low… Ciao and thanks!

        Stal

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  5. Hi Stal,

    Looks like you had a pretty solid month then. I also sold a few stocks in March (well 3 anyway) to reduce the number of different stocks that I hold. My income fund did well though and it’s back in positive territory with almost +5% in March.

    I’ve yet to sell a stock because it reached too high in price although I’ve thought about it when the yield has dropped below my normal threshold (~ 2.25%). I usually just let it ride out as it’s always psychologically hard to sell something that’s doing well!

    Best wishes,
    -DL

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    1. Ciao DL,

      It has been a month of recovery, the fund is performing ok although thanks to foreign currencies fluctuation big part of the gains have been reduced. No worries there of course. 😛
      Selling at high prices is something that I would not do as well, but as I did not buy into the shares since inception I was left with some positions (and still have some of them) that account for 0.5% of the PF. The reality there is that either I re-invest at a much lower yield or I let them go because in time, as I hope that the fund will see more payments in from saved cash, they are going to be too small to make a difference… Maybe it’s a wrong approach but I am learning as I go, I am coming out with some new ideas on how to add into stocks that are rising, will probably write a post soon about it…

      ciaiociaoc and thanks for coming by!

      Stal

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  6. Stal,

    Similar to DL above, I haven’t sold a stock because it is too high before. I am in the buy and hold mold. You sold two of the stocks I hold, BP and MCD. I definitely understand your rationale for BP in preference for a different oil company. I have contemplated a move myself but ultimately decided to wait and see. It is sad to see the golden arches leave your portfolio; it is one of my favorite stocks that I own and I have enjoyed watching it grow over the last few years after some troublesome years. However, if you are comfortable with the transaction and the stock no longer fits in your portfolio, then get it out of there!

    Take care and hopefully April will be as great for you as March was.

    Bert

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    1. Ciao Bert,
      Thanks for stopping by!
      Selling MCD was not an easy task, but as explained above it grew up to a value where buying more shares would have simply meant a collapse in yield and a loss in capital gain. If that happens to a position that represents 3/4% of the PF I’ll hold, but one that was 0.5%… Hardly going to make a difference and it’s just one more stock to watch. I really need to shorten the list of active stocks, reduce complexity. With BP the rationale was different.
      We’ll see what happens, as to the rest April has got all the ingredients to be a good month (dividend wise) 🙂
      ciao and thanks for coming!
      Stal

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