A lot of times in investing, opportunities and times for action don’t happen on schedule. They just happen and you have to be ready to execute. That is the great benefit of having an investment ideology and The List of companies you’ve done your homework on and are ready to buy if the price is attractive enough and the fundamentals of the business haven’t changed from when you were evaluating the company. This past month a few opportunities popped up that allowed me to jump on right away.Read More
I made a couple of investment decisions in April, one building upon previous posts where I’m trying to figure out where to put money in the Mad King world we live in right now. The other decision was a sell decision that was a bit of surprise.
Opened position in iShares US Financials ETF (Ticker: XLF)
One of the big themes we’ve seen with the Mad King is that he wants to take the US economy let alone society back to 1989. During that period, a new law replaced the long standing Glass-Steagall act was passed which essentially deregulated the US financial services industry. Banks could not just be banks anymore. They can sell insurance. They can manage other people’s money. The industry and stock prices had a great run through the 1990’s and 2000’s until hubris got a hold and everything fell apart in 2008. The government stepped in and introduced a whole measure of regulations that clamped down on what the financial industry can do. Now the new President wants to eliminate those regulations.
I don’t agree with it. It opens the door to another financial meltdown at some point. I have no when but the ingredients would again be there. To this day no one has been formally charged with any criminal wrongdoing that facilitated the market crash of 2008-09. Sure banks have paid billions of play money as fines, even though they didn’t admit to doing anything wrong. The capitalism that I know of was damaged immensely.
So now the Mad King has been signalling and even signed an executive order saying that he wants to take us in his hot tub time machine back to the time where banks ran around unchecked and unfettered. You would think that maybe people will learn the lessons of yore. I doubt it. We know how that story ended.
Despite this, and everything I see wrong with it, we’re investors here. We need to make decisions. If the Mad King gets his way, it’s a pretty reasonable thought that US financials could catch a pretty strong jet stream that could take their stock prices higher.
Based on this I made a decision that I would like to get some exposure in the US financial companies.
If there is one area I have very little experience with financial analysis it is analyzing banks and other financial companies. Financial companies have very different accounting standards compared to traditional industrial or service based industries. A lot of it is quite frankly confusing and so I really can’t be bothered to do deep dives into a Goldman Sachs or Bank or America. In this case decided that I would get that exposure by using an ETF.
I decided to use the Spider ETF that tracks US financial services index portion of the S&P500. It is pretty much the default ETF for getting US fin-services exposure. It is very liquid (trades almost 6 million shares/day) and has a very low Management Expense Ratio (MER) of 0.14%).
I now have 2 ETF’s in my portfolio that I would consider more Trump-centric, when I include the Spider Aerospace and Defense ETF that I bought into last month. It’s up almost 3 percent since I bought in. The plan with these ETF’s is to watch how the Mad King follows through. If it looks like he will run into similar difficulty pushing these rollbacks through like the health care repeals then I may look into getting out.
BREAKING NEWS: Literally after I finished typing the previous paragraph, an alert comes on my phone saying that the Mad King is actively looking to go back beyond 1989 and even going back to a some level of Glass Steagall. This would require shrinking or breaking up banks, which pretty much cancels out what ever he scribbled down a month or so ago. From a consumer perspective this is good, however from an investor perspective, this may not be the greatest news. I’ll be watching pretty closely now and if this is where things are heading than I’ll probably be bailing out of this position.
Man does this guy flip flop or what?
Welcome to investing in the 2010’s.
BREAKING NEWS-2: If things are not confusing enough, today the House Financial Service Committee approved a motion to go forward with replacing the Dodds Frank bill which was created after the financial crisis to set up some checks and balances on the financial services industry. It appears the journey to unshackling the banks and Wall Street is back on track...for now
Sold position in Whole Foods (Ticker: WFM) for 27.1% gain
I bought into Whole Foods just over a year ago at $29.61 and added a little more last fall. The stock was plunging at the time as sales/profits were flat lining (in Wall Street’s and many experts’ eyes) as well as concerns that traditional grocery retailers and the Walmart’s and Amazon’s were ready to meaningfully chip away at their dominance in premium food sales. The stock has been trading in a narrow range for most of the past year and has been pretty much out of favour by investors.
A big bugaboo by analysts has been that the company is pricing itself out of the millennial market which apparently is the Golden Goose of our time. Bowing to that pressure, the company has been slowly rolling out smaller stores with more competitively priced goods. The jury is still out on whether this will be effective. My concern is that to me Whole Foods is like a luxury retailer. It has cultivated a brand and foodie culture by offering premium food options at scale. It has built that exclusivity image and it has been quite lucrative. If they do go all in on this 365 Market, will it dilute that valuable brand? Again we don’t know, but history has shown when luxury retailers try to go down market (e.g. Coach, VOSS water etc), the luxury value proposition goes with it and when it does, it becomes very difficult to get back. It’s still early days on this.
Other than this, when I look at the numbers, the company continues to create strong Returns on Invested Capital that are greater than its Cost of Capital. It is creating tangible profit. The balance sheet remains pristine with next to no debt. Despite losing market share, it is still considered a default go to place for premium food.
So the stock has been treading water until late April, when word got out that Jana Partners, an investment company that has built its name for buying a lot of stock in companies it thinks management is not doing a good job of managing shareholder capital and bothering them to make changes necessary, had bought 9 percent of Whole Food stock. The move has many wondering if they will be pushing for management to sell the company. The company, given its clean balance sheet, and strong cashflow, and strong brand recognition has been over the years, been considered ripe to be bought out. Well the notion is now front and centre and shortly after the announcement there were rumblings that Albertsons was considering making an offer. These events have awakened the stock and now it is trading just over $36.
When the stock got above $36, my position was up 27 percent. For those who have been reading my previous Investment Decision blog posts, one of the core elements in my investing ideology is to have an exit plan or a minimum return I want to ideally achieve with every investment decision. For me my exit threshold is 20 percent. I’m comfortable with a 20 percent return because it is well above inflation so I am protecting and increasing my purchasing power. I also think that 20 percent for me is enough of a bite sized return that justifies the risk. It also instills a bit of discipline in that it takes some of the emotion out of the sell decision which can really cloud our judgement. Greed plays a big role in our selling decisions, so having a set exit strategy can go long way. When stock crosses the 20 percent return threshold, I will pause to review if I want to sell and bank the profit or hold on. I review the fundamentals of the business. In the case of Whole Foods I was quite happy to bank a 27 percent profit and move on. I still like the company and the business model. There are some clouds and threats on the horizon, but I think the company has a strong and creative management team that can protect and grow the brand. If the stock were to fall from here I would consider to buy back in, all things equal. I’ve owned Whole Foods stock a few times and it has been a good one for me.
After a quiet month of February where I made no investment decisions, I decided to take on a few actions for March.Read More
From time to time something happens to my investment decisions.Read More
Two years ago I decided to setup an account with an online wealth management company that manages portfolios using algorithms and computer code. Over those two years I have blogged about my experience using a robo adviser and more importantly the results. Here is my update as we cross the two year mark.Read More
This month I pondered a fair bit of what impact the newly elected Mad King could have on stock prices and more specifically the operating business environment. Well just as he signalled, a he rushed out a whole bunch of things he said he was going to do and were not really good to a conducive, stable business environment. This notion has forced me to make some tough investment decisions this month.Read More
I wasn't really planning to make too many moves in December but the market thanks to Donald Trump's animal spirits was in a rather euphoric mood. I suddenly found some of the stocks and ETF's I owned were generating very solid returns and I had to make a decision to keep riding the wave (is the wave sustainable?) or bank some profits. It turns out I did a little of both.Read More
Throughout the year I’ve shared and tweeted (#trades2016) with you the investment decisions I’ve made throughout the year. Well let’s take a look and see what I did right and more importantly what I did wrong…and did I learn anything from it?Read More
As we embark on a new year, I thought I’d close the doors on 2016 and reflect on a very eventful year for myself and my practice and share some initiatives we're planning for 2017.Read More
As it comes time to close the books on 2016, we reach that point where the financial fortune tellers and psychics get to stand on the soap box and shout their prognostications for 2017. But wait a minute, how about their predictions for 2016? How did those pan out? Fortunately I like to make a point of noting down their predictions just so we can highlight their proficiency or deficiencies. So let’s take a look and see how those predcitions by the Smart Money People played out.Read More
In Part 3, I review my decision to buy a stock that I had previously owned. It was doing really well for me on paper, but then a negative game changer moment ensued that lifted the rug out of the stock. Despite this, I decided to buy back in.Read More
In Part 1 of my review of my November investment decisions, I focussed on decisions I made iwht my existing holdings. In Part 2 and Part 3, I review the new stocks I added to my portfolio and how I rationalized and came to my conclusion.Read More
Despite the incredible amount of uncertainty the election created, I continued to stay true to my investing ideology and look for opportunities. At the same time, I was faced with several selling decisions. As November evolved, several opportunities did emerge. I opened positions in 3 stocks which I will share in subsequent posts over the next few weeks. In this post I review my sell decisions.Read More
In part one of my review of my recent investment decisions in October, I went through my thought process for buying shares in Cal Maine Foods. In part 2, I walk down the road of my decision to buy shares in an upstart company in the sports apparel space.Read More
In October I pulled the trigger on adding a couple of new stocks to my portfolio. As always I framed my decisions by answering the 8 questions which I teach people how to answer in my Everyday Investing series of online courses. To give it justice, I will be breaking down my assessment into two separate posts.Read More
September was a strange month in that on several occaisions of the stock I owned was rumoured to be interested in buying another stock I own. I don’t think I’ve ever had that before as it pertains to my stocks. In September I decided to take advantage of some these exuberant moves, both to the upside and downside to further add and take some profits inmy portfolios.Read More
No new positions were added in August, but I decided to take some action and bank some profits on some positions that I think have had a good run.Read More
One of my big goals for 2016 that I wrote about back in January, was to leverage technology to elevate and increase my distribution of the various learning modules I’ve developed and use with my coaching clients. They are important modules in laying a foundation in understanding important principles that go into figuring out what stocks to buy and sell. To me they are a cornerstone of my practice. Well I’m happy and really really excited to announce that I’m ready to take my practice to the next step!Read More
In Part 2 of my investment activity review for July, I review my analysis of a company that I’ve long admired but I never had a chance to buy into because the stock has always been pricey. In July some recent events caused the stock to fall down quite violently and I thought I should take a look at it using my 8 questions and see if there is still an opportunity.Read More
In this 2-part post, I review one of my new additions to my portfolio, one that I really never thought I would see myself going there, yet here we are. That's investing.Read More