Investments

It’s getting really difficult to find decent valuations but for some reason Telia Company has performed quite poorly for quite some time now. It dropped today almost 2% so I decided to buy additional 250 shares for 3,714 EUR per share. Dividend policy is exactly what I expected it to be going forward. 2 SEK annually for next couple of years (+ perhaps additional ones) is quite OK and I still maintain a fair value estimation significantly above the current valuation. Then there’s the additional consolidation option in the sector which should provide interesting possibilities for the involved parties.

In my overall strategy I’ve ruled that the portfolio can contain one pure risk position. In the past this position was filled by VEREIT (ARCP at the time) but since then VEREIT has pretty much completed the turnaround and is now considered as normal position. Today I however decided to open yet another such position with a purchase of 350 shares of Scorpio Tankers Inc. for 4,66 USD per share.

Not a very typical holding for my portfolio as it’s operating in a leveraged cyclical segment I really don’t like nor understand in detail. Main motivation was the assumption of good enough chance of turning cycle, very modern fleet providing competitive edge, somewhat limited downside, significant upside potential and very high yield. I’m hoping to exit this position around 9 USD per share and meanwhile collect the dividends. The exceptionally high yield is a risk indicator and there’s always the possibility for a dividend cut which in turn would test the thesis about limited downside.

There’s also one extra factor in this position. As the company is incorporated in the Marshall Islands, taxation will be a bit different. As Finland doesn’t have tax treaty in place with Marshall Islands, dividends shall be taxed as normal income very much like normal pay check. At the moment this isn’t a big factor but for a long position that could provide interesting possibilities for less taxed dividend income. Not really relevant for me since the taxation is likely to change many times before I’ll willingly decrease my normal income. For pensioners this could be an interesting detail though.

Link: http://seekingalpha.com/article/4023325-scorpio-tankers-stng-ceo-emanuele-lauro-q3-2016-results-earnings-call-transcript

Portfolio and overall markets are in all time high valuations but still there are some investment opportunities available. H&M is one of them. I’m still not a huge fan of the sector in general but the company characteristics, yield, debt and cash balance make it very difficult to ignore right now. SEK exchange rate is also one factor in this process which could turn out to be a positive driver for the future. Today I bought 40 additional shares for 255,80 SEK per share. Depending on the market mood swings I might make identical purchase during Q1/2017.

I’ve been waiting for a decent possibility to add on my existing Lockheed Martin position. Finally Mr. Trump provided one with a tweet about F-35 budget being out of control. Not especially cheap valuation but I still decided to buy additional 4 shares for 248,91 USD per share. I really doubt this will have even short term impact on the company, yet alone long term.

Link: http://seekingalpha.com/news/3229946-trump-takes-aim-fminus-35-costs

 

Yet another addition to existing Diageo position with a purchase of 10 shares for 99,99 USD per share. There are multiple factors pushing Diageo down, none of which are very relevant in the long term. Very reasonable valuation made me pull the trigger once more. Almost bought more REITs as well but I’ll try to control myself to see how the sector moves when FED actually makes the rate decision.

Minor compensation for the closed Deere position with a purchase of 120 shares of VEREIT for 8,29 USD per share. Most of the upcoming rate hike should be already priced in but there might still be a minor correction in REIT sector when FED actually pulls the trigger. There are still some risks from the ARCP fiasco but in general the new management has done terrific job to turn the company around.

These things don’t usually play out well for me but I decided to sell out my position on Deere Company today. They beat the expectations with a significant margin and the stock shot up 10 percent. My original cost basis was around 84 USD and today I sold all 45 shares for 101,25 USD per share. During my ownership in the company I received 175,20 USD as dividends.

Now I don’t typically like to sell any of the companies I still believe in. With the current valuation however I feel that there’s a good chance that I can buy back the shares for much less within the next couple of weeks or months. I’m not totally sure if I’ll do that but it’s an option if the price drops enough. I really don’t like to speculate but I can accept it for the cyclical positions and especially for cyclicals which seems to get overvalued.

See: http://seekingalpha.com/news/3226623-deere-soars-big-fq4-beat

This was a free trade as my broker had a campaign for S&P 500 companies. This was also the day of the US elections which ended with a mild surprise as Donald Trump won the presidential seat. I expected stocks to take a nose dive but instead got a lesson on the difficulties in predicting any short term movements in the market. Realty Income Corporation however has been going down for a while now so I decided to buy 6 shares for 56,62 USD per share. Once again I dumped my existing USD position on a free trade to avoid currency exchange fees as well.

First of all, minor addition to Telia Company AB with a purchase of 100 shares for 3,832 EUR per share. Nothing special here, just a minor addition to what I believe to be a reasonably priced company with a strong dividend.

Then there’s yet another new position in the form of Yara International ASA. Entry position consists of 50 shares bought for 292,00 NOK per share. I’ve been thinking about a position on fertilizers for a while now to complement other cyclical positions. I consider it to be a segment which will benefit from multiple mega trends going forwards. It’s also a sector which most likely will see some consolidation, some of it already in progress. Yara operates in the major league within the sector and the overall cycle phase appears to be near enough to the bottom.

Link: Yara Investor Relations

Telenor dropped below my average price before reporting quarterly results. As I didn’t anticipate any significant changes going forward, I decided to buy additional 80 shares for 133,40 NOK per share. My position in telecom sector is mainly based on the assumption that the sector will continue to grow due to IoT, connected cars and other similar drivers and on rather bold assumption that regulation will effectively block disruptive competition. I also believe that eventually there will be some consolidation taking place but in reality I can not predict the companies involved in such action.

It remains to be seen if my short term thesis was correct. Eventually the results can be found from here: http://www.telenor.com/investors/reports/2016/telenor-groups-results-for-the-3rd-quarter-2016/