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May, 2020: 6 31
Disclaimer - IMPORTANT - Read this first!
| Investor's Journal is a diary focused strictly on investments and personal finance issues, primarily from a contrarian and retiree point of view. Follow along with an average guy's failures and successes as he learns, by trial and error, the fine art of value investing. |
5/6/20-Since the prior entry (4/10/20), significant alterations have been made in our basic 25 holdings, now combining reserves, bond, and equity assets, the latter reduced to just my top 20. With these changes, the following are our revised basic holdings: AMGN; AWF; AYX; BAC; BHK; COP; CRWD; DDOG; GM; JPM; OKTA; QQQ; RCII; RSP; SCHD; STX; T; USB; VBF; VCIT; VIOO; VMFXX; WFC; XRX; and ZM. (Of those, AWF, BHK, VBF, VCIT, and VMFXX are the tickers for our bond holdings or reserves.)
Total dividends are as yet on track to achieve our goal for 12/31/20. We continue to expect to increase dividend income by 13.5% annually (as calculated from the latest, 12/31/18, base amount of $37,500). In fact, we should receive portfolio dividends overall for 2020 of at least $50,000.
The market value of our liquid assets has, though, continued to fall, down 2.03%, or $28,750, since the prior entry. Through the close of trading today, total liquid assets are only $1,386,252.
Net total assets (including real estate and all other holdings) have decreased 10.71%, or $203,851, from their 12/31/19 level and are now just $1,699,582. My wife and I began our marriage in June, 1985, with net assets of $5000. Even with the latest reductions, we have, of course, been fortunate, showing a compound annualized increase from that little nest egg of over 18%.
All things considered, it still seems best to have our liquid assets portfolio divided roughly 50/50 between bond holdings plus reserves, on the one hand, and stocks, stock mutual funds, or equity exchange traded funds, on the other. If the portfolio becomes heavily skewed one way or the other, it will be time to rebalance. Currently, bond assets plus reserves represent 47.58% of total liquid assets. Equities are the remaining 52.42%.
5/31/20-Since the prior entry (5/6/20), several assets have been sold and others bought for our basic 25 holdings. Those redeemed were: AMGN; COP; GM; JPM; SCHD; STX; T; USB; and XRX. They were replaced by these stocks which have in their favor both relatively low price to free cash flow and relatively high dividends (all as well with reasonably low dividend payout ratios): ACCO; BPOP; BSRR; CAL; CTBI; HPQ; OPBK; PFBI; and TSBK. With these changes, the portfolio is again taking on a more traditional focus for me of low price to value. These, then, are the new basic holdings: ACCO; AWF; AYX; BAC; BHK; BPOP; BSRR; CAL; CRWD; CTBI; DDOG; HBQ; OKTA; OPBK; PFBI; QQQ; RCII; RSP; TSBK; VBF; VCIT; VIOO; VMFXX; WFC; and ZM.
Total portfolio dividends remain on track to reach our year-end target. Indeed, they should exceed it, coming in at $50,000 or above, thereby more than assuring that once again we see an increase in dividend income of at least 13.5% a year (as calculated from the latest, 12/31/18, base amount of $37,500).
The market value of our liquid assets has increased since 5/6/20 to $1,424,924, up 2.79% or $38,672. Through the close of trading Friday, 5/29/20, liquid assets are $1,424,924.
Net total assets (including real estate and all other holdings) have decreased 8.56%, or $162,969, from their 12/31/19 level and are now $1,740,464.
I do not anticipate keeping half of liquid assets in safer reserves or bond assets indefinitely. Warren Buffett has offered a simple ratio for evaluating whether or not the U.S. stock market is over- vs. undervalued. He suggests dividing the country's equity market-capitalization by its gross national product. Just last January, that result was about 155%, probably the ratio's highest level of overvaluation ever, signaling that a likely correction or worse was coming. Sure enough, March saw U.S. markets drop by about a third.
Given that January level of "irrational exuberance," covid-19 was just the catalyst for a more or less inevitable decline. Since March, though, we have seen what probably is a bear market rally. By now the Buffett indicator of U.S. equity market-cap to gross national product stands at 144%, once again too high for realistic investor hopes of long-term profitability. Buffett has said when the ratio is around 80% or below it is usually a great time to be buying stocks. Much above 110%, though, is asking for trouble.
Under these conditions, and particularly as most of the pandemic's effects on our economy have yet to play out, I am happy for now to keep roughly 50% of our portfolio in stable assets, available for buying bargains after another major dip in stock prices. Once the markets have fallen further, I expect to gradually raise the percentage we keep in equities back to the two-thirds allocation maintained prior to 2020.
Disclaimer and Disclosure Statement
Neither I nor Investor's Journal will be responsible for losses by anyone who obtained ideas from this site.
This diary is intended for personal interest and general information only. You are advised to do your own research (as well as to consult highly compensated professionals) before spending money on anything.
I know of no reason anyone should take my financial musings seriously. At best I am a dedicated amateur providing a bit of investment-related insight and entertainment, at worst an amusing diversion.
My wife, Fran, and I may at times own shares of some of the assets mentioned here. But neither of us receive any benefit from reference to them, unless you count the mutual misery when we get it wrong, or the opportunity to gloat when we get it right.