Recent Transactions

I had a flurry of activity in the last quarter of 2013, While there were some additions to my portfolio, I also made some disposals of stocks as well. 

 

As I indicated recently, I’m moving to supplement my core dividend portfolio with a few promising growth stocks. I’ve made that move because I feel that my dividend income portfolio is in a pretty good place. I’ve made most of the moves here that I’ve wanted to make to set up a good income base. I’ll continue adding to these stocks selectively, but I’d like to try and add some growth stocks into the mix.

I already have a few of these growth stocks, and the returns have been fairly good. I’d like to eventually have 20-30% of my portfolio invested in growth stocks over time.

Going forward, I’ll be breaking out my recent transactions into both transactions in my core dividend portfolio, as well as ones that I make in my growth portfolio.

Given there was quite a bit of activity in the last quarter, I’ll summarize it all here. For those who are wondering, much of the sale activity was more trimming of positions rather than complete exits. I haven’t ditched my goal of attaining passive income via my dividend portfolio.

Rather, strong capital gains in some core stocks, and the need to plonk down some cash for an upcoming property purchase acted as a natural incentive to trim some positions around the edges.

Dividend Portfolio Sales

Apple (AAPL)

I wrote about this one previously. I exited my entire position in Apple. This was probably the tech position that I had the least amount of conviction in. Apple’s growth profile is flattening out in my view. It will likely experience some margin compression as it rolls out “mini’s” and “cheaper versions” of all it’s flagship products.

I sold all my 10 Apple shares for $521, realizing $5200 in proceeds and a nice gain of about $1k, plus about $100-$200 of dividends thrown in for good measure. Like most stocks, Apple enjoyed a nice ride up over the last year, certainly from where I bought at $410.

BP (BP)

I slightly trimmed my rather large BP holding. I sold 115 shares at 45.70, realizing about $5k in proceeds. I still really like BP. I continue to believe that it remains undervalued. The significant discount from the legal overhang will pass in time.

Colgate (CL)

There was an interesting twist with Colgate.  I had a small holding in Colgate, approximately $4k.  I had made the decision to completely exit Colgate. Interestingly enough, my wife was somewhat attached to this position. So I made the decision to acquire about half of it back at slightly less than what I disposed it for. I still believe it’s trading at a pretty expensive multiple and that there are better valued businesses around. At the end of the day, I guess it’s still hard to go past  a nice stable consumer staple!

Mastercard & Visa (MA, V)

I expect both of these companies to remain long term core holdings in my portfolio in 20 years time, in whatever manner they happen to exist. However both have had huge runs up in recent times.

Mastercard was up 70% alone in 2013, while Visa was up close to 50%. Mastercard also announced a stock split and a pretty significant dividend hike. I always knew this would eventually come. Visa and Mastercard generate a lot of free cash flow, even with the ample investment opportunities on hand. I trimmed these positions rather the exiting. I took about $2k off the table for each of these at recent prices, leaving me with positions of close to $14k in each.

Lockheed (LMT)

Another bolter in 2013. Up almost 67%. Frankly, I’m a little stunned with the performance of this one. Defense spending cuts are in the works. While Lockheed is well positioned to compete, I can’s say with clear cut certainty that it’s revenues and profits won’t be adversely impacted in 5 years time. Still the stock market chose to reward it pretty richly in 2013. I recently trimmed about $2k from Lockheed at recent prices, still leaving me with a position exceeding $5k.

CME Group (CME)

Another 2013 market darling, up 64%. Investors suddenly woke up and realized that interest rates are on the move up and commodity prices are showing increased strength and volatility. All of which auger well for CME. Unlike Lockheed, I can understand why CME moved up so much. In my view though, the move up put CME into overvalued territory. I took the chance to trim a little from my position, around $2k. I still maintain an $8k position in CME. I love the economics and competitive positioning of exchange businesses like CME. This will be a core, long term position of mine.

Western Union (WU)

Western Union was another business that had a very steady run up in 2013, over 30%. This is a business that has some great fundamental strengths. If Western Union can execute and it’s moat remains, then it will be very well positioned long term. I must admit though, I’m getting a little less certain of it’s ability to withstand the massive mobile payments and money transfer innovation that’s taking place. It’s still a good business, perhaps no longer a great business. I’ve taken the opportunity of a good run up in price to trim about $3k from this position. I still have a $5k holding.

Dividend Portfolio Purchases

Health Care Services Group (HSCG)

I wrote about this one recently. This is a new purchase for me. HCSG is an intriguing company. it provides laundry, maintenance services, house keeping to hospitals and nursing homes, rehabilitation facilities and aged care facilities. I love businesses like these that have long term locked in contracts and ride a secular trend (in this case, the increasing “greying” of the baby boomer population in the US).  I purchased 150 shares at $25

Resmed (RMD)

I recently mentioned that I acquired another 40 shares of Resmed stock at $50 share. Resmed missed quarterly earnings estimates last quarter and got spanked by the market. It dipped about 14% on the miss. Frankly, I viewed the earnings miss and stock reaction as an opportunity to load up. My outlook remains that this is a high growth business paying a modest dividend that will rapidly grow over time.

United Guardian (UG)

I also wrote about this one recently. I added to my position in United Guardian, in which I already have a reasonable stake. I was able to acquire another 55 shares at $25/share. I continue to like this stock. UG reported an increase of 14% in yoy EPS growth in it’s most recent quarter.

Mead Johnson (MJN)

This is a new position. I like the positioning of this company, which is a maker of infant formula and nutrition. It should meet with continued good long term growth in Asia as disposable incomes rise and consumers are more interested in having their children enjoy mineral rich nutrition supplements. I initiated a $2k position in this stock at recent prices.

McCormick (MKC)

I’ve had my eye on this business for a while. It’s a maker of spices and condiments. I’ve written about it previously as one that I believe has a strong moat and attractive financials. McCormick is a very stable company with a strong underlying business. The valuation has been attractive enough to draw me in. I initiated a $2k holding in McCormick at recent prices.

Fastenal (FAST)

I first came across the Fastenal business in around 2006. I bought a small holding of about $5k. I exited in due course, but I really should have stayed. It’s more than tripled since then. Fastenal distributes fasteners and washers across the US. The source of it’s moat arises from extensive distribution and getting fasteners to anywhere as fast as possible.

It’s a pretty boring business, but with annual revenue growth and net income growth well above 10%, and returns on equity exceeding 25%, it’s one I’m happy to be invested in. I purchased an initial position of $2k in Fastenal at recent prices. It’s one I expect to add to further over time.

I’ll do more detailed write ups of Fastenal, McCormick and Mead Johnson in due course.

Growth Portfolio Sales

Medidata Solutions (MDSO)

Well, what can I say about Medidata? This company has tripled since I bought it just over a year ago. Unlike large cap growth stocks, which I want to have more of my portfolio in over time, small cap growth stocks have inherently more risk because they are earlier in their business cycle. When an early stage growth company provides you a 3x return, I believe it’s incumbent on you to take profits.

MDSO is a pretty unusual situation. I’ve very rarely has something triple on me in a year. I’ve completely desrisked my investment in Medidata. I’ve pulled out the entirety of my initial investment in the company, and that still leaves me with a current investment valued at $8k. At this point, I’m just happy to let this ride.

Medidata is in an interesting, high growth space. It uses cloud technologies to assist in drug prototyping and commercialization. It’s a massive market, I’m just not sure that Medidata isn’t markedly overvalued here. The stock recently split, which has added to it’s price continuing to move higher. I took another $2k off the table recently, leaving me with a holding of about $8k.

Growth Portfolio Purchases

I’ve initiated core growth holding purchases in Yandex, Priceline, Bidu and Linked in. You can read more detail about the transactions here, and the reasons behind them.

That concludes the Q4 2013 transaction activity. I don’t expect anything like this level of activity (either on the purchase or disposal side) moving forward for 2014.

 

Comments

  1. Integrator,

    Wow. You knocked it out of the park with some of these holdings.

    From the list, CL, CME and HCSG are all interesting for me and my portfolio objectives. It’s just tough to find any deals right now after the monster runs some of these names have been on.

    Keep up the great work!

    Best wishes.

    • Integrator says:

      Thanks DM. More luck and good fortune than any real skill on my part. Who can predict how Mr Market is going to value great businesses from one year to the next :) Long term, all the core holdings should continue to generate steady growth in my view.

  2. Jon says:

    Hi FI,
    Lots of trading !
    I’m more of a buy and hold forever investor. Don’t know if you’ve come across Stephen Bland from the UK, he started High Yield Portfolio share strategies decades ago, has a cult following amongst UK HYP investors. He believes in “strategic ignorance”. Once you’ve made a decision to buy (analysed P/E, P/B, yield, debt etc) you hold forever because nobody can predict the future for an economy, industry or stock. For eg my BAe shares (UK defence supplier, competitor to LMT) increased by 50%, nobody could have predicted that.

    He recently wrote some short articles for Stockopedia, see link below, highly recommend a read.

    http://www.stockopedia.com/columns/stephen-blands-high-yield-portfolio-5/

    Reg, Jon

    • Integrator says:

      Hi Jon,

      Last quarter was pretty exceptional. I normally don’t do anywhere near this level of transactions. It just so happened that elevated valuations and the need for cash to find money for a deposit all happened to coincide!. That said, I periodically rebalance where values have gotten out of line in my portfolio. I don’t want a small cap growth stock occupying a bigger portion of my portfolio then it should, hence the reason for the partial disposal. Some of the others had run a lot to the point where I felt they no longer offered fair value. I’m still happy to keep the core position…. I like to think of it as occasional trimming of the edges :)

      Best,
      FI

  3. moneycone says:

    Funny you mention ResMed… I was recently evaluating this stock. Still haven’t pulled the trigger, but is on my radar.

  4. I’m of the same opinion of AAPL. I’m holding for two reasons that should get sorted out this year.
    1: share repurchase debate. $60b is 12% of the company but they have the cashflow and bank size to do more. I am essentially looking for another STX.
    2: “New amazing products consumers will love” was announced by Cook. If they really will do something new I will stay. My fear is it will be a different sized iPhone or iPad.

Trackbacks

  1. […] easy access to buying and selling stocks meant that I made partial disposals in companies like Colgate, Mastercard and Visa which are some of my top performing businesses. […]

Speak Your Mind

*