Valuing eBay as a Bank?
Paypal Is In An Increasingly Bad Position
-My diversified, passive investing ETF portfolio
–My Ultimate Sustainable dividend portfolio
Both of those are highly diversified and I can sleep without any problems even if we do see another big market crash.
Another sector of my investments that is starting to worry me a bit more however is my technology stock investments. I’m not as worried about my long & short tech stock picks because they are “long & short” and thus would not be expected to do better or worse no matter what the market turns into. However we not get to the “problem”. I have my longer term speculative picks which are a growing part of my investments. I have made 1 in each of the past 3 years:
Not only are they very significant investments from the start but the first two have done extremely well. I have no intention of selling in the near future and will likely make more such picks.
The main reasons are of course that I believe that is where I have the best understanding of the companies, the environment and can make the best “picks” The big danger of course is that as will happen with other sectors, the tech stocks will most certainly go through another bubble. For technology stocks, it’s very easy to remember the last one where many dot com stocks did not even make it. I’m not sure I want to have 20-30% or more of my assets so vulnerable when something like that happens.
By selling an ETF that tracks the Nasdaq Index, I would certainly be better protected if such an event occurs but there is of course the downside that I’d be paying to borrow the ETF. Also, if ever my stock pick returns are mainly due to the overall market, those returns will basically be “zero”. I’ll be long names that have gained big but shorting an index that has done the same. I decided to look at charts for the 3 names to see how they’ve done in comparison to QQQ:
It’s still very early to tell on TRIP but clearly the other 2 would have done extremely well even if I had those shorts.
Instead of owning $100K of tech stock names for examples outright. I could own:
-$100K of Tech stock names
-Short 100$K of the Nasdaq (through a short on QQQ)
This would make my strategy “cash neutral” more or less and would allow me to invest it in a more diversified manner.
I started considering this after hearing that many tech venture capitalists have such a strategy in place to limit their exposure to the sector since they generally have a significant portion of their savings invested in their own funds.
I’d love to hear your thoughts on the subject. I’ll certainly be looking into the cost of such a strategy (basically how much the borrow on QQQ typically goes for). You could argue that QQQ is not the ideal hedge since holding a “internet stock” ETF would have more correlation but I fear the cost of such a “perfect” hedge would outweigh the additional benefits.
My long & short trades are generally a lot more volatile than my other trading portfolios which is why despite their strong performance, I will continue to put a limited amount of cash into that account. However, given the performance of the strategy over the past 5 years, it’d certainly be tempting to put more into it in 2015. I guess I’ll discuss that when I publish my post about the lessons that I take from my 2014 trading.
Today, I will be closing 3 of the 5 remaining long & short tech stock trades:
Long Apple (AAPL) & Short Yelp (YELP): +44,05% – Yelp is a company that has been overvalued for some time and putting up against a stock like Apple gave me good odds. The trade was negative for some time but then Yelp reported disappointing guidance:
Long Google (GOOG) & Short Blue Nile (NILE): -24,47% As many of you know NILE has been one of my favorite shorts over the years but it has recently become closer to what I’d consider to be its “fair price”. Still, shorting it against Google seemed like a good risk/reward trade but when Google fell short in terms of earnings, that trade went bad.
Long Tripadvisor (TRIP) & Short Travelzoo (TZOO): +27,13% Ahh. I love this pairing. TRIP has had a tough run and I’m currently down over 10% on my long term speculative bet (to be fair, the market is also down) but I have no doubt that over tiem, TRIP is a superior play and you can expect me to put this trade up again at some point next year.
The returns for the long & short portfolio now stand at +40,13%, a good return in any year and far beyond my yearly objectives for this portfolio.
As many of you know the Ultimate Sustainable dividend portfolio was built over a year ago as an attempt to slowly become financially free. It is the most important part of my passive income plan and in weeks like the past 2 ones where we start to see panic in the financial markets, it’s a good process for me to go back and see how the portfolio is doing.
As is always the case, you can get extra information in my newsletter, it’s free to sign up for here:
Without further wait, let’s get started. Here are the portfolio holdings as of last night:
|Ticker||Name||Shares||Oct 16 2014 Prices||Oct 16 Values|
|OMC||Omnicom Group Inc||32||$66.16||$2,117.12|
|JCI||Johnson Controls Inc||43||$40.69||$1,749.67|
|ITW||Illinois Tool Works Inc||37||$83.07||$3,073.59|
|SJM||JM Smucker Co/The||22||$97.88||$2,153.36|
|TROW||T Rowe Price Group Inc||32||$75.43||$2,413.76|
|OXY||Occidental Petroleum Corp||25||$86.44||$2,161|
|XOM||Exxon Mobil Corp||22||$90.60||$1,993.20|
|ADI||Analog Devices Inc||47||$44.60||$2,096.20|
|TXN||Texas Instruments Inc||33||$43.59||$1,438.47|
|VWO||Vanguard FTSE Emerging Markets||74||$40.63||$3,006.62|
|BND||Vanguard Total Bond Market||36||$82.97||$2,986.92|
It has not happened much but this October will actually generate less money than October 2013 ($30.78 vs $41 last year). I’d have to check but I’d imagine it’s caused by a company moving its dividend dates a bit. Not a big deal but I’ll certainly continue to monitor.
|TXN||Texas Instruments Inc||Dividend increase of 13.3%|
|VWO||Vanguard FTSE Emerging Markets||Dividend increase of 6.7%|
|BND||Vanguard Total Bond Market||Dividend increase of 3.8%|
In addition to the normal “dividend reinvestments”, I also decided to add a bit to our positions in 2 of the stocks that have paid dividends since the last USDP update:
-Illinois Tool Works Inc (ITW) 6 shares – $500
-Vanguard FTSE Emerging Markets (VWO) – 12 shares – $500
A few days late, but it’s that time of the month again. We’re starting to see a bit more volatility which always provides a few more investing and trading options. There are still some great opportunities out there and I’m always on the lookout for ways to improve my Ultimate Sustainable Dividend portfolio. Why? Because it’s a key part of increasing my monthly passive income (see last update here). There is no “perfect” stock of course. The market is fairly efficient so it’s all about finding high quality stocks that are a good match for my portfolio and provide a good potential/downside risk ratio. Obviously, yield is just one criteria but it’s an important one and for that reason, looking at the top large cap stocks in terms of dividend payout is a great way for me to get started.
|Ticker||Name||Price||Dividend Yield||Payout Ratio||Ex-Dvd|
|DO||Diamond Offshore Drilling Inc||33||10.62||88.69||10/30/2014|
|WIN||Windstream Holdings Inc||10.94||9.14||250.77||12/31/2014|
|NE||Noble Corp plc||20.24||7.41||25.2||11/13/2014|
|FTR||Frontier Communications Corp||6.44||6.21||362.42||12/09/2014|
|IRM||Iron Mountain Inc||33.1||5.74||213.91||12/24/2014|
|HCN||Health Care REIT Inc||62.78||5.07||3110.77||11/06/2014|
|TE||TECO Energy Inc||17.75||4.96||96.66||11/10/2014|
|PM||Philip Morris International Inc||84.51||4.73||68.07||12/23/2014|
|PBCT||People's United Financial Inc||14.46||4.56||87.67||10/29/2014|
|RAI||Reynolds American Inc||59.44||4.51||79.1||12/10/2014|
|MO||Altria Group Inc||46.19||4.5||81.21||12/22/2014|
|PCL||Plum Creek Timber Co Inc||39.22||4.49||135.51||11/12/2014|
|KMI||Kinder Morgan Inc/DE||38.86||4.43||138.48||10/31/2014|
|VZ||Verizon Communications Inc||49.71||4.42||51.73||10/08/2014|
|ED||Consolidated Edison Inc||57.03||4.42||67.89||11/10/2014|
|DRI||Darden Restaurants Inc||51.59||4.26||157.37||10/08/2014|
|DUK||Duke Energy Corp||75.17||4.23||82.38||11/12/2014|
|TEG||Integrys Energy Group Inc||65.62||4.15||61.84||11/28/2014|
|KIM||Kimco Realty Corp||21.96||4.1||174.48||12/29/2014|
|PNW||Pinnacle West Capital Corp||55.53||4.09||60.31||10/30/2014|
|POM||Pepco Holdings Inc||26.79||4.03||245.45||12/12/2014|
|PEG||Public Service Enterprise Group Inc||37.26||3.97||58.57||12/05/2014|
|XEL||Xcel Energy Inc||30.61||3.92||58.43||12/23/2014|
|CNP||CenterPoint Energy Inc||24.73||3.84||114.15||11/14/2014|
|GAS||AGL Resources Inc||51.26||3.82||70.93||11/19/2014|
|AEP||American Electric Power Co Inc||52.87||3.78||64.46||11/10/2014|
|KRFT||Kraft Foods Group Inc||56.3||3.73||45.05||10/13/2014|
|CINF||Cincinnati Financial Corp||47.63||3.7||52.22||12/15/2014|
|CMS||CMS Energy Corp||29.99||3.6||59.69||11/05/2014|
|DTE||DTE Energy Co||76.87||3.59||68.53||12/18/2014|
|WEC||Wisconsin Energy Corp||43.81||3.56||56.96||11/12/2014|
|LEG||Leggett & Platt Inc||34.99||3.54||87.71||12/10/2014|
|GE||General Electric Co||25.4||3.46||53.11||12/24/2014|
|F||Ford Motor Co||14.59||3.43||22||10/28/2014|
|D||Dominion Resources Inc/VA||70.04||3.43||72.88||12/03/2014|
|CVC||Cablevision Systems Corp||17.77||3.42||122.86||11/13/2014|
|SE||Spectra Energy Corp||39.26||3.41||80.56||11/12/2014|
|LMT||Lockheed Martin Corp||178.34||3.36||52||11/26/2014|
|AVB||AvalonBay Communities Inc||142.69||3.26||932.94||12/30/2014|
|GIS||General Mills Inc||50.47||3.25||53.41||10/08/2014|
|AIV||Apartment Investment & Management Co||32.22||3.24||31414.27||11/12/2014|
|WM||Waste Management Inc||47.6||3.15||696.94||11/28/2014|
|SPG||Simon Property Group Inc||165.81||3.14||111.96||11/10/2014|
|ADI||Analog Devices Inc||47.58||3.1||60.32||12/03/2014|
|MCHP||Microchip Technology Inc||46.13||3.09||71.14||11/18/2014|
|WU||Western Union Co/The||16.24||3.08||34.72||12/18/2014|
|PBI||Pitney Bowes Inc||24.38||3.08||62.64||11/12/2014|
|NEE||NextEra Energy Inc||94.23||3.08||65.11||11/26/2014|
|STX||Seagate Technology PLC||56.08||3.07||35.85||11/03/2014|
|PG||Procter & Gamble Co/The||83.79||3.07||61||10/15/2014|
|CSCO||Cisco Systems Inc||25.31||3.01||47.85||01/02/2015|
|OXY||Occidental Petroleum Corp||95.96||3||34.84||12/08/2014|
|CAG||ConAgra Foods Inc||33.33||3||140.9||10/29/2014|
|LLY||Eli Lilly & Co||65.67||2.98||44.89||11/14/2014|
|CPB||Campbell Soup Co||42.45||2.94||50.88||10/08/2014|
|MRK||Merck & Co Inc||59.9||2.94||116.53||12/11/2014|
|VNO||Vornado Realty Trust||99.82||2.93||#VALUE!||11/05/2014|
|BMY||Bristol-Myers Squibb Co||50.85||2.84||90.44||01/07/2015|
|WYNN||Wynn Resorts Ltd||182.28||2.74||96.59||11/07/2014|
|CME||CME Group Inc/IL||80.95||2.32||151.06||12/05/2014|
Of course, as I always mention, dividend yield is one criteria and Diamond Offshore Drilling Inc (DDO) is a great example of that fact. Yes, it has a solid 10% dividend yield but look at the trajectory of its earnings, revenues and dividends:
oh and the stock price hasn’t been doing too well either:
I will be writing more about these names soon in our free mailing list, join now if you have not done so yet: