This is odd. MKP was trading at $18.20, yesterday morning. When the IPO at $14.85 came online, shortly after lunch, the stock price went up several cents. Today, the stock is up further to $18.40. The IPO is small and was sold out in roughly 60 minutes but I would have expected it to drive the price down, not up. Past IPO experiences have involved a 10~12% discount which drives the stock down to just above the discount for a brief time with the stock recovering a couple of months later.
The 15th is payday, for most of our companies. One of the companies boosted the dividend by a wee bit. Another goosed the dividend by 50%; it had been paying 4.25% and is now 6.4%. Even after the rocket ride with Tesla, it is still clear to me that long hold is the best way to success. I'm certainly not complaining but a strong majority of our money does not come from Tesla. To put it in a baseball analogy, I think it's OK to swing for the seats sometimes, when you get just the right pitch. Most of the time, the goal should be to get on base. Investing is about getting rich slowly. Trading is about vastly under performing the market while dreaming of getting rich quickly.
MKP closed Friday at 18.54. That's a 25% spread from the IPO price that will fill on November 1. Six months ago, MKP gave existing shareholders rights to purchase more stock, also at a nice discount. I certainly executed those rights but I was a smaller shareholder, at the time. At the IPO price, this stock is distributing at 9.1%. At the current share price, this stock is distributing at 7.3%. MCAN is not a core holding on the Canadian side of our portfolio. I'm going to put some time into considering why it is not.
i lost CAR this way. Avg in price of some $9 per share. Lost them at around $20 or even less. Never intended to sell. Just make some monthly income selling calls. That was just in 2020. CAR is at $150 today.
That sounds unfortunate. I was surprised when DBM-UN took an upward jump that allowed someone to execute their calls. It was not a positive event, on my side. I knew there was a chance they could go but I don't love the company, yet, and it seemed a low risk. I bought thinking I would own this company for 20 years. This is how I plan to sell down our portfolio, when we arrive at that time. The idea is to keep selling calls and become more aggressive, as necessary. The end result was very positive for us, due to the MKP IPO while I happened to be sitting at the keyboard, wondering how to put cash to work. This is directly attributable to luck, not skill.
Sometimes luck and skills go hand in hand. Sometimes not. In your case, id say more often than not, you personally create your own luck by due diligence and risk assessment.
Our core companies are projected to return 10~12% over the long term. No more. REITs, service industry, financials. These companies are not get-rich-quick schemes. And yet, our 10 year average return is 16.1%. The discrepancy comes from "one time" events like buy-outs, IPOs, etc. A well run REIT with strong financial sheet is a carnival duck waiting to be shot. We've experienced several of these. Tesla was a rocket ride. We've also done extremely well on a handful of IPOs we have later ridden for the long term. This latest example is one of them. In order to capitalize on the IPOs, we have needed to have a decent cash buffer. I've operated with a cash buffer since 2017, when I thought the market was "a little warm". At this point, you could put a soiled diaper into a bag and sell it for $2M. I have tried to not be taken in by the lusty gains of the broad market. Instead, I've tried to focus on owning good companies that work hard and turn a profit. The only advantage good companies have over meme stocks is a good company should carry us when the market implodes on itself. The idea being, I don't want to have to wait for a decade to sell stock for living expenses, since we don't have a lot of decades left. If the market implodes and our companies stay down as long as the meme stocks, my strategy will have been objectively proven to be incorrect. I'm literally betting my life on this strategy and I make no public proclamations of it being correct.
The WBI that no one cares about is now at 206.4. I will drop the tenths digit once the WBI enters 4 digits of significand.
I notice a lot of capital raising in the Canadian REIT space. Perhaps there is an expected downturn of which I am unaware. So far, I have not submitted interest in any of these IPOs. That's not to say I wont, if the right one comes along. I have no interest in reducing these positions, either.
I get the impression, other investors consider every gain to be evidence of skill. Assuming this is the case, I do not share the same hubris with many of the other investors I read. Our poorest performing REIT just sold this morning. It was not a big position, so I wasn't all that worried about it. Still, it had to go. The reason I carried this REIT for so many years is because I haven't had such a clear view into an opportunity for quite some time. My view on our portfolio is that some skill and a significant portion of luck has gotten us to our current holdings. I love our companies and fully trust they will take good care of us. I also assume this is the best our portfolio will ever be and all future money should go into an index. This is how I have felt since 2012, despite our portfolio flying like a rocket over the course of that time. My wife believes in my capabilities more than I do. That's not to say I consider myself an investing moron. It's just that I try to assess what portion of our gains came from skill and what portion came from luck. My skill will remain and can be counted on, although it will diminish over time. Luck will come and go with the vicissitudes of the market.
My market gains come from....being DUMB enough to just sit and do nothing.......while holding simple individual stocks and a couple of funds. I dont have the brains to be a trader, or do options, or any of that other stuff that smart people do.
I find wisdom in B Russ comment that luck and skill go hand in hand. It takes discipline to position yourself to buy stock at the next fire sale. On the other hand, the first company I had been scooping issue at every opportunity for years and then Black Rock bought out your company at an 18% premium, I'm not able to argue that my skill had anything to do with that. At this point, perhaps there is an argument because I can see that Black Rock is buying any R-E related stock with half way decent books that isn't bolted down.
Flattered, my friend! many unsuccessful people in life like to point to the successful and chalk it up to just luck. A rhetorical argument would be the avg worker putting in their 40 and going home to watch sitcoms, wake up and for their boss again. Has no idea of how to even value an investment of any kind. Or broaden their knowledge past their current employment status. But gets stonk tips from twitter meme stonks… and then point fingers at somebody when they achieve success, but that successful person was also putting in 40 and also spending hrs a day on research or self improvement instead of watching reruns of big bang or ncis, after hrs. who will be more lucky?
WBI = 206.2 The TDI was up at 210.4 until two days ago when the Bureau of Economic Analysis posted an upward revision of GDP on October 28. Those documents are published here: https://www.bea.gov/data/gdp/gross-domestic-product I calculate the WBI by taking GDP and dividing by the Wilshire 5000, scraped from this URL. https://ca.finance.yahoo.com/quote/^W5000FLT?p=^W5000FLT
I’ll admit, I have had no idea what the WBI is.. I tried googling (I actually use DuckDuckGo) but don’t think I got any closer to the answer.. is this a metric you use personally or is it widely used? What does it indicate to you?
It's a modified version of the Buffett indicator. I call it the WBI. Warren Buffett uses the total market capitalization divided by the GDP as an indicator of reasonableness. Right now, the total market cap is more than double the GDP. It's a point of reference. In 2009, the Buffett indicator was 58 (market cap just over half of the GDP). Market cap has gained 4x in that time, even after adjusting for GDP growth. I use a modified version of the Buffett indicator. Instead of the total market cap, I use the Wilshire 5000 index. The Wilshire 5000 isn't the market cap but it covers almost all of it. I seem to recall it's over 99% of the market cap, so... close enough. The advantage of using the W5K is that it is tracked by Yahoo and published every day. This saves me from having to calculate it myself. Using the W5K to represent the total market cap is a commonly used substitute of the Buffett Indicator. For all I know, Buffett uses it himself. Because of this, I call it the WBI (Wilshire Buffett Indicator). I coined this term but it I did not coin the indicator itself behind it. This graph stops just before 2020, back when things were reasonable. Anything below 80 is a strong buy indicator. As best I can tell, reasonable is anything below 145. Caveat: During times of low interest rates, it is reasonable for the WBI to be substantially higher than when interest rates are higher. Question: Is a WBI over 200 reasonable, given the ultra-low interest rates of today? Answer: I don't know but I think so. The danger is that climbing interest rates could cause the bubble to pop because they will signal reduced tolerance for price/earnings ratios and, therefore, market cap. Despite seeing a massive bubble pop in our future, I am heavily invested in the market. The most I have done is turn off most of our DRIPs and stopped investing new cash unless I can find value in a specific company. I have not sold a single share because of the dark cloud of macro factors I see on the horizon. But, yeah, we are building a lot of cash....
Thank you for the explanation! What other sort of indicators do you look for in your value companies (if you don’t mind sharing)? I know you look for honest/trustworthy management from reading your other posts, but do you have selective ratios that a company must meet or more of a combination of factors?
I use a half dozen indicators on a daily basis. Some of them have been shared previously but I think it's just you and I, at this point. Sure, I will share more.
I notice a lot of doom comments, regarding Chinese debt. China had 7T of national debt in 2020 and it is going down. The US has 29T of national debt right now and it's going up. Chinese debt to GDP ratio is many times better than America's ratio. What is happening will be a very interesting experiment, allowing us to compare a fiscally responsible nation to a fiscally irresponsible nation, over time. To be absolutely direct, I'm not 100% confident I know what the outcome will be but I am 100% confident it will be interesting.
All of our bonds have sold. The bonds were purchased for macro factor insurance purposes. The most recent bonds mature in 2029 and pay a rate of 6%. After selling our other bonds, these seemed like a God send. Instead of a ladder, I picked up quite a bit of just that one series. With inflation hotting up, I posted a long term sell limit orders about a month ago. I left them open until the end of the year. Suffice to say, it wasn't a motivated sale so the prices were set to very nice, one time, gains (by bond standards... 6% capital gain in 7 months). I will mention the 9 year maturity of the largest position was a bit of an issue for me, although I accepted it enough to participate in the IPO. This move seems counter intuitive. We now have quite a bit of cash heading into what appears to be a period of substantial inflation. On the other hand, we are heading into retirement with substantial cash reserves and a bit of spending money if equities go on sale. The decision pivots on a risk analysis of best/worst case. The advantage of being insulated from sequence of return risk far out weighs the loss of bond income.
