How do you define "quality companies"? Does this have anything to do with corporate governance or operational efficiency? Or, are you referring to how a stock behaves in the market?
We just hit a new low for 2022. My only outstanding buy order is now 21% below the current ask. Our cash level is 21.5% and building. It will be over 30% by year end, once a non-market transaction closes. I see plenty more red ink in the future. No plans to sell anything. I continue to hold for the long term, as usual (tm of WXYZ).
A lot of our cash was deployed, yesterday. I wish I had put even more into the market but I have less courage in post retirement. We are back down to 11% cash, from 23%. I've been trying to be more aggressive and revert to something similar to pre-retirement investing style but that is easier said than done. This morning, I cut more buy orders but the market has recovered significantly and those orders are not going to fill. Things aren't entirely clear but, at this point, I believe my investing style is going to revert to very similar to pre-retirement but with a minimum 4 years of austerity level cash sequestered for insurance.
I'm working on the month end numbers and we are down 7.1% from our February ATH. This is well below previous 2022 lows.
WBI 152.2 I've recently noticed we are outperforming the 10 year S&P 500 more now than we were 18 months ago. Not long ago, we just barely out performed it. And, yes, if we removed Tesla from our investing history, we would have under performed VOO. In the late 2000s, I started parking money in high distributing companies. I've never been a big fan of bonds. That was the time I started thinking about retirement. The original idea was to be 60% dividend investor and 40% growth by the time I retired. I ended up with about 85% dividend investments by 2011. I didn't retire in 2010, as originally planned, for reasons unrelated to investing or finance. Those distributing companies ended up returning the money surprisingly quickly. The growth companies I purchased in the early 2010s were bought with dividend money. When I bought the first tranche of Tesla in 2016, it was with new money (a commuted pension) but when Tesla sank back down to just above my purchase price in 2019, I tripled down with dividend money. I've come to view a company that distributes less than 4% to not distribute a relevant amount of money. I have owned companies that distribute this low but the distribution hasn't changed the dynamic much. 4~6% is a low distributor to me, but interesting. Any company that distributes over 6% is a strong distributor, IMO. I have worked on building up a portfolio of distributing companies but I have not ignored other metrics. Even now, I don't have a lot of strong distributing companies because I don't love the options available. There is only one company I like that distributes over 6% and I don't want to go all-in on that one company. Growth and distributions go hand in hand. One plant fertilizes the other. Without distributions, I would have made a ton less money on Tesla. Without Tesla, I would have a bunch less distributions right now. To the extent I've been able to manage it, creating an ecosystem of growth and distribution companies has built a retirement portfolio that seems pretty strong to me. Time will tell how good this strategy is. Oh, yeah,... There were several years when I knew I would be better off investing in the S&P 500. I got out of VOO at the end of 2016, right when it was taking off on record gains. The reason I kept my value investing strategy is because that is how I know how to make money. It's what I do. The market ran away from me for a bit, until Tesla rocketed me back up, but I always believed in my strategy. The point was, over the course of two decades, I thought I would be better off with my strategy, even though I thought VOO would out perform me on the short term. My first 6 months of retirement found me shifting into a more conservative mode. I picked up a 1 and 2 year GIC and made sure to have plenty of cash. I've since realized I need to continue to take risk at a similar rate to the accumulation years. I've never been big on risk but small risk is doable. So, I have returned to something closer to my strategy of 1 year ago than the ultra-conservative mode I was edging into.
For 100 years, energy defined economies. These days, technology largely defines economies but energy is still relevant. The Ukraine war is redefining European economics. Make no mistake. Gazprom is going away, Nord Stream is no longer providing needed energy to Europe. Europe has decided to expedite the conversion to renewables. That's an obvious decision but I question the practicality. With supply chain issues in nearly every industry (thanks, China), moving quickly to do anything is going to be difficult. At least they are recommissioning a bunch of nuclear power. They desperately need to. Winter is nearly upon us. It sounds like LNG is not fully in place and it does not look like they were expaditing LNG infrastructure sufficiently. I've been ripping my hair out, wondering why they aren't building LNG with war time focus. They should be. This could be more profound than almost everyone expects. If they get cold in Europe this winter, there will be panic, economic collapse, refugees, etc. I'm not saying it's going to be chaos. I'm saying they look under prepared. They tell us it's going to be OK, so perhaps it will, but it doesn't look like a demonstration of competence to me. Particularly, Germany looks under prepared. Don't be surprised when Giga Berlin and other industry is shut down due to energy shortage. I suppose the pandemic has shown us we can shut down industry for long durations with no economic cost so perhaps I am concerned over nothing.
I think a lot of what you have mentioned is very possible and seems likely. I read a story about a month or so ago about how dire some of it has already become. The rampant energy prices and lack of LNG was already forcing limited production and shutdowns in manufacturing and such. They can't afford to keep them operational due to the costs and shortages. They were even rationing coal for heating already with some people in line for days. It would appear it is going to get a lot tougher on those folks. It appears they never imagined it could actually happen and then it did. The time to have prepared has passed and now everything is reactionary. Russia knew all along, but perhaps under estimated how it would unfold. I figure they assumed they would walk through Ukraine quickly and without too much opposition from Ukraine, even under estimating the global reaction. He may see it through to the end, whatever that is in his mind. Sometimes the world seems like a really big place and then we realize how connected we all are when something happens. I feel for the folks who are going to suffer because of that lack of planning. Off topic: I enjoy your thread.
Update. So, company A seems to be slowly sinking into the ocean. It's gone down so much, I have contemplated buying it back but will not. Company C bounced up 30% after we expanded our position at a cheap price. It then sank down again to an even cheaper price. We hit it hard last week and now it's back up 20% from last week's purchase. I am not playing company C. It's a matter of scooping what we can when the price is down. There is a power structure change within our portfolio. Two of our companies are way up. Three are substantially down. A couple are treading water. We are 4.9% down from our February peak. Our portfolio looks a bit different than it did then. I'm not super optimistic about terrific gains any time soon. We will be happy to tread water for the next 12 months. I will point out, company C could easily dip back down and become a value buy again. If it does, I will continue to expand this position as much as I can. Mostly, this is the era of wait and see for us. Our near cash is strong. Our distributions are strong. Our bets have been made; now it's time to watch the race and see who wins.
Company C remains strong. We have another strong company but it is a far smaller holding so not that big of an impact. Company B has sunk back to roughly what I thought was a deal. Everything else is down. Overall, we are down a smidge. Overall, I am happy. Our distributions are strong and we have no immediate plans to buy or sell anything. We aren't exactly plundering the market, though.
WBI 144.3 At this point, we have a single DRIP. It's corporate and I have no intention of ever turning it off, as it was a bit of trouble to set up; that DRIP will go away as I sell down that position, many years from now. I turned our last synthetic drop off, just now. It wasn't a big one but it feels like the last one. Brokerages calculate DRIP share prices to the disadvantage of their customers. TD Ameritrade selects the highest price across a period of a few days. Keep in mind, they don't buy stock at the price they sell it to DRIP customers at. They buy stock in large batches in advance and sell it to customers on a monthly basis. There is a threshold at which it is more efficient to just leave a long term buy order open and it isn't all that high, depending on stock yield.
We have picked up a bit of stock at nice price levels recently. Mostly, I'm trying to keep a bit of powder dry for a year end sale on companies.
The PE ratio of one of my REITs just dipped below 5. Consider me engaged. This is a great time for a long term investor. I'm a bit concerned about a market collapse at the end of the year but it's always better to have a good deal today than wait for a great deal tomorrow.
WBI 147.8 Yesterday, two of our companies were bargains. I submitted limit orders which came tantalizingly close to filling. The day low is exactly the limit price for one of the orders but it did not fill a single share. This is the nature of this investment style. As much as I would like to have picked up a wee bit more of a couple of companies, I am now content to wait until year's end. If there is a sale on companies in Q4/Q1, I will buy quite a bit. If there is not, I will look at other options, including GICs. I'm not a big fan of GICs. We currently own a few and I'm OK with it but, at time of purchase, it was the least bad option. I will probably never own a GIC with a maturity longer than 2 years.
There is enough talk about a recession that I think it is a self fulfilling prophecy. There are so many negative factors hitting our economy, it would be ridiculous if it didn't crash. We'll see but I think it's time to hoard cash. I'm not going to sell anything but I will hold onto our distributions and maturing GICs as cash, as they come in.
WBI 153 We've had big gains, this week. We are about mid way between the 2022 high and low. We are now bracing for impact.
I've come to discover there are quite a few people who still think hydrogen has a chance as an energy storage medium. This makes me think I should trade more because there is a field of cash out there, waiting to be harvested.
