Thanksgiving is past, November is winding down, and I cast my eyes on December with portfolio decisions in mind. I like to complete my end-of-year portfolio review a bit earlier than most, since I like to have any serious decision-making completed before the final holiday weeks arrive. It allows me to enjoy the season and family without any great overhanging clouds of investment worry. Do I have any little messes to clean up before December?
My Portfolio Structure
I divide my portfolio into three sections. My base consists of dividend paying companies with growth prospects. These are long-term (5 years to infinity) investments and I merely need to make a check to make sure nothing significant has changed in the company or in their prospects that might make me have to reconsider the investment. They are my foundation for total return and constitute about 60% of my portfolio value. I have some of these shares on a Dividend Reinvestment Program to regularly add to the holdings.
The second part of my portfolio are middle-term investments (1-5 years) which I believe provide exceptional upside. However they are not the buy-and-forget type of investment I want for my long-term portfolio. In most cases they are turn-around or value plays.
The third and final group are special situations. These are short-term (less than a year) trades keyed to take advantage of market conditions, or special events such as spinoffs. These types of stocks can transition into longer-term investments, depending on what the future holds. In any case, these holdings require much closer attention than the rest of my portfolio.
NOVEMBER CHANGES
I made two major changes during November in closing out positions. From my mid-term portfolio I sold my holdings in Gulfport Energy Corporation (GPOR). This is bittersweet for me since I first bought it when it was $2.50, near the bottom of the oil crash, while I finally closed it out at about $33. For a long time I thought I might hold Gulfport forever, but it then traded its West Texas Permian oil fields for a stake in Diamondback Energy (FANG), while expanding its nontraditional energy plays into Ohio and the Canadian Oil Sands.
This is a shift in strategy that I do not fully understand and I am not convinced it is completely a wise move. I expect Gulfport to remain in a fairly narrow trading range for the near future, while I have my doubts about what the macroeconomic environment will be going forward for independent energy producers like Gulfport. With the increasing glut of mid-continental energy I felt it was time I pruned my energy holdings and Gulfport was the odd company out. I may regret this decision, and so Gulfport will remain on my watch list going into 2013.
My second change was Sycamore Networks (SCMR). This had been a value play which was looking good right until the time the company announced it was closing shop. I made an emergency blowout, selling my shares and immediately taking up a new short position. I then ended up closing out the short sale when I felt the dropping price reached the neighborhood of where I thought the liquidation value would be (about $2.75). I made some money off the rollercoaster, but it was a lot of work for small beans. It is the perfect example why keeping a close watch on your riskier trades is a smart move.
Here are the highlights of the rest of my portfolio right now:
LONG TERM PORTFOLIO:
ConocoPhillips (COP) - I have been slowly accumulating stock through the company's DRIP, including fully reinvesting all dividends. The company has been relatively unexciting this year following its spinoff of Phillips 66 (PSX) but I like the way it is setting itself up for the future. Plus, its strong dividend makes me happy.
Recent Price | 58.42 |
52 week trading range | 50.62-78.29 |
Dividend | 2.64 |
Dividend Yield | 4.60 |
Payout Ratio | 31.00% |
Price Earnings Ratio | 7.08 |
Cash/Share | 1.05 |
Return on Equity | 21.36% |
BV/Share | 37.85 |
EPS | 8.14 |
Phillips 66
A happy May surprise came my way on the Phillips spinoff from Conoco. The company has started out of the blocks well, with the stock price aggressively rising the last six months. The company has initiated a conservative dividend which I expect to grow regularly. Meanwhile, the company is reinvesting in its chemical and other units. I like what it is doing now and I think it is set up to be a strong total return performer well into the foreseeable future.
Recent Price | 47.38 |
52 week trading range | 46.07-48.40 |
Dividend | 1.00 |
Dividend Yield | 2.20 |
Payout Ratio | 5.00% |
Price Earnings Ratio | 5.94 |
Cash/Share | 4.95 |
Return on Equity | N/A |
BV/Share | 30.22 |
EPS | 7.78 |
HollyFrontier Corporation (HFC)
Yes, another energy company, in this case a regional refiner. The company is well suited to take advantage of ongoing imbalances in regional oil prices. Plus the company has an aggressive mind fix for providing shareholder equity through special dividends and other owner friendly programs. I love these guys to death. I probably will need to make some future decisions about my overweight in energy. In fact this is one reason I trimmed Gulfport from my portfolio. Still, I like energy, especially the refiners going forward, so I will keep this going.
Recent Price | 38.54 |
52 week trading range | 21.13-42.33 |
Dividend | 0.60 |
Dividend Yield | 1.60 |
Payout Ratio | 36.00% |
Price Earnings Ratio | 5.34 |
Cash/Share | 8.09 |
Return on Equity | 40.40% |
BV/Share | 26.30 |
EPS | 7.07 |
Mondelēz International, Inc (MDLZ)
Mondelez is new to my long term holdings. I love its international growth horizon. Like Conoco and Phillips, I bought into the old Kraft Foods (KRFT) which split into its mostly North American Operations (Kraft) and mostly international (Mondelez). I live in Latin America and travel often to Asia, and I constantly see the spread of Mondelez products in these markets. It has lots of room to grow, and I like its strategies to develop its new markets.
Recent Price | 26.80 |
52 week trading range | 26.18-42.54 |
Dividend | 1.16 |
Dividend Yield | 4.40 |
Payout Ratio | 57.00% |
Price Earnings Ratio | 13.07 |
Cash/Share | 2.10 |
Return on Equity | 9.61% |
BV/Share | 20.36 |
EPS | 2.01 |
Resource Capital Corp (RSO)
I have moved away from mortgage REITs the last few months but I have kept Resource Capital. The company focuses primarily on commercial real estate and commercial finance in the United States. It is the area of REITs that I feel best about right now. Once we are past whatever the Fiscal Cliff solution is, I might expand my holdings into some more REITs.
Recent Price | 5.86 |
52 week trading range | 5.00-6.32 |
Dividend | 0.80 |
Dividend Yield | 13.60 |
Payout Ratio | 158.00% |
Price Earnings Ratio | 9.98 |
Cash/Share | 1.39 |
Return on Equity | 9.76% |
BV/Share | 5.91 |
EPS | 0.59 |
Diana Containerships Inc. (DCIX)
Diana is my foray into transportation. I like its business model and strong dividends. It has had a couple of rocky quarters lately, so I may have to prune this soon, but I am still hanging on for now.
Recent Price | 6.10 |
52 week trading range | 4.57-7.88 |
Dividend | 1.20 |
Dividend Yield | 19.70 |
Payout Ratio | 166.00% |
Price Earnings Ratio | 17.34 |
Cash/Share | 0.35 |
Return on Equity | 3.98% |
BV/Share | 6.48 |
EPS | 0.35 |
Mid-Term Investments
Bank of America Corporation (BAC) has so many ongoing issues, yet it still is trading at around 50% of book value and it is throwing off profits and a minimal $0.01/share dividend. This is definitely not a buy and forget stock, but I expect a lot of upside over the next 3-5 years. I will probably buy more of this stock on dips.
Recent Price | 9.74 |
52 week trading range | 4.92-10.10 |
Dividend | 0.04 |
Dividend Yield | 0.04 |
Payout Ratio | 11.00% |
Price Earnings Ratio | 26.62 |
Cash/Share | 58.03 |
Return on Equity | 2.32% |
BV/Share | 20.40 |
EPS | 0.37 |
DreamWorks Animation SKG (DWA) has had a rough month as the share price has fallen, in part due to disappointing numbers for its new release of Rise of the Guardians. Still, these lackadaisical results do not bother me. I am into Dreamworks for its sharp uptick in production schedules, expanding movie library and its future plans for television channels and theme parks.
Recent Price | 18.61 |
52 week trading range | 16.34-22.98 |
Dividend | N/A |
Dividend Yield | N/A |
Payout Ratio | N/A |
Price Earnings Ratio | 26.92 |
Cash/Share | 1.55 |
Return on Equity | 5.12% |
BV/Share | 16.91 |
EPS | 0.82 |
Short Term/Special Situations
Murphy Oil Corporation (MUR) has announced a future spinoff of its North American operations. I have found that spinoffs are almost always great investments, as I discussed here. I will probably hold onto Murphy Oil and its spinoff entity for at least six months after the spinoff closes, which management has indicated will happen sometime in 2013. After that point I will decide whether to keep both company shares, sell one and keep one, or dispose of all.
Recent Price | 60.00 |
52 week trading range | 43.29-65.60 |
Dividend | 1.25 |
Dividend Yield | 2.10 |
Payout Ratio | 32.00% |
Price Earnings Ratio | 16.55 |
Cash/Share | N/A |
Return on Equity | N/A |
BV/Share | 45.31 |
EPS | 3.59 |
IN CONCLUSION
I am happy with where I am now, but also have some cash on hand. If the market is as rocky as I expect it will be in the coming weeks I may buy some more Bank of America or Dreamworks depending on how things go. Otherwise, it's time to hang the garlands and heat up some mulled cider.
