With this series of articles, I am looking to track the performance of my portfolio to determine when to action to rebalance, initiate new positions and exit others. YTD, the performance of this portfolio has been 33%, largely due to the inclusion of a small cap Chinese real estate company which has had a return YTD of 68%.
Performance this Quarter
The best performers this quarter are Xinyuan Real Estate (XIN) and Ingersoll Rand (IR) with a 33% and a 7% return respectively. The losers this quarter are Seagate Technology (STX) and AT&T (T) with 8.5% and 7% losses respectively versus last quarter. So let's take a look at each stock and what may be driving these trends starting with the worst performer and working towards the strongest.
The company reported earnings and guidance that were in line with expectations, but shipped considerably fewer PC drives (-5%Q/Q and -25%Y/Y). This has many folks worried that the continuing decrease in PC drive sales will continue to erode FCF within the sector and continues to be the primary bearish thesis on hard drive stocks. This argument does not represent a new downward impetus for the sector in my opinion. My reasoning for owning the stock has been the considerable dividend yield that they offer which is around 4% and still only represents a dividend payout ratio of 33%. I will be sticking with my position and adding more if it drops below $37.
Earnings were reported pretty much inline with expectations and a significant purchase of Leap Wireless (LEAP) was disclosed at $15/share. I have previously written about both AT&T and the deal and it was subsequently brought to my attention that this actually represents a pretty decent price for spectrum when compared to prices paid in previous deals. I will continue to stick with AT&T long term due to the 5.3% dividend yield and I will look to add to my position if the price continues to drop much below $33.
The company reported earnings that were inline and beat expectations and then guided unfavorably for Y/Y revenue growth of 3-5% when expectations were for 5% and announced the cutting of 4K jobs. This appears to be another example of this company turning in pretty solid earnings and forecasting a weak outlook that then craters the stock price. Fundamentally, not much has changed since I last wrote about the company and it's interesting to see the support that has shown up around the $24 mark over the last few days. I still like the 2.8% dividend yield that the company offers and will maintain my position at current levels.
Ingersoll saw strong revenue growth and has issued guidance for 1-3% YOY growth. The company is spinning off its security segment into a separate company to be listed as Allegion in 4Q13. I have written about both the company and the spin-off at length previously and will continue to maintain my position in Ingersoll until the transaction is completed and reevaluate at that time.
Xinyuan Real Estate
Xinyuan reported revenue of 198.5 million which was up 17.5% Q/Q and almost 42% ahead of previous guidance. The quarter was strong and guidance for the year was increased along with an announcement of an additional 60 million for share buybacks. The share price has seen significant appreciation in the last two weeks (~20%) and now has a dividend yield of only 3%. I will continue to hold at these prices and may take a bit of profit and allocate it elsewhere in order to maintain some balance in this portfolio. I continue to like this stock and with a forward P/E of 2, there is significant potential for further appreciation.
This portfolio has performed pretty well this quarter with losses from the tech stocks being offset by the strong performance of Xinyuan. I will continue to watch AT&T and add to my position if the price continues to dip most likely with profits taken from my position in Xinyuan.